Today is the first day of December and it started with a bang up 249! One might ask: Is this the start of a Santa Clause rally?

Interestingly the Santa Clause rally you may hear talked about this month refers to the week AFTER Christmas and includes the first 2 days in January. Now this is not the "official" definition because there isn't one. But most industry experts agree that it is the week after Christmas and not the whole month that is part of a Santa Clause rally if one takes place.

Most people automatically assume that a Santa Clause rally is for all of December because that makes the most sense. It has been speculated that stocks go up then because people are more optimistic around Christmas and in a stock buying mood. It has also be attributed to people getting money as Christmas presents and/or Christmas bonuses and being more apt to buy stocks rather with that money.

December has historically been one of the best months for the stock market but nothing is ever guaranteed of course. Todays rise of almost 250 points is a great start but things can change fast in this economic environment.

Remember that there is always trouble around the corner and this year we see high tension between North and South Korea as well as some uncertainty in Ireland. We also just have news that 2 million people are about to lose their unemployment benefits so December could be a rocky month for stocks despite today's big gain.


A writer in The Wall Street Journal yesterday called the money individual investors put in the stock market "dumb money". You can read the article here.

The article goes on to say that because earnings are up, optimism is up, and the economic numbers are improving that more and more regular people are putting their money back in the market.

The term "dumb money" in stocks is similar to the term "dead money" in poker tournaments. In a poker tournament, all contestants that are recreational players are thought to be buying in with dead money since they presumably have little to no chance of winning. Only the professionals put in the smart money because they have the best chance to win.

Dumb money in the stock market is similar in that it presumes that individual investors have no idea what they are doing and are incapable of analyzing stocks and making decisions based on fundamentals. It assumes people invest with their hearts because they like certain stocks but they lack any concrete data or reasons to pick those stocks. When individuals pick their own stocks and decide it is time to go back into the market, they are doing it with "dumb money".

Stock analysts and anyone in the industry have smart money because they presumably know what they are doing. It is their "job" to know what they are doing. I assume that if people put their money in mutual funds or any vehicle where a "professional" gets a commission it wouldn't be as dumb of them.

Wall Street has often been portrayed as a very exclusive "club" of young professionals who get paid millions and live the high life. Whenever there is a stock scandal of any kind, politicians spew on and on about how Wall Street needs to be regulated or controlled in some way. Wall Street is viewed as a haughty group by many and using the term "dumb money" doesn't help stop that perception.

Articles like this which propagate the myth that individual investors are dumb seems to me to be a dumb thing to print. Why insult people? Actually, why insult the very people that you are hoping will use your professional money management services? It sure doesn't make me want to run out and hire a financial expert to take my investing to the next level!


Am I the only one that buys stocks only to watch them go down the next couple of days? It seems that 90% of the stocks I buy go down right after I buy them. It's almost as if my buy order signals the stocks to go down! Now I am pretty sure that I must be experiencing selective memory but it does seem that way nevertheless.

If you are going to learn to invest your money in the stock market, one thing you have to be prepared for is that you will have losses. You will make bad stock picks and you will be wrong some of the time. It doesn't matter whether you are picking your own stocks or whether you are taking the advice of a professional, you will have stocks that are losers sooner or later.

The good investor will learn how to minimize those losses by getting out before too much damage is done but he also knows when to buy back in. The good investor will also be able to pick more winners than losers and learn how to negotiate the ups and downs of the market for a lifetime of smart investing.

One way you can lose money is by doing a lot of panic selling. Some investors hate to see their stocks go down and once it seems like that is the way a stock is going, they sell it. Selling isn't always bad of course, but if you are doing it all the time based purely on emotion because you are scared, you will find it very hard to make money in stocks. You should usually be buying and selling stocks based on a stock's fundamentals and the future you see that company having.

2008 was an awful year in stocks and a lot of people lost a lot of money. The same thing could be said right after 9/11 when the market went down fast because of fear and panic. Now, anyone who sold during those times when the market was plummeting did avoid further losses and that is good for some people. But if you kept your money in after 9/11 you got it all back several years later and a lot more.

