Quick! Someone Give My Head a Shake.

So the Dow finally made it into record territory, but where’s SCUR? Yes there was another downgrade. Now someone needs to give my head a shake. SCUR was over $7.00 then it was downgraded. It fought back to over $7.00 again, but did I sell it? NNNNNNOOOOOOOO!!!!!!!! So then what. There was that nasty old NASDAQ letter that sunk it below $7.00. And today they get another down grade, which drops the price 22 cents to $6.34. So now what?

The approach I’m taking with SCUR is to hang on to it for now. that since the Dow is heading on to new records, I’m going to see if SCUR can battle its way back over $7.00. Then you can believe it that I’m going to sell otherwise my short term play is going to end up being my long term play. Someone give these guys a good contract so I can take my ball and go home.

Back on the oil front, oil rose the last two days on rumors of an OPEC production cut. However, it seems as if only a few countries are in agreement over a production cut. The result is that the price of oil is back down to the $62.00 mark today. Looks like Nigeria will be the lone country to cut production by 5%. But the Alaska pipeline has come back online and inventories are good so it is unlikely that Nigeria’s move will result in any permanent price increase.

Now the only thing the markets have to worry about is the broader economy and the growth rates. From all the indicators in the last month or so it would appear that any inflation worries are dead. That means the only thing the markets can be worried about now is a slow down or a recession. There I said the “R” word, look for the world to fall apart shortly. We’ll just have to see how the senile old farts at the Fed manage this one.

Long term play CLRK is at $17.20.

What's Going on with the Dow?

Yesterday I said the Dow would make it to a record close. Today I’m eating my words. Perhaps I should also be eating my shorts. Again, today, it looks like the Dow will not be hitting a new record close at all. The second quarter GDP number was revised down from 2.9% to 2.6%. This lower number reflects the slow down we were talking about earlier in the week. At the very least it shows that the US isn’t growing at a break neck pace so there’s no need for the Fed to raise rates. Leaving rates unchanged or lowering then is good for the market.

Let’s take a look at SCUR.  Secure Computing today announced a deal with IceWEB Partners. IceWEB Partners is going to start trying to sell Secure Computing’s line of products to their Federal Government customers. Ordinarily, that would be a good thing, but today SCUR also announced that they had received a letter of deficiency from NASDAQ. A portion of the news release reads as follows:

On September 26, 2006, Secure Computing Corporation, a Delaware corporation ("Secure"), received a Deficiency Letter (the "Letter") from Nasdaq ("Nasdaq") indicating that when Secure completed its acquisition of CipherTrust, Inc. ("CipherTrust") on August 31, 2006 (the "Merger") pursuant to the Agreement and Plan of Merger dated as of July 11, 2006 with Peach Acquisition Corp., a Georgia corporation and a wholly-owned subsidiary of Secure, CipherTrust and CT Shareholders' Representative LLC, a Georgia limited liability company (the "Representative"), as amended by that certain First Amendment, dated as of July 14, 2006, that certain Second Amendment, dated as of August 1, 2006, and that certain Third Amendment, dated as of August 30, 2006 (as amended, the "Merger Agreement"), it failed to comply with the shareholder approval requirements set forth in Nasdaq Marketplace Rule 4350(i)(1)(C) (the "Rule").
Nasdaq verbally notified Secure of such noncompliance on September 14, 2006. In response to the verbal notification, Secure took action to cure the deficiency by entering into the Fourth Amendment to the Merger Agreement to restrict the issuance, in connection with the Merger, of an aggregate number of shares of its common stock equal to or in excess of 20% of the number of shares of its common stock then outstanding on the closing date of the Merger, unless and until shareholder approval has been obtained.
Consequently, the Letter confirms that, subject to the public announcement requirements of Nasdaq Marketplace Rule 4803(a), Secure has regained compliance with the Rule and the matter is now closed. On September 27, 2006, Secure issued a press release, in accordance with Marketplace Rule 4803(a), disclosing receipt of the Letter.

So now the merger is going ahead and SCUR is onside with NASDAQ. The good news is that IceWEB is peddling SCUR’s products to its establish customers. Now the market is choosing to focus on the letter and the merger instead of the good news of the agreement. This focus on the negative is what concerns me. Looks like this might be an indication of the market mood in general. Perhaps I’m looking at what’s going on with a particular stock and overlaying it on the entire market.

Am I reading too much into what’s going on with SCUR today? Or is the market mood turning negative in general? Maybe what’s going on with SCUR is an indication of why the Dow can’t hit a new record? But if you look at the market breadth for the Dow it’s positive. More stocks are going up than down.

So what gives?

A Record Breaking Day

Yesterday was a relatively good day. SCUR, although down, managed to hold above $7.00. CLRK gained 0.31 to close at $16.99. It would have been nice to see CLRK break $17.00, but I’ll take a 31 cent gain any day.

The big news for today is that the Dow is within 53 points of the record close of 11,722.98 it set on January 14th 2001. The futures are all pointing up this morning and all indications are that the Dow will be able to break the record close today. If this happens the market psychology will shift to a more positive one and we should see the markets on a break out and pushing on to new highs. Seeing the Dow at new highs will spur a lot of the little guys to get into the markets. There’s no way that regular folks will want to miss out on the rising market. They’ll want to get in and make some money too. So in they’ll pour. The institutional guys will wait and watch for signs of a market top. When everyone is in, they will start selling and pull the rug out from under the market. Then the little guys will get burned.

Greed has a funny way of influencing behavior. Many of the guys that will get burned will be the same ones that got burned in the internet bubble. But greed has a way of wiping out their memories, a kind of selective amnesia if you will. Greed is also the same emotion that will allow these people to hold stocks to the bitter end. They won’t want to sell stocks below where they bought them. So rather than sell and take a small loss, they will ride these stocks down until margin calls force them to sell and take a bigger loss.

