Lear How to Trade Stocks

Markets at Peak

2009-09-16T20:20:00.001-07:00

The current market is at alarming levels. Seems like people are over reacting to the data. There would be a real down trend for correction going forward. Lets watch out.

Caution is the Key!

2009-04-23T19:41:00.000-07:00

Its been quite a rally for last few weeks. Hope this is the end week for all the rallies. We might face big down turn testing our prior lows in the forthcoming days. The real reason being the stocks have had real nice run without pulling back. There should be some stop somewhere to have it controlled and steady. The problems are not solved. They were actually being delayed. Housing Market shows some sign of relief after pumping in Billions and Trillions of Dollars. The actual recovery should come within which is not happening at this point.

This is the time to be very cautious. The analysts have forecasted very low on profits which in the sense made most of the companies to beat their targets. Now its gonna change.. People will expect pretty more from the companies wherein government cannot support too long. There might be thoughts of Nationalization few months back. Now, situations were changing and people started thinking Banks are gonna run on their own. But we may not be so sure on that until the problem is resolved. Hiding the issue doesnt mean the issue is resolved. Mark to Market rules have facilitated the people from hiding the losses from the markets. But if things are not working as expected there we will see a big slide again later this year.

Employment issues were growing day by day. General Motors is still hanging and trying to survive under Government Aids. But it cannot continue for long as we expect. Things are not so good at this moment. Time to be Cautious.

Sign of Relief --?

2009-04-08T22:19:00.000-07:00

After a very bad february, we had a nice little run during march. Dow has bounced more than 25% during this month alone. Not to mention that most of the financial stocks have regained their lost kingdoms. After the fears of nationalization during February and unclear statements by Treasury secretary, investors went wild and keep selling throughout the month. Thanks to Bernanke and Obama to comeout with 800 billion stimulus bill and made it through congress. Also, the most awaited Mark to Market rule which helps to keep the hope of financial recovery by 2010.

But still the challenging part is raising unemployment and increasing layoffs. Recent results from Alcoa is not so good and its kind of difficult to predict whats in store for April. Till now market is hanging around 8k benchmark and try to find some direction going forward. April used to be the deciding month for most of the stocks. As the earnings keep coming out we might see some reactions in the market.

Thanks to RIMM to bring back the energy and confidence in tech sector. Recent talks of IBM with Sun has created a possitive note in tech side but unfortunately the deal hasnt been struck which is not good for both the companies. Also, still the fears of deepening recession is not out of question. Addng to that SEC is also trying to bring back the Uptick rule which went out during 2006 and other regulations for the hedge funds.

Will all this help the market... we need to wait and see.

Comedy or Serious?

2009-03-14T16:03:00.001-07:00

The recent debates / clashes / fights between John Stewart / Jim Crammer and CNBC was getting hot and finaly Jim came out to John's show and accepted the fact that he has no forecasting of what he really said. All the news said was what he heard from the CEOs and COOs. But there are too many good videos which supports John to bring up the nice point in a bad way. But is it comedy... No I don't think so.. It makes perfect sense that these news channels are supposed to do investigations on what they really telecasting. The group of people sitting and analyzing and advising come back and apologize that "sorry we made a bad call" is not gonna get the poor investors money.. Its already gone and never coming back. So, either stop promoting those words of CEO s and stop advising or start doing an introspection before giving any advice to others.

Check the Full Daily Show Episodes:

John Stewart on CNBC

John Stewart Head to Head with Crammer

Find some interesting videos on You tube about these issues.

The Bear Market Raily!!

2009-03-12T23:51:00.001-07:00

As I mentioned few days back, the rally is here.. This may not last for long .. Most of the bear markets there would be short rallies which brings in the new investors and squeeze them out and make them run away from the markets. This is very common in every bear market. Just like how we get few down days in Bull Market. Here its gonna be bouncing for few days.. Thanks to Citibank to end the hammering of their stocks by saying they are profitable last few months.. Still there are questions on how they interpreted their profits. We need to really wait for some more time to see whether its the real truth or just for convincing the stock holders and moving the markets. Unfortunately many of the CEOs of those banks which have already vanished like Bear Sterns, LehMan Brothers, Wamu, Wachovia, Merril lynch were also saying we are good and well capitalized till the time they are bankrupt. There is no criminal actions or law suits against those people who manipulates their stocks by giving false message to markets.

