The Stock Nerd

The TRUTH: John McCain’s an economic idiot

Stock Nerd — Mon, 20 Oct 2008 02:16:19 +0000

As you may or may not have noticed, John McCain’s campaign has taken a down turn along with the spiraling economic situation in the past month. Do we really want an indecisive president who changes his positions in the economy on a near daily basis it seems? Is he schizophrenic? Let’s take a look at his various statements in the past MONTH alone (If you trail back to January 2008, you can find even more conflicting statements):
1. September 15th - “You know,” said McCain, “there’s been tremendous turmoil in our financial markets and Wall Street and it is — people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult time. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government.” Check out the full article here.

2. September 24th - John McCain wants to suspend his campaign! Why? because of the “historic crisis in our financial system,” said McCain. Wait, I thought he said that the economy was fundamentally sound only 9 days ago? It seemed like McCain was trying to make up for his “fundamentally sound” statement obviously. That clearly backfired on him also! It DID in fact seem more like a stunt to most people than anything. A pathetic attempt to try and convey his “understanding” of the economy when he clearly does NOT. You read more about it here.

3. October 14th - YET ANOTHER Proposal! AND more and MORE! I can’t seem to dig up all the articles, damn those news search engines which can’t find me one news article for everyday regarding one topic (I get 100s of results instead). If you’ve been following the campaign though, you will know that he keeps making changes the past few days to his economic plans, especially with his mortgage plan to save the middle class. /Start Sarcasm After all, he is the “middle class savior”! He can clearly relate with us, since most middle class Americans have NINE HOMES and loads and loads of money. /End Sarcasm I’d like to add that Obama may be rich now, but he was one of us up till a few years ago. He’s had actual experience in the recent middle class world.

Do we want to hand our economy to a guy who can’t make up his mind?

- The Stock Nerd

October 15th Market Outlook

Stock Nerd — Wed, 15 Oct 2008 08:40:00 +0000

Just thought i’d throw out my predictions for Wednesday, October 15th, 2008 It’s been fairly hard to predict what exactly is going to happen in the market the next day due to the extreme volatility lately, but my personal take is that we will see the market decline overall. The earnings reports tomorrow will most likely bring the market back down to the realities of the crisis.

The following major corporations will be posting earning reports for the 3rd quarter tomorrow:
eBay
JPMorgan Chase & Co.
Wells Fargo & Company
The Coca-Cola Company
Delta Air Lines, Inc
You can get the full list here.

Should have another post tomorrow, be on the look out!
- The Stock Nerd

Why is everyone so furious about the $700 Billion Bailout Plan?

Stock Nerd — Wed, 15 Oct 2008 00:15:40 +0000

I know it’s a bit late to talk about it, but I feel it’s important to share my take on the bail out plan. So, why the anger? I mean, it’s sort of understandable because it puts our tax dollars on the line, BUT it must be kept in mind that WE, as Americans, helped get ourselves into this damn mess by living above our means.

I didn’t cause any of this, why am I being punished?!
You might say, “My family and I most certainly didn’t cause this mess because we’ve always payed our debts on time, why should I be punished?” This is a rather common complaint and if that’s what you’re thinking… trust me, my family and I completely feel you as we have ALWAYS paid everything on time in full amount. Fact is, if we’re going to get through this financial crisis, we must be united as a people. We must be willing to sacrifice for the good of our country as citizens/residents of the United States of America.

Financial companies are pointing fingers at the American people
Now, the Americans that are living above their means are part of the blame, but we can’t turn a blind eye to the companies who gambled by providing loans/credit with a high risk of default to these Americans. They have no right to point fingers at all. Simply put, the greed of the financial companies cannot be ignored.

Bailout plan or not, billions of dollars were going to be provided to companies anyways
The bailout plan just lays out a specific amount of money to provide to company, which gives investors/companies a certainty in government intervention when necessary to keep the company functioning. It’s just a security, which puts faith in the minds of the investors/companies. With or without the bailout plan, the government was going to hand out billions of dollars either way, as noted with AIG.

