Is Dow 18,000 Just A Matter Of Time?

If you've been waiting for a significant pullback in the market to buy stocks, you have been waiting a long time. The market continues to defy gravity and that quick 1000 point drop we had at the end of September into the beginning of October seems to be long forgotten. Its amazing how stocks have kept going up since 2009, no matter how much uncertainty there was/is in the world.

For all those years, it has been quite easy to make money in stocks as so many of them have gone up. Tossing darts at a stock board really would have worked! But that can't last forever.

I think 18,000 on the Dow will happen, if not this year then real early next year. I just have the feeling we will get there. But after that, the hurdle over 18,000 might take a while to get over.

Take a look at the Dow chart below and see that every new 1,000 point hurdle is taking longer and longer to get over. 13,000 to 14,000 was real quick. 14,000 to 15,000 took a bit longer but still took very little time. 15,000 to 16,000 took more than double the time of the other two and 16,000 to 17,000 took even longer than that.

Depending how the elections go November on 4th, Dow 18,000 will probably come quicker if Republicans win both the Senate and House. That is because they are seen as being friendlier to business and lower taxes. But no matter who wins, I think Dow 18, 000 WILL happen within the next 4 months.

After that though, the euphoria may really wear off as investors decide to take gains and wait to see what the new year has planned. Nothing in world seems to be going to smoothly right now and fear about the economy (in many countries) as well as terrorism and wars may finally get the better of investors's unbridled optimism.

Disclaimer: Please remember, this is just my opinion and I hope I'm wrong and the markets continue to go up. But before you buy stocks or open any broker accounts, make sure you consult a financial planner or at least do your own homework so that you understand what you are doing.

THIS STOCK CHART SCARES ME

It's hard to look at the chart below and not gets scared. In fact, its hard not to log into my broker account and sell everything, or at least put a stop loss on each stock.

But the fact is that I could have made that same statement for the last one or two years, and been wrong every time. Look how much higher the stock market has gone since it passed its all time high which was close to the top of those first two mountains on the chart. 

There is no doubt that we are uncharted waters as the market has gone almost straight up since 2009. The difficult part for me has been putting money into stocks along the way as I keep looking at charts like this one and scaring myself into non-action. I keep waiting for a meaningful pullback and the most we can get is 3% to 5% which hardly counts. 

I feel like a dummy as I have had too much money on the sidelines, determined not to get hurt too badly if another crash comes along. And in my conservatism, I have cost myself so much money I don't want to think about it. The danger is that I, and other investors, will throw in the towel and start buying again as we try to play catch up. And THAT will be when the market crashes. 

This goes to show that I just can't time the market and when I try, I usually fail. I'm pretty sure you are no different. The best way to go about investing your money is to put it into stocks/the market on a consistent basis and for the long haul whenever possible. That way you buy in at the highs, lows, and in between. 

StockTwits: A Time Waster Or Can It Be Useful?

StockTwits is an incredibly addictive platform for anyone who likes social media and the stock market. For a lack of a better description, it is Twitter for stocks.

When I first signed up I did so out of curiosity and expected to spend an hour or two at most before I got bored and abandoned it forever. I don't have a Facebook page and have little interest in social media so I figured my time on StockTwits would be short.

Well, I'm finding I use it every weekday the market is open and I want to explain what I use it for.

First of all, you can waste a tremendous amount of time on StockTwits and most people do. Just like Twitter, it is a place where anyone can post anything and it has a character limit of 140. You can link to pictures, articles, blogs or just about anything you want to as long as you stay within that 140 character limit.

Most people only post meaningless chatter about the stocks they own or follow. So, if you go there just to read the "Twits" and shoot the shit, you can waste as much time as you like and maybe have some fun if that is your sort of thing.

But I use it to find out what stocks have the most action and have breaking news and I find that on the top part of the StockTwits screen where they have the trending stocks. The stocks that are "trending" have the most chatter and there is usually a reason for that so I can just quickly look at the home screen to see what stocks are hot at the moment.