There should be some severe penalty and punishments for those who gave info to the markets without solid background informations. Lets see ..

Last few days there is a huge rally without any really great change in the economic and housing conditions. The housing data is still bad and unemployment is still raising and nothing really changed. The simple reason for this run is nothing but the quarter ending. All these institutions want to book profits by manipulating the stocks and creating a short term up trend. Its one way good so the market will continue to make some money without loosing big on a day. Also, it brings in the money that were lying on the side due to fear. This rallies bring in those fresh investments in to the market and digest them.

Also the rumour on mark to market and Uptick rule fuelled up the rally. For those edge funds to make money they want stocks which are fat so that they could make money by shorting them down. Now they all covered and waiting for the poor investors money to come in to market and buy those stocks. Later these big players again short them down.

Not the first time we are witnessing this. We have seen the same happend to citi when it broke 5$ barrier. So, the history repeats itself. This recession is not over and this rally is not gonna last long :(. If you are smart enough make money or cover your shorts in this run..

Whats Wrong with WellsFargo?

2009-03-04T23:43:00.001-08:00

"Wells Fargo" is being one of the very conservative banks which doesnt take any serious risks in order to make big profits. Their one and only move in the recent financial crisis is to buy Wachovia for a bigger price than that of what Citi offered. Everyone said this move make Wells Fargo a better bank and made it among the top 3 financial institutions in America.

Fortunately or Unfortunately they have also borrowed money from Treasury on TARP funds. This made them to answer the congress for every moves they make from now on which is good for the investors to know what they are upto... The real questions are not answered yet. How much is the loss Wellsforgo is currently holding due to the merger with Wachovia. How much cost cutting measures they are going to take in the coming days. How they are gonna mitigate risks and how they protect their dividends.

Recently JP Morgon made a smart move for cutting their dividends 80% in order to have more cash to protect and safeguard themselves and promising investors on long term stability. But Wells havent announced any cut in their dividend payouts. Everyone is surprised to see wells 10% yield and still stocks are going lower. Sounds like the losses due to merger of Wachovia are taking toll on WFC's stocks.

We might need to stay close and watch whats going on in the near future. Will it join C and BAC?

Finally Bounce Back Time!!

2009-03-04T23:26:00.000-08:00

Its not even 2 weeks, when we wrote about DOW at 7800 is very dangerous.. As suspected, it went well below 7000 and started to bounce back today after a massive downward run. I think this is the short term bottom. We could see a nice run up for around 10% from here which might get DOW back to 7600 range by next two weeks. Its kind of setting up for the Quarter ending. Also the institutions want to hold up the market for few more weeks prior to the next worst earnings coming up in April. Its second quarter after the official recession. Everyone knows very well the numbers are gonna be bad. They dont want to push the stocks too bad. So, we will be seeing a run up for 10-15% from here and then decision will be made after April first two weeks and then market can go to retest their Feb lows again. Just like what happened in October. This is a very typical recession market. Its clear that things are not going to recover soon as expected.

Everyone started realizing that the Change may not happen quick enough. It takes its own time. We could say its been too much of expectation from the historical president at this time. He is trying to do what he could ( may be he could have done it better). Still we need to wait and see how this stimulus is gonna work out and effect of budget which everyone is unhappy with.

Whatever may be the conditions and whatever may be the reality.. we are gonna bounce back for next few weeks. Happy Short Bull run in the bear market.

Fears are growing that SPY might retest 500 levels if things are not going to recover by June.. Next quarter is gonna look pretty ugly. June is gonna be bad. Lets be ready for that... :(

Dow 7800 - > Cat on the Wall?

2009-02-10T23:35:00.000-08:00

As we were discussing about the worst might happen if the bailout II which is the one final hope for the financial crisis and economic turnaround. Treasury Secretary announced the bailout early today on which the markets reacted very badly as expected. The reason being there is no clear statement of what they were going to do for resolving the problem. In the speech, every word the stress is on we were working on a plan which bring private and public sector together which will help to bring the bad assets out of the banks etc etc.. There is no new plan as such has been announced except its kind of marketing a plan which doesn't exist. The next worrying issue is the amount of constraints that were put forth for those banks requesting the money. Its more likely the funds will remain with government itself as the constraints are more severe that most of the banks may not want to participate and go through a stress test. For the equity holders of financial institutions its a big risk that they might get wiped out.

