Happy New Year!

Tonight we say goodbye to 2009 and hello to 2010. Time to close out another year and look forward to the new year ahead. For most investors, this year has ended on a high note, as the stock markets have recovered nicely from the market lows in March. Most people could have never expected such a good recovery from the disappointment of the markets in 2008 and early 2009. One again, the market shows that no one can predict exactly what the market will do. There are just too many variables. Sure some smart folks seem to put together a formula for success that works for a while, but inevitably, it falls apart. To be sure, if there was one sound and perfect investment strategy that worked all the time and for all people, then don't you think we all would be doing it? And who ever wrote that book would be a multi-millionaire! But then again, that is what makes investing challenging and rewarding. Accepting that there is no one right strategy. Every person has to develop a plan for him or herself and constantly monitor it and make changes when necessary. Everyone has a stock they wish they would have bought, or a stock or fund they wish they would have sold way before they did. Forget it and move on! Don't let your emotions get in your way and spoil the virtues of investing in the stock markets. Know your limitations and don't be afraid to ask for help when you need it. Let's finish the year on a high note and look forward to the bull continuing to lead the way in 2010.

Tax Deductions

With this being the last week of the year, some people may be looking for some last minute, year end tax deductions. For people who itemize their deductions on their income taxes, making last minute charitable contributions could help and make some needy organizations just a little bit happier during this season of giving. Check with the organization to make sure your contribution will be counted for this year before you make that donation! For those who may be expecting to make more money next year, you can pay some of your January expenses early and write them off your taxes for 2009. A good example is paying your January home mortgage payment early. That could help raise your mortgage interest deduction. Just remember that next year you will only make 11 payments unless you keep the strategy up and make an extra payment or two next year.

For those concerned with last minute IRA and HSA deductions, don't worry. You have until April 15th to make contributions for 2009. As always, please consult your tax advisor for specific tax ideas or questions relating to your own unique situation.

Merry Christmas

The staff and writers of "Thoughts from Scott", would like to take time to wish all of our loyal blog readers a very, Merry Christmas, this holiday season. This year has been a very interesting one in the stock markets as we have been on a roller coaster ride from the beginning of the year as we watched the market trend down to the lows in March, only to rebound and recover gains that most people would have never thought possible. Investors and market watchers breathed a sigh of relief as they saw their portfolios and retirement accounts recover much of the losses from 2008 and early 2009. Most are optimistic of a continued bull market into 2010, although one should not expect the same percentage gains next year. The one downside for some is the continued low interest rate environment which continues to plague CD buyers and money market savers across the nation. Those expecting inflation to push the Fed to begin to raise rates, have been frustrated as they renew their CD's into lower and lower rates. Some have decided to try bonds for higher yields, or dip their toes back into the equity markets for high quality, dividend paying stocks. So let the Santa Claus rally continue and let's enjoy the fruits of the season!

Tax Harvesting

This is the time of year when people may be looking over their portfolios for possible changes looking ahead to next year. Some people might be re-balancing by selling some of their stock positions and buying bonds. Others may be selling corporate bonds and buying real estate investments. For those looking ahead to tax time, one strategy is to sell some of your losers to take advantage of the tax loss you are allowed to deduct off your taxes. You are generally allowed to deduct up to $3000 in losses against your income. Any amount over this can be carried forward to future years if needed. As always, consult a tax professional to see what the best strategy is for you. Once you have identified an investment position to sell, you can look for new positions to buy so you can stay invested in the market. One thing to keep in mind is this, you cannot repurchase the same investment you just sold, for 30 days. This is known as the wash rule. Once 30 days has passed you can repurchase it if you want, but most people just find a similar stock or fund to do the job. Take advantage of the tax laws and rules to help you make some lemonade out of your lemons. It also helps to not get too emotionally attached to your investments. Remember, you want to build an investment portfolio that has a strategy, not a scrapbook of stock names that are blast's from the past! The more emotion you can take out of investing, the better off you'll be in the long run!

Buy low, buy now

ExxonMobil's purchase of XTO Energy, a leading US natural gas producer, could signal a good time to buy in to natural gas at the lows. Unlike most other stocks, natural gas stocks have not had a good year. Clean energy proponents and alternative fuel cheerleaders see natural gas as a big part of the equation going forward, but not too many people have bought into the idea as an investment strategy yet. So if you agree with the age old adage of "buy low, sell high" when it comes to investments, now might be the time to take a look at natural gas. Not sure what company to buy? Take a look at ETF's. One way to buy natural gas is with the UNG exchange traded fund. It's currently trading just below $10/share, but is up over 8% in the past month, from a low of $8.50/share. If there was ever something out there to prove the "buy low, sell high" strategy, this could be your chance! Just don't bet the (wind) farm!

Santa Claus rally

This is the time of the year when people are preparing for the Christmas holidays and for the end of the year. For stock market watchers, it's a time to reflect on where the market has been and where some think it is going in the future. Many people want to know if this is a good time to be invested in the market or if it's time to get out. One interesting thing about this time of year, is the notion of the "Santa Claus rally". It is a widely held truism that the stock markets out-perform during the last two weeks of December. Over the years the time frame has varied from a two week period to the whole month of December, and some even let it overlap into January. As with any statistics, there are times when it performs well and times when it does not, but the Santa Claus rally, does seem to exist most of the time. Consider this tidbit from Steven Halpern's TheStockAdvisors.com website article:

"Whatever the reason, in the last 40 years Santa has rarely missed a beat. By looking at the performance of the S&P 500 from November 20 through January 31 each year, we note that...

• Excluding bear markets, only four years resulted in a loss for the period. The biggest decline was in 2002-2003, when a retest of the major bear market bottom caused the Index to drop 6.4%.
• Considering the entire 80 years of S&P 500 data, only two years saw a decline of greater than 10%. That occurred in the middle of major bear markets in 1931 and 1969.
• Conversely, a number of years have seen exceptional gains. Ten Santa Claus Rallies out of the past 80 years have produced gains in excess of 10%. Five of those hefty rallies occurred during the dismal stock market decade of the the 1970s.

Now, if you are a long term or "buy and hold" investor, the Santa Claus rally effect doesn't really matter, although most people will be happy when the markets go up. And one wouldn't think that there are too many people who only invest during this time of the year. For most people, the Santa Claus rally is a nice anecdote and provides some interesting small talk at holiday parties and happy hours. My general advice is, the best time to invest is when you have the money.

Goodbye Yellowbrick Road?

After a strong run which surprised even the gold bugs and so-called, "experts", gold prices have finally retreated. With the dollar getting stronger, the price of gold has fallen from a record $1227.50 per oz. to $1143.50 per oz. in just a few days. That's a pretty big drop in a short time and could lead the latecomers to the gold party to think that the party is over. On the other hand, for those who never got into the game, this correction could be a second chance to get in and wait for gold to resume it's upward trend. For those who did get in early, this could also be a good time to take some profits and protect some of their gains. Either way, it should be interesting to watch gold this week as investors decide if the tide is turning against them.

Twitter Twursday

Lots of stuff in the news, and we don't mean Tiger Woods. GE sells NBC, Bank of America is ready to pay back their bailout money, gold continues to climb, Ben Bernanke is in the hot seat, etc, etc. How will these stories affect the stock market today? Stock futures point to an early bounce. Follow me on Twitter @scottjwheeler as I note trends in the stock markets. Getting ready to buy gold or sell gold? Is oil dead? What's up with those coffee companies? Can Harley Davidson continue to outperform gold this year? Read my 5 most recent tweets below in the right-hand column or go to: http://twitter.com/scottjwheeler and follow me.

Cyber Monday

Today, retailers get a second chance to improve their bottom line, by enticing people at home and at work to shop online, by offering special deals and incentives for Christmas shoppers and discount hounds around the world. Results from Black Friday indicate that while shoppers were out, most spent less than last year. That's not surprising given the recession and economic downturn over the past 12 months, not to mention the fact that more Americans have lost their jobs during the same time period. While online shopping is convenient and offers another avenue for retailers to sell goods, it doesn't necessarily help those looking for hot toys and gadgets. The Zhu Zhu Pet for example is sold out on the Toys R US website and appears to be available only for those willing to pay triple the price on eBay. It seems to me that stores should limit the number of items sold to prevent the practice of resellers who snap up all the hot toys each year to make a quick buck on eBay at the expense of parents trying to surprise their children on Christmas morning. Either the people at Toys R US do a terrible job of forecasting sales or the vendors can't keep up with demand. Apple seems to be the only store that tries to match product with demanding consumers and keep their items off the eBay black market.