The one thing that can throw a wrench into the Dow’s record is this mornings report on fuel inventories due to be released at 10:00am EST. Right now oil is down $0.44 to $61.01, so my guess is the market thinks that the oil inventories will come in higher. Although oil managed to consolidate over $60, I see it dropping further, which will be good for the markets.

So we’ll look to see the Dow post a new record close and CLRK should cross $17.00 and SCUR should also rise. I’ll need to revisit my price target on SCUR in the short term for tomorrow.

Ebbers heads to Jail

This day is going to be a strange day and the rest of the week will likely be volatile. This morning the S&P and Nasdaq futures were up slightly but the Dow futures are down slightly. Lennar, a large home builder, said its revenues would be short of forecasts. This adds to the worries that home prices will continue to decline.

Today sees the release of consumer confidence at 10:00am so look for some kind of move in that market just after 10:00am. Most economists see a stronger confidence number from August so look for that to come in over 100.

Oil seems to be consolidating in the $60 - $62 range. I think oil will consolidate at this level for the rest of the week before heading lower to the high $40’s or low $50’s.

It looks as if the link I included on one of my posts last week was timely as Bernie Ebbers is starting his 25 year prison term today. Looks like he’s gonna take the fall, as he should. There are folks at CITI Group that should be doing hard time as well but they had connections. It just goes to show you that Wall Street lives by a different set of rules that the rest of us.

Bad News/Good News

The market kind of started out good and then the housing report came out. No surprise that the housing market is cooling. Home prices actually took their first drop in 11 years. So now the real estate experts all say they expect prices to drop for several months while the excess inventory works its way through the system. The question now becomes, will the lower mortgage rates cause people to pick up the pace of purchasing taking advantage of reduced prices and rates to absorb the excess inventory of houses faster then it would otherwise take? Does this mean there will be a lot more talk about hard or soft landings? Well, one thing’s for sure, the lowered housing prices will almost certainly help reduce the inflation rate.

But around noon the market stabilized and started heading north. What gives? The market seems to be looking at the hard versus soft landing question. The Fed stated that they were concerned that there may be inflation in the system, but the market has looked at the recent fall in the price of oil, gold and other commodities and now the drop in housing prices. The market is basically saying that inflation is becoming a non issue which will allow the Fed to move a little earlier on lowering interest rates to head off a recession. The net effect is the market thinks there will be a managed slow down not a full blown recession.

I think it’s kind of interesting to see that the markets initial reaction is negative and then they look harder and see some positive. I think this goes a long way to gauge the mood of the market. Maybe the market participants want to see a rally. Maybe they would like to see the Dow in record territory. Then the public will come enter the market in droves setting us up for a nice bubble to burst.

CLRK is now up 2.14% to $16.67 while SCUR has cleared the psychological barrier of $7.00 and is currently sitting at $7.15.

The Golden Egg

After a nice relaxing weekend, the first thing I see Monday morning is that oil is below the $60 price level and the futures are pointing to a positive opening today. BP said that it would resume shipping Prudhoe Bay oil and it seems Iran is prepared to discuss its nuclear program. The S&P, Dow and Nasdaq futures are all up this morning and ready for action.

The only thing that can reverse today’s upward trend is the housing report due out at 10:00am Eastern time. A larger than expected slowdown in housing sales could be confirmation for the market that the economy is slowing down. Signs of a slowing economy bring about talk of the “R” word. Speculation will run rampant that their may or may not be a recession looming on the horizon. Then, once again, we’ll be left to a bunch of senile old men, removed from reality to keep the economy rolling.

Look out here comes the soft landing. Like they say, it’s not the fall that kills you, it’s the sudden stop. But I’m sure all the Feds men will get together and do the right thing. After all they’re appointed and not in any real danger of losing their jobs if they make any bad decisions. Even if they did lose their jobs, they’re never in any real danger of hard times like you or I. Theirs is the world of fat cats. Like their corporate executive friends, they will be taken care of quite nicely.

Speaking of corporate executives, are they getting fat lately or what? Seems like even when they mess up or post lower numbers they still get a high(er) bonus. Yet if my performance falters during the year, my bonus will be in the toilet. Even when these so called execs ultimately fail enough to be dismissed, check out the golden handshake they get on the way out the door. Do some research, you’ll see what I mean. We need to see performance based compensation. I’d love to see one of these execs lay it on the line and say, if I don’t perform I will not collect a penny in salary or bonus. At the very least no bonus will be fantastic. But we’ll never see that happen because they are only interested in themselves. They don’t care about us as shareholders, only themselves and what they get out of it. So next time you buy a company, think about whether the top execs are looking out for the shareholders, or their own pockets.

It's Friday and Nothing Much Going Is On

Today’s a kind of boring day. No major news on the market front, other than the price of oil. Oil and gold are both up a bit today, so the negative feeling from yesterday carried forward to today. Although markets are off there is no major selling. The Dow at the moment is down only 30 points and Nasdaq is down 16 points.

Looking at my portfolio, CLRK is down a penny and SCUR is down 3 pennies. Man I am starting to feel like the markets. I don’t feel like doing much today. I can’t see anything going on today to change the mood. We’ll just have to ride it out until Monday and start over with a fresh good feeling. Today feels like the focus should be on the weekend and taking a break from all this talk of markets and inflation.

One interesting thing going on today is that the treasury prices in the U.S. are rising, bringing the yield on the 10 year note to 4.61%. Does this suggest that the markets think that the economy may be slowing faster than the Fed thinks? I say it does. We have to remember that all of the statistics that the government uses to measure economic output are usually at least a month old or more before we see them. So although the Fed says that the economy is showing signs of slowing, it has likely gone beyond that point by the time of the Fed statement. But being old, senile bankers, the Fed’s ability to anticipate is, much like their sex drives, greatly diminished.

