The Bull Hunters Guide

Recently in this blog, we’ve addressed the topic of general stock market tips that were intended to help new investors come to terms with some of the myths and rumours that dominate the market, as well as to avoid some typical mistakes that often spell the downfall of first time investors. Having addressed a sufficient amount of those, however, it’s time to move on to some more specific topics. In particular, we’re going to begin to discuss the different strategies that are normally employed for choosing winning stocks and comment on the pros and cons of each one.

Having it all figured out

Everyone out there seems to have it all figured out when it comes to the market. They all think they have the sure-fire formula for picking up on the next big thing and hitting it big all with one well placed investment. The truth is, of course, that no one can accurately predict the future all of the time. If they could, there wouldn’t be any fun in playing the market!

As one plays the market and grows accustomed to its ups and downs, one can’t help but to begin to see patterns. This is just the nature of the phenomenal (and shortcut-loving) human mind at work. Everyone develops their own strategies. Be that as it may, there are certain strategies that have risen to the forefront and tend to be seized upon as “sound strategies” by a majority of individuals.

Fundamental analysis

The first of these, and the most important is the concept of “fundamental analysis”. Simply put, this is, of course, the analysis of the fundamentals of a company. But what exactly does that mean? The main theory here is that stocks tend to have a “real value” which is separate from the nominal value that it is being traded at on the market.

This “real value” is determined by looking at a number of factors, including the projected future cash flows of the company in question (the same thing you would look at when buying a company outright, which in a very real sense, is what stock trading is all about), as well as how fast it will generate the profit it seems to be ready to generate, and what that passage of time means in terms of inflation.

Differing schools of thought

Phew. It’s a lot to think about, and maybe that’s why there’s so many competing schools of thought on how best to determine what the real value of a company is. Those differing schools of thought are what we’re going to be discussing over the next several posts in this blog.

Until then, happy trading!

See you next week for part 2 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks:

The stock market has dropped 2 years worth of gain in the last few months.  One would be tempted to call it a large correction in a Bull Market or the start of a Bear Market.  Either way there are ways to make money in both markets.  I have personally not felt the drop since I’m 100% insured at the level I got in at and have locked away profits along the way.

Trust Me - Said The Smiling Bank Manager

The market has people worried!  It’s dropping and suddenly the “Fed” (Federal Reserve Bank of New York), a non-US Government controlled corporation that makes a living from lending money to it’s biggest customer: The US Government, decides to “issue”  Billions of dollars to “prop” up the economy…  Well, that money never existed in the first place.  Seriously, how is that going to help?  We all know it does, short term, but the long term effect is this:

• 150 Billion Dollars issued to the US economy (or was it 200? Does it really matter?)
• The money isn’t backed by squat! It’s simply issued. It is only regulated.
• Inflation devalues the existing currency in circulation, which will possibly increase interest rates. Oops! Who collects interest rates?
• The US now pays annual interest on that money, presumably from taxes as it surely doesn’t have many other sources of income. But the US Government doesn’t issue money, so how will it ever repay the debt?
• The US National Debt increases (by over 1 Billion Dollars per day). Remember, the money isn’t issued by the government.
• The downward spiral is fueled even more.

Money Is An Illusion

If money can just be issued without any backing (i.e. gold), then what controls the supply and demand?  Who controls whether we have another recession or depression?  Who stands to benefit from a major stock market crash and / or a depression?  Only really the people that issue and charge interest on money.  True value is running out over time, a bit like an option, melting away, like sands through an hour glass.

Are The Bears Here To Stay?

First of all, this doesn’t matter if you are financially educated.  You know what to do, right? I’ve already mentioned how I protect my investments.  There are many things to think about for the future direction of markets. I’ll mention one major one…

The current (42nd) US president has added more national debt to the US than the previous 41 between them.  Last I looked, the deficit was growing by USD700 Billion per year. China and Japan, between them, hold enough US treassury bonds and US cash to crash the US economy back to the stone age.  All military equipment (and the soldiers) around the world would need to be dumped in the sea, WWII style, because there would be no money to ship them home…

Another reason…

US hard assets are being sold off to former enemies (and future wanted enemies), such as Russia, Japan, India and China. Meanwhile US money is largely being invested in soft assets such as technology that ages (and depreciates) very fast, especially during war (or a stock market crash).  Hard assets, such as factories, can still produce product, regardless of the assets value.

Don’t get to carried away when you see the markets take a massive leap upwards next time. It will likely take the opposite direction the next day. Great for options traders! It’s volatile and will move in big jumps, reacting to almost artificial signs. Like the Fed pumping in 150 Billion Dollars of money it doesn’t even have to print. It’s like the Milk Man telling you that you need 4 litres of milk instead of 1 litre that you normally use. Why? No reason… just that you’ll need to pay him more for the extra 3 litres of milk.

Oh dear…

See you in a few days for part 5 of the “Basic Investment Strategies”

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks: