DAILY STOCK MARKET FORECAST

Any coordinated attack by terrorist groups, especially al-Qaida, will affect trader thinking. Any news of organized attacks and the market would sell-off immediately. It will depend on how devastating the attack is to how traders will react. The reverse is also true. Any al-Qaida officials, or top leaders that are captured or killed should be a rallying point for the markets, assuming all other things are equal.

(Alternate spelling: al Qaeda and al-Queda).

how war with Iraq could affect the U.S. stock market.

Although there is no absolute answer to this, we can take a look at what causes markets (stocks) to move. 

First of all, understand that traders and investors are a very nervous. Especially nowadays, when so much pain has been taken over past years- you cannot really blame anyone for wanting to minimize a loss in the market.

Think about why you buy stocks. None of us buy stock in hopes that when its sold it will be lower in price- a loss. Unless you need a loss for end of year tax purposes, you most likely buy stocks to make a profit. The more certain you are about a stock and its future, the more likely you are to buy it, if you're in the market to buy.

So the more certain you are about a particular stock, the more likely you are to buy it. The opposite of certainty is uncertainty. The more uncertain you are, the less likely you are to buy the stock.

Uncertainty doesn't have to be directly related with just the stock, but could have to do with the environment the stock is in. Example. Lets say you are looking at company 'ABC',  and ABC, has in the past, grown 50 percent a year and is projected to continue that growth, and the market for ABC products is very good, you might buy some of the stock.

Let's say you complete your analysis of ABC and a ZNN breaking news headline grabs your attention and it's stated that certain overseas countries are talking about building  their own ABC plant. Now they may or may not build that plant, but at this point there is some uncertainty.

Throw in to the mix- Rumors that war is about to break out in another country that imports ABC products and now you have another uncertainty. The uncertainty can be just about anything that could impact the companies stock directly or indirectly.

That is the nature of being uncertain, you just don't know. That's why the market can fluctuate violently sometimes (market volatility).

It's like getting sick. If you get sick you begin to feel bad. The worse sick you get the worse you feel. Once you begin to get better, you probably begin to feel better. Same thing with stocks. The worse it gets for a stock, sector, or the market, the more you stay away until you just don't want anything to do with it. Unless the uncertainty (sickness) is terminal (Enron), at some point- it gets better. The less uncertain (the better you feel) it gets, the better chance the stock, sector, the market will rise. At some point the stock, sector, market (after enough selling) will find a base of support from which prices rise, all other things equal. 

If you have a lot of time on your hands, you can track all of this yourself and you can determine when it's time to get in- most likely it's when you don't want anything to do with that stock, or the sector, or the market- is when you should consider getting in.

Here's a little history- before war broke out in Iraq- when it was uncertain what would happen.  

2 Scenarios

There are probably 2 ways we can deal with this question. Either the U.S. does or does not attack Iraq.

1). The US will not attack. The reason- it appears Iraq is complying with U.N. resolutions (key word here is appears). President Saddam Hussein cannot be totally naive. He must know any attempt to hide weapons of mass destruction (WMD) will be dealt with in the total destruction of himself and his government. Unless he is totally crazy, he will comply- Although he will try and get away with whatever he thinks he can- to sting out the process. You have to wonder how long can the US and Britain keep 200,000 plus troops in the region. 

2). Hussein is hiding these weapons and the US does attack. If this were to happen, we would get plenty of warning of an attack because the US would want to stay on the good side of the UN and world opinion. It was originally thought that an attack could come at any time but since Iraq appears to be complying, it would take time for the US to make a case to the UN and the world.

Bottom line. Perception is what it's all about. President Bush and Prime Minister Blair must keep the UN and the world focused and 'pumped-up'. The free world has too much to lose if terrorist can organize and attack with weapons of mass destruction.

Market Reaction

Normally, if unexpected war or conflict breaks out, the reaction of traders would be to sell. This occurs because the market would not have built-in war or conflict (into trading strategy) and traders do not like anything that is uncertain- so they sell. In the case of the current situation (2002-2003) with Iraq, the possibility of war has pretty much been factored in.

Certificates of Deposit: Tips for Investors

Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.

Here’s how CDs work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.

Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities – known as "deposit brokers" – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers.

At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with other special features.

Some long-term, high-yield CDs have "call" features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate.

Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print. And don’t be dazzled by high yields. Ask questions – and demand answers – before you invest. These tips can help you assess what features make sense for you:

