Thursday, April 26, 2012

Investor Tip to Remember #1

This is the first of a series of investmenrt tips for you to remember throughout your investment career.

Beware saying "It is only ..."

You will often hear this phrase followed by a sum of money. "It is only a penny per day." The person telling you this wants to convince you that something costs you so little that you'd be a fool to refuse to buy-in.

So in the example one penny per day is $3.65 per year. In an average year. OK still not a lot but you get the drift, it still builds to something substantial.

A bank salesman once told me that an investment would "Cost ONLY 5% per month." I could easily make that up in the stock market, it was rising and "You'll Earn 10% easily at current investment rates." He told me that in September 2007. The week before the slide in the stock market. Of course he could not forecast the crash of 2007-8, what he could forecast was HIS commission on my initial $15,000 investment. A nice little earner for him.

You will also tell yourself "It's ONLY ..." whatever as you look at stock prices. Penny stocks look like a bargain, the are only $1.30 that is much more affordable than Apple Inc at $600. I could buy hundreds of those penny stocks compared to one Apple (AAPL) stock. But realistically, Apple deserves to be higher and is cheaper than that penny stock. Apple has global impact that penny stock may be little known outside one corner of Noname City, Peoples Republic of Nowhere. But because of the theory of, "It is only ..." you but 500 shares and see it disappear over the next few months.

You will tell yourself trading charges "Cost only $9.99" then order hundreds of different trades, seeing various stocks rise and gove you a profit of $10, you will then rarely say "My profit is only ..."

See "It is only ..." as your greatest investing enemy. It will become a red flag to warn you of possibly poor decision making or someone trying to convince you to make a mistake to their advantage.

Monday, April 23, 2012

Of Falling Knives. Missed Boats and Markets

There is an old saying that investors should bear in mind; "Never catch a falling knife."

OK so much for the knives in this post. Be sure they will cut you and can cut your profits.

But what do investors do when markets rise so far that things get dizzy and there looks to be a fall, or as the professionals call it 'a correction.'

We should be sitting tight, waiting for the knife, erm stock market to drop.

Riight now we are in a falling market. I am sitting tight on some orders right now. I and you want to maximize our profits and things are looking good for us to buy in on this correction.

Some good stocks are getting reasonable pricings.

I stated in an earlier post that Apple Inc is going to be a buy for me below $550. that holds true not matter what the results posted this week say. Unless they are totally disasterous.

Another interesting falling stock today is Walmart (WMT) the have been accused of paying bribes to Mexican authorities, in order to open stores. So on that news their stock is falling. The bad news is an excellent opportunity to buy in stock. I am an owner of WalMart (WMT) and this fall is an opportunity  to top up on a few less expensive stocks as the initial panic stops and the stock regains its basic confidence.
The trick now is to pick the stocks you like on fundamental levels, good stocks, good profit stream, lots of strong cash flow and set a level where you like a company. Buy in at those levels or cheaper and keep buying until the stock rises then follow it up.

It is easy to say but hard to do.  Buy in as market and stocks reach you value levels not those of a TV or press pundit. If you wait for the good news, you'll be waiting too long and miss the boat.

This 'correction' is a boat you should look to catch, even the correction of 2007-8 was no Titanic for those who bought in on the down turn.

Sunday, April 22, 2012

Begin Tax-Planning for Next Year

It may seem strange to think at the end of this tax season of preparing for next tax season.

Planning now however can make investing while paying lower taxes next year much easier.
For instance, many of the tax breaks given to investors in previous years expire on December 31st 2012.

This means a possible increase in dividend taxes and also Capital Gains taxes.

Planning now to invest the maximum in tax efficient products will pay off in the long run.

You should put as much money as you can into an IRA or ROTH IRA these vehicles shelter your investmentsfrom taxation both State and Federal.

Anyone under 50 can add $5,000 in the current tax year, over 50 and you can invest $6,000.

If you add $600 per month to your IRA you will find at the end of the year you will have filled up your savings and not have a struggle topping up your allowable sum.

Also look towards tax efficient products such as Municipal Bond offerings.  I personally invest in A municipal bond fund, (Ticker MUB) it trades at about $109.00 at the moment, but it pays a reasonable yield about 3% and it is free of state and federal tax on its dividends. A nice little earner if you top out your IRA and need to save more money on dividends.

