Financial Kudos Blog

My head is spinning - I am listening to CNBC.

Are you getting as tired as I am listening to the 'brains' on CNBC?  Last week they were talking about the return to better times - even some talk of the DOW testing longer term resistance levels.  Today, everyone seems to have gotten up on the wrong side of the bed and is looking not for sunny and 80 degrees, but rather a beginning of a protracted cold war.  While I understand the need to give both sides of an argument, I am making the call for some consistency - especially when the economic data has not materially changed form one day to the next.

I don't mean to just pick on CNBC, they have been doing this for years.  Rather I would speak to all market participants that react instead of act to the big picture.  If the market is overdone, no problem just be a little bit more consistent.

I am not original here, but how about adding a track record, like a baseball batting average, for the folks marched onto the TV set?  Don't just track right and wrong calls, but look for closely at the 'on base percentage'. In essence look at the reasoning for the directional calls and the performance - not just the quick stats.  Being right is obviously the goal but when we can't right all of the time investor's need to know who is smart and on point vs. who is just lucky.

P.S. Sorry about the sports analogy but I can't help it since it is Baseball season.

Investors what's next? - 5 Concepts for the future.

From time to time it makes sense to step back, see where we have been and then set our sites on where we are going.  History is nice but it's just that.

1) A V shaped recovery. Just wishful thinking or the speed of the economy in 2009?

2) A democratization of good investment ideas and concepts.  The Internet and social media continue to  level the playing field.

3) Newspapers as we know them are history. Magazines other than conceptual articles are irrelevant.  Information is NOW not yesterday.

4) Blogs are so yesterday - two way conversations will outlast everything else going forward.

5) Independent Research after the global settlement ends will find a different format and a different stage.  Analysts will join main stream social conversations and provide value as they sell their services to a more focused customer.

6) Bonus topic - With so much 'free' information out there it's time to pay a little bit of money for a filter to quickly find what you are looking for or should be looking at. What is your time worth?

These are just some random thoughts and concepts to ponder.  Look forward to the Beta launch of the new Financial Kudos community - its closed to members only and its not free - just more focused and provides more value.  We think about the future everyday and would appreciate your comments and thoughts.

Short Note: Economy is tunring?

Today we would like to make a short note to investors and our readers:  the stock market is turning, the so called 'stress test' is going well (go figure), retail sales are on Target at TGT and WMT, initial jobs claims are ok and history shows that recessions last only so long.  It's time to think about growth and the future.  How we pay back all of the money is a story left for a more pessimistic day for now let's think positive and that the recovery is upon us.

Dow 10,000? When the conversations will start

Remember those conversations from a long time ago about 'Dow 10,000'?  It has been a long while. I remember them clearly, like it was those profitable days of yesteryear.  The markets have come a long way and perhaps they have a long way to go, but it is always nice to reflect on where we have been.  

Below is the current set of charts for the Diamonds - looks like some resistance at 9,000 and then off to the 10,000 conversations again.  Well at least we hope, otherwise the markets look over extended.  You be the judge:

Investors: Is it worth investing in a long shot like ‘Mine that Bird’ who won the Kentucky Derby?

We see it all the time, investors shooting for gold by betting the long shot.  Seemingly, we all decide if the risk makes sense relative to the reward at some point for our portfolios.  We suggest that taking a shot is not the worst thing in the world.  It would be far too boring to just sit back and ‘do the right thing’ and invest for the long term.  In fact, the recent markets results would strongly suggest otherwise.  Sometime it makes compelling sense to invest a little something and go for broke.  Just be careful you don’t bet the ranch.  Isn’t that what the venture capital guys do all of the time?  They always try to swing for the fences and hope that the winners are huge and the losers get lost in the averages.

Please don’t misunderstand, we are not suggesting all risk all of the time, but every now and then to stand at the betters window and go for it can add a lot of excitement – and potentially some huge gains. Cashing in those tickets is a lot of fun!

'Bear Market Rally' or history repeating itself?

CNBC was kind enough to remind us this morning that 100% of their interviewed guests called the recent rally a 'Bear Market Rally', tantamount to a tease or a so called 'sucker's rally'.  Well, April was the single best month for the markets since 1938. Warren Buffet has said that the September Pearl Harbor comparisons are now over.  He went on to say that we continue to fight the war- I would agree, as I am sure war torn investors would agree as well.  By the way Becky Quick from CNBC - great sound bite!

Many market participants think that its always different this time.  Recessions typically last 16 month the history books show. If the current recession, which officially kicked off in December 2007, is any indication, this one is certainly deeper but nevertheless history has been repeated once again.

Long term trends to assess markets are far more important than today's latest gibberish, rant or rave. Although, I would agree that current trends and issues seem to change the look and feel of the root cause for the event and the clean up. The Internet, or rather the speed of the information flow has certainly helped set the pace for a turnaround.

The purpose of this blog is not to call the end bad times but rather to remind investors that the markets have a rhythm (or as my first grader would happily tell me 'it's a pattern Dad') and to think about the big picture and not only 'investorjoe' on Twitter saying he just sold XYZ at a slight profit.  Do we really care about that trade, specially after the fact?

