The Super Fed?

Obama has called for an overhaul of the financial system. What does this mean? Basically, power is being moved around because of the financial crisis. Will it work? Depends on if the plan goes through.

The SEC is, or was, the Wall Street regulator. They apparently did not do their only job and let financial enterprises run amok. As a result, we are in the economical and financial situation that has given the US a disheartening, recession filled year.

Obama wants to give more power to the Federal Reserve. Here is where the problem lies. Many people feel that the Fed will be too powerful. The Fed did a good job with what they had to work with to try and combat the recession. If you burden the Fed with more responsibility, will they be able to continue doing their job efficiently while taking on more jobs? I don't think so.

The Fed should continue being the Fed that is has been for decades. There is no need to give it the jobs the SEC should have been doing. While we need a better regulator, we cannot depend on the Fed to keep us out of these situations. You cannot make cash money when everything you have is in one thing. We should not put everything we have into the Fed just because they did their job. We need to call the SEC out and make them earn their paycheck.

Stuck in a Funk

We have seen the market rally tremendously from the March lows. All kinds of positive information from banks, housing, retail, and consumer confidence have brought the market back around favorably. However, we are seeing a pause now. Why? This is simply a sigh of relief from investors built upon anticipation for what is to come.

The market responded nicely toward positive numbers the past few months, yet, the market seems to have stopped moving. This is because we have not seen any updated numbers. The next part of the rally depends on second quarter earnings. CEO's have suggested the recession is over after this quarter. We will see whether they stick to this view when they give their outlooks with their conference calls.

Now is the time to start taking profits and being cautious. If we see positive numbers, the market will jump even further. If negative news comes out, the market will fall again. Cash money is only made taking profits. Share prices move fast. If you don't act soon enough, the money you seemingly made during the rally will be gone again. I am not saying that I'm expecting bad numbers. Actually, I am. However, I would urge you to be cautious and make good on what you have while you still can regardless of what happens. There is no V shape in recovery. It is a long, drawn out process. Take your cash money before it's too late.

Commodities: The Play of the Summer

Commodities were a household name last year as we saw a rise in prices all across the board. Usually we can see a rise in oil and gas in the summer as people take vacations. We have seen a rise in commodities for the past month. The question is: how long will it stay?

Agricultural commodities probably will cease to have any high, sustaining rallies. The season to buy fertilizer and crop necessities are over. The only way we see a rally here is if oil soars and everything else follows. Look at commodities into winter for any price declines. Next year looks promising as the economy and market get back on track.

Oil is where you want to focus for the summer as far as commodities go. Last year, oil and the market trading adversely. This year, however, we see oil as a reference point for the economic rebound. The price of oil and inventory levels show signs of economic detail. So, as we see prices rise and inventories fall, the recession appears to be reaching an end if we are not already there yet.

You want to invest in oil service companies. These will rise with oil and will still be great companies with great prospects when oil falls again. There are even mutual funds and ETFs that track nothing but energy that are great plays now. Commodities are down 56% compared to a 32% drop in the S&P since prices topped in July. Whether prices should have been so high is an irrelevant question. The fact is that prices will return. There was a lot of money made in that spike. OPEC and investors everywhere are waiting for that return. To make cash money, you have to know where cash money will be at ahead of time. It does you no good to get there after everyone else.

Charts Making the Difference

I saw an interesting segment on television the other day about technical analysis. Technical analysis primarily used charts to make buy and sell suggestions and predict future price targets. This particular segment showed chartists using past stock price data to determine when investors get in and get out for certain stocks. Lately, I haven't exactly used this idea to pick stocks, but I have used an another version. I have been focusing on sectors that will be the first to recover from recessions such as consumer discretionaries, industrials, financials, etc. We have seen jumps in a few of these sectors to confirm these allegations. I flip through Valueline and look at charts of companies from each of these sectors. I usually like to see a chart that has been on a steady incline for the past 10 years. However, due to the huge drop in the market, I have been focusing on companies that been hit hard and have begun to rebound nicely.

What I really want to point out is that you do not always have to worry about fundamentals when trying to pick stocks. In a rally like this, the investors out front are the ones who are focusing on short term movements. As a result, my portfolio is up nearly 50% on the year. I'm not trying to say anything against fundamentals. In a normal market, it is long term fundamentals that will beat out the market. This hasn't been quite the normal market for the last several months though has it? The best investor has to be willing to change when the market does. That is the investor that will be the first to make cash money.