Black Friday Backfire

While the official sales numbers aren't in yet, early reports from store managers seem to indicate that shoppers have now become smarter than the stores. Black Friday got it's name from the date that retail businesses crossed over into "the black" for the year, meaning they finally made money. Holiday sales are extremely important to retail stores, so much so, that the final outcome can make or break their annual sales goals. The basic premise is to get shoppers to come into their stores by offering extremely competitive prices on a few select items, often at razor thin margins, to entice buyers to choose their store over the competition. For the plan to work, however, shoppers must also purchase other goods and items at regular or more profitable prices. This is what the industry calls a "lost leader". What's happening now, is that shoppers have become more knowledgeable about pricing from other stores because of the internet and iPhone apps that make comparison shopping easier. Now consumers can go to each store, buy the "door buster" deal and move on, thus leaving the retail store without the extra profit from their other goods and services. Advertising executives and retail executives might have to re-think the "Black Friday" strategy in the future, or else see their profits dwindle even further into "the red"!

Happy Thanksgiving!

I want to take a moment and stop and share what I am thankful for in my life, this Thanksgiving Day: My God, my wife, my children, my family, my friends, my job, my business, my health, my hobbies, and my freedom! Thanks to all who read, share, and comment on my blog!

Stop orders

Back in the bull market of the late 1990's, many people saw the prices of their stock go up almost exponentially to heights never imagined. Rather than sell at the highs, some thought that stocks would continue to advance. Those that did not see the internet bubble coming and sell out in time, saw their stock position tumble back to earth. In effect, they lost all or most of their gains because they did not sell in time. What could they have done differently? Lock in gains! Let's say you bought shares of stock ABC at $10/share and watched it climb to $20. Rather than hope that it continues to climb higher, you can put in a stop-loss order to sell your shares if the prices drops below $15/share. If the stock climbs to $25, then change your stop-loss order to $20. But if the stock falls from $20 to $15, your sell order will kick in and you will sell out around $15 and book a 50% profit. If you still like the stock, buy it again later. But don't be in a position where you kick yourself for not selling at $20 or $15, when the stock drops down to $8. Don't be greedy! When you buy a stock, have a price in mind that you would like to get out at, and stick with it. You can also use stop-loss orders to limit your losses when you first buy into a new stock position. If you book profits and limit your losses, you will make money in the long run. You can always make adjustments to your plan, but you need to have a plan in the first place.

Twitter Thursday

I've been posting market updates on Twitter, with a special emphasis on Harley Davidson stock ("HOG") and gold ("GLD"). Both are having a great year and deserve a look in your portfolio. Of course, if you've been following me for long, you know that I actually like silver ("SLV") better than gold! Follow me on Twitter @scottjwheeler or go to: http://twitter.com/scottjwheeler and keep up with my tweets! As usual, my last five tweets are posted below if you scroll down and look in the right-hand column.

Fools Gold?

The biggest asset class in the news lately has got to be gold. As the dollar continues to weaken, gold has surged in price over the last several weeks to all time highs in price. Thursday's close had gold priced at a never before seen value of $1123/oz. Year to date, gold is up over 26% and has gained over 78% in value in the past 3 years. So is it too late to buy gold? Some pundits expect gold to continue to climb to $1200, $1500, and some even predict $2000 in the not to distant future. Of course, like anything else, it all depends on your goals and objectives. Are you in it for the long haul or just for a short term play? If the US Dollar strengthens from actions from the Fed or Treasury Dept. moves, then the price of gold may come down a bit. Long term, these predictions could play out. Just remember, had you bought gold in the early 80's at the going price of $800 per oz., you would have watched it go down below $300 and back up to today's values. If you really want to get in on a piece of the action, the safest way to play is by buying the Gold Trust ETF, "GLD" or the Market Vectors Gold Miners ETF, "GDX". You can hold in your brokerage account and not worry about the cost of storage fees and safety issues that gold bars and coins entail. Think gold is too expensive? Try silver. It usually follows to path of gold, and is a fraction of the cost. The Silver Trust ETF, "SLV" can be had for $17.15/share at Friday's close, and silver has actually outperformed gold this year. It's up over 53%! Happy mining!

Veteran's Day

Happy Veteran's Day! This day is set aside to honor our veteran's of world war, and rightly so. Formerly known as Armistice Day, which was started in 1919 to honor the veteran's of the "great war", World War I. Over the years, it changed to include veteran's of all world wars, and in 1954, President Eisenhower changed the name of the holiday, officially, to Veteran's Day. While many people honor those currently serving in any branch of the armed forces, the holiday is traditionally set aside to honor those veteran's who served in any past world war. Thank you to all veteran's who served and put your life on the line for my freedom and the freedom of all Americans!

A long time...

This week, the Federal Reserve Open Market committee met to discuss possible changes to their current policy of holding interest rates in the ultra low range of 0.0-0.25% where it is currently. As expected, they decided to keep rates unchanged. More importantly, were their much anticipated comments afterwards, which traders and analysts try to decipher to detect trends in the future. Fed Chairman Ben Bernanke stated in part, that even though there are positive signs of growth in GDP and the end of the current recession is at hand, the current unemployment situation is a problem that will take a while to see improvement. Because of this, the FMOC sees themselves holding interest rates at this very low level, for "an extended period of time". Meaning, it could be a couple of years before they see the need to begin raising interest rates again. Economists are not predicting the unemployment rate to decline to "normal" levels until sometime in 2012. So for people looking for rates to go back up on CD's, money market accounts, and other savings accounts, you might have a long wait on your hands. What does this mean for savers and investors? It might be time to begin looking at alternate options for higher yield. Longer maturity CD's (5 years or more), Bonds, and dividend paying stocks and/or ETF's, might be in order for people needing higher income. Some folks will have to move into some higher risk investments to make their long term plans work out. But everything has a risk. Staying in short, low yield, CD's carries interest rate risk, and inflation risk. Where do you need to be?

The risk of bonds

The recent news on the pre-packaged bankruptcy plan of CIT, is a real life example of the benefits and perils of investing in bonds. Up until the news of CIT's filing on Sunday night CIT bondholders were getting a 7.75% yield on their bonds. Stockholders had already seen their stock price plummet from a high as late as 2007 from over $60 per share to around $1. The news of the bankruptcy sealed the fate of the stockholders and even preferred stockholders, they will end up with nothing for their investment. But bondholders, will end up with 70 cents on the dollar, or a 30% loss on their principal. Nothing to really cheer about, but at least they walk away with most of their original investment returned. Works out to about the same kind of loss many people experienced in the stock market collapse of 2008. Had CIT not filed bankruptcy, these bondholders would have continued to collect their 7.75% coupons until maturity and then get their original investment returned, at least that is the way it was supposed to work. CIT's failure will be the 5th largest bankruptcy filing in history. While these types of events are bad news for investors of all types, it shows the benefits of being a bondholder over a stockholder. I would much rather try to make up a 30% loss than a 100% loss!

One Year Anniversary

I have now been writing this blog for one year. I originally started this blog as a way to capture my thoughts on various topics and share my insights with others, hence the name, Thoughts from Scott. Over time, this blog has morphed into a blog primarily about investing and saving. My posts are designed to give some useful and basic information to people who are or might be struggling in this area. Like an old, but popular and very funny TV commercial for Countrywide Mortgages a few years back, many people are "in debt to their eyeballs"! My thoughts and ideas on ways some people could help themselves by learning from my experience in working in a bank, I thought, might be beneficial. This blog is a way for me to comment on current events in the financial world, and also give back to the community.

