Do you know how much energy stocks have soared in the past 5 years? I don't know the exact averages, but you're looking at 30%+ average returns for more than a few energy mutual funds. Because of this, alternative energy have gone up substantially as well. I'm no expert, but common sense tells me that energy/alternative energy stocks may be vastly overvalued at this point. Also, this isn't like Google or Apple where people didn't known much, or were surprised with the results. For your second point, I don't agree with it one bit. You can sell stocks through a discount broker almost instaneously. Why would you need one with high volume to sell? I mean this should never be a problem unless you invest in some unknown/penny stock, which you're destined to lose anyway.
Right now housing market is very bad and no signs of getting better. Its not a safe thing to buy. I know this because I bought CFC (Countrywide) and I lost a great sum of $$. As far as Im concerned, when there are rumors about a recession, finance is probably the worst thing you can invest in.. In addition, I had some shares of alternative energy such as Coal and Natural Gas. As far as I know the TARGET PRICE for these coal are expected to be much higher in the future. http://www.reuters.com/article/marketsNews/idINBNG1628620080602?rpc=44 Many experts say that coal will be soaring.. and Ive kind of had this notion in my head for 4-5 months because my dad is in the oil business himself and he does stocks as well. As for high volume, I invest in penny stocks as well and Ive found out how hard it is to sell for a good price especially when nobody wants it or if the price isnt going up... and this is because of low volume. Before you try to discredit me, you should know that I actually do invest in stocks and that Ive been pretty successful lately with the advice Ive posted Before you try to discredit me because of my age,
it sucks losing money and trust me i've lost a lot along the way lol. but don't let that steer you away from any money making possibility. granted, i don't want to be in financials but if i see a low risk good reward opportunity then i will take it. not sure why you bought CFC but i hope lessons were learned. further, it is not rumors of recession it is valid fears of a long drawn out recession. you need to think about what is already priced into stocks since they put a price on things that might happen in the future. if you find something where the worst fears are already priced in and then a catalyst comes along to change that sentiment then you need to be ready to act. doesn't come along everyday but it's good to know when it does. anyhow...my point is that it is a good idea to have some clue which of the financials are poised to move one way or the other when some game changing event comes along. i agree but be cautious. the coal stocks have already been on insane runs and it makes it tough to start buying in here. i imagine your dad is cleaning up on energy if he has been in it thru this whole bull run and congrats to him if he has! i remember i used to follow them. i'm glad i don't trade them anymore. yes i know cheap stocks have huge percentage swings but that is just too risky and a lot of risk does not mean more reward. low risk/high reward and good percentage chance of working is the way to go. further it sucks getting stuck in a lot of shares of something that is illiquid. it causes me to make poor decisions especially if something is ripping against me or i think i don't have an out for my position. sometimes i do well in thinner higher priced stocks but thin and low priced = suck. you are young and still have a lot of work to do but it's nice you are starting younger than i did. hopefully you will keep an open mind and try to continue to learn about what drives everyone in the market and why things react the way they do to certain situations that occur. oh and don't fall prey to the bs retail trader excuses to how things work in the market. if you want examples of guys who are on tv that are amazing with their knowledge of how the market works then watch rick santelli and art cashin. they know whats up. pick up a barron's too. another great little newspaper. realmoney.com also has some very good commentators as well but it is a pay site but well worth it.
Yea I made a killing in Peabody. Not a fan of alternative energy. Not even a fan of oil, I just think it's too overheated right now. My risky contrarian picks are HOG and SBUX. I also like AMZN. And I wouldn't touch the financials, unless you have a 3-5 year view, and even then I would just buy the XLF, GS, JPM, or BAC. Those are the finance companies I trust. But even then I'd buy the xlf. I would put a little speculative money in YHOO, somethings going to happen there. And I like GE, a year out. It's a tougher market than in years past, and not something that you can just buy and let it fly. I heard a financial columnist once describe it as a running game, not a passing game, and I echo those sentiments.
and for swtsig...i would look to invest a nice chunk into brasil like radapharoah suggested. don't do it all at once if you can. i would look to dollar cost average in. if oil does get a nice pullback here then EWZ (brasil etf) should pullback as well giving you a nice entry area. they are truly developing into a big time economic power and they are completely poised for major success over the next 10 years.
