Archive for January, 2009


Make Millions in the Penny Stock Market

Filed Under: Investment Strategy, Technical Analysis by Bill — 4 Comments
January 10, 2009

If you’ve read any of my other postings you’re probably going “Ha, now he’ll tell us how it’s not possible!” Well, “Ha, it is possible” I haven’t personally done it, but it’s no different than any other way of making money in the markets.  You trade cash for stocks you find more valuable and trade stocks for cash when you find them less valuable.  However, there are some major differences .

What is the Penny Stock Market?

When I speak of penny stocks or penny shares I’m referring to any stock traded outside the major exchanges like the NASDAQ, NYSE, AMEX or other large national exchanges.  Some of these small exchanges often referred to as “over the counter” are pink sheets and OTCBB.  These stocks generally have low, or at least sporadic, volume; their market capitalization is small – often less than $100 million; or  their per share prices is less than $1.

How is Trading in Penny Shares Different than Regular Stocks?

The biggest differences the trader needs to know are:

  • Larger Spread - The bid/ask price on penny stocks tend to be a much larger percentage than on regular stocks. This is due to the low volume and minimum variation between prices. 5 cents of a $10 stock is only 0.5% versus 5% of a $1 stock.
  • More Easily Manipulated – You may have worked a good system out, unfortunately unscrupulous people can more easily manipulated a small cap stock. With low volume a small surge of money can change the price quickly without reason – or even clever marketing schemes.
  • More Volatility – The above reasons create a wilder ride that may make it difficult to find a method that is consistent. It also just may be too emotionally hard to maintain your system.

For the investor the lack of media coverage and government regulation makes it difficult to trust information you come across. Without meaningful information (inside knowledge) I would strongly suggest fundamental investors to stay clear of the penny stock market.

For the trader who still thinks his millions are in the penny stock market I say “Go for it!” However, please spend your time in the trenches learning on regular stocks, options, and commodities first. Feel free to paper trade the pink sheets on the side, but the knowledge you’ll gain from the regular markets first will greatly increase your chance at the 100% per week system! Don’t feel tempted to jump on one of those purchased systems unless you designed it, and definitely don’t take your chances with a random email or forum posting.

The penny stocks are the wild west and I just want you to have your six shooter ready before you venture out.

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Bailout Bazooka

Filed Under: Personal Finance by Bill — 3 Comments
January 6, 2009

The number 1 trillion dollars has been throw around for the total cost of Obama’s economic stimulus plan.  I have a hard time wrapping my mind around the size of 1 trillion dollars so I want to try to break it down.  No, I’m not going to relate it to miles to the moon or or how long it would take you to that high at one number a second (31,710 years), but it what it could mean to the tax payer.

First, to finance the Trillion dollars at the current 10 Year AAA Banking and Finance rate of 5.8% a 50 year loan payment would be 61.4 billion per year.  As of 2007 there were 138 million tax payers in the Unites States leaving a cost of $445 per year for every tax payer for a couple of generations.

Hold on you say, the rich pay most of the taxes (the top 0.1% of income pay 17.4% of all federal taxes) and we’re only concerned about the impact of us normal folks.  Fair enough.  In 2006 the bottom 50% of income earners paid 3.3% of the federal taxes.  So keeping things proportionate the bottom 50% would pay 2.0 billion dollars per year or about $30 per year.  $30 per year doesn’t sound too bad, unfortunately that’s for those making less than $30,000 per year.  Odds are you make more than that.  The top 5% making more than $137,000 per year pay 57.1% of taxes – this would cost $5,081 per year per taxpayer.  Those of us in the middle between $30,000 and $137,000 per year (middle class) would pay $392 per year.  Obama and Biden say they are pushing for the middle class, do you feel you’ll get your $392 worth out of the bailout.  Not just the first year, but every year for 50 years?

Here’s a summary of the tax brackets and estimated costs per year:

Income % Taxes Paid % of Population $$ Per Year
$328,000+ 36.9 1 $16,400
$137,000-$328,000 20.2 4 $2,250
$30,000-$137,000 39.6 45 $392
Less than $30,000 3.3 50 $30

Please comment below if this is worth it to you.

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Stock Market High

Filed Under: Investment Strategy by Bill — Comments Off
January 5, 2009

Today I was listening to the doom and gloom on the cable news stations about how bad the world and economy is and I felt the need to check my long term buy and hold account I hold for my mother-in-law.  Generally, I try not to watch these as much as my own accounts because she can’t stomach the same volatility I can so if I manage the account too much it ends up like mine.  To my pleasant suprise I found I was only down by 10% since May!  Compare that to S&P 500 over the same time frame which is down approximately 33%. 

Normally being down isn’t a good feeling, but doing so much better than my 401K managers has put me on a stock market high.  It was truely motivating and helped psyched me up for the new year. 

Have you found those milestones in your stock market trading that gets your heat beating?  What gives you that market high?

For the record the account is currently holding PFE, DIS, PEP, and CL.

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Stock Market Growth

Filed Under: Investment Strategy by Bill — Comments Off
January 4, 2009

A lot of people have been hurt in the recent stock market drop off.  Those hardest hit were probably those who paid their money every paycheck to their IRA’s and 401k and were just getting ready to retire.  Could you imagine feeling you had enough to retire then only be half way there after a couple of bad weeks?

For decades fund sales people and personal finance have told us that the stock market grows at 8% per year while bonds only average 6% and money markets are 1-3%.  Those extra 2 – 3% over 40 years can make a huge difference in your portfolio growth.  While this is all true there are a few bumps in the road that often get neglected when teaching people about the stock market.

The stock market growth is not in a straight line.  It has swings up and down and sometimes has swings way up and way down.  If it’s really high up it’s called a bubble, no one seems to have a problem with these.  When it’s way down it’s called a crash.  You never have control of when these market swings will occur.  Sometimes you get lucky and the big crash of the century occurs right when you’ve started investing so most of your money goes in on the low side.  Sometimes it happens when you’re about to retire.  Imagine thinking you’re done working and about to retire and then WHAM! you’re only half way there again.  This is the buy and hold mentality and you just live with it. 

Your alternative is to manage your investments yourself (or pay steep fees for hedge funds that put a little more effort into their choices.)  With managing your money yourself you can just play it safer all the time by diversifying between money markets, bonds, and stocks.  This will usually lower your risk, but also lower your reward.  Choosing this route will often make your stock investment career a more stomach-able ride, but may make it very difficult to save enough for retirement due to the lower returns. 

Your only other alternative is to add some timing to your investments with some risk control.  Often times with combining fundamental analysis, technical analysis, with some good money management you can improve your overall returns while minimizing risk.

There is no one right way to do this that I can place in one 400 word post, but read through the site and you’ll find things that you can blend into your own style.  If you need any help feel free to comment or drop me an email.

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