Searching for yield

Investors and savers searching for income are starting to squirm. As CD rates continue to drop, those who have maturing CD's have a difficult decision to make. Do I reinvest my 5% CD into a 1-2% CD or take my chances in the stock market by buying a stock with a nice dividend? One option many people forget about is bonds. Bonds come in many varieties, Government bonds, Corporate bonds, and Municipal bonds, to name a few. Many people shy away from bonds mainly because they don't understand how they work. One perception is that they have a very long holding period, like 20 or 30 years. While its true that some bonds when first issued, can have a 30 year maturity, bonds can be purchased in the secondary market with maturities of a year or two. So if you're worried about inflation and interest rates rising again soon, you can buy a bond with a short time horizon. Another mistake is thinking that you can lose money buying a bond. Well, you can lose money buying anything. That's the risk of investing. But the way most people lose money with bonds is because they sell them for less than they paid for them, just like stocks. On the other hand, if you find a bond and buy it at a discount, you will make money if you hold it to maturity. In addition, you will collect some nice interest payments, called coupons, along the way. The other way you can lose money with bonds, is if they default. That is why you need to make sure to buy high quality, or investment grade bonds. These days, investment grade, corporate bonds can be found on the secondary market that are maturing in less than 5 years, that are paying over 5% and can be purchased at a discount. Government bonds, while safer, are not paying anymore than CD's, and municipal bonds are much harder to find at a discount. Most are now selling at a high premium, making them less desirable. So if you need income, and can't stomach the paltry rates that bank CD's are paying, buy bonds! They're not as scary as you think!

Buy on the dips

One investing strategy that is coming back in vogue is the concept of "buying on the dips". This is where one would purchase stocks or add to your existing positions whenever the market makes small corrections. While some bears have predicted corrections of 10-15% in the recent months, which have never happened, smaller 1-3% drops happen on a regular basis. This is normal stock market activity. The "buying on the dips" strategy takes advantage of this situation. Since the March '09 lows, the stock market has now advanced over 60%. That's a lot. A much faster recovery than expected. Use your cash positions to buy good stocks that pullback on down days and you will be rewarded over time. Did you miss out on the monster Amazon day? Wait for a correction and buy it later. Use more strategy and less emotion in your buying and selling decisions and you will sleep much better at night.

New theme! After nearly one year since starting this blog I felt it was time for a new design. Please give me some feedback on your thoughts and suggestions.

3rd Quarter Returns

Investors receiving their 3rd quarter 401(k), IRA, and brokerage statements this month should have breathed a sigh of relief. Higher balances and improved returns have recovered most accounts nicely since the end of June. Those who may be disappointed are the ones who got out of stocks completely in March or April, only to see the stock market recover with returns over 50% since that time. The lesson? You can't out smart the stock market. Analysts and bears were telling people to get out of the market as the Dow Jones hit 7500, 8500, and 9500, only to watch in dismay as the index passed through 10,000 recently and some now predict it to hit 10,500 by year end. Determine the right mix of stocks and bonds that you should have in your portfolio based on your age, objectives, and experience, but everyone should have some exposure to stocks in their long term retirement accounts. Cash may be king, but not when it pays less than 2 or 3%.

The New A-B

This past weekend, the St. Louis Bloggers Guild hosted their annual Interactive Festival at the Shock City Music studios in St. Louis city. Besides the Bloggers Guild and Shock City, one of the main sponsors was Anheuser-Busch. Now why would A-B sponsor a "small" event, like the Interactive Festival? Because it made sense and had little downside. Besides, "making friends is their business"! After being turned down by Miller, and with the other option of having to purchase beer from Schlafly Bottleworks, A-B stepped in at the last minute and provided plenty of their signature brew to help provide refreshment to the scores of attendees at this year's blogging forum. For a company as large as A-B, not every promotion has to be broadcast on TV to millions. While some bitter folks still grumble at the big changes that the company made last year, A-B still takes care of their hometown, as witnessed by this event and the recent donation to Fontbonne University. So say what you will about the decision to sell their theme parks. A-B is focused on making beer and making money in a global economy. You can't fault them for that. Oh, and if you want to buy their stock, you can once again buy "BUD" on the New York Stock Exchange! Today's close: $51.19 per share.

Check Gas Prices

The newest feature that I have added to my blog is a link at the bottom of this page where you can plug in your zip code and check gas prices in your area. I have found that there is nothing that people like to talk about more than the price of gasoline. It changes every day. People like to get the lowest price and are proud to tell you where the lowest prices can be found. My 95 year grandmother even knows what the current price of gas is, and she hasn't driven a car in close to 15 years! Now gas is the ultimate in variable expenses for families and often the hardest to budget. If you have a long commute to work each day, gas can be a huge burden on your weekly budget. But if you don't work, then you can decide how much you want or need to drive to keep costs down when prices jump. A year ago, the national average for a gallon of gasoline was over $3. Today, it is a little over $2.50/gallon. As recent as the summer of 2007 gas spiked to over $4 per gallon and had people all over the country reevaluating their driving pattens, work schedules, and choice of automobiles. Hybrid car sales took over and people started looking for vehicles with better mpg ratings in earnest. People have looked at the profits of giant oil companies like ExxonMobil with disdain for years. How could they be so greedy and charge such high prices to us plain folk just trying to get by, people would say. Conspiracy theories abound for those who think that oil companies are in collusion when it comes to pricing gas at the pumps. But since the stock market crash of 2008, everyone is looking for a way to save a dime here and there, so punch in your zip code and find out quick where the best place is to fill up. You can thank me later!

Alphabet Soup

If there were ever a group of people who could not come to an agreement, it would have to be economists. It seems like economists are being quoted a lot lately as reporters and bloggers seek their "expert" opinions on whether or not our country is coming out of a recession and how strong or weak the recovery will be. While no "official" statement has been made that we are no longer in a recession, only 80% of economists believe this to be true. Mark Twain once said, "Get the facts first. You can distort them later." Most comments from economists these days seem to be focused on the economic recovery ahead. As expected, there is no shortage of opinions. Some see a V-shaped recovery, meaning a sharp increase in economic growth in the next year. Others see a W-shaped recovery, otherwise known as a "double-dip" recession. These people believe we could see another downturn before things get better. A third group believes we will see an L-shaped recovery, which is a long, drawn out process that will take many years. Of course, nobody knows for sure. Like the stock market, there are too many variables in play. So what's an investor to do? Keep saving, keep deferring money to your 401(k) plan, and pay down your debt. The world is not coming to an end...well, at least not until 2012!

Interactive Festival

If you are a blogger, read blogs, thought about writing a blog, or wonder what a blog even is, and you live in or around St. Louis, Missouri, then you will want to come down to the St. Louis Interactive Festival next Sat., Oct. 17th. The event is free, but you must register online to reserve your spot. It's easy! Go to:

http://stlouisbloggersguild.org/2009/10/1050/

There you can read more info on the event and register in seconds. This event is sponsored by the St. Louis Bloggers Guild and promises to be an outstanding day of presentations and networking by the brightest and best of the St. Louis bloggers and social media experts! See you there!

Gold Rush

Now that gold has passed through the $1000 per oz barrier once again, people are talking about gold. Should I buy gold, should I sell gold? Like any other investment, it all depends. The main reason people buy gold is as a hedge against inflation. Right now, inflation is not a problem. So why has the price of gold jumped up lately? Well, the dollar is weak right now and there has been talk of de-linking the dollar to the price of a barrel of oil in global markets. In addition, many people feel stocks have run up too fast and are due for a correction soon. So some people are buying gold as a diversification tool in their portfolios. Not a bad idea, just don't go overboard. Here are a few key things to remember about gold as an investment. It doesn't pay income or dividends. Gold is strictly a capital appreciation play. What form are you going to buy it in? You can buy gold funds or ETF's which can be held in your investment portfolio, but if you buy gold coins or bars, you have to consider the storage costs and safety issues. Items placed in your safe deposit box at the local bank are not FDIC insured. So what are the alternatives? Many experts believe commodities in general, not just gold, are still in a bull market and have room for advancement. While we may not see inflationary pressures on interest rates anytime soon, the prices of commodities may continue to rise for a while. Silver, while similar to gold, is much cheaper than gold and has many other uses to people and industry than does gold. So what to do? Keep your options open, and if you do buy gold, don't go crazy. Most experts recommend 5 to 10% of your portfolio tops.

