Commodities Bull Market – Crude Oil and Oil Companies Uptrending?
As many of you already know, the price of crude oil was in a freefall from $140 a barrel to $35 a barrel from July 2008 to December 2008. For any of you that were long crude oil during this drop, I am sure it was very hard to stomach the pain of watching your money dwindle. For those of you who owned oil companies, the pain was even worse as some of these companies lost over 70% of their value in a few short months. Luckily, you are likely to see some of those gains come back in the near future.
The price of crude oil has increased from $35 to $55 since the beginning of 2009 and we have not hit the summer driving season yet. There is no doubt that the crude oil market was harshly oversold during the complete liquidation of assets that took place in 2008. Commodities were not fundamentally impaired in any way and should not have seen such steep declines. Luckily for us, this gives us an amazing buying opportunity.
The recent drop also changes the current psychology of driving. When gas fell under $2 a gallon, many Americans stopped worrying about the price of gas and began to drive much more. With gas being so cheap, it no longer made a huge dent in their wallet. Well, as we fast forward to increasing fuel prices, there will be less fuel on the market as the entire world has been binging on the lower fuel prices. Even though the economy has been horrible, there is no way to travel without using crude oil unless it is by foot or bike. I think we all know that most industrialized nations are not going to travel by foot or bike.
This is great news for the long term outlook of crude oil. I have been a bull on crude oil since 2005 and will remain a bull for the next decade as it is very difficult to explore and find crude oil. Now that the profits of oil exploration companies are being pinched, it will make even harder to discover and pump oil. This means that less and less supply will reach the market so the prices must go up at some point. I would currently suggest investing in the DBE rather than oil companies traded on the stock exchange.
Commodities Bull Market – March 22nd – Gold Bounces off 50 Day Moving Average
As many of you know, I have been a commodities bull for the last four years. After researching long valuation waves and the decade long trends that financial markets tend to trade, how could you not be a commodities bull? Looking at recent history, we know that commodities double bottomed in 1999 and 2001 which started a strong uptrend. The commodities bull that began in 2001 is likely to continue for at least several more years if history repeats itself. Most commodities bull markets average 15 years in length. This means we will see the commodities bull run until 2016.
On a more recent note, we have witnessed the price of gold skyrocket after Ben Bernanke and the Federal Reserve Bank injected $1.05 trillion into long term treasuries and mortgage backed securities. The reason gold skyrocketed is due to the fact that the US Dollar is likely to decline in value with over $1 trillion more being dollars being printed and injected into the economy. Gold rocketed from $880 to $960 in a matter of hours after the announcement by the Federal Reserve Bank. This does not come as a surprise as the 50 day moving average for gold is currently $912. Gold spent about half a day under this level before the strong bounce to $960.
This is great news for gold bulls as the 50 day moving average will now continue to hold as support in the current uptrend. It is an uptrend that started in mid November at $700 and has carved its way upward to $960. A 37% gain in four months is something to cherish in the current investing environment. Making the current gold uptrend even more exciting is the fact that we have yet to break into new highs. Once we top $1050 and gold hits all time highs, we should see quite a run up on mere excitement from retail investors.
One thing that always worries me about bull markets is when EVERYONE thinks it is a smart investment. Luckily, we do not have this at all in commodities. What is amazing is the fact that there are so many commodities bears right now. With the value of the dollar declining and a great chance of hyperinflation, how can so many analysts remain bearish? I will not fight this battle as I am quite excited about their bearishness. We will continue to see gold and other commodities grind higher and the analysts will find reasons that the bull should end or is already over.
I will continue to invest in gold as I feel the gold and commodities bull is only half way through its run. Even more exciting to me is the fact that the parabolic run up in prices at the end of a bull market is when the greatest gains are made. From 1979 to 1980, 14 years into the previous commodities bull, gold rocketed from 200 to 850 in ONE YEAR. I honestly hope this does not happen in the current bull as this will show the grand finale to our commodities uptrend. Hopefully we will continue to move higher with consolidation. When we see a move of over 300% in one year, I will get out and put my money back into equities.
