Tuesday, October 7, 2008

How to make money in this big stock market depression

In my last article I told you how I made 40% profit in the mast months while nearly everyone lost money and a lot of companies went bankrupt and some more will go bankrupt soon. This last article and my profit was based on pessimistic point of views, but we gonna switch over to the optimists right now!

Right, you read it: We need to become optimists in this current environment!

I can understand people who ask now "Why the hell? Everything is going down! Nothing will be as it was anymore! We will all die! The capitalism is at its end!"

I am sorry to disappoint everyone but: This is f**** not the case!

Sorry for the rude expression, but sometimes you need to make a point. And my point in the current situation is pretty easy. Buy, buy and buy. Well, be selective of course and don't through cash out the window. Let me tell you what I just did:

So as you can see: be selective. What many people might ask right now is "Why did you buy those and not others?"

First of all, I like high-dividend companies and the Deutsche Telekom AG is one of those. Besides the fact that it market leader in Germany for broadband Internet connections and landline telephones (and many other countries) it also owns the worldwide operating T-Mobile brand for operating mobile telecommunication services all around the world. T-Mobile is market leader in Germany as well and it is the 4th biggest mobile network carrier in the US but one of the most technology pushing one (see the Google Android powered G1 phone and the many exclusive BlackBerry releases over there). With a current dividend of around 7% is quite a deal. Moreover, the company is kind of backed up by the German government.

Secondly I like stocks with a lot of potential in its price. This counts for Deutsche Telekom AG as well as for AMD. Well, more for AMD as the stock price dropped a lot over the past years. This was partly caused by AMD's takeover of ATI (a major graphic card maker) as well as structural and market influences. AMD's core business is developing, manufacturing and selling processors for computers which makes it the only real rival of Intel
(market leader in processors for computers). While the price is extremely low at the moment and the company was in serious troubles over the past months I think "They will never go down!". AMD will come back to its highs from some years ago which were around $40. Therefor, I bought them.

Moreover, Deutsche Bank AG is one of the few bank I really trust. Blame me if it turns out I was wrong but right now I see some chances here and I went into it. Given my German background (respectively passport) it is quite obvious that I am bit German orientated at the moment but that does not mean I don't look further over the sea.

What else can you buy at the moment? This is one of my first direct stock recommendations I do here and believe me; I don't do this often so take a serious look at it:
  • General Motors
    It is still a good company and the price is so low it needs to be bought!
  • AIG
    Saved by the US government / FED this is a real opportunity in the US financial market.
  • Deutsche Lufthansa AG
    This strong company flies you around the world and comes with stable earnings and profits. It is a bargain right now as they don't really suffer from the financial crisis but the falling oil prices give airlines more potential for growing profits.
That are current recommendations and I don't take responsibility for any development in those stocks. However, please feel free to quote me :)

I guess you didn't go short in oil

Don't wanna say "I told you so!" ... :)

Some months ago I anticipated that the Oil price will go down (see Why you should go short in Oil!). Everyone (like me) who listened to me would have bought some put options in oil and just waited. That's what I did and you should have done this too. I made some fluffy 40+% profit in the past months which could have shown on your bank account as well. It was actually pretty easy to anticipate a decline in oil prices. As I described in the article I mentioned before you had too many optimists in the market who were all saying things like: "The price is gonna rise.", "A barrel oil is gonna cost $200 soon.", "We will never go back under the $100 barrier - that one is gone forever.", and so on.

The fact that there was no pessimist in the market anymore made me a pessimist. One of the greatest investors in stock market history is André Kostolany who once said:

"When the last pessimist turns optimist you need to sell!"
(not literally, but I think you get the meaning)

This exactly happened.

In addition to the missing pessimists we had a general market environment which made declining prices more than possible (keywords: financial crisis, mortgage, lehman brothers, etc.). So all kind of got together and just finalized in the correct conclusion that the oil prices needed to fall.

The last time for today: Told you so! :)

OK, enough with that. How do we get out of this mess now? Most people must have lost some money in their long positions but I hope you still got some cash at hand. Stay tuned for the next article when I tell you how you can make millions out of the current situation.