Better than expected earnings from Alcoa and a better than expected unemployment numbers add up to an up day in US stock markets. The Dow Jones is up 100 pts.

Stocks are mixed today ahead of the 3rd quarter earnings reporting season set to begin tonight with Alcoa.

As expected, the stock markets advanced in early morning trading on renewed optimism of a broad based global recovery.

Optimism Overseas

After a two week sell off in the stock market, investors are ready to move more cash from the sidelines and take advantage of an anticipated upward move in the markets following the Reserve Bank of Australia's decision to raise interest rates last night. This seems to be a positive sign that the long financial crisis is ending and optimism in the future is not unfounded. We'll see how long this view lasts as companies begin to prepare their 3rd quarter earnings reports and release them to the public. Here in the U.S., investors are still reacting to extremely low interest rates available for CD's, as many banks here continue to lower their rates, not raise them. This fact forces many people looking for income to take longer maturities or higher risk investments to get the yield they need.

Coincidence?

So yesterday's 200 point drop in the Dow Jones happened on Oct 1st, but is that why the index fell, just because it was October? No, new economic reports that came out yesterday caused traders to think that the economic recovery ahead may not be as strong as previously thought. Now no one really had predicted that the economic recovery from this recession would be strong, but new data seems to indicate that it may be worse than expected. Does that make sense? If you follow the stock market for very long, one thing you will learn is that economists are known for changing their minds a lot. They are not a group to take responsibility for previous statements either. They will merely state that "new data" has led them to take a different view that they had before. Today, the US Labor Department is scheduled to release their monthly jobs report. Depending on how the numbers look relative to previous reports, the stock market could drop further, or go back up. This is the nature of the stock market on a daily basis.

October Blues

Welcome to October! The temperatures are falling along with some leaves, but does the changing of the calendar from September to October mean that stock prices will be falling also? October has been a historically bad month for the stock market, but stock prices fall for many reasons. Poor earnings, worse than expected sales, poor economic reports and conditions, product recalls or failures, the list goes on and on. But stocks do not just go down because it's October. Since March, the stock market has recovered nicely, maybe too well. Stocks advanced 15% on average in the 3rd quarter alone! This has some people thinking that it may be time for a correction of some kind. Of course, many people also thought this might happen in September and it didn't. So take some profits, and sit on the sidelines this month if you are worried and can't sleep at night, but don't just sell because you turned the page on your calendar.

As usual, weekly economic reports only make a difference to day traders and short term investors. It may be interesting fodder for the talking heads at CNBC.

US stocks in mixed trading today as investors weigh a drop in consumer confidence report with a better than expected housing market report.

Stocks begin the week on an up note. Merger and Aquisitions seem to be the early theme of the week.

200 post milestone

We have just passed our 200th post on our blog! Hopefully we are helping people figure out the right way to invest and save money while reducing debt and expenses. Thanks go out to the St. Louis Bloggers Guild for helping us promote our blog and find more readers. If you've been thinking about writing a blog, check out: http://stlouisbloggersguild.org/ and think about coming to the Interactive Festival in October. Not sure why I'm writing in the 3rd person, but I like it!

The Fed also stated that they see signs of improvement in the economy and inflation remains "subdued". What does this mean? Don't expect rates to change soon.

As expected, the Federal Reserve announced today that they will leave interest rates where they are now, which is in the 0-0.25% range.

Mobile Blogging update

This week I have been trying a new feature on my blog called "Mobile Blogging". It allows me to post messages on my blog using my Blackberry via texts. Texting gives me 160 characters which is more than Twitter, but still not very much room to work with. So I have to balance making more frequent posts with not being able to say much each time. Also, with mobile blogging, I cannot post a title to my blog post. This may be of little consequence to most readers but it is a concern. For the time being, I will continue to experiment with this new format.

Classic story: Those waiting for the "sky to fall" to get back into the market have been watching the market hit one year highs! Dollar-cost averaging works!

What the Fed decides to do or not do with interest rates this week will not affect your portfolio 5 years from now.

Don't let your long term investment decisions be swayed by headlines and chatter from talking heads on TV.

Stock futures point to down day, but not everyone will head for the sidelines. The tech sector still appears to have steam.

Investors worried about a September selloff now think a correction may come in October. Meanwhile stocks continue to climb!

Individual investors are not convinced that this current stock market ralley is for real. Many expect a pullback of some kind and are booking profits.

Stocks have continued their winning ways this Friday as economic optimism trumps concerns over the pace of the recovery. The Dow Jones moves closer to 10000.

The only news of note in the stock market today is the Quadruple Witching Hour. That's when all the stock options and futures expire at once.

Mobile Blogging

I am setting up a new feature on my blog called "Mobile Blogging". Once it's set up I will be able to update my blog during the day, or at least much more frequently than I do now, by sending text message posts to my blog. Currently, I update in the mornings after I peruse the morning headlines and stock market updates, to get a sense of what is going on in the financial world. As you know, many times events happen or breaking news comes out, which can potentially change the market movements. Federal Reserve statements are one good example. So keep in touch, and for Twitter followers, I am still on Twitter @scottjwheeler.

CD Ladders

One strategy for CD buyers looking for higher yielding CD's is to buy CDs that mature farther into the future. That is, instead of buying a one year CD, buy a 3 year or 5 year CD. You may be surprised to know that CD's can have maturities up to 20 years out! Currently, many CD shoppers are buying one year CD's or less, because they are worried that interest rates will go up next year. But what if they don't? The Fed has not changed rates since December 2008, and they haven't given any indication that they will raise rates anytime soon. The risk in CD's is that you don't know what the rates will be in the future. So what's a better approach? Build a CD ladder with CD's that mature in staggered maturities. Many people want their CD's to mature each year so they can access cash for planned purchases or emergencies without penalty. If you build a CD ladder, you will have money available each year to spend or reinvest. So how do you do it? Buy a 1, 2, 3, and even a 4 year, and 5 year CD to begin. As each CD matures, you buy another 5 year CD which will go on the back end of your ladder. After 4 years, you will own nothing but 5 year CD's, but you will have a CD maturing each year, so you can take advantage of available cash, or buy another 5 year CD. Remember, 5 year CD's will always pay more than 1 or 2 year CD's, and if rates start to go back up, they will go up for all CD's not just the shorter ones. So if you are going to buy CD's, do yourself a favor and buy smart, build a CD ladder. For more aggressive investors, the same thing can be done with bonds.

Even CD's have a risk

As the financial world looks back on the past year of horror known as the collapse of the financial system, investors still look for ways to make money in the markets. Some have sworn off stocks and mutual funds forever, stating the risk of loss is too great and the possible recovery could take too long. Others have given up on bonds due to the risk of default which seems much higher today than in previous times. Side note: high yield or "junk" bonds have been the best asset class to own in the past year! Real estate investors have seen their portfolios deflate and harder to sell as the financial crisis became a credit crisis for potential buyers. Even gold, while inching towards the $1000 level again is still off 50% or better when looking at it on an inflation adjusted basis. The result? Many scared investors have turned to CD's offered by banks. They don't have any risk right? After all, you cant lose your money in a CD can you? Well, they are principal protected, but to say they don't carry a risk would be untrue. The risk with CD's is interest rate risk. When you buy a CD, you lock in an interest rate for the term of the CD. While this may be good when rates are falling, it's bad when rates are rising. The risk with a CD is, you do not know what the interest rates will be when your CD matures. So if you bought a CD that was paying 5% when you bought it, you might only get 2% when it comes time to reinvest that money. For people who live off the interest earned on CD's, this can be very bad. Some people have been speculating that interest rates are due to rise because inflation is imminent with all the government spending and bailouts this past year. Most economists dispute this theory, at least in the short term, and don't expect interest rates to jump until late next year or even 2011 at the earliest. So those CD buyers who purchased 6, 9, or 12 month CD's expecting higher rates next year, could be in for a rude surprise. So what's a CD shopper to do? Come back next time and we'll discuss a few strategies...