You can see in the screenshot above that Amazon is listed first and the stock is getting hit hard after a bad earnings report. Fourth on the list is Baidu which is trending for the opposite reason: they just released a good earnings report and the stock is up nicely.

Overall, I believe StockTwits is a colossal waste of time and I try to spend as little time on it as possible. It is a meeting place for like minded stock market junkies who mostly post meaningless opinions. 

However, I do use it to as a quick way to see what stocks have breaking news and/or are being talked about the most and I don't know anywhere else you can get that kind of instant information on the Net.

USING CHARTS TO BUY STOCKS - ITS HARD!

Gary B. Smith is on Fox Business News as a frequent guest analyst and he also is a regular commentator on a show called "Bulls & Bears". His nickname is "The Chartman" because his expertise is picking stocks by just looking at their charts. Thats it....he doesn't care what a company does or anything else about it....he only cares about its chart.

Since I have never picked a stock solely on the basis of what the chart looks like, I can't personally vouch for whether a person can really make money over the long term that way. But one thing I do know, if you invest only on the basis of a stock's chart, you will be doing a lot of short term trading and you better keep abreast of what is happening on a daily basis because one break in the chart's pattern means you need to sell or buy.

Can buying and selling stocks purely based on their charts really be called investing?  I guess it can because the definition of the word mentions only that you put money to use with the expectation of making a profit. But if charts are the only way you pick stocks, it sure seems like you need to devote a tremendous amount of time to the endeavor because it isn't easy. Charts have an endless number of patterns and interpretations and mastering a winning strategy seems to be out of reach for most investors.

Interestingly, in Gary's latest article, he talks about investing for his daughter's future. I don't know what their ages are and he doesn't say but based on his age, they are perhaps between 10 and 18 years old. Does he talk about teaching them the charting process and daily grind of chart analysis? Nope. Seems like he prefers the old long term buy and hold a solid stock method for his daughters who have many years ahead of them before retirement.

He picks two stocks (ExxonMobile and Waste Management) because they presumably will stand the test of time and be around for the next 50 years. Putting stocks you know are solid picks in your portfolio seems to be what he would suggest for own daughters. That has to make you wonder about the validity and difficulty of his preferred investing style of chart analysis.

Again, I know some people are able to make money in the stock market just by analyzing charts. However, for the vast majority of investors, that seems like something that is just not feasible because of the complexity and the high number of hours it would require to learn. For most people, it is best just to pick good companies, buy their stocks, and watch them grow over the long term.

WHY STOCK BUYBACKS CAN EITHER BE GOOD OR BAD

Stock buybacks are when a company spends its excess capital to buy back shares of its own stock. Investors generally consider buybacks a good thing because it can signal that a company is confident in its future and sees no better investment than itself.

Publicly held companies have these choices when it comes to spending profits:

1) Offer dividends to investors - dividends are a way to directly funnel profits to investors.
2) Do a stock buy back - stock buybacks can indirectly make investors money because the stock price might go up as the company buys shares.
3) Use the money for research and development - using the money for R&D is an investment in the future and will hopefully pay off at a future time.
4) Buy other smaller companies - buying another company is something that can make the buying company stronger by adding new technology and new products.
5) Sit on the money and invest it - keeping the money and investing it is something that might add security to the company as they build savings that could be used to keep the company afloat in tough times or be used in any of the above ways later.

Stock buybacks have become popular in recent years (you can get a current list of announced buybacks here) and the biggest one on record is Apple's buyback. Anything Apple does gets a ridiculous amount of scrutiny so there are a lot of opinions rattling around the Web. But with all those opinions you can sift through and sometimes find the truth and that truth is that a buy back can turn out to be a good thing or a bad thing.

Stock Buybacks Can Be Good

When a company spends its own money buying its own stock, it might show that management is confident in the future (after all they know best whats in store in their pipeline of products). They feel that there is no better investment out their than their own stock so that is a vote of confidence that many investors like. 

Also, when a company does do a buyback, that means there will be shares bought and that will/should/can help drive up the price of the stock. This will of course depend on the number of sellers but having guaranteed buyers is a good thing. So, investors may profit from a buyback by seeing their shares appreciate in value.