So we will see the economy slow, then the Fed will react as the economy comes out of the slowdown. Then the recovery will pick up even more steam from the Fed’s late reaction and everyone at the Fed will pat themselves on the back.
Oh well, back to anticipating the week end that lies before me.

Wrong, Just Dead Wrong

So it figures that when I say that the market will have a fairly good day all hell breaks loose and the Dow heads into the toilet for 100 points. Well things started off ok until the market started to falter as the price of oil popped up a bit. Things really went bad when the Philadelphia Fed index was released. The report, which was released at noon, the read on regional manufacturing plunged into negative territory for the first time in three years. The market was only expecting a modest decline from the August number. So as expected, the insiders turned tail and went for the exits. Now guys like me see that our stocks are down. Concern hasn’t slipped in yet as we still have a nice profit on SCUR and CLRK is up a little as well.

I came across this wonderful link to the PBS show Frontline. This episode is entitled “The Wall Street Fix” and is a great program documenting the kind of playing field the little guy like me is up against. The frontline folks have broken this program into five chapters that are easy to load. Here’s the link:

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/view/

Enjoy the show.

It's Nice When Everything Works as it Should.

My large two stock portfolio looks to be in good shape. SCUR finished yesterday at $6.85 giving me a total profit on that stock of $903.00 and CLRK finished at $17.58 giving me a more modest profit of $248.00.

Yesterday the Fed did what the market wanted and the little guy like me that held onto some stock got a little bit of profit out of it. Of course I haven’t realized any profit yet as I haven’t sold either of the two stocks I hold. That’s the main thing to keep in mind when bragging to friends about your investing prowess. Until you sell there is no profit. Now, that is much easier said then done. People are greedy and always listening to the voice inside their head telling them to hang on and squeeze a little more profit out of this stock instead of selling at their target. Then the next think they now, the stock retreats and they end up selling below their original price target when they finally decide to sell. One of my rules is to never beat yourself up for taking a profit. Better to take the profit than a loss. There are thousands of stocks out there, so there will always be others to play.

The trouble is that people get lazy and don’t want to look for the next stock to play. It’s so much easier to ride the one I’ve got now than to put the effort in to find a new one. But I think if you keep a list of stocks that you watch, even when all your money is fully committed, you’ll always have options to play if you are watching specific stocks. You should also keep your list dynamic. If there are stocks that don’t appear to be moving in any particular direction take them off your list. And if you find others that are volatile, then make a point of adding them to your list. By keeping an active and dynamic list you should at least have one or two options to go into once you free up some cash.

Oil appears to be rebounding this morning but I’m not going to be fooled by this bounce. I can’t see this “rebound” lasting and see oil continuing its long term downtrend. Someone also asked me if this is a good time to buy gold. I don’t think there is any reason for the price of gold to rise. I don’t see gold as being a store of value during recessions as it once was, especially since the Federal Reserve tends to think it can manage cycles through monetary policy and good propaganda. The only reason that I think people buy gold as a store of value is during a geopolitical crisis. When something nasty happens, people panic and then run to gold but under normal circumstances, gold should just end up becoming another industrial metal the way silver has.

Since the Fed made everyone happy, and oil and natural gas have backed off, look to see a nice positive day today.

The Fed Dog and Pony Show Coming to a TV Near You

Looks like the Fed did what was expected and life went on as usual. Everything is rosy. Markets initially backed off a bit after the announcement but the Dow came roaring back and is currently sitting pretty up almost 83 points. Whether you like the Fed or not, or subscribe to the mumbo jumbo, propaganda, Voodoo or what ever you would like to call it, the markets are up and that’s all that counts.

Well the rest of the day and evening will be full of self serving analysts and commentators with inflated heads trying to get as much TV exposure as possible. They will be trying hard to complicate the world so that we will feel we need them to gain some form of primitive understanding of the complex financial world. To Quote Peter Lynch, arguably the world's most famous mutual fund manager, “I spend about 15 minutes a year on economic analysis. The way you lose money in the stock market is to start off with an economic picture. I also spend 15 minutes a year on where the stock market is going.” I tend to agree with Peter that all this analysis of the Fed, inflation, unemployment, rates etc. is a great show and perfect for over complicating something that is essentially a simple concept. Something so simple even a guy like me can grasp the concepts and maybe make a little money to boot.

For the record, SCUR is at $6.87 up $0.10 and CLRK is at $17.51 up $0.49.

Fed up with the Fed

My stocks didn’t fair too badly yesterday. Things could have been much worse. SCUR surprised my by finishing up seven cents to close at $6.77. CLRK managed to hold and finish above $17.00 so that psychological support holds.

Today looks to be off to a good start anyway; all of the futures are up significantly and the overseas markets are largely positive. Yesterday Oracle’s earnings beat Wall Street’s estimates and also forecasted solid growth for the current quarter. Because Oracle surprised the Street and forecast strong growth for the current quarter, their shares were up 13% in the after hours markets and will be one of the catalysts for a rally this morning. Had Oracle not forecast solid growth, then their shares may even have dropped.

Oil, on the minds of most market participants over the last few weeks, managed to slip below $61.00. This will add further fuel to the fire of any morning rally. A low price of oil will cause a broad based market rally. The only variable in today’s market rally is the Fed decision due out this afternoon at 2:15pm.

The Fed is expected by most market watchers to leave rates unchanged. However, most of the market participants will be taking a close look at the accompanying statement. The business economists and the analysts will be looking at the statement for clues about where the Fed sees the economy and inflation going in order to determine what the Fed is thinking about future rates.

