(photo courtesy of flickr.com)

There are many companies looking for money to increase and modify their production capacities. One way they do this is by sharing the ownership of the company with individual investors.

The ownership of the company is divided into many parts – there could be millions of these parts. A price is given to each part – called share or stocks — so that the person who wants to become a partial owner of the company buys a number of those shares. He or she is free to sell them to other people after some time. There are certain things that people who want to earn money from stocks should know and do.

How to earn money from stocks

If you want to earn money from stocks, you should understand the ways in which stocks make money. There are two main ways that stockholders earn money.

Dividends

The first way of making money from stocks is the dividends that accrue every year on the stocks you buy. As an owner of the company you are entitled to your share of the profit. The profit is calculated and given to you at the end of every year. But, if you depend on dividends, you will not make enough money from stocks.

Price appreciations

The second route is the price appreciation of the particular stock. This is the best way of making money from stocks. If a company is doing well, people want to be part of it. That means that these individuals will want to buy stocks of that company from those who originally bought them. They are usually willing to pay more than the price of the first person paid. The more people looking to buy a particular stock, the higher the price they will be willing to pay. Smart investors buy stock when prices are low and sell it when prices are high. The difference is the profit.

Earning more from stocks

Tip #1: Spread out your investments

When you buy stock in several different companies you diversified your investments and thereby minimize your risks. The stock market is a volatile thing. Things change very fast. If you have a lot of money to invest, it is wise to buy stocks in different kinds of companies so that if the price of one is falling, others may be appreciating. You should be aware of the saying “don’t put all your eggs in one basket.” If you put all your money in one company and things go bad there, you will lose.

Tip #2: Sell at the right time

There are times when you should hold onto stocks and times when you should sell. If you keep stocks when the price is appreciating, you are likely not to make any money. You need to sell your stocks when the prices are increasing because the appreciation will not last forever. Prices might fall sooner than you think. Watch prices carefully, so that after they have appreciated for some time, you are prepared to sell.

You can avoid the risks

You may have heard people say that stocks too are risky, yet if you understand the above principles you can and will make money from stocks. These are the principles that keep investors in the market for the long haul. People have made fortunes in the stock market and you can, too, if you play it right.

As long as they're OK, consider installment loans for your business's short-term financial needs. (Photo: flickr.com)

Small businesses are looking to installment loans rather than stocks for funding options. Before the recession, many small businesses were investing in the stock market, trading for added revenues. Dallas-area financial planner Chance Woods stated his clients have a “mixed feeling of relief at stock gains since March, and are reluctant to fully commit to the market.” Research is showing that most small business owners are feeling the same hesitation. The financial hit many of them took due to last years’ recession is having a huge effect on their confidence to move towards stock investing again.

Woods added, “People have been on an emotional roller coaster over the last two years, so they’re not quite ready to say, ‘I’m all in’…it’s going to take some time for them to recover and a lot less market volatility than we’ve seen.”

Alternative Investing

Although alternatives to stocks like money-markets and savings accounts were popular, it seems now that the return on investment is so low, business owners are hesitant there, too. According to Bankrate.com, the current rates for both modes of investments average about 1.5 percent around the country.  Seeing the lackluster interest rate, many business owners are opting for immediate installment loan options rather than wait out slow and minimal returns of other investing vehicles.

A Case in Point

Donnie Griffin, owner of a management consulting firm in Palm Springs, California, invested his money wisely. However, when the recession hit hard, he sold a good portion of his $250,000 portfolio. One week later, the stocks saw their biggest gain throughout the recession period. Griffin agreed he had “unfortunate timing” in his decision, but he also said that he wouldn’t venture back into the stock investing market easily. “Once you make a decision I think you’ve got to just ride it out… having experienced this drop, I’m better experienced for the next time one comes around.”

Griffin is not alone. As a business owner, his sentiments are shared nationwide. Many people lost a lot of money in stocks during the down economy. Although Griffin is patient, a lot of others aren’t. They want a more solid way of guaranteed money. Installment loans for a lot of qualified small business owners are proving to be that option. These types of loans are quick and simple for the qualified applicant. They potentially can bring money in when small business owners need it most. Rather than wait out a long-term investment and then reap only a small to moderate return, business owners are more confident in alternative types of loans.

No Guarantees on the Market

The most difficult thing for investors is that there is never a guarantee of market growth. The market is volatile and may take another turn for the worse. Robert Haley of Advanced Wealth Management stated, “It’s a gamble to hold and not sell now, and it’s a gamble to go all-in.” He believes that the way to mitigate the gamble is to build a long-term portfolio, but not rely on it for immediate funding. His belief is that a portfolio is never for immediate (or even moderate-term) funding. A better option may be immediate installment loans, or assets that are quickly liquidated. These are the types of funds that small business owners should have readily available for times of trouble.

Image from Flikr

Consumers are looking for more debt relief options as the stock market continues to fluctuate. This week the DOW Jones Industrial average made some drastic changes. The DOW Jones average is a roster of thirty stocks that most effectively weight the Wall Street’s financial climate. The DOW dropped Citigroup Inc and GM Corp. from its system. This is in response to GM’s recent filing for bankruptcy protection.

GM has been part of the DOW system for 83 years. This is a testament to the faltering economy and how different it may be once the recession is over. Travelers Cos. and Cicso Systems, Inc. are both set to replace Citigroup and GM, respectively.

Credit and the DOW Jones average

Many people look to the DOW as a barometer of the overall financial climate of the U.S.  With the DOW making major changes and going through restructuring, people are concerned.

