I had promised that I was going to start my own thread regarding stock investments and the markets. So many things have happened since last time I was here and I really do not feel like sharing my knowledge. But a promise is a promise and there have been few people that have emailed me and supported me.

This thread will deal with investing in the stock markets. I will not discuss individual stocks but discuss ETFs like SPY, DIA, IWM and QQQQ. The one good thing about trading ETFs compared to individual stocks is the the ETFs provide instant diversification among similar companies within the same sector.

I will post more as we go along, regarding entry-price, profit-target and stop-losses. I do not think that any ETF is good or bad. It is good only if I'm making money and bad if I'm losig money.

If you have not been in the market so far, please read this as an information piece only rather than my recommendations. There is risk involved and you should know how much risk to take on any position.

Any suggestations, comments and criticisms are welcome as long as it is market related. If this thread gets out of hand and we start discussing off-topics, I'll stop posting.

Have a happy new year!!!! May 2007 bring you and your family lots of joys and riches.

Nepali Kai: Just read your response from yesterday. Laugh as much as you want at my naivity ( i think you meant naivety) but I'm the one laughing all the way to the bank. Check this out:
http://www.sajha.com/sajha/html/openthreadall.cfm?StartRow=81&PageNum=5&forum=2&threadid=34109

Honestly your analysis is so flawed I do not even know how I can expalin. Let me dumb it down a little bit. Have you heard the expression, "Birds of a feather flock together" that is what happened to Nokia after Motorola came out with the earnings. If the companies miss earnings because of a company specific problem then the competetior will do better but if it is slowing demand, then all the companies will go down. For example when Airbus said that there were problems with their wiring system that will delay the airplanes to come out of the plant that was company specific problem and Boeing went up.

Anyway, there are many people here seriously discussing ways to make money and I do not want to make this a pissing contest. WHY DON'T YOU TELL US HOW WE SHOULD DO IT INSTEAD OF TELLING US HOW IT IS NOT POSSIBLE TO DO IT.

I had mentioned 4 picks here: QQQQ, LLTC, SNVT and OVEN. All those are up except for OVEN. Read my analysis on what moves the market. I will post that shortly.

"If the companies miss earnings because of a company specific problem then the competetior will do better but if it is slowing demand, then all the companies will go down."

well i guess that explains the optimism regarding APPLE and its new cell Phone ,

Honestly your analysis is so flawed I do not even know how I can " expalin"

( i think you meant explain)

cheers

QQQQ, LLTC seems to be good option. 'SNVT' is not a valid ticker symbol.

There are so many options for trading online - eTrade, Scott Trade, Ameritrade..etc etc which one would be the better option for the beginners...does it make any difference from which site you are doing your business????

Exactly, even though there is slowing demand, the market expects apple to take market share away from Motorola, Nokia, Sprint, RIMM and Palm. This is the reason why trend following works. Although there are all these bad news coming out, the market is still going up because the market is not looking at the present or past but the future. As long as the market thinks that the Fed has an accomodative policy, it will keep on going up.

You seem to be dodging the question that I had asked several times? HOW SHOULD WE INVEST OUR MONEY SO THAT IT CAN GROW? Give us some picks or strategies.

onestly your analysis is so flawed I do not even know how I can " expalin"

( i think you meant explain)

cheers

Dude that was a typo. I was typing too fast as in I am making too much mooooolah. Your's navity was no typo.

Net Freak: Sorry it is SVNT.

" Although there are all these bad news coming out, the market is still going up because the market is not looking at the present or past but the future."

now you are contradicting yourself , if all the bad new coming out of a business cannot affect the market , how can you say there is a trend? what businesses and market do are completely different matter ,

and everyone is looking at the future now , much like everyone was looking at the internet miracle in the late 1990's

and regarding my naivity , it wasnt a typo , yeh , yeh you should know, you were right by my side when i was typing right , but i take yours as a typo , excitment of a breaking bank account i might add

it doesn't matter how much money you two guys make, if you're both pathetic enough to nitpick on other people's typos - sad. there are better things to do in life than pull people down for petty reasons.

Well this thread is getting a little off topic. In the future I will try to post stuff regarding markets only. Like I said on my first post if people have questions about my strategy I will respond to those but if people disagree but do not provide an alternative on how it should be done then I'll just ignore them. If you disagree and can suggest something better I'd welcome it.

I just noticed that OVEN closed at 16.18 and that was the price that I recommended it.

What drives the price?

There are several things that affect the price of a stock. Current/future earnings, sales, expected growth rate are some of the stuff that they teach you in school. It is correct but there are other factors too and that they never teach you in schools. Now I am understanding why some people think that only value investing is the way to do it. Basically what that means is that buy a company trading below its intrinsic value. It is not easy to find such companies, that is why Buffett is sitting on $50 billion worth of cash.

