WilliamMckinleyCapital.com/Rebuilding America.
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Trades For The Week (3/24 - 3/29)
A modest week in live alerts in the bulls room, totaling $3243 in gains. The sick part about it is that we never put huge capital at risk when we do this. Any person can come in, take our educational class, apply themselves to the material, and learn to make these kind of gains week in and week out. Our goal is simply to help people with smaller accounts make consistent profits week in and week out. As you can see we keep our losses small and minimize our risk by making sure we take a manageable position size on each trade. Small gains add up to big weeks and big weeks add up to huge months! We try to trade small but trade aggressively and add those gains up, resulting in huge weeks and months.
We dont put huge capital at risk. Our goal at bulls is to help people with smaller accounts make consistent profits week in and week out. As you can see we keep our losses small and minimize our risk by making sure we take a manageable position size on each trade. Small gains add up to big weeks! We try to trade small but trade aggressively and add those gains up, resulting in huge weeks and months.
Kunal is on video all week all day giving out the alerts live and teaching while he does.
If you are struggling with your trading then you need to join our bootcamp course starting in May! Our program is designed in such a way that you come out of it ready to trade live in just 3 months. We teach you everything from risk management to scanning to trading strategies. The class is one of a kind. See why you should sign up for the course here and email me mb.willoughby@gmail.com if interested in signing up
Trades for the week (3/24-3/29) by mb_willoughby
The 4 Rules Of Trading Penny Stocks
One of the most common emails we get here at DamnGoodPennyPicks.com are from people wondering about the do’s and don’ts of trading the best penny stocks. While alot can be said on the subject, we distilled our take on the matter into Four Rules which follow:
Penny Stocks: The Four Rules of Trading
1. Never Risk More Than You Can Afford To Lose
If you are trading penny stocks with money you need to pay your rent or buy milk for your kids or make you car payment, stop what you are doing and come back to penny stocks when you have extra cash that will not hurt you if you happen to lose it. People do make money trading penny stocks. But people also have trades go against them. Make sure the money you are using to trade cheap stocks isn’t money that is going to hurt you badly if you happen to lose it. Please.
2. Don’t Fall In Love With Any One Situation
So, you research a stock or get a hot tip and form an idea regarding a stock and…you stick to your opinion ONLY AS LONG AS IT’S PROFITABLE. If you’re proven wrong, get out and wait for the next opportunity. There are always stocks that are performing now. So if your “winner” turns out to be otherwise, don’t frown, don’t fret, don’t double up, just move on. If you have any profits in your stock than multiply this advice by 10. Your reason or opinion or where you think a “winner” is going means nothing. It’s the price of the stock here and now that matters. If it isn’t what you thought it would be, get out.
3. Stay Alert, Especially On Fast Moving Stocks
This may sound obvious but so many people rack up losses disregarding this rule. Watch what you are doing. Never try to fit trades into your schedule when a stock is on the move. If you know you have to be away from your computer for a long while, consider exiting your positions and diving back in when you can watch your screen. If you’re trading full time try not to schedule anything during market hours. Also, always recheck your orders to make sure you’ve entered them correctly. On some cheap stocks you’d be surprised how easy it is to add an extra zero. Once again, STAY ALERT. It’s your money you’re playing with.
4. You Can Never Go Poor Taking Your Profits
Sure, stocks run. Sometimes a lot more than where you thought they would go. So what? They also swing down too. If you’re comfortably ahead in a given situation consider selling and booking your profits. Even if they are small. Racking up lots of small profits in a row will eventually result in BIG gains. No one ever went poor taking profits.
And that’s about it.
At DamnGoodPennyPicks.com we have been trading penny stocks for a while and are always available to answer any of your questions. You can reach us via email at info@damngoodpennypicks.com or with our contact form on our website at http://www.damngoodpennypicks.com
All the best as you trade penny stocks,
Jeff Mirkin
Check Acceptance
Even in this wireless and digital age, there are many consumers who prefer to use paper checks as their primary method of payment. Now, with William Mckinley Capital’s check acceptance solutions you can easily accept your customers’ preferred payment method and reduce deposit time. Plus, WMC’s check acceptance solution eliminates non-sufficient funds surprises.
WMC will set you up to accept checks like credit cards with equipment that quickly and conveniently converts checks into secure electronic documents. Not only does it make for easier record keeping, but you’re also guaranteed payment... and that makes checks as good as gold.
Now, there’s no need to turn away a paying customer! Add checks to your payment acceptance offerings and you’ll stay one step ahead of the competition. Whether you accept check payments, credit card payments or any other form of non-cash payment, North American Bancard has the merchant account payment solutions you need to succeed. That’s because WMC has the experience and expertise, backed by superior service and dedicated support to help American businesses prosper.
To Accept Checks email:
williammckinleycapital@gmail.com
Subject Line: Need To Accept Checks
Gift Card Acceptance
The best gift of all is money. That’s why so many merchants now offer gift cards. But here’s something you might not have thought of – gift card acceptance serves as a cash advance to your business, bolstering your bottom line.
Offering a merchant gift card is a simple way to set yourself apart from your competition, while increasing your profits. The most obvious benefit of selling gift cards is having cash in hand without having to provide products or services at the time of purchase. That’s like turbo-charging your cash flow.
But that’s just the beginning of the benefits:
Gift card recipients are oftentimes new customers. Not all gift cards end up getting redeemed – that’s like found moneyGift card recipients often spend more than the face value of the card
William Mckinley Capital makes a gift card program easy! All transactions are handled by a credit card processing terminal, so implementing and tracking is automatic. The same terminal is used to issue and redeem. Best of all, your gift cards can only be used at YOUR store.
And all of our merchant gift card programs are backed by superior service and dedicated support which is why we are an industry leader.
No matter what the size of your business, William Mckinley Capital can make merchant gift card acceptance a reality for you. These powerful money-makers are truly the gift that keeps on giving!
William Mckinley Cappital believes in helping American business prosper and we would be proud to partner with you to take your profits to the next level!
Did you know?
On average, Gift Card receivers spend more than the value of their card. And oftentimes, these purchased cards are never fully redeemed.