Kelsey Glaser of Charleston, West Virginia said, “My family always used credit, but now that everything is so unknown, we are cutting back on plastic…with industry giants going down like they are, who knows what tomorrow will bring for us, the little guy.”  Glaser is not alone in his concerns.  Many Americans have been cutting back drastically as they maneuver the economy.

With huge corporations falling to the recession, no one is entirely at ease.  More and more consumers are trying to find debt relief options in other ways.  Some are drastically budgeting.  Many are using public transportation.  Some consumers are finding that combining households, reminiscent of the Depression days of the 40s, is the best option for them.  Regardless of the strategy, people are thinking in terms of the future and wanting to sustain themselves until things turn around and improve.

The future economy

With the Dow Jones average restructuring and dropping two industry giants, many economists are saying that though it is difficult news, it is the beginning of the end.

Maury Colevich, economics instructor, stated, “Although things are hard, this isn’t the calm before the stom anymore. We’ve already been through the storm and now things are settling themselves out.  We have to be prepared for that settling to include restructuring and reorganizing of what was typical in the past.  It’s all part of the process.”

Consumers and finances

Consumers are told to view the financial turmoil as temporary.  They shouldn’t take this as a sign of how things will be from now on. Like all things, there is an end.  In the meantime, many consumers are doing serious assessments of their finances, looking for new debt relief options.

One family in Missouri started a clothing-swap in their neighborhood to save on kids’ clothing.  Another family in Pittsburg said they are only going to restaurants that offer them half-off days.  It’s this kind of budgeting that seems to be ushering in a new way of life for Americans.

As one economist, Gail Graedey of Florida State University, stated, “People have made it through the recession, but now they are all going to hold tightly to their new altered lifestyles. … If something helped them with debt relief, they aren’t going back to their old ways just because the industry is better.  Consumers are smart and are going to watch their bank accounts for a while longer.”

Today is quadruple witching day! I know, it seems odd so far away from Halloween, but it actually happens four times a year, and it refers to a certain stock market event. There are not four magic sorcerers or stock traders wearing costumes with pointy hats.

Quadruple witching day simply refers to a day every quarter when several options contracts expire at the same time.

What effect does quadruple witching have?

On quadruple witching day, “stocks are more likely to push higher during the expirations.” This means that all three major markets are likely to finish higher today. However, the positive difference will have to be pretty big for any market to finish without a loss.

That reminds me, I should check on how my stock in that company that does payday loans with no faxing.

Quadruple witching hour

The magic on quadruple witching day actually happens all in the last hour of trading, which is called the quadruple witching hour. It falls the third Friday of March, June, September and December.

The quadruple witching hour is from 3 p.m. to 4 p.m. Eastern Standard Time, or, as they like to call it, New York Stock Exchange time.

The ‘quad’ in quadruple witching

Quadruple witching happens four times per year, but that isn’t where it got its name. Quadruple witching refers to four types of securities. Those four are:

• Stock index futures
• Stock market index options
• Stock options
• Single stock futures

History of jargon

Quadruple witching was originally called triple witching, before the introduction of single stock futures. Because it was originally called triple witching, many believe it is a reference to the Three Witches featured in Shakespeare’s classic MacBeth.

The phrase was based on these literary characters in order to indicate the additional volatility that leads up to the securities expirations. The term, now “quadruple witching” is generally only used by stock market participants, and thus it is considered industry jargon.

MacBeth and money

This isn’t the first time MacBeth has been associated with money. I know of several high schools that did productions of MacBeth to raise money for the drama club or even just for the school overall. MacBeth has been made into several movie incarnations, although none of them made a significant amount at the U.S. box office.

An independent film called “Scotland PA” was loosely based on MacBeth as well. The film was released in 2001 and made $384,098 at the box office –  not bad for an indie film. The movie took several liberties with Shakespeare’s original plot. For instance, rather than battling over a kingdom, the characters fight for ownership of a fast-food restaurant. The film is set in the ’70s, and the central character, named “Mac,” reveals his idea for the drive-thru window to his boss, only to later be passed over for a promotion in favor of the owner’s son.

So, if you’re not glued to watching the stock market today in anticipation of quadruple witching hour, maybe you  can check it out.

I know that when I leave town on a 2-day business trip, I expect to find great changes when I return. It’s only natural; one leaves one’s own environment, flies off to a totally different place, there’s a change in the weather, major differences in the food and upheavals in conversation topics. Then you come back and hey! Nothing’s changed since I left? Hard to believe-isn’t it?

Now you’re an astronaut

So if the effect on a normal earth-bound human is surprising, imagine what an astronaut feels. He’s been torn out of earth’s gravity for 12 days, he has been in a state of weightlessness, his blood pressure is zero and the blood is probably circulating anti-clockwise, he has lost his connection to the stock exchange and in fact has been worrying that it may not be there and that he will have to start applying for all sorts of Personal Loans to make it through to the end of the month. His arrival has been delayed for 2 days, he was diverted to a different airport and he can’t sue the airline.

What happened to the recession?

He puts one foot down gingerly onto mother earth and faces the crowd of reporters who have been hanging around the landing strip for 48 hours without sleep, food or cigarettes. “Welcome back to earth, Commander! How were things in outer space?” “All was okay. How’s the stock exchange doing?” the reporter looks him as though he has been too near to the sun or the moon. “How did the crew behave, Commander?” “Fine. What’s with the swine flu? Have the scientists isolated the guilty bug yet?” “No change. Commander, how was the food on the trip?” “Tasteless, as on all flights. Are there any changes in the housing market?”

Back in space

By this stage both the astronaut and the reporter wish they were floating somewhere up there in outer space on a very high orbit, far from earthly matters such as recessions and swine flu. The astronaut is stunned – he has been involved in earth- shattering exploits for 12 days and here people are still walking around in the same shirts. Nothing has changed; he has been to the stars and back and boring old earth is still swinging its way around the sun as though nothing has changed. How can it be?

