Timing when Investing in Active Stocks

The best time to have sold JPMorgan would have been at the end of last week before the company announced its recent losses. Since that was not possible the best time to buy the stock will be when it has lost its maximum before recovering. However, if you are interested in investing long term in this company you want to look at discounted anticipated earnings over time, the stock’s intrinsic value. Considering what is happening in Europe, banks may get hit across the board. The Greek debt situation seems to be leading to a Greek financial collapse. That may lead to debt defaults in Spain, Portugal, Ireland and Italy, the rest of the so called PIIGS group. Runs on banks in these nations are quite possible if they have a lot of Greek debt in their portfolios. Later you can include debt from the other countries listed. The contagion could spread to banks in the USA and then stocks of JPMorgan, Wells Fargo, and the rest could be suspect. Investing in active stocks could then be a matter of waiting, again, for a slide stock prices to reverse itself.

Short Term Investing in Active Stocks

Active stocks that have gone down in price do not always deserve the price drop. For example when another company attempts a hostile takeover the stock price may rise on speculation and the willingness of the potential buyer to bid up the price. If the buyout fails and is overleveraged the stock price may fall dramatically, below the price that fundamentals would support. In this case short term investing in active stocks is a good idea, provided that you have done your homework. Buy when the stock bottoms out and sell when it comes back to a reasonable price. Then keep the stock only if it is a good stock investment based on its long term fundamentals. As always we are not suggesting that one buy or sell JPMorgan or any specific stock. The point of this discussion is to present an example of thinking through the process of investing in active stocks.

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The USA is decreasing its dependence on foreign oil through investment in sustainable fracking technology. As the US moves toward being the world’s number one producer of oil and natural gas, the price of natural gas in the USA has fallen dramatically. This is great news for US consumers and a boost to the US economy. Money that is not spent on oil as gas is available for investment that will help drive economic expansion. The US oil and gas industry is seeing boom times that are likely to continue. Manufacturing is up. And, the Chinese Yuan is being allowed to float more widely in daily currency trading. The issue of a cheap Yuan has plagued US industry for years as a cheap Yuan has helped Chinese companies sell for less in the USA. A more expensive Yuan will make US products more competitive both in China itself and worldwide. To invest in the dollar, an investor does not need to buy dollars and put them in the bank. He simply uses his dollars to invest in dollar denominated investments, especially in the USA.

A Greek financial collapse is back on the table and with that comes the possibility of an exit from the European Union. Investors are concerned that if Greece defaults on its debt, Italy, Spain, Portugal, Ireland, or even France might be next. If a “domino effect” set of financial collapses is likely a run on banks in Europe would likely be next followed by a shutdown in credit across the world. On one hand the wins by socialists in elections in Europe have upset the painfully ironed out debt relief deals now in place. However, a change of approach that would avoid painful austerity measures could avert a recession. The cost would be inflation and a still less valuable Euro compared to the dollar. So, here we are back to the premise that to invest in the dollar in the weeks, months, and perhaps years to come may well be a good idea. Although we are not suggesting any specific investments it will probably be a good idea to look at which business sectors will benefit from a stronger dollar, which business sectors will benefit from less expensive energy prices, and which stocks are likely to rise as a consequence.

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While the return to Socialism in Europe drives stocks down Greek bank shares are taking a hit as well. Fundamental analysis is crucial to successful investment and the fundamentals are uncertain now in Europe as the return to Socialism drives stocks down. A resumption of the level of uncertainty that reigned in Europe over the last couple of years could well affect the global economy. Exports are already down in China as Europe’s economy weakens. Weakened European banks are doing less business in Asia and credit for global trade is harder to get in Asia. Although United States manufacturing is in its 35 th month of expansion the growth of jobs in the USA is slowing to a point where it is barely keeping up with population growth and not replacing jobs lost in the Great Recession that started in 2008. As the return to Socialism in Europe drives stocks down, investors are looking for bright spots in the global economy and save havens in case of another economic downturn.

We wrote recently about the best places on earth to invest . Currently investors do not include the Euro Zone on that list. However, if one believes in the so called “blood in the streets” approach to investing, there are probably some great stocks in the Euro Zone that are unjustifiably down in price. Picking new winners always requires a bit of foresight and the ability to tune out the static of day to day worries and focus on the long term. As a return to Socialism in Europe drives stocks down the Euro is suffering as well. Remember that companies based in Europe that export across the globe will, in fact, benefit from a cheaper Euro. As China seeks to make the Yuan a reserve currency they will need to let it float and probably rise with the market. With a cheaper Euro and a more expensive Yuan, European industry could profit from increased sales to China and other Asian nations. As always we are not suggesting that one invest in European stocks or avoid them. The point is to think through investment opportunities in search of profits.

