Finances: US market set to fall again?

Business Money
1

I don’t have a clue about this guy’s theory:
biz.yahoo.com/tm/040121/11162_2.html

However, another one I read a few weeks ago makes a lot of sense: that the U.S. economy is so dependent on oil that a spike in oil prices leads to a drop in the market.

The research said that a hike of 5% is enough to make it worthwhile to dump stocks and buy bonds. Well, in the last few weeks, retail gasoline has gone from $1.39 to $1.62 – a 16% hike – and is expected to stay high due to the cold winter and weakening dollar.

I’m thinking about buying some puts in the morning on broader stocks – maybe FRE, which has had a hell of a good run-up lately (I’m up 20% on it) – and calls on gold stocks, which should benefit still more from the sliding dollar (lost 12%, bought at exactly the wrong moment).

2

Woohoo! I just made 60% on my FRE put options today! FRE dropped like a rock after the Fed announced it would have a tightening bias on interest rates. I thought I’d blown it all on Monday when it rose a buck, but today I am vindicated!

Hey kids, we eat tonight! :moo:

Ok, anyone else got some hot stock tips?? :mrgreen:

3

Jan. 28 ?The Federal Reserve left short-term interest rates at just 1 percent today, the lowest level since 1958, but it jolted markets by retreating from its open-ended pledge to keep rates low for "a considerable period.’

Though subtle, the Fed’s change in language after its two-day policy meeting caught economists by surprise and it offered the clearest signal yet that the era of rock-bottom interest rates may be drawing to an end. The Fed’s announcement shook up the financial markets. Prices of Treasury securities dropped sharply.
nytimes.com/2004/01/28/busin … ED.html?hp

Bad news to start the day, but I expect 2004 to be a good year for the market, as was 2003: 9/11, major fears of terrorism and Bush’s various wars are hopefully behind us for the most part and technology seems to be on the rebound after its years of decline. I lost a fair amount yesterday but am not selling anything. Need to get back to where I was in 2000.

My best stock pick lately has been Noven Pharmaceuticals (NOVN), a small company that make transdermal pharmaceutical skin patches, like smokers use to quit. Another one of their big products is hormonal patches used by post menapausal women. Below is their chart.

I bought in May 2003 at about 12, right after bad news came out that a study had revealed that the hormonal supplements might be linked to cancer and the stock plunged. I figured it was just one study – maybe it was wrong. Besides, it’s a small company that has done well before and has various other products it can/will develop. So far my gamble has been good. It’s up 69% from when I bought it. I intend to sell when it’s up 100%. I recommend that you buy lots of NOVN ( :wink: ).

4

We have reentered a new bull market. Buy on the dips and sell on the spikes. The correlation between interest rates and the market is also a good one, but hard to do short-term trading on.

The oil one has a lot of going for it, but the way it works is that higher oil prices lead to higher inflation, which leads to higher nominal interest rates, which then leads to lower equities markets.

As the world is awash in oil and the Iraqi supply should come on line sooner or later, I expect oil to fall, once the temporary shortages in the consumer countries are behind us this spring.

5

My best Taiwan stock has been Hon Hai, which I bought after they distributed dividends this spring and the price dropped to 125, which is still a very expensive stock, but Hon Hai’s a good company and that seemed like a fair price for them. Its now at 155 and I’m hoping to sell at 160 in the next week or two.

But, where to put the money next? I haven’t figured that out yet. Maybe Taiwan’s market will drop significantly around election time and I’ll get back into Hon Hai or another local stock then. What do you think Holger?

6

I left the financial sweatshop for an industry sweatshop mid-June 2003, so my bets are not current.

However, I would get out before election, say when the market or the stock shows early sign of flattening out, and then get in once a bottom has been formed on the charts. (IE the stocks are getting out of a downtrend). However please note that I used to be a chartist. This investment method only works with the 5-10 biggest stocks here, if any. (Hon Hai should be in top 5).

If you want to trade taiwan tech, then find the semiconductor book to bill ratio, and the bookings ratio (I prefer the latter) and correlate it. You will then have a good and basic idea of how to trade those stocks with a decent measure of downside protection. Disclaimer: Investing in stocks is inherently risky etc.

7

The Taiwan stock market should be a good bet the next couple of years. I would buy in when it hits a low just before the referendum. After the election/referendum things should look good for 2004.

8

MT watch that shock. It might about to break down on the charts. Small volatile, if it falls out of the uptrend, get out.

9

Buy TTF(thai fund) and IF(Indonesia fund) on NYSE. After bird flu ends you’ll get nice rewards on these 2.

10

Does anyone have opinions on UT Starcom (Nas:UTSI)? I bought into it last summer, and it has been a rollercoaster ride. While I think it has excellent prospects, I am also severely irked that management diluted shares by about 10% a few weeks ago through a private placement (funds from which are going to be used for “general corporate purposes”).

I am thinking about buying more, but OTOH I am feeling wary of a company that would cut into its shareholders’ equity for no specific purpose.

11

Noven, which our friend MT

12

I don’t think so Holger. Since Jan 24 NOVN dropped from 20.5 to 18.7, but it appears to have started a rebound in the second half of last week. Likewise, the NASDAQ dropped from 2150 to 2010 at Jan 24 and bounced back a little late last week. Same for the DJIA which fell from 10700 to 10500 in the same period and is also bouncing back.