Jobless recovery

The big economic news of the day is the monthly employment report. It is expected that job losses are trending down. That's the good news. The bad news is that the unemployment rate will probably be 9.5%. Most economists are now saying that the recession has ended and that inflation will not be a concern. Interest rates should stay low for some time and most Fed watchers do not expect a change in rates until 2011. While an economic recovery is underway, experts warn that the rate of recovery will be very slow. What does this mean for you? Invest in solid companies. Preferable ones that are paying dividends. After all, you can't fake dividends! So cheer up! It's a 3 day weekend, football season has begun, and the worst is behind us!

If you can't stand the heat...

If you can't stand the heat...get out of the kitchen. This is a well known saying that bodes well for people investing in the stock market. Some people can't stand volatility. The ups and downs of the markets are frustrating to many people and cause them to worry and lose sleep. But volatility is not new. There have always been ups and downs in the markets and there always will be. One assumption people make is that the recovery from severe bear markets is too long. But they are not looking at the whole story. If you look at the stock market crash of 1929 as an example. Some might conclude that the Dow Jones did not recover and move on to new highs for over 15 years! But if you count reinvesting of dividends and capital gains, the recovery would have taken only 4 years! That's a big difference! Don't just look at the point to point moves on the charts. With dividends and capital gains, investors can make money in almost any market. This fact goes almost always unreported by most writers who are trying to make a case against stocks. So buy stocks and funds that pay dividends and be sure to reinvest those dividends. That's how you make money. If you want safety, buy CD's. If you want to invest, buy stocks. If you can't sleep at night, it might be time to reallocate your portfolio.

Know why you invest

Now that we are in September, many people may ask if they should get out of the market. Why? Because it's September! September has been a notoriously bad month for stocks in the past. There are a lot of reasons to get out of the market. Book profits. Raise cash for an emergency or planned expense. Rebalance your portfolio allocations. But should you sell just because the month on your calendar changed from August to September? Ask yourself if you are a long term investor or a short term trader. Will you need the money you have invested in the next 6 to 12 months? Perhaps you shouldn't be in the market in the first place. Are you saving for college expenses or retirement that is more than 10 years down the road? Stocks probably have a place in your portfolio. Everyone has different needs and objectives. Figure it out and discuss with your trusted advisers. Don't believe the hype on TV or in the internet chat rooms. Use volatility to your advantage.

The Beat Goes On

Investors who lost a lot of money in the market last year are getting nervous again. After a 50% run up in the markets over the past 5 months from the March lows, people who stayed invested to recover their losses are wondering if it's time to get out. The so-called experts on CNBC and elsewhere have speculated that a correction is imminent. Economists have said that the recession is ending or already has ended. Inflation is not posing a problem yet, and the housing crisis has bottomed out. So much information. The market has shown time and time again, that it can and will correct itself. If you bet against the market, you bet against hundreds of years of data that shows the stock market beats other investments over time. Your decision is to decide how much to put in to the market, not when to get in and when to get out. Market timers have to be right twice.

So if you're worried about losing money in the market, adjust your allocation to stocks. If you need FDIC insurance, then you need to make sure you can live on 1-2% interest right now. For most people, that is not enough. Talk to your financial advisor to structure your portfolio for your specific goals and objectives and don't forget to add to your investments.

Stocks continue to rally as investors bet recovery is for real

St. Louis Interactive Festival

Today's post is more of a commercial for the St. Louis Interactive event coming up on Oct. 17, 2009. It is being hosted by the St. Louis Blogger's Guild and promises to be a great festival. New to social media or an old pro? Come check out the St. Louis Interactive Festival.

The St. Louis Interactive Festival is a one-day training festival that will allow you to get up to speed in the technology world, market yourself or your business in ways you never thought possible, and get the edge up on your competition.

For more information, go to: http://stlouisbloggersguild.org/2009/08/save-the-date/

Credit Card Relief

People who use credit cards, which is just about everyone in the US, will get some relief from the credit card companies today, who have to comply with some new rules:

Credit Card Relief: Phase One

How New Credit Card Rules Affect Your Wallet

While these new rules will certainly help some people, a better way is to help yourself. Be in control of your credit cards. If you pay your balances off each month, the interest rate they charge doesn't matter. In a post-911 world credit cards are necessary to buy airline tickets, rent cars, and reserve hotel rooms. While debit cards can accomplish this, having your money in your bank account reserved can cause temporary problems and may cause a rash of overdraft fees. Also, you don't have the same protection from billing issues or grievances with debit cards as you do with credit cards. So what should you do? Pay off your credit card debt as soon as possible and only charge on your cards what you have in the bank to pay off each month. Make sure you have a no annual fee card and don't carry more than 2 cards in your wallet or purse. If you really want to get in control of your spending, start using more cash. Some retail stores and vendors will now give you a cash discount for not using your credit card. That's a win-win. Recent studies suggest that Americans are now saving more and paying down their debt. This is a good thing and a silver lining from the recession that many people have discovered.

Read the fine print

A comedian once said, "there is never any good news in the fine print". Or something like that. There is truth to that statement. The fine print is usually disclaimers, exceptions, exclusions, and other legal sounding jargon which can often make a good thing, well, not so good. It's a way that companies protect themselves from lawsuits and loopholes. You see a lot of fine print in the automobile ads in the newspapers. Special financing, super rebates, extra good deals, are usually only for a limited selection of vehicles, for a limited time only, and for a limited number of people who can actually qualify for the deal in the first place. So why do they do it? Advertising! All car manufacturers and dealers want people to come buy their cars and trucks. They want you to think that they have the best deals in town. But in most cases, it's buyer beware. You might think the salesperson likes you but he likes himself better. He wants to make a sale to make money and possibly qualify for a sales incentive bonus. Right now, the Cash for Clunkers program is drawing in throngs of people to car lots all over the country. But, even though this is a government program, there is some fine print to be aware of: Waivers. Since some auto dealers have not been paid by the government for the rebates that they have passed on to the consumers, some dealers are now asking buyers to sign waivers stating that if the selling dealer does not get the government rebate, the new car buyer will either pay the dealer the $3500-4500, or return the car! Here are a couple of other things to be aware of when buying a new car in the Clunker program: 3 Clunker Traps Car Buyers Should Avoid

So do yourself a favor, read the fine print. You'll be glad you did!

Taking profits

If you look at the historical charts of the Dow Jones and S&P 500 stock indexes, you can't help but notice that over time the indexes go up and they go down. In general, they tend to go up more than they go down which is why people like to be invested in the stock market. With the recent return of 50% in the S&P 500 over the past 5 months, most stock watchers would suggest that it may be time for a pull back. While most people have not recovered their losses from last year, this recovery since March has been a welcome surprise to those who were overly pessimistic and were predicting the Dow Jones to go down to 5000 (it's in a 9200-9300 range right now!). So what should you do? If you agree that it's time for the market to take a breather, you can sell some positions where you have gains and take some profits. If the market drops 5-10% in the short term, you have cash to buy back in at lower prices. You will have to decide how much you want to sell for your repositioning, but do not sell everything. If the market continues to climb, having some positions still invested will help you. Remember, it's better to be wrong and see the market continue to go up, than it is to be wrong and watch the market tank before you could get out. The market will be watching the Fed today to see how they think the economy will effect the markets in the short term. While this is entertaining to some, its not terribly important for long term investors.

Time for a checkup

Now that the stock market has gained 50% in the past 5 months, it might be time to check your accounts for asset allocation rebalancing. For an asset allocation calculator, click here:

Asset Allocation Calculator

Why rebalance now? Well, now that you've made up some of your losses from last year, it might be time to protect your gains from further losses. After all, the market does not usually have 50% run ups very often, so bank some of your gains. Of course, the market could continue to go up further, so don't take everything out of the market. This is why asset allocation is important. Obviously, your age, investment experience, goals and objectives, and time horizon are very important factors in the asset allocation equation. Everyone is different. As in life, learn from your mistakes and use your life experiences to gain wisdom and capitalize from it. What if you had protected some of your gains in October of 2007 at the previous market high? You wouldn't have suffered nearly the losses that you did. So don't beat yourself up for past mistakes. Focus on the future and move on. You'll be glad you did! Oh, and keep saving and paying off debt. These are good things! Don't let anyone tell you otherwise.