How is this bailout directly helping ME?
The idea of the bailout plan is to halt banks and other financial institutions from crashing to protect the consumer/people of America. Think about it, if we had a major bank crash like JP Morgan Chase Bank, a lot of American’s citizens money would be tied up and it would be a CRAZY, HUGE mess. This is more so important for the small banks than the larger banks (JP Morgan Chase & Bank of America come to mind) who will likely ride this crisis out and end up benefiting from it (since they’ve already both dissolved at least one large financial institutions thus far). The bailout will also help prevent a freeze in credit, which would be devastating for the economy (many businesses count on credit to run, including mine). For a normal consumer (non business owner)… think car loans, mortgages, credit cards, etc. Credit is a very important part of the economy for everyone. I think that the above paragraph provides the big picture regarding you (and everyone else) and credit, but if you need any more clarification, please let me know and i’ll create a seperate article getting into the specifics.

Are we going to end up paying everything we lend?
Definitely not. The idea is that if it works perfectly, it will all be paid back. Of course, we don’t live in a perfect world so there is definately a chance it might not work as intended. But chances are that the government will receive a large portion of the $700 billion back. This isn’t the first time the government has provided bail out money to large companies (think U.S. Savings and Loan Crisis of 1989).

I think this addresses most of the questions of the common people, definately leave comments so I know what to clarify or expand upon.

- The Stock Nerd

Before the stock market opens!

Stock Nerd — Tue, 14 Oct 2008 12:12:09 +0000

This is just a VERY early morning post that I want to get out before the stock market opens today. The stock market opens in 1 hour and 33 minutes (while i’m typing this). Taking a look at pre-market data, it seems the stock market is going to most certainly open with some pretty big gains. Lately, the market has been setting historical records all over the place. In fact, yesterday the Dow Jones Industrial gained 936.42 points (which is an 11.08% gain!), which is the most ever since the Great Depression. Although it seems like the market is gaining some ground, I heavily doubt that is the case. This is a huge mess that we’re in, and we could very well see the gains posted easily reverse. I don’t want to scare anyone here though, that’s not what i’m trying to do at all. I just hope people will be cautious to buy right after a day of record breaking gains. Ever heard of the suckers rally? I’m going to link you guys to an article from February 2008 that is a favorite of mine. The guy who wrote it pretty much figured out what was going to happen. It’s perhaps the best prediction i’ve seen to date regarding the economy long term.

I should have another post later today, most likely regarding what we see this morning in the market.

- The Stock Nerd

Let’s buy the Dow Jones!

Stock Nerd — Mon, 13 Oct 2008 05:01:33 +0000

So, this week I was talking to my dad about how the Dow Jones Industrial has lost 40% of it’s value in a year and he promptly asked how he could invest in the Dow Jones in the near future. I told him that there are brokers that will invest in the individual stocks that make up the Dow Jones or he could even do it himself if he really wanted to, but he was still lost. He said he didn’t want to invest in individual stocks, only the Dow Jones. A large proportion of people who generally aren’t market proactive and don’t care for the market don’t realize that the Dow Jones is actually a collection of 30 stocks that represent 30 different large industries to predict movement as a whole. That’s what it is, an index which indicates market direction (and it does a good job at this obviously due to the selection of stocks). If you’re just getting into understanding how the stock market (and now IS a good time to understand the stock market) works, check out one of my previous post: What are the stock market indexes?

In the past weeks, trillions of dollars of wealth has been lost in the stock market and it’s really important for us to know why. I will be including more articles with basic information on the stock market every so often to help heighten understanding of the stock market during this tough time. The most important thing to remember is, don’t panic.

That’s all for now.

