Let me see if I understand this correctly.

"A jump in unemployment sent stocks sharply lower Friday as investors feared that Americans won't soon deviate from their tightened budgets."

That means that someone thought consumers would go back to spending money, or realistically increasing debt, because the new year started? Or they thought that the $120 a month less in taxes (for only 4 months) President Obama has proposed was going to spur new home purchases? At the same time that nearly every industry in the nation is slashing jobs?

It must be great in the world that some of these economists live in.

We have lost the most jobs in this nation since 1945. That's at the end of WWII, when we scaled back from the massive military supply we needed for the war. And I believe more people had more savings and less debt than today - even adjusting for inflation. And the Government had none of the debt we have today, or will soon have even more of if Congress and President Obama get to spend as they plan on doing.

How could anyone look at the 2nd half of 2008 and not expect consumer spending to continue downwards. To expect the stock market to continue in the bear market that it's been in for months now. I mean what did they expect, President Obama would smile and the world would just step up and buy stocks?

President Obama is a Liberal Democrat. He has said from day one that he will increase the deficit, spending more money than ever before. He has made it explicitly clear that he intends to get even more money from fewer sources, business and the higher incomes. What exactly counts as higher income keeps changing, and getting smaller. And business really loves to have to pay more money as sales shrink.

Let's not forget that with the mismanagement of the Fed and the Treasury (neither of which is President Obama's fault - given) we have wasted billions of bailout dollars, have a line of industries waiting for their turn at the free money ATM called Government, and inflation is the one word no one wants to talk about. And inflation will be the one thing that really kicks everyone's ass.

Of course President Obama will say that the sky is falling tomorrow if he doesn't get to give away all our money. That's polispeak, meaning that he wants to look good at trying something that can't work so he has some political clout before it all falls apart. Then he can point backwards in time and blame everything that fails in his plan on President Bush. Politics as usual.

Of course these "old politics", that President Obama promised to banish, are very good at keeping political clout but horrendous for low wage earners and small business. The stock market knows this. That's why its a bear market. And as we approach the inauguration, I expect even more selling. I mean why have an investment when the taxes on it will cost more than you expect to make in the next 2 or 5 years.

As a stockbroker I learned to look for capitulation in the market. That emotional point when people just give up. That's when smart money jumps in and buys. Except that the emotional selling all happened in September and October. Since the election smart money is selling. And that means things are really going to get worse.

Until there is a reason to buy stocks, the market will continue to slowly slide down. Never in just a straight line, but trend down it will. The Democrat-led Congress will authorize spending in new programs that will not help any one get a job or start a business. The President will come up with plans on how the Government can take care of everyone, while being in every pocket deeper than before. And $1.2 trillion dollars in debt will look like a target to strive for in coming years.

I've said it before and I will again, a Nancy Pelosi and Harry Reid Congress with the most Liberal Democratic President in decades equates to double digit inflation, double digit unemployment, rock bottom consumer confidence, and business bankruptcies all not seen since the Carter Adminsitration - if we are lucky to have it that good.

So who is surprised? Not me.

Labels: American economy, bear market, Congress, credit crisis, Harry Reid, inflation, Nancy Pelosi, Polispeak, President Barack Obama, stockbroker

Lately every pundit and expert discussing the market of lat has spoken about the financial companies. There is of course good reason for this but the really smart investors are looking in place that the general populace are not, for the next rally that will inevitably come to pass.

Following that line of reasoning I have written about how I found gold and coal to be solid buys. I also have stated that I think some financials are the best buys in the market. But I have to admit I got caught up in all the emotion and forgot to look at the tech market as well.

Now I realize that back in August I was discussing how technology stocks should not be limited to just companies that are directly tied to a PC or Mac. And my reasoning was sound , since technology is more than a computer and it’s funtioning. But if we were to look at the tech stocks that focus on computers what might be said?

Well there is eBay. This company might be the best buy on the market right now for this sector. Without having stores and storage facitlies overhead costs are always low. Since the purpose of the company is to facilitate trades interest rates are not a primary focus on their ability to do business.