As the bailout money lenders are going to washington to face congress questions tommorow, the markets are at very critical levels below the previous bottom and the lowest for 2009. If things are not working well or not turn around we might witness another wide sell off till it finds the next Dow bottom around 7000+ levels which is not so good. Things might look very ugly and it takes even more time if it touches below 7k anytime. We might need to add another bad year if that happens to the market.

Already few investors jumped in after the last low levels in october last year.. We may not expect the same thing to happen this time as people were very cautious in proceeding forward. Considering the global economic down turn and stimulus delay and mounting unemployment number which keeps increasing everyday globally, its gonna be very bad in the near future and it might take more than what everyone were thinking to recover.

Its all with how and what the new administration is going to do with bailout fund and Stimulus fund. How they are going to make it work instead of adding to the already high deficits. Lets wait and see...

Bailout Plan II - >Financial Massacre?

2009-02-09T22:54:00.000-08:00

Whats gonna happen tommorow when Geitner the New Treasury secretary announces the plan for the Bailout II. Will it be a Bullish sign for all the banks or massacre for all the financial stocks . As we all know the new administration was clearly putting tough terms for the financial companies who requires TARP need to follow lots of regulations. We may not get new surprise other than putting more complex rules for getting the money..

But here we are missing something.. the idea of TARP is to increase the flow of money in the financial systems and not to put blocks in it. It should be such that the money is clearly flowing through the system through the banks to all the parts of economy. This issue is very delicate and may or maynot work. Though we are little far from getting the banks nationalized but still we maynot guarantee the bank stocks will remain above zero..

Markets Looking for Direction !!

2009-01-23T21:54:00.000-08:00

After brutal attack on Bank of America and Citibank and every other finacial last week, the news is its not over. This week was one of the most oscillating week. Everyone in the market were very much anticipating a rally for the new democratic government headed by Obama. But the reactions were exact opposite from what was expected. All the indexes were thrased to retest their support levels just few minutes after president elect became Mr.President. Its a drama in the wall street welcoming the president with a alarm.

Later the markets recovered well from the losses. Thanks to IBM for getting a better than expected results and Apple for a blowout earnings. Not to forget the bad news during the long weekend in Europe banks were facing more troubles. The fear is clearly visible on the eyes of the investors.

Where this is gonna end. When the finacials will stop asking more money for their troubles are some questions which are still not answered by anyone. One other thing is the New president is not in favour of bailing out banks without penalty. There is a clear message that each penny recieved from tax payers were accounted and the recievers are supposed to pay them back with pain.

Later in the week, the Tech Titan and Software giant Microsoft gave worse than expected result and poor forecast followed by GM. Thanks to Google to keep the hope and the nerves of the investors.

Next week is gonna be more interesting and we could get some clear indication where the markets are heading. Are they gonna find the nexxt lower support around DOW 6800 and SPY 680 or moving forward back to above 9000 range till further bad news are recieved. We have to watch. The current levels are alarming and cannot be withstood as there is no support.

Lets wait and watch !!

Bank of America - the Next Citibank?

2009-01-14T20:17:00.001-08:00

After the massive slide of Citibank shares, finally the news came out regarding their bad mortage bets have become worse during the fourth quarter last year. We are all aware of the stories how Citi and Fed made a deal and what happened to the stock price and the dividends etc.

But in the recent days, Bank Of America stocks are sliding little rapidly than other financials. This makes us to think whether Citi pattern is repeating on Bank of america as well? More than 10% yield in the dividend as of the current BOA stock price doesnt attract the investors and they keep selling it ... Definitely there is something cooking underneath. May be we need to see in the future weeks whats gonna happen to BOA. Better to stay away and watch instead of getting in ..

Also note that the problems with Citi is not over yet. Recently they announced the deal to sell off their profit making brokerage unit to Morgan Standly (which makes morgan as the number one brokerage overtaking Bank of america). Citi started to shrik itself into a small banking company rather than the giant financial institution.

In comparison, Bank Of America aquired two of the very badly affected companies last year namely Countrywide and Merrill Lynch. Have they made the right choice in choosing Merrill is another big question. Its very evident that Merril is not better than Lehman in any chance as they did similar wrong bets. On taking over Meril, BOA has did a big bad move.. is another question. As they announced recently that they will be cutting as much as 35k jobs and getting money from Federal government doesnt show any good .. Also another point to be noted is, whether Bank of america dividend is safe? From the current price and the happenings it is very evident that they are going to slash their dividends just like Citi which would have bad effect on the stocks. Its better to watch rather buy.

