Financial Blog Update -
Stock Market Manipulation is a malformation of stock prices by brokers or groups or institutions. Market manipulators make the price of stock go up or down when they want the ability to buy or sell large quantities of shares at the best prices for them. "After all, no price is too low for a bear or too high for a bull!"
When the "one that sits behind the curtain" Level 3 Traders/Market Markers, (Level III highest level of quotes system provided by NASD member firms, who have the ability to enter quotes, execute orders and change prices), when they start accumulating large amounts of shares in the open market- that buying tends to have an impact that usually moves the stock price of the intended security higher.
Now, that is not good if you are buying large amounts of shares and you don't want to pay a higher price per share for them. So, by the time they're done buying a few blocks of stock, the price could have gone much much higher in process, and the profit they were hoping to make on that block has decreased before they done buying. The same if he is trying to sell, it would drive the shares down lower and he would get less money per share. That's not a smart trading philosophy either, if they want to get better price on the sell side.
To accomplish this kind of an objective a shrewd trader will often dump a sizable position of their stock (acting bearish on it) first into the open market to try to achieve a result. "Panic Selling"
which will cause the stock to decline further.
Ponder this scenario for a moment: A Market Maker sells a significant quantities of a particular security they make a market in and the stock price begins to nose dive, then other stock holders get spooked and they also begin to sell their stock as well. Now everyone's panicking and the stock is down 30%
. The manipulator wins and can now try to quietly buy back this stock now without being noticed (bullish), and without pushing the price back up again and/or if the manipulator sells significant quantities of a stock (let's say 100,000 U.S. Steel shares - NYSE:X @29.00) and the price DOESN'T go down
, then that means someone else out there must be buying similar amounts of X's stock as it comes onto the market. - "some other big trader somewhere wants this X stock badly at this price too, so share prices are likely to spike." as the price of the stock starts to trend higher (as the first manipulator keeps buying it, supply will start to become less, so the price will inevitably continue to rise), you often find the manipulator then starts selling again. Why you ask?
He wants to know if the other manipulators out there are still interested in buying the stock. If so, then the price shouldn't fall by much; the other manipulators will be buying up the stock that the 1st manipulator is selling. That's what the 1st manipulator wants to see happening; he needs other big traders to help drive prices higher, as otherwise there will be no one for him to sell to later on.
The manipulator also wants to know if there are any novice stock holders out there who are on the point of selling, who could be convinced to sell if the price starts going down further still. Price moves down; those uninformed stock owners sell their stock; the manipulator gets to buy them back without moving the market, and he does so at a much cheaper price than if the stock price had kept going up. Once the manipulator has consumed all the supply of stock out there, anyone who wants to buy can only buy from the manipulator, who can then start to raise that price on the stock.
(FYI, you notice that I mentioned US Steel (X); that was just a stock I chose today for this newsletter article, and we sometimes follow X or trade it, but at this time we don't own any X common stock or X options at this time, for full disclosure.)
Both manipulators involved have very clear intentions, to move the price of that stock up and then distribute shares that he has purchased in order to take the stock price higher. There are occasions when the manipulator would also be asked by a group of investors to sell the shares held by them at higher prices along with the shares that he might have accumulated as well.
Manipulating stock prices can happen quite easily, even unintentionally and it takes place more often than you think. Achieving it in a perfectly legal way is no more difficult, depending on how much trading power one has. Individual stock investors just don't have ready access to these types of techniques and consequently, they often end up on the wrong and losing end of these scenarios.
When trading situations like this, a little knowledge can go a very long way and that is why having a battle tested company like BullsToBears.com
in your arsenal makes sense. We scan the market for these algorithms when they start a feedback loop with each other, this typically results in the wild swings up or down. So, we issue the buy alert and once markets moves higher by a significant margin, other traders will jump in to correct it, because they will think this is an anomaly out of which they can make money, so the stock continues to move higher and our subscribers at BullsToBears.com are very magnanimous about the situation and sell them back our stock we just bought 15% - 20% - 30% cheaper a few days/weeks ago.
These type of Market moves happens often and is not a securities violation. In fact many groups and institutions, even including but not limited to the federal government, engages in these market manipulations. What separates legal manipulations, from illegal manipulations like "spoofing the market" is the quality of the information distributed by the entities who are engaging in the manipulations. In laymen's terms: As long as the information is made readily available to the general public by the parties involved and, is truthful and accurate, there is generally nothing wrong and no red flags are raised with these trading activities.
This stock market is complicated, the future is uncertain and periods of turmoil and confusion are to be expected. There’s nothing you can do about that. Just get used to it, learn how to adjust your trades and notice the anomalies. When there is nothing but fear in the air and investor confidence is very low, stick to your convictions, a prudent investment strategy and a long-term focus will help you practice good trades and stay the course. When these times arise and you know they will, disciplined investors like Bulls To Bears subscribers will have the opportunity to take advantage of these manipulated miscorrelated stock prices.
When you look at the market, and all you see is red stocks and scariness. Remember to look at it as your investing from a smarter perspective, imagine it as a long term buying opportunity. That is your goal. You should look at investing through nearer to longer term horizons.
Granted, short-term volatility and selloffs are tough on the nerves and psyche, especially when bad stories captivate the news and everyone's scared and panicked and running for the exits. Learn from the pros on what our years of stock trading has taught us, that this is a better time to be a stock buyer, and not a stock seller. Just Imagine yourself having the insight and the opportunity to go back in time and buy some great stocks like Amazon, Priceline and Apple after the markets collapsed in '07-'09? If you had the wisdom and had placed some good trades then... instead of running for the exits? How different could your life be today? So, be bold and create your own future!
So, next time the media outlets and Wall Street news stations are bashing stocks and there is wild market swings and higher than normal volatility, take a breather. Think hard and smart! Because when they do this, they try to get your emotions involved. When you start acting based on fear and your emotions
kick in, they win, you lose! When your emotions enter into the trade you start to make bad decisions both in and out of the stock market.
We have a idea! Strive to be a smarter trader and experience our trading program for yourself. Learn how Bulls To Bears
can help you to narrow your focus onto what we know and believe to be better trade setups. Take advantage of legal market manipulations that happen daily and learn the laws of supply and demand with our 14 FREE DAY TRIAL.
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We hope to see you soon! Till next time... Happy Trading!
How High Is High? Can The Bulls Charge On?
In doing our due diligence for our members we constantly explore websites that allow average traders to make stock predictions. Many of them try and make their own stock predictions tend to do so using technical trading tools. They prognosticate on the direction of certain equities based on triangles, trend lines, moving averages and more. What I am astounded by is how each one of them can have a different opinion from one to the next. One thinks the stock is going to tank because it looks like a descending triangle. Another thinks it is signaling a breakout to form a new high.
The interesting thing though, is when it comes to the general market. They all seem to think the Dow and other averages are too high and “done”. It seems that they all look at the general market the same way.
They analyze it like a single equity which has climbed too high based on its current earnings and value. In general, they are wrong as witnessed by the continuing new highs experienced in the market. The question is, why is this the case?
The stock market always has the potential to continue to breakout. Stock prices may go up more, as people continue to earn hearty returns. More loose money comes to the market, and prices go up further still, attracting even more money. Rumors about the longest-running bull market in history swirl and more investors come into the market. After all how can you beat 5% GDP?
There are many reasons for this boom, but the main reason we believe involves sector rotation. If you look at the current investment situation, there is really no place else for the money to flow. Bonds and debt instruments are still not paying enough to be worth putting your money there. Commodities present too much risk. Real Estate once again shot up to unrealistic multiples and investors are left scratching their heads for alternatives to stocks. Currently there are no good replacements. So in their quest for diversity they seek out other areas of the market that have not done as well. They rotate money from one sector to another. But the money still stays in the stock market.
You see this reflect clearly in the Dow which has natural diversity built into it. Some weeks the Pharmaceuticals like Merck or Pfizer or Johnson & Johnson are running. The next week they are flat and the technology stocks like Apple, Cisco and Microsoft are running. While each sector runs, the other sectors don’t seem to sell off. This continues to drive the average forward - week after week.
Business is looking better than ever with business enthusiasm at record levels. The Market continues to make new all time highs. President Trump’s focus is on long-term economic fundamentals, which has remained exceptionally strong, with strengthening U.S. economic growth, historically low unemployment, and increased wages for the average American worker. The recent tax cuts and regulatory reforms continue to strengthen the U.S. economy and continue to increase prosperity for the American people.
Companies have enormous profit margins right now and are they are using their excess cash to buy back its shares. This, of course, reduces shares outstanding. When companies with Billions in cash like Amazon buy back their shares, this reduces the need for the big mutual funds, etc.
For now Stocks continue to soar without taking a breather for a correction despite all the craziness and volatility going on in Washington, continued tension with North Korea and worries about trade Tariffs. How much longer can the market hold its nose up high and pretend that the world is a stable place? We know how hard it is for our society to loosen its grip on the concept of Ever More and to contemplate the idea of Enough. But we recommend trying it.
The stock market just won’t go down, despite geopolitical concerns, over stretched valuations and an unpredictable president. Understanding why the Market keep rising is one way to judge how long the rally is going to last and what will happen next.
Will this upward spiral end? Of course it will! But it may take a lot longer than people think. President Trumps economic stimulus has a strong focus on manufacturing. This has not been a focus for a long time. The Dow industrials are geared to be able to take maximum advantage of this. The companies that make up the average could see a long period of solid earnings growth. How does this affect the average investor? Well as we all know, in the stock market, all ships ride high tides. If the Dow keeps going up, expect the rest of the market to follow suit.
In conclusion: Don’t listen to the pundits and naysayers who say the market is overvalued and miss out on major increases in your portfolio because people say the market is “too high”. We firmly believe the greatest risk to the average investor at this time is being underinvested.
Rather than worry about whether now is the best time to buy, just keep buying. Market high or market low, just keep buying. You should think of buying investments like you buy your food. Make it a habit to invest your money like you make it a habit to pay your bills. As long as you can buy, you should continue purchasing equities. Just do it! Thank us later...
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Till next time... As always, Happy Trading!
Gold is a commodity subject to the variation of supply and demand. The value of gold changes fast, and gold's price moves can be very volatile. Gold stocks also have a tendency of performing terrible when the stock market is doing well, as they are today.
