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Weekly Market Review ~ Friday, 08/31/12

  • August 31, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Weekly Market Review

Several mergers, including Hertz Rental buyout of Dollar Thrifty failed to excite investors, as prices were largely stagnant on Monday. The markets were also unaffected by Apple’s $1 billion lawsuit settlement over Samsung concerning a patent dispute. On Tuesday the major indexes once again finished mixed. A rise in June US home prices was offset by a drop in consumer confidence. A revised upward estimate on the second quarter GDP and a report outlining an increase in July US home sales failed to spark stocks on Wednesday, as small deviations from the unchanged mark have become much more common than in the recent turbulent past. The relative calmness of the market was shattered on Thursday with the Dow experiencing a 100 point drop. The downturn was triggered by a drop in a Eurozone economic sentiment reading. On Friday, stocks gained back most of their previous day’s losses when Fed Chair Bernanke provided yet another assurance that the central bank will step into provide support if the economy begins to head south.
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The Investor Sentiment Wheel

  • August 30, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior


Weekly Market Review ~ Friday, 08/24/2012

  • August 24, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Weekly Market Review

It was a listless Monday with the major indexes finishing with a very slight loss, as there was little news to propel the markets in either direction. On Tuesday, early day gains could not be maintained, and fell further when it became apparent that the S&P and Dow would not be setting new four year highs. The Dow had its third straight losing session on Wednesday. The loss was mitigated, however, by increased optimism following the release of the Fed minutes stating that several Fed members are leaning towards more stimulus if the economy does not pick up soon. On Thursday, selling accelerated when it became clear that not all the Fed members favor stimulus given that the US economy has maintained modest growth. The Dow finally finished with a gain on Friday, and a sizeable one at that, as the 100 point gain followed a report that Fed Chair Bernanke re-iterated a pledge to take action if more stimulus is needed.
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Facebook: You may have passed, but mutual funds loaded up!

  • August 23, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Mutual Funds, Seeking Prudent Advice

The Facebook stock offering has been an unqualified debacle.  Many investors got lured into the hype, while others smartly passed.  The stock price is down nearly 50% from the initial offering price as of yesterday’s close at $19.44.  By the way, the S&P 500 has gained more than 9% during the same time period.

What’s a bit more surprising is how some mutual funds dove in without abandon.  For example, Morgan Stanley funds took big bets on Facebook.  Eight of their funds have >5% of their assets invested in Facebook.

In June, a commentary on Morgan Stanley’s fund website reported that Facebook and other tech stocks were “the leading detractor in the portfolio this quarter,” discounting the decline in Facebook shares “to post-IPO volatility.”


Weekly Market Review ~ Friday, 08/17/12

  • August 17, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Weekly Market Review

A disappointing Japanese GDP report broke the markets recent winning streak on Monday, although volume and volatility were low. A positive US retail sales report and several strong earnings report failed to ignite stocks on Tuesday, as the major indexes stayed near the unchanged mark. Stocks were once again listless on Wednesday with little change, perhaps a relief to investors remembering the mayhem the stock market experienced a year previous in August 2011. On Thursday stocks broke out of their doldrums with a solid gain that pushed the major indexes close to multi-year highs. Small gains pushed the Dow and S&P even closer to multi-year highs on Friday.
[table id=76 /]


Hall of Fame Coach Jim Donnan Charged With Ponzi Scheme

  • August 16, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Scams & Schemes

The SEC hit college football Hall of Fame coach Jim Donnan with fraud charges on Thursday, August 16, 2012.  The former University of George football coach is accused of helping run an $80 million Ponzi scheme that victimized other coaches and former players.

Working with business partner Gregory Crabtree, Donnan convinced 100 investors that their investment company was a wholesale liquidation business that would earn 50% to 380% returns by purchasing “leftover” merchandise from retailers and selling them to discount retailers.  In reality, they spent only $12 million of the investors’ capital and used the remainder of the $80 million to pay fake returns to early investors.

According to William Hicks, associate director of the SEC, “Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk. But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out.”

Donnan used his celebrity status to solicit victims.  He allegedly told a pro football player, “Your Daddy is going to take care of you” … “if you weren’t my son, I wouldn’t be doing this for you.” This player subsequently invested $800,000.

This is a classic affinity scam where the alleged scammer victimizes friends and acquaintances in his professional network.  Promising very high returns with nearly no risk is a big red flag.


Weekly Market Review ~ Friday, 08/10/12

  • August 10, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Weekly Market Review

The Dow broke a nine-week Monday losing streak to finish in the black for the first time since late May on the first day of the week, as concern over European debt has diminished for the moment. On Tuesday the S&P 500 finished above the 1400 mark for the first time in three months, as investors were heartened by the suggestion from a Fed official that the Fed should instigate a bond-buying program to stimulate the economy. The Dow followed suit on Wednesday by setting its own three month high. On Thursday the major indexes finished near the unchanged mark, as US initial jobless claims were largely in line with expectations. Stocks finished up on Friday once again. While the gain was minimal, continued optimism over world central bank action is forthcoming continue to push the major indexes to multi-month highs.
[table id=75 /]


Weekly Market Review ~ Friday, 08/03/12

  • August 3, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Weekly Market Review

Despite a slow Monday morning start following a disappointing report that US manufacturing had dipped in June, stocks were able to rebound and finish near the unchanged mark on increased speculation that global central bank action is inevitable. On Tuesday the month of July ended on a down note as moderate losses were had by the major indexes as investors held back on buying before hearing the Fed’s upcoming policy-setting statement. Stocks kicked off the month of August on Wednesday with a modest loss when Fed Chair Ben Bernanke failed to unveil any unexpected statement regarding the state of the US economy. On Thursday, the lack of a coherent plan from European Central Bank Chair Draghi sent stocks lower once again. All of the week’s woes were forgotten on Friday after a US payrolls report revealed that 163,000 new jobs were created in July, much better than expected. The Dow rose over 200 points, finishing the week at a three month high.
[table id=74 /]


How Does the Stock Market Work?

  • August 2, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

Real Life Adventures by Gary Wise and Lance Aldrich

This cartoon highlights how your behavior as an investor strongly influences your success.  Investor behaviors that likely contribute to reducing your returns include:

  • The tendency for investors to sell underperforming investments and then replace them with others that performed well; a pattern of “buying high,” and “selling low.”
  • Emotionally driven decisions that may cause trading at inopportune times.
  • Investment activity motivated by media hype, financial news networks, or televised “experts.”
  • Poor market timing decisions resulting in missed opportunities.

Avoid being the subject of this cartoon!  Great investors throughout history have understood that building long-term wealth requires the ability to control one’s emotions and avoid self-destructive investor behavior.


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