Is It Time For A Bull Run?

There is a boy in town that runs around yelling,"hamburgers tell the future, hamburgers tell the future!" I wish that were true I would run over to the local hamburger stand and demand to know what we can expect from the economy and the stock market. Instead I have to read analyst reports to try to get a feel for what will happen.

In a recent report by Ned Davis research they see the end of the Bear and predict the start of a Bull run based on past cycles of the stock market and various stimulus packages. They also see the recession ending somewhere between March and June. The Federal Reserve is saying that a pickup will happen by June. Ned Davis Research believes that we could see a recovery in stocks of about 72% for the year--I hope so! I'm still suffering when I look at my investments but I'm starting to reposition to buy.

On the down side at a gathering of academic economists in San Francisco, the economist there remain pessimistic about the way that the Federal Reserve has handled the financial crises and the economy.

Yup! I think I'll go buy a hamburger.

"Magic 8Ball Will The Stock Market Rebound Soon...."

I admit that I occasionally shake the Magic 8 ball like a teenager but, when it comes to investing I like to rely on charts and tried and true methods of determining the outcome and direction that the market will take.

In my opinion, we are in the late stages of a bear market. I'm starting to see a sharp increase in Utilities, Oil, and energy these three being the biggest movers. Also an increase in Real Estate Investment Trusts (REITS). Not surprising is a downward trend in Retail, Auto, and Leisure Products. These are all indications of a late bear stage in the cycle and the bottom of a trough.

Another good indicator of a stock market trend is to look at a moving average of the Dow Jones and check the price and volume. Over the past year the Dow declined steadily with it's sharpest drop occurring in the last week of September and the first week of October. The Volume during these two weeks nearly doubled as investors scrambled to pull out of the markets and stuff what was left of their holdings into safe keeping. The heaviest volume was trading at 2,344,911,100 compared to 778,840,100 in the first week of September. Over the past week the market has been trending up in light volume of 472,561,500 as investors are looking at bargain sale prices and are coming back into play.

"Magic 8 ball does my true love, love me back....Oh sorry," Does this all mean we are ready for a bull run? Maybe, keep an eye on the Dow Jones average. look for a sharp increase in Volume and Price change. I think it could still be choppy for a while yet but, I'm looking for the bull to be let out of the pen in the not too distant future.

Should You Buy Back Into the Market?

I admit, to jump back into the market today you would have to seriously "grow a pair" as big as an elephant! There is still more room for the market to drop apparently another 9,000 points! Logically, if you are a wise investor you can start to see the opportunities that are unfolding before you. There are bargains that you can buy into for a pretty sweet deal and you should consider picking them up while they are so low. Consider buying for a long term horizon.

The Stock Market is a leading indicator of the economy in that it precedes the economy by about three to four months. Analysts believe that we will see a decline in the Gross Domestic Product (GDP)for at least two quarters. Technically this spells out, can you say it as a whisper,--Recession. The definition of an economic depression is if it prolongs into years rather than just a few quarters.

So, should you start buying again? You should start to see the market bottom out and heading back up within the next couple of weeks to a month, so if you want go out and grab some bargains do your research and make sure that the stock is sound and that there is solid management and good prospects behind it. Be proud of your cojones amigos!

Dollar Cost Averaging---Is It A Good Idea?

The concept of dollar cost averaging is that you take an amount of money say $200 and invest it at the same time every month or every quarter, what ever! You just invest the same amount at the same interval. When the market is low you pick up more shares of a particular stock or mutual fund. Over a long period of time like several years this technique helps to reduce market risk and effectively helps you to save and invest. If you invest in a mutual fund this will also help you to reduce the risk of a particular company as well.

If you have a gigantic amount of money to invest like an inheritance, I would invest the whole enchilada at once rather than eek it out over time using the dollar cost method. I think that a sound portfolio over the same period of time would give you a better return. I mean, I would never let a large chunk sit in a savings account slacking off like a loser when it can be working for me! A good mix for a portfolio is to take 100 and subtract your age--put this percentage into stocks, take %10 and keep it in cash and put the rest in a bond fund or Treasury bonds, or corporate bonds.

If you are struggling to save and invest I would go with the dollar cost averaging technique. You can set up a good stock mutual fund for about $2500 and add the $200 at the same day of each month. You can have the amount automatically transferred into your investment account.

If investing is new to you, select a brokerage house that has a good reputation and that has been around for a long period of time. My favorite is Fidelity Investments. They have excellent customer service and management.

Multi Level Marketing Opportunities and Pyramid Schemes.

My mother maintains a vendor booth at an indoor swap meet and farmers market in her city. She is keeping it mainly to promote her cheesecake business by handing out samples and business cards. She also likes to go to meet new people and has made friends there.

She called the other day and was a little vexed about a man that befriended her there. She said he was really charming and before long had pulled up a chair inside of her booth and had just kind of moved in-- talking about how he was recently widowed, etc, etc. Then all of a sudden he started pressuring her into some business deal where she would invest $1,500 dollars and she could make loads of money in return. He handed her some glossy pamphlets that looked professional. My mom responded to his gesture with, "aren't you just running a pyramid scam?"