For Registration email:
williammckinleycapital@gmail.com
Subject Line: Accept GiftCards
Credit Card Processing
Credit card processing has become a vital component of the business sector. As credit cards establish a top spot in every consumer’s wallet, a reliable processor becomes every merchant’s necessity. More than 23 billion credit card transactions are processed each year, just within the United States. The credit card processing begins after the card is swiped. The information on the magnetic stripe on the back of the card is read by the machine. There are four actual steps a merchant must take in order for the card information to be sent to the processor for funding. First, they must authorize a transaction. The merchant must swipe the card or capture the card number and expiration date in some manner. In this way, the merchant continues authorizing sales throughout the day, collecting a batch of transactions. At the end of the business day, they settle their terminal (or software). By settling, the merchant sends the card information to the processor. Then, the processor (otherwise known as the acquirer), disburses the different cards’ transaction information to the various networks; the networks, in turn, collect the funds from the card issuers. The card issuer will keep a certain percentage, called the interchange fee, then releases the remaining to the acquirer. This step is called clearing. Lastly, once the acquirer has received the transaction money, they will collect a small percentage for their work, then release the rest to the merchant. This is credit card processing.
However, there is much more to processing than four simple steps. And this is where William Mckinley Capital offers and excels at servicing business owners. We cater to business owners at every stage of card acceptance. With experienced and educated account executives, even the most fresh and inexperienced business owners are able to easily navigate the world of credit card processing.
Once boarded with WMC, our underwriting department ensures the merchant account is set up to best fit with the merchant’s business model. For instance, where next day funding seems to be necessary, next day funding is made available. Where a merchant may need assistance better equipping their marketing/sales website, underwriting will explain what needs to be added or subtracted to better market their services and attract clientele. Simultaneously, our customer service and technical support are available throughout the day to help with explaining credit card acceptance guidelines, pricing, technical issues, etc. And, of course, merchant awareness is always available to keep watch over specific credit card transactions being submitted, making sure each transaction is valid and able to be processed. They are the first ones to catch those fraudulent customers plaguing the industry with identity theft. There are numerous other departments in the company as well, each striving to make the card acceptance easier and more seamless for the business owner.
William Mckinley Capital works in the business of servicing businesses. We work to make credit card processing easy at every step; we work to make your work simple!
To Get Started and Receive Application email:
williammckinleycapital@gmail.com
Subject Line: Need Card Processing
Stocks dragged down by Citi and other banks
NEW YORK (CNNMoney)
Stocks continued their March swoon Thursday, and banks were among the biggest losers.
The Dow finished basically flat, while the S&P 500 and Nasdaq ended in the red. The Nasdaq is now down for the year, although tech stocks took a back seat to the financial sector today.
On Wednesday, the Federal Reserve rejected Citigroup's capital plan, saying it was troubled by the bank's inability to predict how much it could lose in a severe economic downturn. It banned the bank from any dividend hikes or share repurchases for the next year.
Citigroup shares dropped over 5% Thursday.
Citi was among 30 large banks required to submit capital plans for an annual stress tests. The Fed approved 25 plans. Citi and four other smaller banks were turned down.
"$C Just can't get its house in order," said TexanGal on StockTwits.
Bank of America shares gave up earlier gains even though the bank announced an increase in its dividend and a new stock buyback plan. The firm also unveiled a $9.5 billion settlement with the Federal Housing Finance Agency. The deal settles all litigation between Bank of America and the agency over the use of mortgage-backed securities in the run up to the housing meltdown.
One trader on StockTwits thought the stock should have moved higher on the news.
"$BAC what a disgrace. We got a dividend and buy back and we settled a big lawsuit," said WarrenNewyork.
Related: A tale of two megabanks: BofA vs. Citi
On the earnings front, Lululemon popped after the yogawear maker reported quarterly increases in revenue and net income. The stock was up over 6% even though it also had a slide in same-store sales.
Brian Sozzi of Belus Capital Advisors, wrote that this decline for the athletic wear maker was a "once unthinkable development."
StockTwits user Dank104 wasn't too impressed by Lululemon's results.
"$LULU why is this moving up so much? earnings and forecast were better than expected, but not spectacular," he said.
Related: No downward dog for Lululemon stock
GameStop shares tanked after the video game retailer missed earnings estimates and gave a lackluster outlook for the current quarter. The company was hit hard by Wal-Mart's announcement last month that it would buy used video games, a business which is traditionally GameStop's bread and butter.
"$GME It's only a matter of time before GameStop dies off. Games are now sold through your system (PS3/4, XBOX..). More convenient," said MichaelStephen.
BlackBerry was downgraded to a "sell" by an analyst at Société Générale. Shares slumped on the news. The stock has had a rough go of it in recent years, but has rallied around 21% this year on hopes of a turnaround. BlackBerry is the second-best performer in CNNMoney's Tech 30 index. The company will report its latest quarterly results on Friday morning.
Accenture dropped 5% after reporting a decline in quarterly net income. The technology services company was recently hired to work on the Obamacare website.
King Digital Entertainment shares dipped again. The maker of online game Candy Crush Saga took a beating in its initial public offering on Wednesday. Despite an IPO price of $22.50, the stock is trading under $19.
European markets finished mixed. The International Monetary Fund said it was throwing Ukraine an $18 billion lifeline.
Asian markets also ended mixed. Japan's Nikkei rose. But Chinese stocks fell. Shares of online giant Tencent fell by nearly 6% in Hong Kong. Investors and traders have been growing concerned that valuations have become too rich for Chinese tech stocks ... much like investors in the U.S. have regarding the likes of Facebook and Twitter.
By Jesse Solomon, March 27, 2014: 04:19 PM ET
3 Reasons The IRS Bitcoin Ruling Is Good For Bitcoin
On Tuesday, the U.S. Internal Revenue Service issued a notice, informing Americans of the U.S. Federal tax implications of bitcoin transactions. Bitcoin owners and prospective bitcoin owners should take five minutes to read the six-page notice.
For the most part, Bitcoin owners were pleasantly surprised by the news. Anyone who researched the topic or spoke with a knowledgable accountant understood bitcoin gains would need to be reported at tax time. It was expected they would be treated as property, which is how the IRS guidance ended up dealing with bitcoins.
Bitcoiners expected clarification at some point, but not before this year's tax filing deadline.
This clarification is good news for three reasons.
First, it clears up the tax environment. Prior to this announcement, some potential bitcoin investors were concerned it might be illegal. Others thought it was legal, but didn't want to risk getting in trouble with the IRS by making a mistake on their taxes.
This announcement, however, demonstrates that bitcoin is a legal financial investment, and provides certainty as to the way transactions should be reported. Before this announcement there was mostly guesswork as to how the IRS would classify bitcoin transactions. No one likes guessing when it comes to tax penalties, and this guidance removes that guesswork.
The second reason this is good news: this is one of the best possible outcomes. If bitcoin had been classified as a currency instead of property, that would have resulted in a higher tax liability for many bitcoiners -- since those gains or losses are classified as ordinary income or loss. With Tuesday's IRS ruling, bitcoin investors can further benefit from the U.S. long-term capital gain rate, in addition to their investment's massive appreciation.
