2010 Predictions, Spring will come in January

Okay here they are and you got them here first:  2010 will see

Dow Jones:   12,000

Standard and Poors:  1300

10-yr Treasury Rates   4 1/2%

Fed Funds 1 3/4% 

30-year fixed mortgage rate 6%

1-year CD rate 2 3/4%

Money market rates  2%

Employment for January Period will show growth

and by year end the unemployment rate will be under 8%

Best stock sectors:  Industrials, Health Care, Consumer discretionary, Autos, retail, tech and transportation.  Not in that order ( you have to do some thinking on your own)

Airline Stocks still a buy

Buy on bad new, sell on good.  Airline stocks are still a buy and you can get them now cheaper than last week.  AA, LOV(southwest), jet blue and alaska air still have a way to go.  I expect each to make money in 2010.  You can buy them until you see the first sign of discounting or fair reduction, then take your money and run.

Bank CD's BAD, Utility Stocks Good

So you are tired of the 2% at the most you can get on a one year CD.  How about investing the money in equal parts in A T & T, Verizon, Southern Company and Duke Energy, buy a six month "at the money" put option to insure your principle and enjoy a 6% yield.  Of Course you will have to buy more puts in Six months but if the stock moves up those puts at the same strike price will be cheaper then.  This way you can enjoy a nice yield (at least better than the CD rate) and potentially get some up side return on the principle.  Sounds good to me

Gold for Jewelry only

Okay, You bought Gold in 1979 and finally in 2009 you could have sold it for what you bought it for.  No Dividends, No Interest, No hedge against inflation:  Nothing.  If you want to bet that Gold is going to go through the roof from the current $1,000 plus level and you are going to make a pile of bucks,  Good Luck.  If you want to bet go to Vegas. If you want to make some money, buy an investment property with the money in a desirable location and rent it out (even if it does not now cover your mortgage  if you have to have one).  Eventually you can make great cash flow and get real appreciation against inflation.  Oh, put down at least 60% of the current value and watch the bankers beg to lend you the rest.

Gold, is bull shit unless you are buying some bling for your best girl.  That is the only way you will be smiling.  

Remember when everyone tells you something is a great great investment and money has already driven it to new all time highs, it is too late.  Gold will fall as fast as it went up.

Research in Motion (RIMM)

Q:  I watch fast money on CNBC they were down on RIMM for several weeks and even cited an analyst who had a price target of $50 per share.  The price soared to over $70 recently.  I sold out at $60.  What happened?  JB from Atlanta

A:  JB you are correct, there were quite a few experts that put "Sell" recommendations out of RIMM during the last several months.  What happened was RIMM (think BlackBerry) sold the heck out of there products and made good headway on expanding business in China.  I believe the negative bias in the predictions was brought on by two things.  1. No one was getting a clear picture from Research in Motion on current sales levels and 2. The introduction of the Druid from Motorola is expected to take a lot of business.  The Call Option action was indicating solid numbers by RIMM into the December option expiration date.  The option players were correct and the price on RIMM soared on their earnings report for the third quarter released on Dec 16.  It is still possible for RIMM to hit the $50/share level.  I would be a buyer if it gets to that level and then moves higher (check out the when to buy chart for stocks in Investors Business Daily for a primer on technically when to buy) .  I would not buy it at the current $68/Share as I believe an investment in Verizon or A T & T with  6% dividend yields make more sense for the investor.

Options as future Price Indicators

Call Options are the Right to buy or the Obligation to Sell a stock at a particular price.  The right to buy is established if you buy a "call"  If you sell a "call" you have to deliver the stock to the person who bought the "call" from you.  But wait, using the indicated price of a call option for a particular month in the future can give you a good indication if  the market (the investing public) expect the price to go up by the settlement date (the date your right or obligation  expires or must be exercised).  Recently General Electric calls with a strike price of $10.00 for April have had virtually no time value.  If the stock is at $15.50 then the option has been trading for $5.50.  On the other had IBM March 125 Calls have been trading for $8.25 with the stock trading at $129.00.  This is telling me that the market expects the price of  General Electric (ge) to go no where from now until April, but it expects IBM to trade significantly higher in the next several months.  Combine this with some expected revenue forecasts for the next few months for these stocks and the winner will become very clear.

Royal Dutch Shell and A T & T

Q:  I was advised by Edward Jones to buy RDS.B (@$60.01x165) and it has lost ever since. How long shall I give it before bailing out? Also got T but felt that was an okay buy. I guess this business is as good as going to Las Vegas.


A: Okay, the Royal Dutch Shell Hit a high for the last year or so in Mid October and again in Mid November at or near the price you paid. the average low price for the 4 years preceding the recession was around $65 with a high of over $85 hit three times during that period. As the economy picks up again (which it really has begun to do) the need for gas and fuel oil will increase again giving the stock a boost. There is support for the stock price at $54 and I suspect that is where it will hit before it moves higher again. The good news is that it is paying a dividend of 6% and I see that as secure and will eventually move higher as well. Most analyst who follow the stock say to hold (not sell or buy) at the current level. I agree if you bought it for the dividend and for growth over a several year period.
I like AT& T at the current price and believe that with the I-Phone success and other things they have working that the price will move higher in 2010 with possible dividend increases as well. Analyst for the most part show this as a Hold as well, but I believe that it has the potential to return an easy 10% growth plus the 6% dividend that it currently pays.
For the long run these are both conservative stocks with good potential and 6% dividends. Like any stock in the short term they have down side risk on return of principle if you have to sell them at the wrong time to meet other obligations. On the other hand: One and Two year Certificates of Deposit are paying from 1 to 2.25% at this time with no possibility for growth.
So, long story short, if you can afford some pain by watching the price
fluctuate, stick with them. If the Royal Dutch Shell price goes below the $54 write me and I will look for the reason why and get back to you.
don't ever hesitate to ask me for input before or after you have invested, I am very happy to help out.