January to March quarter posted a 0.9% gain in GDP, giving investors the fundamental understanding that textbook recession is out of the picture. It was certain that investors would respond favorably, and they did. The dow was up 52 points to 12,646. This kind of optimism is great for a market that’s been beaten down by high commodity prices and a slowing economy.
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As the market livens up, it should be obvious to investors that the scams of the market are plentiful as well. Though the pump and dump nearly died at the beginning of the internet age, today these schemes are still doing quite well.
The pump and dump scheme is centered around two major contributors: pure speculation and illiquid stocks. Pump and dump operators never pick stocks with high volume, they instead look to find low volume stocks that can be pushed up in value on more buying volume. More people interested in buying a stock means that through competition they slowly push up the bid and ask prices. Read more…
I don’t think anything shines as bright as the movie theater as a perfect example of the amount of disposable income in the hands of people. The audiences are largely made up of young adults who earn less than older movie-goers but have less financial responsibilities thus rarely cut back on their spending when the economy slows. Older viewers are more likely to cut back on their entertainment expenses and likely put less money in the hands of their children to go see the new hot thriller.
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If there is one great thing about today’s volatility it is the quicker developing trendlines that come with it. Highly volatile stocks are pushing trends quicker, rather than having a week to a month in between top and bottom support and resistance lines, its taking just a few days. Large movements up and down fill out trends quicker and with more accuracy, slower trending is more likely to push out of an existing trend while quick movements mean a contained trend. Read more…
The containers and storage products offered by Rubbermaid are sold by the billions. Without them, last weeks dinner would go straight to the trash and our pencils and pens would be without a container. It should come to no surprise that Rubbermaid is a great play against recession, its earnings are solid through sales of plastic containers and other products such as vacuum cleaners.
If anything is certain, its Rubbermaid’s bottomline which is something that can’t be said for most companies in today’s economic environment. At 11.5 times next years earnings, there happens to be a great bargain in the plastic products company. High energy prices may be cutting into its profits, but for the long term, this is a great brand to hold on to. Even better is that I’m looking for a 50% run in the next couple years. Read more…
We often hear about how the US dollar is pegged to oil as the demand for the currency is derived mostly from oil which can only be priced in US dollars. As the price for oil rises, it will take more dollars to buy the same amount of oil, thus push up the price of the US Dollar. With oil at $135 per barrel, it now takes $11,475,000,000 per day in dollars to supply the world, that’s twice as much as just a couple years ago when the word worked with $60 barrels. Read more…
In this wild and unpredictable market, the forest for the trees approach of taking investments in sectors rather than individual stocks is certainly showing its strength. The up and down markets of today can be ridden out with this approach that not only have logical appeal, but plenty of evidence to back it up. Quite frankly, individual investors are horrible at picking individual stocks and would instead get the same return from investing in the sector rather than the company. Read more…
News abound of a 300,000 increase in the daily production of crude oil by Saudi Arabia and the decision by Congress to cut supply of 70,000 barrels per day into the US strategic oil reserve certainly made a few people happy but the end result is literally and figuratively a drop in the bucket.
An increase in supply by 370,000 barrels a day will have little to no impact on the current price of oil for a variety of reasons. First and foremost is that many countries enjoy the ability to print money. Even better is that the United States can print US dollars to use immediately for oil, other countries have to exchange their home currency first for dollars then buy crude oil unless going through the few nations that accept other currencies. Second is that China’s growth has created a consumerist China, no doubt that the rising middle class can afford new luxuries including personal cars and other energy intensive products. Read more…
Industrial output dropped again for the second time in 3 months down .7% from last month. Industrial goods are the lifeblood of the economy. Industry that creates products generates wealth and maintains a healthy cycle. Manufacturing dropped even more with a .8% drop from a month ago.
Wealth is created from generating more revenue than is needed to complete a good. In the case of automotive, Toyota buys $10,000 worth of parts that are merely paperweights until assembled. At that point it becomes a $15,000 car that generates wealth of $5,000. The customer gets a necessity, the producer gets a hefty profit. The net result is the creation of wealth which can only happen when a good is produced for more than it costs. Read more…
Hewlett-Packard is taking another large step to expand its horizons. The new deal with EDS will represent its biggest purchases since it bought Compaq in 2002. In buying EDS, HP hopes that it can expand its marketshare in the computer servicing sector. My thoughts, it adds plenty of shareholder value even if HP does take on some debt to finance the acquisition. Read more…
The long term trend is definite. The big bankers are largely dependent on central banks to back up their own poor investments with bailouts and other solutions such as liquidity loans and collateral for treasury transactions. While these decisions ultimately hurt the taxpayer, this kind of benefit has been particularly beneficial to the big bankers. Small and regional banks are unlikely to receive any credit or help from the Federal Reserve though large banks readily get huge handouts for the greater good of the people. Read more…
Coca-Cola enterprises works alongside The Coca-Cola company to wholesale its products. It buys the product from Coca-Cola (KO) and resells it. Rather than the original company controlling from top to bottom, CCE is able to profit from emerging markets and sell at a discount to the larger manufacturer.
In my opinion, Coca-Cola Enterprises (the distributor) has plenty of exposure to emerging markets which makes Coca-Cola so profitable. While I do like the original manufacturer, I believe that CCE provides a better investment and exposure to the markets around the world. Better yet, CCE is selling at a huge discount from just this January when it topped $27 per share. Though the company is limited in its horizons, particularly due to the fact it must buy from KO to resell to other markets, it maintains hope for growing markets through its wholesale distribution. Read more…
Bill Gates came out today to say that Microsoft will develop its own search engine marketing program. Google and Yahoo operate their own, but Microsoft has been falling behind its competitors. Google leads the way, nearly all of its profit is derived from its search engine marketing program. Yahoo has a similar program, still in beta, that produces some revenue but has very little marketshare in the Google monopoly.
This represents a much better deal for Microsoft shareholders and customers. Yahoo wanted a nearly 100% premium over their pre-bid price, far too much to pay for a company slowly losing marketshare. Not to mention that Yahoo’s own search engine program is still years behind Google’s which works with millions of webmasters around the world. (Yahoo’s is restricted to US residents) Read more…
Scott’s Miracle Grow was in the mid $50s in 2007 and now its trading down at $30 per share. Though the company recently announced that it would be recalling four of its products, the long term credentials look no worse today than when the stock traded at $56 a share.
Today the company announced that four products are under recall. Two of which are improperly labeled and the other two weren’t yet registered with the EPA. While this does cause some short term troubles, the best time to buy in a good investment is when its cheap. The stock lost 10% on news that hardly affects the long term prospects, at this price, SMG is a great investment. Read more…
Now that the dollar is its cheapest in quite some time, 50% discount to the Euro in just 5 years, there is some great room for foreign companies to start the buying spree. The market slowdown and minor correction is likely to start off the investment from foreign investors. Stocks, by price earnings multiple are the cheapest in years, a lower dollar makes that proposition even better for overseas investment.
Iran finally stopped selling oil in dollars, which will further lower the demand for greenbacks and as a result, their value on the open markets. The Japanese buy a considerable amount of their oil from Iran, and are now contracting to buy oil in yen rather than USD. While Japan has been buying up a large portion of US debt and dollars, the buying will likely slow or stop as they have no need outside the realm of oil. This leads me to think that Japanese buying in the US markets will explode. The US dollar reserves of Japan will likely turn to US securities, as the dollar buys little else around the world. Read more…