This whole system is one giant farce if you ask me. Why should a bunch of people that are out of touch with reality decide what I have to pay for interest rates? These guys have no idea what inflation is, what the middle class do, their struggles to make ends meet. In fact these guys are so out of touch with the majority of people, the hard working middle class, that they have shrunk their numbers. The numbers of the middle class are shrinking and the gap between the rich and the poor is widening. So these guys must be doing something right.

My all time favorite of the Central bankers is Alan Greenspan, whose senility never ceases to amaze me. This guy is often heralded as the greatest of all time, yet most people could never understand what the hell he was saying. Greenspan even acknowledged this himself when he said, “guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I said.” Now here’s a guy, with the stated objective of confusing people, running the monetary policy of the country.
These guys even go so far as to say that some level of unemployment is a good thing. They actually call it a natural level of unemployment and know what it is. Last I hear somewhere in the 4.5% - 5% range. But these bankers and economists can say that because they are never the ones laid off or part of that 5%. I’ll bet their tune would change if they were unemployed for any length of time.

All I know is that with each passing week my paycheck buys less and less. Yet these senile old men are going to sit in a room behind closed doors and decide what’s good for me and the rest of the free world. The best part is that none of these people have spent any time in the free world and most have no clue about the real effects of inflation and unemployment. None have ever done a hard days work for meager pay and wondered how they will make it to the next paycheck or what they need to cut back on to make a go of life. These guys and their rich investment industry friends have no concept of what stuff costs and what it takes to get things. Yet here they are affecting my life and yours but all the while ensuring that the pockets of their rich friends get fatter.

Markets Lower Ahead of Federal Reserve Announcement

Looks like the market is going to finish down today. I am somewhat dismayed that CLRK is below $17.00 today. I was hoping that it would hold above $17.00. I talked about even numbers being psychological support and resistance. For those that are not familiar with the concept. A support level is a price at which the market feels the stock is cheap enough that an inflow of orders creates enough demand to push the stock price back up. Support is formed when the stock keeps bouncing off a price.

Resistance is the opposite concept. A stock price rises to a point where people feel the stock is over valued and sell to take their profit. This act of selling causes the supply of a stock to increase resulting in lower prices. The stock is seen to rise and fall after hitting a price, the price becomes like a physical ceiling if you will. I think the market looks at even dollar numbers as psychological support and resistance.

This means that if CLRK can close above $17.00 the market will see $17.00 as support and buy stock when it gets close to $17.00 and hopefully cause the price to rise. If CLRK closes below $17.00, then $17.00 can become resistance and people will sell CLRK as it approaches $17.00. The act of selling as it approaches $17.00 will make it difficult for CLRK to make it above $17.00. That’s not to say it won’t happen, it will just be more difficult.

As we discussed earlier, tomorrow the Fed is meeting, It looks like not much will be happening before the Fed announcement. So all eyes will be on the Fed.

An Open Letter to Canada's Finance Minister

Now that the personal stuff is largely out of the way we can get back to looking at stocks and ranting about the investment industry in general and the stock market in particular.

Yesterday was a decent day for me. CLRK woke up for 53 cents to close at $17.55 and SCUR was off a little bit at $6.70 down five cents. CLRK is slowly starting to show some potential and it’s only a matter of time before the market realizes the gold mine that is Color Kinetics. I will give SCUR another day or two before I can determine if I should keep my target on that stock or dump it. Two stocks that I have put on my radar are MFLX, which I mentioned in previous posts and WIRE. WIRE is the symbol for Encore Wire a manufacturer of residential and industrial electrical wiring. Their main market is the southern US where they are benefiting from the reconstruction efforts after last years hurricanes. I look at each of these companies and let you know my opinion in my next post.

Now I want to talk about something near and dear to me. In Canada when you leave a company with a pension, you can have your share of the pension funds deposited into a Registered Retirement Account until you decide to retire. In the past at the provincial level, this money had to be kept in separate “locked in” retirement accounts. Now if you tend to change jobs on average every five years, you can end up having five or six separate locked in retirement accounts. Naturally, all these accounts have fees associated with them. And to make things even sweeter for the financial institutions, they were allowed to charge yearly fees for the administration of these accounts. Most charge fees over $100 per year. People that change jobs more frequently, tend to have more of these accounts with smaller balances. The end result is that these smaller accounts become eroded due to proportionally high fees. Throw in some losses in the markets and commissions and the accounts can head towards zero in a hurry.

The provincial governments looked at the situation and realized that this was not good for the average working people. The provincial governments decided that they need to relax these rules and allow people to place these funds into their regular Registered Retirement Accounts. This allowed people to consolidate accounts. It also had the added benefit of allowing people, who were facing financial hardship to access the funds by deregistering some of these previously locked in funds. The provinces recognized that these locked in funds were the account holders and they really had no business in telling the account holders how to manage their money or what to do with their money.

Not so for the federal government. In Canada, any company regulated by the federal government also has their pension regulated by the federal government. And the federal government says that when you leave a federally regulated company, your pension money must remain in a separate locked in retirement account and you are not allowed to access those funds or move them to a non locked in account under any circumstances. They somehow feel the need to dictate to people how they can and what they can do with money that is rightfully theirs. Through these regulations, this experiment, and eventually this blog was born. The money used to trade is sitting in a locked in account. Since I am unable to touch it, and it is not a large amount, I realized that it will just be eroded over time. So I decided to throw caution into the wind and see if I can either make a lot of money or lose it all. What difference does it make? The federal government says it’s not mine anyway. At least I can’t do with it as I see fit.

A few weeks ago I sent a letter to the Finance Minister (In Canada, he’s referred to an Honorable, but frankly I can’t see what’s honorable about any politician) asking him to address this issue. All I got was the standard patronizing reply:On behalf of the Minister of Finance, the Honourable James M. Flaherty, this is to acknowledge receipt of your correspondence of August 28, 2006.Please be assured that your comments will be brought to the Minister's attention as soon as possible. Departmental Correspondence Unit
Since then I haven’t heard back from his office at all. Now perhaps if I give a sizeable donation to the party, I would get a response. I huge donation may even get me a change in some legislation. Well my distaste and dislike for politicians has only been reaffirmed from this experience. I can most definitely assure you that if it was to the Finance Ministers benefit the legislation would be changed, but because it benefits the ministers friends who run the financial institutions, the legislation will never change.