But, Stock Buybacks Can Also Be Bad Because...

When a company buys back any amount of its shares on the open market, they are paying the same price you or I would if we bought the stock. So if they pay a hypothetical average price of $100 per share and after they do that the stock goes down and continues going down, it sure looks like they paid too high a price. That is bad. Just like investors can buy stocks at too high a price and get burned, so can companies who buy back their own stock. Figuring out what the correct value of their company is and making sure they pay a price that is lower than that is key for management.

Another reason a stock buyback could be interpreted to be a bad thing is if investors decide a company is doing a buyback because they are out of ideas for better ways to use the cash. Remember, investors are always looking for businesses that are growing so they can make more and more money. That is why R&D and M&A are often considered good ways to spend money - it shows that company management is thinking forward and trying to grow the business. Just buying back their own stock could indicate a lack of new direction which might in some instances be viewed by investors as bad.

DUMB STOCK INVESTORS BUY THE WRONG "OCULUS" STOCK AND LOSE MONEY

Greed and stupidity. You don't want your stock picks to fall into either category!

Yesterday it was announced that FaceBook bought a company called Oculus Rift for $2 billion dollars. While the investing world was busy debating whether that was a smart move, some investors were busy Wednesday morning trying to make a quick buck by buying what they thought was that same Oculus company. What they really bought though, were stocks of other companies totally unrelated and in doing so they lost money, as they should.

First of all, it is and was impossible to buy stock in Oculus Rift because it not a public company and there are no shares to buy! So, anyone who tried to make money this morning by purchasing any stock with the "Oculus" name was uninformed and really shouldn't be investing in stocks until they educate themselves.

Oculus VisionTech Inc. (OVTZ) is one of the companies that saw their stock soar just because they had the "Oculus" word in their name. The stock opened at 18 cents a share and went all the way up to over 35 cents a share before people realized they had made a mistake. The stock even had to be halted for over an hour and as I write this the stock now sits at just 14 cents a share which is back down to where it should be. People who bought OVTZ at the frenzied opening lost a lot!

Oculus Innovative Sciences, Inc. (OCLS) is the other stock that saw some quick uniformed buying before coming back to earth. The stock closed the night before at $4.54 and got all the way up to $5.20 in early trading before the error was noticed. That is about an 8% pop all because people were buying the wrong stock.

Its absolutely crazy that "investors" (and I say that word lightly) can be so dumb that they buy stock in the wrong company. This kind of thing happens because they want to capitalize on a news event and they hope to make a quick profit. But making a quick score in stocks is NOT the way to invest your money and these people ended up losing money instead. 

FOR MOST AMERICANS, OBAMA'S MyRA SAVINGS PLAN IS A BAD DEAL

President Obama wants you to start saving money. To do that he has proposed something called "MyRA" which stands for My IRA and it is something that every American should AVOID!

Why? Because it is a bad deal plain and simple. If you start a MyRA account you will be loaning your money to the government for pennies on the dollar. All you will get are the lowest interest rates which right now amount to almost nothing.

Obama is trying to get people to start saving and that is a good thing. He is targeting the uneducated and the undisciplined segments of our society and trying to get them to save at least something every week or every paycheck. But in return.....well, he is giving them very little.

You Need Money In The Stock Market

In order for your savings to ever amount to anything, you should have at least some of your money in the stock market. Interest rates are so low that they pay you next to nothing and the stock market has, over time, proven to be the best place for a growing retirement account. If you want any decent return on your money, you have to put some of it in stocks.

MyRA doesn't give you that option.

All you get with MyRA is a piddly savings account type return which will get you nowhere. You will really be buying some of America's debt and you can read more about that here. And you won't be getting any tax benefits from it either as you have to put in after tax dollars. The interest you earn is tax free but who cares as that will be so small an amount that it won't matter much.

The most important part is though, that you can't put a dime of your MyRA into stocks. This will only continue the unfortunate fact that poorer people stay poor as they never benefit at all from a rising stock market. Obama's MyRA does nothing to change that.