Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
All OTC securities are assigned a market tier based on their reporting method (SEC Reporting, Alternative Reporting Standard) and disclosure category – Current, Limited or No Information. Securities on OTCQX, the highest tier of the OTC market, are required to have Current disclosure and meet minimum financial qualifications. Securities in OTCQB tier must be SEC, Bank or Insurance reporting and must be Current in their disclosure.
Make Money Trading Earnings Announcements
If you watch the financial news media, youve seen how earnings releases work. Its like the big game on Sunday; it comes with hours, and sometimes days, of endless experts providing their predictions of what the numbers will look like, and other experts providing their strategies of how to invest or trade based on the news. Some would say that it is media overhype at its finest and if you watch the endless flurry of graphics and earnings central music, its hard to argue.
But for the individual investor , is there money to be made in earnings announcements? As with most topics on Wall Street, there are a flurry of opinions, and it will ultimately come down to individual choice, but here are two of those opinions to help you decide for yourself.
SEE: Profit From Earnings Surprises With Straddles And Strangles
Why You Should Try
According to CNBC, the percentage of S
Once the price breaks below a support level, the broken support level can turn into resistance.
This link will help thou $BPWRF BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/BPWRF
OTC Markets Group established a categorization system to indicate the level of financial and corporate disclosure provided by the companies using its quotation system. Apart from the OTCQX tier, the disclosure categories do not signify issuer quality or merit of any security. Categorization is based on the level and timeliness of a company's disclosure and OTCQB and any of the OTC Pink categories can include both high quality as well as speculative, distressed, or questionable companies. Investors are encouraged to use caution when considering many these companies for investment.
What Is A Pyramid Scheme?
A pyramid scheme is a fraudulent investing plan that has unfortunately cost many people worldwide their hard-earned savings. The concept behind the pyramid scheme is simple and should be easy to identify; however, it is often presented to potential investors in a disguised or slightly altered form. For this reason, it is important to not only understand how pyramid schemes work, but also to be familiar with the many different shapes and sizes they can take. (Many investors do not understand how to determine the level of risk their individual portfolios should bear. Find out for yourself in Determining Risk And The Risk Pyramid.)
The Scheme
As its name indicates, the pyramid scheme is structured like a pyramid. It starts with one person - the initial recruiter - who is on top, at the apex of the pyramid. This person recruits a second person, who is required to invest $100 which is paid to the initial recruiter. In order to make his or her money back, the new recruit must recruit more people under him or her, each of whom will also have to invest $100. If the recruit gets 10 more people to invest, this person will make $900 with just a $100 investment.
The 10 new people become recruiters and each one is in turn required to enlist an additional 10 people, resulting in a total of 100 more people. Each of those 100 new recruits is also obligated to pay $100 to the person who recruited him or her; recruiters get a profit of all of the money received minus the initial $100 paid to the person who recruited them. The process continues until the base of the pyramid is no longer strong enough to support the upper structure (meaning there are no more recruits). (From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work.
The Fraud
The problem is that the scheme cannot go on forever because there is a finite number of people who can join the scheme (even if all the people in the world join). People are deceived into believing that by giving money they will make more money (with an investment of just $100, you will receive $900 in return). But no wealth has been created; no product has been sold; no investment has been made; and no service has been provided.
The fraud lies in the fact that it is impossible for the cycle to sustain itself, so people will lose their money somewhere down the line. Those who are most vulnerable are those towards the bottom of the pyramid, where it becomes impossible to recruit the number of people required to pay off the previous layer of recruiters. This kind of fraud is illegal in the Unites States and most countries throughout the world. It is estimated that 90% of people who get involved in a pyramid scheme will lose their money. (Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
Fraud Disguised
Because people are attracted to the idea of making a quick buck with very little effort, many different forms of disguised pyramid schemes have succeeded in fooling people. Despite the illusion of legality presented by these revamped schemes, they are still illegal. It is thus important to recognize the characteristics of such so-called investment plans .
Many schemes will adopt the guise of gift-giving or loans that take place in investment clubs because none of these activities are technically illegal. However, the practice of donating a gift (tax free up to $10,000 in the U.S.) to someone (the recruiter), then having to recruit people into the club in order to receive a return on your investment (or your gift, rather) is essentially a pyramid scheme in disguise. (Joining an investment club isnt a get-rich-quick scheme, but it can help you learn the ropes or sharpen your investing skills. Learn more in Benefit From A Winning Investment Club.)
Multi-Level Marketing (MLM)
Legal multi-level marketing (MLM) involves being recruited in order to sell a product or service that actually has some inherent value. As a recruit, you can make a profit from the sales of the product or service, so you dont necessarily have to recruit more salespeople below you. And while you may be encouraged to recruit other salespeople whose sales would give you more profit, you can stick to just selling the product directly to the consumer if you choose.
A pyramid scheme MLM, however, will most likely sell a product with no independent value. The product could take the form of reports of some kind, for example, or mailing lists. In this kind of pyramid scheme, you would be required to recruit new members into the MLM in order to make a profit and keep the MLM alive. Joining the MLM is the only reason anyone would buy the products sold by this pyramid scheme.
Ponzi Schemes
Named after Charles Ponzi, who ran such a plot from 1919-1920, the Ponzi scheme is a fraudulent investment plan. It is not necessarily a pyramid, which is hierarchical. In a Ponzi scheme, there is one person who takes peoples money as an investment and does not necessarily tell them how their returns will be generated. As such, the peoples return on investment could be generated by anything; it could come from money taken from new investors - which means new investors essentially pay off the old investors - or even from money made by gambling in Las Vegas.
Chain Letters
Chain letters can be received electronically or through snail mail and are not illegal on their own. However, they take on the form of a pyramid scheme when the letter asks you to donate a certain amount of money (even just 5 cents) to the people on a list, then delete the name of the first person on the list, add your name, and forward the letter to a certain number of other people. The next people receiving the letter are then asked to do the same thing, so that you can receive your money as well. By forwarding the letter, you are asking people to give money with the promise of making money.
Conclusion
It is easy to see how a pyramid scheme can work, but participating in it (regardless of the form in which it is presented) involves deception and fraud because not everyone will receive the money that is promised in return.
As with any other investment plan you consider entering, it is important to ask the right questions. How will this money be invested? What is the rate of return? Who will be investing it? Talk to professionals and do your research before placing your money anywhere. And always remember that if a plan promises youll get rich quick with no risk or doesnt tell you how your money will be invested, you should raise a red flag and exercise caution before getting on board.
Therefore, there were a lot of bullish buyers of the stock around 18. When the price declined below 18 and fell to around 14, many of these (now unhappy) bulls were probably still holding the stock.
This link will help thou $NHVCF BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/NHVCF
All subscribers to OTC Link are broker-dealers that are members of FINRA. Subscribers are permitted to quote any OTC equity security eligible for quoting under Exchange Act Rule 15c2-11 or the applicable exemptions to Rule 15c2-11. OTC Link does not require companies whose securities are quoted on its system to meet any eligibility requirements.
