This past week,although certainly a week to have the weak bail,but this correction was needed....
When you listen to all the whiners and the politicians along with their corporate contributors,everyone is playing the blame game..
Where were all these people in the .com boom of the mid 90S.Analysts were giving the green light to buy and projecting share prices totally out of the norm in opposite relation to their balance sheets and popping champagne as if those times were expected and deserving...
Most of those companies and it has to be said that hype can be equally as damaging as bashing....If the 90s weren't a classic example of total misrepresentation of expectations on corporate governess and analysts as well is the gullible expectations of investors can only be on the present situation the fault of everyone.
Now, I agree the worldCom and Enron along with some others,doesn't excuse the fact that fraudulently cooking the books is above all a breach of trust between corporate and investors,but makes for a very unstable relationship...With that said,investors,of course should be better informed, also need to place a certain responsibility of his/her own judgement...Those .com companies were high flyers without real substance...Take a look at Amazon,here is a company that never turned a profit until recently and was commanding a huge share price and analysts were telling investors it was a good buy at these triple digits.This was nothing more than hyped up share price potential and there are equally as many companies with the same hype and had nothing more than 4 computer screens and an idea....
Remember Aol/TimeWarner merger,well there will be more to come out on this....I'm not suggesting on any corporate malfeasance just the hyping that has now put a cloud over this whole deal...I from the start believed this to be and will go down as one,if not the worst merger ever.
If investors were to do their DD on more than what brokers and the media displays they would come out better informed...Many investors rarely ever look at Sec filings let alone their own 401K plans....Just the other day a group that I do filings research for asked me to look at their 401Ks and not one had ever taken the time to view these documents until this past couple of weeks, because of what the news media brought it to their attention.
These investors assumed that since it was a mutual fund and handled by professionals they expected all is well....What some don't understand with 401K and regular Mutual funds,is these instruments need to be adjusted from time to time as with individual stocks....Most plans allow you to trade within the fund family without penalties...
To give you an example,all these funds that I looked at were very heavy loaded towards technology and many of these funds were not adjusted from the boom of the 90s and took a big hit with some losing 60-70% of the funds value...Now there is little one can do but hold on. For those that were reasonably balanced, I made recommendations to increase their technology funds and move towards more midcap companies....
If you are in your middle age,income is not a factor right now for your fund, but with technology at it's lowest point and midcaps being the next wave of potential winners, makes these two areas of greater return on your investment..
The above two funds mentioned took the biggest hits and if the investor were to have move these funds over to a more conservative fund like treasury or municipal bonds would have faired far better....Now the tables are turning and and this funds,although are conservative and worth holding,but should not be the biggest % in your portfolio....Lets look at Municipal Bonds.Most states are moving into negative balance sheets and that makes these bonds unattractive since they will probably be downgraded a few notches depending on many factors,but never the less based on overall receipts taken in and what is left if any for maintaining and growth....One area if you have this fund is "Reits",these are tied to Real Estate mortgage rates and are extremely attractive since interest rates are very low..These are conservative funds and carry income yields,but they have their drawbacks and funds need to be adjusted pertaining to the relevant times.These two type of funds should be in every portfolio,but depending on your age is the requirement on how large of a degree each fund makes up the overall portfolio.If your retired,move more into income and conservative,if your middle age,have it well rounded into aggressive and growth oriented funds...
Precious metals funds are ok,but should be the smallest holding in any one fund....Here again you will have faired ok if moving around,but for the sake of having no inflation this should just not be touched or even considered....
We didn't hear much complaining because investors were making lots of money in the 90S.The media did not complain ,because their audience would have turned them off if they did. Politicians did not say anything because they did not want to turn off their constituents, nor did they want to disrupt the contributions the companies that financed their election campaigns.
And so,there was no complaining while the bubble grew larger and all these companies were enjoying shareholders support without real substance backing up their balance sheets.
I can remember through online stock discussions forums like Raging Bull and seeing all the high fives and kudos congrats that was going on among investors. Here on occasion, when one person would question the company on it's figures or other pertinent negative factors or why this or that. They would be called all sorts of names,berated for the notion that they should question the company of what so many had placed their monies in.Of course all the longs were never in real discussion other then things are just fine and we will certainly make it because it is the future..As usual, the skeptics said nothing.
The market went up too high and then suffered the serious downturn that we find ourselves in because of the greed of investors. It is not the government's fault, or that of the SEC regulators. Corporate executives now being brought to the skids were pushed into by the very share holders that now want their hides. But investors refuse to take any of the blame, instead they just complain.When things were fine all is well, now we are in the eye of a hurricane and it's everybody else's fault.
The stock market is still the greatest market place for individual investors to make an incredible amount of money,but you have to apply common sense and due diligence....No,it isn't right when corporations cook the books or give a false sense that everything is just fine.When our corporate leaders do undermine their ethical standards and defraud investors,then the strong arm of the law should come in and hand out "don't get out of jail cards"
In closing,if any of you were real investors you would spend the next couple of days figuring out which companies you would want to own.Don't take this decline in the markets as this is a bad place to put money,but with the economy still strong, makes this a great and as with every Bear Market, ripe towards a far greater financial reward...
This decline is fine and weeds out the weak,corrupt and have stood on notice that corporate books will be again the focus,"that what you read will better be able to comprehend with legitimacy".Look for a healthy comeback and much stronger market.
