stock market

Stock Market Records Is It Time to Buy

by

Nothing gets the financial press in tizzy quite like a run of “up days” for the stock market. And, nothing gets the mainstream media interested in the financial media’s excitement like a new RECORD! Dow Jones Record High The Dow Jones Industrial Average has notched some record high closes lately. The S&P 500 Index isn’t far behind, within striking distance of its record high as well. So, what do these new stock market records mean for smart investors? First, the recent stock market records are a lesson to be learned for long-term investors such as retirement investors. When the market looked terrifying in  2008 many people sold off stocks in their 401k plans and other retirement savings, often after much of the damage had already been done. That was a foolish strategy then, but now, five years later, those investors are officially the fools. You were better off to have just stayed put. Harsh? Maybe, but if you are investing for retirement or other long-term horizons, this is a critical lesson to learn. In a recent discussion someone said to me that he was sure he did better by getting out when things were bad and getting back in now …

Read More

1987 Stock Market Crash 25th Anniversary

by

Twenty-five years ago on October 19th, the Dow Jones Industrial Average fell 508 points, just over 22 percent, the biggest one-day percentage drop in history. The crash was so severe that it usurped the use of the term Black Monday, which had previously been used to describe the two-day crash in 1929 that led to the Great Depression. Ironically, the stock market ended up for the year in 1987, having opened on January 2, at 1,897 and closing on December 31 at 1,939. However, it would be almost two years until the market overtook the highs for the year that occurred before the crash. After Black Monday, the so-called circuit breakers were implemented to reduce the chances for such spectacular, all at once, market drops. These curbs were revised and expanded to individual stocks after the “flash crash” of May 2010. Most interesting for students of personal finance is that while events like these can be punishing over the short-term, they fade quickly into the realm of past returns for long-term investors. Remember that just a decade later, in 1997,  the stock market was in the middle of a major rally which would continue for several years until the popping …

Read More

Job Numbers Good News or Bad News

by

On Friday, the US Department of Labor released the July non-farm payroll numbers. They showed that employment rose by 163,000 while the unemployment rate was basically the same at 8.3 percent. Of course, this is an election year, which means that within minutes, the airwaves were flooded with spin about how this was good news or bad news, depending upon your political persuasion. Truth in Money How do you tell if the July nonfarm payrolls data is good or bad? Among politicians, talk is cheap. There is no need to be accurate or correct, only to color the perception of the electorate in such a manner that you garner the majority of their votes. In other words, a politician, and their supporting ecosystem of political pundits and talk show hosts have no interest in what the jobs numbers, or other economic data, actually mean. How can you tell when a politician is lying? His lips are moving. In fact, many of them have only the barest of understanding as to what the data actually says. Instead, they have their experts comb through looking for what can be characterized as good or bad and then run with whichever one supports their …

Read More

2012 Economic Recovery?

by

It’s July 1st, and that means that the second quarter just ended. Recent economic data suggest that the housing market might finally be improving a little bit. Recent jobs data suggests that the labor market is at least holding its own, even though it isn’t strong enough to be lowering unemployment yet. How companies report their second quarter earnings will go a long way toward showing whether or not the economy will finally move forward faster than a snail in 2012. Economy Improving? Here is what to look for. Companies should report earnings that are pretty much in line with how well they did in the first quarter since there were no real up or down catalysts in the second quarter. However, what you really want to be looking for is the guidance that companies are giving for the next quarter and the rest of the year. If companies feel good about the rest of the year, that means that they are more likely to spend, or at least not cut. That additional economic activity is what this economy really needs to kick it over this hump because consumers are tapped out. A solid third quarter with rising expectations heading …

Read More

Economy Slowing? Banks Downgraded

by

The Dow Jones Industrial Average fell over 250 points today, while the S&P 500 dropped over 30 points. That is the second worst day of the year for the stock market. So, what happened, lots of stuff… or nothing, depending on how you look at things. Weak Economic Data The U.S. economy has been growing very slowly for a while now. However, the markets seem to keep getting ahead of themselves and forgetting the “very slowly” part. Every time new economic data comes out that shows the economy is indeed only growing at a snail’s pace, the markets get hammered. First up, the Federal Reserve announced it was cutting its growth and inflation forecasts for the rest of the year. Part of this is bad news. After all, the Fed’s growth projections weren’t exactly rosy in the first place. The second part, however, is good news. It means that all of that stimulus out there in the form of low interest rates and bond market maneuvers by the Fed are not causing inflation. Banks and insurance companies are big losers are the news of a worse economy. People cancel insurance when they cut back on spending. In addition, a significant …