Sunday, June 8, 2008

Why Politicians Never Say Things That Have A Positive Impact On The Markets

The G8 is meeting in Japan and the Japanese trade minister warns of a recession based on the oil price. (Source Bloomberg)

What happens then? Of course, the markets go down. The oil price climbs and will also climb more and more over the next days due to the impact of the politician's thoughts and their need for publicity. This is not good for the markets at all.

However, this does not affect my thoughts about the oil price and its future development. It even encourages me in my thoughts about that. The markets are going crazy about oil. Nearly every single trader will tell you these days: "The price is going up - you need to have it!".

That is exactly what you should not do!

As far as the history books are telling us, politician's statements about markets and market prices never ever had the impact they thought it might have. "It always turns out different than expected" a very good old investor said some time ago. Even though most people don't want to believe that, but it is true: the price might climb some more days - and that's it.

The day all pessimists turn into optimists is "the beginning of the end". In this case: the beginning of falling oil prices and the beginning of rising option prices for me :)

Saturday, May 24, 2008

Why you should go short in Oil - I do!

Well, most people right now believe the oil price will climb more and more in the next months and years. Even though it seems not to be supported by any fundamental data. Supply and demand are well balanced right now but we see it goes more and more to the state that there is more supply than demand on oil. This is technically not a good base of facts for investing into oil.

Furthermore, we have seen a huge climb on oil over the past years which even accelerated the past months. Below is a 10 year chart of the Brent Crude Oil price indication in Euro.

It is being said: "When the last pessimist becomes an optimist you should go out of your long positions!"

I still see some comments of - so called - experts who tell us this price is too high and it will go down. So there are still some pessimistic views on the oil price which means the rally might not be over yet. However, those people are getting less and less every week. This actually leads us to the conclusion that rally is getting to its end. Perhaps sooner than later!

Fortunately, I don't have any positions in oil at the moment so nothing can go wrong for me. But I would not be me if I would not consider to take advantage of the current situation by earning some money. So to be honest: I am planning to go short in oil and get some puts on this.

13 Steps Plan to Make Money with OIL

  1. Be prepared that the oil price crash will not happen tomorrow or next months.
  2. Find a good OIL PUT Option with a longer runtime (at least 4 or 5 years).
  3. Reserve a bunch of money for this investment.
  4. Make yourself clear that you might loose all of it.
  5. Split it into 3 equal parts
    1. 1/3 for an initial investment
    2. 1/3 for a second investment (in case it is needed)
    3. 1/3 for a third investment (in case it is needed)
  6. Buy the oil put of your choice for 1/3 of your investment money, NOW!
  7. In case the oil price is climbing more, use the second 1/3 of the money to get more puts as the price for the put will fall when the oil price climbs.
  8. Repeat the previous point if needed.
  9. Patience is your Friend: Be patient and don't get nervous.
  10. The oil price will crash. Sooner or later.
  11. Your put's price will rocket boost through the ceiling.
  12. Sell your put when the oil price fell under 70 ($110).
  13. Have a nice party with your friends. They might have lost the money you just made.
Always remember: 9 out of 10 people playing (I say playing because it is playing) with options loose their money.

Thursday, May 22, 2008

Market Thoughts from a Ubiquitous Mind for Profitable Investment

What will this blog be about?

This blog is meant to be the freeway of Jack's thoughts to the world. He will publish his thoughts on the global economy and current trends which take influence on his investment thoughts. You can use these thoughts for your investment choices if you want, but
Jack cannot give any guarantee on this - of course :)

Who is the hack is the author? More importantly: What he thinks he might know about investing?

Jack started investing in the stock market many years ago. He lost a lot of money already but he didn't stop investing and therefor, he also made some money over there. Over the past years his investing strategy turned into a strategy which can be summarized in: Don't doing what everyone does - and make money with that.

In case you are interested in getting
Jack's thoughts with an ease to your feed reader, please feel free to subscribe to this site's feed: http://feeds.feedburner.com/MarketThoughtsForProfitableInvestment