Tuesday, January 20, 2009
Monday, January 19, 2009
When You Get This Strange Investment Phone Message, Run The Other Way!
Two years ago, many people whose first name was definitely not Tracy, came home after a long, honest day’s work to find the following strange investment phone message on their answering machine:
"Hey Tracy, it's Debbie. I couldn't find your old number and Tammy says this is the new one. I hope it's the right one. Anyway, remember that hot stock exchange guy that I'm dating? He gave my father that stock tip on the company that went from under a buck to like three bucks in two weeks and you were mad I didn't call you? Well I'm calling you now! This new company is supposed to be like the next really hot thing. And they're making some big news announcement this week. The stock symbol is PWRM. He says buy now. It's at like 50 cents and it's going up to like 5 or 6 bucks this week so get as much as you can. Call me on my cell, I'm still in Orlando. My Dad and I are buying a bunch tomorrow and I already called Kelly and Ron too. Anyway I miss you, give me a call. Bye.”
Now I know what you’re thinking: you probably wouldn’t fall for it. NOBODY WOULD, RIGHT? So explain this: before the messages were left on thousands of answering machines, this stock traded around half a dollar on volumes of ten thousand shares a day. As more and more people listened to their answering machines, the stock rose to seven dollars, with daily volume exceeding two million shares.
As regular readers know, the InsideAlpha strategy has generally taken the other side of the trade: patiently waiting for hyped stocks to rise, and then profiting from the downside. In the case of PWRM (which IA didn’t target), it didn’t take too long until that stock went back down, all the way to under ten cents a share. That’s what these stocks all end up doing.
In the same fashion, people usually try to convince me that nobody ever gives a second look at unsolicited email. Well, a recent study begs to differ.
Thorsten Holz, a graduate student at the Laboratory for Dependable Distributed Systems at University of Mannheim in Germany, recently studied stock spam with his colleague Rainer Böhme of the Technische Universität Dresden. After carefully analyzing 22’000 messages, they found that the average stock would rise 1.7% on the day that one or more e-mail messages referenced the stock; the more spam sent, the greater the increase in the price of the stock, in general.
Not all players are investing rationally. So what are you doing about it? You might get upset because this great little undervalued stock that you bought a while ago won’t go up because, you reason, investors are not as rational as you are.
Marc Mayor is the owner and chief advisor of Swiss-based Inside-Alpha. Mayor's Inside Alpha stock investment strategy has now verifiably beaten the S&P Index by at least 18% for six years running with 5 times less risk regardless of up, down, or sideways markets.
Sunday, January 18, 2009
The Covered Call Options Trading Strategy
The Covered Call Options Trading Strategy
A covered call option trading strategy is a strategy where you sell a call option against shares that you already own. For instance, let's assume you held 100 shares in company xyz and your outlook for these shares was that they may increase a little or decrease a little over the next say 3 months.
Rather than selling the shares and looking for a stock that you hope will increase in value at a greater rate, you could implement a covered call strategy.
So, taking the above scenario as an example, you could write a covered call, x number of strike prices above the current price of the stock.
Let's have a look at a few possible outcomes, assuming that you received $ 100 in premium for writing the call.
A. The stock increases in price a little over the next 3 months, but does not hit the strike price at which you wrote the call. Here you have gained 2 fold, as you benefit from the increase in stock price and you get to keep the $ 100, as the call has expired worthless.
B. The stock falls in price a little over the next 3 months. Here, you have lost money on the stock as it has fallen, however, this loss is offset by the $ 100 that you received for writing the call. It is possible that the $ 100 could cover all of the loss, or maybe even still generate a profit if the loss on the stock is less than $ 100.
C. The stock increases in price over the next 3 months and trades over the strike price at which you wrote the call. Here you benefit to a limited degree, as the profits generated from this move are limited, with no extra profits being generated above the strike price of the call.