Luckily, that is not the case yet, so lets continue to enjoy the uptrends that gold and all commodities are in. Silver is an interesting investment right now as it tends to make much more drastic moves than gold, but goes in the same general direction. Will we see silver shoot up to over $20 an ounce in the near future? Let’s see what the next week holds.
Each Sunday I will provide my knowledge on the commodities bull market. Right now, commodities continue to look like a great investment. Until we see those parabolic moves upward, I would be an investor in this arena. Make sure to bookmark the link below to read the column every Sunday.
Retail Outlook – Prescription Sales Dry Up
Retail sales of prescription drugs slowed to their lowest increase in 47 years in 2008; prescription sales grew 1.3% to $291 billion. In 2007, sales were up 3.8% while 2006 showed an 8% increase in sales. There are many reasons we have seen prescription sales dry up, but the number one reason is definitely the state of the economy.
Also, after a brand name drug’s patent expires, a generic can be created and push the price down as much as 90%. Many of these generics are also available over the counter (OTC). With the troubled economy, patients are much less likely to pay the extra money for brand name drugs; they are much more likely to get an OTC or generic.
Prescription retailers Walgreens, CVS and Rite Aid has seen the effects of this recession. When looking at this stock chart, we see that CVS and Walgreens are down 33% and 37% respectively since January of 2007. Rite Aid continues to tetter on the brink of bankruptcy as their stock price has fallen 87% in the same time period. You may say that being down 33% and 37% since the beginning of 2007 is not that bad when compared to many other companies, especially the banks and financial institutions.
That is correct, but these companies are supposed to be recession proof as they provide necessities such as prescriptions, toothpaste, tissues, laundry detergent and canned food among other staple merchandise. This makes perfect sense as Americans are scaling back and only buying these staple products. The problem is that Americans are cutting back so much that they are buying even less of these staples. They are cutting pills in half and only buying sale and coupon items.
Working in retail, I see first hand just how much people are trying to save. Many times, I will see a transaction in which an item is rung up for $4.99. The customer then uses a $2.00 coupon from the Sunday newspaper. The customer also uses one of the coupons they got directly from the retailer from a previous purchase. Common instances of this are “Save $3 on your next purchase with a $20 purchase.” Individuals are saving these up and getting items free in the future. In essence, that $4.99 item is getting sold for mere pennies which goes towards taxes. Obviously, prescription retailers are making no money off these purchases.
On the pharmacy side, each retailer offers $25 for a transferred prescription. Once again, consumers are finding a way to get free items. This time, they will transfer one of their prescriptions from Rite to CVS and get the free $25. They then use the free $25 and coupons they have saved at other pharmacy retailers. After the prescription has been filled, they then transfer it from CVS to Walgreens and get another $25. Just imagine if you have 10 prescriptions for three family members. You can add up money quite quickly by doing this.
Unforunately, customers are getting away with this as customer service is a HUGE push for these companies right now. They are willing to do whatever the customer wants to get them in their doors. Ultimately, this is going to cause their stock prices to decline even further as they cannot make money by giving away merchandise and prescriptions for free. Until these retailers realize that the customer is not “always” right, they are going to struggle to profit in this economy.
There is no way I would be an investor in any retail pharmacy at this time. They are doing their best to turn things around by giving great customer service, but it is coming back to bite them. Too many people have learned to screw the system which results in lost money for these companies. When the economy turns around and the unemployment rate declines, we could see a bounce in this sector, but until then, Americans will continue to find a way to save money and pay little to nothing at these retailers.
Each Thursday I will provide a retail outlook so make sure to bookmark the page below and return for a direct prespective of the retail industry.
Short the S&P 500 at 803
This bear market rally has been very strong with gains of over 20%. Now with the market throughly oversold, it is time to short the S&P 500 at 803. The 50 dma is exactly 803 and that is where the S&P 500 currently stands. I would be very suprised to see the market eclipse this mark with how oversold we are. We should see some steady losses in the near term.
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President Obama Mortgage Bailout Plan – How Much Will it Save Me?
