Since the U.S. stock market hit its closing low on March 9th, it has rallied over 20%. Even prior to the Dow Jones Industrial Average's 497 point advance on March 23rd, the market had shown significant signs that a nice rally was in force. Smart investors, who've been waiting for a decent opportunity to put some capital to work, have set their sights on the stocks that are showing significant strength compared to the rest of the market.
Picking the next big movers in the stock market can be a daunting task. But, many of today's analytical programs make this task a little bit easier. I use a program called Telechart by Worden Brothers, and have been using this program for about ten years. However, many of the online brokerages offer good capabilities as well.
Here are a few tips to finding stocks that are ready to make nice moves over a couple month period:
1. Look for the stocks that are trading at or near new 52 week highs
2. Look for stocks that are trading further above their 52 week lows than other stocks
3. Look for stocks that have shown significant increases in volume over the last six months
Once you have identified a number of stocks that show these characteristics, look for stocks that have been consolidating for a couple weeks, and up to four or five weeks. We don't want to enter a new position when a stock has been up 10 days in a row, so we look for those that have traded sideways for a bit within a nice uptrend. We then look to enter a trade when the stock breaks out above its recent consolidation pattern.
These are your high momentum stocks that, when market conditions are good, can give you a pop of 50% to over 100% in just a couple months. However, in the current market environment, it is a good idea to scale back expectations, and not to use any leverage. However, these stocks can provide you with decent short term returns. If it becomes clear that economic conditions are improving significantly, you can then be more aggressive.
Remember, there is no full proof trading strategy. This type of strategy will generally result in more losing trades than winning trades. However, if you use some common sense and manage your risk, you can enjoy decent returns, as a few good trades will more than make up for the small losing trades.
Copyright (c) 2009 Scott Cole
Scott Cole is a stock market analyst and owner of the website http://www.theultimatestocktradingsystem.com. He also writes daily market commentary at http://www.kungfutrader.com
Article Source: http://EzineArticles.com/?expert=Scott_A._Cole
Thursday, April 2, 2009
The Market is Rising But Stocks Keep Breaking Down. By Dr. Winton M. Felt
The market appears to have changed from being a declining market to being a rising market. Day after day, reporters announce that there has been another market advance. Yet, it may seem that every time you invest in a stock it breaks down and your stop loss is triggered. It is not always easy to participate in a new uptrend.
During the transition from a bear market to a bull market, is parking your assets in a money-market fund really your best option? Here are some alternatives.
In the transition time, when the market appears to be in the beginning phase of a new up-trend after a prolonged decline, we may hesitate to invest until we have more assurance that the trend is likely to endure awhile. In the early stages of a recovering market, we may be slower to invest than we could be. There is a good reason for this. Those who carefully monitor stock behavior during these times may notice that an inordinate number of stocks break down and collapse after attempting to reverse course. Even though the market seems to be recovering and indexes are rising impressively, individual stocks are churning. During a recovery after a bear market, stocks may make a big rise and then fall enough to lose almost all the gain. Only those who bought at the very beginning of the price surge can make a profit under those conditions. Most investors will not do that, so they will lose on their trades. When thousands of stocks alternately rise a little then plunge to give up most of the previous gain, the overall market may look good as it rises steadily to higher valuations. In the meantime, though investors may hear that the market is up 12% year to date, they notice that their own portfolios are down 5%. Thousands of stocks are taking turns at pushing the market a little higher. Even though the percentage of breakdowns is high, the combined effect is a rising market. During times like this, when individual stock breakdowns are relatively frequent, the volatility (and risk) of individual stocks is much greater than that of the market as a whole. Thus, many investors move assets to the money-market while the market as a whole is making gains that are much more attractive.
Individual stocks do not always evidence this level of instability in the early stages of a market turnaround. However, when they do, I suggest that investors and traders evaluate whether or not it would be wise to make the following "tweak" to their discipline. During the waiting period between the time when the market turns bullish and when you begin to take positions in selected stocks, you might be able to further enhance returns by investing in the market as a whole. There is a security (symbol = SPY) that tracks the S&P500. It is an exchange-traded fund (ETF) also known as a SPDR (Standard & Poor's Depository Receipt). Our traders track SPY and a large number of other ETFs daily and rank them relative to each other. They make this part of their daily discipline because it gives them the information they need to participate in the market even when individual stocks are churning but the market is rising. If this helps them, you might benefit from doing the same thing.
Technically, it is a no-load mutual fund that trades on the stock exchange like a stock. Investing in this stock is somewhat like buying the Vanguard 500 Index fund, but it is better for the purpose. Vanguard discourages people from buying and selling their fund like a stock.
Almost all mutual fund managers want to minimize fluctuation in the amount of assets they are managing. That's why most are so ardent in opposing attempts to "time the market" (an issue I may take up at another time).
"Timers" sometimes sell their stock positions or mutual funds because doing so is required by their discipline for managing risk. Fund managers, on the other hand, have a vested interest in discouraging investors from doing anything that removes cash from the consolidated investment account they are managing. SPY, on the other hand, can be bought and sold like any other stock. Thus, if you get a buy signal on the market, but are not yet ready to take individual positions because of the number of breakdowns you are seeing in individual stock patterns, you might consider filling several of your portfolio slots with SPY. Then, as you need cash for the purchase of individual stocks, you can sell enough SPY to meet your needs. Because SPY represents 500 stocks, it is less risky than individual stocks in the early stages of an up-trend. This will enable you to participate on the upside even if individual stocks still lack stability. While you are waiting for good opportunities in individual stocks, you have the possibility of making much more than money market returns by investing in the market (S&P500) as a whole through the purchase of SPY. Even here, though, proper timing is essential. Do not invest in SPY until indicators confirm that the market is in an up-trend.
How can one know when to use SPY instead of individual stocks? The issue hinges on whether the new market trend has sufficient internal momentum to support individual stock trends long enough for them to be profitable.
A simple way to monitor the development of a new market trend is to watch the Dow (tests conducted by our traders have convinced us that the Dow gives more precise signals for shifting trends in the market than does the S&P500). One way to approach the problem is to track the 10-day and 20-day simple moving averages of the Dow Jones Industrial Average. Your alert signal would occur when the 10-day moving average rises above the 20-day moving average. Your signal would occur when the 20-day moving average begins to rise while the 10-day moving average remains above the 20-day average. This alignment and the rising of the 20-day average would suggest that the momentum of the new trend is sufficiently developed to support trading in individual stocks. The position of the 10-day average above the 20-day average lets you know that the short-term trend still supports the rising of the 20-day average. Until these conditions occur, a person could stay with the SPY positions. Even after the signal is given, SPY would be sold off only as needed to free up money for a stock purchase. Reversing the configuration of these moving averages would provide a bearish indicator. Of course this combination of moving averages is only one example of the tools that might be employed. The purpose here is to be able to place money where it can earn a return well above that offered by any money market fund when individual stocks are whipsawing too much or triggering stop losses too frequently for most people to make significant headway toward profitability.
Copyright 2009, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com
Dr. Winton Felt has market reviews, stock alerts, and free tutorials at http://www.stockdisciplines.com Information and videos about stock alerts and pre-surge "setups" are at http://www.stockdisciplines.com/stock-alerts Information and videos about stop losses (including volatility based stop losses) are also provided.
Article Source: http://EzineArticles.com/?expert=Dr._Winton_M._Felt
During the transition from a bear market to a bull market, is parking your assets in a money-market fund really your best option? Here are some alternatives.
