What are moving averages

Moving averages are a way to find trends in the stock market. They are primarily used by technical analysts. The graph of the moving averages smooths out the graph of daily prices. They are lagging indicators, showing what the market has done in the past, not necessarily predicative of the future. There are two popular types of moving averages - simple moving average (SMA) or exponential moving average (EMA). 

The idea behind a SMA is simple: you find the average of the most recent five days. So basically you take a certain number of days and find the average over those days. Then every day after that you replace the oldest day with the most recent one. For instance, when finding a 5 day moving average:

Day	Price
1	10
2	11
3	12
4	11
5	13
6	14
7	15

On the 5th day the SMA would be (10+11+12+11+13)/5 or 11.4. The next day the SMA would be (11+12+11+13+14)/5 or 12.2. On the 7th day the SMA would be(12+11+13+14+15)/5 or 13.

The EMA is slightly more complicated. It gives preference to the most recent days, but no day is ever entirely taken out of the average (as in the SMA, all days not within the most recent period are discounted) they are just weighted extremely lightly. For instance, in a 10 day EMA, the most recent day would be weighted 18.18% with every preceding day being weighted a little bit less. 

What is the difference between these two? Well, to start, since more recent days matter most in EMAs, they are much more sensitive to recent changes. On the other hand, SMAs sometimes lag behind more. The trade off here is that EMAs could sometimes can give false signals whereas a SMA could be more accurate. Another thing to take into account when looking is the length of the average. A shorter/longer average could show the same differences as a EMA/SMA. The longer average will lag more but be more accurate than the average of a shorter period.

What are you going to use a moving average for? To spot trends. Regardless of the volatility of day-to-day trading, moving averages allow you to look at the big picture and see how the stock has been trading over a long period of time. Also, if the stock is trading above the moving average, it can be considered to have an upward trend; if it's trading below, it has a downward trend. Finally, comparing moving averages of different periods can be compared. If the shorter moving average is above the longer moving average, there is an upward trend. If it is below it has a downward trend.

Moving averages by themselves are in no way a determination of whether to buy or sell. It's important to remember that you are only looking at trends in the past. They are not guarenteed to predict the future and can give bad signals sometimes. However, they are a useful tool when you are trying to look at stock trends as one one part of your stock analysis. 

What is Shorting Stocks?

Traditionally, when you’re trying to make money in the stock market, you buy stocks at a certain price and hopefully that price will increase so you can sell the stocks at a profit. This method is called going long and is the most common way of trading stocks. However, there is another, lesser known way of trading stocks called short selling. Short selling is the opposite of going long. When you go long, you make money as the price of the stock increases. When you short a stock, you make money as the price of the stock decreases.

So how does this work? Say that you believe stock ABC is over-valued and its price is going to drop soon. You couldn’t make any money off of this prediction going long, so you must short the stock.

1. First you contact your broker to borrow, say 100 shares of ABC. Typically the broker himself is not the one lending you shares, they are in turn borrowing the shares from another investor; however, this really doesn’t matter to you.
   
   
2. You then immediately sell all 100 shares for the price at the moment – let’s assume $20 a share. This gives you $2000.
   
   
3. This $2000 is not your profit. Obviously you can’t just borrow shares, sell them and be done. You still owe the person you borrowed the stocks from. The basis of shorting stocks lies in the fact that you borrowed 100 shares of ABC, not the value of those shares. You only owe the lender those same 100 shares back, regardless of their value.
   
   
4. Now, a week later, the price of ABC has dropped to $10, as you predicted. You now buy 100 shares at $1000. 
   
   
5. You give your broker the 100 shares, which means you have repaid your loan. You still have $1000 left over, which is your profit. (You will likely owe your broker a small fee for borrowing the stocks as well)

This could have gone another way though. For instance, say the price of ABC had increased to $30 a share. You eventually have to pay back the stocks you owe. Though brokers rarely if ever call in your loan, it is possible for them to do so. This means you would have to buy back the stock at whatever price it is at the moment, regardless of the price. Oftentimes when someone is shorting a stock, they will cover their positions to limit their losses. Covering means buying back the shares that you owe to repay the loan, even if it means taking a loss. In this case, you would have bought back 100 shares of ABC at $30, taking a loss of $1000.

Shorting stocks is usually done over a short time frame. When you borrow someone else's shares, you are essentially taking out a loan from them. They in turn charge you interest, as with any other loan. Therefore, the longer you keep their shares, the further the stock must drop to earn you a profit after paying back the interest.

There are risks involved with shorting a stock; more than going long. When you go long, your profits are infinite (the stock’s price can go up innately) yet your losses are finite (the price can only drop to zero). The opposite is true with shorting a stock. Your profits are limited and your losses are infinite. Now to be realistic, obviously no stock prices goes to infinity; they eventually hit a peak, but the idea is that a stock has more room to go higher than it does to go lower.

Shorting stocks is a debated topic. There are those that support it for various reasons. For instance, Warren Buffet believes that it is a useful way to reveal fraudulent companies. Yet, there is still a lot of unease around shorting stocks. It is associated with corruption, such as when hedge funds create false news to drive down the price of a stock and profit by shorting it. Many people view it unfavorably, simply because you are profiting off someone else's misfortune.

Personally, I don't like the idea of shorting stocks. When you go long, you are investing in a company. When you short a stock, there is no benefit other then the money you get. There is nothing produced. I see shorting stocks as an example of the way the stock market is turning into a money making scheme rather than a way to invest in a company, which is what the stock market is intended to do. 

How do you guys feel about shorting stocks?

Festival of Stocks #132

Welcome to the 132^th Festival of Stocks! There were a lot of great articles on a wide array of topics. If you are featured in this edition, please make sure you link back to this post. Thanks!

Editor's Pick

James Cullen presents Entertainment Properties (EPR): Load Up, or Lights Off? posted at College Analysts, saying, "Is it time to step up and buy this REIT?"

Fitz Villafuerte presents Investing In Mutual Funds posted at Ready To Be Rich, saying, "A simple explanation of mutual funds and the advantages and disadvantages of investing in mutual funds"

Dividend Growth Investor presents Merck/Schering-Plough Merger Arbitrage Opportunity posted at Dividend Growth Investor.

Ramis presents Dollar Cost Averaging posted at Financial Highway, saying, "What is Dollar Cost Averaging? A look at how you can build your investment portfolio through dollar cost averaging."

Mike Power presents US Stocks that can Make The Best Stocks in 2009 List posted atBuyMyStockPicks, saying, "look for companies that should perform in a though economic period. Stocks that have been under evaluated by a psychotic market!"