Swine Flu: Viral Marketing Powered By Twitter

I just heard that the CDC (Centers for Disease Control) is on Twitter.  Pretty ironic that a viral tool like Twitter is being used to disseminate information about a virus.  I guess everything comes full circle.   

This is Social Networking at its core.  When the message must get out what better way then through the use of the latest social networking tools? Powerful stuff really.  The next question is now that the headline gets pushed around the globe in 140 characters or less, what is the best course of action to get people more in depth information about a topic? Where do the ‘tiny URLs’ go?  What are people reading (or for that matter with You-Tube, what are they watching) to gain more knowledge and receive accurate and in-depth information?

We believe the same thing is occurring with investment information.  Short 140 character quips are wonderful.  When we hear that someone with the screen name ‘Genius13’ just successfully traded gold for the 18^th time in a row within the last 3 hours is really of no moment.  It is only useful to hear why she traded gold and more over it is critical to hear it before she makes the trade.  

It comes down to ‘depth’ and sound bites.  We think you need both.

We want you! Beta users to receive free membership!

About a month ago we posted a blog which discussed the fact that we are looking for investors (not just any investors but talented investors) to participate and contribute to the new Financial Kudos website.  We anticipate our launch for beta users to take place in mid-may.  Would you like to join us? 

Following is our post from March 18, 2009.  Please send us your email information (or at least subscribe to this blog) so that we can offer you a spot in our beta group.  Our initial beta users will receive free membership for 3 years!

"Over the last few weeks our team has been actively searching for the talented investors on the Internet.  Not just the “traders” who pat each other on the back or give a short tweet about their latest trade, but investors who truly provide insight.   For sure, smart talent exists but where are you on the Internet and more importantly how can you monetize your insight and get rewarded for your efforts?

We seek to find folks who have decided that it is time to bring together a group of really smart and insightful traders and investors who wish to get paid for their efforts.   If you fit the mold, send us a note and become and early adopter for the next wave in investment information and research.  The subject should say:  It’s about time for me to get paid for my efforts! Send the email to info@financialkudos.com and please include your name, phone number and a sentence or two about how you feel about the current offerings on the Internet for investors.

We look forward to speaking with all of you and hope you join us on the ride towards the next wave!"

Does it take '60 Minutes' to diagnose the problem with mutual funds?

Last night the CBS program 60 Minutes spent some time speaking about mutual funds and 401ks in the wake of the market crash. Hidden costs, poor performance, they touched on everything.  While it is unfair to suggest that all mutual funds are at fault here (we must think about the rough markets as well), it makes sense to discuss the 'new' mutual funds: ETFs (Exchange Traded Funds).  In fact, we would go so far as saying that mutual funds are so yesterday.  ETFs have grown in popularity over thew last several years.  Even though you must watch the cost structure associated with ETFs, the management costs are reduced and there are NO sales charges. You need only pay your regularly low commissions rates to trade. 

If you want to match market performance why not select the market you want (sector, general,S&P, DOW etc.) buy an ETF and be the market?  When Wall Street rights itself after the recent debacles, we believe ETFs will play a significant role and displace mutual funds in 401ks and portfolios in general.  

PS: ETFs make great trading vehicles!

What makes a 'tip' good? 5 simple things to look for.

Investors are always looking for a 'good idea'.  We all want a tip for a quick trade.  Sure we can sift through the millions of websites, do the research, filter information and find something great, but who has the time?  The race to free on-line tips has been hard fought and has been awarded to anyone who wishes to find the needle in an enormous (and continually growing) haystack.  We intend to make the haystack smaller with our community launch.  In the meantime, let's look at the basics when considering what constitutes a good idea.

Below is our list of top items which when combined can help you analyze your next  'good idea':

1) Timing - is it actionable NOW?  Do I still have time to take a position and make money or am I only going to get the scraps? Most of the time when we get that "aha" moment it is too late.  We need a place to go to get the information quicker.

2) Risk/Reward.  Pretty simple but often overlooked in the correct way.  Make sure the reward matches the risk of investment loss as well opportunity risk.  I.E. "Am I better off with a CD or keeping my cash on the sideline?"

  

3) Does the idea make sense?  Sit back, reflect and think clearly, is this idea logical?  For example is it logical to think in a recession that a retailer of luxury goods is going to see a huge increase in revenue and profits as well as an enhanced gross margin?  Most of the time if we just think about the logic we can save ourselves a lot of aggravation and money.

4) Interesting Idea but what is the track record of the person making the recommendation?  Can you verify that the person is qualified - and I don't we mean a strong resume, I mean strong results in similar situations?  What are their peers saying? Do they have a following?

5) Is it liquid?  Can I purchase the investment without moving the investment?  Can I sell the investment or will a small sell order destroy the bid?

Over the next several weeks will continue to add to the list.  Suffice it say, information is free, ideas are plentiful, now you must integrate these pointers and mitigate the losses associated with a bad trade.