Cars are not investments

Unless you own a 1963 Corvette Split Window Coupe or some such other vintage sports car from yesteryear, your vehicle is most likely worth less now than when you bought it. New cars can lose 20-30% of their value when you drive them off the lot! Now to be sure, in America and especially the Midwest, a car is a necessity for most people. Public transportation is not adequate for most people needing to get to and from their places of employment, much less stores, shopping centers, and other places of business. While the Cash for Clunkers program is getting all the press this week, most people do not benefit from this program or should not buy a new car this way. If your vehicle is worth more than $3500-4500 then you should sell it yourself. You will always get more when you sell it yourself, than when you trade it in to a dealer. When you do buy a "new" car, buy one that is "pre-owned", not brand new. Your best value will be vehicles that are 2-4 years old because most of the depreciation is taken off and it should still have relatively low mileage. Pay cash when at all possible for your new ride. Finance charges and interest add up and cost you a lot of extra money in the long run. When you pay off your car, keep making payments to yourself. Set up a new savings account for your next car and save up until you have all or most of the money needed to purchase you next vehicle. Keep your car 6 years or until you have 100,000 miles or more on it. You will spend a lot of extra money in your lifetime if you buy a new car every 2 or 3 years. Sure it's fun to buy a new car, but cars are expensive. Ultimately, a new car or truck purchase is an emotional one and usually not a necessary one, unless you really do have a clunker that just died in your driveway. There are lots of reasons you can find to buy a new car, but there are also lots of reasons you can probably think of to keep the one you currently have another year. Some of you might want to know what kind of car I drive. Well, if you really want to know, it's a 2003 Dodge Durango. I'd like to get a new ride, but it's only got 52,000 miles on it. Should be good for a while longer!

Cash for Clunkers waiting game

While the fate of the Cash for Clunkers program still waits the decision of the Senate, the debate continues as to whether or not this is a good program for Americans. One view, is that this is good for the economy, a gov't stimulus plan that is really working. Battered auto dealers are getting much needed car buyers into show rooms across the country and buying new cars which puts money into the hands of dealership owners and the pockets of the salespeople. Jobs are being saved and possibly the dealerships themselves. Another view, is that the Cash for Clunkers program doesn't really help the average American. People who are struggling to get by should not be buying new cars, but rather used or pre-owned. What's more, the Clunkers program actually takes the real affordable, lower priced vehicles off the market, because they end up in the junk yards instead of being listed for sale by owners. For more on this view, read a commentary from yesterday's St. Louis Post Dispatch writer columnist, David Nicklaus:

Despite popularity, "clunkers" program is a lemon

What do you think? Let's hear from you and see who you believe has the better argument. Post a comment.

Cash for Clunkers End Game

Astute readers of this blog may remember that I first wrote about the Cash for Clunkers program on May 1st. At that time the details were not yet clear, but I wanted to prepare my readers of the new Gov't program coming to the aid of the Nation's Auto Dealers. Fast forward to August. The Cash for Clunkers program appears to be heading for an abrupt end. It now seems that the program was a victim of it's own success. While the program was to last until November, more consumers brought in their "clunkers" for trade and the $3500-4500 rebate than planned, and the program quickly ran out of funds. Debate over the weekend has the White House, Congress, and Senate at odds over whether or not more money should be added to keep the program going. Car Dealers are concerned that they may be left holding the bag on deals that are still on the table or have not been processed. One huge complaint from dealers is that the program has too much red tape and the paperwork is too cumbersome for their employees to handle. What's more, the gov't website that is required to be used to process the paperwork, has crashed many times as it cannot handle the load of incoming deals from around the country. So unless the Senate approves more funds, this government program could be over as early as Tuesday! So what does this mean for consumers? Strike your deal for a new car soon, but don't be surprised if your local car dealer has already pulled the plug on Cash for Clunkers. Here's a thought: maybe the car dealers should just lower their sticker prices by $4500. That seems to be enough to bring in some much needed sales and move some inventory. If you can't sell your clunker on your own, then give it to a charity or take it down to the junk yard yourself.

Twitter Friday

Wrapping up a busy week, so I will be updating my blog today via Twitter. Scroll down and read the Twitter updates in the right-hand column below or follow me @scottjwheeler. Hope the bulls continue their winning ways today, but the early morning futures markets point to a lower open. Most discussion today will be centered around the latest GDP numbers and the Cash for Clunkers program that is apparently, already out of money!

Trends

In the fashion world, there are always new trends to note and follow. New trends typically emerge from New York, Paris, or Milan, and make their way to the west coast and creep slowly to middle America. People like to follow trends because they want to be in style and ahead of the curve. In investing there are trends also. Technical analysts note the 50 day and 200 day moving averages of the stock market indexes to see what direction the overall market is going. Trends can also be seen in the stock price performance of individual companies. The difficulty for most investors is what to do with the data. Will the trends support a buying decision? Do the trends say sell? Some investors hope that their favorite stocks will rebound from lows and move on to new highs. Recent buyers of GE have seen their stock price double in the past six months, although it is still down over 50% in the past year. Some stocks never recover. Kodak was one of the Nifty Fifty stocks in the 70's, but it couldn't keep up with the technology trends and lost favor with shareholders forever. Now people are asking about GM. Can they come back? Will they be able to climb out of bankruptcy and become an industry leader again? Sadly, their stock is now trading below 50 cents per share. Technology trends will always change and technology stocks are making a climb back this year. The Nasdaq index is the best performing index so far this year and is inching closer to 2000 every day. Of course, it is still well below the all time highs set in the year 2000. While the Dow and S&P 500 indexes recovered and set new highs, the Nasdaq did not. Will this trend continue? You make the call. One thing is certain. Technology will always change as new ideas are born and inventions discovered. Look for the trend and if you spot one you might be able to make some money too!

Bulls

I have been out of town on vacation, visiting some old friends from high school at a reunion in Boston. We stayed in the Boston Financial District while we were there. A couple of observations. The recession does not seem to be hurting Boston. We saw plenty of tourists and the hotels, restaurants, and pubs in the area seemed to be doing some booming business. So while we hear that Ben Bernanke believes we are getting out of the recession and the economy will recovery, albeit at a slower pace, life moves on. The markets have responded well with the recent news of companies earnings for the most part being better than expected. There is a sense that with the markets doing better than some have hoped, that the bears may be heading back to their caves for a while as no one wants to miss out on the recovery. Of course, some pundits are now calling for a double-dip recession, but most expect better days ahead of us in the short term. Stay tuned on Twitter as I post updates during the day. Follow me @scottjwheeler and let's hope we see another good week in the markets!

Twitter Takes

Follow me on Twitter today @scottjwheeler, as we see if the stock market can keep the winning streak alive and post it's 8th up day in a row! The futures are down this morning, but anything can happen on Wall Street to change direction. More earnings reports are due out today and Bernanke's testimony yesterday will continue to be scrutinized.

200 Days

Today I will take a time out from my usual discussions on money and finances, to state that I have now recorded 200 days of not drinking soda. While I have not lost as much weight as I anticipated, I feel good and I am sure my health is a little better for doing so. I do not feel any compulsion or need to ask for sodas when I go out for lunch or dinner, although I do have an ice tea occasionally.

My goal was and still is to make it through 2009 without drinking soda, but can now tell that since I do not miss it, I will probably continue on with water. One disturbing trend continues to be that more and more restaurants are beginning to charge for water as a way to make up for their lost soda revenue. If it were me, I would charge a little extra on the sandwich instead of making people pay up for their healthy habits!

Just do it!

While talking heads and pundits bicker and debate on whether or not we are seeing "green shoots" or "green weeds" and if the recession has ended or if the economy will continue to be dogged by rising unemployment, life goes on. The average investor has to decide what to buy and when to buy it. If you are saving for your child's college or your own retirement, you still need to save. If anything, you may need to save more. While inflation will always be a problem in the long term, it should not be your primary focus when choosing where to invest your money. Just Do It, is more than just a clever tag line by Nike, it is a simple solution to get people moving in the right direction. Some people get paralyzed by fear. Fear they are doing the wrong thing, fear they will lose money, fear they are paying too much. As most parents will tell you when reflecting on the life of their children: time flies! If you wait for the right time or the best moment to start saving and investing, that time will likely never come. But your kids will still grow up and want to go to college, and you still will someday quit working and hope you have enough savings to fund your retirement years. So turn off the TV and keep funding your kid's college savings account and your retirement plan. Don't like the Nike slogan? How about this old school pearl of wisdom: If you fail to plan, you plan to fail. Hey, Nike's stock isn't half bad either!