The Rest...

The Smarter Wallet presents Investing In The Stock Market? Rules To Help You Sleep At Night posted at The Smarter Wallet.

Sun presents Bought 600 Shares of Citigroup posted at The Sun’s Financial Diary.

Cody Butler presents What Is A Money Market Account And How Does It work? posted at Investment-For-Beginners Blog, saying, "An introduction to money market accounts, what they are and how they work."

Steve Alexander presents Quick Take: Deckers Outdoor Corp (DECK) - MagicDiligence posted at MagicDiligence - Optimizing Joel Greenblatts Value Stock Strategy, saying, "Deckers Outdoor benefits from product momentum driving strong growth, and a very sound financial footing. But beware - this could be another fad stock in the making."

MoneyNing presents Zecco vs TradeKing - Online Stock Trading Comparison posted at Money Ning, saying, "TradeKing and Zecco commands the market of cheap trades but who is actually better? Check out this comparison guide before you decide which one is right for you."

Jae Jun presents Negative Enterprise Value Screen for Net Nets posted at Old School Value, saying, "This screen will help you to find companies that are loaded with cash and with manageable debt. A quick way to find companies trading at cash value."

Super Saver presents Bear Market Maxims posted at My Wealth Builder, saying, "Although published in July, 2008, Andy Kessler's Bear Market Maxims are worth hearing again, as we enter the eighteenth month of a bear market."

The Financial Blogger presents Long WebMD(WBMD)/Short Yahoo(YHOO) posted at Intelligent Speculator, saying, "I found it a bit difficult and frustrating to be short Yahoo! because the recent changes in the structure have been followed by almost weekly announcements of changes in the direction, or new technology arrivals."

Jack presents What China Market Offers Nike(NKE) to Fight Recession? posted at Silent Treasure.

Silicon Valley Blogger presents Find Investment Opportunities In Any Business Market Environment! Ride The Economic Recovery posted at The Digerati Life.

Ryan Suenaga presents Dude, Where’s My Dividend? posted at Uncommon Cents.

George presents Ultimate 2009 Berkshire Hathaway Annual Meeting Guide posted at Fat Pitch Financials, saying, "In anticipation of this year’s Berkshire Hathaway (BRKa) annual meeting, Fat Pitch Financials is starting its 2009 annual meeting guide early this year."

Aussie Investor presents Australian Stock Of The Week - McMillan Shakespeare Limited posted at Australian Stock Market Today, saying, "Stock markets all over the world have been decimated in recent times, and Australian shares have been no different. But investing for the long term requires patience and an eye for quality. So with that in mind, this week I have a look at McMillan Shakespeare Limited, one of the better quality stocks at the smaller end of the market."

To read any past posts, see future hosts or apply to host a future edition, check out the Festival of Stocks homepage. If you'd like to submit an article for a future edition of the carnival, here is the carnival submission form.

Why You Need To Invest Now

The stock market has really scared people away as of late. People are sitting on the sidelines with cash, too afraid to invest it in anything because they are afraid to lose it. However, though it is scary, you still need to invest.

Before you start investing, you should understand the economy, why people invest and why you need money in your life.

You need money in order to be happy. Money may not be able to buy happiness, but if you don’t have any, you certainly aren’t going to be happy. You should understand what your financial needs are. You want a car and a house; you want to be able to spend money to go out with your friends and family, to have a good time. Maybe you want to be able to donate back to the less fortunate. You want enough to live a comfortable life. All of these things take money.

Most people won’t earn the amount of money they need to cover everything they would like to have during their lifetime. A person does not EARN (as in, from a job) enough money to sustain their way of life. Hence, the need to invest, to earn more money than you can simply by working. Ultimately you are going to decide you have to invest your money because you want more than you make.

So what do I mean by invest? Well there are people out there who have jobs and earn income. At the end of every month, they have a certain amount of money. There are also people who need money, such as businesses, entrepreneurs, the government, etc. To put it simply, investing is giving money from the person who has money to the person who needs money. In return for giving them the money right now, you are going to charge them interest. One thing you have to understand is that everyone would prefer to have money now. So in order to give away your money and not have it until later, you must have some form of compensation.

The difficult part for many people is how they are going to give that money to those people who need it. Especially, how can you give it to them in a trustworthy way? People want to guarantee that if they lend out their money, they’ll be getting it back. Otherwise they are just giving money away, which isn’t the goal of most people. You could just go to the people who need money and say here’s some money, pay me back later. However, there is no law saying they have to pay you back in a timely manner, or that they have to pay you back at all! So you’re taking a risk by lending your money. A lot of people would lose money this way and hardly anyone would want to invest because the risk would be so high.

To avoid this risk there are institutions in place: banks, financial markets, etc. All these institutions have set up different ways for you to lend your money. The choice you need to make is the way you want to give your money away, whether you want to put your money in a CD, a savings account, bonds, stocks, etc. Every form of investment has it’s own pros and cons, namely the reward you’ll get and the risk you’ll accept. In most cases, the more risk there is, the higher your reward will be. The only time this isn’t true is in the stock market. There you can get high rewards with little risk. HOWEVER, with stocks you have to be intelligent about your choices or you will lose money.

Depending on what your investment goals are, you’ll have to choose an investment option. For some people who make a lot of money, started investing early and put away a lot of money every year towards retirement, investing in CDs may be the way to go. Most of us don’t make a ton of money and don’t want to reduce our lifestyles by putting away the bulk of our money every pay period. Here, stocks would be the best option due to their high return IF they are invested in correctly. And by correctly I mean that you need to educate yourself in finance and the ways corporations work in order to pick a secure firm to invest in.

With stocks you are investing your money in a corporation in hopes that the corporation will grow. If it grows, your share of ownership will be worth more. You need to understand how the economy works, how finance, debt, credit, accounting, management, borrowing, lending, financial markets, equity, marketing, and credit ratings. This may sound like a lot, but you need to know a lot in order to make educated decisions regarding the stock market. This is your hard earned money that you are investing in stocks; you don’t want to throw it away because you didn’t know what you were doing.

The market is doing terribly right now... which is why it is the perfect time to get in. As long as your are making smart investments that is. Sure the market may go lower in the short term, but ultimately, in the long term it WILL go higher. No one can predict how the market will do in the short term, its based on news that comes out and how investors feel that day, and you simply cannot predict that. Market crashes like the one we are going through right now are perfect opportunities to invest because you can find great companies at low prices. As the economy gets better, which it is bound to do, these great  companies will return to their glory, giving you a great investment. If you are going to invest in stocks, pick stocks that represent companies that will be able to get through this downturn. Do your homework, you don't want to make a stupid investment in some no name company that loses  all your money.