- Stock Nerd

I’m still a firm believer in Apple

Stock Nerd — Sun, 12 Oct 2008 19:19:19 +0000

In my May 28th post, I wrote about being more aware of your surroundings in daily life. When was the last time you walked into an Apple store if you have one around you? Have you gone frequently enough to notice that it is STILL packed everyday even with this global slowdown? Apple is STILL packed and people are STILL purchasing left and right! Now, that doesn’t mean you should just buy the stock based on that because there are so many more considerations to be made, such as future promise. So, what does Apple hold for us in the future? Is there any competetion that can get in the way? After doing my homework on Apple and picking up a few things from the news, i’m still a firm believer in Apple. Why? Because they do their homework too! Based on the information I could find, Apple still has potential to grab a larger share of the personal computer market and the iPods rally isn’t over yet. The iPod is still being seeked by consumers, and I personally don’t think there will be a “demise of the iPod” headline anytime soon. Apple has clearly shifted their focus to their PCs though, which have been boosting in sales consistently every quarter. In fact, if you go to a major university, you will notice that Apple PCs are becoming more prominent as the computer choice. The fact that Apple has realized that it needs to pay more attention the PC market is very important to me because it shows that Apple has a sense of direction. It’s not going to die out just because its hottest item that made them hot is beginning to “get old.” In fact, just a few moments ago, I ran into an article confirming that Apple will be releasing it’s new MacBooks on Tuesday, October 14th, 2008 (Read more about it here)! As far as competetion for Apple goes, the only major concern I have is that the long anticipated Google Android phone has finally been released. Although the iPhone should still be a preference for basic users who prefer sleekness and ease of use (which the iPhone very much delivers), users who are more sophisticated with their technology might glimpse at the Google Phone twice before making their decision. In fact, i’m still on whether I want an iPhone or a Google Phone. But aside from that, Apple is doing fairly strong and realizes it’s weaknesses that it needs to work on.

So, why did Apple stocks plummet?
If you haven’t noticed, it isn’t specific to Apple at all. Even Google and other giant tech stocks (like RIMM) have lost much of their value. Apple does have a problem in the fact that it currently generates most of it’s revenues from North American and European countries, but I believe this will be the perfect time for them to spread their influence in other parts of the world. With the scary economic outlook ahead, i’m sure we will see slowed consumer spending all around, which includes Apple. The sell off in the market hasn’t helped either. Once we start seeing more confidence in the market (and i’m not sure how long that’s going to take with all the panic lately), I believe Apple will recover easily to at least $180/share. I currently don’t hold any stocks in Apple, but I will most certainly be purchasing in the near future.

Although i’ve been speaking prominently about Apple in this post, the general idea can apply to any company that is still doing very well. Stock prices are extremely low right now and it’s heaven for some investors (and hell for the ones who invested when the stock market was peaked). We may even see the stock market continue to plummet. I’ve read that the Dow Jones Industrial can easily reach 7,000 in the next few months in various reports, but i’m not sure what to believe just yet. That’s all for now.

- The Stock Nerd

Featured: Oil & The Stock Nerd

Stock Nerd — Sun, 12 Oct 2008 08:33:42 +0000

As you can see from my past post, I watch the NYMEX Crude Futures on a daily basis, even when the market is closed (yes i’m obsessed). Just to share, my favorite website to check on energy prices is right here: http://bloomberg.com/energy/. I definately like the fact that it’s laid out nicely all in one page. You should consider bookmarking it if you love checking the price of a barrel on a daily basis like me.

In my featured article, All Eyes on Oil, I pointed out what I believed were the reasons for the increasing barrel price. Most importantly, I pointed that the current market prices at the time ($133.26 on May 27th, 2008) were very unjustified due to speculation (Point 6!). Furthermore, I stated we would certainly see a correction in oil prices down to $110/barrel, which I believe would still be a good estimate if it wasn’t for the deteriorating economic conditions that have recently unraveled (more on this in a later article!). Well, here we are and oil prices have most certainly adjusted, but far more than they should have (who said speculation can’t go the other way?).

Here’s a chart to show you how quickly oil barrel prices have fallen in a short period of time:

As you can see, oil prices have plummeted in an extremely short period of time, and my personal opinion is that the low price of $77.70 is not justified. You may have noticed that i’m all for lowered gas prices and that I HATE when the large firms predict oil barrel prices to be insanely high in the near future. Well, I most certainly still have the same belief, but I’ve got a few of my own thoughts to share about the extremely low prices.