Actually when you think about it, a messed up economy should mean good business for this company. As people worry about keeping jobs, and if they will have to take a pay cut or have reduced hours, the holiday season that is the 4th quarter is coming to bear. And kids love to see gifts on Christmas or Haunakah, because the economy means nothing to them. And parents love to see their kids happy.

So would you rather go out in the cold, spend money on gas (which is still high considering how much crude oil has gone down), and fight crowds to pay top dollar for the latest whiz-bang must have, or might you look for a refurbished version of that same item. Or perhaps a more traditional item? Or a nice gift for you spouse and/or significant other. Especially if that item costs less than in a retail store.

This is why eBay has had increased sale each 4th quarter for years. I really think this will do well as other brick and mortar store have a horrendous quarter.

What else might be interesting? Wll according to Toan Tran, an associate director of research at Morningstar in Chicago

“If you really were a long-term investor, and you really were to buy these stocks, go away for ten years and not look at them, any of the big-cap tech names look cheap now -- Microsoft, Oracle, Apple and Cisco -- they're all trading at extremely cheap valuations.”

Of course valuations are based on business and the rationality of the markets. Neither of which are good now. Still of the big names I would believe that Microsoft is a solid choice.

Microsoft has lots of cash on hand, which eases their need for credit in the near-term. They are a highly diversified company. And they provide a product (though often buggy) that is needed for most people to operate their computers with ease. Being the near monopoly they are has its advantages at times.

I also like Netflix. It’s a simple business model, basically renting movies. It’s a huge industry and the more people can’t spend money outside their home the more they want to be entertained in their home. So there is a stability there, if not a reason to expect increased sales. If jobs are sketchy, and especially if gas prices stay at present levels or go up, people want to be in their homes and save money. Since a trip to and from the movie theater can cost as much as $30 per person, a Netflix movie is a wonderful alternative.

Now these examples are not perfect. The credit crisis and the mortgage bailout will hit them hard like any other company. And the general malaise of the stock market will infect their prices as well. But looking at the long-term they will be fine I think.

These companies and others like them will be able to adjust more rapidly than traditional companies. They have goods and services that people need and/or want no matter how the economy is doing. Their costs are manageable and their structures have survived the internet crash so we have reason to believe that they can survive this.

The big question is when to purchase them, or any stock. That is the hard question. I am an old stockbroker, so I like to buy when the market is in a panic (check), there are big problems on the horizon (check), and after bad news.

The bad news will be 3rd quarter earnings which are about to be released. You can safely bet that the financial will all report painfully bad losses and missed expectations. So will several other major companies that rely on credit for their operations. So another sell-off should be expected. Add to that the likelihood of a President (if Obama is elected) that plans to increase corporate taxes by 10% while the economy is reeling, and the increase in inflation from the sudden federal rate cut today.

Put that all together and I look for the last 2 weeks or so of October through middle of November as a buying period. I expect that the market will pick up a bit in that time, so properly picked companies should establish new floors and trade from there.

All of this does assume that Europe and the rest of the world does not fall into a complete depression. And even a steep recession might alter things a bit. But the basic logic still works.

So do your homework, pay attention, and look where everyone is not looking yet. In every down market there are opportunities – you just have to work at it.

Labels: credit crisis, eBay, Microsoft, Morningstar, mortgage bailout, movie theater, Netflix, stock market, stockbroker

I was speaking with an old friend and colleague of mine today, and he reminded me of something I had forgotten. As I have mentioned before I was a stockbroker, and I worked with my friend for a few years. While we were at the same firm one of my bigger positions was in Lehman.

Now at the time, thru most of the 90’s I felt that Lehman was a great buy. It was one of the better managed brokerage houses, and well diversified. It weathered the Mexico financial crisis without huge exposure, and had few losses in derivative trades, that took down Barrings.