Lastly, this is good news is because, with this announcement, the IRS at least recognizes the legality of bitcoin -- if not tacitly endorsing bitcoin by stating “Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” For some that is a big deal.
Not many people love the IRS. However most people respect the agency, and its recognition that bitcoin has utility is a win in the battle to eliminate the myth that “bitcoin is a mirage.”
Disclosure: At the time of this writing David Smith has a long bitcoin position.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Read more: http://www.nasdaq.com/article/3-reasons-the-irs-bitcoin-ruling-is-good-for-bitcoin-cm339333#ixzz2xE1QJV2d
Read more: http://www.nasdaq.com/article/3-reasons-the-irs-bitcoin-ruling-is-good-for-bitcoin-cm339333#ixzz2xE1QJV2d
Amazon considering free streaming service
NEW YORK (CNNMoney)
Amazon might be taking a page from television broadcasters as it expands its streaming TV service and commissions more original shows.
Emphasis on the word "might."
The company is planning a free streaming service that could complement the $99-a-year Amazon Prime product that it already has, according to The Wall Street Journal.
A few hours after the report surfaced, though, Amazon seemed to dispute it, telling reporters that "we have no plans to offer a free streaming media service."
The back-and-forth stoked yet more curiosity about Amazon's multimedia plans.
Currently Amazon Prime has three main features: free two-day shipping, a streaming selection of TV shows and movies, and an e-book lending library. There's no way to access Amazon's original TV shows, like "Alpha House" and "Betas," without a Prime subscription.
The free service Amazon is considering could change that. As described by The Journal, it would resemble Hulu, the online video site jointly owned by the parent companies of broadcasters ABC, NBC and Fox. Most visitors to Hulu only use its free, ad-supported version, but about five million subscribe to its paid version, called Hulu Plus.
Hulu Plus costs $8 a month, or $96 a year, roughly equivalent to Amazon Prime (but without the free shipping or other perks).
The free version of Hulu features many TV shows, including some that are exclusive to the website. But because of the various limitations and delays imposed on the free version, some visitors are persuaded to pay for Hulu Plus.
Amazon might be eyeing a similar two-tiered business model, especially as it prepares to sell a streaming video device of its own.
On Thursday, hours before the Journal report, the company invited reporters to an April 2 event where the device is expected to be announced. The long-rumored device -- which has been likened to Apple TV and Google Chromecast in press reports -- will help users watch Internet content, including Amazon Prime TV shows, on big-screen TV sets.
Amazon may also want to delve deeper into the advertising sales business. Selling ads before and after TV episodes (and other forms of content, like music videos) would take another page from the broadcasters' long-established playbook.
On Thursday evening, an Amazon spokeswoman said, "We have a video advertising business that currently offers programs like First Episode Free and ads associated with movie and game trailers, and we're often experimenting with new things, but we have no plans to offer a free streaming media service."
By Brian Stelter, March 27, 2014: 08:15 PM ET
Fundamentalist? Technician? Market Psychologist? Why not all Three?
Over the last three years we have experienced what could possibly be the greatest trend following market in history. As the S&P 500 made one final last gasp rally in May 2008 the major indices made lower highs and the stage was set for one of the most vicious 10-month bear markets ever. Each and every rally was a selling opportunity, although there were a few powerful snapbacks along the way, they all eventually failed as the sellers overpowered a dwindling cadre of bulls.
Since the market bottomed in March 2009 the steep ascent of virtually all risk assets (commodities, equities, high-yield debt etc.) has been breathtaking. The past two years have been a trend followers dream, those who employed appropriate risk management were able to sell into strength and accumulate during pullbacks. Meanwhile, even this market (although it has been very forgiving) has punished the over-leveraged with a few vicious sell-offs (Flash Crash, Egyptian panic etc.).
Technical analysis works because it effectively captures the collective decisions of market participants. Think about one of the simplest chart patterns in existence, the bull flag. A bull flag comes about because there are one or more eager buyers of a particular security. They move the price up aggressively but then realize they are moving the price up too quickly so they pull back and lower their bids. This effectively causes the flag pattern, but the buyers are still there laying in wait, ready to pounce once they have accumulated enough shares at lower levels to satisfy themselves. This simple concept is what makes the bull flag a logical and highly effective technical pattern. The trading in $BTU on Friday excellently illustrates the effectiveness of the bull flag/ascending triangle patterns:
There can be no doubt that technical analysis in the hands of skilled technicians has risen to the occasion superbly in the current bull market. Whereas, there have been numerous so called fundamentalists who have been left behind with an assortment of bearish economic misgivings. However, in my opinion there is a clear distinction between a fundamental analyst and a subjectively biased observer. I do not consider the latter to be a true fundamental analyst.
A true fundamental analyst should remain objective and check their opinions of Fed monetary policy or government intervention in financial markets at the door. Throughout 2009 and 2010, many fundamentalists were unable to shift their psychology away from the financial crisis destruction of 2008/early 2009 to the Fed/Treasury promoted reflationary economic recovery. Whereas, market technicians who properly practiced their craft were able to capture the vast majority of the rally from the March 2009 low.
Fundamental equity analysis can essentially be divided into two main categories, one legal and one illegal. The mosaic theory involves collecting public, non-public and non-material information about a company in order to determine the underlying value of the company’s securities. Whereas, insider trading is the use of material non-public information to gain an illegal unfair advantage in the securities markets.
Technical analysis works because the charts are driven by fundamentals. Fundamentalists leave the foot prints of their buy/sell decisions in the charts for the entire world to see. It is the technical analyst’s job to discern what these buy/sell decisions were and whether they were indeed correct and worth following. Let’s take a look at a few charts in order to get a better picture of how both fundamental and technical analysis affect markets:
(Click to enlarge charts)
For a fundamental analyst to buy $RIMM after the March 25th earnings induced gap down they must have believed that the vast majority of market participants had misinterpreted the earnings release and conference call. A decision to ignore the bearish technical implications of such a large gap lower on huge volume requires the investor to have at least one of the following:
- ‘Special’ information as to the future prospects for RIMM and/or a belief that the market is currently mispricing RIMM shares
- The investor believes that he understands RIMM’s valuation better than the analysts who downgraded the stock and large institutions who sold the stock following the earnings report
- A willingness to lose money by stubbornly disregarding overwhelming evidence indicating that RIMM’s prospects are much worse than the market had previously believed
Would a technician have bought $LVS at $1.38 in March 2009? Probably not, within two years LVS was a 40-bagger from those levels.
