Investing

Dow 13,000 What Does It Mean?

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As always, the mainstream media perked up about the stock market and investing world when the Dow Jones Industrial Average passed the made-f0r-headlines 13,000 level. The guys that write news story headlines love round numbers, maybe because everyone else does too. But, just like our infatuation with round number birthdays, such as turning 40, there is no real difference between Dow 12,956 and Dow 13,000, just like there is no real difference between being 39 and being 40 years old. Is Dow 13,000 Meaningful? The 13,000 number is purely psychological, but it does provide an opportunity to take a look at how the stock market and the economy are doing lately. First, and foremost, most storied correctly noted that this is the first time the Dow has managed to gain the 13 K level since 2008. That is significant for two reasons. One, 2008 basically marks the beginning of the stock market crash caused by the bursting of the housing bubble and the subsequent financial crisis, all of which triggered what has become known as The Great Recession. Two, it means that maybe some investors should be seeing a recovery in their portfolios. It is tempting to draw the conclusion that …

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Market Up on Good Economic News

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Just a quick update today: The stock markets ticked up today on a little bit more good economic news. Following recent good labor market news and the Fed holding interest rates at zero, comes statistics showing last weeks jobless claims were at a 3 1/2 year low. Also, several large companies reported good results. Furthermore, two regional business surveys from the Federal Reserve showed better than expected growth for December. Finally, the general business conditions index for New York was higher again showing an increase in both new orders and hiring. That’s yet more good news for the job market. We’ll have new articles about end of year tax strategies, financial planning for those in extreme circumstances, and more in the coming days.

IBM Boosts Share Buyback Again

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IBM must really hate the idea of paying a big dividend. Every year, it seems, IBM authorizes billions of more dollars for share buybacks while increasing its dividend by the smallest amount possible. Then, the company goes on to crow about how it has returned "… over $109 billion since 2008 to our shareholders through share repurchases and dividends." Anyone want to guess how much went to share repurchases and how much went to dividends? If you are thinking 50/50, you aren’t even close. As The Register points out, the share buybacks are a lot more beneficial for IBM executives hoping to keep the earnings per share, or EPS, growing at the proper rate to "earn" their bonuses than they are for shareholders looking to increase the value of their holdings. Of course, there is nothing illegal or even unethical about IBM’s giant share buybacks, but it does raise the question, "Can’t IBM come up with anything better to spend its money on than its own stock?" If not, shouldn’t shareholders just get a check instead of the world’s biggest pile of treasury stock? The company authorized an additional $7 billion dollars to buy its own stock this time around …

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Stock Market 4th Quarter Turn Around

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Sometimes it seems like the stock market is just messing with people. After seemingly running off of a cliff to end the third quarter of 2011, the market has recently staged a rally. Take a look at a chart for the Dow Jones Industrial Average and you’ll see a low point on October 3, 2011. It’s almost like the market wanted to make sure that your third quarter statements looked bad before any sort of upward movement. Of course, there is a long way to go until the end of the year and pressing economic matters like the debt crisis in Europe, the joint budget cutting committee and an unemployment rate that won’t go down are still to be resolved. For the time being, non-day trading investors should remember that short-term movements in the stock market are notoriously difficult to predict. End of Year Portfolio Rebalancing Many experts recommend rebalancing your long-term portfolios like retirement accounts (IRAs, 401k, and other retirement plans) once a year. Traditionally, many people do it near the end of the year. If you haven’t rebalanced your portfolio since last year, it’s a good time to start thinking about doing it soon.

2011 Stock Market Update Q3

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The third quarter just closed on September 30th and it was not a pretty sight for short-term investors. The S&P 500 closed at 1,131.42 which is down 14 percent for the third-quarter. It started the year by opening on January 3rd (the 1st and 2nd were Saturday and Sunday, respectively) at 1,257.62.  That is a drop of a little over 10 percent year to date. The Dow Jones Industrial Average is off 5.74 percent year to date. The stock market took a huge dive starting July 21st and has never pulled itself back up. For those of you looking for the culprit, let me help you out. The debt ceiling deal was reached at the end of July, which means the 21st was pretty much the height of the shenanigans. The markets have had no truly good news since to pull themselves back up by. Outlook for 2011 4th Quarter Stock Market Don’t expect the news cycle to save the stock market during the fourth quarter of 2011. In the 4th quarter, we’ll see increasingly competitive rhetoric building in the Republican Presidential primary, the product of the debt ceiling committee, which most are projecting will fail, and the start of …