In fact after I left the brokerage industry and entered the investor relations industry I wrote a review of Lehman back in September of 2005. At the time the stock was trading at the post-split price of $56.60. That was 2x book value and an excellent price in my opinion. The stock went on to run, reaching a high of $85.80 in January 2007. A nice 54% gain in 16 months. Who would be unhappy.

I believe at the time I stated

“Perhaps as Warren Buffett has said, “Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.”

Well it’s been 3 years now and that same investment looks horrendous. I have to admit that if anyone has held the stock all the way down they have to be pissed off. The company ruined its great cash and book value with bad calls in mortgage and asset-backed loans. The fact that a buyer must be found is the clearest answer of how risky the investments they made were.

I have to say that I am glad I am no longer a stockbroker. But I would also like to say that the call I made was correct at the time. And that I believe that I would have pulled my investment in January of this year at the latest, around $66. My posts of that time identifies that I was looking forward to a horrible year, and that is coming to pass as well.

So I am man enough to stands up and say what I called correctly, and what I missed as well.

But I’ll add this. If I had free capital that I could leverage without fear of loss, I’d buy options and/or stock in Lehman right now. With great risk sometimes comes great reward.

Now some would say I am insane. I don’t think so. My bet is that Lehman is too diversified and too large to be allowed to fail. Like Bear Stearns something will be done to mitigate the loss in the company.

There are too many stocks, 401k’s, pensions, and other assets directly tied to the financial institution. There are too many stockbrokers and staff. Too many corporate loans. And definitely too many mortgages to let this go under completely. My bet is that they will be absorbed by another brokerage or bank. Possibly even an insurance company.

And consider this. Politically this would be horrible if it fails. It will hurt both Democrats – because Congress failed to act to help ensure mortgages would not get worse and helped in the loss of jobs – and Republicans – because this is happening on President Bush’s watch.

Plus, if this bank is allowed to fail it will shake confidence in U.S. financials and the Dollar. Loans and Treasury bonds will be called or sold to deflect losses and prevent future hits. The combination of these events and the resulting hit to the economy will be devastating. I would imagine a full 3% of the nation would be sent to soup lines directly.

So if I am right Lehman will be taken over, but at what price? I expect a range of $3.50 to $5. At the top it means a gain of 41%, at the bottom a loss of 4%. I like those odds. Especially in this environment.

Now I could be very wrong. The Government might let this brokerage fail. That will hurt a lot and have repercussions, but ultimately it will be good for the market. But I think seeing Lehman tank or sell for $2 is distasteful for too many. A slight premium to the current close of $3.65 would be a big positive for the market.

And if you have read some of my posts on how I see the economy I don’t think you are too surprised by this outcome.

“The Fed has been providing banks extra money to ensure their solvency, but not requiring that loan reserves be increased. It’s kind of like stopping a leak in your tub by adding more water. The problem is not getting fixed and may get far worse. And all the panic about the mortgage industry seems to have done nothing but whip up polispeak from political candidates and political parties, each looking to sway voters. …

As a result of all these things I expect that the Dow Jones will drop to 10,200 by December. If I am correct about Congress and Senator Obama - for the reasons stated - then I further expect a drop to 9,300 during 2009. A significant bear market indeed.”

I still stand by these thoughts I mentioned in July. I still say Citigroup is the real big fear. I still think that crude oil prices will run back up to $160 per barrel over the winter. I still expect large increases in inflation and unemployment. Freddie Mac, Fannie Mae, and Lehman are the tip of the financial iceberg. Be prepared.

My friend stated

“Well this is just like Xerox and Kodak. Back in the day they were on everyone’s list to own. They were thought to be too big to drop. But today nobody speaks about them. Why shouldn’t the same thing happen to financials?”

That is very true. But the real question is how we transition to the new financial stock leaders. Opportunities always exist in even the worse markets. You just need to sit back and pay attention, and know your risk tolerance.

I may be wrong again, but I’m willing to tell you my thoughts. You can make your own decisions on how best to manage and invest your holdings.

[By the way, here are how a few other of my calls went.


