Wall Street

Nine Lessons From The Greatest Trader Who Ever Lived

Chess battle The stock market has certainly produced its share of heroes and villains over the years. And while villains have been many, the heroes have been few.

One of the good guys (for me, at least) has always been Jesse L. Livermore. He's considered by many of today's top Wall Street traders to be the greatest trader who ever lived.

Leaving home at age 14 with no more than five bucks in his pocket, Livermore went on to earn millions on Wall Street back in the days when they still literally read the tape.

Long or short, it didn't matter to Jesse.

Instead, he was happy to take whatever the markets gave him because he knew what every good trader knows: Markets never go straight up or straight down.

In one of Livermore's more famous moves, he made a massive fortune betting against the markets in 1929, earning $100 million in short-selling profits during the crash. In today's dollars, that would be a cool $12.6 billion.

That's part of the reason why an earlier biography of his life, entitled Reminiscences of a Stock Operator, has been a must-read for experienced traders and beginners alike.

A gambler and speculator to the core, his insights into human nature and the markets have been widely quoted ever since.

Here are just a few of his market beating lessons:



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Stock Market Today: Rally Over Already?

The stock market today (Thursday) so far has failed to continue yesterday's rally that delivered the Dow Jones Industrial Average's biggest one-day gain since Dec. 20, 2011.

After Washington announced a fiscal cliff deal Tuesday, investors raced into stocks and other risk-on trades, relieved that the country wasn't going to tumble over the dreaded fiscal cliff.

"You've just removed a huge worry from the market," Jonathan Samson, chief investment officer at Samson Capital Advisors told The New York Times.

In response, the Dow finished the first trading day of 2013 up 308. 41 points, or 2.35%. The gains also propelled the benchmark index to its highest close since Sept. 14, 2012. Volume was heavy with more than 4.5 million shares changing hands on the Big Board.

The Standard & Poor's 500 Index added 36.23 points, or 2.54%, and the tech heavy Nasdaq tacked on 92.75 or 3.07%.

Gold gained $13 to close at $1,688.80; silver added 78 cents to $31.01, and oil gushed higher by $1.30 to finish the day at $93.12.

But by 10 a.m. today, the Dow had slipped more than 30 points, or 0.23%.

Some Wall Street analysts were quick to warn that the fiscal cliff euphoria will die out by next week, and that yesterday's rise was nothing more than a short-term relief rally.

"Considering there are so many headwinds facing the economy, including the debt ceiling negotiation in 60 days, the smart money knows the bullish sentiment will be short-lived. The lesson for investors here is 'buyer beware,'" Todd Schoenberger, managing partner at LandColt Capital wrote in an email to FOX Business Network.



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The Best and Worst Stocks of 2012

As we prepare to invest in the New Year, we can learn from the five best and worst performing stocks of 2012 in the Standard & Poor's 500 Index.

While any investor would have loved to know this list a year ago, it's a good guide for 2013. Several of the factors that drove these share prices up and down in 2012 haven't changed.

The best stocks were led by signs of a recovery in housing, a slight return of consumer confidence, and the U.S. Federal Reserve's unprecedented monetary easing measures.

"The sector leaders are what one would expect with the [Fed] policy and with continued monetary injections into the economy this year through bond purchases," Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC, told The Wall Street Journal. "By pumping money into the economy the Fed boosts consumer confidence-and spending-which one would expect to boost consumer and financial shares."

While the leaders' success was tied to central bank actions, the biggest losers simply stumbled from their lack of innovation, inept management, and failed business models.

Best Stocks of 2012

Here are the best performing stocks in the S&P 500 for 2012:

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Stock Market Today: Holding on to Fiscal Cliff Deal Hopes

The stock market today (Thursday) was quiet on the open as investors waited on the sidelines for a fiscal cliff deal update.

About a half hour into trading, the Dow Jones Industrial Average was off 12 points, the Standard & Poor's 500 Index was lower by 2 points and the Nasdaq gave back 3.

Sen. Harry Reid, D-NV, gave a mid-morning press conference to warn we are likely to head over the fiscal cliff. All eyes remain on developments, or lack thereof, on Capitol Hill. If Democrats and Republicans don't come to some kind of agreement by New Year's Eve, the slowly recovering U.S. economy will be struck with some $600 billion in tax increases and across the board spending cuts at the federal level that threaten to deliver a 2013 recession.

U.S. President Barack Obama was due back in the White House today to continue negotiations.

Economists say the resilience of equity markets is due to the fact that most market participants are still betting that a deal will get done, if not by year's end, then soon after the New Year.

That is part of the reason that a stronger bearish sentiment hasn't plagued stocks.

