Friday, June 12, 2009

Is buy-and-hold dead?

The old buy-and-hold strategy looks dead now. Today, hedge funds, using quantitative formulas and models that few understand, are investing billions in stocks. Unlike Warren Buffett's buy and hold forever, hedge funds trade in large volume selling in a day or a few hours. They can short without actually borrowing any stocks. They can own options and futures contracts. Basically, when a few hedge funds start targeting the same company, the party begins. Just have to make sure that whatever they're buying you're buying. And whatever they're selling, you're selling. Because you don't want to go against all the money and power they have.

Insiders starting to sell

According to this article, investors have started selling stocks. Since May 8, buying interests have declined. U.S. mutual funds have also began selling their stock position. The selling pressure is also the highest since October, after Lehman Brothers' collapse.

Of course, bank stocks are the main target of selling. They have risen the most since the market bottom in March. However, energy and commodity stocks have also been the target of institutional traders. Furthermore, it looks like the big institutions like mutual funds and hedge funds are taking the money out of the U.S. and investing in international equities.

Selling pressure has not increased dramatically yet, there might be a good buying opportunity soon. Be prepared!

Bank of America CEO was forced to buy Merrill Lynch?

Bank of America CEO Ken Lewis testified on Capitol Hill today that Fed officials pressured him into buying Merrill Lynch after the bank tried to back out of the deal when they learned about Merrill Lynch's huge losses back in December. An email from a Fed official also threatened to remove the whole management team at B of A if they ever needed assistance from the government in the future and they walk away from the merger.

So basically, B of A's CEO was scared of the Fed and accepted a horrible deal for Merrill Lynch. It seems to me that Ken Lewis was more worried about his job than the benefit of the shareholders. Can you really trust a company run by this type of CEO?

B of A also got upgraded by a few analysts with a price target of $16.50. One analyst even has a price target of $30. With B of A shares currently at $12.97, it might be a good time to buy, however, I just can't seem to trust their CEO.

Sorry, I think I'll walk away from this deal.

I do not have any stock position in any of the companies mentioned in this article at the time of writing of this article.

Wednesday, June 10, 2009

The next crisis: Inflation

Prices at the pump keep rising as crude oil reached $71 today. Mortgage applications hit a 4 month low in the U.S. as the rate of a 30 year mortgage jumped from 4.8% in late April to 5.6% today according to

It looks like rising interest rates is now slowing the housing recovery, and perhaps the economic recovery. With worries of inflation on investors' mind, commodity prices should keep rising. Gold is now at $954.70. Crude prices should keep rising as the U.S. dollar continues its decline.

What should investors do now? My strategy: buy gold, buy oil, buy commodity stocks, and sell the U.S dollar.

Tuesday, June 9, 2009

Banks pay back TARP Funds

Financial stocks went up after 10 banks who received government help paid back their TARP funds. The banks are JPMorgan Chase (JPM) , Goldman Sachs (GS), American Express (AXP), Morgan Stanley (MS), Capital One Financial (COF), U.S. Bancorp (USB), BB&T (BBT), State Street (STT), Bank of New York Mellon (BK), and Northern Trust (NTRS). Absent from the lists were of course Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC), which is suppose to be a healthy bank. The Select Sector SPDR-Financial ETF (XLF), is now up 99.7% since March 9, the day the market bottom.

Now that these so-called healthy banks have repaid their TARP funds, are they still allow to receive government help if the economy worsens?

I do not have any stock position in any of the companies mentioned in this article at the time of writing of this article.

Monday, June 8, 2009

Nothing Special at Apple

In its annual Worldwide Developer Conference in San Francisco, Apple introduced iPhone 3GS, a speedier version of the iPhone, and announced a 50% price drop to $99. It looks like competition from Palm and Research in Motion and the recession have finally forced Apple to lower their price. Investors didn't like the news and brought the shares down 0.6% to $143.85.

Without any new revolutionary products announcement and Apple currently trading at a P/E of 26, the stock looks overpriced to me. Apple's days as a top growth stock are long gone and the company should be priced more as a consumer electronic business. I see the share price falling soon.

I do not have any stock position in any of the companies mentioned in this article at the time of writing of this article.

Sunday, June 7, 2009

Where to invest online? Questrade

The first thing you need to invest online is obviously an online trading account! The cheapest one I found in Canada is Questrade, a Canadian discount broker offering trades in US and Canadian stocks, options, and forex from $4.95. They also have a Tax Free Savings Account (TFSA), which they have renamed to Tax Free TRADING Account. It has all the advantage of a TFSA with Questrade's trading tools and services added.

Questrade's Tax Free Trading Account is where I would recommend you start your investments online. You can start making profits faster and never pay any taxes on your investment income, interest, dividends, and capital gains again!