Ask a Broker, part two
 

Hey all,
Due to popular demand, I'm restarting the old "ask a broker" thread. Got (general) investment questions? Happy to help. As a reminder, I can't give specific advice in terms of particular assets or companies. Beyond that, I'll try to answer your questions as best I can.

Bob

I hear the news people talk about these things and them affecting the stock market. Please explain how the following things affect the stock market:

federal reserve interest rates
unemployment numbers
housing sales
durable goods orders (second part, what constitutes a durable good?)

If you can add any other indicators that also come around regularly, I recall one day there was a "triple witch" of some sort, but don't recall what constituted the triple items.

Fair enough. Federal reserve interest rate is basically the "base rate" for borrowing money, the rate that the fed charges the banks. For all intents and purposes, it sets the "price of money". When the interest rate is lower (as it is right now), it's supposed to make money cheap, meaning people borrow money and use it to invest. This drives up the stock market and everything else. When the economy is moving well, the fed's fear is inflation, so they boost the rate to increase the cost of money, thereby reducing its supply.

Unemployment numbers affect stock prices in 2 ways, one direct and one indirect. Directly, they're a good gauge of the strength of the economy, especially since consumers (employees) drive much of the GDP. Indirectly, high unemployment drives down the cost of wages, meaning companies can save money on hiring and use it elsewhere. Labor costs are usually the largest cost outlay on the part of corporations.

Housing sales are much the same, though they're *much* more dependent on the fed rate. Right now, the effective cost of housing is probably 5% per year cheaper because the cost of borrowing money is so much lower. Also, housing sales are a good proxy for forward-looking economic strength, because people don't buy houses if they're expecting to lose their jobs next month. If and when the rate goes up (or even *threatens* to go up), mortgage rates do, too, increasing the price of borrowed money and therefore of homes.

Durable goods are similar to houses-- they are exactly what they're called, goods that are expected to last (like cars, furniture, etc) as opposed to food, fuel, etc. People only buy them when they have a reasonable expectation of being able to pay them off. These numbers have been massively skewed of late by defense orders since things like planes are included.

Generally speaking, the way these numbers affect the market can be broken down in two ways:

1) People buy when they have faith in the economy (ie, companies aren't going to fail) or when the Fed cuts rates;
2) People sell when they think the economy is headed to the shitter or when the Fed raises rates.

Of course, it's more complicated because a lot of these things are already "priced in" to some extent-- the correction of the past two weeks has been essentially a pricing in of what looks like a likely Fed rate raise later this year. Ironically, the lousy employment numbers this morning spiked the market up, because they are perceived to lessen the chance of a rate rise.

Finally, "triple witching" simply refers to the day once every three months when index futures, index options, and stock options all expire simultaneously. These days tend to experience a lot of volatitility as people try to get in or out of securities, especially for hedging purposes. Some folks on the street actually call it "quadruple witching" now that they've got single stock futures, LOL. If you don't understand options or futures, I'm happy to explain them.

Bob

i'm constantly pressured about putting my money in the market instead of just a savings account, where it's safe.

What are some low-risk options that I can look into?

Bobmsmythe - I look forward to your opinions as well on this, but I will offer my own insight to Hal's question.

Hal - anything you do in 'the market' has some risk attached to it. But a good way that I have found to earn a little more is with Mutual funds. Pick a solid mutual fund with a low management fee, yet has a solid and steady rate of return over the last 5 years (don't just pick something that has skyrocketed in the last 3 months or even 12 months). Look for something with a good mixture of stocks in various sectors would be my opinion.

Funds that just specialize in precious metals, or technology or a specific sector can do extremely well at times and you can make a lot of money with they (25 - 80+%), but the risk level is very high and you can lose the same amount. Hence a nice diversefied balanced fund.