In the transition time, when the market appears to be in the beginning phase of a new up-trend after a prolonged decline, we may hesitate to invest until we have more assurance that the trend is likely to endure awhile. In the early stages of a recovering market, we may be slower to invest than we could be. There is a good reason for this. Those who carefully monitor stock behavior during these times may notice that an inordinate number of stocks break down and collapse after attempting to reverse course. Even though the market seems to be recovering and indexes are rising impressively, individual stocks are churning. During a recovery after a bear market, stocks may make a big rise and then fall enough to lose almost all the gain. Only those who bought at the very beginning of the price surge can make a profit under those conditions. Most investors will not do that, so they will lose on their trades. When thousands of stocks alternately rise a little then plunge to give up most of the previous gain, the overall market may look good as it rises steadily to higher valuations. In the meantime, though investors may hear that the market is up 12% year to date, they notice that their own portfolios are down 5%. Thousands of stocks are taking turns at pushing the market a little higher. Even though the percentage of breakdowns is high, the combined effect is a rising market. During times like this, when individual stock breakdowns are relatively frequent, the volatility (and risk) of individual stocks is much greater than that of the market as a whole. Thus, many investors move assets to the money-market while the market as a whole is making gains that are much more attractive.
Individual stocks do not always evidence this level of instability in the early stages of a market turnaround. However, when they do, I suggest that investors and traders evaluate whether or not it would be wise to make the following "tweak" to their discipline. During the waiting period between the time when the market turns bullish and when you begin to take positions in selected stocks, you might be able to further enhance returns by investing in the market as a whole. There is a security (symbol = SPY) that tracks the S&P500. It is an exchange-traded fund (ETF) also known as a SPDR (Standard & Poor's Depository Receipt). Our traders track SPY and a large number of other ETFs daily and rank them relative to each other. They make this part of their daily discipline because it gives them the information they need to participate in the market even when individual stocks are churning but the market is rising. If this helps them, you might benefit from doing the same thing.
Technically, it is a no-load mutual fund that trades on the stock exchange like a stock. Investing in this stock is somewhat like buying the Vanguard 500 Index fund, but it is better for the purpose. Vanguard discourages people from buying and selling their fund like a stock.
Almost all mutual fund managers want to minimize fluctuation in the amount of assets they are managing. That's why most are so ardent in opposing attempts to "time the market" (an issue I may take up at another time).
"Timers" sometimes sell their stock positions or mutual funds because doing so is required by their discipline for managing risk. Fund managers, on the other hand, have a vested interest in discouraging investors from doing anything that removes cash from the consolidated investment account they are managing. SPY, on the other hand, can be bought and sold like any other stock. Thus, if you get a buy signal on the market, but are not yet ready to take individual positions because of the number of breakdowns you are seeing in individual stock patterns, you might consider filling several of your portfolio slots with SPY. Then, as you need cash for the purchase of individual stocks, you can sell enough SPY to meet your needs. Because SPY represents 500 stocks, it is less risky than individual stocks in the early stages of an up-trend. This will enable you to participate on the upside even if individual stocks still lack stability. While you are waiting for good opportunities in individual stocks, you have the possibility of making much more than money market returns by investing in the market (S&P500) as a whole through the purchase of SPY. Even here, though, proper timing is essential. Do not invest in SPY until indicators confirm that the market is in an up-trend.
How can one know when to use SPY instead of individual stocks? The issue hinges on whether the new market trend has sufficient internal momentum to support individual stock trends long enough for them to be profitable.
A simple way to monitor the development of a new market trend is to watch the Dow (tests conducted by our traders have convinced us that the Dow gives more precise signals for shifting trends in the market than does the S&P500). One way to approach the problem is to track the 10-day and 20-day simple moving averages of the Dow Jones Industrial Average. Your alert signal would occur when the 10-day moving average rises above the 20-day moving average. Your signal would occur when the 20-day moving average begins to rise while the 10-day moving average remains above the 20-day average. This alignment and the rising of the 20-day average would suggest that the momentum of the new trend is sufficiently developed to support trading in individual stocks. The position of the 10-day average above the 20-day average lets you know that the short-term trend still supports the rising of the 20-day average. Until these conditions occur, a person could stay with the SPY positions. Even after the signal is given, SPY would be sold off only as needed to free up money for a stock purchase. Reversing the configuration of these moving averages would provide a bearish indicator. Of course this combination of moving averages is only one example of the tools that might be employed. The purpose here is to be able to place money where it can earn a return well above that offered by any money market fund when individual stocks are whipsawing too much or triggering stop losses too frequently for most people to make significant headway toward profitability.
Copyright 2009, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com
Dr. Winton Felt has market reviews, stock alerts, and free tutorials at http://www.stockdisciplines.com Information and videos about stock alerts and pre-surge "setups" are at http://www.stockdisciplines.com/stock-alerts Information and videos about stop losses (including volatility based stop losses) are also provided.
Article Source: http://EzineArticles.com/?expert=Dr._Winton_M._Felt
Proven Tips to Buy Stocks Online. By Robert J. Tyler
In order to buy stocks online, you must first establish an account with an online discount broker that offers low commission trades. If you don't already have an account with a discount broker, it is important to select one that meets your needs. Don't simply open up an account with a online broker because they have the cheapest trades or advertise FREE trades. Those agencies may not offer the same support as other traditional stock brokers, so do your analysis before choosing.
When you buy stocks online, there are several things you must understand that are different than placing orders with a traditional brokerage firm. The majority of the time, you are in complete control of your trades and are the only one looking at the order before it is placed. While this may not typically be an issue, you need to recognize that you are to blame if the trade is placed incorrectly. Some investors may prefer to continue trading with a "live" broker instead, to ensure their transaction goes through properly.
If you decide to buy stocks online, then you will also need to understand the terminology. You will need to understand the difference between a limit and market order as well as what a Good Till Canceled trade means. While these terms are not complex to learn, you will at least need to have an understanding of what their definition is. Educating yourself is imperative when it comes to investing your money and buying stocks online.
Buying and selling stocks takes a lot of homework and due diligence. Successful investors research financial statements, market trends, technical analysis, and more. Why worry about making online stock trades and your online broker when you should be focusing your time and effort on your investments? Research your broker and define your trading strategy upfront so it doesn't come back to harm you!
When you buy stocks online, you must take responsibility for your own actions. You are ultimately responsible for your trades and actions. While some online discount brokers may offer unlimited customer support and analysis on a particular trade - you will still be the one pushing the button.
Regardless of the type of investor you are - it is still a great opportunity to buy stocks online for the lower commission costs and the flexibility it offers.
Interested in learning more about How to Buy Stocks Online?
Visit BuyStocksOnlineInfo.com today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
When you buy stocks online, there are several things you must understand that are different than placing orders with a traditional brokerage firm. The majority of the time, you are in complete control of your trades and are the only one looking at the order before it is placed. While this may not typically be an issue, you need to recognize that you are to blame if the trade is placed incorrectly. Some investors may prefer to continue trading with a "live" broker instead, to ensure their transaction goes through properly.
If you decide to buy stocks online, then you will also need to understand the terminology. You will need to understand the difference between a limit and market order as well as what a Good Till Canceled trade means. While these terms are not complex to learn, you will at least need to have an understanding of what their definition is. Educating yourself is imperative when it comes to investing your money and buying stocks online.
Buying and selling stocks takes a lot of homework and due diligence. Successful investors research financial statements, market trends, technical analysis, and more. Why worry about making online stock trades and your online broker when you should be focusing your time and effort on your investments? Research your broker and define your trading strategy upfront so it doesn't come back to harm you!
When you buy stocks online, you must take responsibility for your own actions. You are ultimately responsible for your trades and actions. While some online discount brokers may offer unlimited customer support and analysis on a particular trade - you will still be the one pushing the button.
