Today’s Stocks & Topics: ROTH for kids, Retrenchment?, General Mills - (GIS) Treasury Inflation Protected Securities (TIPS), United States Natural Gas ETF (UNG), Ford (F), Vectren Corp (VVC), Intel Corp.(INTU)
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Today’s Stocks & Topics: Day Trader, (SYY) Sysco Corp., Banks, (POT) Potash Corporation of Saskatchewan Inc., Treasury Bonds, (FSLR) First Solar Inc., (UNG) United States Natural Gas ETF, (AIG) American Intl Group Inc.
Steve has put together a “must read” list of recommended books in the Investtalk Bookshelf. Click here to see the list.
Millions of investors have invested their money in various types of mutual funds to grow their assets. These funds can either be diversified stock funds, target specific funds, or bond funds. However, you may not know that your mutual fund could also be investing in risky derivatives to enhance performance, asking the question, “How safe is your mutual fund?”
Mutual fund managers will sometimes use various types of derivatives to boost returns of their mutual funds. However, the consequence if they are wrong means amplified losses. Bond mutual funds may invest in credit default swaps. These have become popular recently because they are easy to trade and many times cheaper. It makes it a simple way to increase or decrease a portfolio’s credit risk. The problem is that these are swaps and not securities; they do not trade on exchanges. This makes it extremely hard if not impossible for the SEC to know how much risk the mutual fund is taking.
Covered calls are also used by portfolio managers. A covered call is nothing new for investors. You sell (write) a call option on a stock you own. The option gives the buyer the right, but not the obligation, to buy your stock within a set time at a specified strike price. It can be used as a way to boost the fund’s income with the premiums made from writing calls. It can also offer a little downside protection. However, what happens if the stock takes off? The fund would give up all the stock’s profit above the strike price as the call holder exercises the option.
To see if your mutual funds invest in these types of derivatives, you will have to take a look at the prospectus. There it will tell you if the fund is allowed to use derivatives and if so it will tell you how much is held in derivative investment. If they are invested in these, make sure the percentage is not overwhelming.
Today’s Stocks & Topics: Companies with Cash, Fear, Mortgage Modification, The Stock Market, Dogs of the Dow, Investments, Partnership.
Steve’s new book: “Above Average Investing” is now available from the Investtalk Bookshelf. Click here to buy your copy today.
Today’s Stocks & Topics: (SVA) Sinovac Biotech Ltd., Dow Jones, (BMY) Bristol-Myers Squibb Co., (UNG) United States Natural Gas ETF, (GS) Goldman Sachs Group Inc.
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Today Bernie Madoff is being sentenced for stealing billions of dollars in the world’s largest Ponzi scheme that he ran for years. He should never leave prison for his crime and truth be told that might be the safest place for him as there may well be a few people he ruined who might take matters in their own hands.
The financial news media apparently have little to report as they focused all morning on the sentencing of Madoff. To be honest there is not a lot of important news items out this morning. Later in the week we have the greatly anticipated labor report for May. Job losses are on everyone’s mind and that report will be released on Thursday. The unemployment rate is estimated to rise to 9.6% from 9.4% nationwide. In California it is already well over 10%.
The stock market seems to be taking a breather from its torrid pace since March but at the same time it is not falling but rather moving sideways for the last month.
That might be an indication of consolidation before the next leg up. Of course this assumes continued improvement in the economy even if it is very slight.
Good Trading
Steve Peasley
Today’s Stocks & Topics: (UNG) United States Natural Gas ETF, P.E. Ratio, Dividends, (FAS) Direxion Financial Bull 3x Shares, (GSI) General Steel Holdings Inc., (COP) ConocoPhillips.
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Today’s Stocks & Topics: 1st Time Buyer, Where The Money Goes?, Mutual Funds, Retirement, Money Management, International Markets, 401(k), Trust Deeds.
Steve has put together a “must read” list of recommended books in the Investtalk Bookshelf. Click here to see the list.
Today’s Stocks & Topics: 401(k), Car Companies & Money, (ORI) Old Republic International Corp., (VLO) Valero Energy Corp., Taxes, (URE) ProShares Ultra Real Estate, (YRCW) YRC Worldwide Inc.
Steve’s new book: “Above Average Investing” is now available from the Investtalk Bookshelf. Click here to buy your copy today.
The market is under pressure again. We appear to be in the correction that most market watchers expected. The fall in stock prices could be simply the fulfillment of the expectations by a lot of market experts. If they expect a pullback they sell and make it happen.
This pullback is just that, a pullback. The indexes are not likely to go back to their year lows. There are too many ‘green shoots’ that appear to be indicating a slow recovery in the economy. This weakness may be as much as 10%. That is an opportunity to buy if it happens.
Yesterday a small ‘green shoot’ was a report about housing. Sales rose 2.4% in May for the second month in a row. Inventory of unsold homes was down 3.5% to 9.6 month supply and prices were down .1%. Make no mistake. These are not good numbers but they are improving numbers. With foreclosures putting excess supply in the market housing is going to remain weak for a long time. However, it appears to be stabilizing for the low priced properties. Inventory numbers are key and they have been slowly improving. The unknown is how much more pressure will foreclosures impact inventory? Can low interest rates and falling prices continue to absorb inventory? The answer is yes with a caveat. How low will prices go and how long can rates stay as low as they are? It appears that housing is starting the long slow process of stabilizing.
Good Trading
Steve Peasley