The decision of what to invest in and how to do it may sound complicated. However, the reason why you should do so is simple: to be happy, you want to live a nice lifestyle that costs more than you can make.

Why the Market is a Mess

Well, the stock market had another bad day... the Dow Jones broke its previous low. However, don't worry about the Dow Jones, instead focus on the S&P 500. The Dow Jones is a broken index. The stocks in it are supposed to represent the US economy, but battered stocks like GM and Alcoa don't represent the type of economy we have right now. For instance, the United States is moving away from being a major car manufacturer. Therefore, a stock like GM shouldn't be in an index that is supposed to be representative of the major industries in the US economy.  The S&P 500 does a much better job of taking into account America's largest industries and thus is much more representative of the United States economy. Uninformed investors follow the Dow Jones while informed investors follow the S&P 500. It hasn't dipped below its lows yet; it's still testing them. 

So why is the market doing so badly right now? The market is fearful that recent government action won't effective enough to fix the problems in the economy. The biggest drag on the market today, as usual, was the banks, including an over 10 percent drop for Bank of America. Obama's mortgage plan received mixed reviews. Investors were pleased with the details, they just aren't sure how well it is going to work; hence, we saw a flat trading day. Before we can see any sustained rally, we need to see a planned solution for the financial sector. The major problem with the banks right now is that we don't know how much their toxic assets are worth. Tim Geithner is working on a plan to get this issue resolved. Once we have the details of his plan, I think we'll see a positive move in the market. Until there is a solution for the banks, don't expect any sustained rally - get used to the market testing the lows.

If you have investments at the moment, don't panic. Be patient. Government action will have an effect; we just have to wait until we have all the details on how the banking sector will be fixed. For now, don't be surprised when we keep having these negative moves in the market. It's just investors who are fearful of the government's action.

Carnival of Everything Money #2!

Welcome to the second edition of the Carnival of Everything Money. Thanks to everyone who submitted an article, it was enjoyable to go through and read them all. I would appreciate it if anyone who is featured in the carnival links back to this post. If you want to submit an article for next week's edition, the submission form is here. Onto the carnival! 

Editor's Choice (These are just some articles that I found really interesting/informative, I hope you enjoy them as well)

The Investor presents Coping with the guilt of losing money posted at Monevator.com, saying, "Losses when investing come with the territory. It's natural for most of us to feel guilty when we lose our hard-earned cash, but here's some advice on stopping that feeling derailing your investment plans."

Silicon Valley Blogger presents No 2009 Economic Stimulus Check? How Obama’s Stimulus Plan Affects The Middle Class posted at The Digerati Life, saying, "This post is about the economy and how the stimulus plan affects the middle class."

Aryn presents Could You Afford to Drop Out of Life? posted at Sound Money Matters.

Chris presents Is It Time to Retire the Penny? posted at financial reflections, saying, "For Abraham Lincoln's 200th birthday, the US Mint unveiled some new designs for the once cent piece. But after one hundred years of Honest Abe's face on the coin, should we consider retiring it?"

Budgeting

Finance Tips 101 presents Answers About Home Equity Loans posted at Finance Tips 101.

keevisr presents Loan Info Central posted at Loan Info Central.

Credit

Mr Credit Card presents Chase Balance Transfer Offer - My Letter from Chase posted at Ask Mr Credit Card.

David presents Capital One No Hassle Miles Rewards Credit Card Review posted at Credit Card Offers IQ, saying, "The No Hassle Miles Rewards credit card from Capital One can help pay for your next vacation."

The Dough Roller presents Why Some Online Credit Card Applications Say ‘Hurry Up And Wait’ posted at The Dough Roller, saying, "The truth about online credit card applications."

Raj Patel presents Don’t Believe These 7 Credit Card Myths posted at DebtGoal.

Debt

David presents Stupid Advice from a Payday Lender Courtesy of Google News posted at Payday Loans Review, saying, "Why you should never pay off your credit cards with a payday loan."

Frugality

Dollar Frugal presents Aldi?s Shopping posted at Dollar Frugal.

Tristan presents Safe Strategies For Financial Freedom posted at Find Financial Freedom, saying, "A safe guide to finding financial freedom and a look at the inherent risks in any strategy that is adopted in a bid to find financial freedom."

The Smarter Wallet presents Expedia Deals and Travel Discounts For The Frugal Traveler posted at The Smarter Wallet.

Steve Faber presents How to Save Money on Car Insurance posted at DebtBlog.

Investing

Investing School presents 30 Components of The Dow Jones Industrial Average Index posted at Investing School, saying, "Here's a look at how the dow is calculated and what it means for investors like us."

korprit zombie presents Beginner Online Stock Market Investing Advice posted at Beginner Investing.

Nesher presents Free trade recorder and equity curve money management system posted at Internet Stock Trading for Beginners.

Brian McKay presents Health Savings Account as a Retirement Account? posted at MonitorBankRates.com, saying, "Are you maxing out your 401K and IRA contributions every year and want a way to save more for retirement using a pretax method? Another way of stashing away money pretax for your retirement is using a health savings account (HSA)."

Locke Dauch presents Ways to Make Money Online posted at Your Blog Is Money.

The Shark Investor presents Strategies For Raising Funds: Borrow Your Way To Wealth posted at The Shark Investor, saying, "How and when to use loans for investing"

FIRE Getters presents What Should We Do If Our Mutual Fund Goes Belly Up? posted at FIRE Finance.

Other

Jacquelyn presents Simple Ways to Teach Your Child the Value of Money posted at WParent.com - Wise Parenting Guide, saying, "Teaching your children the value of money is the parent's responsibilities through parental guidance and example. Read about it in this article."

ChristianPF presents Is the Fed running the U.S. economy into the ground? posted at Money in the Bible | Christian Personal Finance Blog, saying, "This video makes it pretty clear that we are going to be in for some big inflation numbers soon..."

Isaac Yassar presents Why You Should Never Join MLM posted at Isaac Yassar's Overture, saying, "Most people want fast and passive money, and that's why they join MLM companies. However, they do not notice that according to statistics, most of MLM are scam-ful, and most of those who joined, end up scammed. Bill Gates successfully made Windows the most popular operating system in the world because he did not sell it through MLM."

cfgoulart presents Google AdSense Tips - AdSense How To Series posted at Making Money Resources, saying, "Making money with Google's Adsense - Tips on getting started."

Saving

jim presents Best Money Market Account (MMA) Rates posted at Blueprint for Financial Prosperity.

asgreen presents That Good Old E-Fund posted at Always the Planner....