The same thing will probably be said about the Dow going from 14,000 down to 7,000 in 2008: if you left all your money in you have gotten a lot of it back as of today and will most likely get all of it back, eventually. That is if you have the time to wait.

Panic selling and selling based on fear means that you are most likely afraid to buy back into the market. You are often paralyzed and your money will be out of the market too often. It is a fine line between being out of the market based on what you see happening with the economy or a stock and being out of the market just because you are scared.

When you invest in stocks, you have to be prepared to withstand some losses and be alright with the fact that your stocks may not go up the second you buy them. You also have to know that some of your picks will be bad ones. The good investor will be able to recognize the bad picks based on what is happening with the company or economy that turned the pick from a good one to a bad one.


Is now the time to buy Apple stock? Is it too late or should you buy some in anticipation of it going up more for Christmas? I bet thousands of stock investors are asking themselves that question right now and have been for months.

The time to buy AAPL in 2010 was about a month before the iPad came out on April 3rd. You can see in the chart below how the stock was going sideways until the beginning of March and from that point it went up fast. Some choppy waters during 4 months of uncertainty after that and then straight up again.

If you bought Apple stock before the iPad was released you were betting that it would be a hit. That is how people can make a lot of money in stocks very quickly: by being correct about things in the future. But if you bought AAPL before the iPad release and it was a bomb, you would have lost a lot of money so that is the risk.

Right now people are trying to figure out just how big the iPad is going to be. All the signs show that it will continue to be huge as Dell and other competitors are going to be coming out with their own tablets. Apple has also said that the 2nd generation of the iPad that will be released in 2011 will have a smaller screen.

The question is though, should you buy Apple stock here at it's all time high of 283? Or should you wait and hope to catch it at around 250? Will this Christmas be the Christmas of the iPad and see off the chart sales? If you wait to buy, it may never go down and continue straight up and you will never get in.

These are the questions stock market investors have to ask themselves all the time. Greed plays a big part in people's investing decisions and greed has probably played some part in Apple stock going as high as it has gone so fast. People just don't want to miss out and that means they keep bidding the stock higher!

An analyst at Kaufman Bros. has just come out with his new price target for AAPL of $374 which is almost $100 higher than where it closed today. This high number adds fuel to the fire and makes people want to get in now so they don't miss out. But at $283 there is a lot of room to fall and so the risk is there. If iPads don't sell as well as hoped this Christmas season, the stock may fall rather than go up.

So, it is your decision how much you have to have Apple stock. It is your decision whether you can risk missing out by waiting for it to go lower. And it is your decision whether you could stomach the loss you might have if something goes wrong and the stock stalls. Like all stocks in the market, every individual investor has to make up their own mind how much they are willing to risk and what to risk it on.


The Dow has been going up and down all year and August has been a bad month. Today it closed below 10,000 and if you look at the chart below, you will see we have gone nowhere in over 10 years now. The Dow Jones first closed above 10,000 on March 30, 1999 and here it is August 26, 2010 and we are right back at the same place! That is a long time to have gone nowhere.

Was there support at 10,000 and have we just broken below it? Will tomorrow and the weeks ahead mean the selling will accelerate because we have closed below 10,000? And what exactly is support and resistance in the stock market anyway? These are two terms that you might need a Stock Market For Dummies book to understand.

Support is a technical term that means there is a bottom price where there seems to be more demand than supply. In other words, once a stock (or the Dow) drops to a certain point, there seem to be enough people that rush in to buy because they feel that is a good price. This means that it is difficult for a stock to pass below support because people will usually buy it up. Once it does pass below support, that is a bad sign because it shows that there are few buyers willing to buy.

Resistance in the stock market is just the opposite of support. In the case of resistance, it is a price above which there are more sellers than buyers. If a stock goes up but has trouble passing a certain point, it is because that is the price that people are happy to sell at and take their gains. When a stock rises above resistance it is a very good thing because that demonstrates that demand for the stock is high and there is more demand than supply.