Consistently, throughout the years, Gold has outperformed a variety of investments. However, surprisingly there are still millions of Americans who don’t own any gold or gold stocks. A large number of people still remain on the sidelines simply because they are confused by the vast array of gold investment options. This puzzlement is the subject that we are going to examine today in this blog.
It has been characterized by the methods and principles of science that it is easier for individuals to make decisions when there are only 2 or 3 possible choices. Otherwise, the assignment of assessing every conceivable decision turns out to be to daunting of a task for people, to the point that it scares them into inaction.
The gold market has recently seen the innovation of a large number of new products, but at the day’s end there are really only two choices, for buying gold - paper gold or physical gold.
Paper gold investments, also known as gold derivatives, are investment vehicles that have something to do with gold, but do not include the physical delivery of it to the purchaser. Examples include gold mining stocks, gold ETF investments and gold pooled accounts. The calling cards of these ventures is that they are frequently expected to closely track the gold spot price, but rarely do, and at the end of the day you still require a piece of paper to prove possession of it.
Physical gold investments are exactly what they sound like: these are purchases which include taking possession of physical gold. An Investor can purchase gold bullion bars, gold coins or certified coin investments and immediately become a part of the physical gold investment market. The bullion is always tracked by the spot price, while certified coins regularly track the spot price and in many cases beat the bullion over time.
Gold speculators who are in it looking to make a quick buck may do better with paper gold investments, but safety minded investors will usually get what they are looking for by purchasing physical gold. It’s a simple question, if you are one of the many people as of yet who do not own any gold investments, you have two options when looking to buy Gold. It’s merely an easy question of what is most important to you, profit or safety.
Whether it is the tensions in the Middle East, Africa or elsewhere, it is becoming increasingly obvious that political and economic uncertainty is another reality of today’s economic environment. Consequently, speculators commonly take a gander at gold as a place of refuge amid times of political and monetary vulnerability. Why is this? Well, history is full of collapsing empires, political coups, and the collapse of currencies. During such times, investors who held gold were able to successfully protect their wealth and, in some cases, even use the commodities to escape the turmoil. Thus, there are situations that indicate some sort of worldwide financial vulnerability, speculators will frequently run to purchase gold as a place of refuge.
The fact that gold is no longer backed by the U.S. dollar (or any worldwide currency), why is Gold still important to invest in today? The more straightforward answer is that while gold is no longer in the forefront of the global economy, it is still extremely critical to own. To further illustrate this point, there is no other compelling reason to look any further than the accounting reports of national banks and other money related institutions. Presently, these institutions are in charge of holding around one-fifth of the world's supply of above the ground gold. Further still, many national banks have been adding to their ever present gold stockpiles, telling tales of their concerns about the long haul of the worldwide economy.
The idea that gold preserves wealth is even more important in an economic environment where investors are faced with a declining U.S. dollar and rising inflation. Historically speaking, gold has served as a hedge against both of these situations. With rising inflation, gold typically advances. When investors realize that their money is losing value, they will start positioning their investments into hard asset that haves traditionally maintained its value. The 1970s presented a prime example of rising gold prices in the midst of rising inflation.
The reason gold benefits from the declining U.S. dollar, is because gold is priced in U.S. dollars on a global scale. There are two explanations behind this relationship. First, speculators who are thinking of purchasing gold (i.e., national banks) must tender it in U.S. dollars to make the exchange. This eventually drives the U.S. dollar lower as worldwide financial banks try to differentiate out of the dollar. The second reason is the way that a struggling dollar makes gold less expensive for speculators who hold different forms. These outcomes are a more of a noteworthy request from institutions that hold gold forms in retrospect to the U.S. dollar.
When you pair assets that move differently from each other, you tend to create a more diversified portfolio. This is why mixing bonds with stocks is the cornerstone of so many portfolios. Bonds have a negative correlation with stocks, meaning they tend to go up when stocks are going down, and vice versa. Here's the interesting thing: Gold's correlation with bonds over the past decade or so is roughly 0.25, still very low. So gold doesn't track along with stocks, and it doesn't track along with bonds, either. Adding a small amount of gold to a stock and bond portfolio, probably no more than 10%, can help increase diversification and the ultimate safety of your entire portfolio.
Should you be investing in Gold at this time? Being the contrarians that we are and looking at the current prices of gold stocks across the board. Some gold stocks appear to be looming buys. In the case of gold, it is a risky asset class and it would be unwise to invest all your money in it. However, because gold is viewed as a source of wealth, you shouldn't dismiss it as an investment option.
Investors tend to gravitate into gold when they are scared, which boosts its value when assets such as stocks start falling. It just needs to be paired with a more broadly diversified portfolio so you can benefit from the non-correlated nature of gold's performance. And, yes, that will require re-balancing your portfolio every so often, when allocations get materially out of line.
We at BullsToBears.com aren't in the business of buying physical gold, but we can point you in the direction of some gold stocks that appear attractive and might be worth dabbling in at this time and place. As always, were here to help you become a better trader by pointing you in the direction of a some great trades ahead.
So, if you haven't done so yet.. make sure you don't miss our next blog by signing up for our weekly newsletter.
Till Next time... Happy Trading!
Investing is a must and a vital part of good money management, because it provides you with both immediate and future economic security. When done correctly you wind up with a lot more money in the bank and also end up with another income stream.
Investing your money wisely in stocks is one of few ways anyone can create both viable wealth and passive income. Investing smart ensures present and future financial security over the long term. The money generated from your investment holdings should provide you with both financial security and income.
Actually, anything that generates a return is an “investment”. This means that even your savings account generating that 1% interest is an “investment”. However, when most people talk about investing, they're referring to much higher return investments like a funds, bonds and stocks.
One of the ways investments like stocks and bonds provide income is by way of a dividend. A dividend is an amount or a percent paid to a shareholders simply for holding their investment. These investments usually pay a monthly, quarterly, or annual payments, so you get passive income that ultimately could replace your pay check.
So you want to start investing with stocks, but the problem is, you have no idea what you’re doing? That’s okay! Again, we’re here to help. In order to start investing, you’ll need to open what’s called a brokerage account. This is different than a bank account, though large banks might also offer brokerage accounts. However, you’re likely best off choosing a discount online brokerage. If you’re already trying to manage a budget and pay down debt, you might wonder why you have to add another financial task to your to-do list. But this one might be the most important of all.
Discount and Online brokerages make buying and selling stocks more accessible than ever. There are many online resources to build and manage your trading portfolio, whether you are investing in the USA or Abroad. Most brokerage accounts are inexpensive to begin to trade, with most that require only about $1,000 to open and start investing.
Most millennial's today are afraid of investing in the stock market and I can’t emphasize enough how much of an opportunity there is "right now" to kick start a lifetime of wealth creation! It really doesn’t even matter if you make small contributions, because time is on your side. Once you start and open up that brokerage account, even as little as a few hundred per month can help your portfolio grow till you have something substantial.
Today more than ever money plays an important role in our society. Creating wealth is crucial for your future. Many people have money, but the majority of people do not have enough of it. Making smart investments early on in life will pay off big time. Regardless of your current age, it is never too late to start to invest your money and to be able to fund your lifestyle and plan for some rough patches and hardships that life will throw at you. There are no guarantees in the market whether you will profit or not and there is no way to determine today what will happen tomorrow. A number of unforeseen probabilities could eliminate your ability to earn money by traditional means like accidents or poor health.
I hope you have heard the saying that "a penny saved is a penny earned." which is related to saving money? Saving your money will allow you to store it away and use for a later purpose. Many couples save money to pay for educational expenses for their children or for a vacation. You can even save for new automobiles, sports events or to make improvements or repairs on your house. Saving for any of one of these reasons can help you achieve your desired outcome. However, the difference is that you will be saving money to spend it. This "saved money" will not be a part of growing your wealth.
Investing money that you save allows your money to grow to larger sums. Investing your money into treasuries, stocks, certificates of deposits and savings accounts builds wealth slowly over the time. Quarterly or annual interest payments you receive from your investments are added to your original sum and helps to grow your money.
In the end, it is not so important what you choose to invest in, as long as you "DO" in fact invest your money. It is important for us to note that investing in Stocks have offered the most potential for growth. US stocks have consistently earned more than investment-grade bonds and real estate over the long term, despite all the ups and downs of the stock market. That's why investing in stocks, mutual funds or ETFs, is so essential when saving for your retirement and other far off goals.
So, no matter your age your at, and how far away retirement is, you want to enjoy your golden years and do the things you want without having to worry about the money. So, to help you achieve that, the historical odds favor a diversified mix of investments with a significant exposure to stocks. So, sooner than later you must get used to riding the ups and downs of the market. For those investing for the long term and saving regularly, a stock market downturn can even help boost significant savings because the same amount of money can buy you more shares of stocks at cheaper prices.
Still unsure of what to do? Let us explore a range of investing options that Bulls To Bears offers. Our team of professionals does the hard work on what stocks you should be buying for yourself. Our program teaches people how to build a robust diversified investment portfolio, even if they are starting from scratch. Again, if you’re brand new to investing and want to do it right, our stock trading program is the only guide you need. If you don't invest in your future you are already playing the losers game. So, enjoy your life and Invest wisely.
If you haven't gotten to it yet? We encourage you to Join our FREE Newsletter and we will provide you with our trading perspective to help you outperform the market. Also, take advantage of our 14 Day FREE Trial Offer and get a few free stock recommendations that are ready to advance.
The time is now to start making smart investments! Until next time... Happy Trading!!!
I saw another interesting video I'd like to share with you. This one was from Investors Business Daily's web-site, it features an interview with Steve Wendel. Dr. Wendel is a behavioral scientist who studies financial behavior to help individuals manage their money more effectively. He is Head of Behavioral Science at Morningstar, where he leads a team of behavioral scientists and practitioners who conduct original research on savings and investment behaviors. Stephen has authored two books on applied behavioral science.
In this video Dr. Wendel talks about behavioral finances, coaching and psychological obstacles. People needed to be coached because they don’t perform well at current tasks. Coaching is one of those things that a lot of people aren't sure about. Although most of the world's most successful people, from athletes to business people, have coaches to accelerate their success. If you already know roughly what you need to do to achieve your goals, but you're good for making excuses and putting it off, a coach will put an end to that procrastination. When you're only answerable to yourself, it's too easy to say "I'll do it later or wait till tomorrow" and we all know that tomorrow never comes! A coach is there to be your conscience, providing a supportive nudge in the right direction.
