Sooz Pascale

I believe it was Baron de Rothschild who said "buy when there is blood in the streets."

The stock market is DOWN and will likely stay down for quite a while. I have been looking at the amazingly low prices for shares in big name companies. One major bank, for example closed at under a dollar a share Friday, March 6th and is at about $1.50 at close of trading today, March 10. It was up over $20 a share at its high which was last year.

I am getting back into the stock market, but in a VERY small way. I am going to buy $200 -$300 worth of shares a month. I've found a discount broker in FL who only charges about $5-$6 a trade. I've already opened up an account with them and a cashiers check for the account funding is on the way. Look for LOW trade prices and no minimum account balance.

What I am doing is bottom feeding. I am looking at companies that have been hammered in the downturn, but ones I THINK will survive this recession/depression. I plan on a hold and buy strategy - buy the stocks and dont sell them for at least 5 or 6 years.

Don't have the money? If you're working and meeting ends meet, you can probably squeeze $100 a month out of your budget. In five years time, each $100 invested now COULD be worth $1,000. Invest $1,200 over the next year and in five years you COULD have $12,000 which is a nice sum of money. Of course you could LOSE the $1,200 too. Its a risk, but its one I am willing to take.

Its something to think about anyway.

Sooz

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Adam Zaius

It's probably unlikely you will get $100 into $1000. Looking at the Dow Jones Index from the most recent major recession ('87)

Here: .DJI - Dow Jones Industrial Average - Google Finance

At it's lowest point, it fell from 2709.50 to 1766.74 (53%). Five years from the lowest point, it was 3288.

If I invested $100 at that low (Dec 4th 1987), I would have $186 by Dec 4th 1992. This represents a compound interest rate of 12.5%. As an overall average, the DJ tends to produce about 9.7% p/a. So by investing at the low, you definetely came out ahead - but the savings are less than you may imagine.

Now, you can definetely do better - picking good stocks and investing well you can pull that up to 20% - which is a result of about $270.00 over five years, but that requires keeping a good eye, and obviously increases risk.

One final note to consider is inflation and broker fees - if your broker is eating 5% (a good broker should only take less than 0.5% or a fixed fee), then remember that on exit and entry.

If we made $186 (the benchmark), we need to subtract 5% on entry ($5.00), and exit ($9.30), plus 3% annual inflation ($16.60) (total expenses = $30), meaning we really made $56 profit.

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Sooz Pascale

Excellent points Adam. However, I am looking for, as one Wall Street wag put it, something that is likely to be either "a strike out or a home run." Risky? yes, of course, but I am only investing a small amount and that is being done incrementally.

As for brokerage fees, its not a % for me, its a flat rate of I believe 5 or 6 dollars. I wont be doing a lot of trading [in and outs]. My strategy is to buy and hold so I wil pay $5 or $6 for every buy which is about what a fast food combo meal costs. When I sell, it will be the same fee.

Someone is going to make money in the market in its present state. I see no reason why I shouldn't IF I understand the risks of what I am doing and IF the economy bounces back in the next five or six years.

I'm basically optimistic about that. GENERALLY, since 1928, the American Economy has rebounded during the years that a democrat is in the White House. The Jimmy Carter years are one exception that comes to mind and there may be others.

We'll see what happens.

Sooz

Asher Bertrand

Didn't it take until 1954 for the stock market to reach pre-crash 1929 levels? Meh.

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Sooz Pascale

Possibly.

I am looking at stocks which I believe will outperform the DOW, hence my home run analogy. There are NUMEROUS valid reasons to not invest in the stock market right now.

I am still going to step up to the plate, dig my cleats in and swing at a fast ball in the strike zone. If I strike out you can all laugh at me.

I'm going to give it a try though.

Sooz

Mocksoup Graves

I am actually going to be doing that too, Sooz. We are looking at investing in a renewable energy kind of corporation. They lost some money last quarter and are only 19 cents a share(!) but I think of it as almost a form of charity. I won't put in what I can't afford to lose. Hopefully the company bounces back with relish. If not, I won't be out much and if so.. the payoff will be worth it.

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Phoenix Psaltery

And at .19 a share, you could buy 1,000 shares for less than $200; if the company does well and the stock price should rise to even $3 a share, you're still looking at a $200 investment becoming $3000.

Still a helluva lot better than the savings account interest that I'm getting at Wells Fargo -- an absolutely insulting, ludicrous 0.05%.

I remember when savings accounts paid 5% (OK, I was a kid, but still).

P2

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Gigs

Stocks that are at 19 cents a share are extremely unlikely to recover. Ever.

There are a lot of big stocks under $10 that probably will not go away though.

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Sooz Pascale

I got interested when I noticed CitiGroup [City bank stock symbol "C"] was selling at .97 a share last Friday. That's less than a buck a share for a major bank. Since that time, others are getting interested and it closed around 1.54 today. I'm interested. As soon as my cashiers check hits the brokerage in FL and I get my account funded I am buying C if it stays anywhere near this level.

This is a stock that was trading at over $20 a share last year. Will it get up to that point again? I don't know. Will it get significantly higher than 1.55 a share over time? I think so, but don't know for sure. Will it go under? Since the US govt owns 36% of C's shares, probably not.

Sooz

Gigs

I think the market is pricing the risk of nationalization in too. If the bank is nationalized then it probably won't be worth anything.

Adam Zaius

Yeah, if a stock is sub$1/share, it means the company is in really bad shape. Stocks that low are in risk of delisting entirely.