10,000 in the Dow is not a technical support or resistance level: it is just a number. However, it is a number that is special for psychological reasons because 10,000 sounds and looks so much better than anything in the 9,000's. People, whether they are aware of it or not, respond to these psychological stimuli and are more apt to attach importance to them.

The Dow closing below 10,000 on August 26th, 2010 may make people sit up a little more and wonder whether this signals more bad things to come. Or, they may think nothing of it and the market will go back up tomorrow. That is what is so fascinating about stocks: you never know how people are going to react to situations that come up on a daily basis and it is people willingness to part with their investment dollars that drives the stock market up and down.


The stock market is greatly influenced by the general economy and I have always stated that on this blog.

Following up on my last post about is this summer rally real?, we are now seeing that August hasn't been a good month for stocks. I am writing this on 8/20/2010 and as of mid morning the Dow Jones chart for August looks like this:

As you can see, August has seen the Dow go from a high of a little over 10,700 down to just under 10,200. That's around a drop of 5% and bad news is now starting to come out about the economy more regularly.

Just today there was this MSNBC article about more an increasing number of people are having to take hardship money out of their 401K's. That money comes with a 10% penalty and taxes have to be paid on it so anyone that does this REALLY needs the money and is desperate. This is a big indication of just how bad it is out there and how many people are in big trouble financially.

Also just yesterday, the market went down because of a bad jobs report. More jobs were lost in July then economists had predicted and companies look to be pulling back their hiring. I have talked about how I think we are in for bad times ahead as I think all the debt and foolish stimulus bill shenanigans are starting to catch up with us. I think the real unemployment numbers are MUCH HIGHER than the "official numbers" and I think things are going to get worse.

Now, the stock market CAN go up in troubled times but that is rare. The politicians can spin all day long about how things are about to get better or things are really not as bad as they seem but I don't believe them. I THINK THINGS ARE MUCH WORSE THAN THEY SEEM and we are going to be seeing that soon.

It the bad economy news stories continue to come out day after day and week after week, it is going to seriously stop average people from wanting to buy stocks. That will make the market go down and that is where I think it is headed. Reality sooner or later has to catch up with us and the stock market is going to act accordingly which means it is going to go down.

Let's hope I'm wrong but that is the way I see it.


We have had a bit of a summer rally and July has been a good month for stocks. Profits have been good for many companies that announced this 2nd quarter earnings season and so the market has responded accordingly. But will this upward momentum be able to be sustained? Is this summer rally going to continue or die?

The fact is that the economy has not gotten any better. The unemployment rate is still around 9.5% and people are out of work in all demographics. Both personal debt and the countries debt is higher than ever and President Obama keeps throwing money he doesn't have at every problem that crops up. How long can this last and not have an effect on stocks?

The world's economy isn't doing much better as we have seen problems in Greece and elsewhere. Remember, any bad news from other countries now has an immediate affect on our US markets as this is truly a world economy. Our US companies do business everywhere and if something bad happens overseas, our market will go down as well.

The November elections are also right around the corner and there is going to be a lot of media coverage everywhere about that. People are upset and Obama's policies and the economy is going to get a lot of scrutiny which will expose some of the realities that people might have momentarily forgotten. I don't think any of this is going to be good for the stock market and for bolstering people's confidence in a continued rally.

All this adds up to my belief that this summer stock rally of 2010 could be about to be over. This Stock Market For Dummies blog believes we might be in for some tough times ahead and cash might be a good place to be. The stock market may have a little more upside to it but I think we will soon see a lot of ups and downs with perhaps more down days in the immediate future.


One of the things that might be confusing about the stock market for dummies is the closing price for stocks and the after hours price.

The closing price you see in the newspapers is the 4:00 PM price of the stock which is when the market officially closes. However, there is some after hours activity that normal investors like you and I don't get involved in. Usually this activity is not very important to the price of the stock unless some big earnings announcement is made or some big important news story happens after 4:00 PM.