Working with a mentor/coach can help push you to the next level. A good mentor knows where your next step should be to continue on your road to success. When you’re a new trader, it can be difficult to know what the next step is. A good mentor will guide you through the processes of learning and growing. Coaching is individualistic and it works best when it is tailored for the a persons specific needs. We may share computer screens shots and work on the trades together or we could be exchanging emails or texts.
Having a great coach and mentor can make all the difference. We've already tried and failed; we’ve made mistakes and have learned from them. Working with a mentor can be expensive in the short run, but in the long run, you may end up shortening your learning curve and get you even better success that your looking for.
Developmental coaching is an individual development program tailored to help boost strengths, professional goals and objectives. Through coaching, you can enhance your effectiveness as well as support purposeful actions towards your goals and desires. It is your opportunity to stand back and gain new perspectives on your challenges and opportunities. Dr. Wendel's studies help people achieve results in areas of their life that they have previously struggled with, such as exercising more and building up savings.
So, should you invest in the stock market today? The stock market is at an all time high and most stocks appear expensive. This is a conundrum to both new and experienced investors alike. Nobody wants to buy stock if it’s going to crash 20% in 6 months, right? On the other hand, the stock market might continue to go up for the next few years. You don’t want to miss out on that gain. If you search around on the internet, you’ll see articles as far back as 2009 telling investors to pull out of the stock market. The S&P 500 index has more than doubled from that point in time and we’d all be a lot poorer if we followed that advice.
There is an invisible force that determines how we see ourselves and the world. So, If you are a young investor and just starting out, then invest as much as you can. At that point, your saving rate is much more important than the rate of return. Young investors also have time on their side. Even if the stock market crashes, you will have plenty of time to recover. In fact, young investors should hope for a big crash. That’s the time to buy and it benefits them the most. Just keep investing if you’re in your 20s,30s and 40's.
In this session of our Blog, we've boiled down some of our most trusted and crucial trade practices into 25 tips that we think will help to make you a better stock trader/investor.
Successful traders have to move fast, but they don't have to think fast. Why? Because they've developed a trading strategies in advance, along with the discipline to stick to that strategy. It is important to follow your formula closely rather than try to chase profits.
There's a mantra among day traders: "Plan your trades, then trade your plan."
Stock and Options Trading are both difficult to master, requiring time, skill and discipline. Many of those who try it fail. But the tips and guideline we have described below can help you create a profitable trading strategy, and with enough practice and consistency, you can greatly improve your chances of beating the odds in a bull or a bear market.
Again, We are in the process of creating a wealth of new resources and tools to help you take advantage of this historic time in the stock market.
At Bulls to Bears, our followers come to our blogs to learn the skills of trading and then they join our cutting edge advisory service to find the stock situations which they should be acting upon.
So, when placing your trades consider these top 25 Trading tips as a guideline to help you in you quest in becoming the best trader you can be:
Tip 1: Bulls, Bears Make Money, Pigs Get Slaughtered
It's essential for all traders to know when to take some off the table.
Tip 2: It's OK to Pay the Taxes
Stop fearing the tax man and start fearing the loss man because gains can be fleeting.
Tip 3: Don't Buy All at Once
To maximize your profits, stage your buys, work your orders and try to get the best price over time.
Tip 4: Buy Damaged Stocks, Not Damaged Companies
There are no refunds on Wall Street, so do your research and focus your trades on damaged stocks rather than companies.
Tip 5: Diversify to Control Risk
If you control the downside and diversify your holdings, the upside will take care of itself.
Tip 6: Do Your Stock Homework
Before you buy any stock, it's important to research all aspects of the company.
Tip 7: No One Made a Dime by Panicking
There will always be a better time to leave the table, so it is best to avoid the fleeing masses.
Tip 8: Buy Best-of-Breed Companies
Investing in the more expensive stock is invariably worth it because you get piece of mind.
Tip 9: Defend Some Stocks, Not All
When trading gets tough, pick your favorite stocks and defend only those.
Tip 10: Bad Buys Won't Become Takeovers
Bad companies never get bids, so it's the good fundamentals you need to focus on.
Tip 11: Don't Own Too Many Names
It can be constraining, but it's better to have a few positions you know well and like.
Tip 12: Cash Is for Winners
If you don't like the market or have anything compelling to buy, it's never wrong to go with cash.
Tip 13: No Woulda, Shoulda, Couldas When Trading
This damaging emotion is destructive to the positive mindset needed to make investment decisions.
Tip 14: Expect, Don't Fear Corrections
It is not always clear when a correction will strike, so expect and be prepared for one at all times.
Tip 15: Don't Forget Bonds
It's important to watch more than stocks, and bonds are stocks' direct competition.
Tip 16: Never Subsidize Losers With Winners
Any trader stuck in this position would do well to sell sinking stocks and wait a day.
Tip 17: Check Hope at the Door
Hope is emotion, pure and simple, and trading is not a game of emotion.
Tip 18: Be Flexible
Recognize and be open to the unexpected shifts in the market because business, by nature, is dynamic, not static.
Tip 19: When the Chiefs Retreat, So Should You
High-level executives don't quit a company for personal reasons, so that is a sign something is wrong.
Tip 20: Giving Up on Value Is a Sin
If you don't have patience, think about letting someone who does run your money.
Tip 21: Be a TV Critic
Accept that what you hear on television is probably right, but no more than that.
Tip 22: Wait 30 Days After Pre-announcements
Preannouncements signal ongoing weakness, wait 30 days to see if anything has gotten better before you pull the trigger to buy.
Tip 23: Beware of Wall Street Hype
Never underestimate the promotion machine because analysts get behind stocks and can keep them propelled in an up direction well beyond reason.
Tip 24: Explain Your Picks
Buying stocks is a solitary event, too solitary in fact, so always make sure you can articulate your reasoning behind your trade.
Tip 25: There's A Great Stock Trade Somewhere
It's OK if you have to work hard to find a good trade, just don't default to what's in bear mode because you are time-constrained or intellectually lazy.
Whether you are a seasoned trader or a newbie in trading, you can trade independently, successfully and maximize your wealth with the help of our timely and robust advice.
If you haven’t done so already, make sure you sign up for our free mailing list here to make sure you get notified each time we update our blog. You will also get more trading tips, tricks and some other free stuff by subscribing.
Till next time... Happy Trading!
We are getting a lot of inquiries from our followers regarding the current “Trade War” situation currently going on with the Trump administration. We feel it is very important for our followers and subscribers to understand what is really going on here, and how it may impact their trading.
First off, the trade war did not just start. If you look at the current unfair tariffs that many other countries impose on U.S. goods and services you will see that there’s been a trade war being waged against the United States for a very long time. Just because our previously stupid leaders refused to do anything about it for such a long time doesn’t mean that this unjust situation didn’t already exist.
What is currently occurring today under President Trump is... WE ARE FINALLY FIGHTING BACK!
In the end, the answer to this long time complicated problem is quite simple. Every single country in the world can pick what level of Tariffs the United States can apply to them. How you ask? Very simple, whatever level they want to pay, they must adjust the tariffs they charge on U.S. goods to whatever level they want to pay and we will meet them there. This is true open trade, which is what everyone on the left claims they want.
So how will this affect your trading? Well those industries that are right in the cross hairs of the trade war are going to be affected. Some long term and some short term. For example, the Pork industry is one of the bigger ones. When the beginning overreaction occurs, prices of some stocks most likely will fall. When the dust clears there will be opportunities for those of us who choose to seize the day!
The United States is by far the largest economy in the world. We will not lose a trade war! These other countries eventually will concede. And, If they want 5% Tariffs on their Pork, they will put 5% on ours. The bottom line is that over the long term this will be very good for you and many of these industries.
The current Tariff imbalances are what killed and continues to choke certain industries. The recent action by the Trump administration revitalizes industries. However, it is very important for you to understand there will be a little pain in the beginning. You’ve heard the old trader saying and it should ring true in this case. “Short term pains for long term gains.”
So, our advice is to stay strong, stay steady and take advantage of the current market opportunities. Continue to place your trades in the areas we are selecting. Embrace the volatility and some cheap stock prices.
Remember we are value contrarians. We buy when others are selling and sell when they start buying again. It is an age old, proven way to beat the market.
If you are an individual investor trading online, and you’re looking to pull some money out of the stock market, then you need Bulls to Bears in your trading realm. We will help you find those stocks that are undervalued and help you purchase them when their prices are low. We help our subscribers who follow our value investing strategy overcome whatever challenges the stock market is facing.
Another element of this contrarian value strategy is an avoidance of stocks that might be overvalued by the market to help protect the portfolio from the possibility of any downside risk associated with overvalued holdings.
If you still haven't done so? We would definitely recommend that you sign up to receive the BullsToBears.com Newsletter here and gain access to our exclusive tips, resources and tools to help you improve your trading success.
So, sign up today and we will work together to make some positive financial changes in your life.
Once again till next time... Happy Trading!
You hear the term Risk Management being thrown around a lot lately. This is a complex and yet simple subject at the same time. From a trading perspective, we must all realize that when you are investing in anything, especially stocks and options, there is a degree of risk and uncertainty.
Without that risk we all would be buying guaranteed government bonds. How much fun would that be? So, the riskier the stocks the higher potential rate of return.
Along with that potential upside you have that underlying and corresponding prospective of downside. It is therefore incumbent upon the trader to constantly monitor their level of risk involved in both an individual stock and in their overall investment portfolio.
If you are looking for monster life changing investment returns in short periods of return, you better buckle up - you're in for a very humbling, wild and bumpy ride.
Risk management for any average stock trader should involve the following foundation:
1· GOALS - What are your goals? If you are swinging for the fences so be it. You will be buying volatile stocks that can move for or against you very quickly. If you are looking for steady better than market returns than you will need to be focusing on stocks that are larger, safer and more heavily traded and will probably move slower than the “home run” stocks. Usually, the added volatility in these stocks during uneasy times comes from the market sector they are in and not just from the individual stocks themselves.
2· RISK - What are your risk tolerance levels? You must be honest with yourself and figure out how much white knuckle, nail biting stress you can stand. If you are naturally risk averse, you should not try to be a hero and play the market like it is Vegas.