The spanner or the list

“Do you have anything exciting to report, Commander?”

“The spanner was quite exciting. About as exciting as watching your stock dropping through the floor. Is General Motors still making automobiles?”

“Tell us about the spanner, Commander.”

“Well, I was busy fixing this Hubble telescope thing. I had a spanner in my hand and I was tied to the end of the spacewalk rope. I reached into my pocket to get the list of stocks I want to buy when I get back to earth and I nearly dropped the list. So I let go of the spanner.”

Did you drop the spanner???

Not actually dropped, you understand, because of the weightless factor. It floated off horizontally. I wish GM would have been weightless, then they could have gone off horizontally as well, instead of dropping through the floor. You see, that spanner is still going, unlike GM.”

I grew up in a stock exchange oriented house. The family owned a large furniture business and they floated a company on the exchange. I don’t remember much of those days but there were always uncles and older cousins in deep discussions about the ‘market.’ I think I thought they were into vegetables. One day grandfather patiently explained what it was all about. The part of his talk I remember to this day was when he said “I will never disappoint my shareholders. As soon as the shares drop below their issue price, I buy them to keep the price up.” That made sense to me and opened all sorts of possibilities.

I was in business

I found a friend whose father was a broker and allowed his son to ‘dabble’ and I was in business. Whenever I saw the price dip below the datum level, I would hastily borrow all the money I could lay my hands on – Payday Loans and Personal Loans weren’t in business in those days – and buy shares through my friend. I had to pay him off, of course, but as soon as grandfather moved in to correct things, I made enough money for everyone.

Things change

Then grandfather departed and things changed. But I was hooked on the exchange and started reading the papers and looking for clues and tips. I also started looking at things around me and thinking that they influenced the market. For instance I counted the number of cars passing through an intersection on one light change: if the number exceeded 100, it means that the auto industry was up – buy GM or Ford. If there were many skips and cranes in town it meant the building industry was up and I bought shares in the construction sector.

More pointers

If the stores in the mall were full of women buying clothes, then I bought clothing shares; no shoppers, sell the shares. There is a quite well-known indicator – the ‘lipstick indicator.’ This is a theory that says that even when feeling gloomy or economizing on the big-budget spending, it’s still possible to get a little psychological lift at a modest price by buying a tube of lipstick. It is the net effect of replacing big indulgences with small luxuries is an overall contraction in total spending, i.e. the lipstick indicator is predicting a recession. Lipstick sales reportedly soared following the attack on the World Trade Centre.

Does my system work?

When I am playing on a rising market, it works, as does every other system. On a falling market it fails and I lose. But I have a lot of fun. I’ll stand at an intersection counting the cars like a farmer counting his sheep going through a gate, rush home, get into the broker’s website and give the instruction with a great sense of urgency as though I have been tipped off by the ‘Master of the Market’ himself. An hour later when I see the stock going in the other direction I will curse myself for being stupid and acting like a child.

It’s not all like that. Sometimes I will sit clapping my hands for being a stock market guru able to predict anything, as I watch the stock going exactly where I thought it would go.

All in all it’s a bit of harmless fun, the amounts are small and it’s probably a lot safer that gambling online.

Will we ever learn from our mistakes? Probably not. The stock exchanges went from a high-point in June 2007 to a low in March 2009, dropping about 50 percent in under 20 months.

2006 and 2007 Celebrations

We should have seen it coming, but most of us didn’t. In fact, most investors were too busy rejoicing, celebrating their Market wins in 2006 and 2007 to look around and see if they were about to careen off the cliff. We were taking and repaying Cash Advance Loans at a high rate of knots. All was well with the world.

It’s called overconfidence – the belief that you’re more skilled than you really are. That’s the reason we get ourselves into investment hot water. Overconfidence makes you unwilling to recognize bad news.

Overconfidence comes from early success

It happens to all of us who play on the market at some time. We buy some stocks. They go up. We sell and we’ve made money, all at the cost of a couple of phone calls and some broker’s fees. You then attribute all this to your own skill instead of the dumb luck it’s likely to be.

This spectacular operation of yours, on which you get good mileage at dinner, at lunch and in the locker room at the golf club, turns you into an instant stock genius.

The Accidental Investor

That tendency toward overconfidence gets magnified when it’s combined with our tendency to use past situations to evaluate risks in the here and now. Experiments have shown that when people risk their own money on an investment and succeed, they’re likely to take on even more risk the next time around. Why? They don’t think of that money as theirs. It feels like they’re playing with house money.

House money

Let’s say you put $1,000 into a share that triples; now that it is priced at $3,000, you’ve got $2,000 of “house money.” So long as any of that $2,000 gain is left, you may shrug off any losses as a reduction of the house money, rather than a depletion of your own.

Somehow, losing the house money hurts less than losing your “own”, even though, strictly speaking, all the dollars are the same. This highly dangerous “house-money effect” can egg you on into taking an ever-escalating series of risks until you get wiped out.

It Won’t Happen Overnight

If you want to beat the market, you have to battle your tendencies toward over-confidence and judge risks in relation to recent failures and successes. You can also compare your investment performance to market averages to help keep it contextualized. Finally you must develop an investing strategy to help you assess each risk on its own terms.

It takes years to become good at investing, to learn what information is important versus what is just noise, and to get over risk aversion and away from the idea of house money. Just like master carpenters are not made in a day, neither are master investors. But with patience and a little self-awareness, you can do it.

