Is Obama the Answer to Economic Pain?

A lot of people beat down Obama because of lack of experience, myself included. But everyday it seems he does something else that catches my eye, the latest calling out Wall Street bonuses. For this I want to specifically focus on the proposed $819 billion stimulus set to stimulate the economy. The proposal to have 75% of this spent within 18 months is a right move. We cannot continue to wait for everyone to be happy because it is not going to happen. The time to act is now.

The legislation that passed the House called for $544 billion in federal spending and another $275 billion in tax cuts. The spending will create jobs and improve highway and transit projects. The tax cuts will give families up to $1000. The Republicans in the Senate have said they will reject this and propose a smaller bill with more tax cuts.

Conservatives need to wake up and stop thinking about tax cuts all the time. People do not know how to spend money yet you want to just give them more? What will they do with it? I doubt giving people a couple thousand dollars will really stimulate the economy. All they will use the money for is paying off debt. We are in the middle of a credit crisis because large institutions were able to thrive off the weakness of the average consumer to splurge and put everything on credit. Federal spending to create jobs and improve infrastructure is what we need. Creating jobs will give people more money over a longer period of time instead of a one time ordeal to do nothing with. If I am surrounded by debt, why would I spend a stimulus check on new things? Conservatives are being completely absurd and need to be smacked. Unless we reduce umemployment and get a steady stream of money coming in to pay off debt and buy new things, the economy will not improve. Please, all Republican members of the Senate, vote for the stimulus. Your untimeliness of narrowed minded ways of thinking and unwillingness to embrace change will cause further problems before we can get this stimulus off the ground and running.

You Want Some Tech? Well Here's Where It's At

A lot of technology companies have shown a cloudy outlook for this coming quarter. Not a lot of people are spending extra money given the current economy. However, technology is the future and a few companies have been able to capitalize. The wireless industry and handhelds are where the money can be made.

AT&T and Verizon have been battling for the top spot in wireless. With Verizon's recent acquisition of Alltel, it has vaulted to the front. Verizon's fiber optic broadband business is the future and has added more subscribers over the last quarter. It is also aggressively pursuing FiOS TV which will give it exposure to television, phones, and internet.

The main reason I like Verizon is because of its deal with Research in Motion. Sure Apple's iPhone is nice but lets be realistic. It is all they have. With Steve Jobs gone for 6 months, it is all they will have for a while. RIM has been rolling out PDAs and the Storm, which has potential to rival the iPhone. RIM is already around 65% above its 52 week low is a severely depressed market. RIM has the potential to be huge in the future. With the success it has had the last quarter with the Storm, imagine the success it will have once people can afford to buy it.

Ethics Anyone?

I was skimming through the journal earlier and noticed that a vice president of AIG's reinsurance business faced 20 years in prison. Apparently he helped AIG inflate reserves by $500 million several years earlier that caused losses to investors. Anyone surprised? What if I told you he only has to serve 4 years in prison, pay a $200,000 fine, and have a 2 years supervised release. Somehow I am still not surprised.

I am taking a course called managerial accounting. We are currently talking about ethics. We we first started it, I thought it was a complete waste of time. Everyone knows to be honest in their respective businesses. Oh how I was wrong. This is just another example of people being dishonest, hurting innocent investors, and not being caught for years. I realize it sometimes takes awhile to catch these things, but does anyone notice a pattern?

Not only that but look at the sentence. Only serving 20% of potential prison time. This probably help contribute to AIG's collapse and cost investors millions and millions of dollars and all he pays is $200,000. This is wrong! Not only are we lacking in regulation, but we can't even bring ourselves to punish those who are stupid and take advantage of their positions? He got nothing but a slap on the wrist. It is completely shameful to just these things keep occurring and with nothing to say for it. Completely ridiculous! The morals in this country have just been getting worse and no one seems to care. We are in the middle of a complete collapse of the financial system and no one is stepping to the plate.

What to Expect From Energy in 2009

Energy was the hottest sector as oil skyrocketed to $147 a barrel in late July. However, a global recession has severely weakended demand and resulted in oil falling to almost $30 a barrel. Energy stocks have fallen in line with oil yet still offer some upside potential with restriced supply and the eventual strengthening of global economies.

