Bulls, Bears, and Pigs

There's a classic saying in investing, "Bulls make money, Bears make money, but Pigs get slaughtered."  There are two different opinions, on the overall direction of the market, and they are called Bulls, and Bears.  Bulls think the market, or a certain stock, will go higher.  Bears think think the opposite.

Both parties are able to place their bets the way they want, as Bears can "Short" the market, and basically play to profit on the downside.  It's a good thing, because it keeps the market is check.  You need Bears.  If you're a Bull, and correct in your opinion, the Bears are the ones that are paying you.

A Pig is either a Bull, or a Bear, that has stayed in a trade for too long, gave back all their profits, and then some.  Pigs are stubborn.  They won't listen when the facts change.  They've been right for so long, they'll ignore all the signs that go against their opinion.  They'll ignore the both the fundamentals, and the technicals, and it will drive you mad, but also drive you find great prices on merchandise.

Fundamentals, are the actual dollars and cents behind the business.  When companies report their earnings, it's all there for you, in black and white.  Wallstreet calls these accounting numbers, the "Balance Sheet".  It calls quarterly earnings reports, "Earnings".  To know a companies "Earnings" and have an understanding of their "Balance Sheet", is essential.  Without that you might as well put a blindfold on.  You just have no idea what shape the company is in.

Technicals, are what the chart says.  You can look up any companies chart, and begin to analyze certain things.  How many shares are trading per day, which they call the "Volume".  You can analyze patterns and make suggestions as to what you believe will happen going forward.  Technicals do have merits, and I use them on every trade I make, however I do believe fundamentals are trump card.  When both fundamentals and technicals align, I like the stock even more.  Basically, if the company look poised to grow and make money, and the chart looks healthy, it's probably a good buy.

Companies either have "cash" or "debt" on their balance sheet.  Companies with good amounts of cash per share, can weather storms.  See, when a company reports a loss for the quarter, they are burning up money.  When that money runs out, they either have to borrow more, or issue new shares into the market, if they can.

Sometimes debt can absolutely swallow a company.  When you see a company in debt, and losing money, you should probably cut your losses.  I start by never buying them.  Or at least not unless I'm speculating, which means investing a small percentage of my portfolio, on something higher risk.

On to "Dividend Stocks and Money Management"...