The New York stock exchange, with the proliferation of news and people's access to it, has become a more global entity in recent years. The Internet and ease of making trades from anywhere in the world has contributed to this. Information of all sorts is available all the time to anyone who wants it and this means some changes were made in the after hours of the stock exchange. This means that there is now after hours activity and things going on behind the scenes that "normal" investors can't get involved with unless they know how.

If you have a stock that closes at 100 and then announces great earnings, you will see the price go up on all the tickers online and maybe on television. The next morning, even though the stock closed at 100 the day before, it may open much higher and you will have to buy it at that higher number. The same goes for bad news being announced as stocks can go down in after hours too.

By looking to see if there is any activity in a stock after the market closes, one can usually determine whether anything important has happened to the stock since the close. If you see the price of a stock being quoted higher or lower in after hours by a significant amount, it can often mean they announced great earnings or made some other important announcement like a merger or new product.

The after hours price of a stock is not something you should get too caught up in or worry about in my opinion. After all, you should be buying stocks as an investment and if a small movement in a stock's price after hours is going to influence your decision, then maybe you should find a stock where you expect bigger gains.


Things seem to have stalled here lately in the stock market and we are seeing it go up one day and then right back down the next. You can see what I mean by looking at the 1 month chart of the Dow below:

There are many reasons for this up and down movement but what it probably signals the most is that investors are getting a little nervous. The market has moved up very steadily for about a year now all the way from it's low last year of just under 7,000 to over 11,200 a day or two ago. When the stock market continually goes up and back down for a period of time like it has it can mean that the steam has run out of the rally and investors are really torn at what to do. When people are selling one day, buying the next, and then selling the day after, it can mean there is a lot of confused people out there and a lot of differing opinions.

You can read Jim Jubak's opinion of the matter where he likens it from the mood changing from a half full glass outlook to a glass half empty outlook. Stocks just don't keep going up forever and there is always something around the corner that can stall momentum. The financial shenanigans in Greece seem to have helped make investors very nervous in a market that was already very high.

Why do stocks go up one day and down the next? Well, as I have written about before, the market moves on people's perceptions of what is happening and what they think will happen. It is all about whether people see positive or negative things in the future and right now it looks like there is possibly more negative than positive out there.

The Obama administration has this country in more debt than most people realize and that could become very troublesome down the line. If foreign investors start pulling out of America and don't buy up our ever increasing debt, where will that leave us? No stock market can withstand something like that.

This Stock Market For Dummies blog wonders whether it might be time to start selling a stock or two just in case? Maybe it is time to move some money out of stocks and put it into something safer for a while? The problem is that once you sell and get out it is very difficult to figure out when to buy back in again. However, maybe some safety is a good direction to go right now?


The stock market is just one of many places where you can invest your money. Other investment options people commonly use are bonds, savings accounts, money market accounts, treasury bills, gold, silver, and I am sure there are many more. Every one of those investment vehicles has a different level of risk and which one(s) you use should depend on your individual situation and goals.

Investing in the stock market over the long term has, for many years, been recommended by experts as the place you can get the greatest return. Take note that this is over the long term only as it is agreed that stocks can be very risky if you have a short investment time horizon. We have all seen first hand evidence of this as the market started going down steeply in 2007 and didn't rebound until the beginning of 2009. Many people lost a lot of money during that time and many lives were changed for the worse.

Here in 2010, if you want to invest your money safely with little risk you will not be able to make much more than 1%. Interest rates are very low and they pretty much have nowhere to go but up from here. However, there is no indication when things will begin to change as there is financial turmoil across the country. It is likely that interest rates will remain low all this year.

Bank certificate of deposites (CD's) and treasury bills are the two most common ways to invest the money you have sitting around that you want to earn interest on. Savings accounts and money market accounts also pay interest buy usually a lower percentage. You can also buy bonds and sometimes do better with those.

Gold and silver have done very well in the last dozen years or so. People buy these metals for different reasons: some buy them as investments and others buy them as a form of insurance. Both gold and silver are thought to be hedges against uncertainty and thus a form of insurance during difficult times such as we are having now. People who buy them with insurance in mind do not care too much whether they go up in value and are hoping they can just retain their value. Gold and silver have never gone to zero in value and most likely never will.

