I'm Back, Poorer but Wiser

OK, I know what you are thinking. How credible can I possibly be after calling a market bottom at the end of July 2008 and predicting Google's stock price going to $725? At first glance, not very. But anyone who follows financial media might realize that Jim Cramer of CNBC's Mad Money made similar predictions around the same time. My bad for being a "Cramer parrot."

What I've learned in the 4 months since my last blog post: Trust Yourself. Make your own opinion. Figure out what is going on, evaluate it, and make a plan to profit from it. But you need to do it without being strongly influenced from certain media personalities, journalists, and podcasters. You need to assemble your own trading and investing rules. You need to develop your own plan. Most of all, you have to be able to flip at the first sign of trouble that your plan isn't working.

Put reasonable stops on your holdings. Hedge with options or reverse-index funds. Do some short-selling. Stay in cash. All of these things will defend your position in the market and will keep you from losing gobs of money. Knowing a company is fundamentally sound and holding its stock while the market takes it down is not a sound investment strategy. Fundamental research alone will not work in a bear market. Technical analysis and hedging will limit your losses and may even produce profits.

What amount of money do you think is reasonable to lose in a given day/week/month? $100? $1000? Day after day? Week after week? Month after month? Isn't the goal of investing to make money? With that goal in mind, a reasonable amount of money to lose is $0! Have you achieved that goal? I haven't. I went through the recent market downturn brainwashed. I didn't hold any position all the way through, BUT I did keep trying to find new long positions that would work and mostly failed with those. I didn't figure out how to hedge with options until mid-October, and that has helped. I made a few quick hits buying calls and puts, but mostly I have hedged my holdings by selling calls on those positions. To date, I have not realized a loss on any of them, and in fact have profited handsomely from a few.

Jim Cramer insists in his books and on his show that you never sell calls. His way of thinking about selling calls is that it limits your upside. That's fine, in a bull market. It may be self-defeating if everything is going up all the time. But that has not been the case since 2008 began, and (here i go again, making predictions) I feel the market will be range-bound for the foreseeable future (months). Selling calls is ideal in a range-bound environment. There is a right time, a right price, etc. for the proper call-selling strategy, but I won't get into that here. There are a few books out there that outline option strategies, there's no need for me to spew them out here.

In summary, my suggestion to you is not to listen to others, or at least not to blindly follow every piece of advice they give you. If you followed mine to the letter, you would have lost money. But you should consider advice given, and how it would fit into your investing style. Just because someone else made a lot of money following a particular strategy doesn't mean that it's going to work for you, and work for you in this market. There are a lot of good tidbits out there, but it's ultimately up to you to put them together to make money in your portfolio.

Google is Ready to Ramp

Google stock (GOOG) is going to $725. That's my prediction, so you might want to buy soon.


Google is more than search, in case you haven't noticed. It's full of free applications that anyone can use, and is adding functionality all the time. These days, you could get a "white box" computer, load it with Linux or Windows, and get all of your productivity software free from Google. They have the infrastructure in place. All you have to do is use it.


Sometime between now and the end of the year, Google will release its Android mobile platform for cell phones. Again, freedom of choice is the basis, and people will adopt it if it works well. And there's no reason not to expect it to work well, because Google is quality.


Next Google will be targeting ads to you even better with its mobile platform. Your cell phone is basically an electronic extension of you, and this device is best equipped to provide the most targeted ads for you personally. You will click on the ads. It's just too easy.


Maybe someday Google will be similar to Microsoft, a huge lumbering corporation with little or no growth and a stock that stays fairly stagnant. But those days are not yet upon us. At least not this year or next.


Keep in mind, Google at $725 is a 25% gain for you. That's not bad. Sure, there are other stocks out there that could give you a gain like that over the next 6 months or shorter but what's the risk? Google is awash in cash. Your money is likely safe in a company with no debt that just keeps on growing.