Raily Arena presents Finding Online Work That Pays posted at Make Money Easy Online.

Mr. Banker presents High Interest Money Market Accounts (MMA) posted at Best Interest Rate Banks.

travelcat4 presents GreenPrint - Helping To Save Printer Paper posted at Latest Inventions.

Stocks

Adam presents Top 5 Best Discount Brokers for Your Money posted at Pimp My Trade, saying, "A list of the best discount brokers with great software and low commissions."

Taxes

freefrombroke presents Paying Back The Economic Stimulus Payment - Lots Of Tax Confusion posted at Free From Broke, saying, "There's been a lot of confusion over how the Economic Stimulus payments are handled on this year's taxes. Here's the deal."

Thanks again to everyone who participated! Please remember to link back to this post. Check back next week for a new edition.

Festival of Stocks: #128!

Welcome to the 128^th Festival of Stocks! There were a lot of great articles on a wide array of topics. If you are featured in this edition, please make sure you link back to this post. Thanks!

Editor's Choice: This is an article I found particurally interesting; I suggest you check it out.

The Smarter Wallet presents 5 Stock Sectors To Avoid In A Recession posted at The Smarter Wallet

The Rest of the Articles: 

The Investor presents Why investing in overseas markets will diversify your portfolio posted at Monevator.com, saying, "Putting some money in overseas stocks can diversify your exposure to the markets and smooth your returns."

Madison presents ShareBuilder Review: My New Account posted at My Dollar Plan.

James Cullen presents Primus Guaranty (PRS) Earnings Notes posted at College Analysts.

Trade in Groups presents Profiting from Volatility by Selling Options posted at Trade in Groups, saying, "Options volumes are down because of a pullback by institutional investors - so are these the worst of times for the options markets, or the best?"

Sun presents Fundamentals vs Technical posted at The Sun’s Financial Diary.

Adam presents Swing Trading Strategy: Touch and Go! posted at Pimp My Trade, saying, "This article outlines a winning swing trading strategy that I use over and over again to pull in money from the stock market."

Manshu presents Do not use a Leveraged ETF for Hedging | OneMint posted at OneMint, saying, "Analysis of Leveraged ETFs and why they shouldn't be used to hedge portfolios."

Dividends4Life presents Stock Analysis: BP Plc (BP) posted at Dividends Value, saying, "This supermajor integrated oil company (formerly BP Amoco p.l.c.) is based in London and is the world’s second largest publicly owned oil company and the fourth largest U.S. refiner."

Steve Alexander presents Quick Take: Heartland Payment Systems Inc (HPY) - MagicDiligence posted at MagicDiligence - Optimizing Joel Greenblatts Value Stock Strategy, saying, "Heartland Payment Systems is a well-run company in a business with intrinsic moat qualities, but can the company overcome a recent security lapse?"

Investing School presents 30 Components of The Dow Jones Industrial Average Index posted at Investing School, saying, "Here's a look at how the dow is calculated and what it means for investors like us."

George presents Puget Energy Buyout Completed posted at Fat Pitch Financials, saying, "A look back at the history of how I made a 117% annualized return on Puget Energy (PSD)."

To read any past posts, see future hosts or apply to host a future edition, check out the Festival of Stocks homepage. If you'd like to submit an article for a future edition of the carnival, here is the carnival submission form.

Carnival of Everything Money

Welcome to the first edition of the Carnival of Everything Money. I wanted to give my thanks to everyone who is contributing to making this carnival a success! I would appreciate it if anyone who is featured in the carnival links back to this post. If you want to submit an article for next week's edition, the submission form is here. Onto the carnival! 

Editor's Choice (These are just some articles that I found really interesting/informative, I hope you enjoy them as well)

Woman Tribune presents Living Off of Your Credit Cards posted at Woman Tribune.

Toolsie presents How drill bits can keep you thrifty posted at Drill Bits, saying, "Making it yourself will save you thousands. A table sold for a thousand dollars is probably only worth $50 in material. Make it yourself! It's easier than you think."

Nickel presents Readers’ Choice: The Best High-Yield Online Savings Banks posted at fivecentnickel.com.

The Smarter Wallet presents Will The Obama Economic Stimulus Check and 2009 Stimulus Plan Save The Economy? posted at The Smarter Wallet, saying, "Some info on the economy."

Raymond presents Best CD Rates For High Yield Certificate Of Deposits posted at Money Blue Book.

Budgeting

Debt Freedom Fighter presents What is a Personal Loan? posted at Discover Debt Freedom!.

Debt Kid presents Why Budgets Don't Work For Everyone posted at DebtKid.

Financialnut presents Budgeting Tips: 5 Things You Must Do When You Go Over Your Budget posted at Financial Nut, saying, "My wife and I have recently been spending WAY TOO MUCH MONEY! This is how we've used our budget to fix our problems!"

Save This Memo presents Mint: The Free Budget and Finances Tracker posted at Save This Memo.

Chris presents House-hunting expenses and how to minimize them (part 1) posted at Home I Own, saying, "The frugal way of house-hunting"

Credit

David presents What is aMerchant Cash Advance posted at Merchant Cash Advance Guide, saying, "A merchant cash advance is a relatively new form of business financing that relies on the company's future credit card sales for repayment."

CreditCardAssist.com presents Credit Card Habits and the Recession posted at Credit Cards Blog | CreditCardAssist.com.

Apply4-Credit presents Why Your Credit Card Application Was Rejected posted at Credit Card Applications Expert | Apply4-Credit.com.

Silicon Valley Blogger presents Best Cash Back Credit Cards: Your Rewards For Spending posted at The Digerati Life, saying, "Thank you!"

Debt

DebtLite presents What's the Difference Between Good Debt and Bad Debt? posted at Debt Advice.

Debt Free Destiny presents 3 Tips to Stablilize Your Finances posted at Debt Free Destiny.

Destroy Debt presents Are You One of the Lucky Ones with a Refund Coming Your Way? posted at Destroy Debt.

Kristjan presents Blame Keynesian Economics posted at Personal Development for Awesome People, saying, "Keynesian economics will lead the world to a depression!"

Frugality

MoneyNing presents What Everyone Ought to Know When Applying for Free Stuff posted at Money Ning, saying, "Are you taking advantage of free stuff offers? Here's what you need to know!"

PFCreditCards presents How to Beat Priceline and Get a Winning Bid posted at PF Credit Cards, saying, "Priceline's name your own price program is amazing. Here's what it is and how to use it to your advantage."