You make the call

So here's where we are right now. The stock market is having a great week thanks to earnings surprises from companies like Goldman Sachs, JPMorgan Chase, Google, and IBM. More good news is expected later from General Electric and others. This has kept bad news from CIT from ruining the fun. The market is trying to recover from 4 down weeks, after it's 40% run up from the March lows. Pundits are now seeing the Green Shoots and signs of recovery from this economic crisis and recession that has dogged the world for the past 19 months and counting. Inflation fears have been abated for now as there is a more short term concern of deflation. While inflation could come back, it is not expected to be a problem until 2011 or later. Still, some bears out there are not convinced and are predicting a retest of the March lows, one call for the S&P 500 to drop to 600 and so on. So what does all this mean for the small investor? Stick to your plan. Invest in the areas you need to be in. Monitor your investments and make changes as needed. A long term view is still better than a short term look out the back window. Stay diversified and keep saving. Putting your money under the mattress may make you feel better for a moment, but it will not help you reach your long term goals! You gotta make the call!

Twitter Wednesday

Another busy week in the markets with more companies reporting earnings and more analysts checking to see if they are better or worse than expected. So far the markets have had 2 up days this week and are trying to break out of this 4 week losing streak. Bank of America and Citibank will be reporting this week, but cannot expect to have the surprise earnings that Goldman Sachs did. I will be posting updates via Twitter as I head off to a sales meeting his morning. Follow me @scottjwheeler or check the Twitter updates on the lower right hand column of this page.

Banking Crisis is over!

Over the weekend, I read two interesting stories by people who have put themselves on the line and said in all sincerity that the banking crisis is over! First it was the Chairman of Barclays Bank in London who said that the banking crisis is over, but the nasty global recession could go on a while longer. Next up, Donald Luskin, chief investment officer of Trend Macrolytics, who also said in an article posted on Smartmoney, that the banking crisis is over. Luskin goes on to say that while the Obama administration did a wonderful job ending the banking crisis, they did not do so well in other areas. Luskin also thinks that the recession and the bear market is over and investors will have to be skillful in their trades to make money in the markets going forward. Long term investing may be obsolete. Traders will have to buy on the dips and sell in the rallies, he says. Notice he didn't say get out of the market, he just said, be nimble and trade carefully. This has been the manta of investing for all time, buy low and sell high. Everyone has heard that before. The problem for most investors is they don't know when to sell. No one wants to sell a loser and admit they made a mistake. To win in investing you have to be right more times than you are wrong. Sometimes you need to sell to cut your losses and prevent further losses from occurring. Ask your self the question, would I buy this stock today? If not, then why do you want to keep it in your portfolio? What's your next move?

It's good to be not so bad

In the strange world of investing, sometimes news that is bad, is really good news. Yesterday Alcoa posted their 2nd quarter earnings and analysts got to pour over the report and compare it to their forecast. Surprise! Despite posting their 3rd consecutive quarterly loss in a row, the company beat the forecasted loss of 38 cents per share, by 12 cents! In other words, even thought they reported a loss of 26 cents per share, that was not as bad as expected, which was good news for the company and the stock. Shares of the stock gained for the day and surged even higher in after-hours trading. So what does this all mean? Well, Alcoa is one of the companies represented in the Dow Jones Industrial Average. In addition, they are considered a bell weather stock and a barometer for how other companies might do in the coming weeks as more earning reports are published. The good news reported by Alcoa yesterday is that they see signs of recovery in the global economy. So all the bears out there thinking that we could retest the March lows, could be in for a surprise themselves. Who's camp are you in?

Twitter Updates

This week is a busy week. The beginning of earnings season, the G-8 Summit meetings, and so on.

I have a busy week also, so will be doing my updates via Twitter. Scroll down and view the Twitter updates on the right hand column below or follow me on Twitter @scottjwheeler. Stay invested!

Earnings Season!

I used to love the old Bugs Bunny cartoons with Elmer Fudd and Daffy Duck, when they would argue about whether it was rabbit season or duck season. As anyone who follows the stock market knows, it's now earnings season! This is when companies put out their most recent quarterly earnings for the analysts to review and comment. Generally there are surprises. When a company surprises the analysts with good news, it is good for the stock, and when they surprise with bad news, well, it can be bad. Most of the so-called, stock market gurus, are deciding whether we are currently in a "correction" phase, following a recent 40% upswing in the market since March, or whether we are in a more prolonged downward spiral which could test the lows from March, as speculation arises on the lack of strength in the current economy. Many people are questioning if the stimulus package is working and if another one is needed. Some suggest that the effects of the stimulus money are going to present itself in the coming months. Others, like even VP Joe Biden, are wondering if it was enough. The recent volatility in the stock markets suggest that one approach for long term investors might be sector rotation. That is looking at the strong sectors or asset classes in the stock market for possible buys, and selling the weak sectors. This can be a rewarding strategy for those ready to carefully monitor the market aggressively. Many people are pointing to technology as a key sector own right now. As always, if you need help, look for a good coach. Your portfolio should be customized for you. A magazine article or newspaper column can't design a proper strategy for all people, unless you like to follow the herd!

Unemployment

Unemployment is certainly bad for those people who have lost their jobs, but for those who look at the unemployment numbers for a direction of things to come in the stock market, it's a different story. Yesterday's jobs report sent the stock market reeling as the data showed that more jobs were lost in the month of June than previously expected. But if you look at the stock market history, enemployment usually peaks after a recession is over and the stock markets begin a new bull market period. The jobs report is a lagging market indicator and should not have caused a sell off like what happened yesterday. Strange things happen in short holiday weeks like this, when most traders are gone. One should expect a pullback after strong ralleys like we have recently seen, so don't let one bad day scare you back out of the market. Cash is still king when looking for opportunities. The need for diversification of assets is greater than ever, and tactical moves are needed to stay ahead of the herd. Get your game face on and get back in the playing field!

What is your time horizon?

One thing that trips up investors is not knowing what their investment time horizon is. Most people who are investing for retirement assume they are investing until age 65 or whatever age they think they want to retire. But is that when they stop investing? Only if you plan to put everything into cash and take it to the bank or put it under your mattress. Your investment time horizon actually ends when you die. A person who retires today at 65 has a very good chance of living another 20 or more years. It's not uncommon anymore for people to live into their 90's. Karl Malden just died yesterday at age 97. My grandmother just turned 95 and my other grandmother who has already passed away, lived to age 99! So you have to consider the fact that your retirement might last as long as 30 years! While last year's stock market crash put a lot more people back into cash and CD's and out of the stock market, a 30 year time horizon pretty much dictates that some of that money should be invested in the market in some fashion. That doesn't mean you should have all your money in the market, but then again, you should not have it all in CD's earning 3% or less either. Figure out how much you should have in various asset classes and rebalance and adjust periodically to make sure you are on track of your goals and objectives. Taxes and inflation are huge threats to your wealth, and stocks, while volatile on an annual basis, are the only way to stay ahead of the game over long periods of time.

Where there's a will, there's a way!

There are many lessons to be learned from watching the saga surrounding Michael Jackson's death. The news of the day now centers around his will. It seems there are a few different versions floating around. As you might expect, someone with his wealth, or source to assets, might have a lot of people wondering who he was planning to leave all his stuff to. It seems that he has left most of his remaining assets to his mother, his children, and some charities. So let the bickering and the courthouse drama begin. His father was apparently left out of his will, so were his brothers and sister. Well what does this mean to you and me? Other than the shear entertainment value nothing. Except ask yourself this question? Do you have a will? Who will get your stuff when you die? Will it have to be dragged through the courts? It is believed that as many as 70% of all Americans do not have a will. Do you want your state to decide who gets what? For many people, and definitely Michael Jackson, a trust is a better way to distribute your assets after death. A trust will avoid probate, while a will does not. Perhaps you have a will or trust but it has not been updated in some time. Call your lawyer and make an appointment to get your documents updated. It won't matter to you, but it will matter to your loved ones!