Time to take a bite in Apple

2009-01-14T19:54:00.000-08:00

After few months of mounting rumors on health of Steve Jobs, a letter has been published last week about his health and it also states that its just a hormonal imbalance caused that weight loss and Jobs is working on the recover and continue to be CEO.

Just a week later, it was mentioned today that he is taking a medical leave for 6 months for recovering from the more than anticipated problems in his health.

During last years presentation when steve appeared thin on stage he mentioned its due to a common bug.

More than the health concerns, now the problem is on reliability of the news that were being published from apple side about the condition. Already Apple stocks were near the year lows and the retail sales are going down from worse to worst.

Its truly evident that the recession is going to stay for long wherein the gadget sales and costly laptops may not be on the priority for the buyers in this year. Considering these facts sounds like apple may take another hit to go back to its price during 3 year back which is around mid 60s.

We never be certain how market takes the news. Better be prepared for the downturns.

Ready for Another Slide ?

2009-01-04T22:46:00.000-08:00

After a rough 2008 we are here at 2009. Every optimistic person in wall street want to wipe out the losses in 2008 and start moving to profitable side in 2009>

But how far are we from moving up ? This question is really tough ask at this time. May be in few more months we could come up with a estimated timeline. As a new government need to come in few more days. Its not easy to say they will turn around everything. Its not possible without the time factor. It takes time to heal the wounds.

Most likely would be seeing another bad quarter from all financials and other sectors witnessed by the recession and reaction from wallstreet with another big slide retesting the lowest of the previous lows is quite possible. We need to wait and watch. If you have cash, please save it for some more time. Lets wait before investing. Once markets started its movement in proper direction everyone can make money. Until then everyone would loose. Very few makes money at those conditions.

Santa Rally 2008!!

2008-12-25T12:13:00.000-08:00

We are at the end of another bad year for the stock markets. As everyone agreed at this point that US is in recession, we are in the edge of another worst year in stock where major indexes slide more than 30 % in the last 52 weeks.

2007 was gloomy than expected and everyone were expecting the bottom of housing prices in 2008 mid or end. But it never happened. Now all the eyes of focussing on 2009 June as the end of housing problems. Now the focus has turned on to various other issues not the housing as it made server impact to financial system in US and Global markets. Most of the renowned banks were collapsed in 2008 and marked another bad year for banking. But it created a whole lot of vaccum in the job markets which is compelling another recession for US. Actually this recession could be a severe one compared to what we witnessed in 2001. The reasons being simple. 2001 is pure technology and aggrevated by sep 11 attacks. Here Housing attacks are 100 time more worse than sep 11.

What to expect in 2009? Will everything be over at 2009 and markets start rally at the end of 2009? These are some of the most difficult questions to answer. But we need to understand a simple theory. I already mentioned about Dow hitting 7500 and it does happened few days ago. In every recession the indexes goes down and moves up due to support from new investors or people with money who think the market is at bottom. But the reality is little different. We need to see few months of silence after the actual bottom is reached.

Most of the time we will witness a deep cut in the chart and then little low volumes for few weeks prior to the actual recovery. The above facts are true for recession but depression is little different wherein the pattern repeats again and again.
As we have some possitive happenings this time with government pushing lots of money and bailing out companies and pushing stimulus plans, the recovery may be little faster but side effects still remain.

Regarding the santa rally, we are actually witnessing the rally as the markets are not going down though there is real bad things happening. No negative is possitive. We were in the rally past 2 weeks and may extend for the next few days. We might keep hold of 8500 to 9000 range in dow for next few days. But once 2009 opens, things may change. We might witness bad slumps and falls in early few days and then we need to see fourth quarter earnings and proceed forward.

Hope everyone have nice christmas and new year. Lets wait for the 2009 to resolve the issues and new presidency to bring light to the economy!!

Whos the killer? Iphone Vs Storm

2008-11-24T07:25:00.000-08:00

Storm has came out in the market during the economic storm taking on US. It gave very nice pop to RIMM stocks in the recent trading days. Rimm kept staying above 40$ a share. Analysts are very possitive that Rimm will sure give an edge to its sales during the tough economic conditions. Another good point analysts see is the device upgrades from corporate world without increasing the monthly payment. As corporate customer got their data plan paid by the companies themselves it definitely helps blackberry's storm.