Google is alive
Going to 725!

This is the Market Bottom

Finally, we can all relax. The stock market has finally found its bottom. It's time to dust off your cash that you made when you sold all of your stocks at the market top in October 2007, and put it to work in the stock market once again. You can invest in most of the same stocks you were in last summer all over again, now at bargain-basement prices. It's the only way to reap the rewards of the imminent stock market recovery.

For example, we can once again return our money to Research in Motion (RIMM). After recently experiencing a pullback, this stock is poised for another significant increase in value. There are three major Blackberry product releases in the pipeline: the Bold, the Thunder, and the Kickstart. All of these product launches will give Wall Street a reason to trade this stock by the mega-millions. Apple's iPhone (AAPL) is yesterday's news. Now it's Research in Motion's turn. I've got my money on it.

But why, you may ask, do I feel the whole market has bottomed? History shows that recovery from a bear market will not begin until we have bank failures. Without government intervention, both Fannie Mae (FNM) and Freddie Mac (FRE) would likely have gone the way of the dodo. We already lost Bear Stearns. But the real turnaround event was this: Merrill Lynch (MER) issued a huge offering earlier this week and their stock price went UP that day! Intuition would suggest that the price should go DOWN during such an event. But the market actually had more than enough bulls for the offering that they created price appreciation as well. That's an extremely bullish sign.

Never mind that the Dow fell over 200 points on Thursday. Most of the companies in the Dow and other large-cap companies have been reporting positive news. The market is down because of the GDP and jobless news. These are backward-looking economic indicators, while the stock market itself is typically 6 months ahead of the economy. It won't be a smooth climb for stocks, but it will be a net positive climb from here on out, at least to the end of the year.

Move over bears, the bulls are back in town.

Ending the Chrysler Lease Program: The First Step Toward Extinction?

I've read some talk out there in the blogosphere and heard around office water-coolers about how Chrysler is making a big mistake by ending their leasing program. At first I was inclined to agree, as I feel American automakers need to take advantage of every avenue available to move cars. I thought that eliminating their lease program must be the first step in a plan to shutter Chrysler's doors forever. I thought they were closing a door of opportunity. I was wrong.

In fact, eliminating Chrysler finance should prove to be a very healthy step on its road to recovery. Sure, people who work for Chrysler finance will be out of a job, but business is business. Answer this question: Is Chrysler an automaker or a lending institution? Hmmmm. I believe they need to focus their energies on designing and building new cars. The Chrysler prestige is fading quickly, and the time has long since past for getting back to basics.

Does anyone remember the Chrysler that Lee Iacocca inherited as CEO? I'll paraphrase for you here. During his initial days at Chrysler, he was flying into one of their manufacturing plants in a helicopter. There were miles and miles of cars parked outside the plant. Mr Iacocca asked, "When are these cars due to be shipped out?" The reply came, "There currently is no shipping date for these cars." Mr Iacocca was confused. "Well, aren't there dealers waiting for these cars to arrive?" "No," came the reply, "there are no orders for these cars." A chill ripped through Mr. Iacocca's body. "You mean they're just churning out these cars, with no plan as how to sell them?" The feeble response: "Yes, sir."

Mr. Iacocca took on the formidable task of transforming a company whose mindset was centered around complacency and business-as-usual into one where not a single car would be made until Chrysler found out exactly what its customers wanted. He made his case to the federal government and obtained financial assistance to return to profitability. Today's business conditions and market environment sure seem oddly similar, don't you think?

Chrysler needs to get back to the business of innovating, engineering, manufacturing, and selling cars and trucks. That's what they are in business to do. Let the banks and financing companies handle the leasing details. That's what they are for. A company in trouble needs to trim the fat, and the financing arm seems like a great place to start. Lee Iacocca turned a bloated, directionless company into a lean, mean, car-making machine over 25 years ago. Hopefully, Chrysler is finally on the right track to doing it again.