SHREVEPORT, La., Oct. 22, 2006 (PRIMEZONE) -- DonHarrold.net (IARD #119079, http://www.donharrold.net), discusses three commonly-believed myths about investing.
"There are three myths investors need to know about. These myths can put a Halloween hex on anyone's portfolio," says Investment Advisor, Don Harrold.
"I received and email Saturday. It summed up the experience of many investors over the last decade:
Kudos to you for standing up to the lies out there and telling the truth. Being from Houston, I know many people who lost hundreds of thousands or more on Enron, Williams, Dynegy, Mirant, Reliant, Centerpoint, etc. and lost more than they already had by buying the stock when it had gone down (and of course it went down even more). There are all the people I know whose 401k has not only fallen to a fraction of its previous value, but continues to suck away their money every month with nothing to show for it. I myself lost a few thousand back in 2000 based on investment "advice" and have stayed clear of stocks since then and plan to always do so - trading is not my forte. But for those who trade, they need a service like yours that can give them actual useful advice instead of a P.T. Barnum hype machine where . the same signal always appears: BUY BUY BUY! ... Keep up the good work and factual reporting. Sometimes it takes a Louisiana boy to tell it like it is.
This email is why I do what I do. It's this sort of story that compels me to help investors. There are three big myths about investing that people like John should know about. They are Interest Rates Rises are Bad for Stocks, Oil Prices that Go Up Hurt Stock Prices, and Commodity Prices Directly Correlate to Profits," adds Mr. Harrold.
Interest Rates http://www.donharrold.net/videos/102206free.html
The MYTH: Rates that go up cause stocks to go down. Companies must pay more to borrow money. This means they must spend more to pay off debt. That extra expense will drive profits down. Profits that go down will lower stock prices.
The TRUTH: Rate increases either did nothing to the market since 2004 or had a positive effect. The S&P 500 is up 200 points (17.5%) since June of 2004. There were 15 rate increases in that time. Interest rate increases did nothing to slow the markets.
Oil Prices http://www.donharrold.net/videos/102206free.html
The MYTH: A rise in the price of oil is bad for stocks. As oil prices rise, the cost of manufacturing, shipping, and storing goods rises. Increased costs will either drive up inflation or be absorbed by companies as they show lower profits. Higher prices will lower sales. Lower sales will lower profits. Or, if prices don't rise and companies "eat" the extra cost, profits will drop. Either way, oil prices that go up will lower stock prices.
The TRUTH: Since the start of the Iraq "war", oil prices are at all-time highs. Even after the recent pullback they are still double or triple where they were in the last 10 years. The amazing spike in oil prices did nothing to slow the market. In fact, since the week of October 10, 2002 (see comments below!), the S&P 500 is up almost 100%.
Commodity Prices http://www.donharrold.net/videos/102206free.html
The MYTH: A rise in the price of commodities like copper, wheat, or lumber is bad for stocks. As commodity prices rise, the cost of manufacturing, shipping, and storing goods rises. Increased costs will either drive up inflation or be absorbed by companies as they show lower profits. Higher prices will lower sales. Lower sales will lower profits. Or, if prices don't rise and companies "eat" the extra cost, profits will drop. Either way, commodity prices that go up will lower stock prices.
The TRUTH: Commodity prices across the board are at record highs. On one hand we are told that those increases are what makes it so expensive to "own" a home or build a better widget. On the other hand we are told that there is no inflation so speak of. Like the oil-price lie, you can't have it both ways. You will either have inflation or a drop in profits.
The BOTTOM LINE: Fundamental analysis is used to push you in and out of stocks. You can't trust the myths about oil, commodities, and interest rates, so you need to trade against the "story." Use technical analysis to help get you in and out of stocks. http://www.donharrold.net/videos/102206free.html
About DonHarrold.net: DonHarrold.net is a stock research firm. Their daily commentary is regular and distributed worldwide. They are Registered Investment Advisors. They do not accept third-party compensation to make stock suggestions.