On comparing the features, storm has came up with a little different touch screen which is not so sensitive as iphone and it feels the touch. Storm senses the touch and press in the screen rather iphone feels the touch, tap and slide movements.

The browsing speed is better in storm especially with vz's 3G is much better and has more coverage than ATT.

Storm beats iphone big in the emailing service. As they already entered to corporate emailing and calendar synch up, definitely they have an edge over iphone. With much wider screens in place business customers can view their emails in full and can send back better and lengthier emails.

But storm lacks the ipod and the power of itunes and the most stunning apps provided by apple stores. Actualy appstores are moving iphone sales much better than expected. The apps in iphone is really cool. Storm is kind of bluish in appearance which make us feel its phone wherein iphone gives the pc kind of experience.

Overall these two are really good products and getting some better experience and innovative ideas on plate. By getting storm to market RIMM made sure to keep their corporate share of their phone intact though it may not get newer retail customer base from iphone.

In this tough economy wherein things are getting worser everyday..we need to really think how many might move in to blackberry storm or iphone. I am pretty sure these measures might help them to get through the competition not making more profits.

So from stocks point, I am not seeing any upside in both these companies.If they try to maintain their price at the current levels through next few months it would be a great achievement for them.

Check the video for better comparision.

Just to demonstrate how iphone apps have grown and how the developers taken advantage of this device. Check this smule app which makes iphone into a musical instrument.

The New Face of America!

2008-11-08T12:41:00.001-08:00

On November 4th 11 PM EST., everyone in United States of America witnessed a historic moment seeing the first ever African American President being elected as a new face of America.

Its not an easy journey to get elected as president of United states. He made a campaign which has overtaken many of the records. He came across a tough opponents to get the Democratic nominee. Irrespective of all the negativity, Obama finally pulled out an amazing victory in the elections.

Now, its not a easy task to be an American President, he need to do lots of hardwork to get things back on track. Its a very tough conditons out there in financial sectors, insurance and automobile as well. In this economic conditions, we need someone who take quick and agressive decisions to get USA on top of the world.

Lets hope he could do it. The speech after being elected as president by Obama was inspiring. He has refelected the real issues that were facing the country and also clarified its not gonna be that simple to get back to normal conditions.

Under his leadership with democrats having majority in both houses, we could see something happening to turnaround the conditions soon. Lets hope the best.
We believe "YES, He Can change America's Future!!"

What a Ride?

2008-10-17T19:40:00.000-07:00

After huge gains following the G7 and plans for stabilizing and guaranteeing the interbank lending, the wall street gave a huge cheer at the start of the week. Dow seen a massive bounce after many years and very next day where it retested it 5 year lows. What has really changed here in this market? The answer is nothing really changed. Thing were the same as they are in the last week. The reason for the huge record sell off last week is simply "Fear!! Fear!! Fear!!".

Investors are not finding proper directions and many institutions have no clue on whats gonna happen next? They have really given up the hope that some change would happen to resolve this crisis. The one other and the main reason for the sell off was margin calls which has forced many investors to liquidate their portfolios forcibly. Not to forget the many 401k based funds are forced to sell their investments as many people moved their funds to fixed income from other funds which has exposure to stock markets.

Last week, near the end of the session many new people who had their cash sidelines moved in to the market and many shorts covered their positions prior to the weekend. On Monday after the announcement by the Fed for making sure of the banks lending intact and 250 billion investment by Treasury in the top 10 financial institutions has given the momentum on Monday which made Dow to climb an historic 960 point move.

Soon after that things were started to price in the nearly confirmed recession which is not far away. So, good news is depression is almost avoided but recession is nearly confirmed.

Here I would like say the words of Warren Buffet here "You know, I always say you should get greedy when others are fearful and fearful when others are greedy. But that's too much to expect. Of course, you shouldn't get greedy when others get greedy and fearful when others get fearful. At a minimum, try to stay away from that."

Bankruptcy - Unleashed!!

2008-10-10T00:40:00.000-07:00

"BANKRUPTCY" has been discussed so much in the recent times in most of the Channels and news papers. Even many people were talking about it. But, I was wondering how many of us really know what bankruptcy really means. I have got an email recently which clearly explains bankruptcy in layman terms and its also clearly explaining the formation of bubble. Thought of sharing it here.

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollars as there were only two pieces of 1 dollar coins circulating around.

1) There were 3 citizens living on this island country. A owned the land. B
and C each owned 1 dollar.

