Stocks are off to a weak start Wednesday ahead of the Federal Reserve’s key decision on interest rates later today and following a big earnings miss from iPhone maker Apple that is weighing heavily on tech-stock packed Nasdaq composite.

The storyline for the tech sector has turned negative in recent days amid a number of disappointing earnings reports from key players in the sector, ranging from Apple’s (AAPL) first ever quarterly drop in iPhone sales reported after last night’s close to high-profile misses late last week from Microsoft (MSFT) and Google parent Alphabet (GOOGL).

Stock market history is full of growth-plateau-demise stories. When the USA was putting telephones in every home in the early 20th century it was hard to go wrong with AT&T. When every family was getting a car, or two, after World War II it was hard to go wrong with the likes of General Motors. And when home computers and their operating systems were brand new it was hard to go wrong with Microsoft. But late in the game AT&T broke up and is a shadow of its former self. GM went bankrupt although it is back. And Microsoft has become a dividend paying blue chip instead of the growth engine of the 1990’s. How about Apple?

Inventor of the Home Computer and More

The Apple computer was the miracle of the late 1970s. Who would have ever though that one might have their one own home computer. But the stock never took off in the 1980’s and 90’s like Microsoft did. This is probably because the company did not open source its software to outside programmers like IBM did with the PC. Thus Apple was near bankruptcy in 1997 when Bill Gates of Microsoft appeared with Steve Jobs who was back at Apple and announced that Apple was rescued by Microsoft with a $150 million investment. Wired tells the story.

1997: Microsoft rescues one-time and future nemesis Apple with a $150 million investment that breathes new life into a struggling Silicon Alley icon.

With Jobs back at the helm Apple invented hand held devices like the iPhone and IPad and grew hundred fold by 2014. But the question has always been when would the market be saturated with iPhones, iPads and competing devices for the likes of Samsung? It just might be that we have reached that point. So, should you sell Apple stock? Microsoft took a hit after the dot com collapse but stayed in the $30 range paying dividends after it quit growing. Now with a broader focus the company sells for around $55 a share and pays a reliable dividend. If you were in Apple only for the growth it may be time to sell. On the other hand if you want a well-run company that essentially has a license to print money with its attractive products you may wish to hold on to a few shares!

Should You Sell Apple Stock? PPT

[G]old and silver have been building a two year-old wedge pattern – a chart pattern that often leads to sharp moves in the direction of the breakout. Since then, precious metals have fallen sharply due to the calming of Greece-related fears, the stronger U.S. dollar, and lower oil prices. The latest gold and silver breakdown brings the metals dangerously close to breaking down from the wedge patterns.

What is happening to silver is that it is flirting with a substantial decline as the US Federal Reserve contemplates higher interest rates and the EU seems set to settle the Greek debt dilemma. The Forbes article looks at what is happening to silver from a technical perspective. The history of silver prices is a better guide. There are periodic upward swings in silver prices based on economic panic and then collapse, such as when the Hunt brothers tried and failed to corner the silver market in the late 1970s.

Supply and Demand

Prices are determined in the end by supply and demand. The Silver Institute publishes silver supply and demand figures.

Each year, the Silver Institute works with Thomson Reuters GFMS, a leading research company that is based in London, to prepare and publish a comprehensive report on that year’s silver supply and demand trends, with special emphasis on key markets and regions. This annual survey also includes current information on prices and leasing rates, mine production, investment and fabrication.

In the last ten years the world silver supply has risen from 955 million ounces to 1,016 million ounces. Demand has risen more slowly. In 2005 the net balance that demand exceeded supply by 7.4 million ounces and in 2014 supply exceeded demand by 2.6 million ounces. What is happening to silver is that supply is exceeding demand at a time when investors prefer stocks and US dollars to precious metals.

How Low Can Silver Go?

Business Standard reports that silver is at a six year bottom.

Gold prices hit a five-year low in the benchmark Comex trade on Friday, the fourth successive week of a bearish close, following positive economic outlook forecast by the United States Federal Reserve. Silver prices followed suit, nosediving to a six year low.

Weak trend persist in the precious metal segment since 2013 after the US Fed reported a recovery in its economy. Early this week, too, the US Fed chair Janet Yellen hinted that the US economy is recovering as per expectations, which suggested that a proposed interest rate hike may be possible this year itself.