Regardless of the type of investor you are - it is still a great opportunity to buy stocks online for the lower commission costs and the flexibility it offers.
Interested in learning more about How to Buy Stocks Online?
Visit BuyStocksOnlineInfo.com today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
Want 20% Return in Your Stock Investments? Here are the 5 Crucial Numbers a Company Must Possess! By Robert Marsh
It is downright tough finding the right stock picks to invest in with such and up and down Economy! With all the financial companies going belly up and the housing Market in a slump, it is a challenge to get any kind of positive rate of return with good stocks!
Here are the 5 crucial characteristics a Company must have to be able to make a rate of return of 20% or more each and every year if you invest in it..
1. ROIC- Return on investment capital is simply the rate of return a company makes on the cash it plows and invests in itself each and every year. It should be above 10% per year for the last 10 years.
2. Sales - A Company's Sales is the amount of dollars they bring in from the sell of their Products. You want to look at the last 5 years and see a continuing growth in sales each year.
3 EPS- This stands for Earnings Per Share. It is a very important figure of the Company and its operations. It takes the complete earnings of a company and divides it by the number of outstanding shares. You want this figure to be high. It means that each share is generating a very good amount of profit!
4. Equity - This figure is the amount a Company would be left with if it sold off everything, paid off all debts, and took the money that was left! Of course, the higher this is the healthier and more attractive the Company is to invest in.
5. Cash Growth - This figure allows potential investors to know if a company's profits are aligned with making hard, cold cash. Profits are great on paper. But cash growth tells what the company is worth in accurate dollar amounts! The higher, the better.
I hope these stock tips give you some insight in to what makes a company a potentially good investment. Remember, always be selective and do your research before investing in any good stocks.
Robert Marsh owns a site where he provides the top hot stocks and stock tips for the beginning investor as well as the experienced one!Also visit his other site where he shows you how to make free money with the best money making opportunities on the Net !
Article Source: http://EzineArticles.com/?expert=Robert_Marsh
Here are the 5 crucial characteristics a Company must have to be able to make a rate of return of 20% or more each and every year if you invest in it..
1. ROIC- Return on investment capital is simply the rate of return a company makes on the cash it plows and invests in itself each and every year. It should be above 10% per year for the last 10 years.
2. Sales - A Company's Sales is the amount of dollars they bring in from the sell of their Products. You want to look at the last 5 years and see a continuing growth in sales each year.
3 EPS- This stands for Earnings Per Share. It is a very important figure of the Company and its operations. It takes the complete earnings of a company and divides it by the number of outstanding shares. You want this figure to be high. It means that each share is generating a very good amount of profit!
4. Equity - This figure is the amount a Company would be left with if it sold off everything, paid off all debts, and took the money that was left! Of course, the higher this is the healthier and more attractive the Company is to invest in.
5. Cash Growth - This figure allows potential investors to know if a company's profits are aligned with making hard, cold cash. Profits are great on paper. But cash growth tells what the company is worth in accurate dollar amounts! The higher, the better.
I hope these stock tips give you some insight in to what makes a company a potentially good investment. Remember, always be selective and do your research before investing in any good stocks.
Robert Marsh owns a site where he provides the top hot stocks and stock tips for the beginning investor as well as the experienced one!Also visit his other site where he shows you how to make free money with the best money making opportunities on the Net !
Article Source: http://EzineArticles.com/?expert=Robert_Marsh
What is the Key to Trade Success? By Stu McPhee
The road to trade success is very long and colourful. There are many things to consider when trading and for many starting out, there is too much to remember. The best way to ensure that you follow your trading plan and do not cut corners is to develop a routine, preferably written down. If needed, you could write down your routine in the form of a list in a logical sequence, and tick off every item as you complete it. This way you can be guaranteed of completing everything that you should.
You have little hope of developing a routine if you have not developed your trading plan. Your routine will be a logical progression from your written trading plan, and it will facilitate the adherence to your trading plan. You should aim to develop a routine that will guide you through all of the necessary steps and which will stop you getting distracted by other matters.
Decision making heavily influences your trading success. Anything that can help you focus on the important decisions that need to be made should be considered. This is where your written routine or checklist can greatly assist.
One of the advantages of developing a routine is to assist with information management. The amount of information now easily and conveniently available to people is vast. Considering an individual trader can easily be overwhelmed with the amount of information available, your routine will reduce the likelihood of accessing information that is not included or necessary to the adherence to your plan.
As an example, many reputable Internet sites offer market information containing analyst's reports, company reports and other general news. Traders don't need to browse all of the available sites that offer such commentary, yet you can easily be distracted and go searching for material that may support your own opinions. Another example is internet chat rooms.
As a guide, your routine might include items like download the Australian Stock Report, download ASX data for charting software (if applicable), review all of your open positions to see if any of your stops have been hit. If some positions are moving well, you may have to adjust the stops to ensure you are in a position to lock in a profit. You may consider the recommendations made in the report and place one of them on your watch list, review your present watch list and remove those stocks that no longer meet your entry conditions. You may also include some actions that you perform weekly and monthly, for example inserting all of your completed trades into your record keeping spreadsheet or personal financial software and conduct a systematic review of past trades.
Having a trading plan with a supporting routine that will assist you to adhere to your trading plan, is likely to provide you an advantage over most other traders in the market, and increase your chances of long term profitable trading and ultimately trade success.
Have You Read The Ultimate Trading Manual?
Click http://www.tradinginanutshell.com/
Article Source: http://EzineArticles.com/?expert=Stu_McPhee
You have little hope of developing a routine if you have not developed your trading plan. Your routine will be a logical progression from your written trading plan, and it will facilitate the adherence to your trading plan. You should aim to develop a routine that will guide you through all of the necessary steps and which will stop you getting distracted by other matters.
Decision making heavily influences your trading success. Anything that can help you focus on the important decisions that need to be made should be considered. This is where your written routine or checklist can greatly assist.
One of the advantages of developing a routine is to assist with information management. The amount of information now easily and conveniently available to people is vast. Considering an individual trader can easily be overwhelmed with the amount of information available, your routine will reduce the likelihood of accessing information that is not included or necessary to the adherence to your plan.
As an example, many reputable Internet sites offer market information containing analyst's reports, company reports and other general news. Traders don't need to browse all of the available sites that offer such commentary, yet you can easily be distracted and go searching for material that may support your own opinions. Another example is internet chat rooms.
As a guide, your routine might include items like download the Australian Stock Report, download ASX data for charting software (if applicable), review all of your open positions to see if any of your stops have been hit. If some positions are moving well, you may have to adjust the stops to ensure you are in a position to lock in a profit. You may consider the recommendations made in the report and place one of them on your watch list, review your present watch list and remove those stocks that no longer meet your entry conditions. You may also include some actions that you perform weekly and monthly, for example inserting all of your completed trades into your record keeping spreadsheet or personal financial software and conduct a systematic review of past trades.
Having a trading plan with a supporting routine that will assist you to adhere to your trading plan, is likely to provide you an advantage over most other traders in the market, and increase your chances of long term profitable trading and ultimately trade success.
Have You Read The Ultimate Trading Manual?
Click http://www.tradinginanutshell.com/
Article Source: http://EzineArticles.com/?expert=Stu_McPhee
Wednesday, April 1, 2009
What Moves the Stock Market? By James Leitz
You don't need an MBA to get a handle on the stock market. Unless your instructor has plenty of "hands on" experience with stock investing, the class room is not the best place to learn stock market basics.
It's important to gain "market sense", and this is best accomplished by studying the stock market itself. How can the Dow Jones Industrial Average (DJIA or the DOW) be up 300 points one week and down 500 the next? What causes stock prices to fall 50% in less than two years?
