Your Questions About How To Pick Stocks

Carol asks…

How should I invest in the stock market?

Is right now a really bad time to invest or not? Also how do I decide which stocks to invest in?

John answers:

If you are inexperienced then i would suggest a professional stock service or a money manager.
Remember, picking a good stock company is nearly pointless unless you know the direction of the overall stock market because when the overall market goes down then 90% of stock companies get crushed in price.

Mark asks…

How often does a correction in the stock market turn into a full-blown recession?

I’m interested in “leveraged indexes” (ex., SSO) that imitate the general movement of the stock market with increased power. However, if the market plummets, I’m twice as in trouble as I’d normally be.

I know that predicting the market is a difficult if not impossible task, but are there any early “warning signs” to warn me of an upcoming recession?

Historically, how many times have corrections (10% drop in the market) turned into a true, full-blown recession (20% drop or more in the market)?

Thanks for your help!

John answers:

Stock market fluctuations and economic recessions are two entirely different animals, and a market decline doesn’t ‘turn into’ a recession, though it may anticipate an economic recession. There is a weak correlation between economic recession and (past) market returns, but the correlation to interest rates is stronger. One reason for this is that some industries are quite sensitive to interest rates, such as home building, and higher rates reduce demand for new houses; we’re seeing that effect now. If the Fed reduces rates later this year, home building will almost certainly pick up again. High interest rates also affect the demand for financed consumer goods, such as automobiles, and for capital expenditures. If you want a good leading indicator for the market, watch the Fed.

Thomas asks…

What’s going to happen to the average person due to the crashing of the stock markets?

Everyone is hearing about the stock market crasing slow and steady but what does it really mean for the “average Joe” in an everyday life?
PLEASE NOTE

In this case, the average Joe doesn’t invest in anything.

John answers:

Same as when I finished college (MA) in 1987 and entered the crash – no jobs.

The crash of 1987 lasted six years – and the economy picked up again in 1993 and by 1996 we had a ‘runaway’ economy where everybody was getting rich. Alan Greenspan had to raise interest rates to slowly cool down the runaway economy.

So more than likely a similar event will take place beginning today – hiring freezes and no jobs, then six years from now another runaway economy.

Sharon asks…

Where can I get a list of swine flu stocks?

There has been a lot of buzz lately about swine flu and i’d like to find stocks (ideally penny stocks) that somehow relate to the swine flu epidemic. Can anyone help me find a list of swine flu stock picks?

John answers:

No- 800 people (minimum) have died every week globally this year from the regular flu.

The media continues to entertain the idea that the swine flu is a big deal.

Sure, it’s killing people. But there are so many more people dying of different causes.

Charles asks…

Whats a good book to learn about stocks from?

I have just recently become intrested in learning about stocks, bonds and finances since I am on my own now and need to think about my financial future. I was hoping someone could suggest a good informative book or website that would help someone who knows nothing about anything to do with money, to help me learn. Thank you

John answers:

Stock Market Logic by Norman G. Fosback, Chuck Carlson’s 60-Second Investor, How to Pick Stocks Like Warren Buffet by Timothy Vick, and anything by Benjamin Graham.

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