I’m not sure what happened on Jan 24 (Greenspan’s disappointing rate statement was on Jan 28), but apparently something affected all the markets, but I am still confident that the markets will do reasonably well this year, so I’m not selling.

What about you Holger? You don’t like NOVN? Where would you invest right now? Can you name a stock that will perform better?

MaPo, I wouldn’t say UTSI has been a roller coaster ride any more than most of the NASDAQ. Apparently the company makes broadband equipment for wireless communications, what is bound to be a good market in the future. Following its IPO in 1999, it jumped from about 50 to about 90, then dropping down to 20 in 2000 (like most other tech stocks). Since 2000 it seems to be steadily regaining its loss (like most other tech stocks). I don’t know enough about the company, but it looks worthy of consideration to me. But I’m no expert. Just playin the game.

By the way, we should’ve started a poll prior to the new year for people to wager guanxi, or whatever, on stock picks for 2004.

13

I’ve been away from it for awhile but I was mighty surprised by a wise friend’s statements tonight that the black gambling market is all on a pan-blue victory. Perhaps I’d put some money into that. Let the odds up and up on threats of war crapperry etc and come what mays.

Whatever. I’m off to HK and I wish nothing but peace and prosperity to this fair isle that houses my darlling wife. Till my return.

HG

14

I suspect the US market is about to start that counter intuitive behaviour of rallying on poor employment figures.

15

MT, your biotech play is at the right side of a spike, which is where you would run for your life, as the supply of bigger fools has run well and truly out. I did this for a living, remember?

I would say that it’s going to 14, perhaps even to 10. The good news are out, and you have bought into a small volatile stock. Once the previous good news are known by you, you can safely assume that they are known by everybody and that they are in the price.

16

I say, let the American dollar keep dropping. It’ll make my deposits home go further. Bush has been a boon to the American expat economy…or at least to those who have needed to send money home.

If Bush gets another 4 years, then I should have my student loans paid off in no time.

:smiling_imp:

17

Check that out Mr. He -

Good 4th quarter report from NOVN and lots of licensing deals announced (the company makes transdermal patches and, while their hormonal patches suffered a setback due to adverse test results, they also make patches for pain relief and other purposes and have signed deals with P&G and others) resulted in $3.59 gain yesterday (over 20 percent!).

I placed an order to sell half at 22 and half at 24, which would yield me something like 95 percent gain. But, we’ll see . . .

18

You were luckier than you deserved.

Sell now and bless your luck.

All the good news are out, and it will go down again - it’s small and volatile, therefore a hard stock to call for a retail investor.

19

Gas just hit US$1.75/gallon for even the cheapest 10%-alc swill. Recession, anyone?

I’m looking for decent mutual funds with Russian / Eastern European / Chinese / Indian holdings. Any suggestions?

20

Maybe. Or maybe I had a good plan, made calculated investment decisions based on prior research and obtained the desired result. I bought NOVN about a year ago at about 12 and sold all my shares on Friday half at 22 and half at 24, for a 92 percent gain. I’ve made lots of stupid investment decisions (notably buying CISCO near the top based solely on all the enthusiasm and without doing my homework), but this investment – my best ever – was deliberate (I think I first saw NOVN recommended at Motley Fools, but I then did my research).

You said I shouldn’t have bought NOVN because it’s a small volatile stock. That’s exactly why I bought it. I’ve got shares of HonHai, which is a good company, but its shares are trading at about 150. Because the stock is so costly it will have to go up a LOT in order to amount to a nice percentage gain. On the other hand, a cheap stock needn’t rise so much to gain a good percentage. Because NOVN was trading at 12, a gain of 6 would be a 50% gain. That seemed plausible although it would be extremely unlikely with a costly stock such as HonHai. Based on its past price, though, I was shooting for a 100% gain.

Moreover, NOVN is in the medical product industry, a profitable industry. And as you pointed out, it is a volatile stock (news could result in sudden large changes in price). I know past performance is no guarantee of future performance, but I like looking at past charts. I noticed that NOVN traded at about 10 until year 2000, when it shot up above 20, then back to 10, then up to 60, down to 30, up to 40, etc.

I didn’t know what NOVN was worth, but I did know it had bounced up and down a lot (some stocks don’t – some are more restrained and that’s not what I wanted). So I decided to buy after a downward plunge and sell after it bounced back. My opportunity came when a study was published possibly linking cancer to hormonal supplement treatment for women. I figured it’s just one study maybe wrong and NOVN makes various other products. They’ve got a whole system set up for manufacturing, marketing, distributing pharmaceutical transdermal patches. If one product doesn’t work they’re all set to focus on others. So I bought within a day or two of that bad news, when the stock was in a trough.

Ever since then it’s been steadily rising, as people forget about that old report and get excited again about this exciting company that has already demonstrated its potential. I was a little nervous a couple of weeks ago as it dipped a bit, but on Friday they announced good news, it gained over 20 percent in one day and I sold.

Sure there was some luck involved, but there’s a saying that “luck is when preparation meets opportunity.” I prepared for the opportunity in this case. I can’t guarantee my next pick will be so successful, but I’ve definitely learned that the biggest mistake one can make in investing is to simply buy crap based on all the hype. Make sure you know what you are buying, do your research in advance and don’t believe everything you read (most advice regarding specific investments is outdated and/or biased).