Interestingly, the US dollar hit one month high on Friday to 1.08 against the Euro on positive economic outlook in the United States which is expected to rebound investors’ trust towards the US treasure resulting into emergence of dollar demand.

What is happening to silver is that the reasons to buy and hold silver are going away and there are good reasons to sell. When will silver hit bottom? When it does will that be the time to buy? After silver fell off its $110 an ounce peak in the late 1970s it preceded steadily down to the $5 an ounce range over the next ten years and stayed there for a decade. Investors should think long and hard before buying silver, even at substantially lower prices.

What Is Happening to Silver? PPT

The Hispanic Vote and Bipartisan Support on Immigration Issues

Republican efforts to unseat President Obama came to naught in the last election. A large part of that was the large majority of Hispanics who voted Democrat. It may well be that the Republican Party has decided to realign itself on immigration issues in order to garner more Hispanic votes in coming elections. Certainly, the issue of over ten million undocumented persons within the USA is a problem that should have been dealt with much sooner. As with all such issues compromise is necessary on all fronts. If both major parties can come to agreement we may see a wholesale rewriting of immigration law. That could greatly affect the issue of investing and immigration reform as it could make some businesses cheaper to run, some more expensive, some more profitable, and some more likely to lose money. How immigration issue will affect the national budget remains to be seen but that could be central to the issue of investing and immigration reform. Picking new winners in this matter may simply be a matter of looking for companies that process data effectively.

How Fast and How Effective

The President has outlined his plan for immigration reform. It would include illegal immigrants having to register as a first step toward possible citizenship. These people would “submit biometric data” which is code for being finger printed and having your photo taken. Applicants would have to pass background checks and pay fees in order to obtain a “provisional status.” Then “provisionals” would need to wait their place in the immigration line for permanent residency followed by citizenship. Considering the large number of people likely to apply for citizenship using this or whatever process is decided upon, investing and immigration reform may point to profits for those companies that can provide services to streamline this process and make it less expensive. The fact that many business leaders are positive on this matter fits with the assumption that an immigration fix will benefit the country as a whole. Certainly making it easier for immigrants to get work permits could reduce the cost of stopping people at the border. What is a good investment in this area? Look at what economic changes might result and invest accordingly.

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In value based stock investing investors consider the book value of a company and its earnings, preferably an accurate assessment of anticipated earnings. The formula includes a “fudge factor” of 22.5 and calculates the square root of earnings per share multiplied by book value per share. An average Graham number is 1.5. The Graham number is read like the price to earnings ratio. High is overpriced and low is underpriced. Whereas value based stock investing considers a price to earnings ratio of more than fifteen to be high, a Graham number of one and a half carries the same implication. In picking new winners in the stock market, value investors focus on these numbers. When a market downturn occurs it is often a field day for value based stock investing as stocks with substantial long term value are available for low Graham numbers or price to earnings ratios. Value based stock investing seeks to find profit in individual stocks. In addition to stocks with attractive PE ratios or Graham numbers investors look at just what a company does, how well they do it, and how much profit they make, or could make, in the future.

A good example of an attractive stock for value based stock investing might be DDI Corp – DDIC – who design and make circuit boards. Its Graham number implies that it should be priced fifty percent higher. It is mid cap stock which means that fewer analysts follow it than follow large cap stocks causing its promising financials to be overlooked by the market in general. By comparison Quaker Chemical Corp – KWR – is a specialty chemical maker that lost nearly ten percent in the last year but whose Graham number implies a real value of nearly thirty percent more that its current price. This is where knowing what the company does and how it fits into the overall picture is essential for value stock investing. A company whose business will falter during an economic downturn may have a low price to earnings ratio or Graham number but, in fact, may be liable to a lower set of numbers if the current recession worsens. A large cap company may or may not be a good stock investment based on value based stock investing principles. Companies like ExxonMobil – XOM, Freeport-McMoRan Copper & Gold Inc. – FCX, Delta Airlines – DAL, or Hewlett Packard – HPQ may or may not be fairly priced depending upon the state of the economy but they are typically followed closely by many stock analysts so that their market price is typically closer to what value investing considers a fair market value.