"Oh no--that would be illegal. Just invest $1,000."

"I'm not giving you a $1,000!"

"Just five hundred then...you can write me a check."

So then, to get rid of the guy, my mom says,"My daughter Penny handles all of my business and finances." So she gives him my name, phone number and address! So, I have that to look foreword to--a call or visit from Ralph--you would think that being a con-man and all he would change his name to Alfonse or Jonathon or something wholly more attractive and affluent sounding. I am looking foreword to it...almost salivating at the thought...oh yeah...it's on Ralph!, it's on like Donkey Kong!

Multi level marketing is in many business opportunities a legitimate form of selling products. The difference between a legitimate multi level marketing business and that of a pyramid scam is easy to spot. The legitimate multi level marketing company places an emphasis on selling a product where the pyramid scam places an emphasis on recruiting people or asking for investments and in some cases like gifting clubs they will ask for donations where you in turn will recruit people below you to ask for donations or investments. The gifting clubs will sometimes use religious "feel good" terms or names like Renewal Celebrations or Jacobs ladder and might come as a special invitation from a church member.

A pyramid scheme is set up so that there is a hierarchy where people are recruited below those who have been previously recruited. Those who have been recruited make payments to the people above them in the hope of making their money back by recruiting others and gaining payment from them. In pyramids, most of the sales are made to the recruits and not the general public. The nutritional supplements or what ever they have going only serves as way to make the scheme look legitimate.

1. Never feel pressured into joining a multi level marketing group.
2. Never feel pressured into signing or investing in something that you aren't sure of.
3. Take the time to investigate any business opportunity.
4. Check the business out on the Better Business Bureau website at http://welcome.bbb.org/
5. Never make investments at the swap meet!

Always keep in mind, that it's a felony in the United States to participate in a pyramid scheme and is punishable by fines and time in jail. People participating in the scam are viewed as engaging in illegal activities rather than being a victim.

Hostile Takeover Attempts "I'm Going to Disneyland!"

I think it's a good idea to own stock in the Walt Disney Company if you have children in your household. It teaches them how a corporation is run, how to read the financial statements, how to invest their money, and learn about new movies and rides that are coming out before the general public does. Kids can easily identify with the movies, T.V. and theme parks that are run by Disney.

I remember sitting in the theater when the first Pirates of The Carribean movie came out. When it was over, my oldest son who was eight or nine at the time turned to me and goes, "we are going to make so much money off of this!" Here, I was just thinking about where I could put a tattoo of Captain Jack's name on my body! Anyone who can take a drunk, slightly effeminate pirate with bad teeth and make him that appealing deserves an Acadamy Award!

Growing up my parents kept stock in Disney and we would go to the annual stockholders meeting at the Anaheim Convention Center. This is how I became interested in Corporate Finance and Investments. Children were welcome to stand up and ask questions of the Board of Directors or make suggestions. At the time they would always show a movie that was "in the works" and give shareholders free passes to Disneyland across the road there. They don't do this anymore, I think the shareholder's meeting is in New Mexico this year--I'm sure Alburquerque will be just as much fun as going to Disneyland.

One year at the annual shareholders meeting for the Disney Company, A group of Corporate Raiders had been buying up shares of the company and tried to take it over. The word was that they were going to buy up Disney and then dismantle it, selling off it's various attributes. At that time The Walt Disney Company lacked vision and innovation in it's leadership, especially in it's movie making capacity. It became a target for a hostile takeover attempt.

When a company wants to grow either in a new direction or expand in the same capacity it will look to a another company that has the attributes that are desirable for it's expansion and try to buy it. The buyer can go directly to the management and make an offer or it can bypass the management and make a tender offer to it's shareholders. This becomes a hostile takeover attempt. They will make a statement offering to buy each share of stock for a certain amount of money--usually a great deal more than it's worth. The aquisition company will attempt to buy up as much of the target company's stock as to have a controlling share of the company and take it over.

Can the target company prevent a hostile takeover from occuring? If a company is the target of an aquisition there are measures that they can take to prevent the action.

• Pac-Man: This is where the targeted company turns around and attacks the company by buying up it's shares in an attempt to take control of the attacking company.


• The White knight: At the request of the company being targeted for takeover another company can come in and buy up shares at a higher value than the aquisition company coming to the rescue of the target company.


• Poison Pill: The target can issue stock to it's investors (except the aquiring firm) at a discount so that there are more shares that are out there for the aquiring firm to have to purchase making the buyout more expensive.


• Golden Parachute: This is a provision where the aquiring firm will have to pay the management of the target company large sums of money if a takeover happens.


• Suicide Pill: The target company will ruin the company rather than let it be bought out.
  

At the end of the day The Bass Brother from Texas came in to Disney and bought a controling interest saving Disney from a hostile takeover. The new management team of Micheal Eisner, Jeffery Katzenberg, and Frank Wells was introduced. Over the following years the company was revitalized with the new leadership and vision.