Prices depend on the market participant's behavior. For example take OVEN, this company has negative earnings but it is trading at $16 now and has a market cap of about $500 million dollars. What is the reason for this? The reeason being the market anticipates that in the future the earnings are growing to grow at a certain rate that will compensate the investors for taking the risk.

So now 2 question arises: 1) Will the company be able to expand and grow earnings?
2) Will the buyers be willing to pay higher price in the future?

The answer to this is as long as the economy does not fall into recession, it is very likely that the future buyers will be willing to pay more.

In order to determine if the future buyers will pay more or not it is necessary to compare the return on fixed income vs. equity. The current yield on 10 year notes is 4.77% and the current expected return on S&P is 10%. So are you willing to take risk and invest in equties because you are getting 5.23% more than investing in something very safe like the US Notes. Currently the market thinks "yes". It is not what you think or I think that determines the prices. It is what the market thinks that determine the prices.

So if the yield starts going up and S&P's expected return starts declining narrowing the spread, the market will likely fall from that point. In that case it is necessary to sell everything and sit on cash. I know the feeling when you buy something at $15 and it goes down to $5. Been there done that.

I have done research on 40 years worh of data and noticed that the market does not crash out of the blue. Usually before the major fall there are few days of distribution. So it is necessary to use stops, so that just in case your analysis is incorrect and the stock starts going down after you buy it, get out and take the loss.

Here is my another pick: WU. currently at $22.79. Sell it if it goes below $20.

Net Freak: I like AAPL but it is very volatile. I just can't take that kind of risk. Before I buy something I usually like to know where I will get out if I am wrong. Regarding AAPL it is $75. That is $19 per share from Friday's closing.

Here is a good read for anyone interested.

https://a248.e.akamai.net/7/248/1856/b267b5d94e82cd/www.wellsfargo.com/downloads/pdf/com/research/investment/emp/emp_dec06.pdf

that's an awesome article!

CTEL went to 7 from 2.5 and went down to 3.5 within a day? what do you think the reason is? Psycho investors?

CTEL's average daily volume for the last 3 months were less than 100,000. With stocks like that any news that the market perceives to be good can take the stocks higher. I usually stay away from those stocks. Mutual funds do not buy anything trading for less than $10 and the average volume had to be atleast 250,000. Sometimes yo can make a lot of money with the low priced stocks but most of the time these are the type of stocks that fall hard.

If you are not daytrading or swing trading, look for stocks that are more than $10, has EPS of $1 and trading somewhere between the monthly support price and a new high.

Is it a good idea to put all your eggs on one Basket? Put all your money on one stock or rather split and put it on different baskets so that if I falls then another will keep you on balance? Have been looking at few options and was suggested to go for Mutal Funds rather than Stocks since I'm a beginner. But do u say dude? I'm not looking for long term investments, I would rather like to go for daytrading or swing trading. I don't mind taking risk at some extend.

WU seems to be doing good. How long do you think would be save to keep that?

Save = Safe

final post from me in this thread , just want to post a paragraph from Jason Zweig's ( editor of benjamin graham's intelligent investor book) column at money magazine , every one is free to make their own inference from the post ,

" NEW YORK (MONEY Magazine) - If getting rich is supposed to make you feel good, why are so many investors so agitated so much of the time -- even when the market goes up?

It's not only that guy on CNBC who looks (and sounds) as if he just got his belt buckle stuck in an electrical socket. It's how you kick yourself for buying stock in eToys or Pets.com or WorldCom. It's how you kick yourself for not buying stock in Warren Buffett's Berkshire Hathaway.

It's the way your favorite financial Web site bristles with red and green arrows that change color and direction every few seconds. It's daily headlines stocked with scary animals like bulls, bears and even dead cats that bounce.

Investing doesn't have to be like this. In fact, it's not supposed to be like this. Despite everything most market pundits say, investing is not a struggle, a battle, a game or a contest; it is a continuous process that lasts a lifetime. Whether you are winning or losing at any given moment is beside the point.

The only thing that matters is whether you prevail in the end -- and the factors that determine long-term victory are the exact opposite of the ones that tend to create short-term success.

In the short run, the investors who can't let go -- who track and trade on every market move -- tend to come out on top. But the longer they keep at it, the more likely these same people are to become losers. That's because obsessing over the market leads you to think you can foretell the financial future. Then you will make increasingly aggressive bets, which sooner or later are all but certain to end up giving you either heartburn or heartache."


HAPPY INVESTING TO ALL