What do I think?

(I will be following the same format as the All Eyes on Oil post)
1. The rising dollar has most certainly assisted in lowering the prices of crude since it was generally being used as a hedge against the lowered value of the dollar. You will notice that there is some sort of correlation between the strength of the dollar and oil. The stronger the dollar, the cheaper oil gets (and vice versa - at least in recent history - this is obviously subject to change once other factors come into play such as peak oil whenever that comes around).
2. Developing nations, such as India and China, are actually having slowed demand due to the global slowdown. This is a very shocking slowdown in the US and has spread globally. Once investors realized that it was going to affect EVERYONE, oil prices began to drop even lower and lower.
3. I think we can agree that the demand of oil is still clearly inelastic since our world depends on it to function efficiently this day in age. BUT, due to the global slowdown which has lowered overall demand of oil worldwide, we have noticed a huge decrease in oil prices. You better believe that once we’re out of this slowdown, oil prices WILL bounce back.
4. Conflicts are still happening just as often as before. In fact, Nigera is STILL having its oil pipelines attacked. Fortunately, investors aren’t as swayed by it as they were from April 08-July 08.
5. Although long-term supply concerns still exist, the world is focused on what seems like STRICTLY demand now. Just like before, we’re still avoiding the full spectrum of fundamentals. For the oil prices to be correct, both supply and demand need to be taken into consideration. All supply concerns seem like they’re being avoided at this point in time (oil prices are continuing to fall even though OPEC has cut production of oil and will obviously continue to do so), similar to how it seemed like all demand concerns were being avoided by investors in June 2008. When we start bouncing back and the world takes a good look at the fundamentals again, we won’t be able to sustain the current prices.
6. In the previous article, I stated that speculation was heavily inflating the price of a barrel of oil. Now, I believe that speculation is heavily deflating the price of oil. The problem with speculation is that eventually, focus will shift to supply and we’ll likely be on an upward movement once again. I won’t be surprised if we hit even $60/barrel before we see prices bottom out.
7. With the lowered gas prices, alternative energy solutions have slowed. It sucks. I think if we want to see reduced oil barrel prices for an extended period of time, we need to be on a continuous search for solutions no matter how low the price of oil.

Based on the factors above, I believe that we are certainly seeing oil prices that are far too deflated. I still believe we should be around $110/barrel if all fundamentals are considered. The current global slowdown will most likely hamper gains in oil prices until it is over. The problem is that once the global slowdown ends, oil will be back on its upwards trend and speculation will turn around! All we can do for now is hope that the search for alternative energy and more efficient cars continue so it doesn’t hit us as bad in the future. It’s our responsibility as humans on this planet to help ensure we aren’t going to be paying insane gas prices in the future due to our lack of searching for alternatives while gas prices were lowered.

By the way, if Ford and GM are still around in 2010, they should be releasing cars that are around 60 mpg from my understanding. We should see some models from Honda, Toyota, and the other major car manufacturers soon to compete with that also.
Until next time!
- The Stock Nerd

P.S. Feel free to share your thoughts in the comments section.

It’s been a while!

Stock Nerd — Sun, 12 Oct 2008 07:51:37 +0000

Well, first off. I want to apologize for disappearing for such a long time. It’s been almost 4 months, but i’ve been HEAVILY watching the markets on a daily basis since then, I just haven’t taken the time to post. Just to let everyone know, there will be updates very shortly!

Viva La Democrats!

Stock Nerd — Mon, 23 Jun 2008 20:08:30 +0000

Just read up an article on Yahoo.com which I thought would be great to share here.

