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.