Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Gold, Oil, and Syria Really Mix… Plus "3 Strikes Against Apple"

Stock-Markets / Financial Markets 2013 Sep 13, 2013 - 11:44 AM GMT

By: Money_Morning

Stock-Markets

Keith Fitz-Gerald writes: The markets are very complicated at the moment, which is why now's an ideal time to reach into the Money Morning Mailbag and address your concerns.

The goal here is simple: To provide understandable, actionable, and, of course, profitable answers to your thoughtful and extremely insightful questions.


Let's start with Syria and what the conflict really tells us about gold and energy...

Q: "Does the president's speech change anything (in Syria)?" ~ Robert P.

A: Nope. What's interesting in this case is that most leaders throughout history spend their time debating an exit strategy. President Obama seems to be hunting for an entry.

This points to opportunities in gold and energy. The key is not so much the commodities themselves, like most people think, but what conflict says about the need to own them.

Gold is really a value play that's very pure and simple, if you pardon the pun. Conflict places every fiat currency at risk, and that means the need to preserve value overrides price.

Energy is much the same. There is no doubt that a broader conflict would spark higher energy prices, but unless you're nimble and equipped with institutional-grade trading platforms, chances are you won't be able to harness the volatility. But, you can absolutely get in front of the need to find new sources away from the shooting. Exploration and equipment companies are a logical alternative with momentum that will continue long after the shooting starts... and stops.

And finally, the euro.

Europe is far more exposed to fighting in the Middle East than America because of where our oil is sourced. This speaks to a weaker currency as prices rise in conjunction with any conflict escalation. Diversified European companies are a different matter because many do business in dollars. I'm talking specifically about the euro itself.

Q: "What do you make of Apple's big slide?" ~ Thomas W.

A: Apple's got a real innovation problem post-Jobs. Tim Cook is just not up to the task, which is why the company is losing market share in almost every market segment. The latest iPhones move - introducing the premium 5S and the inexpensive 5C for emerging markets - makes it clear that the company wants profits over market share. That's not going to be enough at the end of the day.

It's worth noting that both Palm and RIM adopted similar philosophies on the way down. Droid is now strong enough to "pick" Apple.

There are three strikes against Apple: slowing innovation, a lack of differentiation, and margin compression.

Short Apple or, if you're not comfortable doing that, consider running some really tight stops to protect your capital. Longer term, there are better opportunities out there. It simply doesn't make sense to get "pruned."

Q: "How risky are bonds now... really?" ~ Andrea J.

A: Investors holding long-term bonds are going to get hit hard as rates rise. For example, when yields jumped 0.75% from May to June earlier this year, long-term bond funds dropped an average of 6.01%, according to Morningstar and Money Magazine. Intermediate bond funds took a 3.4% hit, while short-term funds fell only 1%, or just a bit more than rates themselves moved.

You shouldn't sell out, though, because bonds remain an important part of any properly constructed investment program. Instead, consider shifting into short-term bond funds or cash alternatives like the US Global Investor Near Term Tax Free Fund (MUTF: NEARX) if you're willing to take on slightly more risk. That way you'll minimize the impact of rising rates while, more importantly, positioning yourself to capitalize on the higher rates ahead.

[Editor's Note: Money Map Report subscribers who followed Keith's most recent bond-market recommendation locked in a 100% gain last month. But "this game is a long way from over," he says. Get all of Keith's Money Map Report recommendations right here.]

Q: "September is historically the worst month for stock markets but we seem to be doing okay so far. What do you see ahead?" ~ Jonas L.

A: Seventy percent or more of total trading volume is now computerized according to the latest studies, so the seasonal pattern is more likely busted than intact.

As long as the data presents a "Goldilocks" recovery - meaning neither too hot nor too cold - the Fed will have no choice but to continue. That said, the Fed meets Sept. 17-19 so we'll know more then.

As Art Cashin, perennial CNBC favorite and Director of Floor Operations at UBS Financial Services, put it recently, unless Bernanke "gets a miracle with the non-farm payrolls," it'll be tough to justify tapering.

A snowball's chance in hell is more like it, which is why investors would be prudent to tighten up their trailing stops now - ahead of time - as a means of protecting capital and capturing profits.

Remember, the goal is not to time the markets or even exit prematurely. A Barron's study shows that 85% of all buy-sell decisions are wrong, which amply demonstrates the futility of trying to outthink the out-thinkable.

The more prudent course of action is to ride the bull for as long as the bull wants to run. Trailing stops help you do that unemotionally and with the added benefit of being able to plan ahead for turns that will take others by surprise. Serious investors rarely run their money without them.

Traders, on the other hand, often do, but they offset their positions with put options or shorts designed to profit when the markets hiccup. Right now, they're really cheap because nobody is looking on the other side of the fence.

Q: "My friend says the Hindenburg Omen indicator is overly simplistic and produces too many false alarms to be profitable. He cites a whole lot of 'signals' as evidence. Your take?"

A: Sorry, but your friend is dangerously naïve and appears not to understand its true message very well.

The Hindenburg Omen indicator has never missed a major market turning point. The key is in not only the primary reading (which can happen frequently) but the secondary reading (which happens rarely), because it significantly increases the probabilities of a correction.

And that's where experience comes in. You never want to make all-or-nothing decisions. Successful investing is about going with the market's flow, and the Hindenburg Omen indicator helps you do that.

Primary signals suggest turbulence ahead, so professionals (and informed investors who've actually traded big money) begin tightening up stops as a precaution. If and when confirming signals are triggered, many tighten up stops further. Aggressive investors and traders also begin implementing hedges or buying put options.

If there is a crash, the combination of stops and hedges not only ensures stability, but profits, too. If a "crash" never develops, so what. They've stayed in the game and continue to ride the bull to still more profits.

As my grandfather, who played baseball in the "stovepipe" league at the beginning of the last century, used to say, "You miss 100% of the swings you never take..."

The Hindenburg Omen is simply a way to raise your batting average.

Best regards for great investing,

Keith

Want answers? Let us know... Just send us your questions via email, right here.

Source :http://moneymorning.com/2013/09/10/big-dow-index-changes-what-they-mean-for-your-stocks/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in