I bought today

I just couldn’t stand looking at all these bargains any more. I broke down and bought today. Let’s see what happens…

This continues my look at Jon Stewart vs. Jim Cramer, the overhyped battle that teaches us that, if nothing else, investors should stay far away from television if they’re seeking sound investment advice. If you missed part one, CLICK HERE.

Jon Stewart took issue with Rick Santelli’s classification of foreclosed home buyers as “losers.” Not only is it easy for Santelli say that – he is far from the demographic at risk in this economic stew of trouble – but Stewart touched upon a serious issue. CNBC (and other TV network) Wall Street analysts like Santelli who dance about the airwaves with their bluster and decorated history, telling consumers when to buy and sell, knew that the crash was coming but said nothing. They knew how the tricks of the market – derivatives, short selling – worked, but failed to warn people who could ill afford to lose so much that they’d need more payday loans than they’re comfortable with.

Jim “Mad Money” Cramer came to CNBC’s defense

Jim Cramer, the man who bears the albatross of the moniker “In Cramer We Trust” on CNBC network commercials, called out Stewart as a mere “comedian,” someone who couldn’t possibly understand how Wall Street really works. He thought was ready to stand against the Doctor of the “Daily Show.” A war of words from a distance ensued.

On the night of Thursday, March 12, 2009, the distance was bridged. Cramer agreed to appear on “The Daily Show” to debate Stewart over whether CNBC is serving or slamming the masses with its stock market advice.

So begins the conversation

Here are some of the telling highlights of a conversation that says much about both the behind-the-scenes manipulation of Wall Street and the sorry state of what some still continue to call journalism…

The “smoking gun,” so to speak, that Stewart offers against Cramer and similar TV financial pundits is a December 2006 video interview  from a financial blog in which Cramer speaks freely about what he did as a hedge fund manager:

Cramer (vlog interview): “A lot of times when I was short at my hedge fund, I would create a level of activity beforehand. It doesn’t take much money. (It’s) short selling. I didn’t do it, but I’m trying to explain this to you.”

Stewart (on Daily Show): “It’s sounds like you’re saying you did this (you shorted).”

Note: The manipulative nature of short-selling is largely responsible for sinking investor confidence and keeping the Market in the doldrums.

Cramer (on Daily Show): “If so, then I was inarticulate.”

Find out what else Cramer and his brethren were inarticulate about by clicking HERE.

Related Video:

If anyone can get his timing all wrong, it’s the private investor. These guys hang around the fringes of a bull run, biting their nails and wondering if it will last, and then get the nerve to make a move after the real profits have been bagged.

Timing

True to form, they get their timing wrong on the way out as well, selling when markets are nearing bottom, and consolidating their paper losses. As soon as the market recovers and starts moving up, they start buying. It is called the herd mentality, and is usually best seen as a lambs to the slaughter show.

Private investors are tip-toeing back into the stock market.

As the exchanges sink ever lower, private investors are defying the gloom and returning to the stock market. They are either bored at being out of the action or are boldly taking advantage of low prices to top up their holdings. Some may already be regretting their decision, but whatever happens, they are buying good shares at much more attractive prices than 12 or 18 months ago.

This also suggests that the message is finally out: the best time to invest is when shares are cheap, not when they’re expensive.

Construction time again

Research shows that private investors are buying back into industrial stocks, particularly infrastructure and construction-related companies. Construction share prices are 50 percent down from September 2007, and buyers are hunting for bargains. It also shows that investors are looking to the future, rather than living in the past. Financial stocks are a no-no at the moment.

There is a danger that private investors have moved too quickly on the stock market revival. There is still no real direction and it’s not clear what’s happening.

Forget the herd

The herd mentality asserts itself at moments like these and the slow walk can turn into a stampede, crushing optimism underfoot. Then when everybody has lost hope, the recovery begins and fortunes are made. Remember that the herd mentality is difficult to break. Most private investors will never break away from the pack.

But wait-where’s the bottom of the market?

No one can forecast where or when the bottom of the market is, but investing small amounts during these dark days may just pay off handsomely when the sun rises on the global economy again. It’s always darkest before the dawn.

Going against the herd at a time like this needs nerves of steel, but investing little and often should make the return to equities a lot less daunting and be hopefully rewarding in the long run.

The markets are low, lower and lowest

I keep looking at the share prices and literally salivate over some of the bargains to be had. I have never seen prices as low as these. I see unprecedented opportunities to buy shares in individual companies with excellent prospects. That isn’t to say that their share prices won’t fall further, but patient investors dripping money into such companies will be handsomely rewarded over the years to come. For anyone with spare cash lying around this must be worth a try.

However, if you have to take a Payday Loan to raise the money, it’s probably not the best idea.

Bank robberies have taken on some unusual forms lately.

Failing businesses, depleted stock portfolios and family debt have driven some unusual suspects to be accused of robbery lately.

It seems the stress of dealing with a broken economy has caused a few people to snap — people who others describe as regular, upstanding citizens. When personal loans aren’t an option anymore, it seems some people have decided they will find other ways to get money out of banks.

The case of the Church Deacon

Last month, a man held up a South Carolina bank with a gun. Several people inside the bank were held hostage. Police say the man with the gun, who conducted a 90-minute standoff, was Bruce Windsor. The 43-year-old man was a local church deacon. Not only were people who knew him seemingly baffled by the situation, so was he.

“This doesn’t even register. I’m just ill,” Windsor told a judge in a court appearance. “I’ve never stolen anything in my life.”

Police say Windsor tried to steal cash in order to save his failing real estate company. The father of four had no criminal history.

A modern-day Robin Hood?

In September, a father of two teen daughters “lost everything” in the stock market. Keith Giammanco then allegedly went on a robbing spree. Police say he robbed a total of 12 banks.