3. ALLOCATION - What is your portfolio size? A trader must be cognizant of the size of the portfolio compared to the size of each position they take. This is the proverbial “don’t put all your eggs in one basket” scenario.
Every stock trader must know his overall Risk Management and he or she better be diligent at it! You should at the very minimum be practicing the following trade parameters:
· Always set target price goals and stop losses
· Always use actual stop loss orders
· Keep each position no more that 10% to 15% of your portfolio
· In general it is better to trade stocks that have strong volume
· Avoid sectors that seem to be just fads and short term plays
· Be careful around known news events like the release of earnings
· Look for undervalued situations that have been unfairly treated by the market. These have small downsides and large upside potential
(This blog is just a primer on the subject of Risk Management. We will continue to expand upon the subject in future blogs.)
Remember, it is important to understand the importance that Risk management is and that its the heart of the Bulls to Bears trading program. Our approach is intended to reduce your exposure to any unnecessary risks. Our investment team focuses on traditional investments, and we do not risk heavy losses by trying to chase very high returns. Bulls To Bears was designed to help you make informed investment decisions, weighing potential returns against the realistic potential for loss.
With the choice of the Bulls to Bears trading program, you can choose the amount of risk you feel comfortable with for a given return. Your Bulls To Bears representative will help you pick which stocks are best for your portfolio, based on your individual circumstances and suitability.
Effective risk management can be very beneficial to investors, and more particularly helpful to those nearing retirement age. This blog has been written with individual, private investors in mind. It aims to provide you with some information about investment risks in general, as well as to provide insight how these risks are managed within our program.
We provide investment ideas and trading solutions to our clients across the globe. Our breadth of investment capabilities are extensive and among the most innovative within the market. Diversification is another way of managing the risk associated with trading. It involves spreading your money across different asset classes and investments, so as to potentially limit the impact of negative events that impact any one asset class or investment.
Diversifying across asset classes may protect you against underperformance in any one asset class. Your asset allocation will reflect how cautious or aggressive your investment strategy needs to be.
Bulls To Bears trading signals and buy and sell alerts are sent direct to our members; via email fax or phone. Experience for yourself how we can help you to narrow your focus onto what we believe to be better trade setups. These positions are hand selected to give you not only a better probability of success but often better percentage gains.
BullsToBears.com has what you need. Take advantage of our FREE 14 DAY TRIAL today. Stop spending so much time trying to figure out what stocks to trade. We’ve got that covered.
Also, get Free access to our FREE TRADING NEWSLETTER and discover further tip's on how you can reduce your downside risk, know when to add to better positions (based on information that we provide for you) and start locking in more profits.
So, try us now for Free! We look forward to seeing you soon!
That's all for now. Till next time... Happy Trading!
So, you want to DAY TRADE STOCKS??? We'll, that is a TERRIBLE IDEA!
We are constantly asked by people, why don’t you teach any day trading techniques? In response, we decided to dedicate this blog to the adrenaline fueled world of day trading.
(First, let's begin with the definition of day trading: The buying and selling of securities within the same trading day.)
Many of those who participate in day trading cite the following as reasons why they like to day trade:
Less Risk: they contend that since they are exposed to positions for shorter periods of time they are at less risk.
Better Cash Flow: proponents of day trading say that by locking in profits you get better cash flow from your investments.
Faster way to make money: day traders make money in the day. They lock in their profits while long term and swing traders must wait for their profits.
Now if this is what you think, then I have bad news for you. The odds of your success to enter into and exit out of a trade with a profit, within a 7.5 hour trading session is stacked against you!
No one starts day trading to lose any money; people only do it if they think they can make money. Yet about 95% of people who attempt day trading will lose their money. Day trading has between a 5% to a 30% statistical chance of success according to market observers and financial specialists. Even the North American Securities Administrators Association (NASAA) has reported in their findings that over 70% of stock day traders lose all their capital through day trading. Something is going on there!
Why do so many people lose money when it looks so easy? We will tell you... You see everything happens for a reason... Sometimes that reason is... you're in over your head and make bad decisions!
The Stock market is composed entirely of other people that are trying to make money, or fend off losses (hedgers). These people who are very good at trading, are looking to take advantage of some of the orders which are placed by inexperienced traders at bad prices, that experienced traders think are good entries or exits. Usually those people are the ones that are going to be right, and the monies of the inexperienced day trader will be transferred to the more experienced traders account.
Again, this is coming from our own 100 years of combined experience working on Wall Street, our teachings and our investing experiences. We ASSURE you that the odds of Day Trading a Stock for your success is stacked very heavily against you. The system is practically rigged to encourage you to gamble and lose your money, and you’d be a fool to ignore our warnings signs and continue on that journey.
If we didn't know any better, a point could be made for Day Trading. The problem is that this is one of those things that looks great on paper, but doesn’t work in the real world. Here is our response to those that point in the favor or day trading for profits, and we added a few of our observations for your consideration:
Less Risk: day trading involves split second decisions. While you are exposed to risk for a shorter period, that risk is dramatically greater.
Better Cash Flow: day traders who say they lock in their profits are just deluding themselves. While they do close all their positions in a single day, their results are measured on a cumulative basis. Think of it as the guy who goes to Vegas 20 times and tells you about the one time that he won. How about the other 19 times?
Faster profits: this is a fallacy because the potential gain you can make in an single day is limited. Even if you catch a big move, most of the time it is small compared to a stocks short term to near term moves.
Commissions: day traders tend to make a lot of trades. The cost of these trades even when run through sever discount brokers adds up quickly. I worked as a professional day trader and paid only pennies per share in commission. Many months my commissions ate up a substantial portion of the gains I made.
Methodology: most day traders are using market news as the basis of the reason they are trading a position. This means they are literally guessing as to why they are in a position. It is like riding a wild bull and you are hoping to hold on and get off with a gain.
Time and energy commitment: day trading takes a lot of energy. You must be watching the screen always. It is a split second instant decision making activity. Most people do not have the time or energy to commit to day trading. If you don’t, you put yourself in great peril.
Record keeping and Accounting: to keep things on the up and up you must create and maintain meticulous records of your activity. The IRS demands this. If you let this slip for even a few days you can get in major trouble and must spend a large amount of time sorting it out.
Active Day Trading is an enticing model. It promises investors the world, and while some may make some money, the studies show the risks typically outweigh the benefits.
If making money trading the stock market is a goal for you? Then day trading is not for you. Despite all the newest marvels and technological advances and algorithms, YOU do not have the expertise to outpace the stock market ALONE. You just can’t do it. And, if you think machines can replace a seasoned level 3 trader and the market makers? Then, we have a bridge to sell you.
Nonetheless, you will still hear people brag about how they made money on a particular stock. Perhaps they’ll brag about the money they just made today? Then the very next day when the market is off they lose money and blame the stock market.
To sum it up, while day trading has an allure to it, it is not for most people. It certainly is not for the average trader. Traders should focus on short term swing or trend trading if you are looking to have winners that are dramatically larger than your losers. Trading should become an enjoyable experience. Day trading for profits is a very high stressful environment and should be left to the professionals with Big Pockets. Swing Trading and Trend Trading over the short term is far less demanding. It’s the better choice for those who want to try their hand at trading without becoming totally overwhelmed.
It is important for anyone interested in trading stocks to develop a strong fundamental understanding of how the financial markets work and the most important characteristics of various trading strategies. Bulls To Bears members are consistently telling us about the positive influence our short term trading programs has on their portfolios.
Need help finding the perfect trading program to pair with your Stock Market Trading? Get Bulls To Bears's FREE newsletter today and get a better understanding of short to Intermediate Term Trading. Once you learn to invest with us, you will begin to act with confidence and set yourself on a path to trading success. Come and see why some of our members are netting returns that would make many top traders salivate.
Till next time... Happy Trading from BullsToBears.com!
Trend Trading is all about being able to read market sentiment and the balance between bulls and bears. Understanding why a trend is gaining or losing momentum is very important if you are trying to make decisions about whether support and resistance levels are likely to hold or break down, whether a trend will continue, or if a reversal can be anticipated.
The trading tips we are sharing are not a standalone system, but they should build as a cornerstone of any trend trading methodology. The structure of a trends movements consists of alternating spikes (advances) and pullbacks (corrections), which respectively end with the Highs and Lows. Highs and Lows can be called trend points and without a clear definition and understanding of every stage of the movements, often enough confusion could arise, especially for inexperienced traders.
Let’s start with some basic terms:
Trends – this is the direction of the predominant movement of the price of a currency pair. Trends are ascending (bullish), descending (bearish) and lateral (flat). With an uptrend, the next High and Low in the chart should be higher than the previous one, with a downtrend, the next Low and High in the chart should be lower than the previous ones.
Flat Market – is a lateral movement in which new Highs and Lows do not go beyond the previous High or Low.
Impulse – move in the direction of the trend.
Correction – the movement of prices in the opposite direction to the trend. In this case, the correction should not exceed the previous High or Low, except for a false breakdown situation.
- Trend Reversal– is a change in the direction of the prevailing price movement.
The whole goal of trend trading is to identify when a trend begins so you can capture gains within that investments trend. Technical Analysis is often used in conjunction to assist traders on when to take advantage of the current trend in a particular stock to help improve their returns. Day trading involves specifics that are different than the typical trend trading investment strategies. (we will visit this subject of day trading, the pros and cons, again later in another blog...)
The difference between the price target and the entry price is approximately the reward of the trade. The difference between the entry price and the stop out price is the approximately your risk. New investors, when you’re determining whether it’s worthwhile to enter into a trade, consider using a 2-to-1 as a minimum reward risk ratio. Your potential profit should be at least twice as much as your potential loss. If the ratio is higher than that, the trade is considered to be better; if it’s lower it is considered to be worse.
Through our 25+ years experience in trading, we have discovered that when it comes to identifying the trend of the market, there’s no magic secret. Becoming a successful trader takes time and dedication. However, learning professional grade investing skills that Bullstobears.com teaches its members can have a life changing effects. If you're ready to put in the work and learn, we can show you how you can make money consistently in any market, whether it's going up (bullish), down (bearish) or sideways (flat). Choosing the right trading method for you comes first. Perfecting it is the art of and trader. And mentoring you to becoming a successful trading artist is our lifelong endeavor.
