FYInance

Posts Tagged ‘Recession’

IFA.com – http – The random walk of stock market prices and the efficient market hypothesis is simulated by physical action of beads hitting a pattern of pins. The Efficient Market Hypothesis says prices are fair. If the expected return of an investment is 1% per month, about half the monthly returns will below and above that average return. So the fair price set at the beginning of each month sets the chance that future returns will be 50% higher and 50% lower than the expected return. The further the returns deviate from the average, the less likely they are to occur. The red bar overlay represents 600 simulated monthly returns of ifa’s Index Portfolio 100. As you can see the distribution of the beads is similar to the index portfolio.

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devastating phenomenon. It wipes out the middle class by destroying the value of cash, savings, bonds and other paper instruments. But, how does it affect stock markets? With the Federal government just having added .2 trillion in Fannie/Freddie liabilities of which about 0 billion will likely default, the Federal Reserve having now polluted its balance sheet by some 0 billion worth of toxic mortgage bonds with a 41.6% default rate (1 billion in likely defaults), an …

(5/19/09) Selected Findings of Study: The cumulative return for this portfolio for the entire period is 31.75%, or an annualized return of 12.09%…The S&P 500 earned 18.72%, or 7.35% annualized over the same period. The Russell 1000 Growth and Value indexes earned 24.54% (9.51% annualized) and 24.77% (9.59% annualized), respectively. The Russell 2000 Growth and Value indexes earned 22.51% (8.76% annualized) and 9.39% (3.78% annualized), respectively. Thus, the Cramer portfolio outperformed …

Everyone that hasn’t been living under a rock for the last year and a half will be well aware that this recession could possibly be the worst one that the world has ever seen. In fact, the last time the economy was in this sort of state it was world war two that got it all back on track, and I’m guessing nobody wants a world war three so we are going to have to look for different solutions.

It is believed that there are three main causes for the economic slump, and one solution, this theory has been called the four Ms.

I believe that the first factor that helped cause this recession is Mr. Mervyn King. He clearly doesn’t even realise how much of an impact his statements have or the mayhem and panic that they have caused. The second “M” to blame, perhaps more so than the others, is the media.

I believe that both of these factors should be willing to take most of the blame for the situation we all find ourselves in. The media are simply exacerbating matters with their constant negativity and messages of doom. It is enough to make the best of businessmen panic.

The third issue to blame for the slump is the lack of money from the banks. During the economy boom, banks got lazy and now seem to have alienated themselves from customers. The Government did offer to support the banks hoping that it would have a positive effect on small businesses, but like any other business, the banks want to look after themselves and avoid risks. If the government wants to help the smaller businesses then they should forget about helping the banks.

Although the government’s new plan to pay invoices in 20 days is applaudable, they seem to have forgotten that pretty much all contracts will be with big contractors and small businesses are subcontractors. The better pay terms received by these larger contractors has not been passed down to the small businesses.

So now we’ve covered who or what is to blame, what do we do now we are here? Well, I do not think that recession is entirely negative, there are opportunities to be had. The way to seize these opportunities is to keep carrying out the fourth “M”. Marketing.

When the economy is booming, we all become like the banks, lazy. This is because in comparison to times like these, customers are simply falling through your door, but now we have to work a lot harder. Companies absolutely MUST keep on marketing themselves throughout these harder times and judging by the last economic downturn of the early 90’s, the ones that do will be sitting right at the top of the pile come the day the economy starts growing again.

I am buying up a lot of cheap stocks for long term investments. I am trying to come up with companies that people are turning to during this recession. So what kinds of stocks, that have dropped significantly in price over the past 1 or so, would people recommend for long term investing?

When I mean cheap I am looking for stocks like Ford which is trading for under, but also stocks like Apple which dropped substantially in a year.