"People are expecting some sort of compromise to save the day, so they're hesitant to short the market because news on that front will push the market higher," Mark Helweg, founder of financial tech company MicroQuant, told CNN Money.


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Three Stocks to Buy in Next Year's Most Promising Sectors

Whatever 2013 brings for the markets, there will be plenty of quality stocks to buy - if you know where to look.

Overall, the markets are expected to have another positive year.

A survey of 10 top financial strategists by Barron's projects the Standard & Poor's 500 will close at 1,562 in 2013, a 10% gain from current levels. (By the way, last year's picks outpaced the broader index by 6%.)

That would follow modest gains in 2012 of 13.5% for the S&P 500 and 8% for the Dow Jones Industrial Average.

For next year, Wall Street's top guns predict certain sectors of the market - technology, industrials, and energy - will lead the charge higher. Companies in more defensive sectors like consumer staples, telecoms, and utilities, will be laggards.

So let's take a closer look at three stocks to buy from among these favored sectors that should be an excellent place for your money in 2013.

Stocks to Buy in 2013: Cheap Tech

Tech stocks are hugely profitable and as a group currently carry a forward P/E ratio of about 11.

That's cheap versus historical levels.

Tech is also a bellwether for when companies start to invest capital.

"When we get an upturn in capital expenditures, it will show up in tech first," Barclays' Barry Knapp told Barron's.

One stock to buy that has a rock solid balance sheet and a mountain of cash is Cisco Systems Inc. (Nasdaq: CSCO).

Once the world's most valuable company with a market cap of $500 billion, Cisco's shares sank sharply when the tech bubble burst in 2000.

And the stock is still dirt cheap, trading around $20 a share, roughly 10 times next year's earnings. Plus, the company is sitting on more than $48 billion in cash, worth about $9 a share.

With a dominant market share of 60%, CSCO is the de facto choice in the switching market.

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Why Japan's "Lost Decades" Are Headed to America in 2016

It's only been a little more than a week since Shinzo Abe won election as Japan's latest Prime Minister in a landslide-election victory and the pundits are already lining up telling investors to "buy Japan" because it's "dirt cheap."

The hope is that Abe's promises of fresh stimulus, unlimited spending and placing a priority on domestic infrastructure will be the elixir that restores Japan's global muscle.

As a veteran global trader who actually lives in Japan part time each year, and who has for the last 20+ years, let me make a counterpoint with particular force - don't fall for it.

I've heard this mantra eight times since Japan's market collapsed in 1990 - each time a new stimulus plan was launched - and six times since 2006 as each of the six former "newly elected" Prime Ministers came to power.

The bottom line: The Nikkei is still down 73.89% from its December 29, 1989 peak. That means it's going to have to rebound a staggering 283% just to break even.

Now here's the thing. What's happening in Japan is not "someone else's" problem. Nor is it something you should gloss over.

In fact, the pain Japan continues to suffer should scare the hell out of you.

And here's why ...

The so-called "Lost Decade" that's now more than 20 years long in Japan is a portrait of precisely what's to come for us here in the United States.

Perhaps not for a few years yet, but it will happen just as we have already followed in Japan's footsteps with a "lost decade" of our own.

The parallels are staggering.

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Stock Market Today: Biggest Winners and Losers

The stock market today rallied for a second session on hopes lawmakers in Washington will ink a fiscal cliff deal before year's end.

In afternoon trading Tuesday all three major index were sharply higher. The Dow Jones Industrial Average soared some 90 points by 2:30 p.m., the Standard & Poor's 500 Index climbed 11, and the Nasdaq jumped 33. That followed Monday's gains of 100.38 points, 16.78 points and 39.27 points, respectively.

With few economic releases scheduled for Tuesday, investors' focus was pinned on Washington. House Speaker John Boehner, R-OH, and U.S. President Barack Obama continued to haggle over a fiscal cliff deal, with the president making a counter offer late Monday.

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Stock Market Today: U.S. Markets Flat; Focus Shifts to Europe

The stock market today opened quietly in the United States as investors prepared for a very busy week ahead.

Just after the opening bell on Wall Street, all three major indexes were flat.

As Barron's noted, the average daily volume on the NYSE last week fell to 3.3 billion shares, compared with 5.5 billion that changed hands during the same period in 2009, when we were slowly emerging from the Great Recession.

The "fiscal cliff," which could drain $607 billion from the U.S. economy through tax increases and spending cuts, dominated U.S. news and moved markets.

But the fiscal cliff, along with the $16.4 trillion national debt and the growing federal deficit, took a back seat Monday as the focus shifted to Europe.