What about $NG at .37/share in November 2008? NG would also turn out to be a 40-bagger within two years.
Fundamental analysis enables an analyst to determine a fair value range of an equity using an assortment of equity valuation methodologies. Some of the assumptions and projections that must be made in order to form a fundamental valuation model are particularly challenging and often prove to be off the mark. As Yogi Berra so succinctly stated, “It’s tough to make predictions, especially about the future”.
Market bubbles perfectly illustrate situations in which technical analysis and market psychology (herd psychology) trump fundamentals. Fundamental analysis attempts to quantify everything and is rooted in the notion that market participants behave rationally. Meanwhile, market participants can often behave in a highly irrational manner with rational fundamental valuations taking a backseat to powerful positive feedback loops resulting from the madness of crowds. The innate human emotions of greed and fear have been well known to overpower rational thought throughout market history. The thought of missing out on a major bull market plays on our inner most desire of greed. While the fear of further financial loss during market declines has often provoked investors to capitulate and sell at market bottoms.
More on the psychology of bubbles later...
Rider safety is more than a market.
Injury PreventionSafety Helmets Save Lives, Prevent Traumatic Brain Injury
Emergency physicians are urging the public to put helmets on as outdoor activities increase and temperatures warm up. May is motorcycle safety month and a prime opportunity to remind the public about the importance of safety helmets. Helmets save lives and reduce the risk of brain injury, the nation's emergency physicians said today. They see firsthand the tragic consequences of people who don't wear them.
"People are riding bicycles, motorcycles and ATVs more often at this time of year," said Dr. Angela Gardner of the American College of Emergency Physicians. "Now is the time to get in the habit of wearing a certified safety helmet, because it only takes is one tragic crash to end your life or cause serious injuries to your brain that can alter your life forever."
Helmet use is the best way to reduce bicycle head injuries and fatalities from crashes. More than 300,000 children are treated in emergency departments with bike injuries every year and nearly two-thirds (70 percent) were because of head injuries that could have been prevented by wearing a helmet according the National Highway Transportation Safety Administration (NHTSA).
Facts about Bicycle Helmet Use:
Bicycle helmets are nearly 90 percent effective in preventing brain injuries, according to NHTSA. Universal bicycle helmet use by children ages 4 to 15 would prevent 39,000 to 45,000 head injuries. About 540,000 bicyclists seek emergency care with injuries each year. Of those, 67,000 have head injuries and 27,000 of them have injuries serious enough to be hospitalized.
ACEP recommends that bicycle riders wear helmets that meet or exceed the safety standards developed by the Consumer Product Safety Administration. A proper bike helmet should sit on top of the head in a level position and not rock forward and backward or side to side. Helmet straps must be buckled snugly, but not too tightly. Helmets are important for bicyclists of all ages because older riders represent more than three-quarters of bicycle deaths.
Motorcycle helmets are effective as well. "Helmet use is the single most important factor in people surviving motorcycle crashes," said Dr. Gardner. "They reduce the risk of head, brain, and facial injury among motorcyclists of all ages and crash severities."
Facts about Motorcycle Helmet Use:
NHTSA estimates that helmets saved the lives of more than 1,800 motorcyclists in 2008. An additional 800 lives could have been saved if all of those motorcyclists had worn helmets. Motorists without helmets are 40 percent more likely to die from a head injury.
In addition, Dr. Gardner said helmet use isn't restricted to just bikes or motorcycles.
"People should be wearing helmets when roller skating, rollerblading, skateboarding or playing any type of hard-hitting contact sports."
For more information on helmet safety or any other health related topic, please go to www.EmergencyCareForYou.org. ACEP and MedicAlert Foundation are partnering to promote EmergencyCareForYou.org and to educate the public about medical emergencies.
MedicAlert Foundation pioneered the first medical identification and emergency medical information service in 1956 to provide people with a simple but effective method for communicating their medical conditions. Since the organization's founding, MedicAlert Foundation has provided services and products that help to protect and save lives for its 4 million members worldwide. For more than 50 years, the nonprofit foundation has relayed vital medical information on behalf of its members to emergency responders so they receive faster and safer treatment. MedicAlert IDs alert emergency personnel to a member's primary health conditions. In addition to its 24-¬hour emergency response service, MedicAlert Foundation also provides family and caregiver notification so that members can be reunited with their loved ones. For more information, visit www.medicalert.org.
ACEP is a national medical specialty society representing emergency medicine. ACEP is committed to advancing emergency care through continuing education, research and public education. Headquartered in Dallas, Texas, ACEP has 53 chapters representing each state, as well as Puerto Rico and the District of Columbia. A Government Services Chapter represents emergency physicians employed by military branches and other government agencies.
The FrontLine Of Global Resource Chase
The global resource chase represents the most powerful movement of money ever known to mankind. And you’re now on the frontline of it, which is no insignificant feat.
You see, the global population is growing (not shrinking). It’s also getting richer (not poorer).
On such merits, more and more people are chasing after fewer and fewer resources – with no end in sight.
At Oil & Energy Daily, we embrace the reality of a diminishing supply. Because supply shocks lend themselves to unparalleled profit opportunities. The likes of which the world has never witnessed before.
But you have to know where to look.
These days, the most prolific profits might be buried beneath the icy waters of Alaska’s North Slope…
Or they might be tucked away in a Chinese dictator’s desk.
The only surefire way to unlock such an opportunity is to get “boots on the ground” in some of the world’s most volatile (and dangerous) regions, which perfectly describes Oil & Energy Daily’s research methodology.
We’ll be reporting from every conceivable corner of the energy market, including the Middle East.
In doing so, our experts will bridge the tremendous (mis)information gap that exists between you and what’s actually happening on the frontline of the global resource chase.
With that in mind, “the chase” is officially on!
How Powerful Is The IRS?
In 1931, the Internal Revenue Service finally succeeded where the police and FBI had failed for years, when it successfully prosecuted Chicago bootlegger Al Capone for failure to pay income tax, an offense for which he received an 11-year prison sentence. This is a gangster that literally got away with murder, but could not escape the justice of the taxman.
While the conviction of notorious criminals may do a great service for the public, the IRS has also been accused of abusing its power, on more than one occasion, and it has been seen often as a pit bull the government unleashes on its opponents. Although many critics have petitioned Congress to curb the IRS’s power and authority, the voices of dissent reached fever pitch after the revelation in May 2013 that the department had targeted about 75 conservative political organizations, whose tax paperwork had the words “Tea Party” and “patriot,” for audits.