The Bottom Line: When Trend Trading or Swing Trading, a good trader can stack the odds of making a successful trade in his or her favor. As we mentioned previously trading is an art, which means that it is both craft and science and requires a lot of practice to develop consistency and profitability trading stocks.
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Till next time… Happy Trading from Bulls To Bears!
I saw a very interesting interview recently from CNBC with legendary investor Leon Cooperman. Leon is a billionaire hedge fund manager from NYC. He manages around $4B and most of it is his own money. Leon was born of a poor family and grew up in the South Bronx. If you are not from NYC and don’t know the "South Bronx" it is a very poor, tough crime ridden area. It has gotten a little better in recent years but for a long time it resembled a war zone and not part of the greatest city in the world.
What interested me the most in this interview was the fact that his investing philosophy very much resembled our philosophy here at bulls to bears. Specifically, he said “I look for mis-priced assets. There is no stock up without an explanation and there is no stock that is down without an explanation. It’s my job to figure out whether the explanation holds water”.
Contrarian trading involves going against the herd in your trades. A contrarian trader is doing the opposite from most other traders and is, in fact, betting against the masses in order to profit from it.
This is exactly a like minded philosophy here at Bulls To Bears. We might look at a stock and say “it was $50 two months ago and now its $15. It may be a good buy and needs a closer look. Not because of the huge price drop. It may be a good buy because the price drop was created by circumstances that do not necessarily warrant this type of price action. Traders are very fickle and run for the hills at the smell of trouble. Once this starts you get everyone following. This is the heard mentality in action.
It is our job to find those stocks that are still the same good to great companies but panic selling by misinformed market participants has cause a major price move that “doesn’t hold water”. Once we find these, the ability to trade and make money on these is easy. But it takes a lot of homework and due diligence to find them. That’s what we do. That’s what we get paid for.
Recognizing the sentiment that drives trends and the indicators that signal their end is useful for traders of all shapes and sizes, whether you are a committed contrarian investor, someone who dabbles in the occasional contrarian trade or a seasoned bull or bear who acknowledges that all good things must eventually come to an end.
This is yet another way in which contrarian traders can predict market tops and bottoms. If you ask yourself when the market is the most bullish or bearish, the answer to that question should be that the market is the most bullish at the top and most bearish at the bottom.
Some of the most successful traders are contrarians and some of the greatest and most famous trades in history were the result of taking big bets against the market when everyone else was absolutely sure that the current trend would continue.
Keep in mind. Markets tend to follow the prevailing trend until it exhausts itself, and because of this, the one most important factor in placing contrarian trades is that the trader has to time the reversal with precision in order to take a successful counter-trend position.
It’s been reported and no surprise to us that over 95% of traders lose money in the long run. Why? When you realize that a lot of traders are taught and follow the same principles of analysis. They read the same books and follow the same philosophy, and they stick to the same rules for risk and money management. Ultimately, most times they all get the same results in their trading.
This is where contrarian traders have a distinct edge over most stock traders. If you want to excel at contrarian trading, you have to defy that very instinct of going where everyone else is going and start to think independently no matter how counter-intuitive that may seem.
Check out the full video interview with Leon at the link here: VIEW LEON COOPERMAN VIDEO
Also, you can learn more information about our contrarian trading methods and our stock trading strategies on our website at BullsToBears.com.
Also there you'll find a 14 day FREE trial so you can take advantage of some ready to advance trades on underpriced assets like Leon is talking about.
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Till Next time... Happy Trading!
Bulls to Bears is an Independent Stock Research and Advisory Firm dedicated to the Independent investor. Bulls to Bears lives by the philosophy “everyone their own broker”. Our service grew out of the growing trend of individuals wanting to take control over their own financial destiny. Many of these investors had been burned by unscrupulous stockbrokers looking to “churn their accounts” for commission dollars. The advent of the discount broker and the use of the internet gave individuals the confidence to rely on their own talents to pick and execute winning stock trades. Unfortunately confidence quickly turned to dismay as those individual investors learned the reality of the perils of flying solo in the stock market. Bulls to Bears provided the perfect answer to the investor dilemma. Investors could get expert advice, but from a third party who’s compensation was not tied to the number of transactions the investor did. This third party objectivity gave the investors the confidence that our only motive was to bring them winning stock trades! This paper is going to explain our investment philosophy so you can further understand the true value of the experience and knowledge that Bulls to Bears provides its members.
For new investors, dabling in the stock market, it is like when first learning to ride a bicycle. It looks real simple when you watch someone do it. It is another thing to get on and start peddling. Most online traders are apprehensive in their trading. The reason for this is they are not in the market every day. An individual investor is never going to execute the number of trades that will give them the “street smart” confidence to execute their trades with the pinpoint precision that is necessary. This hesitant mind set leads to poor trading results and sometimes even disaster.
The staff at bulls to bears has a decades of trading experience. We are not hesitant in advising you to execute your trades. We have a tendancy to set very strict stop loss parameters to ensure you preserve your capital. We not only tell you what stock to buy, we tell you when you need to be selling to maximize each trade.
Most professional traders make money in the stock market because they develop a strong feel for the market. They also track each individual stock and get a feel for its trading behavior. Bulls to Bears closely tracks its recommendation to learn its behaviors. We track these stocks for months and in some cases years before they become a recommendation to our customers. These actions are what philosophers have spoken about for years. Having wisdom and not knowledge. Knowledge is information and wisdom is experience. The average individual investor can never get to this level because they just can’t spend enough time in the market. Bulls to Bears lives in the financial market place and we bring this wisdom to our clients.
Picking Our Stocks
We have found that the best trading situations are found in stocks that have fallen out of favor with the market. Many times this will be due to a general weakness in certain market sectors. For example technology stocks may be getting hammered as a group, but you will always find one or two stocks in that group that are doing well, but their stock prices are getting hammered like the rest of the group. These stocks are poised for strong upward movement when the pressure is off the group. These stocks usually at or below their book value and are in an oversold territory. Bulls to Bears tracks those sectors, identifies the “diamonds in the rough” and tracks them until they meet our investment criteria.
Stock Picking Goals
One goal is to make sure our clients do not fall into the heard mentality. i.e. Currently gold is the “flavor of month”. To us, this indicates that a bubble exists and there is great risk investing in situations tied to gold.
Another goal is to pick situations that will produce 10% to 15% gains in a months time frame. Day trading for the average individual is just gambling. Long term investing has proven to be perilous when the market hits a rough patches. By setting our goals realistically, we greatly increase our client’s chance of success. Many situations we recommend have potential to show a larger gains, but with proper money management 10% to 15% will provide a bankable differential from those positions that do not work out.
As time marches on, it is becoming more and more difficult for the individual investor to make money in the stock market. Program trading, institutional buyers and instant execution give the professionals an advantage over the individual online investor. Bulls to Bears “levels the playing field” for our clients. Our advantage comes from our market wisdom and our ability move very quickly. This is why we have our internal instant alert systems set up. If you are an individual investor trading with a discount broker you need Bulls to Bears in your trading arsenal. If you haven't done so yet? I would recommend that you sign up to receive BullsToBears.com's FREE newsletter to get our exclusive financial educational tips, resources and tools on various financial matters to help you improve your financial well-being.
So, sign up today hereand we will show you how to start making some positive financial changes in your life.
Till our next blog... Happy Trading!
As we have mentioned previously in this blog, trading stocks is a skill. It is not luck, or chance or some type of alchemy. If you learn the skills and practice them, you can be a good trader. What do we mean when we say Trader? We mean that you are someone who can consistently extract profits from the stock market.
To do this requires you to master two sets of skills. The first is the ability to trade the stocks. This skill is a combination of learning the rules of the game and then being able to follow the rules. It also involves learning the various tools that you have at your disposal to do this. This includes learning how to read charts, examine volume indicators and get a “feel” for the market action.
The second set of skills you need are the ability to pick high probability stock plays. This skill involves more of the “heavy lifting” of trading. It involves continually monitoring multitudes of stocks. You must do your due diligence on these stocks and come up with solid reasons not only to buy them, but to buy them now. It also involves tracking the indexes that have an influence on the individual potential trades. In all, there is a tremendous amount of work that goes into being a good or even great stock picker
Here at Bulls to Bears we have a two-pronged approach to trading. We are going to try to use our blog and our newsletter to teach you how to be a good trader. It is free because the large amount of work including learning is incumbent upon you. Also, we know that if you do become a good trader, it makes our products more effective in your hands. It allows you to apply what we give you to make money for yourself and your family.
The second part of our approach is our stock recommendation service. This you do have to pay for. Why? Because this is where we must do the heavy lifting. We must do the hundreds of hours of due diligence. We must track hundreds of stocks and indexes. We have the burden of finding the high probability situations so our clients can focus on what they need to do: learning to become good traders.
If you look closely at many highly successful stock traders, they all posses similar mindsets that separates them from the rest of the herd. Below we have listed a dozen unmistakable skills-sets that the most successful traders possess, that most people don't understand. They tend to:
1. Keep Emotions in check. - good traders understand how their emotions can influence their trading performance. balance and temper thoughts and emotions.
2. Being confidence - change is all around us, not just in the markets; it’s always happening and there’s no controlling it. Good traders know that and are better at adapting to change, rather than resisting it
3. Mistakes, although uncomfortable - don’t punish yourself and others for them, good traders take responsibility for their every action in the markets and their focus on optimistic growth
4. Appreciate other people’s successes - Trading is a tough profession. Losses and drawdowns are challenging periods that cause many to break. Good traders never compare their own results with others. They don’t feel as though other people’s success somehow diminishes their own achievements. Losers think like that, and in return, losses and disappointments is what they keep reaping in their lives.
5. Sticking to the rules. - Good traders make decisions with relative ease because they understand their rules and what they are trading and looking for in the markets. They do not let other people’s opinions affect their judgment. They’ve learned to trust their own - essentially catching their own fish.
6. Focus on sharpening your skills, rather than showing them off. - some people seek validation or recognition from other traders on Social Medias (especially twitter) for the trades they take, good traders are less concerned about gaining recognition. Instead, they’re intrinsically motivated to become better.
7. View trading losses as opportunities for growth. - Good traders don’t waste time feeling sorry for themselves, they make good traders grow better.
8. Practice delayed gratification. - great traders view their trading goals as a marathon, not a sprint. They’re willing to tolerate short-term pain when it can provide long-term gain.
