HOT NEWS--NOT HOT!

Movers & Shakers: Highlights of rising and falling U.S. stocks - General News - General

There have been lots of "BIG" headlines recently but the positive news for stocks is getting little press. Buried deep in the above article is a paragraph about Office Max (OMX) buying back 25% of all shares. This is a huge buyback. It comes on the heels of numerous other buyback announcements. It also comes on the heels of the leveraged buyout announced yesterday and on the heels of the start-up of a huge leverage buyout fund. What does all this mean?

Stocks are cheap; companies have the most ever cash on their balance sheet; if they do not buy back their shares, someone else will.

What to expect? More and more companies will buy back shares. Managements do not want to lose control and they face the risk of hostile take-over bids. Supply and demand for stocks is just like the supply and demand for anything else. If companies soak up supply of shares by buying back shares, the remaining shares will be bid up in price. What action should you take?

IGNOR SHORT TERM NEGATIVES--BUY STOCKS TO HOLD FOR THE NEXT 3 TO 5 YEARS. TRYING TO WAIT UNTIL THE SHORT-TERM BOTTOM IS MADE IS A MISTAKE; BUY NOW! IF YOU ARE EARLY AND SOME OF THE STOCKS YOU BUY GO DOWN, SELL THEM FOR THE SHORT-TERM TAX LOSS AND REPLACE THEM WITH OTHER GOOD VALUE STOCKS. AS AN AMATUER, I CANNOT RECOMMEND STOCKS BUT IT IS MY BELIEF THAT 5 YEAR GAINS WILL AVEARGE CLOSE TO 100%!