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Reporting Short Sales for Income Taxes

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Reporting most investment income is pretty straightforward. Calculate the gain or loss and enter it on Schedule D. The only trick is whether to report as a long-term or short-term capital gains or capital losses. With short sales, however, there are a couple of tax tricks to know about how they get reported. Long-Term or Short-Term Short Sales The most important thing to understand about short sales, is that they are almost always considered short-term capital gains or losses. Unlike a traditional investment where you buy and hold the property, with a short sell, you do not own the property at all. You borrow the shares from your brokerage who gives you the proceeds of the sale. You close the sale by buying back the same shares you sold. It may seem like you determine whether a short sale is long or short-term by the amount of time that passes in between when the short sale is initiated and when it is closed. However, this is not the case. In order to be a long-term capital gain, you have to OWN the property in question for more than one year. With a short sale, you never own the property. Or, …

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Banks to Buy Back Shares, Raise Dividends After Passing Fed’s “Stress Test”

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Several major banks, including most of those deemed “too big to fail,” are set to raise their dividends and announce large stock repurchases after passing the latest Federal Reserve “stress test.” Banks and financial institutions that have repaid their government bailout TARP funds and passed the stress test have been given the go-ahead by the Federal Reserve to make new capital-based decisions such as increasing their dividend payouts or doing share buybacks. Shortly after the Fed’s announcement, the financial sector came alive with press releases about how the banking stocks would take advantage of the new allowances. J.P. Morgan announced both a higher dividend and a share buyback, for example. Banks Raising Dividends After Drastic Cuts During the height of the banking crisis, most banks and financial stocks were forced to cut their dividends to minimal levels, or even to zero. Eliminating their dividends took away one of the major reasons to invest in financial stocks, which historically have provided solid dividend income to investors. Even the the financial sector’s best preferred stocks were forced to slash their dividends. The quick moves by the big banks and Wall Street firms to reverse their dividend cuts offer a glimpse at how …

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Trading Basics from the SEC

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The SEC released an interesting item today.  It’s a two and a half page "bulletin" entitled Investor Bulletin: Trading Basics. Ironically, anyone who knows enough about the stock market to know about the investor education materials offered by the SEC probably already knows everything included in the PDF file. Be that as it may, if you want an official government agency explanation of terms like Market Orders, Limit Orders, Stop Orders, and Stop-Limit Orders, here is a nice, short, easy to read one for you. By the way, there are numerous investor education pieces available at the SEC website. Just search your topic and add site:sec.gov to the end of your search to limit results to those that are on the official U.S. Securities and Exchange Commission website.

Apple Stock Good Investment or Passing Fad

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People are always asking me if I think certain stocks are a good investment. There is a flaw in the question, but we’ll get to that in a minute. Right now, let’s get right to the real question people are always asking me these days. Is Apple Stock a good investment? What people mean when they ask me that is not whether or not Apple is a good investment, but whether or not I think Apple stock will go up a lot … soon … really soon. They also want to know whether or not I think Apple stock will go down, but that is not why they ask the question. They want to buy Apple stock because it sounds like a smart investment, or because it feels like a smart investment. Of course, none of this has anything to do with an in-depth analysis of the company’s stock and it’s prospects for future growth and earnings. It’s all about buzz. They heard about the iPhone and it’s a big hit! They heard about the iPad and it’s a big hit! They heard about the NEW iPhone, and it’s a big hit! Now, they hear that Apple’s earnings are higher …

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Facebook Valuation Estimates Billions Wrong?

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Now that the new Facebook movie is coming out, even more people are going to be clamoring for information about just what Facebook is, what the Facebook company is like, and, of course, how to invest in Facebook. The catch is, there is no Facebook. Not a Facebook company you can invest in at least. Should savvy investors be looking to buy Facebook stock when they can? Investing In Facebook Let’s start with the basics. When most people think of stock, they think of the stocks that trade on the major stock exchanges like the New York Stock Exchange. The companies that trade their stocks here are called publicly-traded companies, because shares of their stock are bought and sold on public exchanged like the NYSE, AMEX, and NASDAQ. There are also many companies, both big and small, that do not have stock shares that trade on the public markets. These companies are often referred to as privately-held companies, although that is not always a technically accurate decision. Facebook is NOT a publicly traded company. There are no Facebook shares of stock to buy on the NASDAQ or any other public stock exchange. That means that there is no way to …

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