2) B decided to purchase the land from A for 1 dollar. So, now A and C own 1
dollar each while B owned a piece of land that is worth 1 dollar.

* The net asset of the country now = 3 dollars.

3) Now C thought that since there is only one piece of land in the country, and land is non producible asset, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the land from B for 2 dollars.

*A has a loan to C of 1 dollar, so his net asset is 1 dollar.
* B sold his land and got 2 dollars, so his net asset is 2 dollars.
* C owned the piece of land worth 2 dollars but with his 1 dollar debt to A,his net residual asset is 1 dollar.
* Thus, the net asset of the country = 4 dollars.

4) A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar.

* B loaned 2 dollars to A. So his net asset is 2 dollars.
* C now has the 2 coins. His net asset is also 2 dollars.
* The net asset of the country = 5 dollars. A bubble is building up.

(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A.

* As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars.
* B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars.
* C loaned 2 dollars to B, so his net asset is 2 dollars.
* The net asset of the country = 6 dollars; even though, the country has only one piece of land and 2 Dollars in circulation.

(6) Everybody has made money and everybody felt happy and prosperous.

(7) One day an evil wind blew, and an evil thought came to C's mind. "Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more."

(8) A also thought the same way.

(9) Nobody wanted to buy land anymore.

* So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.
* B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.
* C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his Heart is palpitating.
* The net asset of the country = 3 dollars again.

(10) So, who has stolen the 3 dollars from the country ? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B's net asset is still 2 dollars, his heart is palpitating.

(11) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.

* A owns the 2 coins, his net asset is 2 dollars.
* B is bankrupt, his net asset is 0 dollar. ( he lost everything )
* C got no choice but end up with a land worth only 1 dollar
* The net asset of the country = 3 dollars.

************ **End of the story; BUT ************ ********* ******

There is however a redistribution of wealth.

A is the winner, B is the loser, C is lucky that he is spared.

A few points worth noting -

(1) When a bubble is building up, the debt of individuals to one another in
a country is also building up.

(2) This story of the island is a closed system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island's own currency. Hence, there is no net loss.

(3) An over-damped system is assumed when the bubble burst, meaning the land's value did not go down to below 1 dollar.

(4) When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.

(5) If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw.

(6) When the bubble was in the growing phase, everybody made money.

(7) If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.

(8) As in the case of land, the above phenomenon applies to stocks as well.

(9) The actual worth of land or stocks depend largely on psychology

Falling Knife !! Who want to catch it?

2008-10-09T14:21:00.000-07:00

After back to back drops at wall street, we are slowly beating the records of declines the world has ever seen. Every body in the street has one Mantra "SELL!! SELL!! SELL!!". On any potential bounce people were rushing to sell their portfolios for much much cheaper than they worth.

Everybody needs CASH!! As I mentioned before more people realizing the fact. The fact is "Cash is King". If you are in credit or anyway related to credit "Just run away! Make sure you have enough money in cash to survive the recession if there is any!"

Nobody knows when it would end or where it would end! What needs to be done is keep watching and keep analyzing. Invest only the money you wont need it in near future.

Never overdo or overreact on this markets. We could see a huge gain in the next few days.. Who knows starting tomorrow there might be a rally in the market. "Dow may come back to 10000's with in another few days. Mark my words it "MAY" comeback. The probability is high!"

There are people with cash hanging out somewhere who could come and invest at this levels. Having said this another warning "Don't think it is the end of the tunnel!" Still more to come more losses to be taken.

Lets wait for now and keep watching the falling knife!. It hurts everyone who tries catch it. Stay Away!

Apples On Sale!!

2008-10-04T14:22:00.000-07:00

Few months back we have seen apple trading near to 190. With no bad news, this stock was cut in half. Its beaten up very much to its year lows. All the price given for the magical iPhone and redefined ipods, Macs were all taken away from its valuation. What could be the real reason?

On Friday, a rumour on Steve Job's heart attack has brought the stock below the rock solid 100$ price mark and it couldnt get back to 100.

On analyzing the facts, the company has very stable markets for its products. There is a separate segment of people who loves their products and on top they have one of the best CEO's in the business. The potential threat on apple is how many people will buy iPhones and iPods in this slowing economy. As the trend predicts there wont be a rich christmas in many families this year, the question is how Apple is going to answer and whats their forecast for 2008 holidays season and 2009. In any case, if they lowered their forecast (which apple generaly do as they are conservative) below the analyst expectations, dont be surprised to see another 30% hair cut.