• Find Out When the CD Matures – As simple as this sounds, many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they’ve tied up their money for five, ten, or even twenty years. Before you purchase a CD, ask to see the maturity date in writing.
• Investigate Any Call Features – Callable CDs give the issuing bank the right to terminate-or "call"-the CD after a set period of time. But they do not give you that same right. If interest rates fall, the issuing bank might call the CD. In that case, you should receive the full amount of your original deposit plus any unpaid accrued interest. But you'll have to shop for a new one with a lower rate of return. Unlike the bank, you can never "call" the CD and get your principal back. So if interest rates rise, you'll be stuck in a long-term CD paying below-market rates. In that case, if you want to cash out, you will lose some of your principal. That's because your broker will have to sell your CD at a discount to attract a buyer. Few buyers would be willing to pay full price for a CD with a below-market interest rate.
• Understand the Difference Between Call Features and Maturity – Don’t assume that a "federally insured one-year non-callable" CD matures in one year. It doesn't. These words mean the bank cannot redeem the CD during the first year, but they have nothing to do with the CD's maturity date. A "one-year non-callable" CD may still have a maturity date 15 or 20 years in the future. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD’s call features and to confirm when it matures.
• For Brokered CDs, Identify the Issuer – Because federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. Your broker may plan to put your money in a bank or thrift where you already have other CDs or deposits. You risk not being fully insured if the brokered CD would push your total deposits at the institution over the $100,000 insurance limit. (If you think that might happen, contact the institution to explore potential options for remaining fully insured, or call the FDIC.) For more information about federal deposit insurance, visit the Federal Deposit Insurance Corporation’s web site and read its publication Your Insured Deposit or call the FDIC's Consumer Information Center at 1-800-934-3342.
• Find Out How the CD Is Held – Unlike traditional bank CDs, brokered CDs are sometimes held by a group of unrelated investors. Instead of owning the entire CD, each investor owns a piece. Confirm with your broker how your CD is held, and be sure to ask for a copy of the exact title of the CD. If several investors own the CD, the deposit broker will probably not list each person's name in the title. But you should make sure that the account records reflect that the broker is merely acting as an agent for you and the other owners (for example, "XYZ Brokerage as Custodian for Customers"). This will ensure that your portion of the CD qualifies for up to $100,000 of FDIC coverage.
• Research Any Penalties for Early Withdrawal – Deposit brokers often tout the fact that their CDs have no penalty for early withdrawal. While technically true, these claims can be misleading. Be sure to find out how much you'll have to pay if you cash in your CD before maturity and whether you risk losing any portion of your principal. If you are the sole owner of a brokered CD, you may be able to pay an early withdrawal penalty to the bank that issued the CD to get your money back. But if you share the CD with other customers, your broker will have to find a buyer for your portion. If interest rates have fallen since you purchased your CD and the bank hasn't called it, your broker may be able to sell your portion for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD. That means you would have to sell the CD at a discount and lose some of your original deposit –despite no "penalty" for early withdrawal.
• Thoroughly Check Out the Broker – Deposit brokers do not have to go through any licensing or certification procedures, and no state or federal agency licenses, examines, or approves them. Since anyone can claim to be a deposit broker, you should always check whether your broker or the company he or she works for has a history of complaints or fraud. You can do this by calling your state securities regulator or by checking with the National Association of Securities Dealers' "Central Registration Depository" at 1-800-289-9999.
• Confirm the Interest Rate You’ll Receive and How You’ll Be Paid – You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest – for example, monthly or semi-annually. And confirm how you’ll be paid – for example, by check or by an electronic transfer of funds.
• Ask Whether the Interest Rate Ever Changes – If you’re considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a "multi-step" or "bonus rate" structure in which interest rates increase or decrease over time according to a pre-set schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index, such as the S&P 500 or the Dow Jones Industrial Average.

The bottom-line question you should always ask yourself is: Does this investment make sense for me? A high-yield, long-term CD with a maturity date of 15 to 20 years may make sense for many younger investors who want to diversify their financial holdings. But it might not make sense for elderly investors.

Don't be embarrassed if you invested in a long-term, brokered CD in the mistaken belief that it was a shorter-term instrument-you are not alone. Instead, you should complain promptly to the broker who sold you the CD. By complaining early you may improve your chances of getting your money back. Here are the steps you should take:

1. Talk to the broker who sold you the CD, and explain the problem fully, especially if you misunderstood any of the CD's terms. Tell your broker how you want the problem resolved.

    

2. If your broker can't resolve your problem, then talk to his or her branch manager.

    

3. If that doesn't work, then write a letter to the compliance department at the firm's main office. The branch manager should be able to provide with contact information for that department. Explain your problem clearly, and tell the firm how you want it resolved. Ask the compliance office to respond to you in writing within 30 days.

    

4. If you're still not satisfied, then send us your complaint at the address below:

Office of Investor Education and Assistance
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0213

We will forward your complaint to the firm's compliance department and ask that they look into the problem and respond to you in writing.

Please note that sometimes a complaint can be successfully resolved. But in many cases, the firm denies wrongdoing, and it comes down to one person's word against another's. In that case, we cannot do anything more to help resolve the complaint. We cannot act as a judge or an arbitrator to establish wrongdoing and force the firm to satisfy your claim. And we cannot act as your lawyer.

You should also contact the banking regulator that oversees the bank that issued the CD:

 

• The Board of Governors of the Federal Reserve System oversees state-chartered banks and trust companies that belong to the Federal Reserve System.

   

• The Federal Deposit Insurance Corporation regulates state-chartered banks that do not belong to the Federal Reserve System.

   

• The Office of the Controller of the Currency regulates banks that have the word "National" in or the letters "N.A." after their names.

   

• The National Credit Union Administration regulates federally charted credit unions.

   

• The Office of Thrift Supervision oversees federal savings and loans and federal savings banks.

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Is the market overbought? Do you think stocks are overvalued?

you will see that the major indexes are still below the 11/27/01 close. And back two years ago the markets peaked and began the long two year slid that we are just now coming out of. Back then the stock market anticipated a worsening economy and ended up with a depressed market. Today though, the economical indicators are picking up and companies appear to be recovering as is the economy. Barring geopolitical news, non-market related events, the case can be made that the next several years could bring much higher market levels. What stocks to buy is definitely a different question than where the market is headed. What sector to buy, small vs. large capital stocks, stocks vs. funds- it comes down to risk level and time that each investor has to spend studying- research and analysis. Unless this is a false start of a recovering economy, look for significantly higher market levels in the next one to two years.

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