9. Bounce back from failure - Good traders don’t view failure as the end of the road. Instead, they use potential failures as opportunities to refocus and gain new knowledge and adopt new behaviors that will increase their chances of success in the future.
10. Express gratitude - Rather than exclaim you need more, good traders take whatever the markets are offering them in the moment however small the gains are. If they followed their plan to the letter, then what should or could have been doesn’t matter.
11. Focus on what you can control - Good traders are effective in the markets for the mere reason that they devote their resources to that which they can control - and this does not include controlling the markets but their own behavior.
12. Be open to learning - Learning is a paramount and an important tool and an ongoing quest for great traders.
We stress that you don't just practice good trades, practice good trading skills! Bulls to Bears uses a developed hybrid approach of both technical and fundamental trading disciplines to come up with a majority of our stock picks. In doing so we have developed a tremendous track record. Our service is literally designed so you can earn, while you learn. Use our stocks picks to make money and at the same time you are practicing and learning the skills needed to becoming a great trader. Think of it as a work study program for Stock Trading.
If you didn’t recognize yourself in any of those 12 statements above, rest assured, you can develop these qualities in record time. For starters, I suggest getting our investment newsletter here.
In the end it will boil all down to one key quality and that is behavioral change and we can help you with that too!
When I first started trading stocks on Wall Street, the number one criteria firms used in their hiring was something called “coach-ability”. If you were not coachable, you were not getting a seat. These firms did not have the time or the patience to work with you unless you were going to listen and do the things you were told to do. There was nothing worse than some kid just coming out of school and acting like they knew more than you. In the stock trading world, it was a quick way to find yourself ejected from your seat and from the building.
The same thing applies to our business of training people to trade stocks. The only difference is that these people are now paying us for the knowledge. The problem is that since they are paying to teach them to trade stocks, they tend to feel they should have more say in the process. While that would be nice in a perfect world, it just doesn’t translate into the real world. So, in that vein, we thought we should lay out some of the “rules of the road” for getting the most out of the Bulls To Bears stock market training program. These are basically guidelines as to how to be a good student of the game. This blog is written with the intent of making you a better or even great stock trader. So here it goes.
Check your ego at the door: the stock trading principles we teach are based on long term trial and error. We made the mistakes so you don’t have to. These principles are tried and true. Don’t try to reinvent the wheel. It is truly better to be successful than “right”.
Prepare like your financial life depended on it: it probably does. We give you the tools but you need to do your preparation work. Remember we can’t trade the stocks for you. All your good intentions can go right out the window by not applying the basics as taught.
Be honest: with both yourself and with those training you to trade. Most people are not honest with themselves. They lie to themselves and then believe it! When you make, a mistake, admit it to yourself and learn from it. Radical honesty is a prescription for success when trading stocks.
Adopt a mindset of self-accountability: when you get a good recommendation and you mess up the stock trade you must take responsibility for it. You can’t blame others. You can’t blame circumstances. You can’t blame the weather. Only by taking full responsibility will you start to adopt the mind set of an elite stock trader.
Keep it light and have fun: if you are trading stocks correctly, you should be using position size and limit the number of positions to be in line with your financial resources and your current stock trading abilities. If you find yourself totally stressed out, you are doing something wrong. At that point cut back and get your fear under control and give us a call.
Remember the old saying: And if you can’t keep your ego under control, it’s going to cost you a lot of money.
A recent study suggests that Men tend to achieve lower returns than women. It's not because the ladies are better at stock traders. Rather, women are better at NOT picking more stocks than men. They have less of an ego and trade less frequently when the market makes bigger swings. As a result, ladies trade less, are more patient, saving money along the way on investment fees and boosting their overall returns.
Your great advantage as an investor is that you can be boring and trade frugally; rising slowly with the overall market and not wasting money on costly trading that tends to underperform the market.
Even us GREAT stock pickers occasionally get it wrong and issue a loser a “dog with fleas”. No one gets it right 100 percent of the time trading stocks and options. The trick is to know when to cut the losses instead of wishing for a turn around that might never come.
The biggest mistake a beginner investor can make with our program is not following through when the going gets tough. Many times when things get a little crazy in the market, as soon as the market moves bearishly they begin to start trading solo again, on their own impulse, to buying or selling when they don't need to do either. They forget our proven program in place and they revert to trades based on fear trading. Fear of losing money.
Now your ego prompts you into wanting revenge, because your losing, as if there were someone that you could ‘hurt back’ and it will then make you feel all better. Oddly enough, this sadly hurts only you, and not to fun for your ego either! So DON’T let your ego play tricks on you into ignoring your better judgment and doing things you later regret.
Be Coachable! Remember we are the professionals. Our collective has been doing this for decades for others. Bulls To Bears trading program offers a straightforward, very sensible way to get your trading working the way you’d like. If you want to know more about how to pick winning stocks, I recommend that you subscribe here to our newsletter. Everything you need to learn to begin your trading journey starts there. Take the information seriously and focus on learning.
When you begin with us and trade our stocks, focus on learning and understanding trading not on winning or trying to fast track your way to profits. Whether you’re a current Bulls to Bears member or not? or considering joining? We welcome all your feedback. Send us your comments at email@example.com.
As we have mentioned before, our goal is not to have you make great stock trades, it is to help you become a great stock trader. Till next time, be smart and have fun! As always, happy trading!
If you want to be successful in stock trading and investing in general, you need to understand the importance of and adhere to a set of rules that have guided all types of traders, with different trading account sizes. Every rule alone is an important one, but when you use them all together the effects are life changing.
Trading with these rules can greatly increase the odds of making money in the stock market. Very successful traders have a carefully thought out trading system with specific rules to maximize their odds of success. If you're interested in becoming an active trader, BullsToBears.com's Trading Program will teach you everything you need to know to get started. You'll learn the basics and how to develop a trading plan that aligns with your risk and financial goals.
Think of it as a continuing education - traders need to remain focused on learning more each and every day. It is important to understanding the markets, and all of their intricacies, is an continuous lifelong process.
Great research allows traders to learn the facts, like what the different economic reports mean. Focus and observations allow investors to gain instinct and learn the nuances. This fundamentally helps traders understand how economic data affect the markets movements. Politics, world events, economies, tragedy - including the weather - all have an dramatic impact on the stock market. The market environment is dynamic.
The more traders understand the past and current markets, the better prepared they will be to face the future. An ineffective trading plan yields greater losses than expected in historical testing. Markets may have changed, volatility within a certain trading instrument may have lessened, or the trading plan simply is not performing as well as anticipated. It might be the time to reevaluate your trading plan and make a few adjustments, or to start over with a new trading plan.
An unsuccessful trading plan is a serious problem that needs to be addressed. It should not necessarily be the end of your online trading dreams.
Here we have outline 10 rules every trader should follow to survive the long haul. These are everyday Rules That Work! To be successful, traders need lots of encouragement, support, and practice in applying these habits, these rules to a wide variety of trading situations.
Simply apply and adapt these 10 simple rules and you will make more money trading!
1) Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.
2) Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.
3) You must have a trading plan before you start to trade, that has to be your anchor in decision making.
4) You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut loses short the moment it is confirmed that you are wrong.
5) Never trade position sizes so big that your emotions take over from your trading plan.
6) “If it feels wrong, don’t do it.”
7) Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.
8) Do not worry about losing money that can be made back worry about losing your trading discipline.
9) A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake of your nerves as much as for the sake of capital preservation.
10) A trader can only go on to success after they have faith in themselves as a trader, their trading system as a winner, and know that they will stay disciplined in their trading journey.
As always were here to help you become a better trader not only help in placing great trades. If you need help with your trades just contact Bulls to Bears today and get your investment plans back on track.
Remember to sign up for more exclusive trading tips, tricks and secrets by joining our FREE newsletter here.
One of our main goals at Bulls to Bears is to get our members to be a great traders, not just teaching them how to make great trades.
Trading is a skill to be learned. The only way a skill can be learned is by doing, not just learning. So whether you are day trading, swing trading or long term buy and hold trading, you must get as much real world experience as you can to become good. "Learning is an active process. We learn by doing. Only knowledge that is used sticks in your mind" - Dale Carnegie
All traders should have a good trading habits. One of the worst habits a trader can have is trading on impulse without direction. Traders who make trading plans are more likely to succeed, but even with a good plan in place you have to develop good trading habits.
Human nature, is human nature and people make impulsive trades even with their outlined plan taped to their forehead. They exit winning trades too quickly or let losses go longer than their plan states they should. In order to break bad trading habits, traders need to base success or failure on each trade by how they stick to their trading plans. Not simply on whether they make or lose money.
That being the case we like to have our students get into the flow and feel of the market.
We do this by asking some of them to do exercises which allows them to feel the market. These trading exercises force you to focus on the market auction process, order handling and other core market components that will enhance your trading skills.
The objective of this assignment is to motivate student interest in financial markets
Complete these exercises when possible.
You will learn a significant amount of practical trading information for the market when you complete these stock trading exercises.
Start exercising your trader brain and put it to good use!
Here is how it goes:
1. Pick a stock you are going to track every day.
2. Pick a stock index that relates to that stock.
3. Identify the stocks industry group and what other stocks are in it.
Your job is to follow the stock for the next week. We want you to make observations about how the stock acts.
Specifically answer the following questions:
1. When the S&P Index is down, what is the stock doing?
2. If the index has a heavy volume day, how is the volume of the stock?
3. When the stock is up or down significantly, what are the other stocks of the groups sector doing?
The goal here is to get a feel for the stock. If you partake in this exercise, We ask that you email us your observations so we can comment and give you pointers. Send your emails to firstname.lastname@example.org.
If you continue to do this on a long term basis you will start to get a much better feel for the market. You can then pick target stocks and groups and learn to get into the “feel” of the stock market much faster.
Understanding the ebb and flow of a stock compared to the market will make your path to becoming a profitable trader and a much smoother one. Don't forget to Sign up here for BullsToBears.com's free newsletter today for more trading tips!
It has now been 15 months since Donald Trump became president. We knew better yet, contrary to what most “experts” believed, as soon as he took office, the stock market exploded. The upward movement was, without debate, record setting. Every American with a 401K applauded and everyone was happy! Or were they? Professional Stock traders like us have a bit of a different view. With an extremely fast one sided move higher, it was still difficult for investors to have made significant amounts of money. Why? Most traders tend to do better in volatile choppy markets, with swings up and down, just like the one we are in now. So, If you feel like the road to becoming a successful trader is like a roller coaster ride of ups and downs you're not alone.
