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The Best Market to Invest In & the Two Stocks Tyler's Hot On

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Posted by Tyler Bollhorn - StockScores

on Saturday, 31 March 2012 08:09

I will be speaking in Calgary and the Calgary Resource Conference at the Telus Convention Center, you can register at www.cambridgehouse.com . I am doing my talk,
How to Identify Opportunities in Junior Resource Stocks on Saturday March 31 at 1:30.

I consider the stock market my friend, although I don't think it calls me the same. I know the stock market does not care about me, it does not even know me from any of its other participants, but I feel the need to defend my friend. Over the past 20 years, the market has given me a lot of joy and excitement, although it has frustrated me at times too. And now, as the market goes through a time when it is maligned, I feel I must come to its defense.

This week, a CNBC poll ranked investment alternatives based on a survey they did and the stock market came in third behind Gold and Real Estate. 37% of respondents voted Gold as the best investment with Real Estate in second with 24% and Stocks in third at 19%.

The results don't surprise me; they simply confirm what we already know. People tend to invest with a rear view mirror and Gold has been a great performer over the past 10 years so give it the prize. I doubt that it will continue to be the best investment, over the past few months Gold has shown signs of weakness and is now threatening its long term upward trend line. It has not broken it yet so perhaps it will continue to be strong but history has shown that all trends come to an end eventually.

I think picking Real Estate as a good investment is a bit of respondents talking their own book. What would you expect people to say if they own a home? They are already invested in it so of course they will have a bias. I own real estate and I hope it goes up in value but I am not hopeful of that happening in the next few years. I really just need a place to live.

So we come down to the bronze medal. Poor stocks, you have already been through so much and still you get no respect. Perhaps the market just needs to hire a public relations firm.

The world associates the past five years of financial crisis with the stock market, although it was really leverage and greed that was to blame. When a person watches their net worth rapidly decline, and when that net worth is wrapped up in something that they do not enjoy, they are bound to have some animosity. At least we could enjoy our homes, even as their value dropped. You can't even buy a Big Mac with a share certificate.

The contrepreneurs of the world tend to somehow be involved in the markets. Bad people doing bad things catch a lot of attention, especially when the numbers are so staggering. Bernie Madoff is just one person and yet he was able to record a staggering fraud that was based in stock market investing. Put a few of these type of people in the news on a regular basis and pretty soon we think it is ok for people to camp out in public parks in protest.

We should be reminded that the stock market, like money, is not evil. As Ayn Rand wrote in Atlas Shrugged,

"So you think that money is the root of all evil?" said Francisco d'Anconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

It is the people who can be evil and the excesses of our past have brought out their actions. The stock market is not rigged, it is just a place where people make their trades, but there have been bad people with considerable financial power who have used it to their advantage.

Just as the market does not care about me, it does not care about you. It is not out to get you, it is simply a place where people buy and sell assets at a price that each party deems to be fair. The buyer thinks the stock is going up, the seller thinks the stock is going down. One of them will be wrong. The market itself has no influence on who gets to win.

Do not turn your back on my friend. The stock market is the place where innovators and leaders get to finance the products and services that will add value to our lives. Whether it is a drug that will cure the disease you are going to get or the gadget that will tell you what the best wine to pair with your tenderloin is, the market is the engine of our economy. We just have to learn how to play it.

If you approach the stock market with common sense, you will lose. That does not make it evil, that just shows that you are taking the wrong approach. A year from now we will be able to look back and see how some stocks went up dramatically while others went down. If you take the time and put in the effort to make friends with the market, you might be able to be on the right side of those trends. Just don't expect the market to return any of your calls, it really does not care about you.

I am in Calgary this weekend and my two feature stocks are both based here, I found them scanning for stocks making abnormal price gains on Friday using the Stockscores Market Scan.

1. T.GTE
Up strong on Friday and broke a downward trend line that has been in place since last summer. The upward move today was driven by news of a 6300 barrels of oil per day production test on a project they have in Argentina. Support at $5.70.

tyler2

2. T.KRN
An upside break today from a pessimistic pennant pattern, this set up has good but not great potential to evolve in to an upward trend. The company is in the business of mining potash and magnesium and announced their financial results today which the market seemed to like. Support at $8.90.

tyler1

References

 

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    Disclaimer
    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.

 



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Stocks & Equities

The PE Ratio Plunges to Lowest Levels in 20 Years

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Posted by Chart of the Day

on Friday, 30 March 2012 08:25

Today's chart illustrates how the recent rise in earnings as well as recent stock market action has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1900 into the mid-1990s, the PE ratio tended to peak in the low to mid-20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to extraordinary levels during the financial crisis (late 2000s). As a result of the continued surge in corporate earnings the PE ratio remains at a level not often seen since 1990 despite what has been a significant upward trend in stock prices so far this calendar year.