Have a good day.
ET
When you listen to all the whiners and the politicians along with their corporate contributors,everyone is playing the blame game..
Where were all these people in the .com boom of the mid 90S.Analysts were giving the green light to buy and projecting share prices totally out of the norm in opposite relation to their balance sheets and popping champagne as if those times were expected and deserving...
Most of those companies and it has to be said that hype can be equally as damaging as bashing....If the 90s weren't a classic example of total misrepresentation of expectations on corporate governess and analysts as well is the gullible expectations of investors can only be on the present situation the fault of everyone.
Now, I agree the worldCom and Enron along with some others,doesn't excuse the fact that fraudulently cooking the books is above all a breach of trust between corporate and investors,but makes for a very unstable relationship...With that said,investors,of course should be better informed, also need to place a certain responsibility of his/her own judgement...Those .com companies were high flyers without real substance...Take a look at Amazon,here is a company that never turned a profit until recently and was commanding a huge share price and analysts were telling investors it was a good buy at these triple digits.This was nothing more than hyped up share price potential and there are equally as many companies with the same hype and had nothing more than 4 computer screens and an idea....
Remember Aol/TimeWarner merger,well there will be more to come out on this....I'm not suggesting on any corporate malfeasance just the hyping that has now put a cloud over this whole deal...I from the start believed this to be and will go down as one,if not the worst merger ever.
If investors were to do their DD on more than what brokers and the media displays they would come out better informed...Many investors rarely ever look at Sec filings let alone their own 401K plans....Just the other day a group that I do filings research for asked me to look at their 401Ks and not one had ever taken the time to view these documents until this past couple of weeks, because of what the news media brought it to their attention.
These investors assumed that since it was a mutual fund and handled by professionals they expected all is well....What some don't understand with 401K and regular Mutual funds,is these instruments need to be adjusted from time to time as with individual stocks....Most plans allow you to trade within the fund family without penalties...
To give you an example,all these funds that I looked at were very heavy loaded towards technology and many of these funds were not adjusted from the boom of the 90s and took a big hit with some losing 60-70% of the funds value...Now there is little one can do but hold on. For those that were reasonably balanced, I made recommendations to increase their technology funds and move towards more midcap companies....
If you are in your middle age,income is not a factor right now for your fund, but with technology at it's lowest point and midcaps being the next wave of potential winners, makes these two areas of greater return on your investment..
The above two funds mentioned took the biggest hits and if the investor were to have move these funds over to a more conservative fund like treasury or municipal bonds would have faired far better....Now the tables are turning and and this funds,although are conservative and worth holding,but should not be the biggest % in your portfolio....Lets look at Municipal Bonds.Most states are moving into negative balance sheets and that makes these bonds unattractive since they will probably be downgraded a few notches depending on many factors,but never the less based on overall receipts taken in and what is left if any for maintaining and growth....One area if you have this fund is "Reits",these are tied to Real Estate mortgage rates and are extremely attractive since interest rates are very low..These are conservative funds and carry income yields,but they have their drawbacks and funds need to be adjusted pertaining to the relevant times.These two type of funds should be in every portfolio,but depending on your age is the requirement on how large of a degree each fund makes up the overall portfolio.If your retired,move more into income and conservative,if your middle age,have it well rounded into aggressive and growth oriented funds...
Precious metals funds are ok,but should be the smallest holding in any one fund....Here again you will have faired ok if moving around,but for the sake of having no inflation this should just not be touched or even considered....
We didn't hear much complaining because investors were making lots of money in the 90S.The media did not complain ,because their audience would have turned them off if they did. Politicians did not say anything because they did not want to turn off their constituents, nor did they want to disrupt the contributions the companies that financed their election campaigns.
And so,there was no complaining while the bubble grew larger and all these companies were enjoying shareholders support without real substance backing up their balance sheets.
I can remember through online stock discussions forums like Raging Bull and seeing all the high fives and kudos congrats that was going on among investors. Here on occasion, when one person would question the company on it's figures or other pertinent negative factors or why this or that. They would be called all sorts of names,berated for the notion that they should question the company of what so many had placed their monies in.Of course all the longs were never in real discussion other then things are just fine and we will certainly make it because it is the future..As usual, the skeptics said nothing.
The market went up too high and then suffered the serious downturn that we find ourselves in because of the greed of investors. It is not the government's fault, or that of the SEC regulators. Corporate executives now being brought to the skids were pushed into by the very share holders that now want their hides. But investors refuse to take any of the blame, instead they just complain.When things were fine all is well, now we are in the eye of a hurricane and it's everybody else's fault.
The stock market is still the greatest market place for individual investors to make an incredible amount of money,but you have to apply common sense and due diligence....No,it isn't right when corporations cook the books or give a false sense that everything is just fine.When our corporate leaders do undermine their ethical standards and defraud investors,then the strong arm of the law should come in and hand out "don't get out of jail cards"
In closing,if any of you were real investors you would spend the next couple of days figuring out which companies you would want to own.Don't take this decline in the markets as this is a bad place to put money,but with the economy still strong, makes this a great and as with every Bear Market, ripe towards a far greater financial reward...
This decline is fine and weeds out the weak,corrupt and have stood on notice that corporate books will be again the focus,"that what you read will better be able to comprehend with legitimacy".Look for a healthy comeback and much stronger market.
Have a good day.
ET
