How To Use Econ 101 Theories Into Stock Market?
January 12th, 2008 by admin
You probably learned fundamental analysis from Econ 101. In fact, it is one of the most important analysis to outlook the value of a stock. Fundamental analysts care about the nature of the economy and the nature of the company, It focuses on the nuts and bolts of the company and the economy to establish the value of a company and to predict what a company’s stock should sell for.
Let’s look at how fundamentalists examine the bigger picture, the economic environment in which company operates. There are several indicators fundamentalists regularly look at:
The Dollar. If the dollar is strong, that means that the goods import into this country will be cheap. The inflation will decrease, but American industries which rely on exporting get hurt because exports will be more expensive. A weaker dollar means American manufacturers will also helped since their goods will be cheaper overseas, but it could boost inflation on the other side.
Interest Rates. Rising interest rates are considered to be bearish. When interest rates increase, the stocks hardest hit initially will be high price to earning (P-E) stocks (since the value of their future earnings decreases), high-flying technology stocks, Internet stocks, banks, and car makers.
Inventory. This number includes how much a company’s raw materials, work in progress, supplies, and finished goods on hand are worth. If a company is not selling its goods or products, it will have more inventory than it should. The price of that inventory has to be reduced to clear it out, and that means less money coming in for the company to buy new products and hire consultants. That’s means the value of their future earnings decrease.
Personal Income. If people are making more money, they will spend more money. If they are making less money, they will spend less.
CPI. This indicator measures the rate at which consumer prices go up or down for food, housing, transportation, medical care, clothing electricity, services, and entertainment.
The fundamental analysis tries to predict the future direction of the market as a whole, and it tries to predict the direction of stocks you own now and may own in the future. You can read your Econ 101 text book for more information about fundamental analysis.
In fact, if you are new to stock market and want to make a fortune, you need a good stock trading software to help you make decision. I strongly recommend Marl’s Stock Trading Robot. I have made $632 in 2 months following the software’s stock picks. This is not a lot of money but it works. You can read the full review of the software here: Marl’s Stock Trading Robot Review
Posted in Make-Money-Online |