Figuring Out When to Buy and Sell - Annotated Bibliography Example

Running Head: INVESTMENT ARTICLE CRITIQUES Investment Article Critiques Investment Article Critiques Blumenthal, Karen (2009) Family Money: Identifying The Blue Chips, Post-Meltdown Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 14, 2009. pg. D.1 In this article Karen Blumenthal analyzes the once solid ground of Blue Chip stocks and how that paragon of financial virtue has taken a complete reevaluation in the current financial meltdown being experienced on a global level. Once considered “too big to fail” these companies have seen catastrophic failure beginning with Enron right down to the banks falling and being absorbed currently. As she state, “So many big names have tumbled and the short-term outlook is so dreary that its hard to have confidence in todays giants of industry” (2009, p. D1). She synthesizes what the market pros are looking for now, since Blue chips have fallen by the wayside for many investors. Cash Chips, Companies having a strong bottom line, the ability to pay all their bills and have a real net profit left over. While always a mainstay for many evaluators of good companies, this had been replaced by profits on paper rather than in reality. Macro Chips, Companies that have the same qualities as Cash Chips, but their managers are proactive and consistently watch the external trends to keep pace with market conditions, rather than trying to pick up the pieces later. Brand Chips, these stocks are usually familiar names to most consumers, Wal-Mart, Kellog, etc. This brand recognition is considered a competitive advantage and touted by such analysts as those at Morningstar. Finally there age Big Chips, here it is the case where value still lies in the tried and true formula of market value, “ the number of shares times stock price -- is still a good indicator of what investors most believe in” (2009, p. D1). This is often especially true in time where small cap stocks outperform big cap stocks, such as is currently the case. This article helps to realign investor sights from focusing on the unreliable certainties of the past and concentrate on the more reliable possibilities of the present. Henriques, Diana B. (2009) Massachusetts Accuses Reserve Fund of Lying; [Business/Financial Desk] New York Times. (Late Edition (East Coast)). New York, N.Y.: Jan 16, 2009. pg. B.5 In this Article, Henriques investigates the allegations that Massachusetts State Regulators have accused the Reserve Fund of blatantly lying to shareholders about the security of their investments only hours before the fund was forced to disclose that their share price had fallen below one dollar. They alternately warned the larger shareholders allowing them to sell before loosing too much of their investments. After the news hit all the other shareholders they began to liquidate their holdings in the range of the hundreds of millions of dollars, forcing the government to step in to stop the panic and try to mitigate “the complete evaporation of short-term corporate credit” (2009, p. B.5) The primary cause for initial concern was the large stake the fund had in Lehman Brothers, over $785 million worth of assets to be exact. In spite of Lehman’s dire economic news the top Reserve fund managers assured investors that the fund would not “break the buck” and that all redemptions would be honoree on a first come first serve basis. That claim was made public in an e-mail message circulated by reserve sales for and posted on their web site. Bruce R. Bent II, the Reserve chairmans son and a senior management executive was the author of the message. William F. Galvin, the secretary of the commonwealth and the senior securities regulator in Massachusetts stated that these assurances, "contained outright falsities which the principles of Reserve Management knew at the time were not true" (2009, p. B.5). In fact after the share fell below the one-dollar threshold, the Reserve complex had to freeze all redemptions and the process of liquidating all of the assets money fund’s began. This has left tens of thousands of shareholders still waiting for a settlement and final distribution of their assets. Jewell, Mark. (2009). Fund Managers Keeping Tabs On Small-Caps. The Washington Post. Washington, D.C.: Jan 25, 2009. pg. F.4 Mark Jewell analyzes the reasoning behind watching small cap stocks, generally those with market capitalization between $300 million and $2 billion, are the ones to watch for the earliest turnaround during a recession. He sites interviews among three top small cap find managers, Eric Cinnamond, Intrepid Small Cap Fund, Brad Evans, Heartland Value Plus Fund, and Jonathan Vyorst, Paradigm Value Fund. Cinnamond and Evans, while cautious in their recommendations for Energy stocks, they note that while some industrial stocks like steel my dry up completely, energy is not something as Cinnamond states, “where youre not going to just turn off your heat or stop driving” (Jewell, 2009, p. F. 4). While there will certainly be some reduction there is also some stabilization in the fact that consumers will not shut of the fucet entirely, just a more gradual reduction of use. This of course may make prices rise to counter the effect and that creates a entirely different scenario that is not addressed in the article. Evans also notes, as do many others, that it is time for fund mangers to do their homework and not simply rely on corporate balance sheets for their information but address the wider market concerns as well. Vyorst is more concerned looking at the companies that have successfully reduced their risk and exposure to the bad credit / debits and the bursting housing bubbles. He does not want ot bet on specific sectors at this time, but take companies individually and make judgements based on their balance sheets and not necessarily their current situation, monitoring the way they are situating themselves for the future. Jewell notes that as for the future, most analysts are keeping a close eye on small caps, but it would be more prudent to view the economy on a more open basis watching for environmental rather than simply just fiscal changes. Stewart, James B.