Archive for August, 2010
Is a “Jobs Bill” Enough to Boost the Economy?
By Jared A Levy
In listening to the President speak yesterday – after he got the audio fixed- I couldn’t help but wonder if:
1. A jobs bill will really have a significant impact
2. Small business owners are even really aware of this bill and are indeed waiting to hire based on its passing? In other words, will “holding the bill hostage” deter these business owners from extending job offers?
Here is the transcript.
The businesses of investing and trading both have their complicated moments, as does the analysis of economic trends. But I do believe there are some major problems that actually have a more simple solution. Sometimes (in this business especially) many of us tend to think that a solution, method, or path to success must involve layers of complex analysis and in turn very complex solutions. I like to try and reduce things down to the simplest terms any time I can and relate a seemingly large situation or problem to something I can wrap my head around.
From Smart Investing Daily – Bubbles
Don’t Get Trapped by Market Micro-Bubbles, the Silent Wealth Killers
Today’s article is about market bubbles. Right now, you’re probably wondering why I am talking about market bubbles when the S&P 500 is trading down 6.5% since the first trading day of January this year, and down 33% from the 2007 highs. On top of that, home prices have fallen 30% (on average) to 2002-2003 levels, and unemployment is nearly 10%. Frankly, most of the globe is struggling to pay its bills. So doesn’t all of this mean any kind of market bubble has burst? Well, the answer is, not all of them.
Even in tough economic times, when everything seems (and maybe should be) cheap, investors will always find investments to pile into, even if they are short-term bursts, which can easily cause micro-bubbles. I call them micro-bubbles because these market bubbles probably won’t be on the front page of every newspaper or the focus of your nightly newscasts, and they may not even last that long, but they are out there and can hurt you if you buy near the top. What is most interesting is that these micro-bubbles are formed by investors who are sometimes looking for “safe-haven” investments, because they are fearful of corrections in the major markets like the S&P 500 and housing. Even safe havens can be a dangerous place to lurk sometimes.
Just When You Thought Things Were Looking Up…
By Jared A Levy
Watching yesterday’s market action, I realized that we are indeed in a bearish trend. I noted this a week or so ago in my article referencing technical indicators that were recently violated to the downside.
As the S&P 500 Index (SPX) continues back toward its July lows, which are just above the 1,000 mark (1,010.91, to be exact), many technical analysts – including me – are concerned about a continuation back to that level. There currently doesn’t seem to be much technical support from the current SPX price down to the July low.
Ever since the dreaded “death cross” that occurred in July, I have been monitoring the price action of the SPX (partially to check the validity of the cross). After the cross occurred, which you can see in the chart below, the index actually rallied.
The 200-day simple moving average (in yellow) crossed above the 50-day simple moving average (green) early on. The exponential 200-day (red), crossed the 50-day later in the month. Regardless of which trendline you prefer, the index will view these cross points as levels of potential resistance.
Options Trading Pointers: Pitfalls to Watch
by Jared Levy on August 26th, 2010
One of the toughest things traders can do is admit defeat and just exit a losing trade, especially when they or their families are depending on trading income to live. From the perspective of market pundits or advisers, it can be even worse. Not only does their livelihood depend on trading success, but others are looking for guidance as well. One’s trading track record then becomes an even bigger matter of ego and credibility. Trust me … I have been there.
Another problem many of us face is not listening to what our gut is telling us. From the time I started trading, I have tried my hardest to stay in tune with my emotions, my money management, and my risk. I’ve also always tried to stick to the guidelines I set for myself at the onset of the trade. From time to time, however, I certainly break the “rules”… it’s inevitable.
I have never been a big risk taker (in the markets, anyway). Part of the reasoning behind this is that I recognize my faults and realize I am human. I certainly allow greed to sometimes control me but ultimately I need to be able to control myself. In situations where my back has been against the wall because I had no other choice, I couldn’t let my account fall apart. I needed to be able to just stop the bleeding, take the loss, and move on.
With large positions and big risk, you may have so much on the line, you bet big with the intentions of winning big. When the trade goes against you, the loss may be too big to stomach, forcing you to hold on. Then the spiral gets worse and worse until you either finally exit (in order salvage what is left of your account) or worse, the position expires worthless, leaving you with a fraction of what you started with, only with shattered confidence and reluctant to follow your plan in fear of reoccurrence.