Read More

Stock Market Greece Recovery

by

The stock market is attempting to stage a recovery now that worries about Greece defaulting and abandoning the Euro have taken a back seat. Recent elections gave the political parties that favor adhering to the conditions of Greece’s bailout the majority of seats and a solid chance at putting together a coalition government. However, Greece isn’t the only issue out there. Recent employment numbers have not been stellar and few companies are issuing what would be called “enthusiastic” guidance for the coming year. The result is an odd stutter-step market that today (June 18) gave us a mixed day with the Dow slightly down and the S&P 500 slightly up. In the long run, the last few months of market action have been good. Runs in the straight up direction seldom end well. This period of consolidation even had some new outlets using the term correction, which is enough to scare off the faintest of heart investors that are often the cause of so much volatility. For long-term investors the fundamentals today are no different than they were a few months ago. The economy is growing, but slowly. Europe is being held together, but barely.

Facebook IPO Securities Fraud?

by

We talked recently about the Facebook IPO flop. Now, things are starting to maybe look a little bit worse. According to several news websites, including the Wall Street Journal, there may have been some forbidden communications between Facebook, its major bankers, and subsequently, between those banks and their clients. It seems that during the Facebook IPO roadshow, Facebook disclosed, in more detail than in their amended S-1 filed with the SEC, that their earnings were rapidly declining due to the fact that a large part of their user base was shifting to accessing the Facebook service via mobile devices instead of online. The difficulty is that there is no room on most smartphones to put up the ads that populate the right side of the screen on a full desktop computer or laptop computer. As such, Facebook generates almost no revenue from mobile users. If more users access Facebook without generating revenue that is a double whammy. More users equals more expense, but not more revenue. None of this necessarily adds up to trouble for Facebook, other than those disclosures made in private. All material information must be disclosed publicly both about a publicly traded stocks and those about to …

Read More

Apple Earnings Good or Bad?

by

Apple reports earnings on April 24. This report is actually for earnings from the 2nd quarter of Apple’s fiscal year, even though corporations on a calendar year are reporting first quarter earnings right now. (Several tech companies reported earnings last week.) After a rough week for the company in the headlines, these earnings will likely be used as a gauge for the short-term future of Apple stock. Recently, Apple has been the subject of legal action from the Justice Department regarding alleged price-fixing for ebooks. Although this makes up a tiny portion of Apple’s revenue, it is a major key in how the Apple store works. If there is a problem with this model for books, there could conceivably be issues in other markets as well. What is not in doubt is that Apple will continue to dominate the tablet computer market and that its prolific iPhone will continue to be a huge player in the smartphone market. There is little doubt among analysts that things in the marketplace look good for Apple in both the short and long-term. In fact, the only real question about Apple stock these days seems to be whether the company’s shares have risen too …

Read More

Tech Earnings Week

by

This past week featured the earnings release of several major technology companies, coming closely on the heels of major earnings announcements from other tech companies, including Google and Apple. IBM Earnings First up, IBM reported revenue of $24.7 billion leading to earnings of $2.78 per share. The consensus estimates from analysts were a bit higher for revenue, but a bit lower for earnings per share. The company did raise its full-year earnings guidance, but it wasn’t enough. Investor reaction wasn’t pretty with shares dropping 2.4 percent the following day, and continuing down. The technology giant closed on Tuesday before reporting earnings at 207.31 and closed Friday at just 199.55. IBM’s results have also been blamed for the general downward direction of the markets for the end of the week. Still, IBM has a long history of boosting its share prices, primarily by buying back enormous amount of stock each year. Intel Earnings Intel’s earnings didn’t make investors any happier. The stock has had a pretty good run-up as of late, so anything other than a gangbusters quarter was likely to lead to a poor reaction. Intel shares got it. The stock closed before earnings on Tuesday at 28.48, but finished …

Read More

Google Lower Cost Per Click Doesn’t Matter

by

Google just reported its quarterly earnings. They did very well, beating pretty much every analyst’s numbers. Those who want to nitpick will complain that the price per click has gone down. However, that isn’t really surprising considering that the number of clicks went up. There are some issues coming with Google’s stock, but this isn’t one of them. Google Cost Per Click Down Google’s advertising model is based on advertisers paying either “per click” or “per impression.” Actually, advertisers pay per every thousand impressions, but that isn’t the point. Advertisers who pay using the per click model pay a certain amount each time someone clicks on their ad, but nothing if the ad goes unclicked. A smart online advertiser using the per click model will determine how much each click is worth. There can be many ways of determining this, and numerous intangibles are considered by some advertisers. However, the most simple concept would be something like this. Maximum payable cost per click = Amount of revenue generated per click / Number of clicks necessary to generate revenue. In other words, if you generate $1 per transaction (this is called a conversion) and it takes you 10 clicks to generate …

Read More