Hal and Duval,

Let me offer you both a peice of advice with no strings attached. Read "The Intelligent Investor"
http://search.barnesandnoble.com/boo...sbn=0060555661

It was writtten during the great depression and is still considered the authoritive tome in injecting common sense into how you choose to place your money.
Amongst it's tips are simple but often overlooked things like asking your broker for refrences to contact before signing on, demanding that a broker take a lower fee on trades you suggested that make you both money, never accepting a mutual fund with fees of over 5%, etc.
It's written in such a manner as to be readable by all, and is worth it's weight in gold. It preaches restraint and constantly reminds you to consider what your broker is getting out of any deal he suggests. for something written 75 years ago, it reads as if it was written yesterday.
I suggest it to all.

whats your take on real estate- I just bought my first tax sale house last summer- looks good in this state, 2 years to get a clear title, 8% if someone redeems the property, etc- lots a leg work, and many hoops, so what is your opinion?

Brand new to Investing.

Can you recommend me a good introductory book, please??

pretty basic question

where do you suggest i start?

i want to get into investing, and is it best to try online trading? such as etrade tdwaterhouse stockhouse

or get a broker?

It all depends on what you want to do? Do you want to day trade? Swing Trade? Buy a stock and sit on it for the long term?

There are lots of books dealing in various strategies.

I just read a book called 'The Begginners Guide to Day Trading Online'
I can't remember the author, but when I get home I'll check it and post that.

Personally I use TD Waterhouse. I pay $29 CDN per trade. There are cheaper places to trade, and their are more expensive as well. These are all referred to as 'Discount Brokerages' and in my opinion are a good place to start if you are playing for peanuts and just starting out.

A broker I believe will charge you about 5x what an online discount brokerage will per trade. But, you are getting personalized service and may get some advice (but not tips!).

There are pro's and con's to both.

Haha, make money, of course!

Seriously, I just want to put away some money now for long-term gain. But how, where, when why what?!? :)

THIS for the long winded explanation, or THIS for a shorter, more concise version.

Essentially, ignore trying to make money in the short run. Instead, place your money into a mututal fund--and the more companies that it includes, the better. There are some that even include every stock traded. By doing this, your gains are essentially exactly what the market does. You thus by definition cant make any more than the market as a whole does, but you also cant lose more. In the end, you come out on top.

Hey Hal, good to hear from you. The man himself.

Well, it depends on what you mean by "low risk." U.S. bonds are extremely low risk, but they don't pay very well. They can generally be considered as a "benchmark," though. I-Bonds are paying 2.19% right now, and are completely safe. But that's not exactly making much. Corporate bonds will pay more. Unfortunately, if you want to do bonds, you really need to have quite a bit to put up. Unless, of course, you invest in a mutual fund that buys bonds. Really, your best bet is probably to put money into a no-load mutual fund, something that doesn't charge you to invest. A lot of times with folks who are just starting out, I'll recommend that they put 50-60% of their money into an S&P index fund, maybe 15-20% into a small- or mid-cap fund, and then some into a mixed-bond fund. That spreads risk around and minimizes your payment load. If this sounds kind of hazy, it's because I don't know exactly how much we're talking about, and how much risk you're willing to take on. I will say that the S&P 500 has consistently beaten almost every investment, hands down, over the long term, returning on an annualized basis over 10% since 1975. The only investment class open to the average Joe that's done better has been property, and then only if you know where to buy. That's not something I handle. Personally, if you've seen the cost of real estate in NYC, you'll know why I rent.

Ultimately, too, you need to consider whether you'll need immediate access to your cash at any point. If you're looking to buy anything big, like a house or a car, in the next 12 months, and might need some cash, you'd do well to look at something that can be liquidated without much trouble, and to keep some in free cash.

Bob

Generally good advice. Don't assume that a fund that's done well in the last 12 months will continue to do so. There's a disclaimer "Past performance is no guarantee of future results."

If you're just starting out, I'd recommend against sector-specific funds. Instead, putting some money into a small- or mid-cap fund can get you some added growth potential without risking quite so much. This is *especially* true when talking about precious metals-- this is the only specific advice I'm going to handle on this board: metals have had a great run up. As soon as the dollar starts to recover, they're gonna get hammered. Anybody who tells you different is what we call a "goldbug"-- those loonies that invest only in gold and high-powered automatic weapons.