Also, the management or board needs to be clear on the success policy for the top post. Investors were looking closely on this company and their new innovations. In between the list of iPhone killers keep extending including smart touch phones like Rimm Touch,Nokia 5800(multi touch), LG Instinct, HTC G1 phone and so many others.

Lets wait and see who wins and how apple answers investor's questions. Right now lets have some cheap Apple Juice!

How to cut apple to Half? Watch the video !

Tighten Your Seat Belts!!

2008-10-04T12:04:00.000-07:00

After seeing another trumbling week finaly the Bailout bill is passed by congress during the second attempt. Everyone were expecting a huge rally on this report but Market's message was clear. It is WE ARE NOT DONE YET!

Friday market was a classic example or a preview for what is gonna happen in next few months in the markets. After the news of "Wachovia chooses its second partner Wells Fargo" and congress agreed to vote on bailout, there is another worst employment report in the year came out. Still markets held its gains till congress finished their voting and agreed to push the bailout plan. Then market reacted for the employment report.

The point to understand here is whatever you can do with 700 Billion, the recession is nearly unavodiable. We need to pay the price for the Trillions of dollars that were lost. If FED and Treasury comes up with the right medicine for the financial problem it can stop the bleeding but still it will take time for the healing. During that time we will be in recession. Many politicians,financialist,investors warned "we will be in a deep recession if this bill is not passed", but noone assured that there wont be a recession when bailout is approved.

Government has lots of work to do for building the base for the next few years.During this years how we could say the companies will make profit. The maximmum they could do is to make arrangements for their survival. But investors need some future growths year by year. As long as there is no confirm signal on how many years its gonna take to turn this economy around we will be in uncertainity and witness the markets keep going down.

The best bet would be we may end at the worst levels around 50% from the highs for DOW which is around 7000+. To be precise we could see the bottom at around 7600 in Dow. If we are fortunate, we could recover prior to that. It depends on how this 700 Billion is being utilized by Fed and Treasury and how peoples confident would be recovered.

We have the best medicine "TIME" which is the answer for any issues in this world. "Time Will Heal" this wound.

Time Will Heal Lyrics

Is this Right time to Enter or Exit?

2008-09-29T20:08:00.000-07:00

Today 9/29/08, we witnessed another worst slide in indicies next to 9/11 disaster with Dow falling around 7% and Nasdaq around 10% and S&P around 9%.

Most of the 401k Funds falls with atleast 6% loss today which leads to more people to move away from Mutual funds to Safer places like money markets funds.

"All stocks on sale .. AAPL 100$ RIMM 60$ MA 150$ Is it the right time to buy?"

The best answer is "STAY COOL AND WATCH OUT!".

The reason being we just broke the worst ever loss in all three indices today. Now it can go either way. We need to think through this. Is there any change in enviornment or any hope for the market to recover from here. Did we solved any big issues after falling down more than 6% in all indices. The answer is "NO". Stay calm and watch with patience where we are heading to. No one here at wall street is sure of the near future. If you are a loong term investor the best advice would be "Start your investment in a company which is good in fundamental and which you think will stay through this economy".

If you are already in the market "Make cautious reassesment of your investments and think through whether your investments has value for what you have paid for". If you feel I am still good then you are in good shape otherwise dilute those investments which you felt were bad today and stay in cash to get the right stock for a better price.

The truth is "Market is in PANIC mode! This is not the right time to Enter or Exit. This is time to introspect your investment and watch the trend. Who knows this can be just the start of a big crash ever ! "

Lets watch closely for the coming days where we are heading to.. Hope Congress will pass some bill which could help both Mainstreet and Wallstreet without pushing US to a big recession.

Bailout - Bailed out !!

2008-09-29T12:32:00.000-07:00

Breaking News!! House has voted against the proposed 700 Billion Dollar Bailout plan..
The worst news is market is going to see the worst one day crash for this year today!

Markets will recover as they realize the bailout is not a real remedy for the problem. This gives chance for the Economists/policy makers to rethink their approach for this mortgage problem. We should think of lighting candles to remove darkness instead of trying to move darkness out of the room by buying it.

Finally, Tax payers won !!

Wachovia Vanished !!