Understanding Stock Splits
Say you had a $100 bill and someone offered you two $50 bills for it. Would you take the offer? This might sound like a pointless question, but the action of a stock split puts you in a similar position. In this article we will explore what a stock split is, why its done and what it means to the investor.
What Is a Stock Split?
A stock split is a corporate action that increases the number of the corporations outstanding shares by dividing each share, which in turn diminishes its price. The stocks market capitalization, however, remains the same, just like the value of the $100 bill does not change if it is exchanged for two $50s. For example, with a 2-for-1 stock split, each stockholder receives an additional share for each share held, but the value of each share is reduced by half: two shares now equal the original value of one share before the split.
Lets say stock A is trading at $40 and has 10 million shares issued, which gives it a market capitalization of $400 million ($40 x 10 million shares). The company then decides to implement a 2-for-1 stock split. For each share shareholders currently own, they receive one share, deposited directly into their brokerage account . They now have two shares for each one previously held, but the price of the stock is split by 50%, from $40 to $20. Notice that the market capitalization stays the same - it has doubled the amount of stocks outstanding to 20 million while simultaneously reducing the stock price by 50% to $20 for a capitalization of $400 million. The true value of the company hasnt changed one bit.
The most common stock splits are, 2-for-1, 3-for-2 and 3-for-1. An easy way to determine the new stock price is to divide the previous stock price by the split ratio. In the case of our example, divide $40 by 2 and we get the new trading price of $20. If a stock were to split 3-for-2, wed do the same thing: 40/(3/2) = 40/1.5 = $26.6.
It is also possible to have a reverse stock split: a 1-for-10 means that for every ten shares you own, you get one share. Below we illustrate exactly what happens with the most popular splits in regards to number of shares, share price and market cap of the company splitting its shares.
Whats the Point of a Stock Split?
So, if the value of the stock doesnt change, what motivates a company to split its stock? Good question. There are several reasons companies consider carrying out this corporate action.
The first reason is psychology. As the price of a stock gets higher and higher, some investors may feel the price is too high for them to buy, or small investors may feel it is unaffordable. Splitting the stock brings the share price down to a more attractive level. The effect here is purely psychological. The actual value of the stock doesnt change one bit, but the lower stock price may affect the way the stock is perceived and therefore entice new investors. Splitting the stock also gives existing shareholders the feeling that they suddenly have more shares than they did before, and of course, if the prices rises, they have more stock to trade.
Another reason, and arguably a more logical one, for splitting a stock is to increase a stocks liquidity, which increases with the stocks number of outstanding shares. You see, when stocks get into the hundreds of dollars per share, very large bid/ask spreads can result (see Why the Bid/Ask Spread Is So Important.). A perfect example is Warren Buffetts Berkshire Hathaway, which has never had a stock split. At times, Berkshire stock has traded at nearly $100,000 and its bid/ask spread can often be over $1,000. By splitting shares a lower bid/ask spread is often achieved, thereby increasing liquidity.
None of these reasons or potential effects that weve mentioned agree with financial theory, however. If you ask a finance professor, he or she will likely tell you that splits are totally irrelevant - yet companies still do it. Splits are a good demonstration of how the actions of companies and the behaviors of investors do not always fall into line with financial theory. This very fact has opened up a wide and relatively new area of financial study called behavioral finance (see Taking A Chance On Behavorial Finance.).
Advantages for Investors
There are plenty of arguments over whether a stock split is an advantage or disadvantage to investors. One side says a stock split is a good buying indicator, signaling that the companys share price is increasing and therefore doing very well. This may be true, but on the other hand, you cant get around the fact that a stock split has no affect on the fundamental value of the stock and therefore poses no real advantage to investors. Despite this fact the investment newsletter business has taken note of the often positive sentiment surrounding a stock split. There are entire publications devoted to tracking stocks that split and attempting to profit from the bullish nature of the splits. Critics would say that this strategy is by no means a time-tested one and questionably successful at best.
Factoring in Commissions
Historically, buying before the split was a good strategy because of commissions that were weighted by the number of shares you bought. It was advantageous only because it saved you money on commissions. This isnt such an advantage today because most brokers offer a flat fee for commissions, so you pay the same amount whether you buy 10 shares or 1,000 shares. Some online brokers have a limit of 2,000 or 5,000 shares for that flat rate, but most investors dont buy that many shares at once. The flat rate therefore covers most trades, so it does not matter if you buy pre-split or post-split.
Conclusion
The most important thing to know about stock splits is that there is no effect on the worth (as measured by market capitalization) of the company. A stock split should not be the deciding factor that entices you into buying a stock. While there are some psychological reasons why companies will split their stock, the split doesnt change any of the business fundamentals. In the end, whether you have two $50 bills or one $100 bill, you have the same amount in the bank.
Feast thine eyes upon $NWMT BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/NWMT
The flow of information has become faster with the Internet, and surprises are factored in instantly.
Broker-dealers may not give their customers prices inferior to those currently being quoted on inter-dealer quotation systems.
What Are The Odds Of Scoring A Winning Trade?
When many of us think of probabilities, the first thing that comes to mind is a coin toss - having a 50% chance at being right on a given toss. Can something as simple as a coin toss be applied to the market effectively? It can at least provide us with some tools for approaching the markets, and it can be applied in many more ways than one might expect. A traders current views of probability could be completely wrong, and could very well be why they are not making money in the markets. This article is an introduction to the probabilities of trading and to a commonly overlooked but integral part of the financial system - statistics. But dont be scared off by the word statistics; everything will be explained in plain English and without many numbers or formulas.
Understanding the Coin Toss
In the short term, anything can happen; this is why the coin toss is an appropriate analogy for the stock market . Lets assume that at a given moment in time the stock could just as easily move up as it could move down (even in a range, stocks move up and down), thus our probability of making a profit (whether short or long) on a position is 50%.
While hopefully no one would make completely random short-term trades, we will start with this scenario. If we a have an equal probability of making a quick profit (like a coin toss), does a run of profits or losses signal what future outcomes will be? No! Not on random trades. This is a common misconception. Each event still has a 50% probability, no matter what outcomes came prior.
Runs do happen in random 50/50 events. A run refers to a number of identical outcomes that occur in a row. Here is a table displaying the probabilities of such a run; in other words, the odds of flipping a given number of heads or tails in a row.
Run Length
Chance
1
50%
2
25%
3
12.5%
4
6.25%
5
3.125%
6
1.5625%
Here is where we run into problems. Lets say we have just made five profitable trades in a row. According to our table, which is giving us the probability of being right (or wrong) five times in a row based on a 50% chance, we have already overcome some serious odds. The odds of getting the sixth profitable trade looks extremely remote, but actually that is not the case. Our odds of success are still 50%! People lose thousands of dollars in the markets (and in casinos) by failing to realize this. The reason is that the odds from our table are based on uncertain future events and the likelihood they will occur. Once we have completed a run of five successful trades, those trades are no longer uncertain. Our next trade starts a new potential run, and after the results are in for each trade, we start back at the top the table, every time. This means every trade has a 50% of working out. (Learn how to illustrate an asset returns sensitivity read Find The Right Fit With Probability Distributions.)