Bob

I don't really do real estate (except for REITs) but generally it's a good investment if you're living there. It gets a lot more complicated as a pure investment property. I'd check out the experiences of others in your state and see how it's gone, and maybe consult an attorney. Really, I guess I'd need to get more details before I could give you much of an opinion on this specific situation.

Bob

How much money are we talking about? If you've got somewhere in the 10-20 grand level, I'd read my advice to Hal below. If you enjoy it, put a few thousand in an etrade or ameritrade type account and play with it a little, but don't expect big things.

If you have someplace higher than that, you might want to look into getting yourself a broker. Personally, I don't handle anybody that doesn't have mid-sixes, but there are brokers (especially off the street) who do.

Bob

My opinion of day trading is pretty low. I've met plenty of smart folks who've lost upwards of a hundred thousand dollars. Don't let me dissuade you if it's something you enjoy and turn out to be good at, but generally speaking you're gonna be paying out the ass on commissions. I think the lowest per-trade fee out there is about $7. That means that round-trip is $14. So, assume you put $20,000 in the market and you do five round-trips a week (one a day). Let's call it 48 trading weeks (giving you time for a vacation and the days that even we jockeys get off). That comes out to $3,360 right there. So before you even talk about making or losing any money you're already down almost 17%. By way of comparison, the S&P 500 averages up a little over 10% a year. So, to beat the S&P (the benchmark for stocks), you've got to make more than 27%. It's also assuming that you aren't paying for live pricing, which starts at $100 a month and runs up sharply from there. If you want to get full market depth from both listed and OTC you can probably count on paying $250 or more a month for the terminal-- that's going to run you another $3,000 a year, or 15%. So now you've got to make 42% to get what you would have had just by sticking your money in the S&P! And, of course, this is assuming that your time is worth nothing. If you went down to the corner store and got yourself a job selling candy for $5 an hour, and spent the 10 hours a week (assuming you trade only the opens and closes) on that, you'd make $50 a week. Multiply that by 48 weeks, and it's another $2400, or 12%. So to beat the S&P *and* your candy-selling job you're gonna have to make 54%!!!

Obviously, there are people who do manage to do this. But it's really, really unlikely. Honestly, there's a reason why the SEC limits day-trading margin to customers with more than $25,000 in their accounts. It's because anything less is going to mean you're slowly bleeding money. If you can put $100,000 in the account, things get a bit less expensive: $3,360 in commissions plus $3,000 in terminal fees plus $2,400 you'd make selling candy is $8,760, only 8.76%, meaning you'd still have the task of making about 19% on your investment to break even with the S&P, but wouldn't be dying a slow death.

Bob

Yeah, that's about right. I think you can probably beat $29 CDN = approx $20 US. A good choice, though.

Most decent brokers won't bother with you if you don't have 20 grand or so. And, if they will, you'll be paying a shitload to me to make a couple extra bucks here or there. It's a mystery to me why folks in Wallyworld think we brokers know all this info about what's going up or down. If I knew what was gonna make 100% guaranteed by tomorrow each and every day, you'd be damn sure I'd be trading instead of talking on the phone.

As to tips, it really depends how much you're worth. I can't pass inside info, but I do sometimes hear news before it hits the presses and I can and will pass that on to my biggest clients. That's strictly legal.

Bob

I understand they sell decent color printers for $500 or so. But, seriously, check out my response to Hal.

Bob

Good books, both. I'd also add "The Intelligent Investor" by Benjamin Graham. Get the newest edition, though. There's sort of a long-term argument between these two books, one which (for now) it looks like the Value guys (Graham's camp) have won. I think the newest Random Walk editions concede some of Graham's position. Essentially, Random Walk argues that investing is a crapshoot, whereas I.I. says you can find underlying value. Both sides have some merit. I think the very existence of Warren Buffett tends to justify Graham, though keep in mind that Buffett has millions to invest with-- the average $5,000 in cash American won't have much success with his strategies.

Bob

awsome thread. so far very informative.

heres my question.

I have a second mortgage (at 8%)

I have some money saved (could pay off the debt)

Is it better to get rid of the debt, or invest the money? Should I be investing in a 403b instead?