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Foreclosure Prevention Program: Am I Eligible?
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Where Do I Invest During a Bear Market?
Best Rafting Company on the Nantahala River – Brookside
The best rafting company on the Nantahala River has to be Brookside Campground and Rafting. If you want to get away from the corporate atmosphere and want to enjoy the feeling of a family owned business, Brookside Campground and Rafting is your place. Their prices are more than reasonable and you do not have to sit on a bus holding your paddle the whole time. To beat it all, you can walk in without a reservation and get on the Nantahala River at your leisure, not the rafting companies leisure. Located only one mile from the Nantahala River Put-In, you can literally be on the river within five minutes of arriving at Brookside. To get more information, call 1-800-848-RAFT or go to www.brooksiderafting.com
What is the Easiest Way to Obtain and Fix My Credit Score?
When applying for any type of loan, your credit score plays a large role. Many individuals are disqualified from getting a mortgage because of delinquent payments that they are unaware of. It is wise to get a credit report at least once a year. You are entitled to a free credit report each year. Simply go to www.annualcreditreport.com and fill out the necessary information. Studies have shown that over 75 percent of credit reports contain at least one error. Almost one fourth of all credit reports contain inaccurate information that is serious enough to severely jeopardize your borrowing ability. What is the quickest and easiest way to fix your credit score?
As stated early, you must obtain a credit report first. Make sure to read the fine print as many credit agencies automatically enroll you in one of their premier programs and you do not realize it for several months. You will notice a bill for $15.99 from that particular company if you did not decline the offer from the outset. Many credit companies will not refund this amount either. After you receive your credit report make sure to look at your entire account history. Even if you think you have been deligent about paying off your debts on a monthly basis, you never know what might have been reported.
If you have any accounts that are deliquent or key derogatory, meaning the debt has been assigned to a collection agency or an attorney, you will want to verify the information is accurate. If you feel this information is inaccurate, you need to go to the source rather than the credit company. You do have the ability to go through the credit company and file a dispute but it is much quicker and easier to go directly to the collector of the debt. The easiest way to find contact information for the debt collector is to Google the account name. Any reputable debt collection agency will be brought up by Google. Contact this company immediately and decide to settle your debt or dispute it.
Many people feel if the debt is under $200 it is not worth the trouble to fight the battle to have the debt cleared; it is much easier to just pay it. If you do decide to pay it, it will greatly increase your credit score, sometimes in excess of over 100 points. If the debt is an excessive amount, you may need to contact your attorney to find out what your options are. Having a key doragatory account on your credit report can drop your credit rating by over 100 points! This can mean the difference in a 5.25% mortgage rate and a 8.25% mortgage rate.
With that knowledge, it is extremely wise to check your credit report periodically and make sure that all your deliquent debts have been settled before you decide to apply for a loan. Often times, the lender will see these unpaid accounts on your credit report and deny you with no explanation at all. If you have received credit reports on a consistent basis, you will have leverage when demanding to know a reason why you were denied. So go to www.annualcreditreport.com and get your free credit report today. Try to clear up any of those credit problems you may have before you decide to apply for a loan.
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President Obama Mortgage Bailout Plan – How Much Will it Save Me?
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Foreclosure Prevention Program: Am I Eligible?
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Where Do I Invest During a Bear Market?
U.S. Stock Market – A Yard Sale for the Rich?
After a 6% rally, one must wonder if it is sustainable. Is this a bear market rally or the beginning of a bull market? No one will know that answer until the gains and losses have already been sorted out. The one thing that is certain is that that are many “valued” companies that have stock prices under $10 a share. One analysts called it a “yard sale for the rich.” This seems to be the case as many great American companies are trading at a P/E ratio below 10.
While P/E ratios are not the be all, end all of stock picking, it is very important to value investors. If a company is earning $12.00 a share and is only trading at $50, a value investor is likely to jump all over this opportunity: a P/E ratio of 4.16. There are many stocks that are currently in this P/E range in the current market. Manitowac traded at $45 a share less than a year ago and now trades around $3 a share making its P/E ratio approximately 5.
