All Posts Tagged With: "investment industry"
Signs a Stock is Going to Fall
Michael Bowler | RSS | Thu, Jul 23 2009 | 2 Comments
Nobody has said it in so many words, but we are at the end of the recession. In a time when the economy is going to rise and fall as it stabilizes, it is important to know when a stock is about to falter. Everyone knows the basics. Avoid investing in companies that generate sub par earnings, has weak cash flow, or a less than adequate balance sheet. However, there are other nasty characteristics a stock can hold that will drop it into the toilet in inclement economic weather. Keep an eye out for these other symptoms that show an avalanche ahead.
It is not uncommon for a company to lower their earnings guidance. That can happen for a number of normal reasons that happen in the cycle a company goes through: slightly dropped earnings, a weakened economy, etc. Just make sure that the company in question clears the bar they set in that quarter. Why is that? Of course you’re more worried about the value of the stock than the revenue earned from them. Unfortunately, some shareholders, especially those with controlling interest are so worried about the revenue coming in and the performance of the company that value will go down as people sell for lower and lower prices to get out if they do not have faith in the management of the corporation.
It is also not uncommon for insiders at a company to sell off some shares, especially if life changes they are undertaking require quick funds. Other times, you may be looking at an insider that just wants to make some quick income or diversify their holdings. Sometimes if a bunch of executives all dispense of some of their shares at one time, you are looking at a disastrous future. You begin to wonder, “What do they know that I am not aware of?” Be very wary of executives selling at or near their low points. That tells you the executives think their money is better elsewhere, and yours very well may be too.
Another signal that a stock may be in trouble is when a company abruptly discontinues its guidance toward the investment industry. This may signal that the company has no idea or expectation to have an idea of when earnings could come in. This may also have a minor signal in the way of product or service diversification. The company and its stockholders are in trouble if the company cannot keep up with the accelerating market and/or does not come up with new, innovative products or services to keep up or stay ahead of the industry. You do not want to invest in a company that is “betting all their money on one horse.”
Keep an eye on industry trends as well. Sometimes the nature of the industry at that moment can impact that one company and its competitors at the same time. For instance, General Motors, Chrysler and Ford all came down with the same ‘disease’ at the same time, due to the same debts and the same mistakes. That was the time all GM, Chrysler and Ford stockholders bailed at once, and rightly so. Investors with a sharp eye that receive good, up-to-date news and suggestions from a website like this one may be able to limit or prevent losses just by watching these early signs.
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Tags: economy, recession, insider
From Riches to Rags
Michael Bowler | RSS | Wed, Jun 03 2009 | 2 Comments
The Wall Street Journal has begun exposing how the New York financial sector is in such dire straits right now that some former stock gurus have gone to the lowly life of working for a living. For instance, take Carlos Araya. He used to be the Wall Street executive you would see ordering expensive dinners at the Palm Restaurant in midtown Manhattan. Now, he serves there. As Wall Street began to hurt, he lost his job as a crude oil trader on the New York Mercantile Exchange in 2007. After horrible luck at finding a new job in the investment industry, he applied in August 2008 to be a host at the Palm to make end’s meet. He is making just over 10 percent of his original salary.
Some former investment brokers, used to performing high end jobs that they are well trained for and earning salaries some people would kill for, are forced to accept low-wage work because they just cannot convert their experience and training into a job like the one they lost. Now, Mr. Araya is heading toward bankruptcy and is confident that he will never return to the investment business.
Unfortunately, there are thousands of stories like this one. Almost 25,000 jobs have been lost in the financial sector in New York alone since August 2007. Before 2012, that number is supposed to hike up to 56,800. This figure began building in 2007 during the financial hiccup that was a predecessor to our current recession, in which Araya lost his job.
John Carbonaro lost his job with Bank of America as a floor clerk in January 2009, and despite his experience and allure, currently takes care of the domestic duties in the family. Joe Morrone, a former Prudential trading clerk, has been unemployed for two years and struggles to support his daughters and grandson. He has worked in a deli, as a doorman, and a bouncer. He used to own three automobiles for just his own use. Now he shares one family vehicle they struggle to pay for.
Araya sometimes sees former colleagues from Wall Street in the Palm during his shifts. Some are pleasant meetings, offering encouragement. Other meetings are not so pleasant. “The way they look at you, you know they’re thinking negatively,” he says. Others come in asking if they can get a job there too. With 25,000 laid off, it’s certain many of them want a job there.
Araya’s daughter asked him if they could afford their house or if they would have to relocate. He told her he was not sure. She asked him if he knew how much money the family needed. “The way she looked at me,” Araya says, “I could tell she was counting the money in her piggy bank.” The emotionally excruciating exchange with his daughter caused him to run into the bathroom and cry. “At the end of the week, I get my paycheck and I think, ‘I used to make this much in a day,’” he adds.
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Tags: carlos araya, investment brokers, banks