I'll probably be in this house less than 5 years, if that counts for anything.

Hey Bob, now my turn to ask for advice.

I have about $2000 CDN that I use to play with. I have a TD waterhouse account and basically I guess I am a Swing trader.

Up till now I've basically been playing with penny stocks on the TSX, mainly with unprofitable microcap companies that are in bankruptcy protection.

Whats your opinion on what I should be in? Whats your thoughts on penny stocks in general and what would be the right way of playing them?

I'd love to get into the RIM's and IBM's and Yahoo's, but at stock prices so high, I just can't afford them, and the $29/trade i need to make back just kills me.

Anyone else you would recommend aside from TD Waterhouse?

i heard scottrade.com is cheap

The only benefit to the mortgage is the tax advantage. Since you can deduct it, call your mortgage 6%. Can you beat 6%? You probably can, at least over time.

Unless you're a teacher or a priest (which you might be), I don't think you can do 403b. But 401k-- the private sector equivalent-- has some tremendous advantages over traditional accounts. Namely:

1) Tax deferred;
2) Possible matching.

I'd say, generally speaking, up your payments on the mortgage a bit, that way you'll clear a bit more when you sell. Start putting some money in your tax-deferred account, and if you can, make some back payments into it.

The one thing that confuses me a little bit is that you say this is a "second mortgage." What's the term on the first one, and at what rate? You may want to look at refinancing and consolidating, you should be able to get your rate down.

Bob

Well, do you want a nice answer, or a good answer?

Nice answer: It's possible that you'll make some money, and you don't have that much to lose.

Good answer: Penny stocks are a fool's game. You're better off going to Vegas. You say you can't afford to get into IBM, but look at it like this:

IBM shares look to open at 99.55 this morning. Call it 100. You could buy 20 shares. If the price jumps by 10% this year, you'll have made $10 * 20 shares = $200 (minus comissions).

SHIT.ob is trading at .01. So, you can buy 200,000 shares, right? You're a big player, right? Really, though, what you need to look at is the percentage move. A 10% move-- to .011-- still makes you the same $200. And, realistically, SHIT.ob is a *lot* more likely to go out of business. Really, you're betting on a company that doesn't have many prospects and hoping that God smiles on it. It's not that hard to get listed OTC, pretty much any company that can't qualify is garbage or in the shitter. Finally, one last piece of information:

The volumes.

What do I mean? So say you want to buy 200,000 shares of SHIT.ob, as I said above. In all likelihood, that's going to *move* the market-- that's a huge load of demand. So instead of trading at .01, the market is going to push up. Say to .012. So now you're paying a 20% premium. And, once your order is filled, that demand is gone, so the price falls back to .01. You've lost 20% already. Now, you get tired of waiting, and you want to sell. Say the price is .011. Same thing happens on the way out-- you drive the price down by .002, to .009. So you've lost .003 total. On your 200,000 shares, that's $600, almost a third of your initial investment. Do you see why this is a problem?

For the amount of money you're talking about, you're extremely unlikely to make a lot of money moving in and out of the marketplace. As described above, you're going to be burning money on commissions. If you get charged $29CDN each way, that's a total of $58 to get in and out. So, assuming you put *all* your money in a single stock, you automatically are *down* almost 3% before you even do anything. So, maybe you're doing great, I don't know. But I'd want to find something more stable to invest in. FWIW, the commissions on junk stocks are generally the same as real stocks.

I've got to run now, market's about to open

Bob

I think Ameritrade is something like 11 bucks per. Etrade maybe 9 but not sure whether that's limit or market only.

Bob

I do appreciate your honesty, and I would expect nothing but honest answers - no matter how brutal they are.


What I've been doing untill now is dealing with penny stocks in small volumes of 10,000 share lots. This limits my investment to a small amount and I am watching the trends on these charts to see how they are moving via daily highs/lows. basically i'm trying to find sufficiently volatile stocks that are swinging about $0.02 cents in a week or two period and then selling for the quick profit. 10,000 x $0.02 is $200 - $58 commisions is a profit of $142.