The law of supply and demand explains stock market basics and stock prices, if you want to get academic. What keeps stock investing interesting is that in the real world it's not so simple. View the stock market as a very large collection of people, each person with a profit motive. As a group they determine stock prices and move the market as they bid prices either up or down. Stock investing is a people game, not an analytic exercise. Market players are emotional beings, and do not always make rational decisions.
You do not need to be a great stock picker to win at the stock investing game, but you should have a feel for the markets. In a rising stock market, a significant majority of stocks participate and go up. In a bear market like 2008-2009, few buck the downward trend. To get a firm grasp of what moves markets, let's look at recent market action that took the DOW down 50% between late 2007 and mid-March of 2009.
Instead of thinking in terms of supply and demand, think fear and greed. Stock prices move down when investors (on balance) increase the supply of stock by offering shares for sale, sometimes motivated by fear. When greed kicks in they scramble to buy stocks, increasing demand and sending stock prices higher.
By late 2007 the stock market as measured by the DOW had been up five consecutive years. All that was necessary for a change of investor sentiment was bad news. By late 2008 fear was rampant as financial crisis gripped Wall Street and the nation. The financial news went from bad to incredulous. Stock prices fell like a rock as fearful investors swamped the market with "sell" orders.
A market does not fall 50% without a "fake-out" or two along the way. Here's where it pays to understand stock market basics and market dynamics. For example, after a three month drop of 2000 points on the DOW, a 1000 point rally would not be unusual. Such action is often caused by a spark of unexpected good news, and investor greed takes over as "buy" orders flood the market. In other words, who wants to miss out on the action?
Rallies in a bear market hype the emotions, fear vs. greed. The perennial investor question is "how long will this rally last"? An upward move in stock prices can mark the beginning of a new bull market where stock prices go up for years. On the other hand, such a move could be a bear trap as fear once again takes over sending stocks to new lows.
View stock investing as a people game. Understand that people move markets, and they are sometimes acting out of emotion. If you can keep a cool head while those around you panic, you're a step ahead in the stock investing game.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com
Article Source: http://EzineArticles.com/?expert=James_Leitz
It's important to gain "market sense", and this is best accomplished by studying the stock market itself. How can the Dow Jones Industrial Average (DJIA or the DOW) be up 300 points one week and down 500 the next? What causes stock prices to fall 50% in less than two years?
The law of supply and demand explains stock market basics and stock prices, if you want to get academic. What keeps stock investing interesting is that in the real world it's not so simple. View the stock market as a very large collection of people, each person with a profit motive. As a group they determine stock prices and move the market as they bid prices either up or down. Stock investing is a people game, not an analytic exercise. Market players are emotional beings, and do not always make rational decisions.
You do not need to be a great stock picker to win at the stock investing game, but you should have a feel for the markets. In a rising stock market, a significant majority of stocks participate and go up. In a bear market like 2008-2009, few buck the downward trend. To get a firm grasp of what moves markets, let's look at recent market action that took the DOW down 50% between late 2007 and mid-March of 2009.
Instead of thinking in terms of supply and demand, think fear and greed. Stock prices move down when investors (on balance) increase the supply of stock by offering shares for sale, sometimes motivated by fear. When greed kicks in they scramble to buy stocks, increasing demand and sending stock prices higher.
By late 2007 the stock market as measured by the DOW had been up five consecutive years. All that was necessary for a change of investor sentiment was bad news. By late 2008 fear was rampant as financial crisis gripped Wall Street and the nation. The financial news went from bad to incredulous. Stock prices fell like a rock as fearful investors swamped the market with "sell" orders.
A market does not fall 50% without a "fake-out" or two along the way. Here's where it pays to understand stock market basics and market dynamics. For example, after a three month drop of 2000 points on the DOW, a 1000 point rally would not be unusual. Such action is often caused by a spark of unexpected good news, and investor greed takes over as "buy" orders flood the market. In other words, who wants to miss out on the action?
Rallies in a bear market hype the emotions, fear vs. greed. The perennial investor question is "how long will this rally last"? An upward move in stock prices can mark the beginning of a new bull market where stock prices go up for years. On the other hand, such a move could be a bear trap as fear once again takes over sending stocks to new lows.
View stock investing as a people game. Understand that people move markets, and they are sometimes acting out of emotion. If you can keep a cool head while those around you panic, you're a step ahead in the stock investing game.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com
Article Source: http://EzineArticles.com/?expert=James_Leitz
How to Use Options Trading Strategies to Make Money in a Bear Market. By Robert J. Tyler
Did you know that you can implement several options trading strategies that can earn you a monthly income even in a bear market? Many people are surprised to hear that they don't have to sit on the sidelines in a stock market that is spiraling downwards. Education and proper discipline using bear market options trading strategies will put extra cash in your pockets and give you the edge when the next bull market occurs. Here is a simple low risk trading strategy that you can implement when the market is trending down.
Trading deep in the money puts is one of many options trading strategies that can be implemented in a bear market. It is very easy to implement once you have completed your due diligence. This strategy only requires a few hundred dollars upfront and an online discount broker to start.
The first step is to identify a stock that you believe will continue to head lower in the next 4 to 6 months. Then you investigate several put option contracts that have a strike price well above the current share price of the security. After you have identified potential put contracts, you place a buy to open limit order with your online discount stock broker.
Once you have purchased your put contract(s), immediately place a sell to close limit order with your online broker. The limit order should reflect your overall options trading goals. Some investors may require a $1 increase in the price of the put contract before selling, while others may decide to sell after reaching a certain percentage gain. Your exit strategy should be included with your options trading strategies goals. You may also want to place a stop loss order to minimize your exposure if the underlying security begins an upward trend.
Trading deep in the money put contracts is just one way to implement an options trading strategy for a struggling market and economy. Are you ready to trade what the market gives you instead of losing money trading against the market?
I have been implementing options trading strategies for over 5 years now as a way to supplement my income. Along the way, I have learned the power of options trading as well as the risks involved and have taken advantage of bullish and bearish trends to make money!
Did you find this information on options trading strategies useful? You can learn a lot more about how options trading strategies can help you earn an income and quit your day job by visiting - Options Trading System.
Sign up for the FREE VIDEO on trading and managing options to generate monthly income by visiting Options Trading System today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
Trading deep in the money puts is one of many options trading strategies that can be implemented in a bear market. It is very easy to implement once you have completed your due diligence. This strategy only requires a few hundred dollars upfront and an online discount broker to start.
The first step is to identify a stock that you believe will continue to head lower in the next 4 to 6 months. Then you investigate several put option contracts that have a strike price well above the current share price of the security. After you have identified potential put contracts, you place a buy to open limit order with your online discount stock broker.
Once you have purchased your put contract(s), immediately place a sell to close limit order with your online broker. The limit order should reflect your overall options trading goals. Some investors may require a $1 increase in the price of the put contract before selling, while others may decide to sell after reaching a certain percentage gain. Your exit strategy should be included with your options trading strategies goals. You may also want to place a stop loss order to minimize your exposure if the underlying security begins an upward trend.
Trading deep in the money put contracts is just one way to implement an options trading strategy for a struggling market and economy. Are you ready to trade what the market gives you instead of losing money trading against the market?
I have been implementing options trading strategies for over 5 years now as a way to supplement my income. Along the way, I have learned the power of options trading as well as the risks involved and have taken advantage of bullish and bearish trends to make money!
Did you find this information on options trading strategies useful? You can learn a lot more about how options trading strategies can help you earn an income and quit your day job by visiting - Options Trading System.