Abigail Perry presents February 15th: The frugalist's Valentine's Day posted at i pick up pennies, saying, "Why we should take a new approach to Valentine's Day"

Celes presents How Rich Are You? posted at EmbraceLiving.Net, saying, The intention of this article is to invite everyone to rethink the way they look at their money"

Wenchypoo presents A Blast From the Past: "Luxury" Sacrifices posted at Wisdom From Wenchypoo's Mental Wastebasket.

Insurance

Ben presents 7 Things Your Insurance Company or Agent Won't Tell You posted at Money Smart Life.

Matthew Paulson presents Beware the Insurance Sales Pitch posted at American Consumer News.

Investing

Kelli-Ann Hopewell presents 4 Steps To Effective Forum Marketing posted at Internet Business Make Money Online With Welly Mulia.

Deposit Accounts presents Should You Keep all of Your Accounts with One Bank? posted at Deposit Accounts.

Raily Arena presents Sell Your Own Home - Despite the Lousy Economy posted at How to Sell Your Own Home.

Frank Curmudgeon presents ETFs and Other Mutual Funds posted at Bad Money Advice.

Leaving The Folks presents Avoiding Resume Mistakes posted at Real World Advice, saying, "Given today's tough job market, it is important to not have any mistakes on your resume."

Joe Manausa presents Safe Home Buying Process In Tallahassee | Tallahassee Real Estate Blog posted at Tallahassee Real Estate Blog, saying, "If you have ever purchased a home, then you know how much emotion goes into the selection process. Buying a home is not like buying something off the shelf at a consumables store, rather it is a process in which we determine how we will be living our lives in the near future. A prudent buyer knows this and therefore should create a process that does not allow emotion to initiate the home selection process."

The Investor presents Why investing in overseas markets will diversify your portfolio posted at Monevator.com, saying, "Don't keep all your eggs in one basket. Putting money overseas diversifies your stock market and currency exposure."

Other

Livingalmostlarge presents The $155k Dog posted at LivingAlmostLarge, saying, "Would you pay $155k to clone a dog?"

Jacquelyn presents The Wise Parent & Child Money Guide posted at WParent.com - Wise Parenting Guide, saying, "Give your child an introduction to the subject of money by reading this article together."

NetBiz presents Second Chance Checking Accounts: Banks That Do Not Use ChexSystems posted at Money Galaxy - Make Money | Save Money | Invest Money, saying, "For those who need a second chance"

Lazy Man and Money presents Why is Moderate Inflation Desirable? posted at Lazy Man and Money.

Jim presents How to Negotiate A Severance Package posted at Blueprint for Financial Prosperity.

Chris presents How to Spot a Scam posted at Financial Reflections, saying, "Can you spot a scam? Here are some strategies to help."

DebbieDragon presents Things to Think About When Setting Your Prices posted at Freelance Sprout.

Steve Holder presents Head Injuries - Injury Claim Basics posted at Head and Brain Injuries, saying, "For someone involved in an accident, knowing how to file an injury claim can make a big financial difference."

Saving

Raymond presents Second Stimulus Check For Obama 2009 Economic Stimulus Package? posted at Money Blue Book.

The Shark Investor presents Strategies For Raising Funds: Saving posted at The Shark Investor, saying, "All time strategy for raising funds"

Abigail Perry presents Saving for retirement on $20 a week posted at Ms. Money Savvy, saying, "i pick up pennies"

MBHunter presents Let’s keep the savings rate going up posted at Mighty Bargain Hunter.

Stocks

Robert Hazlewood presents A Potential 100% Investment Return In Weeks posted at Ways to Survive Life, saying, "Information on investing in 2x and 3x ETF's"

Adam presents Swing Trading Strategy: Touch and Go! posted at Pimp My Trade, saying, "This article outlines a winning swing trading strategy that I use over and over again to pull in money from the stock market."

Taxes

Gavin R. Putland presents Stupid property owners posted at LVRG Blog, saying, "Property owners' attitudes to taxation inhibit growth in property values.

DebbieDragon presents Tips for Choosing the Right Tax Preparation Service posted at American Consumer News.

Thanks again to everyone who participated! Please remember to link back to this post. Check back next week for a new edition.

Lagging vs. Leading Indicators

100,000 more job losses than expected... and what does the market do? It rallies over 200 points. So why did this happen? Let's go back to yesterday about 30 minutes before the markets closed. Senate Majority Leader Harry Reid told media outlets he expects the bill to pass as soon as Thursday night. Obviously the news came minutes before the market was closing so investors did not have time to look into the story. As the story developed more, it became clear that Democrats and Republicans were nearing a compromise on the bill and it could be passed at any day now. This was good news as there had been a lot of talk in the news about how the bill was having trouble in the senate. However, we would have to wait until Friday to see the positive impact it would have on the market.

But what other news was coming out on Friday? Unemployment numbers! And boy oh boy were they bad.  Many economist expected a loss of 500,000 jobs in January and it ended up being way more - 598,000. 

So today we had a showdown in the market. Unemployment vs. Stimulus Bill.  On one side, we had really bad news (unemployment) and on the other side we had good news (stimulus bill). Which one would win? Well as seen with the 200+ point rally in the Dow Jones, obviously the stimulus bill won, but why? This bring us to a fundamental concept of the stock market. The stock market looks to the FUTURE. The stock market doesn't care about the past, it cares about what is going to happen in the future. Investors wants to know how the revenues and performance of a company are going to be in the future. With stocks, you are trying to predict how companies are going to perform in the future.

Unemployment rate is a lagging indicator, meaning it is something that comes out after it already has happened. The unemployment data is giving us data about a time period that has already passed. The stimulus bill is a leading indicator, meaning it is something that is going to impact the future, but has not happened yet. We know billions of dollars in  spending is going to occur, but it will occur in the future, none of that money has been spent yet. Since the market is trying to predict the future, a leading indicator is much more important that a lagging indicator, which is why you saw that news of the stimulus bill caused the market to rally, and the new dismal news of unemployment did nothing. With the stimulus bill, investors can look to the future and see that it will cause the economy and business revenue to rise, which is why we had the rally today.

Remember, don't get caught up in lagging indicators, they can often give you a misperception of what is going on, leading indicators are a much better way to predict what a company is going to do in the future. However, that isn't to say that lagging indicators don't have an impact on the market, obviously unemployment is one of the largest influences on the market, but that usually a leading indicator is more important.

 

Stocks For The Long Term

A friend of mine asked me today what some good stocks to invest in for the long term were and it occurred to me that I have never wrote about that here. Lately, we've been focused on short term trades so today I wanted to share a few picks for the long term.