The reason this is so important is that often, when traders get into the market, they mistake a string of profits or losses as either skill or lack of skill. This is simply not true. Whether a short-term trader makes multiple trades or an investor makes only a few trades a year, we need to analyze the outcomes of their trades in a different way to understand if they are simply lucky or if there is actual skill involved. Statistics apply on all time lines, and this is what we must remember.
Long-Term Results
The above example gave a short-term trade example based on a 50% chance of being right or wrong. But does this apply to the long term? Very much so. The reason is that even though a trader may only take long-term positions, he or she will be doing fewer trades and thus it will take longer to attain data from enough trades to see if simple luck is involved or if it was skill. A short-term trader may make 30 trades a week and show a profit every month for two years. Has this trader overcome the odds with real skill? It would seem so, as the odds of having a run of 24 profitable months is extremely rare unless the odds have shifted more in his favor somehow. (Find out if mutual fund managers can successfully pick stocks or if youre better off with an index fund. Read Is Stock Picking A Myth?)
Now what about a long-term investor who has made three trades over the last two years and has been profitable. Is this trader exhibiting skill? Not necessarily. Currently, this trader has a run of three going, and that is not difficult to accomplish even from totally random results. The lesson here is that skill is not just reflected in the short term (whether that is one day or one year, it will differ by trading strategy ), but will also be reflected in the long term. We need enough trade data to accurately determine whether a strategy is significant enough to overcome random probabilities. And even with this, we face another challenge: while each trade is an event, so is a month and year in which trades were placed.
A trader who placed 30 trades a week has overcome the daily odds and the monthly odds for a good number of periods. Ideally, proving the strategy over a few more years would erase all doubt that there was luck involved due to a certain market condition . For our long-term trader making trades that last more than a year, it will take at least several more years to prove that his strategy is profitable over this longer time frame and in all market conditions.
When we consider all time frames and all market conditions, we actually begin to see how to be profitable on all time frames and how to move the odds more in our, attaining greater than a random 50% chance of being right. It is worth noting that if profits are larger than losses, a trader can be right less than 50% of the time and still make a profit. (This phenomenon can cause a trader to abandon a proven strategy or risk everything on chance. Find out how to avoid it, check out Random Reinforcement: Why Most Traders Fail.)
How Profitable Traders Make Money
So, obviously people do make money in the markets, and its not just because they have had a good run. So how do we get the odds in our favor? The profitable results come from two concepts. The first concept is based on what was discussed above - being profitable in all time frames or at least winning more in certain periods than is lost in others.
The second concept is the fact that trends exist in the markets, and this no longer makes the markets a 50/50 gamble, as in our coin toss example. Stock prices tend to run in a certain direction over periods of time, and have done this repeatedly over market history. For those of you who understand statistics, this proves that runs (trends) in stocks occur and thus we end up with a probability curve that is not normal (remember that bell curve your teachers always talked about) but is skewed and commonly referred to as a curve with a fat tail. This means that traders can be profitable on a consistent basis if they use trends, even if it is on an extremely short time frame.
Bringing It All Together
If trends exist and thus we can no longer have a random sampling of data (trades) because there is a bias in those trades that will likely reflect a trend, why is the 50% chance example above useful? The reason is that the lessons are still very valid. A trader should not increase his or her position size or take on more risk (relative to position size) simply because of a string of wins, which should not be assumed to occur as a result of skill. It also means that a trader should not decrease position size after having a long profitable run. (Find out if taking the path less traveled will work in your favor - or against it, see Trading Systems: Run With The Herd Or Be A Lone Wolf?)
This information should be good news. New traders can take solace in the fact their researched trading system may not be faulty but rather is experiencing a random run of bad results (or it may still need some refining). It also should put pressure on those who have been profitable to continually monitor their strategies so they remain profitable.
This information can also aid investors when they are analyzing mutual funds or hedge funds. Trading results are often published showing spectacular returns; knowing a little more about statistics can help us gauge whether those returns are likely to continue or if the returns just happened to be a random event. (From picking the right type of stock to setting stop-losses, learn how to trade wisely
BarChart Technical Analysis NITE-LYNX $ASAGF
http://www.barchart.com/technicals/stocks/ASAGF
Weaknesses of Fundamental Analysis
Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on Wall Street.
OTC Link allows broker-dealers to quote any OTC equity security eligible for quoting under SEC Rule 15c2-11. Currently, there are over 10,000 securities quoted on the OTC Link system. Broker-dealers access the OTC Link system either through OTC Markets Group’ OTC Dealer or OTC FIX applications. These applications allow broker-dealers to view all quotes for OTC securities and, if desired, trade those securities through OTC Link.
BarChart Technical Analysis NITE-LYNX $CGMX
http://www.barchart.com/technicals/stocks/CGMX
7 Common Investor Mistakes
Of the mistakes made by investors, seven of them are repeat offenses. In fact, investors have been making these same mistakes since the dawn of modern markets, and will likely be repeating them for years to come. You can significantly boost your chances of investment success by becoming aware of these typical errors and taking steps to avoid them. (To read about market histories, see The Stock Market: A Look Back, The Bond Market: A Look Back and The Money Market: A Look Back.)
TUTORIAL: Investing 101 For Beginner Investors
1. No Plan
As the old saying goes, if you dont know where youre going, any road will take you there. Solution?
Have a personal investment plan or policy that addresses the following:
• Goals and objectives - Find out what youre trying to accomplish. Accumulating $100,000 for a childs college education or $2 million for retirement at age 60 are appropriate goals. Beating the market is not a goal.
• Risks - What risks are relevant to you or your portfolio? If you are a 30-year-old saving for retirement, volatility isnt (or shouldnt be) a meaningful risk. On the other hand, inflation - which erodes any long-term portfolio - is a significant risk. (To see more on risk, read Determining Risk And The Risk Pyramid and Personalizing Risk Tolerance.)
• Appropriate benchmarks - How will you measure the success of your portfolio, its asset classes and individual funds or managers? (Keep reading about benchmarks in Benchmark Your Returns With Indexes.)
• Asset allocation - What percentage of your total portfolio will you allocate to U.S. equities, international stocks, U.S. bonds, high-yield bonds, etc. Your asset allocation should accomplish your goals while addressing relevant risks.
• Diversification - Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, for example, this means exposure to large-, mid- and small-cap stocks. (Find out more about allocation and diversification in Five Things To Know About Asset Allocation, Choose Your Own Asset Allocation Adventure and A Guide To Portfolio Construction.)
Your written plans guidelines will help you adhere to a sound long-term policy, even when current market conditions are unsettling. Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but it will likely be more profitable in the long term. (To find out how to make your investment plan, see Having A Plan: The Basis Of Success, Ten Steps to Building A Winning Trading Plan and Tailoring Your Investment Plan.)
2. Too Short of a Time Horizon
If you are saving for retirement 30 years hence, what the stock market does this year or next shouldnt be the biggest concern. Even if you are just entering retirement at age 70, your life expectancy is likely 15 to 20 years. If you expect to leave some assets to your heirs, then your time horizon is even longer. Of course, if you are saving for your daughters college education and shes a junior in high school, then your time horizon is appropriately short and your asset allocation should reflect that fact. Most investors are too focused on the short term.