Sign up for the FREE VIDEO on trading and managing options to generate monthly income by visiting Options Trading System today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
An Inside Look at a Great Way to Make Money - Investing in Penny Stocks Made Easy. By Grant Dougan
One of my favorite investment types are penny stocks. Because some people view these stocks to be risky, I see many people avoid them altogether Don't let yourself be scared though - you will earn unbelievable money if you know how to analyze these stocks.
Any stock under two dollars is what I see as a penny share. When I consider shares to invest in, I search for a company that is new and growing. You will see many companies that are now trading less than two bucks because they have had troubles. I will always look for organizations that are up and coming instead of organizations that are simply cheap because of difficulties they had. This provides me with me a chance to make some large profits down the road.
We should now have a look at how you can choose the best penny shares. Once you know what to look for, you can start earning fabulous money.
Looking at the industry that the business is in is an important first step. Is the competition in the industry too tough for a new business to enjoy success? You need to analyze the industry as a whole to make sure that the business is producing a service or product that is actually going to be wanted.
Next, of course you want to examine the organization itself. What about the management? It's also essential to consider what the business offers and analyze if their service or product is different from what other businesses in the industry are providing. Try to find companies that either make a unique product or compete on some other aspect such as price. If the company offers something that isn't exactly like what everyone else has then it is much more likely to capture additional sales.
Take a look at what the financial statements of the company look like. Don't worry if you see negative earnings since this is normal for most startup companies like this. But you do want to see that they're being smart with their money and that they have access to the funds they need to keep moving forward.
These stocks can give you enormous gains if the company starts to become successful. By knowing how you can locate a winning penny share, you can make some terrific money.
Finding hot penny stocks isn't rocket science - you just need to understand what to look for.
Click here to see a penny stock system that has been generating massive profits for it's users.
Article Source: http://EzineArticles.com/?expert=Grant_Dougan
Any stock under two dollars is what I see as a penny share. When I consider shares to invest in, I search for a company that is new and growing. You will see many companies that are now trading less than two bucks because they have had troubles. I will always look for organizations that are up and coming instead of organizations that are simply cheap because of difficulties they had. This provides me with me a chance to make some large profits down the road.
We should now have a look at how you can choose the best penny shares. Once you know what to look for, you can start earning fabulous money.
Looking at the industry that the business is in is an important first step. Is the competition in the industry too tough for a new business to enjoy success? You need to analyze the industry as a whole to make sure that the business is producing a service or product that is actually going to be wanted.
Next, of course you want to examine the organization itself. What about the management? It's also essential to consider what the business offers and analyze if their service or product is different from what other businesses in the industry are providing. Try to find companies that either make a unique product or compete on some other aspect such as price. If the company offers something that isn't exactly like what everyone else has then it is much more likely to capture additional sales.
Take a look at what the financial statements of the company look like. Don't worry if you see negative earnings since this is normal for most startup companies like this. But you do want to see that they're being smart with their money and that they have access to the funds they need to keep moving forward.
These stocks can give you enormous gains if the company starts to become successful. By knowing how you can locate a winning penny share, you can make some terrific money.
Finding hot penny stocks isn't rocket science - you just need to understand what to look for.
Click here to see a penny stock system that has been generating massive profits for it's users.
Article Source: http://EzineArticles.com/?expert=Grant_Dougan
Do You Qualify for the New Mortgage Refinance or Loan Modification Program? Find Out! by: Russell Benjamin
Making Home Affordable is a new government program designed to help keep people in their homes by lowering monthly mortgage payments for qualifying homeowners. The plan is projected to help somewhere between 7 and 9 million homeowners all across the United States by either refinancing or modifying their mortgage. Do you qualify for the Making Home Affordable program? There are a few simple questions that will help determine if you are eligible to participate in the Making Home Affordable program. There are two different parts to the Making Home Affordable program, the mortgage refinance and the loan modification. The Making Home Affordable refinance program targets homeowners who are current on their mortgages, but are currently unable to refinance to a lower rate due to a drop in the value of their home. This plan targets those homeowners who have loans held by Fannie Mae or Freddie Mac and whose owe approximately the same or less than the current home value. Here is a quick set of questions to see if you qualify for the Making Home Affordable refinance program: 1. Is your home your primary residence? 2. Do you have a Fannie Mae or Freddie Mac loan? If you are not sure, you can find out if you have a Freddie Mac or Fannie Mae loan. 3. Are you current on your mortgage payments? Current means that you have not been more than 30 days late on your mortgage payment over the past 12 months. 4. Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house? If you answered yes to all four of these questions, then you may be eligible for the Making Home Affordable refinance program. You can find out more about the mortgage refinance program at http://www.makinghomemortgageaffordable.com. If you answered no to any of these questions, then you will want to find out if you qualify for the second part of the Making Home Affordable - the loan modification plan. This plan is for homeowners who can no longer afford their mortgage payments due to an increase in interest rates, a decrease in their income, or a financial hardship such as medical expenses. This plan works for those who are current on their mortgage, or those who are behind on their mortgages. Here are four basic questions that will help to determine if you may be eligible for the loan modification plan: 1. Is your home your primary residence? 2. Is the amount you owe on your first mortgage equal to or less than $729,750? 3. Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)? 4. Did you get your current mortgage before January 1, 2009? If you answered yes to all four of these questions, then you may be eligible for the Making Home Affordable loan modification program. Find out more about the Making Home Affordable loan modification program at http://www.makinghomemortgageaffordable.com. If you answered no to any of these questions, then you still have some options available for avoiding a foreclosure. You can find out more by visiting the Making Home Mortgage Affordable website, the number one informational resource on the Making Home Affordable program.
www.articlecity.com
www.articlecity.com
Four Small Banks Are the First to Pay Back TARP Funds. by Eric Dash
Four small banks became the first to return millions of dollars of emergency aid, and more may soon follow as the industry tries to escape what it considers the onerous conditions attached to the government’s money.
More from NYTimes.com:
• President Gives a Short Lifeline to Carmakers • Contracts Now Seen as Being Rewritable • For U.S. and Carmakers, a Path Strewn With Pitfalls
Signature Bank of New York said on Tuesday that it had repaid $120 million to the Treasury Department. Old National Bancorp of Indiana returned $100 million, Iberiabank of Louisiana paid back $90 million, and Bank of Marin Bancorp of Novato, Calif., repaid $28 million. All of the banks paid 5 percent interest on the money they had received.
The four banks were the first to announce that they had returned money from the Troubled Asset Relief Fund, or TARP. The Treasury Department has set aside $250 billion to prop up the banking system, with about half of that money given to the eight biggest banks. About 500 small banks have received $73.7 billion.
But the purpose of the TARP money and the public perception of the fund have changed since then.
What was billed as a program intended to help healthy banks increase lending and swallow up troubled rivals widened to include a number of struggling banks. New restrictions on executive compensation and dividend payouts made such aid less palatable to bank managers.
“We don’t want to be touched by the stigma attached to firms that had taken money,” said Scott A. Shay, the chairman of Signature Bank. He said he also worried that the conditions on the aid could hurt the way he paid bankers and sales representatives.
Iberiabank executives said that tougher rules, including limiting dividends, made taking the aid untenable. “It really changed significantly from how it started,” said John R. Davis, a senior vice president at the bank. “All those changes made it very difficult for a bank like us to participate in the program.”
Originally, banks that accepted TARP money were required to raise private capital before they could repay the loan. But after Congress passed its economic stimulus bill in mid-February, the repayment policy was loosened as strict new compensation rules were put in place.
Banks could apply to their primary regulators for permission to return the TARP money to the Treasury Department early. The returned money could be used for other Treasury programs.