A Howl of Protest
Both Democratic and Republican congressmen unilaterally condemned the IRS for its blatant violation of taxpayers’ rights. Darrell Issa, the Chairman of the Government Oversight and Reform Committee, stated that “The fact that Americans were targeted by the IRS because of their political beliefs is unconscionable. The committee will aggressively follow up … and hold responsible officials accountable for this political retaliation.” Montana Democrat Max Baucus, who chairs the Senate Finance Committee, expressed a similar sentiment. “We shouldn’t rush to judgment,” he said. “But targeting groups based solely on their political views is not only inappropriate, it is intolerable.” Several other key figures in both political parties also joined in criticizing the IRS after the American Civil Liberties Union (ACLU) released information revealing that the Criminal Tax Division of the IRS believed that they had the authority to access private emails and other forms of communication.
A Long-Standing Issue
Of course, negative public perception of the IRS is nothing new. Several previous presidential administrations have been cited for using this agency to target political opponents, including Franklin D. Roosevelt, who used the IRS to go after republican newspaper publisher William Randolph Hearst and Andrew Mellon, the former Secretary of the Treasury. John F. Kennedy also used the IRS to target “extremist” groups to ensure that they adhered to the rules for tax-exempt organizations. The IRS assisted by creating the Ideological Organizations Audit Project, an initiative that focused on right-wing organizations, such as the Christian Anti-Communist Crusade and the Foundation for Economic Education. Kennedy also employed the IRS to audit steel industry executives who refused to comply with his price control policy.
But use of the IRS to go after those who did not share the visions of those in office has by no means been limited to the Democrats. Nixon’s staff created a list of over 10,000 groups and individuals who were labeled as subversive, and those in this category were singled out for audits or other special attention. These practices became known during the Watergate investigation, and it also became known that Nixon had attempted to glean information on his political enemies and other opponents from IRS records.
The Clinton Administration continued this abusive tradition by engineering audits on republican adversaries and personal accusers such as Gennifer Flowers and Paula Jones. Not to be left out, The Obama Administration has endured considerable public embarrassment from a 2013 IRS-related scandal. The IRS began a wave of audits against various conservative groups, and hacked into their private emails and phone records. One IRS executive pled the Fifth Amendment in order to escape indictment, while the acting agency director stated that he had “no idea” that those under his watch were collaborating to deny more than 300 conservative groups their tax-free statuses. In an article for Fox News in June 2013, Dr. James C. Dobson wrote that his own group, Family Talk Action, was among those that were targeted. He revealed that the IRS delayed approval of 501(c)(4) status to Family Talk Action for nearly 19 months, and that a representative from the IRS told them plainly that they were unlikely to get approval because they were a “partisan, right-wing group.” Fortunately, their application was quickly approved after their attorney threatened to take legal action against the IRS.
Beware the Audit
Although many audits that are conducted by the IRS are low-key, routine affairs that are quickly resolved, some have had devastating consequences, both financially and emotionally, for those who endured them. And in many cases, these victims were scrupulously honest filers who became the targets of overzealous IRS agents looking to collect revenue. Some of them have had to devote substantial amounts of time and money to defend themselves from liens, levies, penalties and interest that were assessed by the IRS after it audited their returns. Joan Smith was preparing for spinal surgery when the IRS unceremoniously debited her bank account for $10,000 because she had failed to answer a lien notice that they had sent her in the mail - to her old address, where she of course never received it. She spent nearly a year dealing with this issue and was forced to postpone her surgery. Other taxpayers have complained about being bullied and intimidated by IRS agents who have barged into their homes and demanded money from them. The harsh reality is that the burden of proof often rests solely upon the taxpayer, who can be considered guilty until proven innocent.
These and other accusations prompted the IRS to make a cursory attempt at reform during the Clinton Administration. Congressional testimonies outlined many of the abuses that were perpetrated by revenue collectors, but while some collection procedures were revised, no real action was taken to limit the powers of their agents. Skeptics therefore cynically referred to this meaningless charade as “Rah Rah 98.” The IRS, however, does now say in its brochure titled “Your Rights as a Taxpayer” that taxpayers must receive courteous and professional treatment from IRS employees.
Its Powers Are Gaining
Those who criticize the IRS for its alleged abuses of power may become even more incensed once the Affordable Care Act of 2013 is fully implemented. This legislation has appointed the IRS as an overseer to the public that will both administer and enforce several segments of the plan. The IRS has already received a blizzard of inquiries from the new healthcare exchanges regarding the eligibility of taxpayers for the health insurance premium tax credit, and it is also tasked with administrating a fee for providers of health insurance that appears to be complicated. Although the outcome is uncertain at this point, it seems likely that taxpayers who lose or don't have health insurance coverage will also face an immediate tax penalty. The base penalty is $95 but, again, it gets complicated when trying to determine exactly what you'd owe.
What Should Be Done?
Republicans have cried for either the reform or the abolishment of the IRS for years, but they have been largely unsuccessful in their efforts. But they were able to install an Inspector General in the U.S. Treasury in 1998, a position that played a role in uncovering the recent scandal. The Fair Tax Movement represents a grassroots effort to abolish our current tax structure and replace it with a consumption-based system of sales taxes. Other ideas include allocating the supervision of tax collectors to third-party judges so that the department is not its own policeman. One thing is certain, the IRS needs more systems in place to restrain its ability to target individuals and increase the transparency of its operations.
The Bottom Line
The history of the IRS is checkered with numerous already formidable powers wielded by the agency, and those powers are only likely to continue to grow for the foreseeable future. Taxpayers can protect themselves from abusive audits and revenue collectors by keeping detailed records that back up all of their deductions and credits and keeping them in a safe place. Those who disagree with the IRS about what they owe still have several avenues of recourse that they may pursue, including negotiating a settlement, the Office of Appeals and tax court.
While the conviction of notorious criminals may do a great service for the public, the IRS has also been accused of abusing its power, on more than one occasion, and it has been seen often as a pit bull the government unleashes on its opponents. Although many critics have petitioned Congress to curb the IRS’s power and authority, the voices of dissent reached fever pitch after the revelation in May 2013 that the department had targeted about 75 conservative political organizations, whose tax paperwork had the words “Tea Party” and “patriot,” for audits.