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One of the main reasons why you need a binary options broker is get info on how to trade. As much many would thing that this training is just buying and selling, however, there is more than this. You need to read graphs, do research and be able to predict how the market of the assets will be in the next few minutes. Binary options brokers will help you on these issues as they will provide you with real time graphs, stock market statistics and financial risk management tips. However, the hardest part is getting the best binary options broker. Here, are tips to help you get the binary options trading broker.

Check whether the broker is licensed

One of the major things to consider is the legitimacy of the binary options broker. Ensure that the site is registered and licensed to offer binary options trading. Although some countries allow unlicensed sites to offer these trading services, you can check for reviews to determine the legality of the website. This will also allow you to know the reputation of the broker to potential traders.

Choose a user-friendly web interface

Binary options are traded via the Internet. This means that you need to search for these brokers online. By performing a simple search, the Internet will provide you with hundreds of sites you can choose to trade. It is advisable that you visit several sites and examine their web interfaces. Look for sites that have easy, binary options user-friendly web platforms. If you can’t understand the interface, don’t consider the broker.

The level of support

It is the role of binary options trader to provide support to their clients. Considering that you are dealing money, you need adequate customer service to ensure that you are trading smoothly. Examine various online binary options broker to know whether they offer customer services. If the broker is providing 24/7 customer support services, then it would be the best binary options broker for you.

Level of security and privacy

With the high rise in number of hacking cases, it is very risky to trade online. With this in mind, the binary options broker should ensure that adequate security measures are put in place for traders to do their business without worrying about their privacy. Enhancing privacy policies ensures that all your personal details are not shared through the Internet and this way will keep you away from binary options fraud. A secure website should have encrypted pages meaning that other users cannot access your account.

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Because of the return of Mr. Putin and because the world economy is ever so slowly improving after the worst recession in three quarters of a century let’s say that it is time to invest in Russia. What does Mr. Putin’s call for a new economy mean? Revamping old state run industries may make things run more efficiently but this has little to do with private investors.

Russia is the second biggest producer of oil in the world at just over 10 million barrels a day as of 2010. The nation’s economy consumes 2.2 million barrels a day and exports 5 million barrels a day. Its proven reserves are around 69 billion barrels. It is the world’s second greatest natural gas producer as well at 588 billion cubic meters a year. It uses 414 billion cubic meters of gas a year and exports 200 billion cubic meters making it the world’s leading natural gas exporter. Its reserves are estimated at 45 trillion cubic meters as of 2011 giving it first place in the world. But, if it is time to invest in Russia is it time to invest in oil companies in Russia? Mr. Putin, in fact, is trying to decrease the dependence of Russia on oil and gas exports. On a profitable investment timeline it may be time to get out of Russian oil stocks and not in as European threatens to fall into recession again and drive oil prices down.

The goal is to improve the business climate in order to attract more investment. This includes decreasing the still heavy hand of the state. Mr. Putin’s orders are to produce 25 million high paying jobs by 2020. Sounds like more of the commissars Mr. P. However, the goal of producing more high tech products is not just a pipe dream. Russia has skilled scientists and technicians. They, after all, are the link to the International Space Station now that the fleet of Space Shuttles have been retired.

The complete range of Russian industry according to the CIA Factbook looks like this:

• Mining and extractive industries producing coal, oil, gas, chemicals, and metals
• All forms of machine building from rolling mills to high-performance aircraft and space vehicles
• Defense industries including radar, missile production, and advanced electronic components, shipbuilding
• Road and rail transportation equipment
• Communications equipment
• Agricultural machinery, tractors, and construction equipment
• Electric power generating and transmitting equipment
• Medical and scientific instruments
• Consumer durables, textiles, foodstuffs, handicrafts

The World Bank has a Doing Business Index in which Russia currently ranks #120 in the world (#1 is best). Mr. Putin wants the country up to at least #20 by 2018. If you think that this wish makes it time to invest in Russia please remember that Russia produces as many bureaucrats as the Ukraine produces potatoes. Unlike potatoes bureaucrats are not consumed. They multiply. While good fundamental analysis is essential to profitable investing it can be difficult to factor in the costs in Russia of a bloated and recalcitrant bureaucracy. A place for possible investment in Russia will be the group of companies that may be privatized in the coming years. These will not be in defense or natural resources.