This week, the Treasury Department said that it would have about $134.5 billion of TARP money left, assuming what it said was a “conservative estimate” that $25 billion of the funds would be repaid. Industry groups, like the American Bankers Association, have lobbied aggressively to allow the banks to repay the money quickly, saying it would send a positive signal to depositors and investors that the nation’s banks were sound.
The announcements from the four banks indicate that all three major regulators — the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Insurance Deposit Corporation — are open to granting waivers.
Only banks deemed “well-capitalized” are expected to receive waivers. Regulators are still scrutinizing the balance sheets of the biggest banks as part of a comprehensive stress test to determine whether they need more capital. Regulators are unlikely to make such decisions until the test is complete.
Also unclear is the timetable for the country’s biggest banks to return TARP money. Top executives at Goldman Sachs, JPMorgan Chase, Wells Fargo and Bank of America have publicly said that they intend to repay it quickly.
President Obama did not provide specifics about the conditions that would allow banks to repay the loans quickly. At a meeting at the White House on Friday, at least two chief executives, Lloyd C. Blankfein of Goldman Sachs and Kenneth I. Chenault of American Express, asked the president to provide detailed guidance for returning the TARP money quickly.
Mr. Obama acknowledged that quick repayment could be a positive signal to the markets but expressed concern about undermining the administration’s efforts to bolster lending.
www.finance.yahoo.com
More from NYTimes.com:
• President Gives a Short Lifeline to Carmakers • Contracts Now Seen as Being Rewritable • For U.S. and Carmakers, a Path Strewn With Pitfalls
Signature Bank of New York said on Tuesday that it had repaid $120 million to the Treasury Department. Old National Bancorp of Indiana returned $100 million, Iberiabank of Louisiana paid back $90 million, and Bank of Marin Bancorp of Novato, Calif., repaid $28 million. All of the banks paid 5 percent interest on the money they had received.
The four banks were the first to announce that they had returned money from the Troubled Asset Relief Fund, or TARP. The Treasury Department has set aside $250 billion to prop up the banking system, with about half of that money given to the eight biggest banks. About 500 small banks have received $73.7 billion.
But the purpose of the TARP money and the public perception of the fund have changed since then.
What was billed as a program intended to help healthy banks increase lending and swallow up troubled rivals widened to include a number of struggling banks. New restrictions on executive compensation and dividend payouts made such aid less palatable to bank managers.
“We don’t want to be touched by the stigma attached to firms that had taken money,” said Scott A. Shay, the chairman of Signature Bank. He said he also worried that the conditions on the aid could hurt the way he paid bankers and sales representatives.
Iberiabank executives said that tougher rules, including limiting dividends, made taking the aid untenable. “It really changed significantly from how it started,” said John R. Davis, a senior vice president at the bank. “All those changes made it very difficult for a bank like us to participate in the program.”
Originally, banks that accepted TARP money were required to raise private capital before they could repay the loan. But after Congress passed its economic stimulus bill in mid-February, the repayment policy was loosened as strict new compensation rules were put in place.
Banks could apply to their primary regulators for permission to return the TARP money to the Treasury Department early. The returned money could be used for other Treasury programs.
This week, the Treasury Department said that it would have about $134.5 billion of TARP money left, assuming what it said was a “conservative estimate” that $25 billion of the funds would be repaid. Industry groups, like the American Bankers Association, have lobbied aggressively to allow the banks to repay the money quickly, saying it would send a positive signal to depositors and investors that the nation’s banks were sound.
The announcements from the four banks indicate that all three major regulators — the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Insurance Deposit Corporation — are open to granting waivers.
Only banks deemed “well-capitalized” are expected to receive waivers. Regulators are still scrutinizing the balance sheets of the biggest banks as part of a comprehensive stress test to determine whether they need more capital. Regulators are unlikely to make such decisions until the test is complete.
Also unclear is the timetable for the country’s biggest banks to return TARP money. Top executives at Goldman Sachs, JPMorgan Chase, Wells Fargo and Bank of America have publicly said that they intend to repay it quickly.
President Obama did not provide specifics about the conditions that would allow banks to repay the loans quickly. At a meeting at the White House on Friday, at least two chief executives, Lloyd C. Blankfein of Goldman Sachs and Kenneth I. Chenault of American Express, asked the president to provide detailed guidance for returning the TARP money quickly.
Mr. Obama acknowledged that quick repayment could be a positive signal to the markets but expressed concern about undermining the administration’s efforts to bolster lending.
www.finance.yahoo.com
Porter's Five Forces Analysis. by: Chris Mallon
If you’ve ever listened to Warren Buffett talk about investing, you’ve heard him mention the idea of a company’s moat. The moat is a simple way of describing a company's competitive advantages. Company's with a strong competitive advantage have large moats, and therefore higher profit margins. And investors should always be concerned with profit margins.
This article looks at a methodology called the Porter’s Five Forces Analysis. In his book Competitive Strategy, Harvard professor Michael Porter describes five forces affecting the profitability of companies. These are the five forces he noted:
Intensity of rivalry amongst existing competitors
Threat of entry by new competitors
Pressure from substitute products
Bargaining power of buyers (customers)
Bargaining power of suppliers
These five forces, taken together, give us insight into a company's competitive position, and its profitability.
Rivals
Rivals are competitors within an industry. Rivalry in the industry can be weak, with few competitors that don’t compete very aggressively. Or it can be intense, with many competitors fighting in a cut-throat environment.
Factors affecting the intensity of rivalry are:
Number of firms – more firms will lead to increased competition.
Fixed costs – with high fixed costs as a percentage of total cost, companies must sell more products to cover those costs, increasing market competition.
Product differentiation – Products that are relatively the same will compete based on price. Brand identification can reduce rivalry.
New Entrants
One of the defining characteristics of competitive advantage is the industry’s barrier to entry. Industries with high barriers to entry are usually too expensive for new firms to enter. Industries with low barriers to entry, are relatively cheap for new firms to enter.
The threat of new entrants rises as the barrier to entry is reduced in a marketplace. As more firms enter a market, you will see rivalry increase, and profitability will fall (theoretically) to the point where there is no incentive for new firms to enter the industry.
Here are some common barriers to entry:
Patents – patented technology can be a huge barrier preventing other firms from joining the market.
High cost of entry – the more it will cost to get started in an industry, the higher the barrier to entry.
Brand loyalty – when brand loyalty is strong within an industry, it can be difficult and expensive to enter the market with a new product.
Substitute Products
This is probably the most overlooked, and therefore most damaging, element of strategic decision making. It’s imperative that business owners (us) not only look at what the company’s direct competitors are doing, but what other types of products people could buy instead.
When switching costs (the costs a customer incurs to switch to a new product) are low the threat of substitutes is high. As is the case when dealing with new entrants, companies may aggressively price their products to keep people from switching. When the threat of substitutes is high, profit margins will tend to be low.
Buyer Power
There are two types of buyer power. The first is related to the customer’s price sensitivity. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. This will increase the competitive rivalry, resulting in lower prices, and lower profitability.
The other type of buyer power relates to negotiating power. Larger buyers tend to have more leverage with the firm, and can negotiate lower prices. When there are many small buyers of a product, all other things remaining equal, the company supplying the product will have higher prices and higher margins. Conversely, if a company sells to a few large buyers, those buyers will have significant leverage to negotiate better pricing.
Some factors affecting buyer power are:
Size of buyer – larger buyers will have more power over suppliers.
Number of buyers – when there are a small number of buyers, they will tend to have more power over suppliers. The Department of Defense is an example of a single buyer with a lot of power over suppliers.
