Stock Market Club

1
Stock Market Club

• October 31, 2007
• Meeting 4

2
Term Of The Week

• Federal Funds Rate
• The interest rate that banks charge each other
  for the use of Federal funds. It changes daily
  and is a sensitive indicator of general interest
  rate trends. The Federal funds rate is one of the
  two interest rates controlled by the Fed. While
  the Fed can't directly affect this rate, it
  effectively controls it in the way it buys and
  sells Treasuries to banks. This is the rate that
  reaches individual investors, though the changes
  usually aren't felt for a period of time.

3
Agenda for 10/31/07

• Market Commentary
• Fed Rate Cut
• Investopedia Run Through
• Buying and Selling Basics

4
Market Commentary 10/31/07

• DJIA 137.54 1.00
• NASDAQ 42.41 1.51
• SP 500 18.36 1.20
• GDP up 3.9 in Q3
• Fed Meeting Trick or treat?
• Cut rates by 25 basis points to 4.50
• Tuesdays economic data looked scarier than Saw 4
• Consumer confidence down (3 straight months)
• Home Prices Down
• Weak Dollar/High Oil

5
Dow Jones Industrials 5-Day
6
NASDAQ 5-Day
7
SP 500 5-Day
8
Fed Rate Cut

• The FOMC decided to lower the federal funds rate
  25 basis points.
• From 4.75 to 4.50
• Lower interest rates boost economic growth over
  time by making it easier to borrow money.
• Lower rates can fan inflation if they stimulate
  too much demand
• A lower rate can also lead to increased pressure
  on the dollar

9
Fed Rate Cut Continued

• Worries about a recession.
• Bad housing market is supposed to effect our
  economy in the short term.
• The economy grew at a 3.9 rate in the third
  quarter.

10
Discussion

• Questions?
• Comments?

11
Investopedia.com

• Overview of the tools and how to use the site to
  your benefit.
• Portfolio

12
Basics of Buying and Selling

• Never buy or sell all at once
• Always use limit orders NEVER market orders
• When buying or selling always do it incrementally
• Figure out how much you want to by before hand
• No need to immediately buy the stock
• Build positions slowly and you most likely will
  be able to get a low basis buying price

13
Taking Profits

• Jim Cramer Bulls make money, Bears make money,
  Pigs get Slaughtered
• Dont be a pig, youll lose money
• If your up a good amount sell some so you can
  keep those profits
• Remember you havent gained anything until you
  sell the stock
• Sell incrementally to lock in gains

14
Cutting Losses

• Reasons for cutting losses short
• Fundamentals of the company change
• The reason you bought it isnt there any longer
• Just because you lost money in one stock doesnt
  mean you need to keep it
• Never act irrational or sell a stock because
  youre scared
• If a stock drops after you buy it, that is just
  an opportunity to buy it at a lower price