Don't agree with some of the above posters. Credit problems, gas prices, food prices, liquidity are going to continue to be a problem for several years. We are already in a recession when you adjust for inflation rates and it will like continue that way for a few more years. The market is very unsure right now and investing in the broad market is a bad idea. There's no reason to believe a traditional defensive stock or a stock with high yield is going perform well at all. The S&P has seen more downgrades in the last half year than in the longest time and again, we're going to see weakness in the broad market; this time period is not the same as last generations where betting on most blue chips gave a decent return. Just because a stock has a high yield doesn't imply it's a good defensive play. It could just as well mean the opposite - that the company is suffering from adverse earnings or even luring investors to keep its share price afloat. I will agree however that in general the small cap market has suffered because of the lack of liquidity and you don't really want to be betting your money unless you are doing your own due diligence. The hot sectors have been anything related to oil, energy, agriculture, commodities, and lately clean tech companies. Invest away then? You're probably a little late as this forecast has already been played out by the Street and most of these decent companies will be at 52-week highs. That being said, it still seems like the right play for the next five years. You just can't stop economies like Brazil, China, India, and others from continuing to enjoy cheap labor, incredible margins and an appetite to consume resources until they're up to par with the most wasteful country in the world per capita, our US of A. Whatever the stocks you're investing in, make sure it is off the the world's global demand (this does not mean necessarily a foreign market or company) that either is enjoying these gaping margins or a company that is sleeping in a bed of cash due to their ownership of some kind of resource.
I'm not discrediting you because of your age. Age really has nothing to do with a person's knowledge regarding stocks; just the investment styles and strategies. I pointed out that it's easy to sell stocks unless you go for "penny stocks", which are by itself, horrible investments. These are stocks rarely produce profits by educated guesses based on homework involved. These are more like gambling, since you really don't know enough of these companies. This is why they're "penny stocks". For your second point, analysts in wallstreet know more than we do about these companies, but they often do not have the required information. How many experts predicted the dotcom bust? How many expected the real estate bust before it actually happened? Not many. I have no idea when the real estate market will improve, but there are definitely more buyers now than a few months ago. When companies require more strict loans, it will lead to a decrease in buyers. However, the low prices should offset this. Therefore, in the long run, you will get safer mortgages for banks and the market will increase again.
Yea, Barrons did do a piece on GE a while ago, then the stock reported earnings, got crushed 10+%, and Barrons had to back it's original thesis. But looking at GE's chart, the thing's just getting hammered, and I think unfairly. It's a better company than that. A lot better than their new gem of GM(PS I haven't read their thesis on GM). But I'd feel comfortable buying and holding GE, especially at these levels.
And yes I'm an avid reader of Barrons, especially the editorials and their book reviews. Also they have a piece right after the tech section, it's a review on cool new gadgets, I love those things.
What investments are you holding right now? I agree with some of your points here, but the international index has actually been down as well this past year, following the US market. Energy has been soaring for the past few years, but I'm not willing to bet on it being a good play for much longer. For other things like commodities, they will probably go down when the market gets better. Right now nobody has confidence in the economy, but nobody knows how long this will last. When it does turn around and you're in the wrong sector, there is a huge opportunity cost involved. If you invested in the total stock market in 2003, you would have had phenomenal returns by just the average increase. This is why the safest play is always going to be for index funds. 90% of money managers do NOT beat the market, so why not invest in the market itself? Sure, you'll lose some gains for these hot sectors, but you'll less the losses as well.
ah well in this most recent barron's there was another note by michael santolli on GE just basically stating that it's yield and the ten year treasury are basically yielding the same. the last time this happened GE caught a nice bounce back in 2003. granted a completely different market environment but something to look at since GE's yield will grow but the ten year's will not. also he pointed out that immelt has continued to buy shares of GE on the open market and that he recently bought another $3.5 million worth last week.