This is a perfect example of a huge opportunity for those with money. The United States stock market is a yard sale for the rich. The NYSE and NASDAQ are littered with stocks trading at P/E ratios under 10 which was unheard of three short years ago. It is true that the stock market is the value of FUTURE earnings, but can these stocks really go down even more than they currently are? Some investors have never had this opportunity in their entire investing careers.
If Manitowac gains just HALF its value back, you would have a 650% gain on your investment had bought today. This is how many investors are looking at the current market. On the flip side of this argument is the fact that future earnings look very bleak. Some companies do not expect to produce a profit for three to five years after the credit crisis is over. With that in mind, the best time to get into the stock market is when everyone is pessimistic and bearish. When every newspaper makes the claim that the US Stock Market will never produce profits it is a great time to invest.
Is that time today? You must ask yourself that question before you put any capital into the current market. The overall pessimism does seem quite low, but are there still bulls out there? If there are bulls, we still need to see a steeper decline until every single person is bearish. This will make you a ton of money as a true contrarian investor, ask Jim Rogers.
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President Obama, This Stock Market Decline is YOUR Fault!
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Obama Mortgage Bailout Plan Promotes Bad Financial Behavior
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Foreclosure Prevention Program: Am I Eligible?
Why I Wrote “President Obama, This Stock Market Decline is YOUR Fault”
I wrote President Obama, This Stock Market Decline is YOUR Fault because I believe it to be true. First of all, I would like to reiterate that I have no political party affiliation. I hope, just as much as you do, that we get through these troubling times as quickly as possible. I do not hope that President Obama is unsuccessful. I actually hope he is greatly successful and leads the United States to one of the most prosperous times in our history.
On November 5th, I wrote, “I personally think you are set up to fail as a president because over one third of the nations invested wealth has disappeared over the last year. It is impossible to illustrate how important this is. With stock market psychology so negative, it is going to be extremely difficult to get money reinvested into our economy; even with YOUR economic plan.” On that eventful day, the Dow Jones Industrial Average closed at 9635. We are now 31% lower.
I do not feel that the entire stock market decline is President Obama’s fault; that is just ludicrous. He was not even a viable candidate to be the next president when the housing bubble burst and the market started its steady decline. Much of this is the fault of previous administration as mortgage loans were given to risky borrowers who were very likely to default. This was a horrible decision by everyone involved. That being said, the most recent decline cannot continue to be explained by the subprime crisis. Many of the mortgage lenders that were part of this crisis are trading under $5 a share if at all. Therefore, their effect on the overall stock market is minimal. It is other parts of the economy that are now starting to slide.
Yes, subprime is partly to blame for other industries suffering, BUT, the stock market is a predicter of future earnings of publically traded companies. It does not reflect anything that happened in the past. If it did, we would ALL be rich; well, most of us. If confidence is so strong and Obama’s new plan is “right” then why is the confidence in the stock market still so bleak? No matter how hard it is for you to admit, those who have money and are investing are the more intelligent people in the world. Wouldn’t it be smart to observe the actions of the more intelligent people?
Instead, President Obama continues to do things that “redistribute” wealth from the rich to the less fortunate. I do not disagree that the less fortunate need some assistance, but why should the more successful and intelligent Americans be punished? They are the ones that took risks early in their lives to increase their wealth. Over 65%, 271, of the Forbes 400 Richest People in America are entirely self-made. You cannot use the excuse that money and wealth was handed down! These 271 took great risks, believed in themselves and used the knowledge and intelligence they created to become wealthy in America. Why should they have to pay more taxes than someone who has punched the same time clock for 24 years and has done very little to advance their career?
This “redistribution” of wealth has definitely caused a stir within the wealthy communities. If you do not believe so, take a look at the Dow Jones Industrial Average stock chart over the last three and a half months. Yes, it is the wealthy who are investing in the stock market! Those that have the money to invest in the stock market seem to be quite reluctant to put money into the economy through investments at the current moment; that is a fact!