Purchase quantity – When a customer purchases a large quantity of a suppliers output, it will exercise more power over the supplier.
Supplier Power
Buyer power looks at the relative power a company’s customers has over it. When multiple suppliers are producing a commoditized product, the company will make its purchase decision based mainly on price, which tends to lower costs. On the other hand, if a single supplier is producing something the company has to have, the company will have little leverage to negotiate a better price.
Size plays a factor here as well. If the company is much larger than its suppliers, and purchases in large quantities, then the supplier will have very little power to negotiate. Using Wal-Mart as an example, we find that suppliers have no power because Wal-Mart purchases in such large quantities.
A few factors that determine supplier power include:
Supplier concentration – The fewer the number of suppliers for a given product, the more power they will have over the company.
Switching costs – suppliers become more powerful as the cost to change to another supplier increases.
Uniqueness of product – suppliers that produce products specifically for a company will have more power than commodity suppliers.
It’s important to analyze these five forces and their affect on companies we want to invest in. The Porter Five Forces Analysis will give you a good explanation for the profitability of an industry, and the firms within it. If you want to know why a company is able, or unable, to make a decent profit, this is the first analysis you should do.
www.articlecity.com
This article looks at a methodology called the Porter’s Five Forces Analysis. In his book Competitive Strategy, Harvard professor Michael Porter describes five forces affecting the profitability of companies. These are the five forces he noted:
Intensity of rivalry amongst existing competitors
Threat of entry by new competitors
Pressure from substitute products
Bargaining power of buyers (customers)
Bargaining power of suppliers
These five forces, taken together, give us insight into a company's competitive position, and its profitability.
Rivals
Rivals are competitors within an industry. Rivalry in the industry can be weak, with few competitors that don’t compete very aggressively. Or it can be intense, with many competitors fighting in a cut-throat environment.
Factors affecting the intensity of rivalry are:
Number of firms – more firms will lead to increased competition.
Fixed costs – with high fixed costs as a percentage of total cost, companies must sell more products to cover those costs, increasing market competition.
Product differentiation – Products that are relatively the same will compete based on price. Brand identification can reduce rivalry.
New Entrants
One of the defining characteristics of competitive advantage is the industry’s barrier to entry. Industries with high barriers to entry are usually too expensive for new firms to enter. Industries with low barriers to entry, are relatively cheap for new firms to enter.
The threat of new entrants rises as the barrier to entry is reduced in a marketplace. As more firms enter a market, you will see rivalry increase, and profitability will fall (theoretically) to the point where there is no incentive for new firms to enter the industry.
Here are some common barriers to entry:
Patents – patented technology can be a huge barrier preventing other firms from joining the market.
High cost of entry – the more it will cost to get started in an industry, the higher the barrier to entry.
Brand loyalty – when brand loyalty is strong within an industry, it can be difficult and expensive to enter the market with a new product.
Substitute Products
This is probably the most overlooked, and therefore most damaging, element of strategic decision making. It’s imperative that business owners (us) not only look at what the company’s direct competitors are doing, but what other types of products people could buy instead.
When switching costs (the costs a customer incurs to switch to a new product) are low the threat of substitutes is high. As is the case when dealing with new entrants, companies may aggressively price their products to keep people from switching. When the threat of substitutes is high, profit margins will tend to be low.
Buyer Power
There are two types of buyer power. The first is related to the customer’s price sensitivity. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. This will increase the competitive rivalry, resulting in lower prices, and lower profitability.
The other type of buyer power relates to negotiating power. Larger buyers tend to have more leverage with the firm, and can negotiate lower prices. When there are many small buyers of a product, all other things remaining equal, the company supplying the product will have higher prices and higher margins. Conversely, if a company sells to a few large buyers, those buyers will have significant leverage to negotiate better pricing.
Some factors affecting buyer power are:
Size of buyer – larger buyers will have more power over suppliers.
Number of buyers – when there are a small number of buyers, they will tend to have more power over suppliers. The Department of Defense is an example of a single buyer with a lot of power over suppliers.
Purchase quantity – When a customer purchases a large quantity of a suppliers output, it will exercise more power over the supplier.
Supplier Power
Buyer power looks at the relative power a company’s customers has over it. When multiple suppliers are producing a commoditized product, the company will make its purchase decision based mainly on price, which tends to lower costs. On the other hand, if a single supplier is producing something the company has to have, the company will have little leverage to negotiate a better price.
Size plays a factor here as well. If the company is much larger than its suppliers, and purchases in large quantities, then the supplier will have very little power to negotiate. Using Wal-Mart as an example, we find that suppliers have no power because Wal-Mart purchases in such large quantities.
A few factors that determine supplier power include:
Supplier concentration – The fewer the number of suppliers for a given product, the more power they will have over the company.
Switching costs – suppliers become more powerful as the cost to change to another supplier increases.
Uniqueness of product – suppliers that produce products specifically for a company will have more power than commodity suppliers.
It’s important to analyze these five forces and their affect on companies we want to invest in. The Porter Five Forces Analysis will give you a good explanation for the profitability of an industry, and the firms within it. If you want to know why a company is able, or unable, to make a decent profit, this is the first analysis you should do.
www.articlecity.com
Wall Street opens 2nd quarter with a gain
NEW YORK (AP) -- Wall Street opened the second quarter with solid gains, extending a four-week rally that brought the market off its lowest levels in 12 years.
After falling in the early going Wednesday on disappointing jobs data, the Dow Jones industrials closed up 153 points on economic data that showed a rebound in pending home sales and improving manufacturing activity. Major indexes all rose at least 1.5 percent.
The reports continued a run of positive economic news in recent weeks that has led many investors to wager that the recession is beginning to ease. Further signs of improvement in housing were especially positive for banks struggling with bad mortgage debt.
Technology and energy shares also carved out advances. As sentiment about the economy improves, investors have been buying up industries they believe are likely to lead the country out of recession.
The Dow charged ahead in March, rising 16 percent off of 12-year lows hit early in the month, but its movements over the first three months of the year were among the most tumultuous on record. Only three other times in the Dow's history has it experienced 20 percent swings in both directions in one quarter.
Despite the strong gains in March, analysts are still warning against calling a bottom to the market and say more volatility could be in store.
"People seem to swing from one side to the other of 'the recovery has started' to 'the world is ending again,'" said Bill Stone, chief investment strategist at PNC Wealth Management.
The Dow rose 152.68, or 2 percent, to 7,761.60, and broader market indicators also rose. The Standard & Poor's 500 index rose 13.21, or 1.7 percent, to 811.08, and the Nasdaq composite index gained 23.01, or 1.5 percent, to 1,551.60.
Pending home sales rebounded in February from a record low, the National Association of Realtors reported, while the Institute for Supply Management's index of manufacturing activity contracted in March but by a bit less than anticipated.
"It's hard to call it good data in a normal environment but it certainly looks like some of the ... housing activity has at least stabilized," said Stephen Massocca, managing director at Wedbush, Morgan Securities. "That's helping the market quite a bit here."
Not all of the reports came as a relief. The ADP National Employment Report said private sector employment dropped by 742,000 in March. The figure was higher than anticipated, and a rattling sign ahead of the Labor Department's Friday report on nationwide job cuts last month.
The market's advance occurred as the world's finance ministers gathered in London to discuss the slumping global economy. Speculation has risen in recent days that the various countries in the Group of 20 are disagreeing about how to handle the global financial crisis. Amid the backdrop of thousands of protesters, British Prime Minister Gordon Brown said Wednesday that the G20 was close to agreeing on global reforms for the financial system.