3. Too Much Attention Given to Financial Media
There is almost nothing on financial news shows that can help you achieve your goals. Turn them off. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance?
Think about it - if anyone really had profitable stock tips, trading advice or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No - theyd keep their mouth shut, make their millions and not have to sell a newsletter to make a living. (To learn more, see Mad Money ... Mad Market? and The Madness Of Crowds.)
Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating - and sticking to - your investment plan.
4. Not Rebalancing
Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it forces you to sell the asset class that is performing well and buy more of your worst performing asset classes. This contrarian action is very difficult for many investors.
In addition, rebalancing is unprofitable right up to that point where it pays off spectacularly (think U.S. equities in the late 1990s), and the underperforming assets start to take off. (Keep reading about this subject in Equity Premiums: Looking Back And Looking Ahead.)
However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows - a formula for poor performance. The solution? Rebalance religiously and reap the long-term rewards. (Find out how to put this tip to use in Rebalance Your Portfolio To Stay On Track, When Fear And Greed Take Over and Master Your Trading Mindtraps.)
5. Overconfidence in the Ability of Managers
From numerous studies, including Burton Malkiels 1995 study entitled, Returns From Investing In Equity Mutual Funds, we know that most managers will underperform their benchmarks. We also know that theres no consistent way to select - in advance - those managers that willoutperform. We also know that very, very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and select outperforming managers?
Fidelity guru Peter Lynch once observed, There are no market timers in the Forbes 400. Investors misplaced overconfidence in their ability to market-time and select outperforming managers leads directly to our next common investment mistake. (For more insight, see Pick Stocks Like Peter Lynch.)
6. Not Enough Indexing
There is not enough time to recite many of the studies that prove that most managers and mutual funds underperform their benchmarks. Over the long-term, low-cost index funds are typically upper second-quartile performers, or better than 65-75% of actively managed funds.
Despite all the evidence in favor of indexing, the desire to invest with active managers remains strong. John Bogle, the founder of Vanguard, says its because, Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] I can do better.
Index all or a large portion (70-80%) of all your traditional asset classes. If you cant resist the excitement of pursuing the next great performer, set aside a portion (20-30%) of each asset class to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio.
7. Chasing Performance
Many investors select asset classes, strategies, managers and funds based on recent strong performance. The feeling that Im missing out on great returns has probably led to more bad investment decisions than any other single factor. If a particular asset class, strategy or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in. Stick with your investment plan and rebalance, which is the polar opposite of chasing performance.
Conclusion
Investors who recognize and avoid these seven common mistakes give themselves a great advantage in meeting their investment goals. Most of the solutions above are not exciting, and they dont make great cocktail party conversation. However, they are likely to be profitable. And isnt that why we really invest?
As part of the analysis process, it is important to remember that all information is relative. Industry groups are compared against other industry groups and companies against other companies.
Investors in the OTC market vary in their knowledge and experience from large institutional money managers to retail investors. The goal of all of these investors is the same – to generate returns from their investment. OTC Markets Group facilitates information transparency in the OTC market by aggregating and disseminating real-time broker-dealer quote information and operating the platform for companies to provide financial and other corporate disclosure for investors.
Introduction To Investment Diversification
Diversification is a familiar term to most investors. In the most general sense, it can be summed up with this phrase: Dont put all of your eggs in one basket. While that sentiment certainly captures the essence of the issue, it provides little guidance on the practical implications of the role diversification plays in an investors portfolio and offers no insight into how a diversified portfolio is actually created. In this article, well provide an overview of diversification and give you some insight into how you can make it work to your advantage.
What Is Diversification?
Taking a closer look at the concept of diversification, the idea is to create a portfolio that includes multiple investments in order to reduce risk. Consider, for example, an investment that consists of only stock issued by a single company. If that companys stock suffers a serious downturn, your portfolio will sustain the full brunt of the decline. By splitting your investment between the stocks from two different companies, you can reduce the potential risk to your portfolio.
Another way to reduce the risk in your portfolio is to include bonds and cash. Because cash is generally used as a short-term reserve, most investors develop an asset allocation strategy for their portfolios based primarily on the use of stocks and bonds. It is never a bad idea to keep a portion of your invested assets in cash or short-term money-market securities. Cash can be used incase of an emergency, and short-term money-market securities can be liquidated instantly incase an investment opportunity arises, or in the event your usual cash requirements spike and you need to sell investments to make payments. Also, keep in mind that asset allocation and diversification are closely linked concepts; a diversified portfolio is created through the process of asset allocation. When creating a portfolio that contains both stocks and bonds, aggressive investors may lean towards a mix of 80% stocks and 20% bonds, while conservative investors may prefer a 20% stocks to 80% bonds mix.
Regardless of whether you are aggressive or conservative, the use of asset allocation to reduce risk through the selection of a balance of stocks and bonds for your portfolio is a more detailed description of how a diversified portfolio is created rather than the simplistic eggs in one basket concept. With this in mind, you will notice that mutual fund portfolios composed of a mix, which includes both stocks and bonds, are referred to as balanced portfolios. The specific balance of stocks and bonds in a given portfolio is designed to create a specific risk-reward ratio that offers the opportunity to achieve a certain rate of return on your investment in exchange for your willingness to accept a certain amount of risk. In general, the more risk you are willing to take, the greater the potential return on your investment.
What Are My Options?
If you are a person of limited means or if you simply prefer uncomplicated investment scenarios, you could choose a single balanced mutual fund and invest all of your assets in the fund. For most investors, this strategy is far too simplistic. While a given mix of investments may be appropriate for a childs college education fund, that mix may not be a good match for long-term goals, such as retirement or estate planning. Likewise, investors with large sums of money often require strategies designed to address more complex needs, such as minimizing capital gains taxes or generating reliable income streams. Furthermore, while investing in a single mutual fund provides diversification among the basic asset classes of stocks, bonds and cash (funds often hold a small amount of cash from which the fees are taken), the opportunities for diversification go far beyond these basic categories.
With stocks, investors can choose a specific style, such as focusing on large, mid or small caps. In each of these areas are stocks categorized as growth or value. Additional choices include domestic and foreign stocks. Foreign stocks also offer sub-categorizations that include both developed and emerging markets. Both foreign and domestic stocks are also available in specific sectors, such as biotechnology and healthcare.
In addition to the variety of equity investment choices, bonds also offer opportunities for diversification. Investors can choose long-term or short-term issues. They can also select high-yield or municipal bonds. Once again, risk tolerance and personal investment requirements will largely dictate investment selection.
While stocks and bonds represent the traditional tools for portfolio construction, a host of alternative investments provide the opportunity for further diversification. Real estate investment trusts, hedge funds, art and other investments provide the opportunity to invest in vehicles that do not necessarily move in tandem with the traditional financial markets. Yet these investments offer another method of portfolio diversification.
