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INM Nov '07 - The Consumer Is The Market's Perpetual Hero
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
October turned out to be a lot better month than many had feared. But the problem is, many investors tend to trade based upon what they think might happen instead of trading based on what they actually see happening in the market. Virtually every media outlet you could turn to seemed to make mention of the 20-year anniversary of the October 19, 1987 crash. Meanwhile there was no crash taking place during October 2007. Instead, stocks rallied.
Oil prices have grabbed a lot of headlines lately, sparking more fears for investors. Consumers are supposedly left with less cash these days due to higher energy costs, and that is one of the big reasons why so many pundits are predicting that the stock market is “sure” to get into trouble at some point. I won’t deny that this argument has merit. However, consumers have been expected to curtail their spending year after year, and yet they keep right on spending. In my humble opinion, your best bet as an investor is still to go with a concentrated portfolio of superior growth stocks.
I recently heard a commentator on CNBC point out consumers have no problem spending - even if they don’t have the money! Why? Banks are willing to keep lending them more money! Why? Banks get rich on the various fees and interest charges that millions of consumers pay. A certain number of defaults are expected, and the overwhelming bulk of consumers do not completely default on loan payments. Sure, news of record defaults and bankruptcies catch our attention, but most financial institutions are dealing with their bad loans perfectly well. We don’t see a long list of financial institutions failing right now, do we?
Whenever financial firms do get into trouble, guess who bails them out? Other financial firms bail them out! Then, they ultimately pass along the cost of the problem to their customers in the form of (you guessed it) higher fees and interest rates. So, indeed, the consumer is forever the hero that comes to save the day. We really shouldn’t expect that to ever change.
The Fed has made their stance clear, and they will continue to provide liquidity and stoke economic growth. Unfortunately, their policy does not seem to show concern for the fact that the US dollar can’t hold its ground relative to other currencies.
Since your dollar’s buying power is quickly eroding, and particularly because it has been falling at a much faster pace than usual, you should definitely be concerned about finding ways that you can multiply the dollars you have. There has been no better money multiplier than the stock market.
If you are reading this, I probably don’t need to spend any energy convincing you to buy stocks. You are already on board with that program, right? So, we should jump straight into the finer details, like which stocks, and when to buy and sell. Sound good? Unfortunately, the problem we soon encounter is that, from a legal compliance standpoint, securities representatives cannot make open buy or sell recommendations and assume they can apply to all investors. Without knowing anything about an investor’s profile, an account can only be self-directed. That is the reason why online trading firms offering low cost transactions do not ask for anywhere near as much personal information about their clients as a typical full service broker requires - because the online trading firm does not give any specific input or direction to the customers. They are strictly order handlers taking “unsolicited” orders.
Plenty of times I have suggested contacting my office if you need additional help with your portfolio. My team at Source Capital is a well-qualified group of licensed representatives with the ability to make the appropriate suggestions to help you reach your investment goals. We can help you with those finer details if you call.
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.