Having a manageable* position comes in handy when you need to hold onto a position that may be oversold and likely to recover. *”Manageable” means that normal variations in the position on a daily basis are not driving you (or your significant other) crazy or compromising your financial health.
From Smart Investing Daily – Housing
How to Earn 18% Without Buying a Single Stock
Monday, August 23, 2010
I recently put one of my townhomes on the housing market to sell. It has been completely remodeled and is in a great location at a price that is the lowest in the area and by far the cheapest when compared to similar units in square footage, location and finish out. (No, I’m not trying to sell you my home.)
I have marketed my home on every real estate website out there and even lowered the price of my unit to the cheapest in my building. The home is located in one of the densest and most desirable areas of Dallas, Texas. Even after all that and 40 days on the market, I have had one showing. I’m not looking for pity at all; in fact, taking this frustration in stride I realized there are some real deals to be had out there.
You see, I am also looking to buy another property and boy, do I have a selection, including penthouse condos in the nicest part of town that were once selling for $300,000 and up are now priced below $120,000 in some cases. The plethora of inventory and the current weak state of the American consumer and would-be homebuyer have created an enormous opportunity for those who have a little faith, knowledge, patience and willingness to look for value in the housing market.
From Smart Investing Daily
If You Like Gold’s Rally, Silver May Not Be Far Behind
Wednesday, August 18, 2010
Last week I wrote about how gold may not only be a great investment for the short term (it’s up another $20 since my article) but also has excellent prospects for the long term because of its beauty, versatility, industrial use and inflation hedge. Silver has many of these properties as well and at a much lower price, but before you get all excited about gold and silver, there are some things you need to know about these two precious metals and how they are related.
A Little History on Gold and Silver
Is the American Consumer Doomed?
By Jared A Levy
I believe the answer to the titular question is, “not totally.” There are glimmers of positivity, at least in some areas. Earlier this week, we got a look into charge-off rates from the major credit card issuers and the news was positive overall. Discover, JP Morgan Chase, American Express, Bank of America, and Capital One all saw reductions in their charge-off rate.
In the first quarter of 2010, the industry average charged-off rate was just below 10% of all balances. Back in the second quarter of 2007, that rate was about 3.8%.
The trend has moved lower with all the large credit card lenders. AMEX has the least amount of overall charge-offs among the major companies, with its rate at 5.5%. Details of the report are here.
What is the charge-off rate?
We all know that if we don’t pay our bills, after a certain amount of time (some very forceful letters, phone calls, and potential fees), creditors such as the aforementioned banks will either internally or externally attempt to collect the debts owed to them. Sometimes, a third-party debt collector may act on behalf of the creditor for a fee.
In other instances, the creditor will “charge-off” the debt that is owed to them and perhaps sell that debt to a collection company for pennies on the dollar. The company will attempt to get as much as they can (they will usually start with the face value of the debt along with any fees or interest that are associated). This process usually begins after about 180 days.
General Motors (GM) Returns to Market (Don’t Get Lost in the Pink Sheets!)
By Jared A Levy
MTLQQ – “Motors Liquidation Company” – is the somewhat cumbersome ticker symbol for the entity that was set up to liquidate General Motors’ assets in bankruptcy. It is in no way shape or form connected to the “new GM” that will begin trading later this year. According to Reuters, this new GM will be dually listed on the New York Stock Exchange as well as the Toronto Stock Exchange between late October and Thanksgiving of this year.
The preliminary GM initial public offering (IPO) filings have taken place. This is expected to be a relatively large offering with some estimates above the $20 billion mark (although this is still unknown). The company will also reclaim the old “GM” symbol (naturally).
Understand that the IPO of this new entity is almost like bringing a new company public with only half a year of earnings data to consider. Since restructuring was complete, GM has released just two quarters of earnings data. Remember, this company was on a trajectory for complete failure before being saved by the U.S. government/taxpayers and others. There are arguments on both sides of this offering. Some are projecting success, while others think it couldn’t be a worse time to bring this company to market.