Once again the little guy is screwed. Bend over here comes your government with a big smile on its face.

Below is the letter I sent:

Hon. Jim Flaherty,

I am writing to you to request a change in the legislation pertaining to locked-in RRSP's. I recommend we change the locked-in RRSP legislation to mirror the legislation in place for normal RRSP’s. I find the legislation onerous and unfair to individuals who need access to the funds today. The failure of the Department of Finance to address the anachronism and unfairness of the Locked-in RRSP is not only unfortunate and short-sighted, but it fails to recognize the hardship the present system puts on many people who have Locked-in RRSPs.

I have discovered in researching locked-in RRSP’s it appears a large number of Canadians are burdened with this restriction. It creates unnecessary financial hardship when it should not. This change would simplify the legislation and could be easily accomplished without creating new legislation. At the same time this would increase the tax revenue base. This will also provide individuals with the option to access funds that rightfully belong to them.

Also, the rigid rules surrounding locked-in plans means that if people want to consolidate their investment portfolios, by combining their RRSP with their Locked-in RRSP, they cannot and are not allowed to. This makes for very inefficient and ineffective investing, as well as it increases investing costs. So on the one hand the Finance Dept. purports to "protect" pensioners from their possible ineptitude and on the other hand prevents pensioners who try to organize and operate a responsibly invested portfolio from doing so. This is both contradictory and hypocritical on the Federal Government's part.

Less government and a "hands off" approach have always been a conservative philosophy. But with regard to Locked-in RRSP accounts nothing can be further from the truth. While other provinces have moved to remove the restrictions from Locked-in accounts and allow people access, the federal government and the Department of Finance refuse to allow Canadians any form of control over funds that are rightfully theirs. Why would the federal government refuse to allow people too have control over their financial futures? Why would the federal government want to stand by and watch its citizens suffer financial loss and hardship because they had the unfortunate luck to be employed by a company with a federally regulated pension plan? Why is it that the provincial governments have moved into a new age of enlightenment and have allowed people control over their financial lives while Ottawa refuses to grant people the same dignity?

Upon researching this issue, I have found that a majority of people when informed of this issue find the position of the Federal government to be unreasonable. I have found the Federal governments antiquated and paternalistic attitudes towards this issue so disgusting that I will not work for a company that is under federal pension regulations if at all possible. I would appreciate a response concerning the above questions and would like to see an indication that the Federal Government is moving towards giving control of Locked-in RRSP funds to the owners of the funds.

I await your response.

Regards,

P.S. – I’m still awaiting his response.

The Fed is Meeting This Week

Well I had a rough weekend and was unable to post until late this morning. As I speak CLRK is over $17.00 and SCUR is up nine cents to $6.84 despite a downgrade on Friday.

Well I guess the big thing on the market’s mind this week is the Federal Reserve decision on interest rates. The Fed will make an announcement on interest rates this Wednesday. Most of the beloved analysts and business economists expect the Fed to leave rates alone. What will grab all the headlines is the statement they release on the economy and inflation. If they raise caution that the economy is showing signs of inflation then look to see a major sell off. Similarly, if they say the economy is showing signs of slowing then there may also be a sell off. I think the only way the markets will not be able to find an excuse to sell off is if the Fed says that the economy is growing strong and at a steady pace.

I think that the markets are looking for an excuse to take a breather. I think that the institutional folks want to get the little guys in and hopeful before the pull the rug out. Perhaps they will let the markets rise a little before pulling the plug but I have a feeling that the markets will drop in the next few weeks. The Dow is within 200 points of it’s all time high right now so I think that I will be very cautious over the next three or four weeks. My gut feeling is that the Fed rate announcement is the perfect day to do it. At this point only time will tell. But the main point of this rant is that the institutional folks will pump up the market and sell shares to the little guys at high prices so they can buy back off the little guys at a discount a week or two later. My gut feelings are often only sometimes right, as witnessed last week, but we’ve seen this too many times in the past.

More on this topic down the road.

My Dislike for Stock Analysts

Well SCUR got the dreaded downgrade this morning and as can be expected the stock is down 10%. So this analyst qualifies the downgrade by saying that he remains optimistic on the company’s long term opportunity but in the short term challenges could limit the appreciation of the stock. How uncommitted can you get. Essentially what this guy is saying is the stock could go down but in the end it will go up. I’ve never seen a statement from an analyst that doesn’t cover both cheeks. That’s why I have such a dislike for them. Analysts are right up there with politicians among my favourite people. In fact I think we should encourage a lot of analysts to go into politics. They can speak for hours on a topic and when you look at what they really said, you discover that they said nothing meaningful at all. Perfect for the campaign trail. Think of the speeches. Taxes will go down before the election but once the government is back in office, let’s hike them up.

I like statements like over the short term we see weakness in the stock or overvaluation etc. but over the long term we remain bullish on the stock. What kind of a useless statement is that? That’s just covering your ass. Basically your saying that you think the price will go down, but since you’re not sure you’ll be long term bullish. By using this kind of phrasing, your saying if I’m wrong and the price doesn’t drop, I can comment about how the company resolved the short term challenges and are moving ahead with growth. These guys know that fundamentally sound companies with good management in growing industries will all appreciate over time. There’s no rocket science there.