20120330

Notes:
Where's the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron's recommended charts of Chart of the Day Plus.

For Chart of the Day Homepage go HERE

Quote of the Day
"The value of a man should be seen in what he gives and not in what he is able to receive." - Albert Einstein



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Stocks & Equities

The Big Picture Historical S&P Cycles: Nominal, Real, Gold & Silver (1928 – Present)

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Posted by Barry Ritholtz - The Big Picture

on Thursday, 29 March 2012 09:38

These four charts below are just the sort of Big Picture, long cycle perspective that so many investors overlook or simply have no knowledge about. These charts are not about making predictions, but rather, are about putting market action into some broader historical context. What has happened in the past? What is typical? Aberrational?


3-23-12-SP-Cycles-Nominal-1


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Stocks & Equities

The Unstoppable US Equity Rally In Perspective

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Posted by ZeroHedge: Charts: Deutsche Bank

on Wednesday, 28 March 2012 02:29

20120327 DB3And the S&P 500 has only risen by more than this on six other occasions after a 10% drawdown...and many of those were during some of the most crisis prone periods this nation has ever experienced.



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Stocks & Equities

Jack Crooks: It's a lay-up: buy stocks!

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Posted by Jack Crooks: Black Swan Capital

on Tuesday, 27 March 2012 10:01

“He may look like an idiot and talk like an idiot, but don't let that fool you -- he really is an idiot.”

- Groucho Marx

John Ross asked me this morning if I could create a scenario whereby stocks fall.  I laughed and said, "Well ... no!" And maybe that is the point. No doubt 'if you are not long, you are wrong' is playing out in spades. But we’ve seen that sentiment many times before near tops.  

The primary thematic shaping up seems the idea that bonds have topped and as this money leaves bonds it will power stocks higher—globally. The idea seems to make sense; but often it is never that easy.  Taking a look at the chart below, there doesn’t seem a heck of a lot of correlation to hang your hat upon, only to say the long-term trend higher in bonds (lower in yields) has been met by a corresponding big run in stocks.    

032712 sp us30-resized-600.jpg

Let’s consider some reasons why US stocks might NOT go a lot higher and, for grins, maybe even, dare I say it, “correct.”  

  1. A recovery in the US economy could mean finally financial assets will start competing for funds and the Bernanke Put, i.e. QE moral hazard liquidity juice, fades. Bonds would get hit here, but stocks might at least correct.
  2. Bernanke’s concern the job market is still not healed may play out because fiscal stimulus fades as the year progresses. Thus, we have well below trend growth and rising prices for energy and food leading to at least a mild case of stagflation; that isn’t good for either stocks or bonds.
  3. Germany decides to go “all in” and throws its full faith and credit behind a Eurobond for the Eurozone. Immediately, the risk profile improves in Europe. S&P and Moody’s decide it’s time to upgrade European paper and at the same time downgrade US paper given that Washington can make no real cuts amidst ideological squabbling. Lots of capital flows back to European bonds and stocks and out of the US; a possible triple-whammy out of US assets (stocks, bonds, and the dollar).
  4. China financial and social unrest ramp up and the Communist Party is at odds on stimulus given their concern about inflation; therefore it’s better to have security locally than worry about Western markets; the additional stimulus never arrives as growth and demand forecasts for China ratchet lower. Likely bad for stocks, but maybe good for bonds.
  5. Eurozone. 'Nuff said!
  6. Rising emerging market capital controls a la Brazil (tacitly condoned by the IMF) are met with rising trade tariffs from developed countries.  Money flows out of risk assets (stocks), quickly from the periphery, and back into bonds as global trade falls.
  7. Republicans win the White House and Congress, fire Ben Bernanke, and make Ron Paul Fed Chairman. They cut the budget deficit twice as much as what Paul Ryan is lobbying for. Ultimately it would be the best thing that happened to the US financial position in a hundred years, but there would be hell to pay as US credit drains from the global economy (and we have to listen to the moochers whining and crying about “fairness” day in, and day out). US bonds rally big time, so does the US dollar; stocks would likely be hit very hard initially, then stage a gargantuan rally.  [I know; but a guy can dream.]

For now, “don’t fight the Fed” and “the trend is your friend” are winning the day. And if the bulls are right about US recovery, European healing, and new Chinese stimulus soon on the way, it could keep running. No doubt.  

Tags: China, Federal Reserve, Ben Bernanke, US Dollar, US Treasuries, BRICS, US Bonds, eurozone, commodities



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