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If you are Wal-Mart you will go ahead with plans to buy more property for stores in what is turning into the world’s largest market for groceries. If you are Starbucks you will increase your presence as an increasingly affluent Chinese populace develops a taste for gourmet beverages. Investment in China can most easily take the shape of finding what stocks to invest in that have a presence in China. The Proctor and Gambles and 3Ms of the world have been in China from the beginning of its conversion to a quasi capitalistic economy. Others like Wal-Mart have a strong presence. In the beginning many companies developed relationships and invested in China in order to produce products cheaply to sell back in their home markets. Now China itself is becoming a major market and many factories that used to produce for overseas consumers are producing for domestic consumption. With the Yuan rising in value against other currencies selling in China becomes increasingly profitable.

Large scale direct investment in China requires a presence in the country, a facility with the language, and familiarity with the business culture. These things take time, patience, and skill. There are companies that can ease the way with introductions and advice. For the late comer to this scene partnering with a local business may be the best choice as it fast tracks access the China’s markets and its labor pool. The problem for many with technical expertise entering China is to retain the keys to high technology while taking advantage of what China has to offer. Too many have set up shop in China only to see their products and their technical secrets copied in a market that does not provide the protections seen in Europe and North America. What makes you a successful investor anywhere can be applied to direct investment in China. The investor will need a clear idea of what he intends to accomplish. If he is investing by way of buying stocks in Wal-Mart, 3M, or Proctor and Gamble he will want to have a clear idea of their game plans. No matter what the route into direct investment in China there appears to be the potential for long term profits as well as risks for the unwary.

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The smart investor thinking about how to buy silver needs to constantly ask himself what is a good investment and what are safe investments? When chaos threatens throughout the world, investors look to precious metals such as gold and silver as safe havens. Ongoing unrest in Egypt, riots in Saudi Arabia, threats of labor unrest in the USA all have an unsettling effect on investors. To the extent that silver is going up because of short term political unrest there is always the risk of a correction when things settle down. To the extent that the huge national debts taken on in response to the worse recession in 80 years stress national currencies, silver may remain a good investment for years to come as the dollar declines in value and silver rises. A bit of history, however, is instructive. This has to do with the Hunt brothers and their attempt to corner the market on silver.

How to buy silver is to keep in mind the lesson of the Hunts. Nelson and William Hunt, sons of Texas oil billionaire Haroldson Lafayette Hunt, Jr., started buying silver in the early 1970s. By 1979 they accumulated roughly a third of the refined silver bullion in the world, excluding that in government vaults. Silver went from around $6 an ounce throughout the decade to over $48 an ounce in the last months of 1979 and to nearly $50 an ounce in January of 1980. The Hunts were heavily leveraged and when the market corrected the Hunt brothers were faced with a margin call of $100 million. Many investors jumped on the band wagon as prices skyrocketed in the heady days of late 1979. Inflation had been rampant throughout the later part of the decade and many saw silver as their opportunity to regain wealth eroded away by the inflation, or stagflation, of the era. When the price of silver began to fall it was dramatic, falling 50% in four days and to less than $12 an ounce two months after its historic high. It was on an especially brutal day, called Silver Tuesday, that the Hunts were presented with the $100 margin call and the risk of $1.7 Billion in losses. The prevailing opinion was that several Wall Street investment houses and large banks were put at risk by the situation. A $1.1 Billion line of credit for the Hunts was cobbled together by a consortium of US banks which stabilized the situation and left silver to go into its twenty year trough. With this little history lesson in mind we suggest that when learning how to invest in any investment vehicle, especially in silver, that the investor start small, do his homework and learn from the lessons of history.

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There are two sets of answers to the question are silver and gold liquid investments. The answers have to do with how to buy silver and how to buy gold for investment. Traditional gold and silver bugs buy and hold gold and silver bullion, either as bullion coins or bars. Alternatives are to buy mining stocks or, especially in the case of gold, exchange traded funds that track the value of gold. In the first case the individual needs to bring or send his gold to a dealer in order to sell it. In the second case the individual can buy and sell stocks online and move his money to a money market account with his brokerage firm. Gold investors with a more than a few ounces of gold will commonly keep their gold in a secure storage facility. These facilities are always separate from the offices of the gold dealer from whom the individual buys or sells gold. Thus it is not just a matter of going to the safety deposit box and taking a few bars or coins to the dealer to sell. A large quantity of gold or silver may require an armored vehicle and security guards.