Here’s a quick summary:
The Democrats are offering a bill to curb oil speculation rather than focusing on removing the moratorium on off-shore oil drilling like the Republics. Now, I will say i’m more of a guy who supports chunks of each party, but I think the Democrats are the best political party in my book. Curbing oil speculation is much smarter than polluting the environment (which the Republics don’t even seem to care about right now). Michael Masters, belonging to the Masters Capital Management, has said that with we could see oil barrel prices fall to $65 to $75 in 30 days with greater regulation! If you read the article, you’ll see that quite a few analyst agree. According to the article, speculators now control 71% of oil on the market. As derived from the article, speculators only controlled 39% of oil on the market only a few years ago. I’m on the Democratic side in this, I think the benefits outweigh the possible negatives.

Check the full article out here:
Democrats offer another bill to curb oil speculation

- The Stock Nerd

My positions (or lack of) for the month of June

Stock Nerd — Mon, 23 Jun 2008 19:11:17 +0000

Just thought i’d share some of my personal performance this month. It’s not too hot and to tell ya the truth, I haven’t purchased any stock this month.

Stock 1: Yingli Green Energy Holding Co. Ltd. (YGE)
Business summary:
“Yingli Green Energy Holding Company Limited and its subsidiaries engage in the design, development, marketing, manufacturing, installation, and sale of photovoltaic (PV) products. Its products include PV modules, integrated PV systems, multicrystalline polysilicon ingots and wafers, and PV cells. The company sells its PV modules under Yingli brand name primarily to installers, PV system integrators, property developers, distributors, and other value-added resellers principally in China, as well as in Germany, Spain, Italy, and the United States. It also sells PV systems to mobile communications service providers in China. The company was founded in 1998 and is headquartered in Baoding, the People’s Republic of China.”

I purchased Yingi right before their earnings release in May. I was fairly certain they over performed market expectations, and I was 100% correct! I was profiting around $200+ within 4-5 days after buying it, but it started to decline soon after (and I didn’t catch it since I haven’t watched the market on vacation too much - bad idea).
Purchase price: ~$21
Current price: $19.15

Luckily, I only bought about $1000 worth of YGE stock because that’s all I could afford to lose. (Reference Tip #1 in the 10 Investment Tips article). Luckily, this hasn’t hurt my portfolio too much and i’m still $400 positive for the month of May and June combined (keep in mind I haven’t traded in June!). I’m leaving my money in YGE for now, I think solar stocks will rebound in the near future, especially with increasing oil prices.

Moving on to my second position….

Stock 2: Lions Gate Entertainment Corp. (LGF)
(Everyone knows these guys for movies - but here’s a business summary that states everything they do generally.)
Business Summary: “Lions Gate Entertainment Corp. operates as a filmed entertainment studio. The company offers motion pictures, television programming, home entertainment, family entertainment, multiplatform programming, online video entertainment, theatrical distribution, video-on-demand, and digitally delivered content services, as well as film, television, and home video services. As of March 31, 2008, it distributed a library of approximately 8,000 motion picture titles and approximately 4,000 television episodes and programs directly to retailers, video rental stores, and pay and free television channels in the United States, Canada, the United Kingdom, and Ireland; and through various digital media platforms, and indirectly to other international markets, its subsidiaries, and various third parties. Lions Gate Entertainment Corp. was founded in 1986 and is headquartered in Vancouver, Canada.”

I purchased Lions Gate Film after assuming that the summer would do the company well with all of the hot releases (and pretty much - summertime is a good time for the film industry). It hovered around in the high $9.00 range until recently and shot up. I’ll be leaving my shares in LGF throughout the summer.
Purchase price: ~$10.20
Current price: $10.38

I only bought about $500 worth of LGF stock because that’s all I could afford to lose. (Reference Tip #1 in the 10 Investment Tips article). If I was actively trading in June, I would have bought quite a bit more when it dipped to the upper $9.00 range. Too bad now! If it dips down again, I will buy.

Anyhow, those are my only 2 positions left currently. I sold quite a bit during the month of May (and it was a smart decision - sold Apple (AAPL) at $188 and it’s around $174 right now - I will definately buy this one again though.) I really need to start researching possible purchases for July. Gotta run again!

- The Stock Nerd