Concerns
With so many investments to choose from, it may seem like diversification is an easy objective to achieve, but that sentiment is only partially true. The need to make wise choices still applies to a diversified portfolio. Furthermore, it is possible to over-diversify your portfolio, which will negatively impact your returns. Many financial experts agree that 20 stocks is the optimal number for a diversified equity portfolio. With that in mind, buying 50 individual stocks or four large-cap mutual funds may do more harm than good. Having too many investments in your portfolio doesnt allow any of the investments to have much of an impact, and an over-diversified portfolio (sometimes called diworsification) often begins to behave like an index fund. In the case of holding a few large-cap mutual funds, multiple funds bring the additional risks of overlapping holdings as well as a variety of expenses, such as low balance fees and varying expense ratios, which could have been avoided through a more careful fund selection.
Tools
Investors have many tools to choose from when creating a portfolio. For those lacking time, money or interest in investing, mutual funds provide a convenient option; there is a fund for nearly every taste, style and asset allocation strategy. For those with an interest in individual securities, there are stocks and bonds to meet every need. Sometimes investors may even add rare coins, art, real estate and other off-the-beaten-track investments to their portfolios.
The Bottom Line
Regardless of your means or method, keep in mind that there is no generic diversification model that will meet the needs of every investor. Your personal time horizon, risk tolerance, investment goals, financial means and level of investment experience will play a large role in dictating your investment mix. Start by figuring out the mix of stocks, bonds and cash that will be required to meet your needs. From there, determine exactly which investments to use in completing the mix, substituting traditional assets for alternatives as needed. If you are too overwhelmed by the choices or simply prefer to delegate, there are plenty of financial services professionals available to assist you.
BarChart Technical Analysis NITE-LYNX $IVFH
http://www.barchart.com/technicals/stocks/IVFH
In that same vein, what works for one particular stock may not work for another. A 50-day moving average may work great to identify support and resistance for IBM, but a 70-day moving average may work better for Yahoo.
FINRA requires every member to trade a security at its publicly quoted (OTC Link or FINRA's OTC Bulletin Board) price and size.
Losing Money? Dont Blame Your Broker
Wall Street has been home to more than its fair share of scandals dealing with everything from accounting, research and access, and initial public offerings. Maybe youve just lost a fortune in the market. The money is gone, and it must be somebodys fault. There must be some way to get the money back. The next step seems obvious: sue your broker.
While it is true that you may be able to recover some or all of your losses based on broker misdeeds or misinformation, keep in mind your broker and other outside forces frequently arent solely to blame. All too often, the real culprit is staring back at you every time you look in the mirror. In this article, well look at some of the things an investor should do ensure a healthy, lawyer-free relationship with his or her broker.
A Sucker Is Born Every Minute
One of capitalisms most astounding aspects is how legions of people willingly hand over their money to complete strangers without making so much as a single telephone call to verify the strangers claims of credibility.
After giving their wallets to the stranger, these people simply sit back and wait for the money to start pouring in. And if they dont get rich and lose a portion of their initial investment, they call a lawyer and sue. On occasion, they even win the lawsuit! Win or lose though, they still feel wronged. They are victims. They have been taken advantage of by unscrupulous capitalists ... or have they?
Your Obligations As An Investor
Becoming an investor gives you certain rights. When you buy stock in a public company, for example you are entitled to a number of opportunities and rewards.
However, as an intelligent investor (or, at least as somebody who would prefer not to be victimized), you also have an obligation to do all you can to learn about the person or organization you trust with your money and the investments your money will be used to purchase. Before blindly handing over your cash, the first step is making sure youve made a strong effort to hire the right kind of help.
Start by conducting some due diligence of your own. It is the safest way to protect your investments. After all, nobody cares about your money as much as you do! It doesnt take a genius to check references and ask questions about a broker. And, of course, the only dumb question is the one that wasnt asked.
Hiring someone to give advice doesnt absolve an investor of the responsibility for accepting that advice. Once the decision has been made to hire outside help, the investors obligation to pay attention and remain fully engaged in the process doesnt disappear.
As an investor:
• Every piece of paper that you are given must be read.
• Every disclosure document must be reviewed until you understand it.
• Every item that you find confusing must be questioned.
• Every investment that you make must be researched until you are positive that you completely understand it.
• Never sign anything that you dont understand, and always get a copy of everything that you do sign.
(For additional information about the sometimes naive expectations of investors, check out Do You Understand Investment Risk?)
What If You Did Your Homework, But Still Found Trouble?
If you have chosen well, the person providing financial advice to you has a fiduciary obligation to give you good advice. Despite that obligation, nobody is right every time. Before you blame your advisor for your losses, be sure you know your rights and responsibilities. If you have truly been a responsible investor, but still feel youve been the victim of a scam, you can take your issue to arbitration, or, in the most extreme case, consult a lawyer and head off to court.
Of course, the reality of litigation is often less rewarding than most people would hope. The process takes time and, if you actually get any money back, you may not get enough to cover the full amount of your loss. To put the odds in your favor, tread slowly and carefully any time money is involved. Set realistic expectations and, if it looks too good to be true, it probably is.
$YLLC BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/YLLC
Because all possible information is already reflected in the price, investors and traders will not be able to find or exploit inefficiencies based on fundamental information.
Quotes for all OTC securities are available on OTCMarkets.com by entering a symbol in the quote search area at the top left of any page. All OTCQX securities display real-time level 2 quotes while all OTCQB and OTC Pink securities display real-time inside (best bid and ask) quotations. Quotes are updated from 6:00 AM to 4:00 PM on all trading days.
NITE-LYNX $CRTP BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/CRTP
Test Your Money Personality
Like almost everything else in life, your response to money is largely dictated by your personality. But have you given much thought to how you behave in regard to your finances and how that behavior affects your bottom line? Understanding your money personality is the first step and will help you shape your approach to spending, saving and investing. So whats your money personality? Read on to find out.
Whats Your Type?
Money personalities have been analyzed in a variety of ways and many people can identify with aspects of several profiles. They key is to find the profile that most closely matches your behavior. The major profiles are: big spenders, savers, shoppers, debtors and investors.
• Big Spenders
Big spenders love nice cars, new gadgets and brand-name clothing. Big spenders arent bargain shoppers; they are fashionable and they are looking to make a statement. This often means a desire to have the smallest cell phone, the biggest plasma TV and a beautiful home. When it comes to keeping up the Joneses, big spenders are the Joneses. They are comfortable spending money, dont fear debt and often take big risks when investing.
• Savers
Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and are often viewed as cheapskates. Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and dont take big risks with their investments .
• Shoppers
Shoppers derive great emotional satisfaction from spending money. They often cant resist spending money, even if its to purchase items they dont need. Shoppers are usually aware of their addiction to spending and are even concerned about the debt that it creates. They look for bargains and are pleased when they get a good deal. Shoppers will often shop to entertain themselves, even if the items they buy go unused.
Shoppers are an eclectic bunch when it comes to investing. Some invest on a regular basis through 401(k) plans and other automatic investments and may even invest a portion of any sudden windfalls such as bonuses or inheritance money, while others view investing as something they will get to later on. (To learn more, read Seven Common Financial Mistakes.)