His motivation for the crime appeared to be his daughters. He wanted to keep them in private school and continue to buy them things. One daughter says her father was “her Robin Hood.” The way she sees it, he took from the “greedy” banks to make his family’s life better.

I guess no one saw it coming

Perhaps Robin Hood would identify more with  Barbara Joly, 68. Joly has been dubbed the “Ohio granny robber,” and last month she was sentenced to six years in prison for robbing three banks.

Joly’s husband says she stole the money to help her son, who had fallen deeply into debt and turned to his mother for help.

General Motors released a report Thursday that said it will likely go bankrupt unless it gets more government funding and successfully restructures the company.

The company has already gotten $13.4 billion in U.S. government loans.

Stock market fluctuations

The dismal report was, of course, followed by a drop in the company’s stock. In fact, GM shares fell to a 75-year low after the news was released.

At their lowest point, shares were going for $1.27 Friday. That’s the lowest price for GM shares since 1933. By afternoon, shares were back up to $1.49.

A little more help

In addition to the $13.4 billion it has already gotten from the U.S. government, GM will seek up to $30 billion to keep the company afloat. But those won’t be easy loans to get.

The company is also seeking additional funding outside the country. It is seeking help from the German government through its Adam Opel AG subsidiary in Germany.

Stocks will continue to decline

Stock market analysts have said that even if the company doesn’t file for bankruptcy, its share prices will likely plummet near worthlessness.

The analysts say that all the bailout money the company is getting from the government will dilute the price of shares.

Meeting with the White House

GM’s stakeholders are holding meetings with members of the Obama administration’s auto task force to weigh options. Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers said the task force will meet at the White House today and discuss GM and Chrysler LLC’s restructuring plans.

GM Chief Financial Officer Ray Young has said that GM is trying to renegotiate its $28 billion in unsecured debt with bondholders.

Paul Robeson

The bad news is like Paul Robeson’s Old Man River. It just keeps rolling along.

He mus’know sumpin’
But don’t say nuthin’,
He jes’keeps rollin’
He keeps on rollin’ along.

Ah gits weary
An’ sick of tryin’
Ah’m tired of livin’
An’ skeered of dyin’,
But ol’ man river,
He jes’keeps rolling’ along.

Print more money!

We can only hope that plans to print money will start to turn things round. I’m taking that Payday Loan they’re advertising and buying a new laptop so I can keep an eye on things.

Up until today, this week has been a disaster with the stock exchanges around the world dropping like stones. They’re back to indices of 10 or more years ago. Shares are trading at their lowest levels since 2003 – lower than the days after the Lehman Brothers’ bank collapse last September.

Is it ok to create new money out of thin air?

On the positive side, governments are doing their best to turn things around. There is a lot of talk in the marketplace this month about something called “quantitative easing”. I had to look up the details of this new “medicine” on Google and came up with this explanation: “Quantitative easing is a term for when a central bank creates new money out of ‘thin air’ to inject into the banking system.” The aim is to increase the amount of deposits in private banks so that, by way of deposit multiplication, they can increase the money supply by increasing debt (lending). ‘Quantitative’ refers to the money supply; ‘easing’ refers to reducing the pressure on the banks.

Newly created cash

A new illness means new medicines, right? The central banks will pump newly-created cash into the economy. People often talk about ‘printing money’ but that’s not what will literally happen. Instead all the commercial banks will find one morning that a computer has miraculously added extra cash into the accounts that they’re obliged to keep with the central bank. The theory is that the banks will then go out and lend that newly-created cash.

Will it work?

No one knows if it will work. But then no one knows if any of the other emergency measures will work either. But it’s worth a try. It can’t make things any worse than they are. We will get out of this mess eventually. No financial crisis lasts forever.

The silver lining

And that basically is the reason why there are so many people around telling us this is a good time to buy, a great time to start a couple of long-term investments, be like Warren Buffett, think big.

But my problem is…

I have developed a bias toward recency – I think that whatever has happened most recently is bound to happen next. And in a market like this, that means your brain is busy scaring you into thinking the market can do nothing but drop.

There will definitely be times like these, when stocks drop dramatically and test your mettle. But if you remain disciplined, do your homework and allocate your invested assets between stocks and gilts in a way that respects your time demands, you will succeed over time.

This one is global. It’s everywhere and it’s hurting everyone. Whole countries are bleeding and the consumers in those countries are hemorrhaging.

• Job losses are mounting
• House prices are falling
• Stock markets are falling
• Pension funds are falling
• Savings rates are falling

It’s like watching a dead duck spiraling downward.

In this recession,

• analysts,
• economists,
• government,
• policy-makers,
• housewives,
• journalists and
• publicans

cannot agree on how this will all pan out, or when it will end. In other words – nobody knows.

So what’s going to happen?

I look at my miserable share portfolio and grieve over the loss. It’s worth about half of what it was before the bomb fell. I get all excited when it rises a few dollars by the end of trading. But I’m still losing half of my money. What’s to get excited about? It may take years or even decades, for my portfolio to return to its old value. Am I going to sit here every evening and mourn over my losses? The stock market will languish for years.

Okay, so recovery will start next year as everyone predicts but all it will do is nibble away at my losses. Who can wait that long?

Maybe this is the time to buy?

Perhaps I should be brave, sell at the present ridiculous prices and start playing the market again at the new low levels. The problem for a Sunday afternoon stock market player is that it’s hard to swallow a loss. I’m in the habit of selling only when I’m making a profit. That was a great strategy on a rising market; what’s the game on a falling market? And the experts tell us that to be a successful stock market investor you need to take a leap of faith. The time to buy shares is when the news is bad, the economy is struggling, and there are no lights at the end of the tunnel. It’s when shares are at their cheapest.