Petroleum and natural gas producing companies offer no short term potential as commodity prices stabilized and find a bottom. However, we could only speculate that these prices will once again increase as OPEC tries to create a floor and economies eventually recover. Only the biggest companies should be bought here. I would recommend Exxon(XOM) as it tops its competitors in most if not every aspect and has been keeping its stock price steady. Conoco Philips(COP) is also a good bet as earnings estimates for this year have remained in line with last year's. Southwestern Energy(SWN) and XTO Energy(XTO) has been consistent performers in natural gas and offer some short term potential as we look for a colder than usual winter.

Oil equipment and services offer a little more potential. Once prices start to rise again, companies will once again be ordering more equipment and will be looking in alternative places to drill for oil. Transocean(RIG) is the world's largest offshore drilling contractor and has lots of free cash. Nabors(NBR) is the world's largest land drilling contractor and offers good long term potential.

Coal offers the most potential as lots of companies have been stocking up to hedge against increased demand and overall prices in the coming years. Coal is seen as a cheaper alternative that is easily transported through rail. Stock prices as a whole in this industry have fallen precipitously but Arch Coal(ACI) and Peabody energy(BTU) look like bright spots in recovery potential.

There are a few good companies that were not mentioned here. As always do your own homework and research before you just accept anyone's thoughts and ideas. Of course these companies might suffer if President-elect Obama has his ideas on green energy carried out. Until companies really start going green, energy industries offer good long term potential as prices eventually recover.

What to Expect From Healthcare in 2009

Healthcare has been the safest play the past year and may continue to be the safest for the next several years. The elderly are the single largest group in America right now. With all the baby boomers reaching retirement, the meds will have to start flowing. You really have to keep a couple hundred thousand dollars on the side just to make sure you can cover all your medical expenses once you retire. Not only that, people are always going to be sick and will keep buying medication. If you only bought one stock, it should be in this sector.

If you want a growth stock, biotechnology is where you need to be. Biotech is a risk however as their products are not assured to pass through the FDA. But with cancer replacing heart disease as the number one killer in America over the next few years, you can expect these companies will be there trying to fight it. Amgen(AMGN) and Genentech(DNA) are two of the largest firms that are good buys on pullbacks. No matter which company you want to invest in, keep up with the patents set to expire and any new drug in the making. If any company is ever allowed to do research using stem cells, buy that stock!

The normal drug industry also looks good as medications don't stop getting bought in a downturn. The trick in this industry is to find companies coming out with drugs that no one else has yet. Gilead Sciences(GILD) has my utmost approval as they have been living off HIV drugs that were the first of its kind to hit Europe. Celgene(CELG) is another that hasn't stopped soaring. They have one drug set to go global and another one with a much anticipated approval from the FDA. This industry is another one of the best.

The medical supplies industry has a lot of great companies. The best just may be Johnson & Johnson(JNJ). JNJ has a highly diversified healthcare product line, a generous dividend, and ever increasing earnings that rarely ever disappoint. And where better to buy these products than CVS Caremark(CVS). CVS beats out competition in almost every aspect.

There are a few good companies that were not mentioned here. As always do your own homework and research before you just accept anyone's thoughts and ideas. This is easily the best sector out there and will be for year's to come with so many growth opportunities. Just make sure you know where drugs stand with the FDA and how much competition they will have starting off. You won't have to look hard to find a growing company, but you will have to keep a close eye on competition and international markets.

What to Expect From Industrials in 2009

Industrials follow the economy closely. This is why they have lost a lot of ground the past couple quarters and why they don't look to gain much in the coming months. Lower profit margins and quarterly estimates can be contributed to the rise in oil, chemicals, and steel prices last year. Now even with these prices at a really attractive level, tough economic times and a stronger dollar have continued to depress these earnings further. Demand is the driver of this sector. With lack of demand in a global recession, growth will continue to subside as manufacturing companies try to regain their footing.

Transportation remains a danger zone. I would advise to stay from auto companies and all those that depend on these companies for sales until some type of stability forms and fear starts to offset. Railroads are the only companies that should even be considered in this industry. However, with lack of demand these companies don't have too much to transport. The railroad's biggest shipment is coal and with Obama's go green campaign, where exactly will coal fit into the plans?
*At no time should airlines ever be owned.