A Howl of Protest
Both Democratic and Republican congressmen unilaterally condemned the IRS for its blatant violation of taxpayers’ rights. Darrell Issa, the Chairman of the Government Oversight and Reform Committee, stated that “The fact that Americans were targeted by the IRS because of their political beliefs is unconscionable. The committee will aggressively follow up … and hold responsible officials accountable for this political retaliation.” Montana Democrat Max Baucus, who chairs the Senate Finance Committee, expressed a similar sentiment. “We shouldn’t rush to judgment,” he said. “But targeting groups based solely on their political views is not only inappropriate, it is intolerable.” Several other key figures in both political parties also joined in criticizing the IRS after the American Civil Liberties Union (ACLU) released information revealing that the Criminal Tax Division of the IRS believed that they had the authority to access private emails and other forms of communication.
A Long-Standing Issue
Of course, negative public perception of the IRS is nothing new. Several previous presidential administrations have been cited for using this agency to target political opponents, including Franklin D. Roosevelt, who used the IRS to go after republican newspaper publisher William Randolph Hearst and Andrew Mellon, the former Secretary of the Treasury. John F. Kennedy also used the IRS to target “extremist” groups to ensure that they adhered to the rules for tax-exempt organizations. The IRS assisted by creating the Ideological Organizations Audit Project, an initiative that focused on right-wing organizations, such as the Christian Anti-Communist Crusade and the Foundation for Economic Education. Kennedy also employed the IRS to audit steel industry executives who refused to comply with his price control policy.
But use of the IRS to go after those who did not share the visions of those in office has by no means been limited to the Democrats. Nixon’s staff created a list of over 10,000 groups and individuals who were labeled as subversive, and those in this category were singled out for audits or other special attention. These practices became known during the Watergate investigation, and it also became known that Nixon had attempted to glean information on his political enemies and other opponents from IRS records.
The Clinton Administration continued this abusive tradition by engineering audits on republican adversaries and personal accusers such as Gennifer Flowers and Paula Jones. Not to be left out, The Obama Administration has endured considerable public embarrassment from a 2013 IRS-related scandal. The IRS began a wave of audits against various conservative groups, and hacked into their private emails and phone records. One IRS executive pled the Fifth Amendment in order to escape indictment, while the acting agency director stated that he had “no idea” that those under his watch were collaborating to deny more than 300 conservative groups their tax-free statuses. In an article for Fox News in June 2013, Dr. James C. Dobson wrote that his own group, Family Talk Action, was among those that were targeted. He revealed that the IRS delayed approval of 501(c)(4) status to Family Talk Action for nearly 19 months, and that a representative from the IRS told them plainly that they were unlikely to get approval because they were a “partisan, right-wing group.” Fortunately, their application was quickly approved after their attorney threatened to take legal action against the IRS.
Beware the Audit
Although many audits that are conducted by the IRS are low-key, routine affairs that are quickly resolved, some have had devastating consequences, both financially and emotionally, for those who endured them. And in many cases, these victims were scrupulously honest filers who became the targets of overzealous IRS agents looking to collect revenue. Some of them have had to devote substantial amounts of time and money to defend themselves from liens, levies, penalties and interest that were assessed by the IRS after it audited their returns. Joan Smith was preparing for spinal surgery when the IRS unceremoniously debited her bank account for $10,000 because she had failed to answer a lien notice that they had sent her in the mail - to her old address, where she of course never received it. She spent nearly a year dealing with this issue and was forced to postpone her surgery. Other taxpayers have complained about being bullied and intimidated by IRS agents who have barged into their homes and demanded money from them. The harsh reality is that the burden of proof often rests solely upon the taxpayer, who can be considered guilty until proven innocent.
These and other accusations prompted the IRS to make a cursory attempt at reform during the Clinton Administration. Congressional testimonies outlined many of the abuses that were perpetrated by revenue collectors, but while some collection procedures were revised, no real action was taken to limit the powers of their agents. Skeptics therefore cynically referred to this meaningless charade as “Rah Rah 98.” The IRS, however, does now say in its brochure titled “Your Rights as a Taxpayer” that taxpayers must receive courteous and professional treatment from IRS employees.
Its Powers Are Gaining
Those who criticize the IRS for its alleged abuses of power may become even more incensed once the Affordable Care Act of 2013 is fully implemented. This legislation has appointed the IRS as an overseer to the public that will both administer and enforce several segments of the plan. The IRS has already received a blizzard of inquiries from the new healthcare exchanges regarding the eligibility of taxpayers for the health insurance premium tax credit, and it is also tasked with administrating a fee for providers of health insurance that appears to be complicated. Although the outcome is uncertain at this point, it seems likely that taxpayers who lose or don't have health insurance coverage will also face an immediate tax penalty. The base penalty is $95 but, again, it gets complicated when trying to determine exactly what you'd owe.
What Should Be Done?
Republicans have cried for either the reform or the abolishment of the IRS for years, but they have been largely unsuccessful in their efforts. But they were able to install an Inspector General in the U.S. Treasury in 1998, a position that played a role in uncovering the recent scandal. The Fair Tax Movement represents a grassroots effort to abolish our current tax structure and replace it with a consumption-based system of sales taxes. Other ideas include allocating the supervision of tax collectors to third-party judges so that the department is not its own policeman. One thing is certain, the IRS needs more systems in place to restrain its ability to target individuals and increase the transparency of its operations.
The Bottom Line
The history of the IRS is checkered with numerous already formidable powers wielded by the agency, and those powers are only likely to continue to grow for the foreseeable future. Taxpayers can protect themselves from abusive audits and revenue collectors by keeping detailed records that back up all of their deductions and credits and keeping them in a safe place. Those who disagree with the IRS about what they owe still have several avenues of recourse that they may pursue, including negotiating a settlement, the Office of Appeals and tax court.
 |
Mark P. Cussen, CFP®, CMFC, AFC
Mark P. Cussen, CFP®, CMFC, AFC, has 20
years of experience in the financial industry, which includes working
with investments, insurance, mortgages, taxes and financial planning. He
has several years of experience as a financial author and has written
numerous educational articles for various financial websites. He has
also worked in retail, discount and bank brokerage systems and is
currently working as a financial planner for the U.S. military. Mark has
a Bachelor of Science in English from the University of Kansas and
completed his CFP coursework at the Bloch School of Business at the
University of Missouri-Kansas City in August of 2001.
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Six Ways Your Tax Preparer Knows You're Lying
Jesus of Nazareth told His followers during the
height of the Roman Empire to render unto Caesar the taxes that were
levied upon them. Two thousand years later, many people still struggle
with this obligation. Rising taxes, a slow economy and the new costs of Obamacare
have tempted some taxpayers to try to cut corners with Uncle Sam. As a
professional tax preparer for a major national service, one of my jobs
is to recognize when a filer may be giving me fraudulent information.
Although it’s not possible to catch all the bogus information, there is a
list of common dodges that dishonest filers attempt to pull to reduce
or avoid their tax bill.
