Ok. Here we go. After much urging and prodding from clients and friends, I have thrown my hat into the blogging universe. I have committed myself to a 6 month run of at least five updates a week. I will be discussing/analyzing what is going on in the markets and trying to break it down in a sensible and manageable fashion. I can't tell you how many times I have taken calls from clients, smart clients, educated people who are completely frustrated and confused as to what is going on in the financial world. The main reason for much of the confusion lies in the structure of the financial world itself. It is a rapidly moving, constantly evolving, self important good old boys club. The members of this club invent and use their own form of financial pig-latin to impress those around them and to reinforce their belief that all of us commoners desperately need them to control our country and our money. Anyway, after you learn a bit of the "pig-latin" you will be shocked to see just how simple many of these issues become. And therein lies the goal of this blog. I will attempt to break down the financial news on a daily basis in a way that will hopefully enable you to prepare yourself for upcoming changes and/or profit from new developments.
First off, who am I? Well, due to industry regualtions and company rules, I will have to maintain a certain level of anonymity and go simply by my first name, Zach. I am a stock broker for one of the big wire houses. I have a bachelors degree in finance and worked formally in the financial industry for the past 5 years, informally for the past 8. I will be happy to take questions but due to various regulatory issues, I cannot give specific stock tips. If anyone would like specific investment advice they can email me directly. Now to the point of this whole thing
Monday, February 21
The middle east is on fire. I'm sure you have all seen the Wisconsin protests. Despite what you hear on the news, the two situations are completely unrelated. Let's start with the middle east.
Libya, Egypt, Tunisia, Bahrain, and to some degree the whole middle eastern and Northern African regions are a mess. This has been a long time coming. Despots and dictators like Mubarak and Qadaffi have used military violence, or the threat of violence, to oppress and rob their people for decades. Only problem with throwing many of these guys out is that they served as a firewall between the developed world and the radical cleric run states like Iran. Who knows who will move into this power vacuum? Let's hope for the best. In the meantime, oil is going to remain high. This is why I have been buying oil related stocks for almost all of my clients for the past 2 years. Global uncertainty= higher oil prices. The threat of conflict could also signal a pull back for the markets here. So, do higher oil prices and a pull back in our markets here at home signal that some really smart people out there think that a conflict in the middle east is imminent and that said conflict could plunge the world into violence? Not at all. The market is simply telling us that it doesn't know what is going to happen. This is huge. If you have paid attention to nothing else, pay attention to what I am about to say. It can make/cost you alot of money. The market HATES uncertainty. Oil is going up because the market doesn't know what is going to happen. A perfect example of this would be a company that many of my clients own, we'll call it ABC oil. Earlier this year, the parent company of ABC wanted to sell them for various financial reasons and due to the fact that they were shifting their focus. The price of ABC tanked by about 25%. Most of my clients wanted to dump it but I urged them to hold and even buy more. The company was solid, paid a great dividend, and the fundamentals were unchanged. The market was simply hating the fact that they didn't know who was going to buy ABC. ABC is currently up more than 50% off its lows. So, moral of the story is uncertainty can often be an opportunity. Oil should conitnue to do well until some of this global instability subsides.
Wisconsin is another matter. I will try to avoid political commentary in this blog and will attempt to address only the financial issues at hand. Part of the issue in Wisconsin is that the governor wants to limit the unions ability to negotiate benefits. They want to do this in order to make long term budget projections and planning more certain and controllable. You decide for yourself if you think thats a good idea. The remainder of the disagreement is due to the governor attempting to get the unions to pick up a portion of their medical insurance and pension plans. Moves like this are going to become common place around the country. Ideology no longer matters. Governments simply don't have the money. They have over promised in order to stay in office and the bill has come due. Some argue that state governments should merely raise tax rates on the rich and corporations to cover the short fall. This works until the rich and the corporations pick up and move (see New York, California, Vermont, etc etc). What does this mean for your investments? Stay away from Municipal Bonds. It's gonna get ugly and could be for quite some time.
Well, that's it. Blog #1 is in the books. I will be back tomorrow. Please feel free to comment.
Until tomorrow,
Zach
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