People are constantly asking me why is the stock market going down. What is causing this bear market? It is relatively simple so don't ask an economist. He will give you a 200-page answer that is undecipherable. Can you understand Mr. Greenspan?
Let's first realize what it is that makes a stock price go up. The basic reason is that the investor thinks that the company will make a larger profit and pay a good dividend - one that is better than it is now doing. People buy in anticipation of better earnings. Really, it is that simple.
Conversely, when a stock starts down investors think the company can no longer sustain its sales and earnings and that the current price is too high so it is sold. Every other reason you hear is hype, smoke and mirrors. Last year we saw more than 1,000 stocks on the Nasdaq exchange lose more than 90% of their value. Many of those stocks have lost even more this year and scores of them are either out of business or been merged into other companies. Their anticipated sales and earnings never showed up.
When a large section of the market is adversely affected with shrinking sales that action many times begins to slip over into other sectors. Last year it was the technology group as a whole that suffered the most. This year it will be almost all the New York Stock Exchange stocks. We have just witnessed the biggest point loss in one week in NYSE history. In the long run it is going to go much lower after its rally.
The market was already headed down before the World Trade Center tragedy and this single act triggered a great amount of emotional selling. The bear market, which has been with us for about a year, would have gone down to the September 21, 2001 lows anyway even if the New York disaster had not occurred.
One thing investors do not like is uncertainty. People want their money to be safe so they will sell some of what they have and will not buy. Those with 401Ks can transfer to money markets. It has become very evident that almost every type of business with a few exceptions will have less sales and shrinking profits. It is not a time to buy. The talking heads on TV are telling you that you can't afford to be out of the market. Oh, yes you can. The best place for the next several months is in a nice safe Money Market fund or some type of short-term bond no-load mutual fund.
Until the market uncertainty goes away and profits start improving for a majority of companies it is best to maintain a cash position. That may not be until the middle of next year. In the meantime cash is king. Don't let anyone talk you into buying anything. The bear is still loose. Don't let him gobble up your investments.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
Culver prom limo ..There are so many kinds of work that needs to... Read More
I mean it when I say that. While plastic silverware... Read More
As an investor you will want to check out any... Read More
Every day I hear from the "experts" on CNBC-TV and... Read More
How many times have you said to yourself, "I'd like... Read More
It depends on your level of understanding of the market... Read More
The trading method you employ to approach the stock market... Read More
Ever jumped out of an airplane? It's OK if you... Read More
At some time in your life you have been on... Read More
If you've ever flipped on the television to CNN Financial... Read More
Before you buy another car you walk around the lot,... Read More
Checked your 401K lately? Going back to about a year... Read More
The Shadow knows. There used to be a radio program... Read More
Three little pigs went to the market to stock up... Read More
People are constantly asking me why is the stock market... Read More
If you have been dealing with mutual funds for any... Read More
One of the most believed bits of conventional wisdom from... Read More
Exchange Traded Funds (ETFs) are a group of passive index... Read More
During the day I watch CNBC-TV, the stock market channel.... Read More
There is so much involved in developing peak performance, that... Read More
You remember (they show it on TV every year) the... Read More
Are you paying any attention to your retirement savings? Do... Read More
You probably know the story of Sherlock Holmes and the... Read More
Since I can remember, and that's a long time ago,... Read More
We've all heard of the stock market and probably have... Read More
Wood Dale limo ..We have two candidates for president that have really different... Read More
Ever turn down a street, get half way and suddenly... Read More
Just about everything you have been told about Social Security... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
For the last 12 years we have seen the Japanese... Read More
The stock market has been in an up trend for... Read More
All stock trading and investing methods must deal with the... Read More
If you have been dealing with mutual funds for any... Read More
One of the great "secrets" of successful people is discipline... Read More
Ever have one of those sample boxes of candy? Each... Read More
The gleam and bright lights of Wall Street lure in... Read More
As an investor you will want to check out any... Read More
I have a 2-car garage. There are nice shelves on... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
Are you paying any attention to your retirement savings? Do... Read More
Professional stock options traders use the term lean to refer... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
After finding the price of a particular stock, usually the... Read More
I am taking the time to help others learn the... Read More
So you're started trading, you bought some positions with your... Read More
Economists know more about how the fragments of society work... Read More
Among the largest forces that affect stock prices are inflation,... Read More
If you are going to be a winner in the... Read More
For years investors have been taught to look into the... Read More
Someday you may want to retire and continue to live... Read More
Stocks & Mutual Fund |