But my favourite rant; and the reason that I think analysts issue statements like that is to get the price down in the short term so their institutional clients and/or the firm can load up on the stock shortly after the down grade. They anticipate, correctly, that the small retail investors will panic that their stock got downgraded and then head for the exits. As the stampede causes the stock to drop, the institutional folks sit on the sideline and wait for the opportunity to buy the stock at a discount price. After which more positive stuff can slowly start to come out about the stock and next thing you know the analysts prediction comes true and the stock price is up long term. Meanwhile he/she looks like a genius while a lot of people have made a lot of money.

Well that’s my jaded take on things as SCUR sits down almost 10%. I’ll be here waiting for the institutional guys to get back in and campaigning for my local analyst in the next election.

Inflation still tame.

The inflation number came out this morning, much anticipated I might add. Inflation came in right in line with forecasts at a modest 0.2%. As expected, a happy Wall Street pushed the futures well into the plus side with the S&P futures at 3.70 and Nasdaq futures up 9.50. What this means to the small investor is that Wall Street liked the inflation number and markets in general will go up today. On the whole if you have a diversified and balanced portfolio, it should go up, all things being equal.

My stocks, on the other hand, are not diversified but merely a play on two that I thought would go well. Although I hope that they will follow the general trend of the market, they are also vulnerable to company or industry specific news. Fortunately there is no negative news that I can see for CLRK so I hope that they participate in any rally today.

More concerning to me is my short term play. Although there is no negative news out there on SCUR, I am concerned that it closed below $7.00 at $6.99. I consider round numbers as psychological barriers. So if the stock crosses a psychological barrier, I think traders see it as a good thing. In their eyes the stock has momentum and they should buy. If the stock fails to hold and drops down through the round number, then I think traders see it as not having enough strength to hold or sustain it’s momentum. Since SCUR closed below $7.00, I’m worried that it will trade a lot lower today. My hope is that the positive inflation news is enough to push the stock solidly back over the $7.00 mark.

Since we’re been talking about oil lately, I should mention that the price of oil is down again to the low $63’s. This is another good sign for any sector but the oil and gas sector. Hopefully it will just keep getting cheaper and cheaper to make the commute to work.

Also remember the witches are out today, so we may see some volatility.

Good luck and happy trading.

Sometimes Things Just Don't Work Out

Well there is 10 minutes left to go in the markets and the Dow is down 15 points. Looks like my gut feeling isn’t exactly accurate. Well the Dow did actually manage to cross into the positive for a brief period today so I was partly right. Here’s hoping that the last 10 minutes goes like gangbusters and we get a late rally to the positive. Just goes to show you that your gut can’t always be exactly right but there can be some kernel of truth in what it’s telling you.

Back onto the topic of oil. Looks like oil is down yet again. The folks at TD may end up being right after all, as now the price of oil is closer to $60 then $70. I can only hope for a return of cheap oil. After all, when consumers are paying less for gas, they will have more money to spend on other things. That money will go towards buying real stuff instead of into the pockets of oil companies. As people spend, earnings will once again increase at consumer goods companies and their suppliers. Then the talk of slowdown will diminish. Hooray for lower oil prices.

Tomorrow will see the release of the CPI number as well as the infamous triple witching. Looks like it may be an interesting day to say the least.

SCUR closed below $7.00. Nuts to that. We’ll have to be careful tomorrow. I was hoping it would hold but now we’ll have to see if it tanks tomorrow.

CLRK actually gained three cents to close at $16.60.

MFLX close down $1.26 to $23.52.

Tomorrow will definitely be interesting.

Retail Sales

What’s going on this morning?

Well continuing yesterday’s rant on oil, I noticed that it was back up above $64.00 this morning. I think that can be expected after seven straight days of declines. Some random people I canvassed said they expected oil to head back up. I did however find a report on the TD Canada Trust website, under the economics section called the TD Commodity Price Report. In it they talk about a US slowdown, the return of the BP pipeline, the diminished forecasts for this hurricane season, and the discovery of additional oil in the Gulf of Mexico. All this they say will contribute to a decline in the price of oil. Their one year price target is $55.00. I don’t know if I agree with their price target, but I do think that the price of oil will decline over all.

Retail sales numbers were also released this morning and they rose 0.2% vs an expected 0.3%. So what happens? The markets sell off and the Dow ends up starting the day down. All this because of a difference of 0.1%? Well I guess when you talk in terms of the United States spending, a 0.1% difference translates into a lot of money. Maybe the US economy is slowing after all?

Well SCUR is down a little but it is managing to stay above $7.00. That’s a good thing. Somewhere in the bottom of my gut is a feeling that the markets will finish the day in the positive. Well we’ll have to wait and see. If the markets finish in the positive, I think we can see SCUR around the $7.20 - $7.25 range. How’s that for hopeful optimism?

CLRK looks to be down about 20 cents on completely anemic volume. When are all the people out there going to realize what a great company this is? Oh well. Long term means long term, right?

The MFLX I was looking at is down another dollar. Maybe it will return to the $18 level where I planned to buy some in the $18 dollar range after I hit my target on SCUR. But alas, it was not to be. MFLX made its run from $18 before I could sell SCUR at $7.56 so I put any thought of selling CLRK to chase MFLX out of my mind.

Most of the other stocks on the list that I put together don’t really stand out as being a potential next buy, except maybe for one that I will look further into talk about latter. If anyone has a stock they see as particularly interesting, feel free to say what it is and why you like it as a comment.

Mid Week Update and Look Ahead

Well oil inventories were a little lower and distillate inventories were higher. So initially the price of oil dropped and no surprise the markets advanced. Oil has since rebounded a bit but the market is still up. There is a fair bit going on this week from a market standpoint. Thursday sees the release of the Retail Sales Report and Friday is the CPI report.