These products are available at a wide number of retailers such as banks and brokers.

One tip, don't waste time putting a product like MUB into your IRA you waste your tax allowance on a product which at present pays no taxes at all. Save your IRA for taxable resources.

Friday, April 20, 2012

Week Ending April 20 2013

Have you had fun this week?

All the talk of above expectation results, collapsing Spanish Bond sales (turning out quite positive) woes of hard landings in China, and not forgetting a mild winter and early spring creating havoc to results. All this talk is, from the respect of the investor, BULLS##T.

The stock market over the long term will "not longer remember waht we said here." It will fade into history as being a mere typical week for the stock market, with little to allow us to discriminate it from most other weeks.

Truth be told the stock market is a mere gambling house. We buy and sell stocks for their own value. The stock is a representation of a portion of a company, but in the market the stock has little to do with the underlying company. A stock is an instrument unto itself.

Take for instance Apple Inc. (AAPL) A couple of weeks ago it was tradiung high on the hog. Then the stock fell for several days. Now it seems to be entering a phase of running at $580-$620 ahead of results.

Did Apple Inc. suddenly lose billions of dollars in market capiutalization because it is a bad company? No.

Did Apple Inc. (AAPL) find itself at the whim of traders moving the market using dump and buy strategies. Possibly.

This case points out there is little correlation between a companies real status and its stock. True a good company will have a better chance of being  highly valued but in the end. The stock market is not about the company, the stock market is about the stock.

The sentiment of buyers, whether they be trraders or investors makes the stock price. If the seller sells into a market which wants to gobble up stock as fast as it can, prices rise. If a seller sells into a market which looks to holding  back prices fall.

Also don't forget the human element. You are dealing with people. They hear and spread gossip. Things look bad or great at the tip of a hat. Prices rise or fall because of the herd or speculators, traders and investors making up their minds with limited information.

See the stock market for what it is. A place to sell instruments in companies, a place of long and short term speculation. Ignore most of the crap about Eurozone and Chinese hard landings, chip shortagers or the sun shining when it should be snowing. Who cares in the long term it doesn't matter.

Assess your chosen stock against its undelying company but remember that you are joining a fluid human driven market. If stocks truly reflected the value of the underlying company we would not see 2% fluctuations from one day to the next. The markets would be almost glacial in their speed of movement.

The stock itself is the purpose of the stock market, not the company, nation, or continent. Stick to the facts and follow the stock. 

Monday, April 16, 2012

Apple Moves towards a Buy

Today, Apple Inc. (AAPL) continued doenwards. At a good margin below $600 for me it is beginning to look attractive.

There is some speculation that Apple has burst its bubble, but I believe that all this selling of the Apple stock is merely large investors taking profit and moving into other stocks.

This idea , I think, is supported by the move of the DOW upwards while the S&P and NASDAQ lingered or fell. Apple Inc does not form part of the DOW but does contribute to the other two market groups. To me this indicates money from Apple stock profits was being moved into DOW component stocks, supporting that market while hitting the other two.

At these new levels Apple Inc. is looking more attractive and I am looking to move some cash into that stock if it falls to $550.

Thursday, April 12, 2012

Case Proved Markets watch Cramer

Yesterday Jim Cramer talked to the CEO of Energy Transfer Partners (ETP) on the show Mad Money.

The CEO was very upbeat about the natural gas pipeline and distribution companies prospects. The company does look interesting to me.  I am looking to buy in a few weeks or so.

In a previous post I warned about jumping in too soon after such a presentation on TV. ETP stock price today is a perfect example.

The stock opened today at $46.40 and in minutes was trading at $46.83 as the morning closes it is trading at $46.74 a little off the high but still at a premium. 

Trading volumes are also high, yesterday the stock traded 400,000 shares today it traded 428,000 shares in the morning session alone.

My case, Market Makers make a killing when popular programs like Mad Money on CNBC talk about a partuicular stock. 

Watch out for the sudden urge to jump into a stock picked on programs such as Mad Money, they are not neccessarily bad stocks, but you will see inflated pricing on them for a few days. Hold back, ok you may miss this spiike in price, but you will also not be paying over the odds for a stock that begins to fall to its old level in a few days.

Mark the stock, wait patiently on the sidelines and when the stock stabilises buy then and enjoy reaping greater profits.