Archive for the ‘Investment Advice’ Category

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Week Ends On Downtrend

Friday, October 24th, 2008

The Dow and S&P 500 closed the week at 8378 and 876, respectively, down 5% and 7% for the week. The Nasdaq fell 9% this week, an indicator that Google’s earnings surprise is not going to heat up the entire sector.

Analysts are saying that Emerging Markets are likely to get the worst of this recessoin, since their credit rating is poorest to begin with.

As always, we are stressing solid, dividend-paying companies with histories of growth through the recession: PG, JNJ, GPC. A small position in SDS or SKF or SRS will offset downside risk and, since these funds work on a double-inverse of their respective indices, they require less upfront investment to reap the benefit.

Posted in Investment Advice, Stock Market, Uncategorized | No Comments »

Nouriel Roubini Offering Free Access for Financial Crisis

Wednesday, October 1st, 2008

We advise you to sign up for RGE Monitor, run by Nouriel Roubini.

We aren’t economists, here at StocksAndMutualFunds.com.

We are investors, and we’re web developers; but we’re not economists.

For real economists, you usually have to pay.

Usually.

One of the best economists in the world is Nouriel Roubini.

He is a professor of economics at New York University’s Stern School of Business, and he is highly sought after for his advice by think tanks and politicians.

He started talking about the U.S. national debt in the nineties. He started talking about the housing bubble in 2004. He started talking about the credit crunch in 2005.

He’s on top of things in a way that most of us, who work too many hours per week to adequately inform ourselves, can be.

His online service, RGE Monitor (short for Roubini Global Economic Monitor), is available at rgemonitor.com, and it contains a number of useful, if controversial, points of view about the current state of our economy.

Usually he offers his premium service for hundreds of dollars per year.

During this economic crisis, premium services at rgemonitor.com are free.

We are in no way affiliated with Nouriel Roubini or rgemonitor.com, and we only see this as a way to educate our readership in a way that we are not capable.

The legislation currently running through the U.S. Congress will need additional legislation to make it work for the long term. The Paulson Plan is a short-term solution, which will be ineffective come January 20, 2009, when we will have a new president and a new Congress.

It is of unequivocal importance that our citizens take the time to educate themselves about the oncoming economic crisis that this bill is prolonging (not avoiding, but prolonging).

The first step in educating yourself is getting acquainted with Nouriel Roubini’s ideas, particularly his HOME plan, which combines relief for lenders (banks, investors), as well as homeowners.

As web publishers, there are a lot of things we want our readership to do:
— Make good financial decisions about their futures and retirement
— Sign up for brokers we recommend
— Retire comfortably and early
— Protect their nest eggs so that they have something to pass on to the next generation

As citizens of the United States, however, we want our readership to educate themselves about the dangers of the credit markets that are looming beyond bad mortgages.

The crises we’re now experiencing are only symptoms of larger problems described by Mr. Roubini.

We do not make recommendations on stocks, or mutual funds. We just report what’s going on.

This is our first recommendation since our founding in early 2006:

Signup for rgemonitor.com now, while it’s free.

It is an unprecedented opportunity to educate yourself on the potential crises ahead, and an outline for how to protect yourself and your assets during these difficult times.

Posted in Bonds, ETFs, IRAS and 401ks, Investment Advice, Mutual Funds, Q&A, Retirement Planning, Stock Market, Uncategorized | 2 Comments »

What’s Going on With Chinese Stocks?

Tuesday, June 5th, 2007

After a tumultuous week that saw two sharp dips in the Shanghai Index, Tuesday saw the market end in positive territory, after being down 7% earlier in the trading day.

What gives?

Investors in China and other emerging markets should be aware that these are high-risk investments, and therefore will experience higher volatility than investments in the more mature markets of Western Europe, North America, and Japan.
The recent dips experienced in Shanghai are the direct result of a change in China’s taxes on stock investments. The change was implemented to detract speculators from high-risk short-term investments. It is the first step in the maturity of China’s Finance Ministry, which is implementing long-term solutions to the rapid business development issues the country is facing.