• AMD – May 2005 – $16.08 High $40.54 in February 2006 now $5.75
  
• AMLN – February 2005 - $22.48 High $50.81 in October 2007 now $20.18
  
• ERTS – November 2004 - $47.79 High $68.12 in January 2005 now $44.99
  
• SIRI – September 2004 - $3.00 High $7.95 in December 2004 now $0.95
  
  Just wanted to be clear and honest on what I have publicly said in the past.]
  

Labels: AMD, AMLN, ERTS, LEH, Lehman Brothers, mortgage crisis, SIRI, stock market investors, stockbroker

Over the years that I spent as a stockbroker I learned that you should never get so tunnel-visioned as to only see one aspect of a market. I’ve known many brokers that solely focused on technology, or banks, and so on. When their sector was in trouble, they and their clients had little safe haven until the market turned. Few things are as troubling as being over-weighted in a sector the market hates.

Conversely I have known brokers that were able to see opportunities driving down the L.I.E. (Long Island Expressway) – he noted that over a couple of months a bank with little exposure in the northeast was suddenly increasing it’s advertising and deduced they were poised to start making mergers and enter that market and was right. I have even seen brokers look at an industry and see the future potential. Such as with breakthroughs with various drugs, or the growth of the internet back in the early days of AOL.

I even saw the potential of satellite radio back when Sirius Radio (then called CD Radio) first got its FCC license for the frequency they use. [I did not get the pricing exactly correct at various points in the time I recommended that stock, I have to be honest.]

So in that vain of thought I occasionally watch what is happening across the pond and the globe, even though I am no longer a broker. And I am noticing that over in London there is an interesting wave of commonality that is unusual to me.

Lately there have been a lot of similarity in the British and American markets, which is beyond the usual trend. Of course there are many reasons for this. The similarity in our systems of government, the shared culture and past. The good will between the nations and the numerous multi-national companies that we share.

Now with all this said I have to wonder what this synchronism of market activity will mean when weighed against the advance of the Euro and the European Union? Will the effects of higher oil prices, and lower levels of alternative fuel sources trigger an adverse effect on London, and thus New York? Will the ripple effect of high transportations costs for British and American goods hasten the decline of the Dollar and Pound? And if this is correct, how long before such an effect is seen in London and then Wall Street?

So I suggest that for those looking for the next phase of this current market cycle here in the U.S. the place to look may not be in the American markets. Look across the pond to our cultural cousins and look at the big picture. Who knows what you might glimpse.

Labels: European Union, London, New York, satellite radio, Sirius Radio, stockbroker, Wall Street

From time to time I am asked questions about the stock market, investing, owning a business, and other questions relating to generating and maintaining wealth. Most often the question for those without a high personal net worth is how to create wealth, and for those already on the path how to accelerate their growth. These are not simple questions and each has several different answers. There is no single blueprint that leads to wealth or a higher personal net worth.

Perhaps one thing I’ve noted is that anyone can create a net worth if they are willing to commit the time to it. Another universal fact, in my opinion, is that creating and growing net worth is based on time perhaps more than any other factor. I have virtually never seen anyone have a net worth that has not worked for it and spent time cultivating it. Those that have, either through an inheritance or a lottery win, generally have thrown away their wealth within 5 years because they have not built up the foundation for the funds they received.

One of the best rules of success, I feel, is something I learned from Napoleon Hill’s Think and Grow Rich. The principle is simple – Do what you do as well as you can, never worry about the money, and the money will come. It seems odd to some, but in my life I would say it has always worked. If you are not doing your best, you will never be paid as well and thus you will never have enough money or wealth for what you want. If you use your energy and time worrying about the bills or what is in your pocket, you have none left to generate the funds you need or want. Of course that is not to say that you don’t have a plan for your money, just not an obsession about that plan.

More directly I would generalize that for those looking to enter the stock market there are a couple of things you should do. Read the Wall Street Journal (or similar daily economic newspaper of high regard) for a year, ask for and read several (a dozen or more) mutual fund prospectuses, and get a stock broker you are comfortable with. While all that is happening, set a budget that takes 5-10% of your discretionary income (at least, more if it’s affordable) and set it aside in a separate savings account.