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Where Will Uncertainty over a Slowing United States Economy Take the Stock Market?

The stock market tries to predict the future. After all that is where, hopefully, the profits are. Fundamental analysis of past and current data is used to predict future growth and profits. Technical analysis helps investors track market sentiment. Whether one is picking penny stocks with an eye on growth or dividend stocks with steady income in mind, uncertainty over a slowing economy makes the job tougher. Long term value investors commonly say that they do not invest in a given stock until they have a clear idea about just the company does to make money. Rather than agonizing over labor reports and the latest about the European debt melodrama many successful investors are looking to invest in US stocks, individual stocks that are turning profits quarter by quarter, expanding their markets, and, in fact, bringing jobs back to the USA. What does the company sell? Who are its competitors? What is their long term game plan? A biotech company with a newly released medical product may have no competitors for several years during which it essentially have a license to print money. Many companies in high cost of entry businesses may not be growing at rapid rates but are stable sources of dividends and steady growth.

Profiting from Volatility

Uncertainty over a slowing United States economy may be driving up stock price volatility. If you, the long term investor, have a clear idea about why your choice of companies will be successful you can profit from the volatility and the fears of others. Right now one of best places on earth to invest just might be the USA. Call options are a time tested means of profiting from market volatility. If you believe that your stock will not rise in price you can sell call options and profit every quarter. If your research leads you to believe that a given stock is due to rise in price you can purchase call options on it. If the price rises you can still buy the stock at the lower, contract price. Your risk is limited to the price of the contract. As always we are not suggesting that one purchase the stocks listed above or ignore them. Consider this discourse an example of thinking through stock purchases and sales.

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Turning Off Credit to Asia

Will less available credit from European Banks really damage the economies in Asia? After all Japan, Taiwan, and mainland China have large foreign currency reserves. But, there is no clear indication that the national treasuries of these and other Asian nations would open their doors, so to speak, and let borrowers walk right in. When the recession and banking crisis hit in 2008 the effects were devastating to a large number of borrowers across Asia and the Pacific. The large European banks that do business across the world have relationships with their clients and are set up to efficiently lend in time of need. If this source of funds is cut off Asian borrowers might find that they have to pay a political price China comes to the rescue with loans. That is to say less available credit from European banks could upset the balance of influence and power across Asia and the Pacific. Profitable investing in Asia might become more difficult as Chinese influence increases and transparency decreases. Add the risk of a Chinese real estate crash, decreased Asian exports to Europe, and higher oil prices based on Middle East tension and you have a recipe for potential disaster for the combined economies of the Far East.

Long Term Effects of Shutting off Western Credit to Asia

World trade will fall off measurably Europe buys less from Asia. It will also fall off if Asian producers, at least of now, find less available credit from European banks. However, if European banks cease to be major players in Asia, local banks will pick up the slack. This could result in stronger trade among the nations of Asia and less reliance of trade with the West. That would, in fact, be a healthy thing for China, Japan, Taiwan, Australia, and the rest. Many credit (or blame) the tightening of credit after 2008 for the fact that China is attempting to internationalize its currency, the Yuan. If China succeeds in converting the Yuan into a reserve currency the roles of Europe and North America in the affairs of Asia could well lessen. However, since banks are in business to make money it is unlikely that European or North American banks will retreat from business in Asia. It will take more than a weak Chinese manufacturing report or questionable real estate market to keep Western banks from investing in the promise of long term Asian growth.

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What Is a Bond Ladder?

A bond ladder is an investment device wherein investors purchase bonds (or treasuries or CD’s) with relatively short maturities. To hedge interest rate risk with a bond ladder an investor can have all bonds mature at the same time or stagger the maturity dates. For example, an investor may purchase 1 year bonds, CD’s, or treasuries. He can buy them all at once and have them mature all at one or he can stagger them so that a forth mature every three months. In either case he will not get caught with long term securities that become devalued as interest rates rise. The down side when one decides to hedge interest rate risk with a bond ladder is that he is usually not holding long term bonds when interest rates fall. Thus he does not benefit from bond appreciation to any great degree. If your answer to what is a good investment in this environment is that it has to be a conservative investment, then to hedge interest rate risk with a bond ladder may be the ideal choice.