I know I could make the same type of money on IBM on a long term basis, but I don't have the patience to be in a stock for the long term. I want to swing and profit take when I can which is hard with such small funds.

Any advice for me? I know I am playing a dangerous game, and I've won some and lost some. My biggest problem is as you said volume. When I want to sell there isnt always buyers, and when I want to buy, an order can take a day or two to fill, and then sometimes i'm forced to chase the stock which is a dangerous game.

I know as a broker you probably think I'm an idiot, but basically I want to make money in the market, and if I want to wait out for the long term I'm using mutual funds (thats where i Have the bulk of my money).

Lessons on Discount Brokerage Usage
 

Bob,

Can you give us a lesson on what some of the different options we have on our online discount brokers?

A buy order is clear to me.
A sell order is clear to me.
An 'all or nothing' order is clear to me.
A limit price is clear to me.


What is Buy on Stop?
What is Sell on Stop?

How do those differ from selling at a limit price, and when would they be used?

I'll give you only one piece of advice if you insist on trading this way: Set down some *concrete* rules and stick with them. If your rule says sell if you're down 20%, damn well sell when you're down 20%. Don't stick on the thing praying it's gonna come back. There's a human tendancy to want to sell the winners to "lock in" profit and to hold the losers in the hopes that you'll get your money back. This is a bass-ackwards way to trade. That said, remember that penny stocks are for companies that by definition are <i>not</i> making money and have little in the way of funding, and that when companies like this cease operations you will not get any kind of warning ahead of time. It sounds like you're putting all of your money in a single stock at any given time. That's a very dangerous game when you're talking about a company that may or may not be there tomorrow. Remember always that you're not buying a symbol. You're buying a piece of a company. If that company is shit, congratulations, you just bought 2,000 little pieces of shit. There's always the "greater fool" theory of investing, and it works sometimes, but somebody always ends up holding the bag. That person never set out to be the greatest fool.

Bob

Re: Lessons on Discount Brokerage Usage
 

There are two ways of talking about this. The reason stops were invented were to input a price at which you would get out. So, if you bought X at 10, you might set a stop at 9, so if the stock fell to that level you'd sell. Swing traders, though, will sometimes use a 2-part "stop" order where you input one price at which you want to trigger an order, and another with the price at which you want to be filled. So the swinger thinks X is going to fall to 9, at which point it will meet resistance. It will either break the resistance and keep falling, or it will "bounce." The trader sets a "Buy on stop" at, say, 9.10, with a limit price of 9.20. So if the stock keeps falling, the order never becomes valid. I never go for that Gann stuff, though. I always advise my customers to set a stop loss (either market or limit, depending on liquidity) on all but the longest-term positions.

Bob

Bob

I'm only putting a third of my capital into any one stock. Not risking it all.

I guess I should also pick stocks with a decent average daily volume so if I do need to bail I might be able to, eh?

How much are you paying on commission again? Was it $27? If so, note that if you're putting a third of your capital into any given trade-- let's assume $650-- you're already in the hole over 8% before any price movement.

Yes, always find something with some liquidity. Otherwise you might never be able to sell.

Bob

$29/trade, so yup, I am in the hole.

but, if I buy 10,000 shares, even a $0.01 increase will give me $42 profit after the commissions. I do try and pick stocks that have a larger swing though - +/- $0.02 - 0.03

frankly though, I know there must be better ways to do this, and I am a total beginner, only been doing it for a month. Thats why I like this thread so much, your insight is great.

Shorting a Stock
 

Is it possible to short a stock using a typical discount brokerage? Or do you need a special account for that?

D

I work for a university, so I think that I only have the 403b availible to me. Will investing in this cause me problems if I decide to change jobs into the private sector and want a 401k?

I didnt mention my 1st mortgage because its at 4.875% and, I dont think I can do better than that with my money, so I dont think it would benefit me to put any money toward it.

Scotttrade certainly looks cheap, but I don't see that I can play the TSX with it - which is my main interest.

Re: Shorting a Stock
 

You always need a margin account to short. Beyond that, I can't say what or if any discount brokerages do, though I think that Ameritrade does, I have a cousin that uses it.