Now I say read the Journal because there is a terminology used in investing that is not used anywhere else. One of the biggest hurdles I hear is that people are unfamiliar with the terms used and thus are unnerved by investing. In reading the Journal daily you get a familiarity in learning those terms. (Don’t be embarrassed to have a dictionary at hand to define difficult terms, I did it and so have many – whether they admitted they started like this or not) In addition it will help you get a feel of the market and the cycle that occurs.

I recall that when I was a new stockbroker, I had a gentleman ask me if I had spent a cycle in the market. I had no idea what he meant, to which he laughed. He meant that I had been a broker for a year at least, and had seen the overall cycle of earnings reports, forecasts, reactions and other events moving the market.

Understanding the timing of the market is as important as understanding the terminology. You don’t want to buy stocks in the short-term to start with, but if you know that say the travel industry in the U.S. is weaker in the spring than say the fall or winter, you may get a better purchase price to start with. Another thing the reading will provide is the reactions that the market has to events. Whether it is a disaster, political unrest, missed earnings, or an unforeseen event companies have immediate reactions. While each reaction is individual it helps to know that missed earnings can lead to a drop in stock price for a short while, but does not mean that company is a bad investment long-term. A disaster could hit the market, but not affect long-term returns. And when a company is in trouble you can learn some of that wording as well. It’s not fool-proof, but it will help you sleep at night while others panic over something that could be minor. Trust me that I have seen this.

As you get familiar with the general market cycle and terminology read the mutual fund prospectuses. This will tell you about the goals of the mutual fund, the historical returns, the administrator of the fund, and the stocks that are – or can be – in the fund.

There are big differences in mutual funds. Some only buy bonds, some only large corporation stocks, or just banks, or just eco-friendly companies and so on. Some only look to preserve your money, some seek to grow at all costs, others are more balanced. There are funds that can buy penny stocks – considered the most speculative equity investment – others buy junk bonds – the most speculative debt investment – and some can use options – highly leveraged investments. There are funds that started on a great year for market returns (like during a market bubble) and therefore have great historical returns, improving the performance in bad years in their average, and others have been around for decades showing a more realistic return over time. Some advisors are hotshots taking huge fees for their names, others are unknowns starting out, and many are just working hard. All of this is important, to varying degrees on how well you can sleep at night and what performance you wish to have.

The last step is to get a broker. After spending time learning the terminology of Wall Street, and the reactions, and mutual funds that you are comfortable with, you now have a means to evaluate what kind of broker you want. Some are newbie’s and desperate to show performance and take risk. Some are seasoned pro’s but with huge numbers of clients. Some like to spend time talking to clients, some don’t. Some are better with a specific area in the market, like banking or biotech. What you are comfortable with will help reach your long-term goals.

And I believe a broker is necessary. The market is a constant, changing, gut-driven industry. A good broker can hear the unspoken words in an earnings report and be cautious, or have an eye for something the market will want in the future. They aren’t always right and it does cost money, but this is what they do everyday all day. It’s not a 9-5 job, and not everyone can do it. In my experience a broker may be wrong 40% of the time, but investors on their own tend to be wrong 70% or more of the time. And when you compare wins, investors on their own just don’t match up. But that is what I have seen with a good broker, which only you can decide for your self.

And I do emphasize starting to grow your wealth with mutual funds. The risk is lower and cost to invest is as well. It’s easier to add to a mutual fund position, and cost effective. The fee to a broker is not prohibitive, in my opinion. And it allows you time to see results and plan for future growth. You may not agree, but it’s one way to create a net worth and grow it.

Now this is just one suggestion for growing your worth. In the future I will mention others. They are all based on my experiences and those of friends and family. There is no guarantee they will be the key for you. I always advise speaking with a trusted professional in the field I speak about.

Hopefully this is the first step in helping you attain the worth you desire and deserve. If you have more suggestions or experiences to share, please comment. But always do what you do best; I believe that if you do that the money will come.

