Thursday, October 29, 2009
Investors and savers searching for income are starting to squirm. As CD rates continue to drop, those who have maturing CD's have a difficult decision to make. Do I reinvest my 5% CD into a 1-2% CD or take my chances in the stock market by buying a stock with a nice dividend? One option many people forget about is bonds. Bonds come in many varieties, Government bonds, Corporate bonds, and Municipal bonds, to name a few. Many people shy away from bonds mainly because they don't understand how they work. One perception is that they have a very long holding period, like 20 or 30 years. While its true that some bonds when first issued, can have a 30 year maturity, bonds can be purchased in the secondary market with maturities of a year or two. So if you're worried about inflation and interest rates rising again soon, you can buy a bond with a short time horizon. Another mistake is thinking that you can lose money buying a bond. Well, you can lose money buying anything. That's the risk of investing. But the way most people lose money with bonds is because they sell them for less than they paid for them, just like stocks. On the other hand, if you find a bond and buy it at a discount, you will make money if you hold it to maturity. In addition, you will collect some nice interest payments, called coupons, along the way. The other way you can lose money with bonds, is if they default. That is why you need to make sure to buy high quality, or investment grade bonds. These days, investment grade, corporate bonds can be found on the secondary market that are maturing in less than 5 years, that are paying over 5% and can be purchased at a discount. Government bonds, while safer, are not paying anymore than CD's, and municipal bonds are much harder to find at a discount. Most are now selling at a high premium, making them less desirable. So if you need income, and can't stomach the paltry rates that bank CD's are paying, buy bonds! They're not as scary as you think!
Saturday, October 24, 2009
One investing strategy that is coming back in vogue is the concept of "buying on the dips". This is where one would purchase stocks or add to your existing positions whenever the market makes small corrections. While some bears have predicted corrections of 10-15% in the recent months, which have never happened, smaller 1-3% drops happen on a regular basis. This is normal stock market activity. The "buying on the dips" strategy takes advantage of this situation. Since the March '09 lows, the stock market has now advanced over 60%. That's a lot. A much faster recovery than expected. Use your cash positions to buy good stocks that pullback on down days and you will be rewarded over time. Did you miss out on the monster Amazon day? Wait for a correction and buy it later. Use more strategy and less emotion in your buying and selling decisions and you will sleep much better at night.
Friday, October 23, 2009
Thursday, October 22, 2009
Investors receiving their 3rd quarter 401(k), IRA, and brokerage statements this month should have breathed a sigh of relief. Higher balances and improved returns have recovered most accounts nicely since the end of June. Those who may be disappointed are the ones who got out of stocks completely in March or April, only to see the stock market recover with returns over 50% since that time. The lesson? You can't out smart the stock market. Analysts and bears were telling people to get out of the market as the Dow Jones hit 7500, 8500, and 9500, only to watch in dismay as the index passed through 10,000 recently and some now predict it to hit 10,500 by year end. Determine the right mix of stocks and bonds that you should have in your portfolio based on your age, objectives, and experience, but everyone should have some exposure to stocks in their long term retirement accounts. Cash may be king, but not when it pays less than 2 or 3%.
Monday, October 19, 2009
This past weekend, the St. Louis Bloggers Guild hosted their annual Interactive Festival at the Shock City Music studios in St. Louis city. Besides the Bloggers Guild and Shock City, one of the main sponsors was Anheuser-Busch. Now why would A-B sponsor a "small" event, like the Interactive Festival? Because it made sense and had little downside. Besides, "making friends is their business"! After being turned down by Miller, and with the other option of having to purchase beer from Schlafly Bottleworks, A-B stepped in at the last minute and provided plenty of their signature brew to help provide refreshment to the scores of attendees at this year's blogging forum. For a company as large as A-B, not every promotion has to be broadcast on TV to millions. While some bitter folks still grumble at the big changes that the company made last year, A-B still takes care of their hometown, as witnessed by this event and the recent donation to Fontbonne University. So say what you will about the decision to sell their theme parks. A-B is focused on making beer and making money in a global economy. You can't fault them for that. Oh, and if you want to buy their stock, you can once again buy "BUD" on the New York Stock Exchange! Today's close: $51.19 per share.
Friday, October 16, 2009
The newest feature that I have added to my blog is a link at the bottom of this page where you can plug in your zip code and check gas prices in your area. I have found that there is nothing that people like to talk about more than the price of gasoline. It changes every day. People like to get the lowest price and are proud to tell you where the lowest prices can be found. My 95 year grandmother even knows what the current price of gas is, and she hasn't driven a car in close to 15 years! Now gas is the ultimate in variable expenses for families and often the hardest to budget. If you have a long commute to work each day, gas can be a huge burden on your weekly budget. But if you don't work, then you can decide how much you want or need to drive to keep costs down when prices jump. A year ago, the national average for a gallon of gasoline was over $3. Today, it is a little over $2.50/gallon. As recent as the summer of 2007 gas spiked to over $4 per gallon and had people all over the country reevaluating their driving pattens, work schedules, and choice of automobiles. Hybrid car sales took over and people started looking for vehicles with better mpg ratings in earnest. People have looked at the profits of giant oil companies like ExxonMobil with disdain for years. How could they be so greedy and charge such high prices to us plain folk just trying to get by, people would say. Conspiracy theories abound for those who think that oil companies are in collusion when it comes to pricing gas at the pumps. But since the stock market crash of 2008, everyone is looking for a way to save a dime here and there, so punch in your zip code and find out quick where the best place is to fill up. You can thank me later!
