Tag Archives: stock market

The Next Stock Market Collapse: Are we There Yet?

April 3, 2016

It seems that we are entering a decisive period for the stock market. The S&P 500 is right at the top of a channel between 2,100 and 1,920. Although I don’t like technical analysis, it is pretty clear that if it rises significantly about 2,100, then a new bull market will start. Conversely, if it drops below 1,920 a major market crash may follow.

S&P 500 10 Year Chart

S&P 500 10 Year Chart

Although anyone with limited knowledge of technical analysis would come to the same conclusion, I imagine 100,000,000 would-be retirees don’t look at this chart. And even if they did, they would not be able to see its importance.

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Can You Invest a Little Money?

invest_gokd

When most people want to invest, they never start because they think you need thousands of dollars to start. That’s not true — and it’s just another psychological barrier to keep lower- and middle-income folks out of the investing game.

You actually don’t need a lot of money to start. The key is to invest a little and keep on investing a little. One of the first investments I made was a bond fund that let me chip in $25 a month. Initially — as you can imagine — it was slow going. That’s another barrier. People want to make millions overnight an retire. That certainly didn’t happen, but during the last few years — over a decade after my initial investment — I am starting to see a pay off.  The dividends that are automatically reinvested every month are now more than double my own monthly investment and the balance has grown nicely, even though this was a horrible investment era.

I mentioned another tip. Reinvest all of your dividends and other profits.

Over the years I have branched out into other investments. I own direct-investment stocks (stocks I buy without a broker) and mutual funds. I like to trade using cheap discount stock brokers, like Sharebuilder. I also own precious metals and precious metal ETFs. All of this was started with a small initial investment that I’ve built up over time.

I also buy penny stocks with a few extra bucks, but I consider that more gambling than investing. Still, an individual investor can mess with penny stocks with little risk and little money.

Here is a great article from Investor Junkie about how you can start investing with about $500.

 

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Why You Should Sell All Your Stocks

panic

I would like to make more money in the stock market, so I think it’s only fair that you sell all of your stocks in good companies.

There are dozens of reasons to ditch your stocks: The economy is terrible. The economy is over-heated. Stocks underperform. Stocks are overperforming and that means they’ll underperform. Obama is the anti-Christ. The Republicans are the anti-Christs. An asteroid could hit the earth. A diamond-filled asteroid could hit the earth, thereby causing massive inflation, thereby sending the economy into a free-fall. Gold will become the currency of choice. So will silver.  And maybe even platinum. The future is uncertain and the end is always near.

Should I go on?

Preferably, you should do this all at once, so that CNBC and other financial loudspeakers catch this meme and begin to spread the panic into the far-corners of the financial world.

Give this sell-off a nickname, too. The Great Panic. The Deep Dip. Worst-Recession-Ever. We can take some time and brainstorm these. Focus group them, too.

Would it be too much to ask, when you start to panic, to bail out of stocks that have relatively low P/Es, high dividend yields, earnings growth over a string of years, and  a lack of competition? Thanks so much!

You see when a panic hits, people do really stupid things, like sell the stocks of solid companies at a discount. They’ll take 50 cents on the dollar for some stocks that have cash, talent, and product lines that will absorb any difficulties during recessions and even depressions.

And, honestly, I am willing to take those off of your hands. That’s the kind of guy I am. You should have such a friend. There are thousands of others out here, too, who might be interested in buying stocks for half-price.

So, it’s imperative that you sell your stocks.

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On Record Highs: The Dow and Paranoia

flickr--creative commons

flickr–creative commons

We’ve just witnessed a historic event.

Last Tuesday, the Dow — a benchmark for stock market strength — cruised to 14,285, well passed the former record set in Oct. 2007. As of Friday, the Dow rested at 14,397. And there was a collective shoulder shrug.

That reaction was in contrast to the heady days of stock market gains in the 1980s and 1990s when each Dow and Nasdaq record was reported breathlessly for days. It was a moveable feast.

So, what’s different about this record?

First, people are paranoid because the last record in Oct. 2007 was soon followed by an almost complete economic collapse. Within months of this record the Dow plummeted, losing half of its value and bouncing along those bottoms for years. Investors are wary of the same happening again.