Managing your debt

Of all the news surrounding the death of Michael Jackson yesterday, this one struck me: "Michael Jackson lived like a king, but died awash in debt". As a matter of fact, he was nearly $400 million in debt! That's a lot of mullah! It seems that just like a lot of other Americans who got in over their heads with loans they should not have received, even someone as rich as Michael Jackson did the same! This just shows that it doesn't matter how much money you make or how much you are worth, you need to be working with a financial advisor to help you manage your investments and your debt. This story reminds me of an NBA player years ago, who had to move in to his parent's house when the NBA was going through a lockout, which meant that the players were not being paid their salaries until it was settled. So this guy who was making around $2 million per year, could not keep up with his bills and had to make some major changes to his lifestyle. So what does this mean for the average Joe making a living but feeling the pinch of the current economic recession? Talk to someone about your situation and get a fresh set of eyes on the problem. Someone without bias can spot areas that can be addressed for change better than you. I once helped a couple save over a hundred dollars a month by pointing out that switching cell phone carriers and getting a better plan was better than having no land line. You see, even though they thought they were saving money by not having a land line, they were paying over $200/month in cell phone charges! You have to let someone look at your whole budget to see what's really going on. It might humble yourself, but the time to get out of debt is now, not later! The lawyers and accountants are going to have a lot of fun going through Michael Jackson's financial records!

All eyes on the Fed

Today the Federal Reserve will conclude it's regular two day meeting with an announcement on their position on short term interest rates. It is expected by almost all pundits that they will not change rates from where they are now (a 0-0.25% range). Of greater interest to traders will be their policy statement on where they see the economy going in the near to mid future. There is now considerable debate between economists as to whether the US economy is heading out of the current recession and if we are possibly entering a period of higher inflation. Some suggest that the greater short term fear is deflation, not inflation. So what does it all mean for the average investor? Well, if you are an investor, what the Fed does or says today means nothing. Investors are in the market for the long haul. If you are a short term trader, then what they say could have some bearing on if you should buy or sell today. Figure out if you are a trader or an investor and act accordingly. Build your portfolio to withstand market volatility and capitalize on market corrections. It's ok to hold cash for the short term, but everyone needs a portion of their assets in the market based on their risk level, goals, and objectives. If you were out of the market these past 3 months, you missed out on a 40% gain from the lows in March! CD's cannot dig you out of the hole you are in from last year's crash. Go Ben, Go!

Inflation coming soon? Maybe not!

Working in a bank, I see people coming in all day long to buy, renew, or inquire about CD rates. Most people make a comment or two about rates being low and wish that rates would be higher. To get the best rates, they are told that they need to buy CD's with maturities over 3 years. No, they want a one year CD. Why? Because they are worried that rates are going back up soon due to inflation. Is this a good strategy? No. First of all, if you want CD's, you should build a CD ladder with 1, 2, 3, 4, and 5 year CD's. Each year when your CD matures buy the 5 year CD. That way you'll always get the better rate and you will have new money available each year. Secondly, how do you know rates are going up? Is inflation really a problem? Actually right now we are in a deflationary environment. Unemployment is rising and there is no upward pressure on wages. The economy is still struggling as well. There is really no threat of inflation in the near future. If you don't believe me, read a couple of recent articles from economists with more credentials than I have:

Why Inflation Isn't the Danger

One Man Against Inflation

So what if you aren't a CD buyer? Well, good for you! Areas to increase your holdings in would be energy, commodities, and TIPS (Treasury Inflation Protected Securities). For the average investor, the problem isn't buying the wrong investments, it's not saving enough! Don't fight the Fed!

Take a longer view

The problem a lot of people have with investing is, they focus on short term performance. This is not entirely their fault. Newspapers publish stock and mutual fund performance daily. Magazines report monthly, quarterly and annual results. While these measurements are interesting, they don't tell the full story. How did your stock, mutual fund, or ETF perform over the past 3, 5, and 10 year periods? Do they perform in good and bad markets? How do they compare with their peers? These are some good questions to ask before you buy (or sell) your investment. This brings up another problem for investors. What is your time frame for your investments? Is it just one year? Most likely not. Most people are investing for 10, 20, or 30 years. Even retirees should have some money in the market. The average 65 year old has a very good chance to live to age 85 or longer. That's 20 years! Twenty years is a long time to be in CD's earning 2-4% which barely keeps up with inflation, and when taxes are factored in, CD's barely make money at all. If you have enough money to live off the income your CD's generate then that's great, don't take the extra risk. But with risk comes reward. The trick is finding the balance!

It takes guts to be an investor

Well, this has been a tough week for stocks. After running up for 12 out of the last 14 weeks, the stock market has hit a bump in the road this week. Is this unusual? Hardly. If history has taught us anything, it's that the stock market goes up and it goes down. Over time, it tends to go up more than it goes down. There is never a straight line in either direction. Some people speculate that the recent advance was too fast and due for a correction. Others think that traders are just booking their profits over the last 3 months. Still others think that the recent announcements of regulatory changes in the industry is causing a black cloud to form over Wall Street. It's probably a mixture of all three. There are too many variables that influence the stock markets for any one theory to predict correctly. That is both the fun and frustration about investing. So what's a person to do? A few rules of thumb:

• The best time to buy is when you have the money.
• Buy on a regular basis. When the market is up you'll buy less, and when it's down you'll buy more.
• Diversify your portfolio with different asset classes. Besides stocks, you need bonds, cash, real estate, commodities, and even gold or silver.
• Rebalance or adjust your portfolio regularly. You need to have a more tactical approach these days.
• If you need help, hire a coach. Talk to a financial advisor you trust. You need a customized plan for your situation, not a cookie cutter strategy you found in a book or magazine.

Don't give up! Investing is a marathon race, not a sprint. You need to consider your time frame, goals, and objectives. What is right for someone else, may not be right for you. For most people, the biggest lesson from this past year was that you need to save more and spend less. There are positive things happening in the world, don't focus on the negative. Turn off CNBC and talk radio and think positive!

Cash in on Opportunities

As I mentioned in yesterday's post, many people are holding way more cash in their portfolios than they used to, before last year's stock market crash. The average cash holding is now around 19% of the typical portfolio. While cash is a good asset to hold for liquidity and safety, it is not a good asset for appreciation and inflation risk. Cash should be used for opportunities that present themselves in the markets. Yesterday, the Dow Jones index dropped almost 190 points. Some people are worried that the economic crisis is far from over. Others believe that the markets had advanced too quickly in the past 3 months and it was a time to sell and book profits. If you had cash on the sidelines yesterday, you could have taken advantage of some buying opportunities for the future. To be sure, you should keep funds needed for short term needs like home, car, and college tuition expenses in safe, liquid investments, like CD's and money markets. But for the longer term, stocks, bonds, and alternative investments will bring higher yields and a greater total return. Want a guaranteed return? Pay off some credit card debt!

Inflation protection

As people have watched all the bailout money go to the big banks, insurance companies, and sadly Chrysler and GM, many have correctly assumed that inflation will rear it's ugly head. The question is, when? Even thought the stock market has had it's best 14 week run since 1975, many people are still holding cash in CD's and money market accounts. Traditionally, these products are not a good hedge against inflation. Yet, with last year's stock market crash, many are understandably afraid of putting too much money back into the market. They would rather get a 1-2% return on their cash than suffer another loss like last year's. The problem is, most people are buying 6 month to one year CD's which are yielding less than 2% on average. What else can they do? Well, for one thing, try to stretch out your maturities by using a CD ladder. Instead of putting all your money in one year CD's, try keeping some there, but moving some to 2 year CD's and 3 year CD's where you will earn a higher yield. While it's true that inflation is coming, it probably won't come as soon as most people think. Spread your money out to protect yourself and earn higher rates in the meantime. Other areas to hedge against inflation for more aggressive investors would be in the following areas: Gold, Silver, TIPS, and Energy stocks or EFT's. Diversification is still the name of the game and just as you would not want to put all your money in stocks, you should also not have all your money in cash! Will Treasuries be the next bubble?