1. False Deductions
One of the most obvious ways that I see some filers attempt to deceive the IRS is when they try to claim additional deductions. When they see their tax bill or refund amount after we have finished the initial interview, they will have me put their return on hold because they suddenly remembered some "additional expenses" that they forgot to include before. Then they return with a list of these items (without any receipts or supporting documentation) and ask me to enter them into the return.
I’ll politely inform customers that adding these types of unsubstantiated expenses will increase the chances of being selected for an audit. If the client isn’t taking the hint, I have to refuse to file the claim. Knowingly filing a false tax return on someone else’s behalf will cause the IRS to discipline both the customer and me.
2. Claiming Dependents Who Don’t Qualify
A sure-fire way to lower any tax bill is to claim a dependent or two, since it can give the filer “Head of Household” status, which gives a larger standard deduction, and adds dependency exemptions and tax credits for dependents under age 17. Obviously, this can be a major point of contention for divorced couples, especially those who share custody of one or more children. For many in this situation, it becomes a race each year to see who can file first and “win” by claiming the kids. Of course, when one spouse claims one or more dependents unjustly, the other spouse can notify the IRS of the violation and have the undeserved refund disallowed. However, this process can take months and can be a headache for the ex-spouse that should have claimed the children.
The IRS has tightened up the rules for filers who claim kids for the Earned Income Credit by requiring them to provide additional documentation each year starting in 2014 that shows that each dependent claimed met the proper support and residency tests. Another dodge is to claim parents who do not live with the taxpayer by showing false statements of financial support.
3. Divorce-Related Fraud
Claiming dependents unjustly isn't the only way that divorcees can fudge their numbers. Although child support is nondeductible for payers, some filers will still try to claim this expense by stating that it is spousal support or alimony in hopes that the IRS won’t notice the discrepancy and will allow the deduction. If they cannot produce a divorce decree that shows that the payment is alimony, then they won’t be deducting it on any return that I prepare.
4. Income Fraud
Filers who fail to report income can not only lower their tax bill but also collect unemployment benefits. Those who report abnormally low income for the year will trigger a red flag, especially if they are claiming dependents. In some cases, they are receiving child support or state and/or federal assistance that is nontaxable, but many of these filers also worked jobs for which they were paid in cash. This type of income is especially tempting to omit because of the additional payroll tax.
5. Personal Vs. Business Expenses
Breaking down business versus personal use for things such as vehicles and office equipment can be a very gray area for some customers. Customers who increase these amounts or percentages towards business use several times tend to arouse my suspicion unless they can cite specific additional instances of use. More creative cheaters might create a dummy business entity to which false expenses are attributed, and I will disallow all such reporting if I sense that the business is not real.
6. Overseas Investors
Some clients think that investment or other income that they earn in other countries can be left off their tax return. This is not the case if they are U.S. citizens. I will closely question and thoroughly document the information a customer gives me about what they did during their time away if they resided in another country for any material period but have no income from there.
If the IRS Catches You
Of course, the rules clearly state that if I knowingly enter fraudulent information on a tax return that I prepare for a client and submit it, then both the client and I will be subject to disciplinary action or even criminal penalties (if the IRS discovers it). The client will also be subject to interest and penalties on the amount of tax that should have been paid.
I inform the customer that adding substantial deductions to the return may increase the chance that they will be selected for audit. If an audit happens, then the IRS will disallow any deduction or other incentive for which there is no proof, even if it was a legitimate expenditure that was actually paid. The IRS may then decide to audit other years of the client’s returns to see if they cheated on those, too. And if you plan on filing fraudulent returns, you should know that the IRS now pays a reward of 15% of any amount of tax that is collected to the whistleblower that reports you – which I may do if I see that you are determined to file a fraudulent return with someone else (because I won’t file it myself).
The Bottom Line
Taxpayers who try to cheat on their taxes are asking for trouble. If caught, the consequences they face usually far outweigh what they’re attempting to gain. For more information on how to correctly file your tax return or the consequences that you could face for cheating, visit the IRS website or consult your financial advisor.
1. False Deductions
One of the most obvious ways that I see some filers attempt to deceive the IRS is when they try to claim additional deductions. When they see their tax bill or refund amount after we have finished the initial interview, they will have me put their return on hold because they suddenly remembered some "additional expenses" that they forgot to include before. Then they return with a list of these items (without any receipts or supporting documentation) and ask me to enter them into the return.
I’ll politely inform customers that adding these types of unsubstantiated expenses will increase the chances of being selected for an audit. If the client isn’t taking the hint, I have to refuse to file the claim. Knowingly filing a false tax return on someone else’s behalf will cause the IRS to discipline both the customer and me.
2. Claiming Dependents Who Don’t Qualify
A sure-fire way to lower any tax bill is to claim a dependent or two, since it can give the filer “Head of Household” status, which gives a larger standard deduction, and adds dependency exemptions and tax credits for dependents under age 17. Obviously, this can be a major point of contention for divorced couples, especially those who share custody of one or more children. For many in this situation, it becomes a race each year to see who can file first and “win” by claiming the kids. Of course, when one spouse claims one or more dependents unjustly, the other spouse can notify the IRS of the violation and have the undeserved refund disallowed. However, this process can take months and can be a headache for the ex-spouse that should have claimed the children.
The IRS has tightened up the rules for filers who claim kids for the Earned Income Credit by requiring them to provide additional documentation each year starting in 2014 that shows that each dependent claimed met the proper support and residency tests. Another dodge is to claim parents who do not live with the taxpayer by showing false statements of financial support.
3. Divorce-Related Fraud
Claiming dependents unjustly isn't the only way that divorcees can fudge their numbers. Although child support is nondeductible for payers, some filers will still try to claim this expense by stating that it is spousal support or alimony in hopes that the IRS won’t notice the discrepancy and will allow the deduction. If they cannot produce a divorce decree that shows that the payment is alimony, then they won’t be deducting it on any return that I prepare.
4. Income Fraud
Filers who fail to report income can not only lower their tax bill but also collect unemployment benefits. Those who report abnormally low income for the year will trigger a red flag, especially if they are claiming dependents. In some cases, they are receiving child support or state and/or federal assistance that is nontaxable, but many of these filers also worked jobs for which they were paid in cash. This type of income is especially tempting to omit because of the additional payroll tax.
5. Personal Vs. Business Expenses
Breaking down business versus personal use for things such as vehicles and office equipment can be a very gray area for some customers. Customers who increase these amounts or percentages towards business use several times tend to arouse my suspicion unless they can cite specific additional instances of use. More creative cheaters might create a dummy business entity to which false expenses are attributed, and I will disallow all such reporting if I sense that the business is not real.