Bob

Nope, no problem. You can either keep it there or roll it over.

You might want to look into consolidating your mortgages. Should save you some money.

Bob

are you willing to do analysis and opinion on stocks that we'd pick in this thread?

I use Ameritrade (former Datek) and you can borrow stocks to short with them just like any other broker.

I have to jump on the bandwagon and say, if you have $2000 and are trading penny stocks, you'd be better off getting on a plane to Vegas and blowing it on a fun weekend. Do you have a safety fund set up in case of job loss, accident, unexpected expense? If not, that would be a much better use of your hard earned and saved dollars. If you do, then take a position in an S&P index type fund and let that be your first investment.Have you ever thought about the risk-reward ratio in trading those penny issues? Let's say they're not good. Wait until you're in a stronger financial position before you trade. When you get there, if you want to swing or position (or even intra-day) trade, start by paper trading first. Why throw hard earned money away without showing you have the ability to be profitable first?

Best wishes and good investing

I do have the vast bulk of my savings in various mutual funds - both RRSP and non-RRSP's (401k for you americans).

The $2000 that I put into my webbroker account is what I felt I could afford to play with, and afford to lose. So if I lost it all, although I'm sure it would sting - life would go on, mortgage would be paid and family would be fed.

I did start on paper, and I still do with stocks I'm watching, I set up a phantom portfolio and try and track it. I am new at all this though.

What i've been doing up till now is just swing trades, buying about 10,000 shares of a stock that appears to have a regular daily or weekly high or low and then sell after i've made 0.01 or 0.02 cents profit.

What else should I be doing?
I'm just tired of making low returns on my money in the mutual funds and want to earn a bit more in the market trading.

What are penny stocks good for? When should they be looked at - or is the correct answer 'never'? I would love to be involved in the big boy stocks, and I do try and follow them, but with the amount I have to invest with, the commissions would erase any profits.

I appreciate all of your advice.

what do you think currently and for teh future of Radioshack (RSH).

I know we (I work for them and have for quite sometime) fell out in the past after spliting, but am told by others around me that its about to skyrocket with a coming press release. Should I buy in now knowing that its going to skyrocket, or would that land me in prison like martha stewart for insider trading?

Whats the annoncement? :)

I would just stay far from the penny stocks.

Have you ever thought of learning to trade options or futures?

No I havnt. I always thought they were much more volatile and dangerous than penny stocks, where they not?

Can you recommend a website or good books where I can learn about options & futures? I know nothing about them.

The way I learned to trade options was by getting good at stocks first. That gives you a grounding in the markets and teaches you to trade.

What do you mean by "more volatile and dangerous"? If you're buying penny stocks at 2 cents and the next tick is one cent, you just lost half your money! Futures can be traded with a lot more leverage than stocks (meaning you have to put up less money). Options are also a leveraged insturment. Essentially though, you need to learn to always trade with stops. That means you know when you're leaving the trade if it's not working your way. Trading without stops is what's volatile and dangerous.
Anytime you trade, you risk losing all the money you're playing with. It doesn't matter what you're trading. It's effective money management that keeps that from happening.
The most informative source I can suggest it RealMoney.com. They have columnists covering a multitude of topics on a daily basis. Read it every day, and you won't believe how much you will learn with time.

Nope. That would violate any number of rules, besides which I'm a broker, not an analyst.

Sorry about that.

Bob

Good advice.

Bob

Oh well :) I was looking for some good picks is all :)

Unless the person you know is high enough up to be in a postion to have insider information, you're fine. On the other hand, if the person is just some random staffer, he or she is probably just repeating a bullshit rumor. Always do your own D.D.

Bob

RADIOSHACK (NYSE:RSH) Quote data by Reuters Edit
Last Trade: 36.05
Trade Time: 10:02AM ET
Change: Up 2.74 (8.23%)
Prev Close: 33.31
Open: 35.25
Bid: N/A
Ask: N/A
1y Target Est: 31.33
Day's Range: 34.90 - 36.24
52wk Range: 18.86 - 34.15
Volume: 848,800
Avg Vol (3m): 1,171,045
Market Cap: 5.92B
P/E (ttm): 22.04
EPS (ttm): 1.636
Div & Yield: 0.25 (0.75%)



Looks like he was right. Although I wouldnt call this a skyrocket. Positive earnings were announced today.

