Stock Tips for a Volatile Q4 2007 Stock Market

401K People-Beware.
Most working Americans have a 401K. This idea has been promoted for years as a great second income for retirement. The stock market has flourished and is flush with millions of dollars of new money every week. This, in itself,h as increased the price of stock and, therefore greatly increased the fortunes of most 401 K people. This is essentially supply and demand. The greater the demand, the greater the price.

Over the last 10 years, most 401K people have greatly benefited from their fund. There have been a few newsworthy exceptions where investors lost everything. Take Enron or MCI. Anyone who had invested in these companies lost big time, especially faithful employees. They worked hard for their company and invested in their stock. They went to bed feeling great about their retirement only to wake up one morning to find out they now had little,if any retirement. These stories hit the news, but are quickly phased out for new headlines. I know,that was years ago. I know, that was only a couple of companies. And yes,I know, their flight from top company to bankruptcy was very predictable. These companies became very greedy and uncaring about their customers. They put bottom line above everything else and no one else mattered.

What has been happening in the last 5 years? Most companies have become uncaring to their customers. Only the bottom line matters. Stock holders want, and expect double digit returns every year. Stock brokers have become consumed with making money for their clients and no longer care about long term effect. Customers, and in many cases,employees, have become second rate, as only money matters. This has led to our industries going overseas, to now everything is made in China. Who cares about quality control, only cost matters. Who cares about the American employee, when great savings can be attained in China or elsewhere? Only making a profit matters. This dollar only goal has greatly helped the stock market as the bottom line always looks great.

What many companies, and stock brokers, have forgot is the dollar is merely a fleeting object. One day you are a millionaire and the next you could become a pauper. When your only goal in life is to make money, you become a victim of your own desire. You lose objective to what others need and only care about your bottom line. Employees and customers no longer matter. Make money, cut corners, fudge the books, whatever it takes to make your company look good.
Now, we even have an industry that makes money with the click of a mouse. They control billions of dollars and care only for computer figures. No one matters, but their bottom line.

So what if the American people suffer, if their fund makes another million dollars, then the American people are just a casualty. So what if the average American family is suffering, they are merely pawns on the way to making millions. So what if people die as a result of certain transactions, these people are only on a computer, it is not their problem. If a future bet goes astray, and the investors lose millions of dollars, oh well, they did not have to invest in this fund. (How many millions were lost last year on a gamble natural gas would go to $15.00 BTU? This future trader did not care how his bet would affect most Americans, he only cared about making millions. He lost his bet, but his investors lost millions. He did not care as he already made his millions and probably still had plenty if he did not work again.) These people have become so tied in with the bulk of brokerage houses, stock funds and banks, that there is little differention.

This basic greed has become extremely common place. The one thing that history is very specific about, the Grim Reaper will eventually come by and set things straight.

We have all heard of the housing slump and it’s effect on millions of homeowners. Yet, we are told this is merely sub prime and these people did not have to buy a house they could not afford. The flip side of this would be the house prices have risen so much most hard working people can no longer afford a house on the old income versus house expense formula. Therefore the sub prime idea. This was great in the beginning, but greed came in and the sub prime became abused to not only helping the average working person buy a house or upgrade to a bigger house, but to getting people to buy houses on speculation house prices would continue going up. Also greedy individuals starting planning schemes called adjustable rates and short term low rates with pre-payment penalties and other greedy loopholes. This greed greatly helped the housing industry and furniture builders. This inturn fueled the stock market to new highs. This also helped the 401K’s.

What they do not say, is most recessions have started with the housing industry. The housing industry goes into a slump then the furniture stores stop buying and furniture manufacturers lay off and go out of business. This in turn leads to a cut back on remodeling that cuts into home supplier’s business. When these people start laying off, then the employees have no money and can not buy other goods. When enough people get laid off, they get behind on house payments and credit cards. This, in turn, starts affecting the banking industry.

Now, 401K people, you watch the news highlights and see the stock market is setting new all time records and Wall Street says there is no chance of recession. They admit there might be a market correction, but no recession. They insist the stock market is the only place to be and that all the markets will be setting new highs. Wall street says most large corporations are very flush with cash and can not figure out why they do not spend it.

401K people, think about this. There was a recent survey of CEO’s. Most said they expected a market slowdown. A few days later, the economist came out with their own survey and said overall market conditions were great. The CEO’s are setting on great funds of cash and are expecting a market slow down. If you had great sums of cash and were near retirement or expecting a possible lay-off, would you spend your money or keep it for a rainy day?

401K people, a parting thought. In the late 1920’s, the stock market flourished. People were making large sums of money and partied and spent like no tomorrow. Life was good. There was no end in sight to the good times. That was until the crash of 29′! The stock brokers and Wall Street are behaving the same way. Life is good and should not end. So what if there is a sub-prime melt down. Life is good. So what if unemployment is up, life is good. So what if Citi-bank writes off 58 billion dollars for last quarter, life is good. So what if most other banks are also writing off billions in last quarter, life is good. Wall Street is doing fine.

Could the CEO’s, who deal with the public everyday, be seeing something Wall Street does not? Could there be a reason why they are sitting on large sums of cash on their balance sheet? Might it be a good idea to sell stocks, especially hedge funds, and put cash in short term, guaranteed, 6 month or year CD’s or bonds? Remember the Grim Reaper often catches up with those who have become consumed with greed for the almighty dollar and care for nothing else. So what if the stock market drops 500 points, drops 1,000 points- life is good on Wall Street?