• Debtors
Debtors arent trying to make a statement with their expenditures, and they dont shop to entertain or cheer themselves up. They simply dont spend much time thinking about their money and therefore dont keep tabs on what they spend and where they spend it. Debtors generally spend more than they earn and are deeply in debt and they dont put much thought into investing. Similarly, they often fail to even take advantage of the company match in their 401(k) plans . (For more, check out Digging Out Of Personal Debt.)
• Investors
Investors are consciously aware of money. They understand their financial situations and try to put their money to work. Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals. (To learn more about how investors think, read The Successful Investment Journey.)
Advice for Your Personality
Once you recognize yourself in one of these profiles and have put some thought into how you approach money, its time to see what you can do to make the most of what you have. Sometimes making just small changes can yield big results.
• Spenders: Shop a Little Less, Save a Little More
If you love to spend, you are going to keep doing it, but you should seek long-term value, not just short-term satisfaction. Before you splurge on something expensive or trendy, ask yourself how much that purchase is going to mean to you in a year. If the answer is not much, skip the purchase. In this way, you can try to limit your spending to things youll actually use.
When you channel your energy into saving, you have another opportunity to think long term. Look for slow and steady gains as opposed to high-risk, quick-win scenarios. If you really want to challenge yourself, consider the merits of scaling back. (Downsize Your Home To Downsize Expenses and The Disposable Society: An Expensive Place To Live.)
• Savers: Use Moderation
Ben Franklin once recommended moderation in all things. For a saver, this is particularly good advice. Dont let all of the fun parts of life pass you by just to save a few pennies.
Tune up your savings efforts too. Pinching pennies is not enough. While minimizing risk is any investors prime goal, minimizing risk while maximizing return is the key to investing success. (For more on how to do this in your portfolio, read Asset Allocation Strategies and Achieving Optimal Asset Allocation.)
• Shoppers: Dont Spend Money You Dont Have
A critical step for shoppers is to take control of their credit cards. Unchecked credit card interest can wreak havoc on your finances , so think before you spend - particularly if you need a credit card to make the purchase. (To learn more, read Take Control Of Your Credit Cards and Understanding Credit Card Interest.)
Try to focus your efforts on saving your money. Learn the philosophy behind successful savings plans and try to incorporate some of those philosophies into your own. If spending is something you use to compensate for other areas of your life that you feel are lacking, think about what these might be and work on changing them.
• Debtors: Start Investing
If you are a debtor, you need to get your finances in order and set up a plan to start investing. You may not be able to do it alone, so getting some help is probably a good idea. Deciding on who will guide your investments is an important choice, so choose any investment professional carefully. (To find out more, see Invest In Spite Of Debt.)
• Investors: Keep Up the Good Work
Congratulations! Financially speaking, you are doing great! Keep doing what you are doing, and continue to educate yourself. (To see if you are on track to achieve post-work bliss, read A Pre-Retirement Checkup.)
Knowledge is Power
While you may not be able to change your personality, you can acknowledge it and address the challenges that it presents. Managing your money involves self awareness; knowing where you stand will allow you to modify your behavior to achieve your desired outcome.
Bar charts can be effective for displaying a large amount of data. Using candlesticks, 200 data points can take up a lot of room and look cluttered.
If you own stock that has been delisted from an exchange and is now quoted on OTC Link or the OTC Bulletin Board, nothing has changed with the shares themselves. You are still the beneficial owner of the securities and may trade them. You should check with your current broker-dealer to make certain that they provide services in OTC securities. If not, you will need to locate a broker-dealer that does provide services in OTC securities.
$AGIJ BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/AGIJ
The Highest Priced Stocks In America
Why do so few stocks get over $400, or even over $200, and should you care? Most companies care about the price of their stock, and actually take measures to keep it down. Splitting shares or issuing new stock can keep the price low. But price is not the same as value. Shares which are trading for over $1,000 each can make it sometimes tough to even afford a handful of shares.
Berkshire Hathaway (NYSE:BRK.A) $114,700
Berkshire Hathaway has the highest shares on the New York Stock Exchange, so it needs special attention. It is over $110,000 because it doesnt split its shares. Normally a company will complete several 2;1 splits over the years, which doubles the shares outstanding but also cuts the price in half. Famous investor Warren Buffett keeps the price high to deter short-term traders from creating excessive volatility. At one point this year it cost over $140,000 per share. At that price it trades about 450 shares every day. There is a lower priced option with Berkshire Hathaway B shares (NYSE:BRK.B), which trade around $75 which were $3,000 per share until a 50;1 split in 2010.
Buffett created this holding company, which is so big that it doesnt just acquire buildings or factories; instead it often gobbles up whole companies. A true conglomerate, Berkshire owns retail, insurance, railways, furniture stores and more.
Seaboard Corporation (NYSE:SEB) $2,460
Seaboard Corporation went public in 1959 through a merger with Hathaway Industries, Inc. It deals in several areas including ocean transportation, pork production, commodity merchandising as well as an energy producer in the Dominican Republic. As you will see in most of these companies it has never split its shares and operations span several industries.
NVR, Inc. (NYSE:NVR) $700
NVR is a homebuilder and mortgage banking company in the United States. It has also never split any of its stock. Its shares took off in the early 2000s just as the tech bubble was popping. Shares went from $70 to about $700 in about 10 years.
Google Inc. (Nasdaq:GOOG) $600
Google waited until after the dotcom bust to go public when it issued shares in 2004. This was a highly anticipated IPO which closed the day around $100. Since then there have no splits and nearly a 500% return to those who have bought and held.
Priceline.com, Inc. (Nasdaq:PCLN) $525
Priceline held its initial public offering in 1999 at $16 per share. This was in the last stages of the dotcom bubble. About a month later the stock jumped to $120 per share. The bubble burst and the price dropped to around $1.30 by 2001. In 2003 it did a reverse split (1:6) which means every six shares you owned was now one, but that one was worth six times the price. If this split had not happened the current price would be around $87.50 each.
The Washington Post Company (NYSE:WPO) $415
The Washington Post company has not split its shares since it went public in 1971. At that time the class B shares were available to the public at around $26.
White Mountains Insurance Group, Ltd. (NYSE:WTM) $415
White Mountains insurance Group deals in insurance and reinsurance. Buffetts invested in insurance companies back in 1967 which was the beginning of Berkshire Hathaways rise.
Alexanders Inc (NYSE:ALX) $415
Rounding out the over $400 list is Alexanders inc. which is actually a Real Estate Investment Trust (REIT). It allows you to buy shares in a company which invests in properties and distributes the profits in the form of dividends. This means a $3 dividend for every share you hold every three months. This can obviously change.
Low Prices
I once heard a friend say to stay away from stocks with prices is over $200, because a $200 stock would need a $40 increase in price to gain 20%. It would be much easier for a $20 stock to move $4. For the record this is not true, sort of. A lower priced stock can be more volatile but the value of a stock is due to many factors.
Penny stocks, for example, will usually have low volume and can be very small companies. There is often less information available and less coverage by analysts. A single event or a few speculators can easily create huge jumps or drops in share price.
Low prices dont always mean you are dealing with a small company. Take Synovus Financial Corp. (NYSE:SNV) they trade around $2 per share. Because they have 785 million shares outstanding they have a market capitalization of $1.6 billion. Ultimately, the price is based on what that share represents: partial ownership in the company.