Futures and options are more dangerous, especially options. I'd recommend the CME website above all else, they're pretty good about explaining them. If you're still interested, I'll dig around and find some newer titles-- the ones I have are mostly old textbooks from the early 90s.

One thing you can do with options which is kind of fun and relatively safe:

Say you buy 1,000 shares of XYZ at 24. You can sell 10 covered calls of XYZ for one month out with strike 25 and probably raise .60-.70 per. That works out to $600 to $700. If XYZ is out of the money (less than 25 and some change) come expiration, the option expires and you keep the money. If it's in the money, you're forced to sell at $25. Not a bad return for a month. Two problems:

1)It will keep you from making the "big money" should lightning strike and the stock go to 100;
2)Some brokerages restrict options trades to covered calls only, meaning that if the stock falls below your comfort level you won't be able to dump it without covering the option first.

Bob

Standard issue. Beat expectations, but it's already giving some of the gains up. Let me tell you a story about earnings volatility:

A couple of years ago, a buddy of mine was running a trading desk. A suboordinate of his put all his prop cash in one company, claiming he "knew" it was going to do great. My buddy told him to sell it, NOW. So the guy did. My buddy happened to have a small position, and the following day when earnings came out, they were positive, and the stock went up. My buddy probably made about 2 grand. His underling would have made 20 had he not been ordered out. He bitched at my buddy, and my friend threatened to break the guy's nose and fire him. Why?

"Earnings are bullshit. It's a fucking crapshoot. Some of mine were up, some of mine were down. You want to gamble? Go to fucking Vegas. Just make sure you pack up your desk when you leave."

The point is that nobody knows how a stock is going to do at earnings. You can guess, and sometimes you'll be right, and sometimes you'll be wrong. I say leave that shit to people who can a)afford to lose, and b)have the liquidity access to get out of a bum position.

Bob

Based on how little I still know about trading, this advice is something I try and follow. Earnings can go either way and you have no idea how they will go. Its way to risky.

I got out of Nortel a day before the earnings came out - I could have made a lot more money than I did, but, I could have lost it all as well. No Regrets.

D

see I knew about the earnings being up before it was released and the person who told me was high enough I think it would have mattered, he even told me to buy stock before today, but it made me feel uneasy. so I held off


and they are getting ready to go up again with another announcement thats being released next week.

Are there are any good penny stocks you guys can recommend or worth to check out to make some fast cash. I’m a beginner and have some chump change laying around. I opened up an account with Ameritrade and get the first 25 trades free.

See the discussion above. The penny stocks were a bad idea 2 months ago, and they haven't gotten any better since.

Nobody but nobody is hanging around Wall Street looking to give away money. There is no fast and easy cash to be had. Resign yourself to that fact and you will take a major step towards being a succesful investor (or trader for that mater).

IPO Filings and withdrawls...
 

Is there any concern about a company that files it's S-1 in march, but still hasn't put out it's shares for an IPO by June? I ask because when I look at IPO lists of filings vs "going public" dates on Yahoo's IPO lists, I notice that the majority of companies that don't go forward immediately, or nearly immediately, seem to withdraw their IPO. Any thoughts?

Thanks

hey everyone I'm a newbie here, and had a quick question. I know this thread hasn't really active as of late but I'm a college student and work full-time for a bank looking to get a series 7 license. Any advice on the test?? Obtaining a license?

Question:

I'm a recent college graduate and throughout my classes the "time value of money" was thrown around. We learned that by investing $2,000 by the age of 21 with 10% interest compounded annually will get you around $625,000 (give or take a few thousand) by the time your 50.

My question, none of the banks I know offer 10% interest. Do money markets or cd's offer 10% interest?