When you talk about investing in 2003 in the broad market - we had the same problems but they weren't on the surface. The situation we're in now isn't comparable to then and I can't see how anyone can assuredly say the S&P 500 will even outperform a bonds or even a good CD rate for the next few years. Does that mean they won't outperform? No. But when there isn't enough evidence to play a certain strategy, you don't play it. You hold a position because you reduce the likeliness it is to gambling. You keep mentioning indexes - there are hundreds of thousands of ways to invest in indexes and each one is different. The reason I don't like indexes and financial advisors is because the holdings are transparent and almost all the research material you need is out there. If you are incredibly busy, sure, indexes and an advisor is just fine... but researching investments is something that really only takes a few hours out of a week. People invest in the first place because they want to beat the interest rate on their bank. That's at least 3-5% difference they're looking for. When you don't go for an ETF or a financial advisor, that's another 3-5% per year you could gain for not having to pay fees. Think that's not a big deal? That most likely results in an extra million or two by the time the average American retires. There's so much documentation on investing - don't be lazy and do it yourself. That is why I specifically said not to necessarily invest in foreign markets or companies, but just companies that are heavily leveraged in abusing the high profit margins abroad. When you look at China, Vietnam, India, South America etc... , you're seeing ~10%+ GDP growth per annum whereas most developed countries are hovering between recession and 2%. I do feel international markets will continue to outperform, but again, the real point I am stressing is that whatever you invest in, a company that is taking advantage of the discrepancies will outperform. Some names I hold am long in include FTEK, TEX, CPST and recently HOLX. However, my disclaimer is that one should never see someone else's holdings or recommendations and think they are right for them. You should always ask yourself what your risk tolerance is, what is your window for holding the stock, what your expected rate of return is and how that compares to the person's expectations.
When I talk about indexes, I'm not talking about the 500 indexes, I was talking about the more inclusive ones such as the Total Stock Market Index Fund from Vanguard. I see what you're saying regarding that they may not beat the bond rates for the next few years, but I was suggesting this as a long term strategy where the individual has at least 7-8 years to invest. The expense ratio for this fund is 0.19% and it has a 9-10% return since inception. If all you're looking for is to beat the 3-5% interest rates from the banks, this is definitely the best way to do it if you have some time. Even though the problems are not the same for different markets, the TOTAL stock market goes through various cycles, but will definitely grow over time. If you're looking to have some income or just invest with a short time-frame, then you'd have to what your risk level is. Bonds practically guarantee you beating the bank rates, but it's not a good idea for future growth. I also do not see the need for financial advisors, which cut into your profits. ETFs are special, but they trade a little too much for my taste.
The problem with investing in the general stock market for the amateur investor is that you have the odds set against you right from the start. There is so much short term trading based on inside information and manipulation, its crazy. I used to work at a equity hedge fund early on in my career and half the trades the traders would take would be from inside sources. These sources could be anyone from I-banks leaking news of an upgrade/downgrade to even things like what Cramer would talk about at night or corporate insiders giving us the heads up on merger talks. If you just watch the chart you could see a spike in price and volume about 7-10 minutes after receiving the news from either phone call or IM. Later I moved onto a commodity hedge fund trading desk (my current job) and I would say the playing field is much more level for the commodity traders. Basically trading in the short term is based on a few government reports out and weather patterns. No one gets this information ahead of time. After my stint at the equity firm, my view of equity markets was severely swayed away from ever investing in stocks again as an individual. My only investments in the equity markets are with other private firms that utilize such inside information.
China has some really good values right now. I like the following Chinese small caps: WATG, SORL, NED, and CHLN. All are trading at very low multiples and have incredible growth on their side. For those who like bottom fishing in deep value territory (i.e., stocks affected by the housing downturn and credit crisis, but will come back), I like AIB, FCFS, and CX. If you want big-time growth and are willing to pay the premium, I like MELI, GMKT, and NUAN.
Exactly, which is why its best to avoid finance/housing especially when the "analysts" are split 50-50 on whether a recession is coming or not. Technology isnt the "hot" thing these days and neither is consumer goods. why? Transportation costs raised because of high gas prices and inflation... and no signs that it will end anytime soon. I have a bit interest in Petrobas and China Sun Energy (CSUN)... and when the finance areas are really down and when oil prices hasnt gone down the past for a LONG TIME, its probably best to start looking into coal, natural gas or other energy methods like solar.