Balancing an Investment Portfolio

Consider this. The economy is improving and there may well be some very good long term investment options just around the corner. But, the European debt dilemma could come back with a vengeance or a spectacular crash of the Chinese real estate bubble could through the world economy back into recession. So, hedge interest rate risk with a bond ladder with the fixed income part of your investment portfolio. The older you are and the closer to retirement you are the larger portion of your portfolio should be allotted to such a conservative approach. Dividend stocks or the big cap and stable variety are also a standard conservative approach. If you are looking to hit a home run by investing in penny stocks in this market, however, make sure that your fundamental analysis is sound and that you keep up to date with market sentiment.

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Proposed Solutions

The head of the US Federal Reserve, Mr. Bernanke, is an acknowledged expert on the causes of the Great Depression. According to current thinking, a bad recession was turned into a depression by ill-advised monetary policy in the early 1930’s. With this sense of things in mind, the FED is following the so called Bernanke Doctrine. These are steps prescribed as a preventative to deflation. Number one on the list is to print money. In addition the remedy includes the massive purchase of US treasuries which serves to drive interest rates down. And, this doctrine prescribes the massive purchase of foreign currency which serves to reduce the value of the US dollar. Simply put the FED is printing money to buy US debt and shipping dollar overseas. This policy may well have its intended effect of staving off deflation. However, it is not just the USA that is loaning money to banks at low interest rates, printing money, and buying foreign currencies. The net effect will be to inject an awful lot of capital into the global monetary supply. The sum of these efforts will not affect just direct investment in China. The weak Chinese manufacturing report is in many ways a symptom and not the primary disease.

What Is an Investor to Do?

If the Euro Zone is really heading into a recession this year investors will want to avoid Euro Zone stocks and at least look closely at fundamental analysis of individual stocks. If the US economic recovery, however slow, is for real, US stocks may well be a better choice. China has its own host of problems, political as well as economic. China may well decide to look inward, stimulate its economy and maintain employment with more infrastructure projects. Despite the recent weak Chinese manufacturing report China has large currency reserves. It may choose to spend those reserves to prop up its economy before Mr. Bernanke’s policy cuts the value of these reserves in half. After years of rapid growth China may be experiencing a “Microsoft” effect. When you grow to a certain size, rapid growth is very hard to maintain. Thus the weak Chinese manufacturing report may be a warning to investors to be careful in picking investments in China.

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What Fracking Does for United States Energy Reserves, the Economy, and Oil Company Profits

At the turn of the millennium many experts believed that the USA had run out of reserves of natural gas that were recoverable at a reasonable price tag. As fracking technology has been applied to shale deposits across the nation natural gas production has gone up by a forth just since 2005. A third of natural gas production comes from shale deposits and reliable estimates are that in twenty years nearly two-thirds of US natural gas will come from shale deposits via fracking technology. Current estimates are that the USA has a century of natural gas reserves recoverable by current technology.

The natural gas industry itself employs two thirds of a million people and is a $118 Billion a year business that is growing in leaps and bounds at a time when the recovering US economy is glad to have more jobs.

And, ExxonMobil profits have gone up again making it the world’s largest corporation by value. Their investment in sustainable fracking technology, mostly by purchasing XTO Energy, has paid off. In the game of picking new winners in the stock market, investment in sustainable fracking technology looks promising.

Fracking Concerns

The Obama administration has just announced regulations that will compel drillers to deal with greenhouse gases that emerge from the wellhead during the later stages of drilling. These regulations are already in place through state policy in Colorado and Wyoming so the work and don’t seem to get in the way of the oil and gas boom. Because technology to trap emerging gases is not readily available at every wellhead the government is giving drillers a three year grace period during which they may burn off excess gases. Thereafter investment in sustainable fracking technology that include the trapping of escaping gases will be mandatory. Another aspect of hydraulic fracturing that scares environmentalists is contamination of water supplies. Advances in technology such as encasing the drilling apparatus in cement encircled steel pipe is meant to reduce the chance of water table contamination. Also, most of the oil and gas with which the drillers are concerned is commonly very far below the water table. A little investment research into who does what in the oil and gas industry and who is successfully applying fracking technology could be profitable for both the long and short term investor.

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