The covered call options trading strategy is considered to be conservative in nature, it can be used if a person is looking for greater profits out of a slow / range bound stock, it can be used to purchase a stock at a lower price than it is actually trading at, it can be used as a hedge against potential losses, Etc, Etc.
A very profitable long term trading system can be built around the implementation of the covered call strategy.
Don Wright.
Which ? Trading System
Totally Independent & Unbiased Testing, Monitoring, Ranking Tables & Detailed Individual Performance Reports For Hundreds Of Futures, Stock, Options & Forex Trading Systems.
Top 4 Problems of “How to Make A Fortune on the Stock Markets” Books!
I'm pretty sure you have seen ads for "How to Make A Fortune on the Stock Markets" books for before. These books, seminars, and training courses claim to teach you how to properly invest in stocks, bonds, penny stocks, commodities contracts, etc. Their advertisements focus on the pleasure of trading stocks from the privacy of your home. You can buy or sell stocks anywhere you can access a telephone or the internet. You don't have to sell any products. You barely have to exert yourself at all.
So what's the problem with "How to Make A Fortune on the Stock Markets" books, seminars, and training courses. Are they just hype or can you follow their directions and get rich as the ads claim? Read on for the truth you must know about "How to Make A Fortune on the Stock Markets" books, seminars, and training courses.
The first problem is stock market training courses and how-to books out there are much like real estate training courses and how-to books: The strategies you'll learn in these programs will be anything but satisfactory. They'll tell you to "buy low and sell high." Duh! Anybody with a competent brain already knows this. True successful investing takes experience. To expect to pick the correct stocks, at the correct time, and to sell them at the correct time, as an uneducated beginner, is absurd.
The second problem is it's almost impossible to stay current with the market. There is just too much ground to cover on a daily basis: Too many articles and newspapers to read, too much software to run…it will all become too much. To top it all off, no one truly knows what makes the stock market fluctuate. This is why entire corporations are dedicated to analyzing and dissecting the market before making recommendations.
The third problem is the risk and the resulting stress it will cause you: The day you discover you have lost a few thousand dollars in a single instance is the day the ulcer in your stomach will begin.
The fourth problem is you lack the funds. It is recommended that have at least a $20,000 portfolio. Forget investing in stocks, options, mutual funds, bonds, etc. Get in the game if and when you can afford it, and proceed with caution. Buying a "How to Make A Fortune on the Stock Markets" book or training course won't help you get this money either. You need this money whether you are educated or uneducated.
Conclusion
There have been thousands of people who have fallen victim of "How to Make A Fortune on the Stock Markets" books, seminars, and training courses. People who simply want to earn an extra income from the comfort of their homes find themselves cheated by con artists who take advantage of their hopeful attitudes. No doubt there are legitimate companies out there offering real investment training opportunities. Unfortunately, home based business scams are at an all time high. It has become harder to find legitimate work from home operations. So, if you are planning on buying "How to Make A Fortune on the Stock Markets" books, seminars, and training courses, use common sense and the guidelines above to avoid falling victim to these infamous scams!
Joe Cooper has researched and experimented with over 275 home based business opportunities over 25 years. Discover more information about "How to Make A Fortune on the Stock Markets" books, seminars, and training courses at
best-internet-home-based-business or internet-home-based-business
Saturday, January 17, 2009
PC Wars-The Saga continues
At one time Dell Computer was one of the extraordinary growth stories in America. Michael Dell could do no wrong. There then comes a time in every entrepreneur's career when he or she has to recognize, it's time to step aside and let new, historically proven managers come in and run with the ball.
Michael Dell stepped down two years ago, and turned the ball over to Kevin Rollins who runs the company on a day to day basis. Dell either has to be kicking himself in the butt for turning the reigns over to Rollins, or be happy that he himself is not on the firing line at the moment.