What do the successful investors do?

Successful investors have faith in the market and in themselves. They do not make the mistake of buying high and selling low. If I decide to wait for the shares to drop even lower before I buy, how will I know when the market bottoms out? I could sit here for years watching the market drop and when it gets really low, I’ll still be sitting on the sidelines waiting for it to go even lower.

Maybe this is the time to get out?

Perhaps it’s time to bite the bullet and quit. I’m sure that all financial news that is still coming in the near future is going to be negative. There will be more uncertainty than ever, and therefore more reasons than ever to not invest in the stock market.

Investing can seem confusing and tricky when markets are operating normally. Now that the stock market, real estate and the financial system as a whole are so shaky, it is even more difficult to figure out what to do.

Luckily some experts out there have advice for young people who are lucky enough to not only have an income but to have money to invest as well.

Figure out your objective

Financial experts agree that what you should do with your money depends largely on your long-term goals. You might be focused on paying student loans and want to remain mobile for a few years. Or you might want to stay put and invest in real estate while it’s cheap.

Whatever your situation is, advisers have a few tips that apply to everyone.

Cool cash

Whether you’re using extra money to invest or to pay off debt, make sure you are also putting some away. It might seem like it makes more financial sense to pay off a loan that is costing you interest. However, it is imperative to keep an emergency cash fund on hand. That way you won’t end up owing more interest on quick loans or credit cards. If you want to pay off your debt, avoiding getting into more debt is critical.

Financial advisers say the minimum you should have on hand is a month’s worth of expenses. Ideally, you should have three to six months of expenses saved, if you can afford it.

Investing in real estate

Low housing prices right now make purchasing a home tempting. But there are a couple of things you must take into consideration. First, credit is extremely tight right now and it will be difficult to secure a mortgage. Also, banks are requiring higher down payments than the 5 or 10 percent down payments they commonly accepted in years past.

Finance experts agree that having an emergency cash fund is the most important step toward financial stability. Spending your emergency savings on a down payment defeats the purpose. Also, if your job situation is at all tenuous, as it is for many right now, taking on such a large debt could be very dangerous.

Risky business

A CNN money expert makes the assertion that young people can afford to invest almost all their money in equities because they have time to make up for any losses. However, different factors should affect how much risk you take with  your investments.

Just as with buying a house, job security must factor into your investments. You may be planning to invest long term, but what if you lose your job? Will you have to pull your investments to pay for everyday expenses if you get laid off? That’s not to say you shouldn’t invest, but unless your job is very secure, you may want to start off with lower risk investments. You can always redistribute your portfolio when the markets get better or if you get promoted or otherwise receive a sign that your job is secure.

How much heat can you take?

Also, you must assess your ability to deal with a fluctuating market. Some investors think they can handle watching their portfolio fluctuate.  However, many end up cashing out their investments early because they get too nervous about losing money on their investments. If you are the kind of person who will be checking your investments frequently and adding up dollars and cents, you probably shouldn’t invest in equities, which are very risky.

All the world’s markets have fallen and huge amounts of real money have disappeared. But has it? Where could it have gone?

Billions slashed from stock markets. Where are those millions hiding?

What money? Questions are being asked, “When the headlines say ‘Billions slashed from the stock market’, where have the billions gone?” Another popular question is “I bought some shares for $1,000 last year and now they’re only worth $500. What’s happened to that other $500? Where’s it gone?”

Scam?

Would you believe that there are people walking around saying that what’s happening is all a scam and the “lost” money has been swiped by the financial services industry?

The answer

The answer is that when a share price changes, no actual money is involved in the change. All that changes is the perceived value of the shares in the minds of the buyers and sellers who actually make up the market. That perceived value may or may not reflect the true value of the piece of the company that a share represents. Investor ideas on value vary wildly and move share prices up or down to highs and lows that bear no relationship to the true value of those shares.

The market is a voting machine

Benjamin Graham, the great American economist and professional investor is considered the first proponent of Value Investing and he explained that, “In the short-run, the market is a voting machine, reflecting a voter-registration test that requires only money, not intelligence or emotional stability, but in the long-run, the market is a weighing machine.”

So, when that investor bought those shares for $1,000 a year ago, that was the price on the market. The $1,000 went to the person who previously owned them. If the same shares are sold today for $500, that $500 will come from another investor, who is asking for that amount of money. In current opinion those shares are only worth $500.

So where’s the money?

The $1,500 in cash that existed (meaning the original $1,000 used to buy the shares last year, and the $500 that our latest investor pays to buy them now) is still there, just in different hands. It’s certainly not in the pocket of some scam-merchant in the industry and no one has taken any of it.

The real money comes from the “weighing machine” part of Graham’s famous quotation. Investor sentiment does not count. All that matters is a company’s actual results. And a share price, which may have soared to great heights or sunk to suicidal lows as the market reacted to good or bad news, will keep going back to the real rational value of the company as determined by its actual financial performance.

Who lost the money?

Everyone who invested in the market or was playing on the market or was gambling on the market, lost money. A person who was buying and selling shares in a limited portfolio of say $5,000 has probably kissed goodbye about half of his money, $2,500.

A major corporation or institution such as an insurance or investment company that invested huge amounts of capital, have also lost about half of their money. If their investment was 1 billion or 2 billion dollars, then their losses are considerable and they are hurting. But no one out there has advanced cash to someone else; no one has the other half of the money.

When stock prices fall during a bear market, what happens? Depending upon the severity of the dive and the overall state of the economy at the time, it’s fairly easy to predict. Typically, investors will go into a panic and rush to sell off as many shares as possible in the shortest period of time. If such behavior occurs on a wide scale – across the stock market – the economy is locked in a stranglehold and brought to the ground.