Perhaps a larger event looming on the horizon for this week is the infamous triple witching day also sometimes referred to as Freaky Friday. Freaky Friday occurs four times a year on the third Friday of March, June, September and December. It’s when all the contracts for stock index futures, stock index options and stock options all expire on the same day. The day typically is a more volatile day as traders look to offset their options and futures positions. This is something taken into account by the day traders but position traders, like what I’m doing, and especially long term investors need not worry too much about it.

Looks like both my positions seem to be diametrically opposed today. SCUR looks to be poised to close above $7.00 so I’ll have to look at keeping my price target or switching to the stop loss that we talked about earlier. Meanwhile CLRK is down 0.15. Yes, CLRK is a long term investment but there is some frustration in seeing a stock you bought sitting below the price you paid for it. Writing this blog requires me to look at prices on a daily basis,, but I must resist the temptation to dump this stock and buy something else. I think this one will prove to be a long term winner. Also MFLX looks to be down $1.00 so that is still on the radar screen. It looked poised to break out but the volume just wasn’t there I guess. Let’s see how low it can go.

As my price target on SCUR is approaching, I must start to look for other stocks that I might want to move into as I exit the SCUR position. So I’ll have to do some searching and see what I can come up with. I’ll bring up some stocks in a future post and we can look at each in turn to flush out some candidates. Who knows maybe someone will post some stocks to look at…..

Oil is Falling, Stocks are Rising

Well looks like the main story this morning is the price of oil. Oil has fallen to around the $64/barrel level. The oil inventory levels are supposed to be released today. I can only expect that if oil inventories are higher, the price of oil will fall. If the price of oil falls, then the markets in general should rise.

So what is this effect of oil prices on the stock market? Why is the price of oil so important to the stock market?

Well the most obvious effect is on the stock prices of the oil companies. When the price of oil rises, the profits of the big oil companies rise, since it essentially costs the same to pump oil out of the ground. Because profit/earnings is such a large component of stock prices, as profits rise so to do stock prices of the oil companies. All one needs to do is to go to Yahoo finance and take a look at a multi year chart of any oil company and see what has happened to their stock price over the last few years.

The second effect on stock prices that a rise in the price of oil has is on the transportation sector. As should be fairly obvious oil is a major cost for companies like airlines and trucking firms. Any company that has fuel as a major component of its cost structure will see their costs increase and their margins fall. Remember that earnings are such a large component of stock prices that as earnings decline so to do stock prices (all things being equal). This is especially true in a highly competitive industry. So any industry that has oil as a cost factor will have likely seen a decline in their earnings and the price of their stock as the price of oil increased over the last couple of years.

We also can’t forget about the general effect on the price of oil. Rising oil prices lead to rising gas prices. Rising gas prices are not only a component of inflation, but also a major part of people’s lives. People find themselves paying more for gas to get to work and go on family trips. Paying more for gas leaves people with less disposable income to spend. It also makes people think twice about going out of town for the week-end when the otherwise might have. Oil prices therefore have an effect on consumer spending.

Rising oil prices also contribute to inflation. Since it is a stated goal of the North American Central Banks to keep inflation in check, rising oil prices can also cause interest rates to rise if the Central banks perceive inflation too be rearing it’s head. If the Central banks increase interest rates, consumer spending will decline as the cost of borrowing increases. The housing market will start to slow. Interest bearing securities become more attractive to investors. All these factors combine to cause a general decline in the market.

This of course is a very simplistic and basic view of how I see things. I’ll keep my fingers crossed that the price of oil continues to decline; both as a consumer of oil products and as someone who is trying to make a buck in the stock market. More on this later.

Good luck and happy investing.

When is a good time to sell?

Now that the market is open, SCUR is above its 50 day moving average. Should I revisit the $7.56 price target I have for the stock? I wonder if I should revise the target after this new information or leave it? I think I would have no problem revisiting a stock if the information turns negative. Or perhaps it’s best to buy a stock with an upper price target and a scenario in which I would exit the position if things get ugly. Prior to now I hadn’t given it much thought. I know that my discount brokerage will not let me put both a sell at limit order and I stop loss order in at the same time in case one gets executed and I forget to cancel the other order. Both could eventually get filled.

Perhaps I should step back and explain a few things first. I have a basic knowledge of orders and a basic and very simple knowledge about technical trading. I am assuming that anyone who reads this also has a basic understanding of how to place orders in a discount brokerage account and some basic understanding about reading stock charts. There are plenty of good places to find the basic information on stocks, charts, placing orders etc on the web that I won’t cover that kind of stuff here. I want to instead focus on the topic of this blog and that is to try and buy some stocks to put a superior return together and prove that it is possible for the average guy to make money in the market.

Now back to the topic at hand.

I have in my experience over the years seen people that buy a stock and watch it run up and as it runs up they keep raising the price of their sell orders to be just above where the stock is trading. Every time the stock closes up they raise their price until one day the price drops and then they end up selling at or below where their original price target is after the stock falls. My question is, “How do I participate in the upward movement of a stock without fear of missing out on any profit I have earned?”

My first thought was to go with a stop loss order. A stop loss order allows me to set a price where if the stock drops to that price, it will be then sold immediately at market. This will allow me to hold onto the stock as the price increases. Should the stock trade through my target price I will still be able to participate in additional gains. But as the price of the stock increases, it moves farther away from my stop loss trigger price. The only way around this problem is to watch the stock and adjust the trigger price upward as the stock increases. Let me give you an example:

Suppose I bought a stock at $10 and had a target price of $13 on it. I could immediately put an order to sell the stock at $13 so that when the stock hits $13, I can realize my profit. If the stock continues higher then I lose out on the profit. Or I could watch the stock cross $13 and then place a stop loss order on the stock to sell if it declines back to $13. Suppose the stock closed at $14, by placing the stop loss order I have now participated in the gain above $13. Now suppose the stock reaches $15, I can leave my stop loss at $13 or I can tighten it up and place it at another price like $14.50. If the stock declines my order will trigger at $14.50 and I will make $1.50 or so above what my original target was. As always if this doesn’t make sense or you want to add some input please feel to post a comment.