I'll call this The Penny Daily's Long Term Portfolio and I'll be adding more and more stocks to it as time passes by. And by long term, I mean stocks that will do well in the 5+ year range.

So what are the stocks I would have in my long term portfolio?

1. Caterpillar- I like Caterpillar because it is the biggest manufacturer of construction vehicles. And years from now, the emerging economies will continue to grow (look past the difficulty they are having now) and Caterpillar will be a huge beneficiary of this. Emerging economies are going to be building more offices and infrastructure, and the first thing they will do is put in orders with Caterpillar for equipment. It is an excellently run company with a nice dividend. As emerging economies and developed countries continue to grow, watch for Caterpillar's earnings to sky rocket.
   
   
2. Pepsi Co. - I like the direction management is moving Pepsi in. Pepsi is looking to get healthier products, and as health seems to be all the craze, Pepsi should do very well in the years to come. Pepsi has been acquiring healthy food companies like Tropicana. Indra Nooyi, Pepsi's CEO, is very serious about growing Pepsi Co., and ensuring it fits the new demands of consumers. Look for Pepsi to perform exceptionally well in the years to come.
   
   
3. Verizon- Verizon is a company that is going to benefit from a growing global economy. As emerging economies become wealthier and wealthier, Verizon is going to find a global market for its products. And as the population of the world grows, people will look for new global communication solutions, and Verizon should be leading the way. Their new FIOS T.V is sweeping America. FIOS is what sets Verizon apart from its competitors. Verizon has shown it is not only constrained to the telecommunications industry, they are looking to grow their business in different ways, including T.V and the internet.
   
   
4. Colgate-Palmolive- This company has products that are here to stay. People will always need personal hygiene products and home care products. As the population of the world increases, Colgate-Palmolive's earnings will increase as well. Colgate-Palmolive is unique from its competitors, including Johnson & Johnson in that it is not in the pharmaceutical business. While you might think that is a negative, it’s actually not. With the new Obama Administration in office, new health care policies will favor generic brands of medicines, rather than the typical brand names. J&J and other pharma companies will take a hit when consumers move away from their medicines and go to generic brands.
   
   
5. General Electric- GE is leading the way in new energy. GE windmills have seen a growing demand and as the economy picks up, people will be looking to GE for new environmental solutions, and I have no doubt GE will deliver. GE is going to see its business sky rocket once we come out of this economic mess and energy/environmental solutions take front stage. GE is one of the best companies in America, boasting a AAA credit rating and a huge dividend. GE is also big enough and has enough cash to buy any competitor, so they are here to stay.
   
   
6. IBM- There is no doubt that this is the era of information technology, and IBM is the leader. IBM is growing its business in all directions, and is breaking frontiers in technology. IBM is not only a tech company, its quickly getting its hands into infrastructure. IBM is doing everything from building a more efficient grid to health care solutions. The world is moving in the direction of utilizing the internet and making it more prevalent in everyday life. IBM is going to be in that business.

All these companies have something in common. They are huge companies that are not going anywhere, hence protecting your investment for the long run. The world is changing and new consumer demands are developing, all these companies are going to be in those industries. These companies will offer good dividends, giving your investment a steady income.

This is just the start of The Penny Daily's Long Term Portfolio, I will be adding more and more stocks that I think will give you safe, good returns for your investment.

What Happened To The Rally?

Today demonstrated once again that the market does not seem to be able to sustain a rally. Lately, every time we see a rally, the next day the Dow Jones comes back with a 100+ loss. If you are trying to trade stocks, hoping to catch a rally, you probably won't find any luck. Don't invest in stocks because you simply want to trade them, invest in the companies they represent because you think they have business models that will be able to last through the recession.

I wrote about how investors should stay away from Kraft in a post last week because people would flock to generic names over brand names. And surely enough, today Kraft announced that it missed its earnings and the stock took a pretty big hit. Not to mention its poor earnings sunk the market. I see so many "analysts" telling people to invest in recession proof stocks like Kraft, but I want you to be aware, that just because they make food doesn't mean they are recession proof. Not only do you need to look at what their product is, but you need to keep in mind the prices of their products compared to their competitors. Kraft sells macaroni for a much higher price than a generic grocery store brand of macaroni. Sure, in a recession people are going to flock to macaroni, but not the brand name ones.

So when you go to invest in recession proof stocks, remember not all of them are equal, go for generic brands instead of brand names.

Don't Forget About Underemployment!

You have heard me talk about the importance of unemployment over and over again. It is the single most important factor in the performance of firms you might want to invest in. Not to mention it might keep you up at night worrying about whether or not your job is safe.

If you are an investor, you keep a tight eye on unemployment because if it keeps rising, you can predict that the majority of firms are not going to grow their earnings since people won’t be spending as much money. Investors use unemployment as a way to tell what is a fair value to pay for shares of a corporation. For example, if the unemployment rate is going up, the value of shares of expensive retail stores is going to go down because unemployed people are not going to be wasting money on expensive clothes. More importantly, unemployment causes fear. Even though the rate is 7.2%, which may not seem like a lot, it causes fear in those who are employed that they will lose their job. This fear causes them to stop spending money because they need to save money in case they become unemployed.

But one thing that many people miss out on is underemployment. Underemployment is when people who are looking for full time work can only get part time jobs, the hours people are working a week are getting cut by employers, or when people who are qualified for high paying jobs are working for lower wages because they cannot find anything else. Underemployment hit 13.5% in December (Bureau of Labor Statistics), bringing the total unemployment and underemployment to over 20%.

Underemployment is just as bad as unemployment because people who are working for less money or have seen their hours cut down are penny pinching the same way unemployed people are. The underemployed are just squeaking by, they are still buying the same essentials that the unemployed are, the only difference is they do not have to tap into their savings. From a stand point of firms, underemployed Americans are just as bad as unemployed because both groups are ceasing to spend money.

The reason I want you to be aware of underemployment is when you are looking for what a fair value for a stock is, the price should not be only discounted for 7.2% unemployment, but also for the 13.5% underemployment. Remember, this Friday the numbers for unemployment/underemployment come out for the month of January.

Hold Your Horses On The Stimulus

Today more Senate Republicans were in the news saying they wanted an overhaul in the stimulus package. I've been wanting to write about what companies should be able to grow their earnings because of the stimulus plan, and therefore making them good investments. However it's been difficult because everyday some Senator gives a new plan. That is why I want you to hold off on making any investment play off of the stimulus until a bill is actually passed in both houses. 