This week so far has been volatile, with the Dow gaining 87 points on Tuesday after plunging Monday by 254 points on President Barack Obama's rejection of General Motors Corp. and Chrysler LLC's restructuring plans.
Analysts expect that pattern to continue in coming weeks as uncertainty about first quarter earnings reports remains. "We're in a wait-and-see mode," said Brian Bush, director of equity research at Stephens Inc.
Analysts largely expect the reports to be negative, but with the bar already set so low, it's possible the market could move higher if the reports meet or exceed forecasts.
Among the big gainers in the banking industry, Citigroup Inc. added 15 cents, or 5.9 percent, to $2.68, while JPMorgan Chase & Co. gained $1.56, or 5.9 percent, to $28.14.
Hope for an easing of certain accounting rules this week is also helping banks. "Mark-to-market" rules, which require banks to value assets based on current market conditions, have hampered banks with massive write-downs in recent quarters, and proponents of a change say it could banks boost their bottom lines.
The Russell 2000 index of smaller companies rose 6.41, or 1.5 percent, to 429.16.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 5.9 billion shares, essentially flat with Tuesday.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note slipped to 2.66 percent from 2.67 percent late Tuesday. The yield on the three-month T-bill rose slightly to 0.21 percent from 0.20 percent Tuesday.
Crude oil fell $1.27 to settle at $48.39 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies. Gold prices rose.
Overseas, Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 1.1 percent, and France's CAC-40 rose 1.2 percent. Japan's Nikkei stock average rose 3 percent.
www.finance.yahoo.com
After falling in the early going Wednesday on disappointing jobs data, the Dow Jones industrials closed up 153 points on economic data that showed a rebound in pending home sales and improving manufacturing activity. Major indexes all rose at least 1.5 percent.
The reports continued a run of positive economic news in recent weeks that has led many investors to wager that the recession is beginning to ease. Further signs of improvement in housing were especially positive for banks struggling with bad mortgage debt.
Technology and energy shares also carved out advances. As sentiment about the economy improves, investors have been buying up industries they believe are likely to lead the country out of recession.
The Dow charged ahead in March, rising 16 percent off of 12-year lows hit early in the month, but its movements over the first three months of the year were among the most tumultuous on record. Only three other times in the Dow's history has it experienced 20 percent swings in both directions in one quarter.
Despite the strong gains in March, analysts are still warning against calling a bottom to the market and say more volatility could be in store.
"People seem to swing from one side to the other of 'the recovery has started' to 'the world is ending again,'" said Bill Stone, chief investment strategist at PNC Wealth Management.
The Dow rose 152.68, or 2 percent, to 7,761.60, and broader market indicators also rose. The Standard & Poor's 500 index rose 13.21, or 1.7 percent, to 811.08, and the Nasdaq composite index gained 23.01, or 1.5 percent, to 1,551.60.
Pending home sales rebounded in February from a record low, the National Association of Realtors reported, while the Institute for Supply Management's index of manufacturing activity contracted in March but by a bit less than anticipated.
"It's hard to call it good data in a normal environment but it certainly looks like some of the ... housing activity has at least stabilized," said Stephen Massocca, managing director at Wedbush, Morgan Securities. "That's helping the market quite a bit here."
Not all of the reports came as a relief. The ADP National Employment Report said private sector employment dropped by 742,000 in March. The figure was higher than anticipated, and a rattling sign ahead of the Labor Department's Friday report on nationwide job cuts last month.
The market's advance occurred as the world's finance ministers gathered in London to discuss the slumping global economy. Speculation has risen in recent days that the various countries in the Group of 20 are disagreeing about how to handle the global financial crisis. Amid the backdrop of thousands of protesters, British Prime Minister Gordon Brown said Wednesday that the G20 was close to agreeing on global reforms for the financial system.
This week so far has been volatile, with the Dow gaining 87 points on Tuesday after plunging Monday by 254 points on President Barack Obama's rejection of General Motors Corp. and Chrysler LLC's restructuring plans.
Analysts expect that pattern to continue in coming weeks as uncertainty about first quarter earnings reports remains. "We're in a wait-and-see mode," said Brian Bush, director of equity research at Stephens Inc.
Analysts largely expect the reports to be negative, but with the bar already set so low, it's possible the market could move higher if the reports meet or exceed forecasts.
Among the big gainers in the banking industry, Citigroup Inc. added 15 cents, or 5.9 percent, to $2.68, while JPMorgan Chase & Co. gained $1.56, or 5.9 percent, to $28.14.
Hope for an easing of certain accounting rules this week is also helping banks. "Mark-to-market" rules, which require banks to value assets based on current market conditions, have hampered banks with massive write-downs in recent quarters, and proponents of a change say it could banks boost their bottom lines.
The Russell 2000 index of smaller companies rose 6.41, or 1.5 percent, to 429.16.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 5.9 billion shares, essentially flat with Tuesday.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note slipped to 2.66 percent from 2.67 percent late Tuesday. The yield on the three-month T-bill rose slightly to 0.21 percent from 0.20 percent Tuesday.
Crude oil fell $1.27 to settle at $48.39 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies. Gold prices rose.
Overseas, Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 1.1 percent, and France's CAC-40 rose 1.2 percent. Japan's Nikkei stock average rose 3 percent.
www.finance.yahoo.com
What Are the Options For Loan Restructuring If You Lose Your Job? by: Patricia Payne
National jobless figures released in March 2009 have revealed that the national unemployment rate stands now at 8.1 percent – which is the highest it has been in 26 years. Among those recently laid off or unemployed are millions of homeowners who still have to meet a monthly mortgage obligation, regardless of their job status. But is there something that a mortgage lender can do to help the unemployed during this economic crisis? Mortgage lenders are usually willing to work with a borrower during a financial hardship, and all one has to do is ask. Rather than face the extreme expense of foreclosure on a home, a mortgage lender may offer some type of temporary adjustment, moratorium, forbearance, or even a permanent loan modification to help keep a borrower’s loan current and out of default. Interest Only Payments One option a lender has is to agree that a borrower may make interest-only payments for a temporary time period. Depending on how long you have been paying on an amortized mortgage, you could save hundreds per month by paying only the accrued interest on your principal balance. If you just acquired a 30-yr mortgage last year, however, don’t expect to save much since most of your monthly payment still applies mostly to interest. Forbearance A mortgage lender may opt to simply grant you forbearance on your required monthly mortgage payment for a limited time, usually three to six months. However, with this option, you can be sure that interest will still accrue and be added to your principal balance. By agreeing to forbearance, you will probably add more payments to the back end of your mortgage. Full Loan Modification If you qualify, you could even reduce your permanent mortgage payment through a loan modification with a lower interest rate, extended term, etc. Understand, however, that in order to qualify for a lower monthly payment modification, you must be able to meet the underwriting requirements and have a regular income that affords you to make that monthly obligation. Unemployed individuals and families with no regular income may not qualify for a full loan modification. Following Citigroup’s Footsteps Lenders could follow the leadership of Citigroup Inc., who in March of 2009 announced that it was helping suffering homeowners who have lost their jobs. Citigroup determined to temporarily lower mortgage payments to around an average of $500 for qualified borrowers who have recently suffered a job loss and are two months or more behind on their mortgage payment. While qualified homeowners are paying the lower monthly payment, all interest and penalties will be waived. The mortgage payment reduction is only good for three months, but should give jobless homeowners a good head start in getting back on their feet. Unemployment has hit millions of Americans. The residual effects of getting laid off and not having a job means additional stress of meeting mortgage obligations. If you have lost your job, be sure to contact your lender right away so they can begin working with you on a solution. This article is intended for general information. Always seek sound financial and legal advice before making any financial decision.
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