Anxious market participants kept a wary eye on Italy after Prime Minister Mario Monti announced he is resigning, citing a loss of support in Parliament. Italian bonds plummeted with the yield on the 10-year rising the most since August.

French, Belgian and Austrian 10-years dropped to euro-era lows, and Spain's debt also declined.

Bucking the trend was Greece, where bonds gained after the ailing country pushed further out the deadline for buying back some of its mountainous debt.

Elwin de Groot, a senior economist at Rabobank Nederland in Utrecht, Netherlands, told Bloomberg News: "We are seeing a selloff but I wouldn't call it a panic yet. The auction this week could be an interesting litmus test for investors. This has also created uncertainty for
Europe-wide policymaking."

Italy's deep-rooted economic troubles and political drift have been taken too lightly, a bevy of analysts warned.

As Nomura Securities' Silvio Peruzzo wrote in a note to clients, "Markets have grown too complacent about Italy, in our view."

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Stock Market Today Stalled on Fiscal Cliffhanger

The stock market today was down slightly as concerns over the fiscal cliff continued to weigh on markets.

Shortly after 1 p.m. on Wall Street, the Dow Jones Industrial Average was down 10 points, the Standard & Poor's 500 Index was down about 3 points and the Nasdaq slipped nearly 14.

Of note in the ongoing fiscal cliff saga was U.S. President Barack Obama and Vice President Joe Biden's 10 a.m. meeting with six state governors on how to avoid the looming double whammy of higher taxes and government spending cuts.

The White House guests included three Republican governors: Gov. Gary Herbert, R-UT; National Governors Association (NGA) Vice Chair Gov. Mary Fallin, R-OH; and Wisconsin's Republican Gov. Scott Brown, who is best known for his battles with public employee unions during the election season.

Representing Democrats were Gov. Jack Markell of Delaware, chairman of the NGA; Arkansas's Gov. Mike Beebe and Gov. Mark Dayton of Minnesota.

Following the meeting, President Obama will engage in his first television interview since the election at 12:30 p.m. with Bloomberg News.

Market participants continue to sit on the sidelines as the GOP and Obama administration butt heads over how to avert falling off the cliff.



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Stock Market Today: Gauging the Fiscal Cliff Effect

U.S. markets were mixed and relatively quiet Monday as investors digested the weekend news that fiscal cliff talks had failed to lead to a deal - possibly even derailing earlier progress.

Just before 2 p.m. on Wall Street, the Dow Jones Industrial Average was down 26 points, and the Standard & Poor's 500 Index and Nasdaq were both treading slightly lower.

On the economic calendar to kick-off the busy week were reports on October construction spending, November manufacturing and auto sales.

What's Moving the Stock Market Today

  • Manufacturing Data
Data released Monday from the Institute for Supply Management revealed the U.S. manufacturing sector dipped back into contraction in November. Businesses reined in spending and curbed expansion projects while they anxiously await the looming blows from the fiscal cliff.

The ISM's manufacturing purchasers' index fell unexpectedly last month to 49.5 from 51.7 in October, marking the lowest reading since July 2009. Forecasts were for a reading of 51.5. A reading above 50 suggests expanding activity. Monday's reports gave no such hints.

According to economists surveyed by Dow Jones Newswire, demand has slowed in the second half of 2012. The culprit is the imminent fiscal cliff.

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Stock Market Today: Fiscal Cliff Fears Can’t Stop This 160% Gainer

The stock market today opened flat before turning negative as negotiations on the fiscal cliff have not progressed, outweighing Greece's new deal concerning its debt.