They have statistical reasons to be wary. Raw economic numbers — GDP growth and employment, for instance — are not even close to the strength that led up to the rally in 2007. The housing market? It’s still a basket case. Also, the stock market gains are based a lot on government — especially the Fed — tampering with the numbers. Cheap dollars have fueled the rally.

However, it may be a mistake to hold this view on the economy exclusively. Remember fear can be just as damaging to your portfolio as greed. Also, remember that time has a way of balancing prices. What was up, might come down a little; what was down, may end up higher.

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All Stock Price Drops Help You, All Stock Price Gains Hurt You

Rob Bennett developed the first retirement calculator that contains an adjustment for the valuation level that applies on the day the retirement begins. His bio is here.

You are 35 years old. You know that you need to start saving for retirement if you hope to be in good shape by the time you turn 65. Fortunately, you just received a $10,000 raise. You make a decision to invest this entire amount in a broad index fund every year for the next 30 years.

S&P 500 over the Last 30 Years

A year passes and you take a look at your portfolio statement to see where you stand. Yuck! Bad news! Stock prices have fallen 30 percent. Isn’t it just your luck to begin investing in stocks just before a significant price crash?

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Probability is On Your Side with QuantDNA

The Rolling Stones–via Irma Thomas–just needed time on their side. But for traders, you need time… and probability.

That’s where QuantDNA comes in. QuantDNA offers the probability of price movements for assets based on a proprietary formula.

QuantDNA is not a new site; they’ve actually been at the financial biz for a while and are associated with some of Wall Street’s big names. I was impressed with the first version. However, they’ve worked on some upgrades and updates to make it one of the most impressive financial tools out there today.

This is actually QuantDNA 2.0.

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Are Stock Prices a Popularity Contest?

Pic @ Flickr Creative Commons

I’m in with the in crowd, I go where the in crowd goes

I’m in with the in crowd and I know what the in crowd knows
I’m in with the in crowd, I go where the in crowd goesI’m in with the in crowd and I know what the in crowd knows.

–Dobie Gray

We all want to be part of Dobie Gray’s in crowd, don’t we?

It’s a good feeling to be accepted and popular. Being popular improves our self-esteem and sense of value. We also feel we’re right in the decisions we make when the crowd agrees with us.

Does that extend to the stock market? According to a study published last week in the journal Current Biology, the answer is “you betcha.”

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Bursts! Is Human Behavior Predictable?


There’s one theory that says the stock market is unpredictable because the stock market is made up of people. Since human behavior is unpredictable, the market must be unpredictable, as well.

The theory has a lot of adherents.

And, a quick review of the, oh, let’s say past three weeks, shows an amazingly volatile market.

But, according to a book by Albert-Lazlo Barabasi, human behavior might not be as unpredictable as you would imagine.

His book, Bursts, the hidden pattern behind everything we do, is a soaring look at the theory that you can predict human behavior, if you can just understand bursts.

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How Greece Will Affect Your Bottom Line

Pic by phaul @ Flickr

Just when you thought it was safe to start spending and investing again, right?

The recent turmoil in Greece has had a bubbling effect throughout the world. The crisis may or may not have been responsible for about a trillion dollar drop in the stock market, but it was definitely responsible for a trillion-dollar bailout.

But, who cares? Those things are not on your personal financial radar map.

Or are they?

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Make Mine a Billion: Avoiding the Financial Mistake Avalanche

pic from artemuestra @ Flickr

It’s now drifted into stock market legend, so we’ll probably never know the truth, but here’s the story: Last week, the market suddenly and inexplicably imploded.

It was already a bad day on Wall Street. The Dow was down a couple hundred points on May 7. Without warning, though, the market plummeted nearly 1,000 points.

The reason for the fall–or perhaps the excuse–was that a trader wrote an order to sell a “billion” shares, instead of a “million” shares. The massive loss was the difference between a “b” and a “m.”
Before we get too snide about this bad-typing trader, it’s important to remember we’ve all made financial mistakes that turned into an avalanche.

I know I have.

There’s the mislaid bill that I swore I paid. It turned into late fees and higher interest. While it wasn’t exactly lead to a stock market sell-off, the lingering effect of those high payments lasted for years and cost me hundreds. I picked up a couple of hot stock tips that blew cold while I wasn’t watching.

So, how do you avoid the financial mistake avalanche?

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