Dell was innovative in selling directly to the consumer as a business model. It worked brilliantly for years. The firm had no equal in the direct to consumer market. Dell also was encouraged to sell big time to the corporate market. All great technology oriented growth companies hit walls. My work shows that it tends to happen about 7 years or so into the growth process. The exceptional growth company can take longer before it hits the wall, and has to reinvent itself. The word reinvent is the correct one to use.
Microsoft has now entered such a period, having become a cash cow as opposed to being a growth company. In my history of technology investing which goes back 35 years, I have never found a growth company that has not hit a wall somewhere in the growth process.
What happens is that companies at some point tend to rest on their laurels, their past successes and glories. They become so committed to what they are doing, that they become incapable of seeing the next revolution sneak up behind their backs and challenge them for supremacy. It always happens and it's always the same way with the same result. Never have I seen a single growth company that could reinvent the revolution. It's always some new kid on the block that spearheads the next new thing.
The consumer has probably now reached a stage where he wants to walk into a store and see what he's getting for his money as opposed to just reading specs on his computer and talking to an outsourced person in India who is absolutely clueless about American culture.
In the last five quarters, Dell has missed on the estimates that it has given Wall Street. In the last quarter there has been a 51% decline in quarterly profit, and now a recall on 4 million laptop batteries to boot (no pun intended). This is not the way to run a major Fortune 100 company.
Things always get worse before they get better
When a growth company hits the wall and starts to decline, the decline usually has to go for quite a while before a new management team takes the reins and starts to engineer a midcourse correction. This is like turning an aircraft carrier around. First you have to make the decision to go another way. You then have to get everybody else on board quickly. It takes several miles to get a carrier turned around at sea; it's not easy for corporate management to do it either.
Dell will have to re-examine its direct to customer sales model, because right now Hewlett Packard is eating them for lunch. The stock is down 60% from its high for good reason. The stock market is telling you something. Is anybody listening down there in Texas.
Dell bet big on the corporate market, and completely failed to take into account the changing sentiments of the consumer market. Dell needs to grow bigger outside the United States. Everyone agrees that the US market is not really a growth market at the moment. The firm must increase international sales to a point where it's growing 15 to 20% internationally. I don't see it happening.
Somebody and not Rollins has to address the lackluster customer service in this country. Why not Rollins? It's because he was in charge of the company when the problem became a problem. You never want the guy who was involved with the problem to be the guy who fixes the problem. He's too busy protecting himself than to fix the problem. That's management 101.
Dell use to be almost perfectly run. They had the low cost model, and the competition, namely Hewlett Packard, Acer, Apple, and China's Lenovo were always playing catch-up, and stumbling trying to catch up. Why did they stumble, it's the same in football, you go for the long bomb when you are behind in the fourth quarter. Now the competition finds its model working, and Dell is stumbling.
I realize that Dell has spent money fixing customer support, and trying to convince people that their product is no longer a commodity. I have seen zero results from this expenditure at this time. In my own work as a money manager, I have lowered my estimates for this company six times in the last twelve months. I currently do not carry it in a single portfolio. Fortunately, I missed the whole move downward, and I am not willing to bet on this company yet.
Yes, Dell is now considered a value stock by many. The problem is that the growth players haven't been completely washed out of the stock yet. This will take more time. The institutions that have had a tough time performing this year will be under pressure to rid their portfolios of Dell by year end if the stock doesn't perform. Dell has agreed to market processors by AMD as well as Intel. They will probably take a hit to their margins because Intel was probably rebating them back a portion of the sales to be an exclusive with Dell.
The company is still sitting with almost $11 billion in cash on the balance sheet, which works out to about $4.50 per share. Wall Street is in the process of lowering estimates for 07. Here's the bottom line, with Dell you still have a valuation risk. Hewlett Packard is growing faster and selling cheaper. The only reason to own Dell here is its previous extraordinary history, but in stocks the past is not always prologue to the future. A stock has no ideas where it traded yesterday, and Dell has to execute on a believable strategy. Go figure.
Richard Stoyeck's background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and StocksAtB
Value Investing