This is what Federal Reserve Chairman Ben S. Bernanke wants to avoid, and he’ll do it with an uptick rule.

Jesse Westbrook reports for Bloomberg that Bernanke said “there may be a benefit in resurrecting a rule that restricts short-selling stocks when share prices are falling amid the current bear market.”

“No longer relevant?” Please…

Bernanke told the House Financial Services Committee that the uptick rule could be of benefit to the nation right now. In essence, the uptick rule prevents investors from “betting against a stock until it sells at a higher price than the preceding trade.” Not seeing the need for it at the time, the U.S. Securities and Exchange Commission removed this rule in 2007. Interestingly, that’s the year most experts say that the current recession officially began…

The SEC originated the uptick rule in 1938 to prevent what’s happening now from occurring. Once E-trading became popular in recent years, the SEC decided that it was “no longer relevant.”

Everything beats 20/20 hindsight

According to Bloomberg, lawmakers like U.S. Representative Gary Ackerman should be happy with Bernanke’s decision. Perhaps rightly so, Ackerman made the logical connection between the absence of the rule and the recent assault upon financials. Evidence? Standard & Poor has fallen 50 percent since the Securities and Exchange Commission dropped the uptick rule. In a case of 20/20 hindsight, current SEC Chairman Mary Schapiro made the Epimethean pronouncement that she “may” bring the uptick rule back…

To find an expert’s opinion on the matter, Jennifer Schonberger of The Motley Fool recently interviewed Liz Ann Sonders, chief investment strategist with Charles Schwab. According to Sonders, we’re more than halfway there.

And the worst part is now

Sonders’ best guess is that

Sometime in the third quarter of 2009, we’ll get the official word that it’s over — now keep in mind, given that it took the NBER [National Bureau of Economic Research] a year to tell us we were in one. The normal span of time between when recessions have ended historically, and when they’re declared in the end, has been 15 months. So if I’m right about the third quarter of 2009, we’ll probably get the word on that some time in 2010.

But right now America is at the bottom of the pit. Corporate inventories are going up because nobody is buying. Consumers are saving for a perpetual rainy day, but even then they’ll look to cash advance loans for added help. Unpurchased inventory stockpiles has caused an artificial inflation of the gross domestic product, making appear better than was expected.

What must still happen?

Fallout from that, Sonders feels, will cause first quarter 2009 readings to be dismal. Then the news will “become progressively less sad.” Since there has been relative calm following a volatile fourth quarter 2008 – largely because President Obama’s economic stimulus is about to go into effect – credit markets are beginning to become more fluid again.

Despite continued volatility in 2009, Sonders sees the stock market rising. But if that rise is to be meaningful, the $9.2 trillion in cash “sitting in nothing but short-term, safe investments like Treasuries, bank and savings accounts and money market funds” must move. It must flow. Since depressed asset prices are low, Sonders says that for some, it is time to buy.

However, she advises that all should assess how much risk their willing to tolerate. “If you’re now way under an asset band of, let’s say equities, and your circumstances haven’t changed, and your time horizon hasn’t changed, then absolutely you should be thinking of putting some money back in.” However, if a consumer already has significant money in stocks, an explosion of increased investment is discouraged.

Payday loans: your bridge to recession’s end?

While they are not a long-term solution to larger financial issues, payday loans can certainly be the right tool at the right time for your budget. Just the boost you need? Perhaps. During this recession and beyond, it always pays to shop around. If you need emergency cash fast and crave convenience and discretion, payday loans may be what you seek.

Related articles

• Rally Attempt Ends, NBER Makes It Official (chrisco.wordpress.com)
• The Deepest Downturns (usnews.com)
• R-word sends markets into dive (thestar.com)

Your payday loan source sees that as of 8:15 a.m. Pacific Time the Friday before Super Bowl XLIII, the Dow Jones is currently at 8,057.25, a drop of 91.76 points from opening. The Stock Market is in need of a serious upswing on the heels of this plummeting economy, and some financial experts think they have just the thing to do it:A Super Bowl victory by the Pittsburgh Steelers… or the Arizona Cardinals.

How’s that for definitive?

Seriously, according to Laura Cohn in her Kiplinger.com article “Super Bowl Stocks,” Robert Stovall of Wood Asset Management has been studying this for years. About 80 percent of the time, if the Super Bowl champion was one of the original National Football League franchises, the Dow Jones industrial average rises for the year. Fortunately, since both the Steelers and the Cardinals were original NFL franchises (dating back before the 1970 NFL-American Football League merger), so how can American stocks lose? Like a no fax payday loan, it’s like money in the bank.

Stovall does urge investors to view this as entertainment and not a certain economic guide. In truth, he feels that that the television commercials you see are technically a better indicator of financial success. Research has proven that companies who advertise during the Super Bowl have received stock boosts, albeit temporary.

The ads must be good, though

Studies from 1989 to 2005 by the University of Buffalo and Cornell show that favorably received ads translated into a run on stock in the advertisers. This of course lead to a jump in their share price. In fact, on the Monday after the Super Bowl, shares of companies that produced the 10 most-popular ads stayed ahead of the Standard & Poor’s 500. Gains even continued after that day. Even shares of the companies that produced the least popular ads went up, but to a smaller degree. No advertising is bad advertising, right?

But at what price? Super Bowl ad time has traditionally been the most expensive available on American television, but with such a large audience in tow, many companies have found the expense to be worth the expense. Three million dollars for 30 seconds of airtime could translate into so much more.

