Get Used to Europe Fears

Europe fears are here to stay. The US economy is doing a lot better. We are making all kinds of progression. The problem is that the signs are hidden behind the headlines in Europe. The EU is the biggest problem in the world and will continue to be for years ahead. The market will continue to experience volatility until everyone realizes that their problems are far from over.

The EU seemed like a good idea at the time. It was good for consumers, companies, and travelers. However, it is terrible for economies. Consider the following: Germany and Greece are two very different countries with completely different policies. If Germany, one of the world's largest exporters, were to experience a strengthening economy, interest rates might need to be raised to suppress inflation and keep huge fluctuations in GDP in check. Greece might be struggling with economic growth and needs lower interest rates to help further stimulate the economy. The EU has a single interest rate for everyone. Inflation might run rampant in a good economy or a struggling economy may never see light at the end of the tunnel.

Currency is another issue. Let's say the EU is going strong but one of the countries is having problems. The euro was one of the strongest currencies a couple years ago. If the euro remains strong, a struggling country would continue to struggle as it would be more expensive for other countries to buy the struggling country's goods. Sales would remain suppressed.

Countries in the EU find it easy to trade with each other. Banks are a primary source. A lot of banks in Germany and France have participated in financial transactions with Greece. Now that the Greece government is on the edge of default, these banks are facing the catastrophe of receiving nothing. The EU is so intertwined that if one thing fails then they all will get hit hard. It is the financial crisis all over again.

Fears about Europe are rampant because of the fact that everything is connected. Having one policy for all those countries is nothing but a recipe for disaster. Growth will be limited in some countries while others will get completely left behind. If something terrible happens in one country, you can bet the house that a few other countries will also be affected. Europe and the EU does not get the cash money stamp of approval. One bad apple will ruin the whole barrel.

Do Not Let Dreams Become Expectations

We all dream of getting that new Camaro, retiring on an island, and maybe even seeing the stock market soar. Some dreams, such as low unemployment, hefty consumer spending, and rising home prices, may be slowly changing into expectations. It seems like every month the market is expecting bigger and bigger numbers. I think this was a huge problem today that helped the DJIA sink over 320 points to end the week.

Sure, if you exclude census hiring, the numbers were mostly mixed. Instead of focusing on this month's numbers, why not look at the overall year? Jobs have been added every month this year after rising only 1 month in 2009. Our economy has formed nearly 1 million new jobs in 2010. Another important number is the fact that companies are working their employees longer hours putting many part time workers back on full time status. The economy is starting to walk again, but many people are trying to make it run.

We need to remember that we are not coming out of just any old recession. This was a recession that was on the tail end of a real estate collapse and financial crisis. These are both topics for another post. However, we cannot judge this recession based on previous experiences. Expectations should not be what we want them to be but instead what we think they should be. We have to remember that not all numbers the market does not like are bad. There were many positive things that came out of the report today. They were just hidden behind dreams and did not reflect reality. Do not worry about what the market thinks. Invest how you know things should be. Once the market figures out what is really going on, cash money is right around the corner.

Consumers Looking Resilient

At the end of May, the consumer discretionary sector was the only sector to have positive returns through the previous three months. The market has been largely skeptical of consumers since the recession as savings expanded while spending fell. Consumer spending is what normally drives the economy. We can only expect the economy to fully recover once the spending goes back up to normal levels.

The problem lies with current market pricing. Prices for many consumer discretionary stocks have risen significantly. The sector was one of the leaders in 2009 and is by far the best performing sector this year. But why? Consumer spending is still down and gives no reasoning to buy these companies. Consumer confidence and expectations have been up as of late giving reasoning to get more bullish on these stocks. So now the question becomes, where can we find value after the run-up?

There are a few companies I have traded in the past that I quite like: URBN, ARO, GES, and RL. All four of these stocks soared from March until May like the market. The past month has caused problems for the market opening up buying opportunities all over the place. URBN, ARO, and RL have all done well the past month with only URBN being virtually unchanged. This shows the strength of these companies with a chance to get strong companies showing little volatility right now. I think the real chance to make cash money lies with GES. GES was trading around $50 a few weeks ago, but now it trades at $36. I have owned this company a few times. With earnings just released and the market still trading low, this is a perfect time to get back into GES. You can just sit back and watch the cash money being made this summer.

Invest Your Own Way

The biggest thing about investing is that you have to find your own style. No billionaire got rich by investing in a step by step fashion that everyone knows about. Every style of investing has its own pros and cons. You just have to find one that complements the time you put into it and the risks you want to take.

I have been investing since I was 11. I have changed my approach several times. I have read more about investing while I was a teenager than most people have read in a lifetime. I started out with historical approach. Big companies with a history of dividends and adequate returns. I then changed to looking at nothing at but current returns. I was trying to find companies that were soaring. Each time I made and lost money.

Now I use a mix of those strategies to somewhat minimize my risk while maximizing my return. I find great companies that the market currently loves. I track a company for a couple of weeks before I get in so I know how it trades. The cash money is made when you see a company get hit hard with the market that previously was rolling. That is when you get in because you know the potential.

I have never used any value models. I have used some relative valuation to compare peers when charts look similar. Like I said before, money is made and lost with the market. Losing keeps your confidence from becoming arrogance. It is only worth it if you learn from your mistakes. I have a positive return over the past decade which is more than the market can say. I am only 21 years old. Cash money possibilities are endless. I just invest how I want to in a way that I feel comfortable doing. Never let someone tell you that you are investing wrong.