Why should you wait? You heard it is going to include infrastructure and tax cuts so why can't you go ahead and make investments based on that? I've seen a lot of people telling investors that Caterpillar is going to do really well from the stimulus package. But that may not be the case. You need to look at what TYPE of infrastructure is being spent. For example, Republican Senator Bob Corker said today he wanted to increase infrastructure spending. So... well that is good news for Caterpillar because they will have more business right? No. The increase in infrastructure spending is for the military. Building new jets and tanks will not increase Caterpillar's business. So while you might think an increase in infrastructure spending is good for Caterpillar, it really is not. So do not be fooled into paying a high amount for infrastructure stocks. If an announcement is made that infrastructure spending is going to be increased, investors might send stock prices soaring higher than they should be because they do not realize just how little is being spent on each sector.

The infrastructure spending is beginning to be very widespread, meaning no particular sector is getting enough money to really jump start the companies in it. That doesn't mean that no company will benefit, but that you should wait until more light is shed on what EXACTLY the money is being spent on. Also, if the spending becomes too widespread, invest in smaller cap companies because while a billion dollars might not stimulate a huge company, it could really have an impact on a small cap firm.

Festival of Stocks #126

Welcome to the 126^th Festival of Stocks! There were a lot of great articles on a wide array of topics. If you are featured in this edition, please make sure you link back to this post. Thanks!

Editor's Choice: Here are some of my favorite articles I found particularly interesting.

Fat Pitch Financials explains what special situations and workouts are and why you might want to consider investing in them in Special Situations or “Workouts”.

The Curious Investor gives a look at how the current market turmoil has lead to possible mispricing in the retail sector in Irrational Retail Valuations.

Trade In Groups tells us why we should short the market in All Data Points to Getting Short the Market.

Onto the rest:

Learn The Stock Market And How to Trade challenges you to not have at least one "ah ha" moment while reading through Stock Market 101, a great review of the basics.

Dividends Value analyzes a diversified investment manager serving individual and institutional investors through offices around the United States in Stock Analysis: Legg Mason, Inc.

Want to know whether Zecco or TradeKing is better? Investing School compares the two in the article Zecco vs TradeKing Discount Brokerage Comparison Review.

MagicDiligence discussed Volcom in Magic Formula Stock Review: Volcom (VLCM); the company is smartly run, financially sound, and has plenty of growth opportunities overseas. It's also extraordinarily cheap!

The Digerati Life discusses Madoff and the impact of investment scams in The Biggest Stock Investment Scam In History: How Does It Affect Us?

College Analysts submitted Freeport McMoRan (FCX) Earnings and Conference Call Notes, analyzing Freeport McMoRan.

The Personal Financier discussed whether valuation and risk measurement were evil in Valuation and Risk Measurement Models under Heavy Criticism – What Went Wrong?

My Wealth Builder presents 1/25/09 Bottom Fishing Portfolio - Changing Strategy to Buying and Selling Options, which details their new strategy - sell put options or buy call options when they think a stock in near its bottom.

To read any past posts, see future hosts or apply to host a future edition, check out the Festival of Stocks homepage. If you'd like to submit an article for a future edition of the carnival, here is the carnival submission form.

What To Invest In If The Economy Gets Worse

What companies should you be investing in if you think the economy is only going to get worse? Well you might think that's a stupid question, why would you want to invest in companies when they economy is going sour? Well believe it or not, there are some companies that might actually fair well. When investing, you can take two strategies. First, look at companies that will do well during the recession. Some of my favorites are Altria, Kroger, American Public Education Incorporated, and Advanced Auto Parts.  

How did I pick these companies? Well you want a company that has a product that people are not going to drop during a recession. That's where Altria comes into play. Altria Group owns Phillip Morris USA and John Middleton, amongst other cigarette manufacturers. Cigarettes are one of the things that most people will not stop buying when they look to cut down costs. Altria should be able to post steady revenue, which is so rare in a recession that people will be willing to pay more for the earnings (P/E ratio) which will send the stock price higher. They also have a nice dividend (more about this later). So pick a company that has a product people are not going to cut back spending on during a recession.

Kroger is another stock that will perform well. Kroger is a grocery store and when people cut back on spending, they stop going out to eat and start going to the grocery store. But there's another reason Kroger and other grocery stores make a good buy. You might buy Kraft or PepsiCo because, well if people are cutting back on eating out, they will buy Kraft/PepsiCo's products so they can eat at home. But that's not the case. These companies are brand names, which are more expensive. Often grocery stores offer their own brands, which are generic and therefore much cheaper. That's why I would buy a grocery store over Kraft. Because not only is Kroger going to see increased revenue just from the fact that people are flocking to the grocery store, but when people go to buy macaroni, they aren't going to reach for Kraft, they will go for the cheaper store brand. 

I talked about why I like American Public Education Incorporated in an earlier post, but just in case you missed it, I'll explain it again. As more and more unemployment occurs, people are going to be left trying to find out what to do with their time. One of the best ways to allocate your time is to further your education so you have a better resume for employers. But most the people who are being laid off have families and thus going to a college campus somewhere is not an option. But online school is. That's why I like American Public Education Incorporated, because they are in the online education business and their revenue is going to increase as more and more people become unemployed and enroll into online school.  So investing in online colleges might be a good idea.

I also talked about car repair companies in the same post, but I'll also mention them again. Advanced Auto Parts fits the idea that since people are cutting down on spending, they will not buy new things, but then they have to get things repaired instead- cars, for example. You may not be able to afford a new car right now, but you still need one. As less people buy new cars, the car fleet in America is getting older, and since most Americans need cars, they will have to get them repaired. Companies like Advanced Auto Parts and other car parts/repair companies will see their business revenue increase as more and more people bring their car in for repairs and new parts instead of buying new cars.

These are all companies that will play off the poor economy. You also have the option of investing in solid companies that have high dividends. Like General Electric, Johnson & Johnson, Bristol Myers, and AT&T. These companies all provide high dividend yields. The idea behind this strategy is that these companies are solid, well-run companies. In a bad economy, their share prices won't go up, but at least you can still make money off of the high dividends until the economy improves and their stock prices recover. But make sure the dividend is safe, if a company has loads of debt, no cash, and is paying a 20% dividend, obviously something is not right and they will end up cutting their dividend. Companies like Bristol Myers and GE have enough cash to pay off their dividend, so they make for a good investment.

I am not saying you HAVE to invest in these companies, but it is the strategy behind how I chose these companies that you should look at if you think the economy is not recovering anytime soon.

Be sure to check back tomorrow if you want to know what to strategies to take when investing if you think the economy has already bottomed. The next few days I will continue to give different investing options for different economic forecasts.