So this brings me back to my dilemma. Should I cancel my sell at $7.56 and put a stop loss order on the SCUR? Right now, since the stock is at $6.93, it is far enough below my target sell price that I can ponder on what to do for another day.

What happened to CLRK? My longer term hold, well it’s bounced back and is currently trading at $16.69. Granted it’s below the $16.97 I bought it for but it is a long term hold and my account is still on the plus side overall. So far things seem to be going well.

What to do? What to do?

Well looks like SCUR was up 0.17 yesterday to close at 6.72. My price target I put on the stock was 7.56. The stock hasn’t been doing a whole lot lately and I was wondering if I should dump it and move on to something else? Are there any opinions out there?

One of the stocks on my list of stocks to watch is MFLX. They have been on a little run as of late and looks like they have just crossed their 50 day moving average and the MACD chart has just hit the positive. The volume on the stock is just a little below the average volume. There is no heavy volume to carry the momentum. Moving into the positive on MACD and crossing the 50day moving average both appear to be good signs. But the markets look to be volatile. What is going on with the broad market?

Well looks like the US trade deficit widened today to record levels which can’t be a good thing. Texas instruments narrowed its earnings forecast for the current quarter last night. On the plus side, Goldman Sachs beat expectations in the third quarter and Apple and Microsoft are both releasing new products today. Oil is lower so that’s a good thing but treasury prices were lower raising yields.

Hmm, what to do. For the time being, I think I’ll wait and see what happens to the SCUR. It had a good day yesterday and I think today will be good too. I realize that the MFLX has broken the 50 day moving average, but I should stick to my plan with SCUR. After all there are plenty of stocks out there and there will always be other opportunity. In my gut the MFLX just doesn’t feel right for now. It feels as if I would be chasing the stock. That’s something I don’t want to get into. If life has taught me anything, it’s to listen to my gut.

My First Two Purchases

So I decided to take this “I have nothing to lose” approach before the idea of tracking things in a blog form entered my mind. I put together a list of stocks to watch, which I can discuss in more detail in future posts. I watched the stocks in the list for a few weeks and then selected two. I decided that I would buy one as a short term play and the other as a longer term holding.

The first stock I decided on was SCUR – Secure Computing Corp. I looked at it initially because here was a stock that had come down. It was affordable to a little guy like me and the charts showed that it was starting to turn upwards. Although it was not probably an ideal buying opportunity for the pure chartisits, I had really nothing to lose and wanted to get in on an early opportunity. I bought 700 shares at $5.56 with a $29.00 commission bringing the total to $3921.00.

I thought that for once I would get in early because one of the knocks about being a small investor is that we are always late to the party. Well now I’m in early and even if I have to wait a little while for the party to start, I won’t get left in the cold watching from the outside. If you look at the chart from Yahoo finance, you’ll that the signal line on the MACD was still negative but trending up while the price of the stock had not yet crossed it’s 30 day moving average. But hey, I’m trying to anticipate here. To date SCUR had been up and down and closed on September 6th at 6.89. That brings us to $4,823.00 not too bad for under a month.

The second stock, and my long term play, was a bit more expensive. CLRK – Color Kinetics Inc. was chosen because I believe in their product. I think as energy costs rise more people will be looking towards low cost alternatives like LED lighting. I also like their balance sheet. They have a lot of cash on hand and no long term debt. I also like the licensing agreements they are entering into. It is a great way for them to get revenue and keep costs down. I bought 400 shares at 16.96 plus $29.00 commission brings the total to $6,813.00. Yesterday they closed at $16.10 so I’m not doing so good there but I think they are a longer term winner. Stand back on this one.

Can the Little Guy Beat Wall Street?

Over the years I’ve heard it said that the little guy is no match for Wall Street. The small individual investor doesn’t stand a chance. Wall Street will make plenty of money off the individual investor in terms of interest and commissions, but in the end the small investor ends up losing. With the wealth of information on the web and the proliferation of online brokerages, you would think that the odds would tilt in favor of the small investor? Not so it appears. All over the web are competing interests. People want to sell you better info, superior trading systems and convince you that you can make 10 times your money in a year. Is there any truth to this? Is this really possible? Do you really need to pay for information and complex trading systems?

Well I’m proposing to find this out. I was given about $11,000.00 US that is in a locked in account that I cannot touch. Since I don’t have access to the money it doesn’t seem to be mine. What I thought I would do is trade on it and see what kind of returns I could get if risk wasn’t a factor. Then I thought, why not make this public and see if there were other people interested in what I’m doing. After all maybe people could give me some tips and recommendations. Maybe I can get people to post comments on techniques and strategies that worked for them. I also thought that some people may want to do the same thing I am; take a little money and see if they can turn it into a lot of money by trading it. I will welcome all suggestions, tips and techniques and evaluate them and comment on them. I may use some or I may not but in all cases I will explain my rationalization.

I also invite people that want to try this along with me to make comments on what they are buying, what price and how much and we can track their success. Perhaps there are people that I can learn from and will do better than me. Perhaps there are people out there that can learn from me. Only time will tell.

I have worked for eight years on a retail trading desk for a discount broker. I started as a trader (order taker) and eventually would up as a team leader. Now before some of you say that I have an inside edge; as a discount broker, we were merely order takers. Think about phoning any call center to order a pizza. We are simply order takers taking your order and sending it to market where your order is filled and confirmed back to us. Granted over the years I did learn a lot about how the stock markets work and types of orders etc. but that is nothing that can’t be found out over the web. I thought of myself as standing on the outside of the building (the stock market) looking in through the window. Although I could see what is going on, I was not part of the “action.”

So now this is my chance to see what I can do…..