P.S. I appreciate your comments and insights. Its much easier posting questions than scheduling an appointment with a financial advisor. Hopefully you can help me out with my quandry.

There is really nothing out there that can offer a 10% rate guaranteed. Most people that are young invest in mutual funds to try and achieve a 10% rate of rerun over a long period of time. There is a lot of risk though, because if you are going after a 10% rate of return YOU WILL LOSE MONEY some years, but it is very possible to achieve it over a ten year span. Since 1925 Large Cap Stocks have averaged about 10-11% rate of return and small cap stocks a little more.

To get a series 7, a firm must sponsor you to take the exam. You ahve to fill out xomething called a U-4, which goes over background info and credit. Then you can sit for the exam.

For study materials, I used Dearborn a while ago, but STC (Securities Training Corp) is what our firm uses now. There are fees to take the exam, which run about 650 bucks or so. Also, you will need more than a series 7 to begin selling, states have other exams that arae needed. They call that a Series 63, 65, or 66 usually.

Invest or own your home?
 

The only investment class open to the average Joe that's done better has been property, and then only if you know where to buy. That's not something I handle. Personally, if you've seen the cost of real estate in NYC, you'll know why I rent.

Bob[/QUOTE]

Isn't it better to own your home than play the markets? Didn't a report just come out with statistics on overall wealth, race, and homeownership? My point is...should I be saving money to own my home, or rent and invest money instead. How are you calculating the break-even point here, with all the risk of the market?

I don't know a whole lot about financials, but I do know this. Owning your own home IS an investment. Even if the value of the house goes down, once it is paid off, you have a place to live that has some value, and are no longer bleeding out rent money every month. Even if property taxes and upkeep are high, it is probably still going to be less than the rent on a place of equal size/value, and could be sold to make some of that money back. Renting is a fools game for the poor, and if I weren't repairing my credit from a few blunders when I was younger, I wouldn't be doing it anymore.

What do you think about hedge funds? Is it crazy to consider investing in one?

How do you deside on a good stock to purchase? What factors weight the most?

ive heard the same things, and i too have never seen a bank account offering 10% annually, and probably never will. im sure to get that sort of return you'd have to invest instead of save. i think on the first page of this thread bob mentioned that historically, indexed mutual funds (i think the s&p500 index was mentioned) have shown a return rate of about 10% annually...not sure if various expense fees are factored into this return.

from what ive read and studied so far, a mutual fund seems like the way to go. specifically an indexed fund, with a small percentage invested in bonds and the rest in stocks. lol dunno if that's right or not :D

i too would like to know the answer to this. im sure a lot of factors come into play....how much money you can invest, whether you're looking for short-term or long-term results, what kind of dividend payout you're looking for, etc.

can anyone enlighten?

A slightly different question:

I understand analysts, and possibly brokers, often give their assessment of a company mainly through reports ( SEC filings and others ) and meeting and speaking with the management team of a firm.
I am assuming that the management comprises mostly of the executive, possibly some senior, managers and board members.
The management team then must give good arguments ( persuad, coerce, whatever you wish to portray here ) that the firm is in good shape and answer questions specifically about the firm's performance.
How realistic is that? Even the most well-intentioned management team could have the worst business at the worst time and not have a clue the hammer about to fall on them. Is there a trapdoor that even the management team could explain that justifies the firm to close up and leave? Or are the members of the management team purely "selling" the firm and their performance when speaking to investors and investment-advisors?

My reason for asking this, which may lead to the obvious answer, is that I am looking forward in my career to being part of the management team, and I'm wondering what skills/impressions/qualities a firm would be looking for.
Managing people resources, using time wisely, communicating effectively are all things I accept as being critical to this type of job, but what else?

Am I more "salesman" or "value-creating agent"?? And if there is grey between there, how do you show you have got the stuff?

Thanks for any input, and please feel free to correct me on any point if I'm wrong..

commodities
 

are you getting much interest in commodity etf's?

i work on the floor of the cme, and am becoming more & more convinced that the commodity bull run is not slowing down, but just beginning. so.........i was wondering if from your vantage as a broker, you see increased interest from your clients?


thanks,

jimk