Investing in gold stocks and exchange traded funds is a means of maintaining liquidity while taking advantage of the investment advantages of gold. The same applies to silver mining stocks. Are silver and gold liquid investments in the cases of mining stocks and exchange traded funds? They certainly are. There are advantages and disadvantages to investing in these vehicles but lack of liquidity is not one of them. Gold and silver mining stocks will typically outperform bullion in a rising market and fall faster in a down market. A well designed and managed ETF will typically do a good job of tracking the price of gold bullion and will offer the advantage of instant liquidity when trading such stocks online. So, in the end, are silver and gold liquid investments? It depends on how you invest.

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When the investor is looking for stocks at bargain prices knowing which penny stocks to watch is of ultimate importance. Many penny stocks are justifiably selling for pennies. They are not strong companies and will probably not grow. On the other hand there are startup companies that will eventually be household names and previously strong stocks that have the prospect of a profitable comeback. Sorting out the wheat from the chaff will tell the investor which penny stocks to watch. Following the stock the investor will be able to buy at a low point in order to maximize profits when the stock rises.

Many successful long term investors look for a margin of safety in a stock. The margin of safety can be property that the company owns, cash in the bank, or ownership of assets in other companies. The margin of safety protects the stock price in times of recession and even stock market crashes. This concept goes back to the days after the 1929 stock market crash and the Great Depression. Many investors had “played” the stock market like they might have played roulette at a casino. The concepts of intrinsic value and a margin of safety replaced the gambling mentality of many investors. Those who embraced the new concepts realized that what is a good investment is a solid company with good prospects and these investors profited. An investor’s strategy can be investing in innovation in biotech or investing in shortages such as in energy products after a disaster such as the recent BP oil spill. In either case the investor will use fundamental analysis to project the profits and stability seen in a good long term investment.

Investors interested in a shorter timeline will find that what is a good investment can often be a stock in a company that is not especially stable or one that has just developed products that may result in a price jump. This sort of investing is more strongly tied to technical analysis of the market and profits are typically short term. In other words the investor will buy an undervalued stock, wait for it to rise in price, and then sell, taking the capital gain. At times when the economy is growing investing in oil can be profitable in this regard. Oil prices, and the price of oil stocks, can go up dramatically. An investor may not want to own oil stocks over the long term but may profit from a short term jump in prices. As always the point is not to run out and buy an oil stock or a penny stock but to investigate, develop a strategy, and follow through. There after an honest review of investment results is important. We learn in life through our mistakes as much as our successes. Invest and learn from success and mistakes what is a good investment.

Silver bullion fell in price way back in the mid 1850’s with silver discoveries in the Western United States and has never recovered its former purchasing power. It fact the price of silver bullion kept falling until the middle of the last century. Then silver recovered at bit, especially with the inflation of the late 1960’s and the 1970’s. When the Hunt brothers tried to corner the market on silver in 1980 the price of silver bullion went from under $20 an ounce to around $70. After their effort failed the price of silver bullion went into free fall and hit an all time low of $4.50 an ounce in 1992. With inflation and concerns about a falling dollar, a monster stock market crash, and unheard of levels of governmental debt silver has climbed to the $18 an ounce range today. Fundamental analysis would tell us that for much of the last century and a half silver was not a good investment. It would also tell us that buying silver at the bottom in 1992 would have been a good idea. So, is silver a good investment today?

To the extent that a person buys silver before someone like the Hunts try to corner the market and have the discipline to get out before the bubble bursts, silver is a great one time investment. To the extent that the investor realizes that all time lows in silver are right down to the bare minimum and invests at the bottom of the curve, silver is a good investment. To the extent that a silver investor can read the silver market and buy and sell bullion with exacting efficiency, silver is a good investment. However, it not like investing in growing companies where there is a steady income stream over the years, unless you think of silver mining.

An alternative to buying silver bullion is to own mining stocks. Precious metal mining stocks tend to go up in multiples to the price of gold, silver, platinum, etc. when the economy is shaky or people doubt the staying power of the dollar for any reason. Because the mining company is, typically, making money even at a lower price it has its overhead covered. Thus any increase in the price of silver is clear profit. Is silver a good investment when you own mining stocks? It can be. When the price of silver is going up deciding on which silver mining operation to invest in is a matter of picking new winners. However, buying mining stocks when the price of silver is high can be a recipe for disaster as the mining stock will plummet faster than the price of silver if there is big correction in silver price. Then the answer to is silver a good investment would be a resounding “NO.”

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