I do not have the answers nor will I ever claim to have the answers, but one thing I know for certain is that knowledge is power. The one correlation that all wealthy individuals have is knowledge. They have knowledge in something that has gained them great power in this capitalist country. It would be very wise to listen to these people who are very displeased with the current actions being taken. Mr. Obama, please use YOUR knowledge and power to analyze the current situation and realize that the actions you are taking and not pleasing the more knowledgeable and wealthy citizens of the United States of America.
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President Obama, This Stock Market Decline is YOUR Fault!
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Obama Mortgage Bailout Plan Promotes Bad Financial Behavior
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Foreclosure Prevention Program: Am I Eligible?
President Obama, This Stock Market Decline is YOUR Fault!
President Obama, I think we have heard enough excuses. You and your buddy Tim Geithner have used the Bush Administration crutch for too long. Look in the mirror, it is your administration that is causing historical fear in this market. Since you were elected President on November 4th, 2008, the Dow Jones Industrial Average has plummeted from 9635 to 6569, a 32% loss. Almost ONE THIRD of the investment value of Americans stocks have disappeared since you were elected!
Let me guess, those months shouldn’t count because you weren’t the president. I will accept that. Since you took office on January 20th, you would expect to see some stabilization with your new programs being implemented, correct? The truth of the matter is that the stock market PREDICTS the direction of the economy so if your plans are legimate then the market should have found a bottom between now an then, right? Let’s do some research. On January 20th, the Dow Jones Industrial average closed at 8281. Today, the market is at 6569. The market has lost over 20% in your first two months!
You MUST do something to stabilize the stock market. It is the #1 investment resource of this country. Why does the market keep going down? You are INCREASING capital gains tax?!? Why would you do this? Wouldn’t it be wise to ENCOURAGE Americans to invest rather than discourage it. If you are going to tax us more on our gains, we are not willing to invest as much. Good call president, let’s push people away from investing.
To top it all off, you are taxing the rich and most prosperous of the country. WHY?!? Do you realize that the most wealthy make this economy run? Do you think the $200 being invested by little ole me is going to help the stock market? NO! The $500,000 being invested by Jim Rogers is going to help the stock market. You are taxing him MUCH more than me though, so he is very reluctant to put any money into this economy. Taxing the wealthy to give to those in need sounds wonderful, but in reality, it is NOT going to make this economy happy.
There will be MORE job losses, the housing market will CONTINUE to decline and you will see this stock market fall even further until you change things President Obama and not the CHANGE you have been implementing.
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Obama Mortgage Bailout Plan Promotes Bad Financial Behavior
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Debt Analysis – What Americans Need Right Now
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Foreclosure Prevention Program: Am I Eligible?
The Government is Pushing Mortgage Rates Lower But Will It Help?
On January 1st, 2009 the Federal Housing Authority (FHA) raised the minimum down payment for a mortgage loan from 3 percent to 3.5 percent. This is assuming that your housing cost to income ratio is 31% or less. You are not able to get a mortgage in which you are spending more than 31% of your income on the mortgage and real estate taxes. This is something that should have been done quite some time ago before the subprime crisis put the economy on it’s knees. Will these changes by the FHA affect your mortgage?
These requires by the FHA will actually help you in the long run. Making it more difficult to get a mortgage loan will weed out the risky borrowers who are likely to default. It is these risky borrowers that were a major part of the current economic crisis. It may be too little, too late, but the government is attempting to reward the financially responsible by offering lower rates along with stricter requirements. Those who have been financially responsible will help to bring the United States economy back to prosperity.
Now that the requirements have been upped you have a chance to lock in at a much lower rate than throughout much of recent history. Lenders are looking to lend money but only to the best of the best. If you have a strong financial foundation then you are likely to get a great mortgage rate, possibly under 5%. Those who have done well for themselves and made good financial decisions should continue to urge the government to tighten their policies on lending. The tighter the policies, the stronger the borrowers. Ultimately we know that the borrowers are the ones who will put a bottom in the housing market and get this economy rolling again.