Different Stocks For Different Strategies

Everyone has a different opinion of what direction the market and economy is going to go. Some think we are headed into a depression, some think we've seen the worst of it, some believe certain sectors are ready to take off. In the next few days, I will take a look at a few different strategies you can take when investing depending on what you think will happen. I'll show you what kind of companies to invest in depending on what you think will happen in 2009. Also, feel free to give me your opinion of the economy in 2009 and I will be glad to give you some picks on what stocks work with your forecast. 

Don't Jump Into Every Market Ripple

So today we had a nice rally of 200 points in the Dow Jones, thanks to a strong performance by bank stocks. But that doesn't mean anything. Tomorrow we could see a 300 point drop because someone reported bad earnings. The bank stocks got a lift from news that the Fed will keep rates at almost 0% all year long and the Obama Administration is moving quickly to buy up more toxic assets from banks. Additionally, House Democrats leaders announced today that the Stimulus Bill is expected to pass the House. 

While this is all good news for banks, don't be fooled by this market ripple. Today Starbucks and others announced even more layoffs. As companies continue to release earnings, they keep announcing massive layoffs to help cut costs. Don't overlook this. As more layoffs occur, companies based on consumer spending will continue to see their earnings deteriorate. The job losses from this week alone are really adding up. 

Lastly, the Stimulus Bill is supposed to pass the House, but that does not mean it will pass the Senate. Democrats do not have enough votes to bypass a filibuster, and right now Republicans seem to hold strong opinions against the excessive spending of the bill and a lack of tax cuts. The market is expecting the bill to pass, but it will probably find resistance in the Senate. And if it doesn't pass the Senate, do not expect the market to take it well. Having said that, I don't think the bill will never pass, I just don't think it will pass right away. Republicans and Democrats both agree that some kind of stimulus package needs to be passed, but not on how it should take shape. And I have faith that President Obama will be able to stretch across the aisle and bring both sides together. If the bill doesn't pass the first time, it will present a great buying opportunity as the market will likely push down prices.  

Keep following how strong Senate Republican opposition is to the bill is so you can predict if the bill will get passed or not. And amongst all the news of stimulus and banks, do not lose sight of unemployment.

Is It Time To Get Back In The Market?

Soon enough. I would say if you want to get back into the market, do so on Feb 9th. After this week, we will have cleared the bulk of earnings reports that are coming out and we will have seen Friday's CRITICAL GDP report. The first week of February will be plagued by talk of unemployment as the January unemployment number comes out on Feb 6th. After all this has passed, we will have a much better idea of which way the economy is heading, whether it is getting worse or not. We will have an idea of how bad unemployment is getting, whether the GDP is contracting or not and as earnings come out, you will know what companies are forecasting for 2009. 

During earnings season, you may be inclined to solely focus on the earnings of the previous quarter, don't be. This is a lagging indicator. Instead, focus on what the company is saying about the rest of 2009. If they are not giving any estimates for 2009, that may be a sign that management thinks its business is going to suffer and the numbers will be bad. If management thinks it will have a strong 2009, you might want to look into the company. No one knows the firm better than its management.

You can better assess what stocks to buy, when to buy them, and at what prices to buy them at. Do not be impatient, if you get into the market now, you might be paying too much for a stock as weak unemployment numbers could hurt the company's value.

A Few Important Dates

I hope everyone is enjoying their weekend! I just wanted to post a few important dates that are coming up which should move the markets. These is for the week of Jan 26th-30th.

On Monday we will see existing home sales figures. McDonalds, Caterpillar, Tyson Foods, and Kimberly-Clark all report earnings before the bell. Texas Instruments and Amgen both report earnings after the bell.

On Tuesday we will have the consumer confidence number out. Dupont, Verizon, AK Steel, Peabody Energy, EMC, Badger Meter, US Steel, Nucor, and Valero Energy all report earnings before the bell. Yahoo, Sun Microsystems, Gilead Sciences, and Norfolk Southern all report earnings after the bell.

On Wednesday we have the Federal Reserve rate decision and the mortgage applications number from the Mortgage Bankers Association. Pfizer, Boeing, ConocoPhillips, AT&T, Wells Fargo, Hess, and the New York Times report earnings before the bell. Starbucks, Qualcomm, Boston Scientific, Boston Properties, and Ameriprise Financial all report earnings after the bell.

On Thursday we will have durable goods numbers and new home sales. 3M Company, Altria, Fortune Brands, Auto Nation, Celgene, Starwood Hotels, Eli Lilly, AstraZeneca, Colgate-Palmolive, Occidental Petroleum, Wyeth, International Paper, Raytheon, and Sony all reporting earnings before the bell. Amazon and Monster report after the bell.

Finally on Friday, we have University of Michigan's Consumer Confidence Index. Proctor and Gamble, Honywell, Cheveron, Simon Property, and Gannett all report earnings before the bell. Exxon Mobile reports earnings mid-day.

These earnings will be horrible, and end up sinking the market next week. We should re-test, if not break the previous November and October Lows we had. It is not a good idea to invest in the market next week, wait for the new low in the market to come where you can find better bargains.

Also very IMPORTANT: On FEB 6TH unemployment numbers for the month of January come out.

General Electric's Dividend, Is It Safe?

Earlier today, earnings came out for more companies including conglomerate monster General Electric. Just a quick take on what GE's earnings mean for you. First off, General Electric reported a 40% loss in profits, takings its stock down another 7%. Its obvious GE's Capital branch hurt revenue, however GE also stated low sales in its Consumer Electronics branch. GE Consumer Electronics is a reminder that consumer spending is still down, do not believe analysts when they say consumer spending is coming back. Also, earlier today GE CEO Jeffery Immelt came on CNBC and stated that they are standing by their dividend of $1.24 for the year of 2009. Many financial analysts are coming on T.V saying GE is going to have cut the dividend, but that might not be the case. People forget that GE Infrastructure actually had an increase in revenue this year, their windmill technology has been skyrocketing and will provide revenue for the dividend. As the Obama Stimulus plan goes into action, watch for GE to receive a good amount of business in the second half of 2009 in its industrial arms. The cash GE receive from its industrial arms can back up its dividend. GE also has over $40 billion dollars in cash. CEO Immelt is very serious about maintaining the dividend and satisfying GE investors. Let me say it again, Immelt is VERY SERIOUS about keeping the dividend. He think it is the best way to allocate GE's cash in today's market. I think GE will maintain its dividend, making it an excellent dividend investment for 2009. GE is yielding almost 10% percent right now. With share prices of all stocks taking a beating this year, GE's 10% dividend might provide a nice safe haven.