If you have been following the market as of late (we are referencing to the Dow Industrials for an understandable point of reference) you will have noticed that volatility has been re-introduced into the market. The current swings are considered by some to be “big” although you should consider that the Dow in much higher than it was just 12- 18 months ago and "percentage wise" these swings are not as big as they may appear. Any great trader will tell you, these big swings up and down are your greatest friend and not your enemy.
We say this realizing though that if you manage to be on the wrong side of one of these big down swings, it could be a bad situation for you monetarily. This is where being a student of the stock market is extremely important. You must get into the movement of the market much like a hitter in baseball. A great hitter studies the pitcher he is facing. Not just when he’s up, but with every batter that steps to the plate. A great hitter starts to time the pitcher, he starts to feel the rhythm of the pitcher. He notices the pitch selection. He notices what the pitcher usually does on a 3-2 count. He notices if the pitcher is throwing first pitch for strikes or testing the batters with balls on the first pitch. The best hitters in baseball history are those who not only hold the all-time hitting records, but changed the game as we know it. They are uncoincidentially among the greatest baseball players of all time.
Not just being in the market but understanding it are parallel. By continually keeping your pulse on the market you begin to identify the ebb and flow and eventually making money through trading becomes easier and more predictable. When that happens and you have swings like we are seeing NOW in the current market, you can make large amounts of money. Your job is to see the market as a great hitter does! Don’t only look at your trades. Do some paper trading. Look at various sectors to see how they are acting in different market conditions. Look at other types of sector securities and see what they are doing. What is gold doing while the market is having a down trend? What are the bonds yields telling you by what they are doing?
If you truly become a student of the market, the opportunities for you to make money will jump right out at you. If you don’t, trading will remain like gambling. Gambling is not a long-term wealth strategy. Remember you don’t just want to make great trades, your main goal is to become a great trader.
Being a great trader is about developing certain mental qualities. It is the process of constantly pushing yourself to grow stronger and better. A profitable trader is not necessarily a good trader. Likewise, a good trader is also not necessarily a profitable one, yet a good trader ultimately finds himself with a much higher probability of being profitable and finding success in the long run.
In conclusion - we are still in a bull market! Just more choppy and much better for traders. So if you want to learn how to become a 300 hitter with stock trading and not someone who just wants to hit 300 once? Start with our FREE newsletter and we will provide you with our perspective, inspiration, and appreciation for our game which is the stock market.
We are more than happy to provide you with tips on how to be a better hitter when stock trading when your up at the plate. Learn the trade. Be the change! Sign up here for our free newsletter today!
Calling all Investors!
Welcome to BullstoBears.com's new and improved investment blog. It’s an exciting time here at Bulls to Bears. We are in the process of creating a wealth of new resources and an array of tools to help our newsletter subscribers and members take advantage of this historic time in the stock market.
Our blog has been re-designed for both new and experienced active traders alike who are looking for stock picks, stock ideas, stock and options trading how to's and overall stock market education with 100 years of combined trading expertise.
When we started our 1st newsletter back in the day, 2003, our prospects began subscribing to it immediately. It was printed on paper and mailed out through the United States postal service. At first they subscribed to Bulls To Bears to get a few good stock tips. As they learned to trade and as time went on they used our methods and services we taught to produce winning trades. Then they joined our cutting edge advisory service as a paid member. They quickly began to find weekly stock situations which they acted upon that enabled them to trade like a pro with a higher rate of return. They began to rely upon Bulls To Bears to get up-to-the-minute analysis of the news that was shaping markets and the financial topics that affected the stock market's movements.
We are excited today to be re-launching our investment blog and have the opportunity to share our stock market trading successes and insights with you!
Upcoming installments of our blog will include:
· Trading account basics
· Accounting issues and taxes
· How to use margin
· Understanding charts
· Understanding Chart Patterns
· Understanding technical indicators
· Basics of Fundamental Stock analysis
· Trading on news events
· When to use stop losses
Investors today have a huge number of resources to gather information. So much so that it sometimes becomes overwhelming and frustrating. Bulls to Bears plans to be a filter to eliminate the noise and allow you to focus on being the best, most effective investor you can be.
We look forward to providing you direct access to our investment team's latest thoughts and perspectives on the stock market arena and the global economy.
If you haven’t done so already, make sure you sign up for our free mailing list to make sure you get notified each time we update our blog with important information.
We welcome you to be a part of a friendly community of traders who all strive towards the same goal – to become consistently profitable.
You will also get lots of other free stuff by being a subscriber to our mailing list. We look forward to being on your team. Exciting things are coming. As always, Happy Trading!
Since that time, Silver, Copper, Gold, Platinum and others have moved to the up side to their highest levels in over a year, and their set for its greatest month since 2013, in the midst of the dollar slumping.
As Gold surpassed a one-year high most precious metals stocks trended higher as the dollar touched a 11-month low after reports of weaker-than-anticipated U.S. financial developments. The huge victor in the sum of it all has been gold, silver and metal stocks, which are getting a major lift as it turns out to be crystal clear the Federal Reserve's choice to bring rates up in December was another slip-up.
Silver's has 16% surge this month as well as silver imports climbed 39% in March, bouncing back from the lowest levels since 2014. Gold has a very pleasant tailwind up right now with the dollar frail and markets wavering and somewhat drawing back. The Bank of Japan on Thursday sent shock-waves through financial markets after it unexpectedly kept monetary policy tight. Many investors had expected the central bank to announce more easing measures in an attempt to help inflation. That has not happened.
So, it would make sense that these precious metals sector has been and will remain among the top performing sectors right now. Mostly because its seen as a of place of refuge. The principle question for metals speculators now is whether this rally still has legs, or not? and/or more room to run?. For now some Traders continue bidding up metals and related mining stocks!
Bulls To Bears investors have enjoyed the ride up so far and believe me another BIG move in a different sector is right around the corner. What will be next big move be? and will you be ready in time? So if you are waiting for the perfect time to seize an opportunity, the time is now! Visit BullsToBears.com and stay ahead of the curve!
Contact BullsToBears.com today! I urge you to start our 14 day FREE trial…so your adventures can begin with our very next stock pick.
In other metals, platinum for July PLN6, +2.65% climbed $27.60, or 2.6% to $1,078.30 an ounce, trading about 10% higher for the month. Palladium for June PAM6, +1.07% rose $7.95, or 1.3%, to $632.30 and ounce, up about 12% for the month. Copper for July HGN6, +2.31% added 5.6 cents, or 2.5%, to $2.289 a pound, trading more than 4% higher for the month.
The long haul silver to gold proportion is indicating a decent pointer of recent bottoms in metal socks. That proportion was as of late astoundingly low and gives off an impression of a trend beginning. In short: Expect higher silver costs.
In the past, whether you look back in 1913, 1971, or the year 2000, silver costs, all things considered, are tied into the US national debt obligation. As of late silver costs were dreadfully low contrasted with that obligation. We know the national obligation is exponentially expanding and hence we ought to anticipate that silver costs will significantly increment from here to "make up for lost time" with this looming and drastically expanding debt obligation.
Silver stocks – even now – are low, oversold, and moving higher. They have as of late broken an essential downtrend resistance line. What Happens Next? What Does BullsToBears.com think is happening right now? There can be little uncertainty that The Banks are getting ready to increase the paper costs of gold and silver.
We as a whole realize that transient costs for paper silver are effortlessly pushed by speculators and major players. The recent (past 6 months) bear showcase (and We're calling it one) has added to an instance of interior disintegration. Now, Precious Metal Stocks are breaking apart one by one as we witnessed big moves higher as of late. Bear markets are slippery monsters and they get a kick out of the chance to do their harm as subtly and as unpretentiously as could be expected under the circumstances. I would rather not say it, however some place ahead the bears are going to get together and the pure little stream is going to transform into a waterfall sending the market lower yet the metals sector higher.
How can you benefit from this anticipate move in Metals? Ensure yourself with a BullsToBears.com membership and by staying in unadulterated riches, like gold, silver, copper, steel and others. For a large number of years, silver and gold have dealt investors with unadulterated riches. It's time to buy again. One stock tip on our radar today is ArcelorMittal (NYSE:MT) trading at just $4.61.
There is always the possibility of war, although we are not yet really participating in one yet. Everyday we are reminded by that and what we are witnessing by terror groups causing worldwide chaos. It is only a matter of time that something will array or a crisis will strike that will propel gold and silver much higher - as fears spread demand grows.
BullsToBears.com's trading strategy is demonstrating a buy signal in silver and gold, copper and steel, showing that a huge long haul base is either as of now setting up or will be concluded throughout the following few months over the sector. Regardless of whether we see an increase to the degree of a couple of dollars for every ounce, the rising up trend will spark a rally and speak to a long haul players that a sign of an increase in precious metals is clear! Just like the one that happened in November 2008, which saw silver ascent more than 400% inside 3 years.
Don't continue to trade the wrong side of the market. Don't wait for social proof from the media you will be to late to the party -once again! Contact a Bulls to Bears trade advisors now for more info on which precious metal/metal stocks you should be buying today!
Being a top stock market advisory service, Bulls to Bears works with many small to mid size investors. These investors trade their own accounts via low cost brokerages like E*Trade, Scottrade or similar. Some are investors that were tired of being “churned” to death by stockbrokers who knew nothing more than they did when it comes to picking stocks. These investors had a good plan to go at it alone, but they never expected to experience a market like they did in 2008. All ships ride high tides and the average retail investor took quite a hit on the ride down. This experience made investors very leery of the stock market. The problem is that this fear is now keeping most online investors locked in to the mentality that it is almost impossible to make money trading the stock market. This is called the “herd mentality” and those who fall into this psychological misfortune tend to keep get hurt over and over because they’re sitting on the sidelines at the wrong time. They sell when they need to be buying and buy when they need to be selling.
There is tangible evidence that this is exactly what’s occurring right now. The fact is that while the market has climbed from 6,626 to 13,000 in three years; most retail investors have continued to sit on the sidelines. We are calling this the silent bull market, it is plain as day but, the retail investor is just not seeing it. This paper explores the phenomena and simply explains how to get you on the correct side of trading today's stock market.