Actual Value
To find the true value of these shares you need to look at a variety of metrics, most of which are calculated per share, to make it easier to compare to their price. For example a very popular metric is the price to earnings ratio. Investors basically see how much it costs to buy a part of the profits of the company. The lower the P/E the better the value, but be careful to only compare similar companies. For example if you bought one share of Seaboard Corp. for $2,300 you are paying about $9 for every $1 of earnings over the last year. But take a look at Hormel Foods Corp. (NYSE:HRL) it costs $29 per share but you need to pay $17 for every dollar of earnings. In this case the $2,300 share is a better value. (For more on the P/E ratio check out Profit With The Power Of Price-To-Earnings.)
Future Prospects
The true value of a stock goes beyond the price you pay, or even what you get right now for that price. The true value of a stock is a moving target based on future prospects. Any company can have a great year, but value can be highly dependent on projections. Analysts scrutinize figures such as the potential growth rate of the economy, the strength of the industry and the prospects of specific companies. In the end, high price doesnt always mean overpriced.
The company was first established in 1913 as the National Quotation Bureau (NQB). For decades, the NQB reported quotations for both stocks and bonds, publishing the quotations in the paper-based Pink Sheets and Yellow Sheets respectively. The publications were named for the color of paper on which they were printed. In September 1999, the NQB introduced the real-time Electronic Quotation Service.
The Basis of Technical Analysis
At the turn of the century, the Dow Theory laid the foundations for what was later to become modern technical analysis.
BarChart Technical Analysis NITE-LYNX $HOMJF
http://www.barchart.com/technicals/stocks/HOMJF
Managing A Portfolio Of Mutual Funds
After youve built your portfolio of mutual funds, you need to know how to maintain it. This week, we talk about how to manage a mutual-fund portfolio by walking through four common strategies:
The Wing-It Strategy
This is the most common mutual-fund strategy. Basically, if your portfolio does not have a plan or a structure, then it is likely that you are employing a wing-it strategy. If you are adding money to your portfolio today, how do you decide what to invest in? Are you one that searches for a new investment because you do not like the ones you already have? A little of this and a little of that? If you already have a plan or structure, then adding money to the portfolio should be really easy. Most experts would agree that this strategy will have the least success because there is little to no consistency.
Market-Timing Strategy
The market timing strategy implies the ability to get into and out of sectors or assets or markets at the right time. The ability to market time means that you will forever buy low and sell high. Unfortunately few investors buy low and sell high because investor behavior is usually driven by emotions instead of logic. The reality is most investors tend to do exactly the opposite – buy high and sell low. This leads many to believe that market timing does not work in practice. No one can accurately predict the future with any consistency.
Buy-and-Hold Strategy
This is by far the most commonly preached investment strategy . The reason for this is that statistical probabilities are on your side. Markets generally go up 75% of the time and down 25% of the time. If you employ a buy-and-hold strategy and weather through the ups and downs of the market, you will make money 75% of the time. If you are to be more successful with other strategies to manage your portfolio, you must be right more than 75% of the time to be ahead. The other issue that makes this strategy most popular is it is easy to employ. This does not make it better or worse. It is just easy to buy and hold.
Performance-Weigthing Strategy
This is somewhat of a middle ground between market timing and buy and hold. With this strategy, you will revisit your portfolio mix from time to time and make some adjustments. Lets walk through an oversimplified example using real performance figures.
Lets say that at the end of 1996, you started with an equity portfolio of four mutual funds and split the portfolio into equal weightings of 25% each.
After the first year of investing, the portfolio is no longer an equal 25% weighting because some funds performed better than others.
The reality is that after the first year, most investors are inclined to dump the loser (Fund D) for more of the winner (Fund A). However, the right strategy is to do the opposite to practice sell high, buy low. Performance weighting simply means that you sell some of the funds that did the best to buy some of the funds that did the worst. Your heart will go against this logic but it is the right thing to do because the one constant in investing is that everything goes in cycles.
In year four, Fund A has become the loser and Fund D has become the winner.
Performance weighting this portfolio year after year means that you would have taken the profit when Fund A was doing well to buy Fund D when it was down. In fact, if you had re-balanced this portfolio at the end of every year for five years, you would be further ahead as a result of performance weighting.
Its all about discipline.
The key to portfolio management is to have a discipline that you adhere to. The most successful money managers in the world are successful because they have a discipline to manage money and they have a plan. Warren Buffet said it best: To invest successfully over a lifetime does not require a stratospheric I.Q., unusual business insight or inside information. What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.
The real-time dissemination of quote information provides price transparency, which leads to a more efficient investment/trading process. The dissemination of price information and company financial data to the investment community (including individuals) leads to the development of new prices via trading decisions. This continuous flow of information between participants defines the OTC market and all market places.
Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears.
Behold the $HRAL BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/HRAL
The broker relies on this information to determine which investments to recommend to you. If a broker tries to sell you an investment before asking you these questions, that's a very bad sign. It signals that the broker has a greater interest in earning a commission than determining whether the investment is consistent with your investment goals and tolerance for risk.
An Introduction To Stock Market Indexes
June 04 2011| Filed Under » Index Fund, Investing Basics, Stocks
Its not unusual for people to talk about the market as if there were a common meaning for the word. But in reality, the many indexes of the differing segments of the market dont always move in tandem. If they did, there would be no reason to have multiple indexes. By gaining a clear understanding of how indexes are created and how they differ, you will be on your way to making sense of the daily movements in the marketplace. Here well compare and contrast the main market indexes so that the next time you hear someone refer to the market, youll have a better idea of just what they mean.
Tutorial: Stock Basics
The Dow
If you ask an investor how the market is doing, you might get an answer that is based on the Dow. The Dow Jones Industrial Average (DJIA) is one of the oldest, most well-known and most frequently used indexes in the world. It includes the stocks of 30 of the worlds largest and most influential companies. The DJIA is whats known as a price weighted index. It was originally computed by adding up the per-share price of the stocks of each company in the index and dividing this sum by the number of companies - thats why its called an average. Unfortunately, it is no longer this simple to calculate. Over the years, stock splits, spin-offs and other events have resulted in changes in the divisor, making it a very small number (less than 0.2).
The DJIA represents about a quarter of the value of the entire U.S. stock market, but a percent change in the Dow should not be interpreted as a definite indication that the entire market has dropped by the same percent. This is because of the Dows price-weighted function. The basic problem is that a $1 change in the price of a $120 stock in the index will have the same effect on the DJIA as a $1 change in the price of a $20 stock, even though one stock may have changed by 0.8% and the other by 5%.
A change in the Dow represents changes in investors expectations of the earnings and risks of the large companies included in the average. Because the general attitude toward large-cap stocks often differs from the attitude toward small-cap stocks, international stocks or technology stocks, the Dow should not be used to represent sentiment in other areas of the marketplace. On the other hand, because the Dow is made up of some of the most well-known companies in the U.S., large swings in this index generally correspond to the movement of the entire market, although not necessarily on the same scale. (For more information on this index, see Calculating The Dow Jones Industrial Average.)
