Make Money In Stocks

Our Economic Crisis

While most of us are still trying to keep our heads above water financially, there seems to be some clear evidence that things will get worse before they get better. The important thing to keep in mind is that this is all cyclical and we should eventually hit a recovery period. Keep reading to learn the reasons for financial crisis and the cycle we are currently stuck in.

What Recovery?

I keep hearing some chatter about “green shoots” and signs of economic recovery. Whether the reporters are all simply overly optimistic or intentionally deceptive, the truth is there are no signs of recovery. Although our current economic crisis is the worst we’ve had since the Great Depression, the signs relating to the reasons for financial crisis all indicate things are not going to improve any time soon.

Four Elements of Recession

1. Bailouts – The government continues to have to issue huge bailouts to lending and insurance institutions. These two huge sectors in our economy, previously prohibited from doing business together, were deregulated during the Clinton Administration. It’s important to note that the original legislation which regulated these two industries was put in place after the Great Depression in response to the causes of that crisis.

This deregulation allowed these two separate banking industries to once again invest in each other. Now that they’re all on the verge of collapse due to their shady investment practices, if the government does not bail them out our entire economy could implode.

2. Deficit – Our current national debt is already close to $7 trillion and there’s no end to the spending in sight. As stated, the government has to continue to bail out these banking institutions to avoid a total collapse of the market.

3. Interest Rates – Interest rates continue to rise as a result of all these. Increased interest rates mean decreased corporate profits leading to more lay offs, rises in consumer debt and continued crashing in the housing market.

4. Inflation – The Federal Reserve responds to government debt by purchasing the debt in exchange for government approval to issue new currency. The Fed is a privately run international institution with no vested interest in the health of our economy. Printing new currency results in sharp devaluation of the dollar which is the actual cause of inflation.

Pyramids

A pyramid scheme can be defined as a system by which the top 1% of a company are the only ones to ever make any profit. The rest of the people holding up the pyramid are all promised they will receive a portion of those profits but they never do. In fact, they’re left holding the debt while those at the top get richer. The reasons for financial crisis and the recession that we are experiencing are a direct result of this elaborate, but rather brazen, pyramid scheme.

Anymore with the recent financial shakeup in the market, everyone seems to be shying away from the stock market worried that their investments are too risky to be sound. However, while it may seem as if the stock market is too shaky to be worth investing in, especially given the fact that many investors are pulling out the market causing it to crumble farther, the truth is that financial crisis is actually one of the best times to get in on the stock market if you make educated decisions.

After all, an investment that has the potential to pay out is much better than a bag of money buried in the backyard that has no chance of ever increasing in value. Although the stock market may seem like it will soon cease to exist, history shows that once the economy recovers the market will as well and stocks will soon skyrocket back to their previous rates. In fact, this trend has been proven over and over again throughout history including during Black Monday, both World Wars, the great depression, natural disasters, and presently terrorist attacks.

The fact is that long term payback of stocks during all of these periods remained consistent and predictable making the stock market a safe place to invest even during the most volatile economic conditions. Unlike many other factors in the financial market, stock can be assigned a tangible value and in many cases the market prices have crashed because they are no longer aligned with the company share value. Buyers that exercise the correct amount of discernment however can discover plenty of bargain deals in terms of the stock market that can produce solid results once the market starts to recover.

Keep in mind also that you should not expect to see profits in just a few weeks if you are truly looking for an investment; if quick results are what you want than trading stocks may be a better choice than investing in the stock market.

In order to do this, you need to step back and evaluate companies that show the potential to prosper in the future. While it is impossible to find a stock that is fall proof, there are certain criteria that can help you identify a great stock investment during a financial crisis. One thing that you should look at is how a company performs in its market now. One that has a dominant control over the market such as Google in the search engine world is a much safer bet since it will be harder for competition to tackle their edge.

Second, you should take a look at their current return on equity. A high return means that the company knows how to invest its money well which means that they will be able to maintain steady generation of profits. Other signs include companies that are international and companies that have rising and consistent dividend payments.