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A Day To Remember: The Great Wall Falls

Posted by rantaboutit on February 28, 2007

Everyone knows that the market goes through a correction every once a while. The problem is not everyone knows when. Stocks slumped Tuesday 27th Feb on worries about economic growth at home and abroad especially China.
What Happened
The Dow dropped 416.02 points equivalent to 3.29%, its biggest one-day point loss in nearly 5 & 1/2 years. The S&P 500 tumbled about 3.5 % and the Nasdaq skidded 3.9 %.

What Caused It
  • Chinese market dropped 9 % on concerns that the government was looking to crack down on market speculation that has driven chinese stocks to record highs. There are were also rumors that China is going to impose a high capital gain tax on stock investments. Other Asian markets slumped in tandem. European shares also tumbled.
  • Former Federal Reserve Chairman Alan Greenspan said that U.S. economy might slip into a recession by the end of the year.
  • Economic indicators showed the biggest monthly drop in new orders for nondefense durable goods, items meant to last 3 years or more.
  • Reports indicated that the median price of an existing home fell 3.1 % in January from a year earlier, giving investors more reasons to worry about the housing slowdown hurting the economy.
  • Increased violence in Iraq and Afghanistan also alarmed Wall Street.
  • The Dow and S&P 500 have each risen 12 % in the past 6 months while the Nasdaq is up 17 %.

Few of the big guns in the tech sector like Google (GOOG) lost 3.5 %, Yahoo (YHOO) lost 3.64 %, Microsoft (MSFT) lost 4.13 % and eBay (EBAY) lost 4.25 %. Chinese stocks got burned badly with CDC Corp (CHINA) losing 11.4 %, Telestone (TSTC) losing 13.97 % and Fuwei Films (FFHL) losing 11.53%.

Those who shorted the Dow (DXD) and Nasdaq (QID) had a smile on their face. Both were up 4.21 % and 4.81 % respectively.

Conclusion: Analysts believe that nothing has changed fundamentally and investors do not need to worry about a bear market. Consumer spending has held up relatively well. The company profits/earnings has been positive. Analysts also believe that this sell-off could give the Feds a reason to lower interest rates which would evidently boost earnings.

Recommendation: Commodities also took a hit and are now trading at a bargain. Alot of stocks are trading at a cheaper prices. For those investors that stayed away from the market, have a question in their mind for sure. Is this a good time to buy? Maybe, maybe not. The point is nobody knows. History shows that after a huge correction, the market trades lightly the next day indicating cautious investors. Any substancial upswing would not occur until day after tomorrow.

(Source: CNN Money)

Posted in Asia, China, Investor, Stock Market News, Traders | Leave a Comment »

Beware: Outrageously high numbers…

Posted by rantaboutit on February 6, 2007

I had previously written about high dividend stocks. I would like to extend this post to include few more stocks that give outrageous yields. (As high as 45.80%). But wait….there is a catch…..!!!

  1. Royce Focus Trust, Inc. FUND operates as a diversified, closed-end investment company. The trust invests in the stocks and bonds in various sectors. They claim to pay dividend of $4.80/share and yield of outrageously high 45.80%. Is this kind of yield justified ? As per my research the last payment was made for $1.20/share, which multipled by 4 will give you 4.80$ which is right on track. Caution: Last four payments added up to only $1.57 which yields to only 14.5%. Do your own research to ensure that they will continue to pay $1.20/share every quarter and this is not a sham.

  2. Cal-Bay International, Inc. CBAY.OB invests in real-estate market. The company had interests in Utah, Nevada, Florida and California. They claim to pay dividend of $0.01/share and yield of outrageously high 41.70%. Caution: The company has made one dividend payment in the month of April 2006. The stock trades at 0.028$/share causing the yield to be so high.Since the company has only paid one dividend, you can’t rely on it in the future.

  3. Polyair Inter Pack, Inc. PPK engages in the manufacture and distribution of protective packaging products and swimming pool products. They claim to pay dividend of $0.81/share and yield of outrageously high 37.00%. Caution: They are only one-time dividend payer.

  4. Latin American Discovery Fund, Inc. LDF operates as a closed-end management investment company. The fund invests primarily in Latin American equity securities. They claim to pay dividend of $9.00/share and yield of outrageously high 33.80%. They pay dividend every six months. The mid-year dividend is small and the year-end is large. Caution: The year-end dividend relies on capital gains as opposed to dividend distributions from the stocks in the portfolio. Can you rely on such a stock for high dividend.

  5. Nicholas-Applegate Intl & Premium Strategy Fund NAI operates as a diversified, closed-end management investment company. The fund intends to invest in international markets. They claim to pay dividend of $9.28/share and yield of outrageously high 31.00%. Caution: The fund pays only at year end which includes capital gains which makes it unreliable.

  6. Templeton Emerging Markets Fund EMF operates as a closed-end investment company. It primarily invests in equity securities. They claim to pay dividend of $5.25/share and yield of outrageously high 30.50%. Caution: The fund pays only at year end which includes capital gains which makes it unreliable.

Conclusion: Some stocks look to be yielding outrageous numbers. They are attention grabbers. But are they genuine ? Maybe, maybe not. Not all high yielding stocks are bad. Again i urge my readers to read read and read…do you own research before jumping into any such high yield stock.

As a rule of thumb, always always check the number of payments made out by these high yield stocks. Ensure the dividend payment is consistent. Also make sure that the payment doesnt rely on capital gains. And finally make sure that the yield is calculated correctly from whichever source you use to monitor such stocks.

Posted in High Dividend, Investment, Investor, Stock Picks, Traders | Leave a Comment »

Should We Trust These Analysts ?

Posted by rantaboutit on February 3, 2007

According to Investopedia

Analysts are typically employed by brokerage firms, investment advisors, or mutual funds. Analysts do the grunt work for brokers, preparing the research that brokers use. Analysts usually specialize in specific industries or sectors.

I personally rely on analyst recommendations as one of the factors deciding buying or selling of stocks. Analysts are in a much better position to make a judgement about the stock than you and me. They go through alot of financial reports and indicators which passive investors dont even want to know. However one important question everyone should always always try to find out is Why ? Why are analysts giving buy or sell signals. Good analysts will always give you a satisfactory explanation and back their recommendation by giving you their sources.

That said, what are analysts overall recommending in 2007 ?
A research shows that the analysts are not too bullish in 2007. The overall buy recommendation as a percent of all recommendations is at its all time low over 10 years. This is scary isnt it ? Does that mean it is time to sell off ? Probably not. Infact as a rule of thumb, when the herd is in agreement on the market’s direction, the opposite usually occurs.

Recommendations: Dont let some indicators scare you. Again the key is research. Try and understand why the analysts are bullish or bearish about the stock. If you find their reasoning satisfactory, only then bet accordingly.

Posted in Investor, Stock Market News, Traders | Leave a Comment »