Aerospace and Defense is a sector that had seen growth due to Afghanistan and Iraq. However, we must be cautious given that the Democrats have not been big supporters of the war and a pullout may be on the horizon. Lockheed Martin(LMT) is the largest supplier of military products. They have won numerous contracts from the Navy and Air Force. Should we pull out of Iraq, LMT should remain a decent growth prospect as their F-35 is scheduled to replace 8 different aircraft types.

Manufacturing has contracted over the last several months as the global recession has seemingly hit each up and coming economy. With a stronger dollar, products seem more expensive and have hit sales even harder. A deeply depressed housing market has not helped out either. This industry should be watched from the sideline as we wait for economies to strengthen and demand to increase.

Machinery saw significant growth with the rise in commodity prices last year. But the fall in demand and, in turn, prices have capped the growth on these stocks for the time being. As seems to be the consistent factor, low demand tied to contracting economies have depressed the outlook for these stocks. I like Caterpillar(CAT) as a top growth company as the BRIC nations continue to progress. Deere(DE) is the world's largest manufacturer of farm equipment and is fresh off a record setting year.

Construction is yet another industry with a depressed outlook for the year. Many think this industry turns around in the fourth quarter. I am not sure what will happen to this industry as the economy and credit will both have to improve to jumpstart construction spending and demand. I am not bullish on any of these companies yet. With severely low prices and some hefty dividends, it might be worth a wait for this to turn around. However, low prices do not always equal a bargain.

Conglomerates may be the most attractive companies in this sector as most have been able to manage their risk by diversification. Diversification does have a different definition for each investor. However, most of these companies still have a lot of exposure to industrials in general. I like United Technologies(UTX) and Teleflex(TFX)as both have solid businesses with great dividends. UTX is buying back shares reconfirm their trust in the company. TFX has acquired a cardiac care company to expand into the healthcare industry. Both, however, have significant reliance on their international exposure to keep up growth.

There are a few good companies that were not mentioned here. As always do your own homework and research before you just accept anyone's thoughts and ideas. This is a bearish sector until the global economy recovers. Weak demand and a strong dollar lowers earnings estimates. Be cautious in how you play this sector. Look for diversification and maybe lower international exposure.

What to Expect From Technology in 2009

The tech sector is a volatile one which means it has been a constant ride as of late. This is one that resembles the consumer discretionary when it comes to the economy. In an economic time like this, it is rare to see people spend extra money for newer technology. This creates a drop in sales and essentially earnings estimates. When researching these companies, growth remains most important as we see how each company tries to stay ahead of competition by staying innovative and seeing what the consumer wants.

Wireless technology is what's hot right now. The top companies in this sector will be the ones who come out with the most convenient technology to combine music, internet, phone, etc into a small handheld device. Apple(AAPL) has been dominant so far, but with Steve Jobs' health uncertain, how far will the stock hold up? Research in Motion(RIMM) has shown that it has potential to be a strong competitor in the future. It has begun to convert the conventional blackberry into a touch screen device. When talking about phones and all they can hold, lets look at carriers. AT&T(T) had a surge as it was the only carrier for the iPhone. Meanwhile, Verizon(VZ) made a deal with RIM. Verizon also just completed a takeover of Alltel. AT&T and Verizon are also leaders in broadband.

Moving to the more conventional computer industry, Microsoft(MSFT) is the premier company. Microsoft has no debt and is sitting on billions and billions of free cash. They can buy any company they want to expand into different areas. Microsoft's future rests solely on its ability to innovate and stay ahead of competitors as they have done. It is important not to overlook Hewlett Packard(HPQ) and IBM as they both lead their competitors in their own respective areas of business and personal computers. They have both shown they can each respond effectively to harsh economic times.

The internet remains a decent spot for growth. Google is always a good company. However, it must be noted that consistently high growth expectations will not last forever. Yahoo remains a strong takeover target and should be bought only for M&A speculation. Amazon is a leader is this category as well as retail as people have a need for discount items. This is a volatile and high P/E industry so manage your risk accordingly.

There are good companies that were not mentioned here. As always do your own homework and research before you just accept anyone's thoughts and ideas. This is a volatile sector in which you will have to manage some risks when it comes to new innovative ideas. Look for companies with low debt and promising ideas. Find the products that will set a trend.