Though it is likely that highly volatile days like the ones we have seen will happen again in China, the long-term trend should remain positive, as its development is just underway.

Posted in Alternative Investments, Investment Advice, Stock Market, Uncategorized | No Comments »

Dow 14,000?

Monday, April 30th, 2007

Jim Cramer was on the Chris Matthews Show this week and mentioned that he expects the Dow to rise an additional 10% within the next 6 months.

That would put the Dow at almost 14,500 by year’s end, which seems like a pipe dream to those of us who’ve been watching the US economy flounder in comparison to overseas investments.
Or is it?

Cramer’s assertation that it is the BRICs that are leading the world is right on target, and it’s important to point out that the Dow 30 is heavily weighted with companies that do a lot of business overseas. By some estimates, 40% of revenues from companies in the Dow come from Europe, Asia and Emerging Markets.

For that reason alone, it’s reasonable to assume that the Dow will break away from the S&P 500 in performance this year, and in the years to come. Big hitters like Alcoa and Boeing can expect big numbers from developing economies that will need their products.

Posted in Investment Advice, Stock Market | No Comments »

Shanghaied Again?

Thursday, March 1st, 2007

The Shanghai Composite Index was down 2.91%. Tuesday’s 8.8% drop was followed by a slight recovery, but precipitated strong declines worldwide, and it appears that China is leading the way, bullish or bearish.

While the Chinese market has a long way to go before one can call it truly “overvalued,” skepticism and the specter of stricter taxes and regulations are warning signs of a rocky road ahead.

For now, it seems that world markets are likely to follow the lead of the Chinese stocks. Japan’s Nikkei ended Thursday down for its third straight day (-1.2%), and Hong Kong’s Hang Seng index was down 0.5%.

Posted in Investment Advice, Stock Market, Uncategorized | No Comments »

Worst Day on Stock Market Since WTC Attack

Tuesday, February 27th, 2007

U.S. stock markets notched their poorest performance since September 2001, right after the terrorist attacks on the World Trade Center and Pentagon.
The Dow fell 416.02, or 3.29%; the Nasdaq dropped 3.9%; the S&P 500 index fell by 3.5%. Earlier in the day the Dow had dropped over 500 points. All thirty stocks in the average were down for the day.
This fall comes on the heels of the worst day in ten years for China’s Shanghai Composite Index, which fell 8.8% yesterday.

The U.S. Equity selloff was greater than any other market, except for China, though the effect was global.
Weakness in Asia has spread global, as Japan’s Nikkei and Topix notched losses of 0.5% and 0.3%, respectively.

The United Kingdom’s FTSE and the German DAX were both down 2.3%, and the French CAC-40 dropped 2.6%.

It is possible that the bloodletting is not over, with U.S. equities, typically less volatile than emerging and developed global markets, being hit so hard. Such a selloff on Wall Street is likely to shake European and Asian markets during the coming trading sessions.

Bonds posted strong gains throughout the day, and, along with dividend-paying stocks that have been hit significantly, are expected to provide stability in the coming trading days.

Posted in Alternative Investments, Bonds, Investment Advice, Stock Market, Uncategorized | No Comments »

U.S. Stocks in Freefall After China Market Shows Weakness

Tuesday, February 27th, 2007

Stocks are sharply down Tuesday, with the Dow down 1.6% and the Nasdaq down 2.5%.

While this is being called a correction, it certainly has many investors concerned, but the main concern is the damage done to emerging markets and, in particular China, which appears to have quite a way to go before hitting bottom.

Risk-averse investors should take note, however, that volatile times are among us, and there are safer bets than the current buying opportunities presented by the recent declines.

Posted in Alternative Investments, Investment Advice, Stock Market, Uncategorized | No Comments »

Buy-Write Strategy Increases Risk-Adjusted Performance

Wednesday, January 31st, 2007

Buy-write describes a hedging strategy in which a security is simultaneously bought and call options are written for the same security. Options are considered to be extremely risky, and used with caution and professional advice.
A recent study at the Center for International Securities and Derivatives Markets at the University of Massachusetts’ Isenberg School of Management determined that a buy-write strategy consistently improved risk-adjusted performance over a ten-year period (Jan. 18, 1996 to Nov. 16, 2006).