  • Greece Close to Massive Bailout- Late Monday the International Monetary Fund, Eurozone finance ministers, and Greece came to an agreement that drastically eases the terms regarding Greece's repayment of debt and sets the stage for a third bailout. The deal lowers interest rates for bailout loans, suspends interest payments for a decade, pushes the deadline back for final repayments until the 2040s, and initiates a bond buyback program. Greece is also now on the brink of receiving a $44.7 billion loan beginning Dec. 13. "The big challenge now is to implement the decisions," Greek Finance Minister Yannis Stournaras said. "Greece has huge potential." The agreed upon measures aim to bring Greece's debt-to-GDP ratio down to 124% by 2020 from the projected level of 190% in 2014. The deal was accomplished by installing unprecedented measures such as carefully monitoring how Greece spends the debt, keeping an account strictly for debt servicing, and insisting that Greece completes the bond buyback before receiving more aid. "Euro-zone countries have put their money where their mouth is," Carsten Brzeski, an economist at ING Group NV in Brussels told Bloomberg News. "However, it is clearly not a carte blanche for Greece but rather a very tight leash."
  • Fiscal Cliff Talks Resume- Congress returned from its Thanksgiving recess and the fiscal cliff will be at the forefront of discussions this week. After last week's short burst of optimism there has not been any further progress on a deficit reduction deal. But for now consumers seem unfazed by the whole debacle, as today the consumer confidence index reached levels not seen since February 2008. The onset of higher taxes coupled with deep spending cuts was thought to lower consumer confidence, but instead consumers spent a record amount of money through Black Friday and Cyber Monday. The consumer confidence gauge interestingly showed expectations for six months from now, when we could be off the fiscal cliff, unexpectedly rose. The percentage of respondents expecting more jobs to be available in six months rose to its highest level since February 2011, and the percentage expecting to buy a home in the next six months hit a new all-time high. "The consumer is in a better place than several years ago," Michael Gapen, a New York-based senior U.S. economist at Barclays PLC (NYSE ADR: BCS), told Bloomberg. "A lot of the numbers are improving, whether it is household balance sheets or the state of the housing market or employment."
While the market is trying to turn positive, here is one stock surging on a medical breakthrough, another soaring on a settlement with Google Inc. (Nasdaq: GOOG), and a third that is up after announcing a special dividend.

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Stock Market Today: As Fiscal Cliff Talks Begin, Stocks Reel in Fear

The stock market today opened lower on the first day of official fiscal cliff negotiations. The markets have been pressured down all week by worries that no deal will be reached, with both the Dow Jones and the S&P 500 losing over 2.5%.

Not even a new report claiming that White House officials are in advanced talks to replace the sequester cuts could lift the market today.

  • Fiscal cliff deal could be close- As the president meets with Congressional leaders today, there is a new report out hinting that a deal involving partially going off the fiscal cliff is in the works. The Wall Street Journal reported today (Friday) that White House officials have discussed a plan where smaller spending cuts and fewer tax increases would be made. The idea is to postpone the majority of the cliff and have "targeted" cuts and tax increases. Basically this would delay making tough decisions on the deficit, including actually making major spending cuts, overhauling the tax code, and restructuring Medicare, Medicaid, and Social Security. Instead of kicking the can down the road again, going off the fiscal cliff is something that Money Morning Global Investing Strategist Martin Hutchinson thinks is a good idea. On going off the cliff he says, "Contrary to all of the media caterwauling, that's not a dreadful fate. In fact, it is exactly what we ought to be doing, since it solves 77% of the deficit problem in one fell swoop." To see his full column, click here.
  • Strike pushes Hostess Brands into bankruptcy- In what may be the saddest economic news of the day, Hostess, maker of Twinkies, Devil Dogs, Ho Ho's and Wonder Bread, announced it's going bankrupt. The Irving, TX-based company said that the closing was a result of a nationwide strike and that nearly all of the 18,500 workers will lose their jobs as the company shuts down 33 bakeries, 565 distribution centers, and 570 outlet stores nationwide. "Many people have worked incredibly long and hard to keep this from happening, but now Hostess Brands has no other alternative than to begin the process of winding down and preparing for the sale of our iconic brands," CEO Gregory F. Rayburn said in a letter to employees posted on the company website." The company said it will try to sell its snack cake and bread business with the hope of reviving such brands as Twinkie, Wonder Bread, and a few others.


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With the Fed Out of "Bullets," A Stock Market Crash Will Really Hurt

Hang onto your hats. It's getting windy out there. Stuff is blowing all over the place.

Oh, that's not wind! That's a giant fan.

Well then, that must be why this "stuff" stinks so bad.

What stuff?

How about the Dow Jones Industrial Average falling more than 1,000 points from multi-year highs reached only a few weeks ago?

Or that the Dow has nosedived 5%, ever since the fateful morning last week when we found out that polls don't mean anything, that Republicans don't have memories like elephants, and that Obamarama is still the game we're playing?

Or that the Nasdaq - you know, that tech bellwether index that a lot of analysts believe is our economic canary in the coalmine - is down 10.6% (technically in "correction" territory) since reaching its highs back in late September? Or that it's down 5.5% since the elation, I mean election?

That's not only stinky stuff; it is scary stuff.

Supposedly the reason the market is going down is that we're nearing the fiscal cliff and may be heading over it. But that outcome doesn't worry me.



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Don't Ignore These Stock Market Crash Risks

Wall Street likes to downplay the idea of a stock market crash and the risks associated with a significant fall in share prices, but the truth is that bear markets and sharp price declines can and do happen with some frequency. As investors, we cannot afford to blithely ignore the possibility and potential for a […]

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