Often what happens is they do an inverse of a split. (Where your $10 share becomes 2x$5 shares). So while it looks like it's gone from $0.20 to $3, it's far more likely that the company instead just said 'Your 15 shares are now 1 share'.

Frankly the chance of a stock that's at $0.19 going to $3 within 5 years is very very slim. It's far more likely to go in the other direction, or bankrupt entirely.

Adam Zaius

Honestly, if you want my opinion - buy good stocks that will give a good dividend. Attempting to 'get rich quick' generally ends badly. Dividend stocks will give you periodic returns for the life of the shares - not too much, but it definetely helps. Plus lots of companies often have dividend reinvestment programs that will give you shares for cheap.

Khamon

Agree with Adam, go for good dividend paying stocks if you can find them. Don't know what I'm gonna do with USB now, just hold it I suppose hoping for recovery, accumulated it for years primarily for the dividend, now it's worth half what I paid (average) and they've cut the payout to a frellin nickle1, just hold it I suppose.

China, yes, China is my new accumulation target, indexes, yes, China & Hong Kong indexes I believe.

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Mocksoup Graves

That is why I am considering it charity. I really believe in the company's product.


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Sooz Pascale

Laugh if you want. Citigroup was selling at .97 a share last Friday. Today it closed at around $1.78. I just hope my cashier's check gets to FL in time to buy before it goes up too much further.

Sooz

Brenda Archer

Something to think about! Thanks Sooz!

Sooz Pascale

I'm having more FUN following the market. Citi closed over $3.00 yesterday and was up to 3.86 before it dropped to 2.60 today. I bought more at $2.74. I also bought Sachs 5th avenue [SKS] at $1.66.

This isn't a "get rich quick scheme." Its a make money slowly scheme. I am buying companies that will probably survive the recession but are selling at VERY low levels right now.

I'm having tons of fun. Its high entertainment!!

Sooz

Sooz Pascale

Citi actually hit $4 a while ago and is trading, last I checked, around $3.20 today 4/24. Since I bought in the $2 level its ups and downs neither discourage or thrill me. I'm in it for the long haul. Saks which I bought in at under $2 is now trading over $4.

I am planning on buying other stocks too, but t5hose are the first two. I am watching Ford and Fredericks of Hollywood and plan on purchasing them next, in small bits.

I'm not bragging, just giving an update and I will update on negative news as well when time permits.

Sooz

jacqueline trudeau

Sooz, better dump c before the result of those bank "stress tests" become public.

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Sarah Nerd

I know NOTHING about stocks. Where would a newbie look to get started without putting up more then a few hundred bucks to start?

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jacqueline trudeau

Lots of info out there, Sarah.

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Sooz Pascale

I don't know that much either to be honest. Let me tell you what I am doing but keep in mind that I'm an IDIOT on this so take my advice at your own risk.

We decided to become "bottom feeders" in that we are looking for good, well known companies whose share prices are way down from about two years ago. We also want to buy companies who have a good chance of surviving the recession. Citi was my first choice because at the time I got interested, it was selling at .97 per share. Thats 97 CENTS. In 2007 it was up close to or over $50 per share. Since the US govt owns 36% of Citi's shares, I don't think it is going to go under. I can be wrong but I don't think so.

Saks looked good also because it was WAY under its historic highs and since its such an old established name I thought it a good risk. On paper anyway, I've doubled the small amount I invested in it and it just keeps doing well. I am EXPECTING a drop any day now and hopefully I will be able to buy more after the first of the month.

Yahoo has a page where you can check share prices of all of the NYSE, NADAQ and other exchanges not quite up to the minute but close. You will need the symbol for each stock you are interested in. For example Citigroup is "C", Ford is "F", Saks is "SKS" Fredicks of Hollywood is "FOH" etc. I am not advising anyone to invest in those companies. I am just saying they are companies I have either bought into or plan on buying. GM and AIG might be good buys except that I am worried they may not survive. I'm keeping an eye on them.

Now, to buy stock you have to have a broker. It used to be that you got NAILED on commissions if you bought under 100 shares. I was pleasantly surprised that is no longer the case. Since I am only putting in a little bit every couple of weeks, I tend to buy in lots of 50 or 25 shares and pay no penalty for it. I use an online broker out of FL that charges a $4.95 commission on each trade [buy or sell]. This is a good rate. Also Trade King doesn't require a minimum investment, which many of them do. I'm happy with them so far but there many on line brokers who seem to be just as good.

Yahoo has a financial page that has the current stock quotes and the message board for Citi is a RIOT to read!! It makes SLU look like a ladies' tea party.

IF you're interested in setting up a Trade King account, PM me and I can walk you through the process. I won't and can't give you stock advice but I am happy to talk to you, or anyone else about what I'm doing and how its turning out for me.

I am optimistic generally. The stock market is SO down, I truly believe it has no where to go but up, IF we are patient. I'm not into the day trading, buy and sell constantly sort of thing. Each stock I purchase I plan on holding for at least three years.

Good luck and let me know you are doing!

Sooz

Sooz Pascale

Nah...I bought C at under $3 so I dont care about the stress tests. I don't think the Govt can afford the political fallout of C going under so I'm holding and will probably buy more.

Sooz

jacqueline trudeau

I don't know... any hint of nationalization, even partially so, i think will send it to zero. You already got your dollar move on a 2 dollar stock - sometimes get in, get out is a good strategy too.

Sooz Pascale

Agreed Jacqueline. BUT for the small amount I've invested I am willing to take the risk and seee if it goes up. If and when it hits $10 per share, I will think about selling. Your advice is good however. One can argue that with the govt already owning 36% of it, it may be quasi nationalized already.

Sooz