Wednesday, October 14, 2009
If there were ever a group of people who could not come to an agreement, it would have to be economists. It seems like economists are being quoted a lot lately as reporters and bloggers seek their "expert" opinions on whether or not our country is coming out of a recession and how strong or weak the recovery will be. While no "official" statement has been made that we are no longer in a recession, only 80% of economists believe this to be true. Mark Twain once said, "Get the facts first. You can distort them later." Most comments from economists these days seem to be focused on the economic recovery ahead. As expected, there is no shortage of opinions. Some see a V-shaped recovery, meaning a sharp increase in economic growth in the next year. Others see a W-shaped recovery, otherwise known as a "double-dip" recession. These people believe we could see another downturn before things get better. A third group believes we will see an L-shaped recovery, which is a long, drawn out process that will take many years. Of course, nobody knows for sure. Like the stock market, there are too many variables in play. So what's an investor to do? Keep saving, keep deferring money to your 401(k) plan, and pay down your debt. The world is not coming to an end...well, at least not until 2012!
Saturday, October 10, 2009
If you are a blogger, read blogs, thought about writing a blog, or wonder what a blog even is, and you live in or around St. Louis, Missouri, then you will want to come down to the St. Louis Interactive Festival next Sat., Oct. 17th. The event is free, but you must register online to reserve your spot. It's easy! Go to:
There you can read more info on the event and register in seconds. This event is sponsored by the St. Louis Bloggers Guild and promises to be an outstanding day of presentations and networking by the brightest and best of the St. Louis bloggers and social media experts! See you there!
Friday, October 9, 2009
Now that gold has passed through the $1000 per oz barrier once again, people are talking about gold. Should I buy gold, should I sell gold? Like any other investment, it all depends. The main reason people buy gold is as a hedge against inflation. Right now, inflation is not a problem. So why has the price of gold jumped up lately? Well, the dollar is weak right now and there has been talk of de-linking the dollar to the price of a barrel of oil in global markets. In addition, many people feel stocks have run up too fast and are due for a correction soon. So some people are buying gold as a diversification tool in their portfolios. Not a bad idea, just don't go overboard. Here are a few key things to remember about gold as an investment. It doesn't pay income or dividends. Gold is strictly a capital appreciation play. What form are you going to buy it in? You can buy gold funds or ETF's which can be held in your investment portfolio, but if you buy gold coins or bars, you have to consider the storage costs and safety issues. Items placed in your safe deposit box at the local bank are not FDIC insured. So what are the alternatives? Many experts believe commodities in general, not just gold, are still in a bull market and have room for advancement. While we may not see inflationary pressures on interest rates anytime soon, the prices of commodities may continue to rise for a while. Silver, while similar to gold, is much cheaper than gold and has many other uses to people and industry than does gold. So what to do? Keep your options open, and if you do buy gold, don't go crazy. Most experts recommend 5 to 10% of your portfolio tops.
Thursday, October 8, 2009
Wednesday, October 7, 2009
Tuesday, October 6, 2009
After a two week sell off in the stock market, investors are ready to move more cash from the sidelines and take advantage of an anticipated upward move in the markets following the Reserve Bank of Australia's decision to raise interest rates last night. This seems to be a positive sign that the long financial crisis is ending and optimism in the future is not unfounded. We'll see how long this view lasts as companies begin to prepare their 3rd quarter earnings reports and release them to the public. Here in the U.S., investors are still reacting to extremely low interest rates available for CD's, as many banks here continue to lower their rates, not raise them. This fact forces many people looking for income to take longer maturities or higher risk investments to get the yield they need.
Friday, October 2, 2009
So yesterday's 200 point drop in the Dow Jones happened on Oct 1st, but is that why the index fell, just because it was October? No, new economic reports that came out yesterday caused traders to think that the economic recovery ahead may not be as strong as previously thought. Now no one really had predicted that the economic recovery from this recession would be strong, but new data seems to indicate that it may be worse than expected. Does that make sense? If you follow the stock market for very long, one thing you will learn is that economists are known for changing their minds a lot. They are not a group to take responsibility for previous statements either. They will merely state that "new data" has led them to take a different view that they had before. Today, the US Labor Department is scheduled to release their monthly jobs report. Depending on how the numbers look relative to previous reports, the stock market could drop further, or go back up. This is the nature of the stock market on a daily basis.
Thursday, October 1, 2009
Welcome to October! The temperatures are falling along with some leaves, but does the changing of the calendar from September to October mean that stock prices will be falling also? October has been a historically bad month for the stock market, but stock prices fall for many reasons. Poor earnings, worse than expected sales, poor economic reports and conditions, product recalls or failures, the list goes on and on. But stocks do not just go down because it's October. Since March, the stock market has recovered nicely, maybe too well. Stocks advanced 15% on average in the 3rd quarter alone! This has some people thinking that it may be time for a correction of some kind. Of course, many people also thought this might happen in September and it didn't. So take some profits, and sit on the sidelines this month if you are worried and can't sleep at night, but don't just sell because you turned the page on your calendar.