The S
Financial Analysis
The final step to this analysis process would be to take apart the financial statements and come up with a means of valuation. Below is a list of potential inputs into a financial analysis.
Accounts Payable
Accounts Receivable
Acid Ratio
Amortization
Assets - Current
Assets - Fixed
Book Value
Brand
Business Cycle
Business Idea
Business Model
Business Plan
Capital Expenses
Cash Flow
Cash on hand
Current Ratio
Customer Relationships
Days Payable
Days Receivable
Debt
Debt Structure
Debt:Equity Ratio
Depreciation
Derivatives-Hedging
Discounted Cash Flow
Dividend
Dividend Cover
Earnings
EBITDA
Economic Growth
Equity
Equity Risk Premium
Expenses Good Will
Gross Profit Margin
Growth
Industry
Interest Cover
International
Investment
Liabilities - Current
Liabilities - Long-term
Management
Market Growth
Market Share
Net Profit Margin
Pageview Growth
Pageviews
Patents
Price/Book Value
Price/Earnings
PEG
Price/Sales
Product
Product Placement
Regulations
R
For thou convenience $INAR BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/INAR
Cash Flow On Steroids: Why Companies Cheat
It seems that every year another top athlete is exposed in a doping scandal. But these are people who are trained since birth to believe that all that matters is their performance, so they naturally take a risk on anything likely to increase their chances of winning. Companies, similarly indoctrinated to perform well at all costs, also have a way to inflate or artificially pump up their earnings - its called cash flow manipulation. Here we look at how its done, so you are better prepared to identify it.
Reasons for Cash Flow Manipulation
Cash flow is often considered to be one of the cleaner figures in the financial statements. (WorldCom, however, has proved that this isnt true.)
Companies benefit from strong cash flow in the same way that an athlete benefits from stronger muscles - a strong cash flow means being more attractive and getting a stronger rating. After all, companies that have to use financing to raise capital, be it debt or equity, cant keep it up without exhausting themselves.
The corporate muscle that would receive the cash flow accounting injection is operating cash flow (OCF). It is found in the cash flow statement, which comes after the income statement and balance sheet . (If youd like a refresher, seeWhat Is A Cash Flow Statement? and The Essentials Of Cash Flow.)
How the Manipulation Is Done
Dishonesty in Accounts Payable
Companies can bulk up their statements simply by changing the way they deal with the accounting recognition of their outstanding payments, or their accounts payable. When a company has written a check and sent it to make an outstanding payment, the company should deduct its accounts payable. While the check is in the mail, however, a cash-manipulating company will not deduct the accounts payable with complete honesty and claim the amount in theoperating cash flow (OCF) as cash on hand.
Companies can also get a huge boost by writing all their checks late and using overdrafts. This boost, however, is a result of how Generally Accepted Accounting Principles (GAAP) treat overdrafts: they allow, among other things, for overdrafts to be lumped into accounts payable, which are then added to operating cash flow. This allowance has been seen as a weakness in the GAAP, but until the accounting rules change, youd be wise to scrutinize the numbers and footnotes to catch any such manipulation. (For more on analyzing these, see How To Read Footnotes.)
Selling Accounts Receivable
Another way a company might increase operating cash flow is by selling off its accounts receivable. This is also called securitizing. The agency buying the accounts receivable pays the company a certain amount of money, and the company passes off to this agency the entitlement to receive the money that customers owe. The company therefore secures the cash from their outstanding receivables sooner than the customers pay for it. The time between sales and collection is shortened, but the company actually receives less money than if it had just waited for the customers to pay. So, it really doesnt make sense for the company to sell its receivables just to receive the cash a little sooner - unless it is having cash troubles, and has a reason to cover up a negative performance in the operating cash flow column.
Non-Operating Cash
A subtler steroid is the inclusion of cash raised from operations that are not related to the core operations of the company. Non-operating cash is usually money from securities trading, or money borrowed to finance securities trading, which has nothing to do with business. Short-terminvestments are usually made to protect the value of excess cash before the company is ready and able to put the cash to work in the businesss operations. It may happen that these short-term investments make money, but its not money generated from the power of the businesss core operations.
Therefore, because cash flow is a metric that measures a companys health, the cash from unrelated operations should be dealt with separately. Including it would only distort the true cash flow performance of the companys business activities. GAAP requires these non-operating cash flows to be disclosed explicitly. And you can analyze how well a company does simply by looking at the corporate cash flow numbers in the cash flow statement.
Questionable Capitalization of Expenses
Also a subtle form of doping, we have the questionable capitalization of expenses.
Here is how capitalization works. A company has to spend money to make products. The costs of production come out of net income and therefore operating cash flow. Instead of taking the hit of an expense all at once, companies capitalize the expense, creating an asset on the balance sheet, in order to spread the expense out over time - meaning the company can write off the costs gradually. This type of transaction is still recorded as a negative cash flow on the cash flow statement, but it is important to note that when it is recorded it is classified as a deduction from cash flow from investing activities (not from operating cash flow). Certain types of expenditures - such as purchases of long-term manufacturing equipment - do warrant capitalization because they are a kind of investing activity.
The capitalization is questionable if the expenses are regular production expenses, which are part of the operating cash flow performance of the company. If the regular operating expenses are capitalized, they are recorded not as regular production expenses but as negative cash flows from investment activities. While it is true that the total of these figures - operating cash flow and investing cash flow - remain the same, the operating cash flow seems more muscular than that of companies that deducted their expenses in a timely fashion. Basically, companies engaging in this practice of capitalizing operating expenses are merely juggling an expense out of one column and into another for the purpose of being perceived as a company with strong core operating cash flow. But when a company capitalizes expenses, it cant hide the truth forever. Todays expenses will show up in tomorrows financial statements, at which time the stock will suffer the consequences.
Again, reading the footnotes can help expose this suspicious practice.
Summary
Whether it is the world of sports or the world of finance, people will always find some way to cheat; only a paralyzing amount of regulation can ever remove all opportunities for dishonest competition and business requires reasonable amounts of operating freedom to function effectively. Not every athlete is cycling anabolic steroids, just as many companies are honest on their financial statements . That said, the existence of steroids and dishonest accounting methods mean that we have to treat every gold medalist and every companys financial statement with the proper amount of scrutiny before we accept them.
FINRA members may not trade for their own account at prices that are equal to or better than the prices of limit orders that they have received from their customers or from another FINRA member firm on behalf of its customers. Protecting customer limit orders encourages the use of such orders by the investing public and results in more capital committed to securities trading in the secondary markets by a source other than securities dealers. The protection of customer limit orders for all OTC securities was implemented in the 4th quarter of 2008.
Both will be able to come up with logical support and resistance levels as well as key breaks to justify their position.
This link will help thou $GMXS BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/GMXS
Followers
|
1493
|
Posters
|
|
Posts (Today)
|
0
|
Posts (Total)
|
821321
|
Created
|
03/04/10
|
Type
|
Free
|
Moderator PhotoChick | |||
Assistants Nilbud ManicTrader |
Posts Today
|
0
|
Posts (Total)
|
821321
|
Posters
|
|
Moderator
|
|
Assistants
|
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |