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Capitalize on the Falling Blue Chips Editor’s Note: Jonas is back to let you in on what’s really going on in the world of bailouts and blue chips. Enjoy… Buying the Bailouts
There’s a stark contrast between the tone on Wall Street, and the one on Main Street. While our leaders opine that our economy is on the verge of collapse, it’s hard to see the signs if you just turn off the 24-hour news networks. It hasn’t always been this way, of course. On October 29, 1929 the stock market crashed, throwing the economy into a tailspin that the U.S. wouldn’t get out of for a decade. Despite what the soothsayers say, the U.S. isn’t on the verge of a “Great Depression part deux.” That’s not to say that there aren’t serious problems plaguing our economy today. Want to short those fickle financials to recoup some losses from last week? Too bad — the SEC placed a ban on shorting 799 financial stocks. The companies on the ban list aren’t just stocks like AIG or Morgan Stanley that were teetering on the edge of oblivion… It includes names like T. Rowe Price and Legg Mason (both up respectably in the last couple of months). That’s almost half the stocks in the financial sector! ********************************* Your Automatic Payout Opportunity Insiders have just snapped up 392,000 of their own shares. While still paying a handsome 7% automatic return to shareholders, in the form of cash “paychecks.” That's double what it doled out in 2005. And it says nothing about how much your money could grow just in the value of the shares themselves. This could be the best-combined growth and income stock you'll come across anywhere. Check it out here… ********************************* Where Did All the Blue Chips Go? At the same time, so-called blue chips are dropping off the radar at an alarming pace. Once impressive Lehman Brothers now sports a market capitalization in microcap territory. Fortune 500 companies like Constellation Energy (a hometown favorite here in Baltimore) have seen share prices chopped in half in the course of a week. What’s happening to the blue chips? Congress doesn’t seem to know what’s going on either. Now they’ve scrapped a bad agreement on how to handle doling out $700 billion dollars to stop the bloodbath on Wall Street. Lawmakers have been hashing out the deal in Washington all week. The House votes today on the version the Senate passed Wednesday. Sensible investors are scrambling to figure it all out while their portfolios hang in the balance. One thing’s for sure — the blue chips aren’t quite as blue anymore. But don’t think that there’s only bad news in the markets these days. When the blue chips take a hit, other investments make up the difference. And let’s face it, the blue chips are making the small-caps look pretty good right now. Don’t Bail on the Markets Yet On the whole, most economists believe that the first quarter of 2009 will be a tough one for investors. I wouldn’t go and buy shares in an index fund anytime soon. The Dow Jones and S&P 500 aren’t for me. But that does tell an interesting story to those in the know… There are always investments out there that will make money. Lots of people became wealthy during the great depression as a result of smart investment choices they made. Buying commodities in 1928 and 1929 proved to be a good idea, for instance. Buying stocks after 1929 would have proved to be very profitable as well, especially small-caps. Just take a look at what investment legend John Templeton did during the Great Depression. In the ‘30s he borrowed $10,000 from his boss and bought a bunch of penny stocks. That big bet turned into a $40,000 pure profit. Early investors this time around could have an even better opportunity. Finding the right investment is the most important part. History points to small-caps… Cheers, P.S.: We just put together our four favorite penny stocks to play this market. You don’t need $10,000 to get started. Just $200 works. Check it out here… |
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