6. Overseas Investors
Some clients think that investment or other income that they earn in other countries can be left off their tax return. This is not the case if they are U.S. citizens. I will closely question and thoroughly document the information a customer gives me about what they did during their time away if they resided in another country for any material period but have no income from there.
If the IRS Catches You
Of course, the rules clearly state that if I knowingly enter fraudulent information on a tax return that I prepare for a client and submit it, then both the client and I will be subject to disciplinary action or even criminal penalties (if the IRS discovers it). The client will also be subject to interest and penalties on the amount of tax that should have been paid.
I inform the customer that adding substantial deductions to the return may increase the chance that they will be selected for audit. If an audit happens, then the IRS will disallow any deduction or other incentive for which there is no proof, even if it was a legitimate expenditure that was actually paid. The IRS may then decide to audit other years of the client’s returns to see if they cheated on those, too. And if you plan on filing fraudulent returns, you should know that the IRS now pays a reward of 15% of any amount of tax that is collected to the whistleblower that reports you – which I may do if I see that you are determined to file a fraudulent return with someone else (because I won’t file it myself).
The Bottom Line
Taxpayers who try to cheat on their taxes are asking for trouble. If caught, the consequences they face usually far outweigh what they’re attempting to gain. For more information on how to correctly file your tax return or the consequences that you could face for cheating, visit the IRS website or consult your financial advisor.
|
Mark P. Cussen, CFP®, CMFC, AFC
Mark P. Cussen, CFP®, CMFC, AFC, has 20
years of experience in the financial industry, which includes working
with investments, insurance, mortgages, taxes and financial planning. He
has several years of experience as a financial author and has written
numerous educational articles for various financial websites. He has
also worked in retail, discount and bank brokerage systems and is
currently working as a financial planner for the U.S. military. Mark has
a Bachelor of Science in English from the University of Kansas and
completed his CFP coursework at the Bloch School of Business at the
University of Missouri-Kansas City in August of 2001.
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How Stocks Trade?
| Investopedia: Are you looking for more information on currency trading? Try our Forex Walkthrough, it goes from beginner to advanced. |
The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, reducing the risks of investing. Just imagine how difficult it would be to sell shares if you had to call around the neighborhood trying to find a buyer. Really, a stock market is nothing more than a super-sophisticated farmers' market linking buyers and sellers.
Before we go on, we should distinguish between the primary market and the secondary market. The primary market is where securities are created (by means of an IPO) while, in the secondary market, investors trade previously-issued securities without the involvement of the issuing-companies. The secondary market is what people are referring to when they talk about the stock market. It is important to understand that the trading of a company's stock does not directly involve that company.
The New York Stock Exchange
The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The "Big Board" was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-mart, is the market of choice for the largest companies in America.
 |
| The trading floor of the NYSE |
The Nasdaq
The second type of exchange is the virtual sort called an over-the-counter (OTC) market, of which the Nasdaq is the most popular. These markets have no central location or floor brokers whatsoever. Trading is done through a computer and telecommunications network of dealers. It used to be that the largest companies were listed only on the NYSE while all other second tier stocks traded on the other exchanges. The tech boom of the late '90s changed all this; now the Nasdaq is home to several big technology companies such as Microsoft, Cisco, Intel, Dell and Oracle. This has resulted in the Nasdaq becoming a serious competitor to the NYSE.
 |
| The Nasdaq market site in Times Square |
On the Nasdaq brokerages act as market makers for various stocks. A market maker provides continuous bid and ask prices within a prescribed percentage spread for shares for which they are designated to make a market. They may match up buyers and sellers directly but usually they will maintain an inventory of shares to meet demands of investors.
Other Exchanges
The third largest exchange in the U.S. is the American Stock Exchange (AMEX). The AMEX used to be an alternative to the NYSE, but that role has since been filled by the Nasdaq. In fact, the National Association of Securities Dealers (NASD), which is the parent of Nasdaq, bought the AMEX in 1998. Almost all trading now on the AMEX is in small-cap stocks and derivatives.
There are many stock exchanges located in just about every country around the world. American markets are undoubtedly the largest, but they still represent only a fraction of total investment around the globe. The two other main financial hubs are London, home of the London Stock Exchange, and Hong Kong, home of the Hong Kong Stock Exchange. The last place worth mentioning is the over-the-counter bulletin board (OTCBB). The Nasdaq is an over-the-counter market, but the term commonly refers to small public companies that don't meet the listing requirements of any of the regulated markets, including the Nasdaq. The OTCBB is home to penny stocks because there is little to no regulation. This makes investing in an OTCBB stock very risky.
Stocks Basics: The Bulls, The Bears And The Farm
| Investopedia: Are you looking for more information on currency trading? Try our Forex Walkthrough, it goes from beginner to advanced. |
The Bulls
A bull market is when everything in the economy is great, people are finding jobs, gross domestic product (GDP) is growing, and stocks are rising. Things are just plain rosy! Picking stocks during a bull market is easier because everything is going up. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If a person is optimistic and believes that stocks will go up, he or she is called a "bull" and is said to have a "bullish outlook".
The Bears
A bear market is when the economy is bad, recession is looming and stock prices are falling. Bear markets make it tough for investors to pick profitable stocks. One solution to this is to make money when stocks are falling using a technique called short selling. Another strategy is to wait on the sidelines until you feel that the bear market is nearing its end, only starting to buy in anticipation of a bull market. If a person is pessimistic, believing that stocks are going to drop, he or she is called a "bear" and said to have a "bearish outlook".
The Other Animals on the Farm - Chickens and Pigs
Chickens are afraid to lose anything. Their fear overrides their need to make profits and so they turn only to money-market securities or get out of the markets entirely. While it's true that you should never invest in something over which you lose sleep, you are also guaranteed never to see any return if you avoid the market completely and never take any risk,
Pigs are high-risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their due diligence. They get impatient, greedy, and emotional about their investments, and they are drawn to high-risk securities without putting in the proper time or money to learn about these investment vehicles. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.
What Type of Investor Will You Be? There are plenty of different investment styles and strategies out there. Even though the bulls and bears are constantly at odds, they can both make money with the changing cycles in the market. Even the chickens see some returns, though not a lot. The one loser in this picture is the pig.
Make sure you don't get into the market before you are ready. Be conservative and never invest in anything you do not understand. Before you jump in without the right knowledge, think about this old stock market saying:
"Bulls make money, bears make money, but pigs just get slaughtered!"
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