A company's growth and profit forecasts describe how capable a company is in delivering its promises to its investors. These numerical projections are carefully prepared by a company based on their past profits and projected additional profits due to new products and services, operations and infrastructure improvement.
Aside from profit forecasts, company image can also make an impact on a company's profitability. Rumors of change in management, take-over, mergers, and even personal issues about the company's top executives can affect the company's image.
For example, a rumor of a merger between two big companies projects more stability and greater profit projections for both companies. As more investors would want to buy stocks from these merging companies, the demand for their stocks will rise. Based on the law of supply and demand: the greater the demand for stocks, the higher will their prices be.
A bankruptcy rumor about a company can send its investors to sell all their stocks. If there are more sellers than buyers of stocks then the supply (of stocks) is greater than the demand for stocks thus, stock price will fall.
2. Political Economy
General news about the local and global politics has an immediate impact on the economy and consequently to stock market prices. Politics and economics are correlated. Positive news such as lower unemployment rates, increased productivity, peace and order, and strong confidence in the government has positive impact on the economy. Such news encourages more local and international investors to open companies in a certain location or country. This in turn would generate more jobs, and as an effect, would encourage more trading in the market at higher stock prices in general due to the increase in demand for stocks of different companies.
On the other hand, negative news such as political instability and turmoil, security problems such as terrorism and insurgency, frequent strikes, and inflation has negative impact on the stock market prices. Investors are driven away by these things and close-up. As an effect, more stockholders would sell out. This creates more sellers than buyers thus stock market prices fall.
3. Interest rates
Higher interest rates are associated with a slump in economic growth. This creates a sluggish environment where investors become apprehensive in buying stocks. Either they keep the status quo or sell out their stocks. When the demand for stocks is not high, prices will go down.
Are stock market newsletters really worth it? Are the predictions and recommendations helpful? Well, my honest opinion is that none are worth the price, and some are indeed hucksters. Think about this ? with the advent of the Internet, absolutely anybody can publish an investment letter. The cost to publish it is tiny if you can put up your own website and send your own email ? one subscriber and you're in the black! No one regulates or oversees such folks ? all they do is publish their opinions through the Internet, and you pay perhaps $150 a year for the privilege of getting their emails. There are no guarantees that they are the smartest guys in the room, and who knows what kind of research they actually do (Look, I do a BLOG on my website, and that's effectively the same as doing a newsletter. The difference is that I'm just not charging you anything to see it).
One of the big dangers is that many newsletter writers have monetary ties to the companies they recommend, which you do not hear about. This leads to serious conflicts of interest, and there is virtually no means to find out about it.
For whatever reason (I think because 1. It's the fad, and 2) It's easier) most stock investment letter writers today are chartists of one flavor or another. Well, as the one of the last of the Mohicans when it comes to believing that fundamental forces move the market, let me tell you a big secret among stock commentary letter writers: All the forms of chart reading, from Elliot wave charting to whatever flavor you choose, are simply and purely horse manure. There is simply no scientific support for them. Like palm reading, tarot cards and astrology, chart reading is highly subjective and open to the interpretation of the reader. One need only look to an assortment of Elliot wave experts and see that one looks at the chart of a certain stock and sees it will be heading upward in the future, while another views the same chart and foresees the stock heading downward. Most chart interpretation is based on patterns of squiggles in the chart lines, but how a chart appears is heavily dependent on the parameters of how you draw it. Seeing various ?head and shoulder? or ?cup and saucer? patterns are very much like Rorschach inkblot tests ? you project your thoughts and feelings onto the meaningless inkblot. Making decisions based on chart squiggles - Yikes!
The prices of stocks and commodities yoyo up and down with a general long-term trend in an upward direction, and it always has been so. Just because a stock or commodity price moves up for a week doesn't mean it will move upward for the next three months. Just because a stock or commodity price moves down for a week doesn't mean it will move downward ward for the next three months. In the same way, just because it was warm in New York for a week in January, it doesn't mean winter is forever banished. Just because we have a couple bad hurricane seasons back to back doesn't not mean all such seasons will be bad from now on (Just ask the morons that used to work at Amaranth - and the poor fools who had their money invested there). What a short memory we all seem to have!
So the next time your letter writer says ?Its the end of the world! The markets are going down to nothing? Jus wait and don't get too excited. It wont be long until another letter writer will proclaim ?Its a moon shot, the markets are going through the roof straight to the moon! Don't get too excited over that either....... The market goes down and everyone gets worried the market will implode. But after a few weeks of solid gains, the worry dries up and the market get overbought. What happened to all that worry?
There's going to be loads of fast steep drops and sharp jumps in the stock markets, gold and silver from here on out, you can bet on it. These shakeouts are necessary to get weak players out of the market.
I think anyone who studies the fundamental facts and charts can do as well as some over paid letter writer. Most well paid stock market letter writers do not out perform the market, nor do they out perform the stock picks of monkeys armed with darts. I highly doubt those who track commodities or currencies do any better. There are studies done concerning the Hedge Fund operators, the most over paid by market advisors far, showing that they also, do not, as a whole, outperform the market. So why do some folks pay good money for newsletters, mutual fund managers and Hedge fund operators when scientific study shows they are no better in the long run than market indexes? I don't know ? there is simply no rational reason.
Personally, I think you might as well flush your cash down a toilet as invest in newsletters. You'd be much better off to just buy some gold or silver with the money. Or even better yet, grab a pen, develop a talent for writing BS, and then start your own newsletter, charge other people money and invest the cash you make in stocks or precious metals.
If you feel you just must read some of these newsletters to get ideas ? there are a number of free sites on the Internet like my BLOG. In addition, a good number of investment letter writers do still publish a printed version of their work, and many libraries still subscribe and you may be able to view them at your local library. There are plenty of free sources to get ideas. For more information on investing in mining company stocks, check out the authors web page on Mining Company stocks at: http://nevada-outback-gems.com/gold_invest/Investing_Gold_mines.htm
For More general information on investing in gold and other precious metals, check out the authors web pages on investing at: http://nevada-outback-gems.com/gold_invest/Investing_Gold.htm
Both Nicky Pilkington & Reno Chris are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Reno Chris has sinced written about articles on various topics from Bear Stock Market, Jewelry and Hobbies for the Family. Chris Ralph writes on small scale mining and prospecting for the ICMJ Mining Journal. He has a degree in Mining Engineering from the Mackay School of Mines in Reno, and has worked for precious metal mining companies conducting both surface and underground. Reno Chris's top article generates over 4400 views. to your Favourites.