Labels: investment, mutual fund, Napoleon Hill, penny stocks, personal net worth, political unrest, savings account, stock market, stockbroker, Think and Grow Rich, Wall Street, Wall Street Journal

Continued from Jim Cramer gets upset with reason Part 1...

It’s a real gloom outlook. Like dominoes falling the effects move from the financial sector to every other industry. Once it starts there is really nothing that can be done. This is why so many would tell Mr. Cramer they are afraid. This is why he would demand that the Fed ease rates. It’s not a recession they fear, it’s a depression. It wouldn’t be 1929, but a depression all the same. Economically it’s just part of the cycle, emotionally and in terms of real people it’s quite another.

Most average people are unfamiliar with the terms being discussed by most analysts. Many see Mr. Cramer flipping out and they don’t get it. Such are the markets.

It’s not worth pulling everything out of the market in a panic, to me. It is worth evaluating and planning your investments around. A good plan takes into account that these things may happen and provides shelter for the storm. Just as the markets rebounded from the 2000-1 drop, the up-coming drop will also be survivable. But don’t doubt it will hurt a lot.

Since 2003 the market has gone from around 8000 to 14000, a total of roughly 75% overall or about 19% per year. That is very strong growth. The 7% drop from 14,000 to 13,000 is not enough to balance the growth. I’d expect a drop to 11,000 before things settle out. And at the same time there will be far less credit available. Already that has gotten tougher as Mr. Cramer mentioned. It will get worse.

These are things I expect. I could be completely wrong, and that would be a great thing. How any one person should prepare for this potential problem is a conversation that I cannot have. I would suggest having the conversations with your professionals though, and re-evaluating the potential costs of a mortgage. Preparation is the key.

**Mr. Vass is no-longer a stockbroker, and is not providing any financial advice. The above is an expression of the thoughts of Mr. Vass and do not make or imply a solicitation. Investments of any nature are complicated and highly individualized; it is recommended that any financial advice be sought from licensed professionals. **

Labels: Jim Cramer, mortgage rates, stock market, stockbroker

So I was checking out a few things when I ran into this conversation by Mr. Jim Cramer. Actually I can’t really call it a conversation. It’s Mr. Cramer going off about his concerns. This is perhaps the most passionate I have ever heard him be. And I understand exactly why.

I’ve mentioned before that I am a former stockbroker. I’ve had years of experience and have spoken or listened to maybe hundreds of analysts and CEOs. I’ve come to understand the relationship between the markets, data, investor impressions and institutions both domestic and international. Given this I have a bit of understanding of Mr. Cramer’s words that some I’ve read do not. He may be blustering and a bit of a showboat, but he is no idiot.

Here is the actual footage –


The fact is that if you are an investor in the market, you should be concerned as well. Things are not going well and they will probably get worse. For all the naysaying of many democrats (and a couple of Presidential candidates) the economy has been doing well. That has a lot to do with the low interest rates and the boom that has persisted in the housing market. Couple that with investor impressions and you get most of what the market has been for a while now. But interest rates are on the rise and the evil some men do is coming to term.

When I say evil I mean the vultures that sought out the uninformed and ill-advised that were convinced to take on high-risk variable rate mortgages. Whether they are White or Black, most were less educated in the ways of markets and were not prepared for what would happen if rates increased. I don’t know how many people took advantage of the low rates being offered to take second-mortgages to cover rising healthcare costs or to keep up with the Jones’ and get new cars or some other such. How many ads are still being shown on TV advertising the homes that can be bought for as little as $1000 if you just call a 1-800 number for details.

For whatever the reasons, I estimate that the last 5 years has caused more people than are being estimated now to take on a home. I would say 10-20% of them were older people that took on risky second mortgages and 10-20% were mislead about the eventual cost of a first mortgage. I guess it could mean a total of about 10 million are in danger of defaulting on their loans.

If so many were to do so, banks and financial institutions would take significant losses. Profits would shrink as they are used to cover the defaults. Credit would tighten, causing some small businesses to fold, middle level companies to stagnate and fire employees and large corporations to increase prices. Unemployment goes up and the GDP of the nation drops.