Payday loans retain value

Much like basis your investments upon who wins the Super Bowl, ad picking for stock investment is also not a foolproof science. This is for entertainment purposes only, despite the statistical evidence that suggests there may be some credence in the theories. A stock is not like a payday loan. Numerous factors can decrease its value; a payday loan retains its value for you during a short-term cash emergency.

Related articles

• SUPER BOWL 101 – For women (and men) who don’t know football (Steelers vs. Cardinals) (lift-magazine.com)
• U.S. Justice Dept. demands sale of Labatt USA (ctv.ca)

It Took a Melt-Down to Get Me a Payday Loan

The economic downturn will never touch me, I thought.  This is the story of how I was saved by  payday loans. Here I am, ordinary citizen of the world, nobody special and not the inventor of the wheel!

I live in the mid-west in a modest home with my wife, three kids, a dog and a mortgage. I am an engineer working for a good company and most of the time involved in interesting projects. On the weekends I spend time with my kids. Sometimes the whole family goes out for a picnic and we eat a lot and have a great time. I not only enjoy my life, I love my life. I wake up in the morning wanting to go to work, unlike some of the other guys in the office.

The earth tremor

The first signs that something was happening were news articles in the local papers. I eat early, before the rest of the family so I read the paper while I eat. The articles were all about sub-prime mortgages. I had to look this up on Google to understand it. “A financial term popularized by the media during the “credit crunch” of 2007 and involves financial institutions providing credit …” I shrugged. Doesn’t affect me, I decided, as I buttered a piece of toast. Off I went to work, happy that there were no waves around me. In the office I was told that some firings would be announced. I would not be among them. I was also not affected by the credit crunch. With Mary working at the hospital as a senior theater nurse, we didn’t even have an overdraft.

The stock market fall-in

I heard about this on the train going home. The guys were crying about how much they had lost in a single day. I smiled. I do not play in the stock exchange. At home there was a letter from the bank announcing that my mortgage rate was going up and the interest on my savings was going down. There was also an ad from a Personal Money Store offering a Payday Loan service. I smiled and shrugged. Who needs it?

The edge of the wave touches me

The General Manager called the staff together the next day and informed us that the Harley Project had been shelved. “All engineers working on this project will receive letters at the end of the day.” I was working on it, but only in the area of the security systems, almost as a sub-contractor. “You have enough other work to keep you busy, so you remain,” he said with a smile, shaking my hand.

At home that evening, Mary told me that the oven in the kitchen had blown out and that the repairman had quoted approximately $1,000 for the repair. “We have to eat,” I smiled as I poured myself a scotch. The following day I received a demand for some unpaid taxes that I thought had gone away. I nodded, but did not smile this time. Mary reminded me that we have 3 weddings to attend, all neighbors. “We have to go Tom, and there are the presents…”

The wave gets me

Now it was too much and I couldn’t cope with it. The bank refused to speak to me and then I remembered the flyer from Personal Money Store offering  payday loans. I called and the rest is history. I am a confirmed fan.

The federal government has a history of making quick payday loans to large corporations in their times of needing poor loans when they were on the skids.  Many large financial institutions have gotten this benefit from the government, and especially in the last 30 years, whilst curiously this generosity has not been extended too far to the American public.  The 70s and early 80s were the worst economic periods in the nation’s history since the Great Depression, and the subsequent recessions were mild compared to the period of stagflation that was present at that time.  The early 70s and 80s recessions weren’t matched in severity until the current recession began.

The 70s and the aftermath

After each recession, both in 1973 and 1974, the economy experienced a period of rebound for the next 5 years.  Granted, there wasn’t a full recovery made from the 1973 recession until the early 1990s, but it had made some steps back to where things had been.  That is, until 1979.

1980 – 1982:  The recession in the 1980s was the worst since the Great Depression.  After the 1973 recession and stock market crash, stagflation, or a combination of productive decline and inflation, had set in and was adversely affecting the American economy.  It was worsened by the events of the Iranian Revolution, which slowed oil exports throughout the whole world.   The results of the energy crisis combined with the stagflation was post World War 2 record high unemployment, lack of growth in manufacturing industries, and several large bank failures.  Several large banking institutions, especially savings and loans, crashed, and the effects rippled throughout until the 1990s.

1990 – 1991:  A recession was nearly unavoidable after the stock market crash in 1987.  Though the stock market crash was quickly recovered from, the banking sector, especially savings and loans were affected by a decrease of consumer confidence, but the greatest impact was in the manufacturing sector, which still needs quick payday loans.  Production dropped off for about a year, and matters weren’t helped by the Gulf War, but it was brief and it was also not nearly as harsh as the periods of recession of the 70s and 80s.

2001 – 2003:  The 2001 – 2003 Recession was a product of three great forces colliding together, and those being the collapse of the internet boom, corporate scandal on the largest scale yet, and also the events of 9/11.  The stock values of internet businesses hit a peak, and then plummeted when the sheer number of them meant a vast drop in demand, and dozens of companies were exposed as having fraudulently altered their accounting books.  Market confidence plummeted after these events coupled with 9/11.  However, this recession was also mild, marked by slightly higher unemployment for a two year period.

Today’s Recession

The latest recession, according to the National Bureau for Economic Research (NBER), one of the most trusted economic research firms, began in December of 2007, when a decline in the amount of goods produced began as the housing bubble began to shrink.  The collapse of credit firms began when a significant portion of mortgages were foreclosed upon by people that couldn’t possibly pay for a mortgage were lent to by credit lenders, who NOW are the people who need moeny.  The solution that the government has been leaning towards has been to aid those companies that need cash the most, with quick payday loans of sorts to bolster their bottom line so they don’t fail, and to inject the credit market with much needed capital.