The study compared the Russell 2000 Index with one-month on-the-money buy-write strategy as well as a 2% out-of-the-money strategy and a 2% in-the money strategy.

The index overall performed better than the buy-write strategies over the ten-year period, returning 10.67% annualized, while the buy-write strategies performed similarly on a risk-adjusted basis, particularly the on-the money strategy, ranging from 9.21% (ATM) to 10.60% annualized (OTM).

During the unfavorable market conditions (January 1996-Febryary 2003), however, the buy-write strategies handily outperformed the index.

Significantly, the buy-write strategy lowered volatility enough to show that the strategy can outperform the index by neutralizing the effects of market fluctuations, while not sacrificing the gains of an up market.

The study does, however note that returns for the buy-write strategy are less normalized than those of the index, and, therefore, risk measures other than volatility may be more appropriate. Further, the study suggests that a more active approach, based on valuations and call selection, may significantly boost returns, both absolute and risk-adjusted.

The complete study can be found at the center for Institutional investors at the Options Industry Council.

Posted in Alternative Investments, Investment Advice, Options, Uncategorized | No Comments »

Census Bureau: Vacant Homes at 2.1 Million

Monday, January 29th, 2007

The Census Bureau released a report today that 2.1 million homes were vacant at the end of 2006, representing 2.7% of all owned units. That is the highest vacancy rate in over 50 years.

2006 will not be remembered the year of the bust, as the median home price came in well above $150,000 for the first time ever.

Rental prices also had a record year, topping $700 per month on average across the United States for the first time ever in the fourth quarter.

The report is further evidence that the housing bubble has not yet reached its trough, as supply is clearly outstripping demand. It is highly likely that this kind of vacancy rate will lead to fewer housing starts and lower bottom lines for homebuilders nationwide, as a buyers market opens regionally.

Details of the report can be found at census.gov.

Posted in Investment Advice, Stock Market, Uncategorized | No Comments »

Start Investing With Just $100

Sunday, January 28th, 2007

While there really is no comparison to a professional investment adviser to help make investing decisions, for most people it’s just too expensive to get that advice. Further, most advice centers on investing with $1,000 or $10,000, and most just don’t have that to risk in the stock market.

We’re going to tell you how to do it with as little as $100.

Ultimately, whether you have $100 or $1,000,000, the story is the same: create a diverse portfolio of stocks and bonds that will withstand stock market dips while increasing in value over the long term.

Here are three simple steps to achieve this with $100:

  1. Open a brokerage account with a discount broker that has no investment minimums and low transaction fees. We recommend Zecco, which offers 40 free trades per month and no hidden fees or account minimums.
  2. Fund the account. This is where you send money to the account by check, wire transfer, or automated clearing house (ACH). ACH is preferred because it is faster than a check and wire transfers are relatively expensive.
  3. Make your first investment.

You’re going to want, as mentioned earlier, a widely diverse portfolio that covers all sectors and countries. You can’t exactly do that with $100 if you’re going to invest in stocks. Also, corporate bonds and mutual funds are out, since they require more capital than $100.

ETFs (Exchange Traded Funds), however, are like mutual funds that trade on the stock market, and you can purchase partial shares. Many ETFs track widely diverse indices, such as the S&P 500 or the MSCI-EAFE global index, or the Lehman Brother Aggregate Bond Index.

If you were to invest $100 in a different ETF every month for three months, you could have a well-diversified portfolio of stocks and bonds that would withstand most market volatility while steadily growing as the market does over time.

Of course, you would want to add to your investment on a regular basis, and I would invest no less than $100 at a time to keep transaction fees from limiting your growth. And when your account reaches $10,000 you’ll want to seek professional advice or at least move your funds over to traditional mutual funds, which typically have lower cost structures and are easier to manage.

But this is a pretty simple, inexpensive way to start investing.

Posted in ETFs, Investment Advice, Retirement Planning, Uncategorized | 2 Comments »

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