vrijdag 10 augustus 2007

Health Of US Economy Up For Debate

Partisanship cuts across virtually every issue in Washington, DC and the health of the US economy is no exception. Most media commentators would appear to fall on the side of those who believe the recent market upheaval is an ominous sign. Tuesday's decision by the Fed not to cut interest rates, for example, unleashed a torrent of negative stories on the economy. ABC World News, for example, said "people looking to borrow money, and hoping the Fed would make that easier today, came away disappointed." The CBS Evening News reported "30-year fixed rate mortgages are averaging 6.68% now. That's if a lender will actually give you one." The Washington Post said "the Fed's rosy outlook was rejected yesterday by some analysts," and the Los Angeles Times, in a front-page story, said "the fear on the Street is that the good times are coming to an abrupt halt."

The negative talk about the economy continues this morning. USA Today, in a story titled "Housing Market Troubles Still Look 'Pretty Gruesome,'" reports, "The housing market blues showed no signs of lifting Wednesday as the National Association of Realtors warned that US home sales in 2007 could fall to a five-year low, and a major home builder...warned of a 21% drop in quarterly revenue. 'It still looks pretty gruesome,' said Joel Naroff, president of Naroff Economic Advisors." USA Today adds, "Bloated home prices, feverish real estate speculation and widespread defaults of subprime mortgages have led to a housing slump that some economists fear could drag the US economy into recession." The Wall Street Journal runs a similar report.

Stocks rallied yesterday (for a second straight day) but there was no network TV coverage of the big gains in all major indexes, and only limited attention from major newspapers. As the Wall Street Journal reports, "Optimism about the economy sent the Dow Jones Industrial Average to another triple-digit gain." The Dow "finished ahead 153.56 points, or 1.14%, at 13657.86, capping the biggest three-day point and percentage gain since March 2003." The Nasdaq "rose 2.01%, or 51.38 points, to 2612.98, its biggest one-day point and percentage gain since 2006. It is up 8.2% this year." The Standard & Poor's 500-stock index "rose 1.41%, or 20.78 points, to 1497.49, ahead 5.6% on the year." The Financial Times, under the headline "Wall St Rallies In Volatile Trading" and USA Today, which runs a brief AP story in page 5 of its "Money" section, were among the news outlets that also reported the stock rally.

President Bush tried to turn the tenor of the coverage yesterday, in remarks to a group of journalists after meeting at the Treasury Department. Bush expressed optimism about the economy and called the business environment "sound." The Financial Times says the President "appeared aimed at reclaiming the initiative in the debate over economic policy at a time when Democrats are seeking to exploit widespread pessimism among middle-class Americans about the direction of the US economy." Likewise, the New York Times reports Bush's remarks had two aims: "to reassure Americans about the economy and combat Democratic criticism of his policies." It was, adds the Times, "an unusual presentation for Mr. Bush, both politically and economically. Presidents are usually advised not to wade into discussions of markets at a time when they are so unpredictable and anxiety-inducing." In fact, "immediately after the president's comments, Democrats excoriated him for saying that the economy was in sound shape, and many called on the administration to encourage federal housing agencies to step in and make more money available, perhaps by buying up troubled mortgages to avoid foreclosures."

The Washington Post notes that "despite mounting concern over the downturn in the housing market," Bush "dismissed proposals advanced by prominent Democrats to grant government-chartered Fannie Mae and Freddie Mac more freedom to buy mortgages and mortgage-backed securities. And he ruled out any taxpayer bailout of lenders threatened by the subprime home-loan crisis." The Wall Street Journal says the President "shrugged off concerns about stock-market turmoil, saying Wall Street is adjusting to a flood of liquidity and is beginning to 'readjust its assessment of risk.'" He also "dismissed recent polls showing that US citizens are feeling sour about the economy. ... He said he understands 'there's disquiet out there' but attributed much of the economic anxiety to concerns about the war in Iraq. '"I happen to believe the war has clouded a lot of peoples' sense of optimism.'" USA Today reports Bush said "financial markets will be able to work through current turbulence without torpedoing the economy, calling the business environment 'sound.'" The AP says the President "struck a reassuring tone," expressing "confidence that investors would eventually calm down."

Bush made similar points in an interview on Fox News' Your World: "I would point out that the economic growth in the second quarter was 3.4 percent. And I would remind people that this economy is pretty darn strong given the fact that the job picture remains strong. And so there was a correction. And you know, markets tend to correct. And the fundamental question is: Will they correct is such a way as to not derail the good, strong economic growth that we are seeing?"

zondag 5 augustus 2007

Growth Stocks...The Future!

Continued Strong Growth Rates Important
What will the stock do tomorrow? Will the company continue to grow at a faster pace than the market in general?

These are typical of the questions growth investors ask about stocks they own. What is the companying going to do tomorrow – in earnings, revenue, sales, and so on.

In a word, growth investors are all about the future and as such are very concerned with a company’s prospects. Will this industry keep growing and will this company participate in that growth?

You don’t have to be an expert on the industry, but it is important to do some reading online and in the financial press to help you identify which industries are growing.
How the Stock Fits
It is also important to understand how the industry fits into the economy and what factors could change that would slow growth in the future.

It probably is obvious that many growth industries are in or related to technology of some kind.

It would also be a good guess that many growth companies are small to mid sized.

However, there are a number of large companies that continue to be growth companies. Companies like Microsoft remained a growth company for many years.

The problem for large companies is maintaining a growth rate that keeps them in the category.
Do the Math
The math of percentage growth begins to work against them. It is one thing for a $100 million company to grow 20 percent – that’s an additional $20 million in sales.

For a $10 billion company, that’s an additional $2 billion in sales – a more difficult task if the company is in a competitive market. Do the math: If the company’s average sale is $200 per unit (for software, for example), it will have to sell an additional 10 million units to grow sales 20 percent. Selling 10 million units of anything in a year is not something every company can do consistently and increase it for the next year.

A good growth candidate will be well positioned, although not always number one, in its industry with prospects for continued high growth rates.

Many growth investors want at least 20 percent year-to-year increase in revenue with a corresponding increase in earnings, but you will need to find your own comfort level.
Questions about Growth
Questions growth investors must answer about a potential investment:

* The company, its financials, and its management - are they all positioned for sustained growth?
* Is the company in an industry likely to benefit from the current economic environment?
* How much should you pay for the stock?

Determining a good entry price for a strong growth stock can be difficult, but it is the most important factor in determining success.

Ideally, you will buy into a growth company early enough to profit from sustained growth.

However, if you pay too much of a premium for the growth potential, you may limit future profits.

donderdag 2 augustus 2007

First Entry

Hey, Grike here !

Listen, I know nobody is waiting to read another random crappy blog, so Ill try to keep mine as entertaining as possible. I have been studying economics for quite some time now and I can't get enough of it, so I decided I'd share my knowledge on here !
Let me know if you enjoy my blog, if not, let me know aswell, I'm always open to criticism