What to Expect From Financials in 2009

Financials are a funny sector. Either they are out in front of the pack in a bull market, or they severely lag the market in a bear as we have seen recently. The question is will financials keep dragging on the bottom or will they rally to lead the market out of its slump? I am going to say right now that financials will not be a feel good story until maybe the end of the year. We will have to wait until 2010 to see a true rally and none of these short squeezes or seemingly feel good stories. So if they are going to drag what should we invest in?

I think it is important to get out the fact that credit still hasn't regained its popularity yet so income from interest is not going to be significant on earnings statements in the coming quarters. Also we have to remember that the companies doing all the acquiring (BAC, JPM, WFC) will still be absorbing losses from the respective acquired companies. This will dampen earnings for another quarter or two until the businesses are fully integrated.

There are no specific companies that really just stand out. However, with the government helping out most major financial companies, it would be wise to sit back and watch how the companies respond to the assistance. See what they do with the money and if its in the best interest of customers, shareholders, or management. Dividends are also another area to watch. Have these companies had to cut their dividends(most have) or will they keep raising it? At no time in the next 6 months should you just jump into financials. Start to look into building a small position into the third quarter.

As for specific companies to invest in, a few could stand out once this bailout business does what its supposed to. Morgan Stanley(MS) and Goldman Sachs(GS) both stand out as they are the last of the brokerage firms. What is more important is that both have become bank holding companies. JP Morgan(JPM), Bank of America(BAC), and Wells Fargo(WFC) each have to swallow their respective acquirees balance sheets. WFC stands out here as they didn't quite need the government's help to acquire Wachovia. BAC will become the largest bank if everything goes as planned. BAC and JPM will both expand into the mortage area with Countrywide and Washington Mutual being acquired. Credit still remains a problem as nobody wants to lend except for the government. Once credit thaws out look for Mastercard(MA) and Visa(V) to stand out.

There are good companies that were not mentioned here. As always do your own homework and research before you just except anyone's thoughts and ideas. This is the sector you will have to be patient with the most. Resist the urge to buy into any rally and wait to see how banks respond to what has happened over the past several months.

Earnings Season: Expectations Too High?

Previews of the upcoming earnings season has already kicked off as Time Warner and Intel have started throwing around numbers. The shares of these companies are off as it seems investors may be suprised that earnings will not be as high as previous years. May I remind everyone that these earnings are for the fourth quarter. Remember the fourth quarter? The quarter where the market nosedived. Many companies slashed prices to try and stay in the black. Earnings estimates were cut. Why does it seem as if investors may be forgetting the not-so-great news that is going to be confirmed over the next several weeks? It will be hard to find a company that actually truly surprises on earnings. When I say truly surprises, I do not mean a lower loss than expected. I am talking about positive signs that the company may have been able to throw off much of the pessimism that we have seen. To get over this bottom, we have to take the upcoming news in stride and look forward to a strengthening economy. We have to realize that losses will happen. There will be a few more writedowns. We need to remember that we are coming from a trying quarter. Earnings will not come in much higher than the estimates. We need to take in the new year and see where we are headed this year. The last one is gone. Remember, learn, and then look at this year as a new experience and one to grow in.

The New Growth Spots

Over the last 6 months, growth has been rarely seen in any industry as the markets closed significantly down for the year. Healthcare has remained strong as it is one of the few if only stable sectors. But when looking for growth where should we look for 2009? I believe the market has reached a bottom as have most sectors. The worst is behind us. Now we just wait out the recession. Banks will remain volatile as losses are absorbed into balance sheets and takeovers and mergers are finalized. It will still be awhile before this become a safe place to try and invest. But as for now the risk remains too high. Commodities and energy have seem to begin a rebound from their lows and look like it could be the main growth spot as prices will inevitably pursue their previous highs. Industrial growth will remain slow as they normally follow the economy. Most of your portfolio of stocks should remain value based as volatility does not just stop and economic factors could see any array of numbers for a given month. Ease yourself into growth stocks as these could outperform over the next two years as the market rebounds and consumer confidence gets its mojo back. Be patient and always do your homework before jumping on any bandwagon.