(2009) Common Sense: Figuring Out When to Buy -- And Sell -- Stocks These Days. SmartMoney. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 14, 2009. pg. D.1 Buy Low – Sell High. According to James Stewart there have been several occasions , even in this market, where this Common Sense approach came into play. He notes that as recent as the Week of January 5, 2009 the rally in the NASDAQ, which he admits lasted only a few hours, was just such an opportunity. This supports his somewhat over optimistic claim that we are in the middle of a bull market. The trouble with his philosophy is that one has to be ready on a moments notice to buy and or sell at the low or high. Day traders may have this under control but the typical investor with another day job would be hard pressed to accomplish this. Stewart quickly addresses this situation by relating his own delay in actually cashing in on the situation. Where many investors thin they would have till the next day or so to make a decision, he had also missed the boat. He advocates re-calibrating the old Common sense thresholds. He not4s that as the NASDAQ bottom line declines so has the percentage of sell levels and a more fastidious approach to the market must now be maintained. However he notes that this may not be available for most investors. His prognosis for 2009 rides along with most of the bleak chirping of other investment professionals; he at last he ends with the tried and true advice of financial planners worldwide, “As I have throughout the past year, I recommend a disciplined, long-term approach that rests on faith in the continued ingenuity and productivity of the American -- and global -- work force” (2009. P. D1) So while there is some positive glimmer in what really is an unfeasible approach to the intermittent bull market that Stewart proclaims, he tell us nothing new or gives us any new advice for weathering this storm. Strauss, Lawrence C. (2009) Barrons Insight: A Pro Thinks the Worst Is Past But Isnt Betting on Recovery. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 11, 2009. pg. 3 Strauss’ article is not absolutely pessimistic, but lends a shade of realism and common sense to the present economic situation. He gleans his information from Laszlo Birinyi, a longtime market watcher who is president and founder of Birinyi Associates. Birinyi feels that what has worked in the past may not work in the present unprecedented situation. While there is a certain amount of recovery and stabilization that can be predicted, there is no quick fix or not overall trend to signal a recovery at this time. Birinyi also admits that long term prediction, even 12 moth predictions, are notoriously unreliable due to the plethora of information coming into the scene. He states that this market will be "driven by that days news" and that "trends are going to be difficult to discern. But at the end of the day, we dont think the market is going down from here" (Strauss, 2009, p. 3) Unfortunately current news in February of 2009 is proving him a little over optimistic as yet. Neither the Stimulus package nor any “good” news released in the media has had the power to overtake the bank closing list that has been mounting or the dire reports form most companies and the millions of job losses that have occurred. Birinyi does note that this has leveled the playing field as far as stocks are concerned. No longer are there the Big Blue IBM stocks that were always held as mainstays, all stocks, publicly traded companies are now being viewed on their own merits rather than assumptions about being to big to fail, or brand recognition. As he states, "In the past, they have been the focus of attention and been able to pull the rest of the market ahead. But nowadays, a stock like an IBM is just another stock, and it doesnt have the glamour or the halo effect these stocks were given in the past” (Strauss, 2009, p. 3). So the glamour days are over, now it is time to review the real facts about companies and their bottom lines. References Blumenthal, Karen (2009) Family Money: Identifying The Blue Chips, Post-Meltdown Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 14, 2009. pg. D.1 Henriques, Diana B. (2009) Massachusetts Accuses Reserve Fund of Lying; [Business/Financial Desk] New York Times. (Late Edition (East Coast)). New York, N.Y.: Jan 16, 2009. pg. B.5 Jewell, Mark. (2009) Fund Managers Keeping Tabs On Small-Caps. The Washington Post. Washington, D.C.: Jan 25, 2009. pg. F.4 Stewart, James B.(2009) Common Sense: Figuring Out When to Buy -- And Sell -- Stocks These Days. SmartMoney. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 14, 2009. pg. D.1 Strauss, Lawrence C. (2009) Barrons Insight: A Pro Thinks the Worst Is Past But Isnt Betting on Recovery. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 11, 2009. pg. 3 Read More