2008-09-29T07:36:00.001-07:00

As we are waiting on the baliout Vote in the house, one more well known names "Wachovia Corporation"(NYSE:WB) vanished from the markets. Similar to Washington Mutual which vanished just 2 days ago, Wachovia followed the similar steps. FDIC forced a deal to be made between Citigroup to take over the assets and banking operations from Wachovia and Share holder might again be wiped out of the deal.

Now Citi become the largest US bank in terms of total deposits and raised their presence all across the country.

From the text statement of Citigroup it was mentioned:
"Under this agreements,Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Citi will acquire more than $700 billion of assets of Wachovia’s banking subsidiaries, and related liabilities. The Federal Deposit Insurance Corporation (FDIC) has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio."

Now citi is expected to raise more funds and cutting its dividend to half. Though its sounds like a killer deal it might potentialy become a killer to the Citibank share holders where they got half of their dividends lost. As per the analyst, this is a statergic step for Citigroup on a long term basis.

But at the end of the day one more bank "Wachovia Corporations" is out of the books..

Video Streaming Business - Who is winning?

2008-09-28T09:51:00.000-07:00

Leaving behind the economic worries, financial crisis and the expected recession, entertainment still hold its share.

During the last one year or so, we have been seeing there has been lot of focus on video streaming and its becoming a very good market or channel for business. Starting from youtube, a known success wherein users could create their own channels to broadcast their own homemade videos, many other companies have started pushing video contents instead of having it as news articles. We could see video reviews of the products, video articles (CNBC, WSJ, FOX, Yahoo TechTicker,Street.com TV,Market watch and many others) and we are seeing many of the big companies focused on entertainment were coming up with streaming via internet. Video streaming is slowly becoming the next popular business in news, media and entertainment industry.

As of now High definition TVs delivering super quality videos were becoming common and we couldnt find those CRT Tvs in any retail stores. Now the competition for set top boxes and video on demand services have started. Sooner or later we maynot have DVD players instead we get streaming content from internet in High Definition directly to your Television. With the great progress in optical fiber based video and internet with high bandwidth its gona be very simple to make a move towards internet based video streaming.

After great success in music industry, Apple came up with Streaming videos starting from most popular Tv episodes to recent movies. They came with a product to support their videos on TV called Apple TV (one of the unsuccessful product from apple.They are trying to fix it and make it popular though) which would stream videos from itunes store in high definition to your TV. This works on rental basis wherein customers can rent a movie for a fixed price and it available for viewing only for fixed time once its started.

Netflix came with more than 5000 movies available for live streaming and its totaly free for the subscribers. They also came up with a settop box Roku which is specifically designed to support streaming from Netflix alone. This has been some success for them as they target to move beyond DVD rentals and save some money in postage and handling Dvd subscriptions. But not every movies are available for live streaming though. But its a good start for moving towards internet based streaming.
They also had some tie up with LG to bring in a settop box. I am Not sure what happend to that initiative. Also got some news about a blue ray player along with the settop box.

Most recently amazon jumped into the same video streaming market with Amazon Video on Demand service to bring in the Tv episodes and Movies to the customers. We already known they came with mp3 stores which kind of directly competing against itunes and they had support from google android phone to have amazon mp3 stores inbuilt with it. As they move on to push kindle device to most of their book lovers now they might target to push their video service with it.

Apart from the streaming services, set top boxes were also bringing up so many boxes to the already loaded entertainment set. Adding up to Apple TV, Netflix Roku,Tivo, Sony came up with bravia adapter for streaming videos from yahoo,aol,fearnet,cbs,youtube and the recent amzon videos but it works only with sony TV. They had talks with popular cable companies like Time Warner, Comcast, Cox , Charter , Cablevision and Bright House Networks to have this set top box inbuilt in TV itself. Not sure how the profitablity for those cable compaines would be compromised with it and other TV makers would be forced to have such similar technology in their TVs.

Microsoft also trying to bring in their Xbox to serve the purpose of browsing internet videos through their gaming box. They had partnership with Netflix to bring in the videos to TVs.

What is the impact of this video based contents, movie streamings getting popular is many of this Theatre chains may go out of business sooner or later. As we already know crowd to movie theatres are shrinking, they may feel the real heat of this soon.

With more enhanced internet capable mobile phones with wider screens, better internet bandwiths.. Who knows, in the near future we could see movies getting released in theatres and Video on Demand on the same day. We could expect it very soon!

Mossberg Review on Amazon
Mossberg on settop boxes