Where We Are
During the week of March 2, 2009 the Dow Jones industrial average hit 6,626 and marked the end of a precipitous drop that some say was even worse that the 1929 market crash. As we write this paper the Dow is now flirting with 13,000 and even crossed it last week. According to a firm by the name of Strategic Insight, the US Stock and Bond Mutual Fund net inflows will reach $80B in 2011. This is an estimated drop of 67% over 2010.
Mutual fund investments are a good indicator of what the average investor is doing. Their participation via 401k’s and other retirement vehicles gives us a good indicator of what the small money is doing now. So based on this report, the small money is moving out of equities when the big money is gobbling up all they can. When that same money that had left starts to flow back in, the big money players will be selling stocks at huge gains and the small money will be buying at the top again. The cycle continues!
The Herd Mentality
Financial professionals refer to what we are talking about here as the herd mentality. This term comes from a small rodent “the lemming” that will blindly unknowingly follow his fellow herd members right off a cliff to their death. There is an uncanny psychological phenomenon that explains this and it is called social proof. Most people do not make decisions in a vacuum. Prior to making a decision, they always reach out in some way to see if other people support the decision they are about to make. In the stock market this means that the individual investor is going to reach out to his constituency base to see if they are back in the market. When they see all their friends are afraid and are not trading, they won’t either. It is a self-fulfilling prophecy and they will never make significant amounts of money trading stocks. They just will never get it. However, the successful investor conditions himself to think just the opposite. Like what Warren Buffet tries to explain over and over, ”Be fearful when others are greedy and be greedy when others are fearful.” He wants to buy low and sell high. The problem is when it’s low it looks dangerous. This is when professional traders stick to their training and buy & earn profits. The average retail investor absolutely must find a way to change his or her view.
The Solution: Bulls to Bears
If the average retail investor had a broker that they could truly trust; one that they absolutely knew had their best interest at heart, they would drop their discount broker in a heart-beat. Why? Because as we mentioned, people need social proof when making decisions. They would reach out to their broker, but only if they know they can trust them. For the most part many can’t tell if their broker is recommending a stock in their best interest or because he is looking to earn a commission. Many of the retailer investors are sitting on the sideline because they have no financial professional to hold their hand and give them the confidence needed to be in the market during these turbulent times.
BullsToBears.com has solved this problem for every retail investor. We are a completely neutral third party advisory service. We don’t get paid every time you make a trade. We get paid for brining you winning trades. The better our track record the more customers we get. That is how we make money. We provide the social proof that smaller investors need to have confidence to trade any market.
Don’t continue to trade the wrong way or on the wrong side of this market. Trade like the professional traders do and move forward now. If you wait until you get your social proof from the media or your friends, you will be way too late to the party. Contact Bulls to Bears today and get your investment plans back on track.
Wall Street is stuck in a highly volatile range as investors hoping for a rally into the end of the year are browbeaten by Europe's unfolding crisis. For months, investors have been enthusing about valuations, earnings and, more recently, signs of an improving economy. Those may be good reasons why stocks should rally, but even the most ardent are starting to sound a bit glum. The political intrigue in southern Europe has flummoxed investors stateside. Papademos has replaced Papandreou. Berlusconi is, well, gone -- leaving the presidential palace on Saturday secretly through a side door after his resignation as prime minister while crowds shouted "clown, clown" among other insults and threw coins at his limousine. When word of his departure spread, people danced in the streets and drank Champagne. The headlines and the subsequent volatility seem relentless. Early last week, there were worries about a potential Italian default, and now we've seen government and regime change in two of the periphery nations. Italy's Senate approved a new budget law, clearing the way for approval of the package in the lower house on Saturday and the formation of an emergency government to replace that of Silvio Berlusconi. Papademos was sworn in as Greek prime minister, replacing predecessor Papandreou after days of political wrangling. He is tasked with meeting the terms of a bailout plan to avert bankruptcy. But with worries that the crisis could spread to other countries, investors are looking for either the European Central Bank or EU governments to commit more capital in order to backstop sovereign bond markets. For the markets to continue to rally, we would need to see market confidence that Italian, Spanish and French bonds are money good, There is likely to be more volatility around the sovereign debt crisis until we get more capital committed to the solution.
It seems like just yesterday gold burst through $1,000 an ounce. It actually wasn’t quite yesterday, but it was only a year and a half ago. As you likely know the price now has shot through $1,800 an ounce. An 80% increase in roughly 18 months. Not bad. But that doesn’t tell half the story. Ten years ago a person could have bought that same ounce of gold for under $300. A decade later such an investor would have made 6 times their money by holding gold. That is almost a 20% compounded rate of return. The power of compounding never fails to amaze. I got nothing out of this huge gold price increase and I’m not likely interested in buying gold directly today either. Why ? I simply don’t like it as an investment. The price of gold is determined too much simply by the emotions of investors and not enough by its usefulness or earnings power. I simply can’t value it. I understand the desire to own a hard asset, but I’d much rather own oil or farmland where the world’s growing population and limited supply also are making for a fundamental reason for price increases. I guess I share the view on gold that Warren Buffett does. Consider this exchange from an interview with Ben Stein (Stein):
Stein:“My first question, as I sit there on the couch in his office, is: "What about gold? Is this a classic bubble or what?"
Buffett: "Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
It is all well and good that I share Buffett’s lack of interest in gold. The unfortunate truth for Buffett, Berkshire Hathaway (BRK.A)(BRK.B) shareholders and yours truly is that not being invested in gold has cost the whole group of us a LOT of money over the past decade.
I have no excuses for missing the run in gold. I followed David Einhorn as he repeatedly spoke on the time being right to invest in gold. His New York Times article from over a year ago nailed the current mess that is boosting gold prices (Times):
“The question we need to ask is this: If we don’t change direction, how long can we travel down this path without having a crisis? The answer lies in two critical issues. First, how long will the capital markets continue to finance government borrowings that may be refinanced but never repaid on reasonable terms? And second, to what extent can obligations that are not financed through traditional fiscal means be satisfied through central bank monetization of debts — that is, by the printing of money?”
But I can only invest based on what I believe to be true. I need conviction or I can be shaken out should an investment temporarily move against me. I’m certainly open to changing my opinion when facts merit a change, but when it comes to gold I don’t think the facts have changed. It still has very little functional value and little earnings power and I’m not going to invest in something whose value is derived only from how worried investors are about certain macro items. At some point prospects are going to improve and then what for gold prices ?
What I have noticed, though, in relation to gold that has my attention, is how significantly gold producers have underperformed the commodity that they sell. As a group, it seems that the stock market is not pricing their assets or production using anything near the current commodity price. If gold prices stay where they are, these companies are going to produce too much cash flow to continue to be priced the way they are.
I think one of three things likely have to happen.
Gold equities will rise so that their assets and production are valued using current gold prices
Gold drops and these equities don’t drop as much because they were never priced as though current gold prices were sustainable
Gold keeps rising and the gold equities rise even faster because they don’t even reflect current prices and because of the leverage their earnings have to the commodity price (fixed elements to their costs).
Given that line of thinking I think it might make sense to go short gold and long the gold stocks. If gold keeps going up, the equities should eventually go up faster because they have some catching up to do just to reflect current prices. If gold stays where it is, the equities should increase as the market begins to believe that their earnings power will be based on current gold prices. And if gold drops, the equities should not drop as much because they are not priced for current gold prices.
I’m just feeling my way through this idea and some of the equities with large gold exposure that I’m looking at are:
Barrick Gold (ABX)
Kinross Gold (KGC)
Yamana Gold (AUY)
I think this idea definitely has some merit as I’ve read enough to be pretty much convinced that gold stocks are significantly undervalued if you believe in current gold prices. A short gold, long gold equities trade might be the best way to both take advantage of the potential for sustained high or rising gold prices and protect you (or even profit) should gold prices reverse.
The key thing to remember is that the valuation gap between gold and the gold equities can widen even more from here, so a lot of patience could be required as you wait for this gap to close.
In Europe, there was more progress toward strengthening a financial rescue fund aimed at shoring up the region's banks. Slovakia's parliament approved a measure that would release large amounts of money to European banks and governments before a full-blown crisis sets in. Slovakia had blocked the bill Tuesday, becoming the only one of the 17 countries that use the euro to do so. Wall Street has been fearful for months that one of Europe's shakier economies could collapse. If countries like Greece, Spain and Italy can't repay their debts, global banks that own those countries' debt would be at risk. That could make banks even more leery of lending to each other and to businesses. If that escalates enough, it could cause another international financial crisis similar to what happened in late 2008. Markets rallied over the last week as officials in Europe seemed like they were making progress toward shoring up European banks. In addition to the stronger bailout package, European Commission leaders had said they would require banks to hold more capital to protect them against losses. But without specifics on how those reforms will be accomplished, traders are getting concerned that the plans will deteriorate.
U.S. markets tanked this week even though the Federal Reserve offered a bigger dose of economic stimulus than investors had expected: The Fed plans to reshuffle $400 billion of its investments in hopes of pushing down interest rates on mortgages and other long-term loans. Lower rates are supposed to coax consumers and businesses into borrowing and spending. The Fed also plans to invest proceeds from maturing U.S. Treasury debt into mortgage bonds in an effort to support the housing market. But economists say the Fed's effort -- dubbed Operation Twist after a similar Fed program conducted during the Chubby Checker dance craze of the early 1960s -- probably won't make much difference.
Rates on mortgages and other loans are already the lowest in decades. Frightened Americans would rather cut their debts than borrow, and businesses aren't seeing enough sales to justify hiring and expanding despite rock-bottom borrowing costs. The Fed's announcement underscored the fear that the American central bank had run out of tools to stimulate the economy. That leaves fiscal policy -- government spending programs and tax cuts -- as the only other way to juice growth. But political bickering is preventing Washington from doing much of anything. Congressional Republicans are focused on cutting government deficits, not widening them in the name of helping the economy. They are resisting President Barack Obama's $447 billion plan to generate jobs with payroll-tax cuts and more spending for roads, bridges, schools and other infrastructure projects. Economist Eswar Prasad of Cornell University says the U.S. government should tolerate higher deficits now to spur economic growth -- as long as it delivers a credible plan to bring its budget under control in the future.