Other people like to buy these metals for investments in hopes that they will keep going up in value. Anyone who has invested in either silver or gold in the last 5 years have done very well as they are both near their historical highs.

The stock market is the place where most people invest their money with the hopes of making the most in return. The stock market has historically outperformed all other forms of investments when looked at on a long term chart. However, you should never invest money in stocks that you know you will need soon.

You can make money in the stock market by buying stocks of individual companies yourself through a stock broker or you can buy baskets of stocks known as funds that are managed by a professional. Choosing which stocks to buy and then figuring out when to sell them is something that can take a lifetime to master. For this reason, many people favor and recommend you buy funds so that someone who is qualified can make the decisions. There is a fee for most funds though, and that is another expense that you have take into account.

You will owe taxes on any money you make from any of your investments. Whether you make interest income, dividend income, or profit from the sale of stocks you will owe taxes on that money to the United States government. If you make in the thousands of dollars this may require you to send in money on a quarterly basis otherwise you will incur late charges that can be quite steep. The US governement (and all governments) always want their share of any money you make.

If you feel you are in the "investing for dummies" category, note that learning how to manage money is not something that is learned overnight. It takes time to learn what all your options are and what risks you feel comfortable taking. It is important that you take only the amount of risk that allows you to sleep well at night. Your money is hard earned and if you don't feel comfortable taking risks to try to get bigger returns, that is OK. Investing is a personal issue and there is no formula that is right for everyone.


8/11/2010 Update: While I think penny stocks are risky, they continue to be of interest to many investors. I have found this Penny Stocks VIP newsletter that is 100% FREE to sign up for. All you have to do is enter your email and then click on the "confirm email" link when they email you. You will then be set up to receive their free VIP newsletter.


For years, people have been fascinated with penny stocks and the idea of making money by investing in them. One reason is that because they are so low in price, anyone can afford them. But are penny stocks a real investment opportunity you should be looking at or is it one you should never get involved with?

There are many definitions of what constitutes a penny stock. Some people consider every stock that is under $3.00 to be one while others make the cutoff at $1.00. No matter what you deem to be a "penny stock" the important thing is that it costs very little for a reason.

Some people believe that all stocks start out as penny stocks and grow from there. They might get this ideas because of the stats on some stocks which include all the different times a stock has split. Big stocks like Microsoft may have split so many times that after that has been factored in, it looks like the stock was originally offered for just pennies or a few dollars. Seasoned investors know, however, that Microsft and other high fliers like it were never offered for such low prices and the opening cost was much higher. The adjusted stock price is something you should understand before you make incorrect conclusions.

There are several things that make penny stocks much riskier than other higher priced stocks. One of the things is that in most cases, stocks that only cost pennies or a dollar or two are that way for a reason. When you get down to such low valuations, there is usually a reason why they don't cost more and that reason is never a good one. This makes most penny stocks very risky to buy but they continue to get interest from beginners and certain sectors of the market because of the "potential" upside.

Something that is the case with many penny stocks is a lack of history and information. They are often listed on "pink sheets" and anything there is not required to file with the SEC. This means you will be buying penny stocks without the usual scrutinization and regulation that is associated with regular stocks on the NYSE and Nasdaq. Of course even with regulation, things can go very wrong with any stock you buy as evidenced in recent years by stocks such as Enron that have gone bankrupt and lost investors millions. However, buying penny stocks can mean taking an unnecessary risk on something you know very little about. That is truly the stock market for dummies you might say.

Another problem with buying penny stocks for beginners is that with any stock priced so low, there is a lack of liquidity. This means that you may have trouble selling your stock because there are not enough buyers. Penny stocks are something that you should really understand before you get into them and you should only do it with money you have to lose. Too often, young investors who don't have much money choose to take shots at penny stocks just because they are cheap and they hope to find the next Dell or Google and end up losing their money.