Quote:
Originally Posted by Kevin
Go to fool.com
Subscribe there. They have some great reading.
Weird name for a stock site eh?
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Second that - fool.com is good.
Stay away from Jim Cramer on cnbc. That dude is a clown - someone analyzed his picks over the long term since the show has been on, and he is 2 percent short of the S&P 500 - before including trading commissions - which are substantial if you trade as much as he does. Think of him as a tout who is always screaming L O C K.
That said, the only reason to watch him is to do what they call "fading the cramer pop" - which is shorthand for waiting a week after he makes a recommendation, then shorting the stocks he recommends for the following week. That, my friend is a great strategy, a little like fading every ******* that comes into the forums and starts touting crap.
FYI, shorting is a way you can make money on stocks going down. You need something called a margin account to do it, but that is available at most brokerage firms. If you short a stock, you make money when it goes down. For example, if you short 100 shares of Bear Stearns at $100 per share, you start with -$10,000 (you are actually borrowing the 100 shares of stock and immediatley selling them, with an obligation to buy them back at some point in the future). You then close the trade (technically, you are "buying stock" to cover the short") - if the stock has gone down, say to $90, you only pay $9,000 to pay back the stock that you borrowed for $10,000, pocketing the difference.
Of course, the risk with shorting is that the stock goes up, and you have to pay out more than what you paid for the stock to cover the short. The risk here is, in theory, infinite, since a stock going down can only go to zero, but a stock can go up to anything, but in reality, a financial stock like BS or something like that (short of an internet or a biotech that can go up really fast) - can only go to a certain point until fundamentals kick in. Especially with large companies, they will trade in a certain range (called a range of multiples).
In other words, a company like Bear Stearns, like we used in this example, is never going to do more than a doubling in something like a year. The multiple to earnings that financials trade at is, at most, perhaps 25, and at the least, something like 7 or 8.
Anyway, hope this helps.