Continued in Part 2...

Labels: Jim Cramer, mortgage rates, stock market, stockbroker

Just something I wanted to pause and think about. Today the Dow Jones broke past 12,000 which is a new intra-day high. Big cheers, the market must be doing well and it must mean that everyone is making money in their 401 k and mutual funds. Well I’m sure that is what the big six and a few others would like you to think. I think its just stupid, all the hype about this. [The big six are the leading, well-known brokerage houses. This includes Merrill, Lehman and the others, all of which I dislike.]

Why am I not interested in the hype? Why don’t I think that most people are making money today and that this new high has yet to impact Joe Average? Because during the week of January 10, 2000 the Dow Jones Industrial Average hit 11908.5 and then continued to trend down to a low of 7422.27 on September 30, 2002. It’s taken the better part of a decade to reach a new high. That is significant. It means that many are just getting back to even.

Let me clarify what I’m thinking. I was a broker for many years (I left the industry, without ever being involved in a lawsuit, in 2001 for family reasons). Like all brokers I realize that the average investor does not know what they are doing. Average investors buy high, sell low, miss opportunities, and follow bandwagons on a regular basis. I have watched as former clients bought internet stocks, against my advice, because they were being bought and creating new highs – without being able to explain what the company did, and often with a company that had no history as it was a new IPO. For a while they made money, and then got killed. I’ve seen the same thing happen in biotechs, and various other industries. It wasn’t just the bubble that took down investors.

[For the record I did advise in one internet stock, AOL, and I did lose money during the downturn. But I did try to minimize losses and advised several 5 year plans to weather the crash, some were followed others not. I was not a genius for the market, but I was no fool either.]

Because so many were crushed in the crash, bad decisions were made. Most sold to make margin calls or just bailed out. Others never took the chance to buy when things were low. I recall the battles I had with multiple clients as the market opened after 9/11 and dropped to a low of 7926.93. Fear prevented a chance to regain funds lost from the bubble burst, primarily while others were frozen due to lack of capital. Many just had to hold on and wait for things to improve.

So if like many you owned GE Around Oct 2, 2000 (59.94) instead of around Feb 10, 2003 (21.30) today you would be down 24.38 (close was 35.56) or 40%. Maybe some liked Pharmaceuticals like Phfizer which was 48.13 around June 12, 2000 reached a low of 20.57 around Dec 5, 2005 and closed today at 28.10 for a grand return of a loss of 20.03 or 42% down. Maybe smaller companies were of interest like NITE which traded at 59.43 around March 20, 2000 dropped to 4 around Sept 30, 2002 and today had a close of 19.45 for a loss of 39.98 or 67%. Even if you like a story stock like SIRI you may have paid 69.44 around Feb 28, 2000 and not the .38 in the week of March 10, 2003 with a close today of 3.90 for a loss of 65.54 or 94%. [I did advise on positions with SIRI, NITE, GE, PFE, LEH and many other stocks. Former clients may have owned these stocks long term and had higher or lower cost averages than what is discussed.]

For those that could afford to buy-in and average down, life may be good. Most investors don’t though, whatever the reason. So the reality is that many are down today, or even, and the highs bring them no joy. The hype is just that. Many corporations are in similar situations too. It just annoys me to hear the talking heads on various programs trying to get people happy when the news isn’t really great. Or ads on television saying that people should go and invest on their own when they don’t understand what is involved. I find it irresponsible.

The economy is better, things have improved. Barring events like 9/11, or Enron, the markets will continue to grow. But hype will never help mom & pop investors. It does help some institutions though, like LEH which was 15.68 around Feb 14, 2000 and continued HIGHER to 78.70 on Oct 16, 2006.

Just keep this stuff in mind as you watch the talking heads spout how great things are in the market. Or you see that ad saying that you should invest on your own.

This is what I think, what do you think?

Labels: Dow Jones Index, GE, LEH, NITE, PFE, SIRI, stock market, stockbroker