There are other reasons to fear an Obama presidency. His anti-business stance isn’t exactly a secret, and combined with a democratic leadership, could create a wealth of burdensome government regulations that eat away at profits and bring the economy to a standstill. Some businesses might actually do better with an Obama presidency, particularly solar, as Obama’s energy policy is to put about $40 billion towards developing renewable energy, paid for by increased taxes on oil businesses and other businesses.

In short, who you think will win the election is something to consider when investing over the next few months. Who our president is, more so than anything, may have a bigger effect on the stock market in 2009 than anything else.

When the public starts to believe that a certain type of asset has nowhere to go but up, generally it’s a good bet that it’s going down. There is widespread debate over the cause of the increase in the price of oil. Those bullish on oil claim it’s a simple supply/demand issue. The supply of oil is relatively stagnant, but the increase in demand from countries like India and China are rocketing up the price. Furthermore, the decline of the US dollar has also raised the price of oil.

However, many believe that oil speculation has resulted in an increase in the price of oil. People are buying oil as a hedge against both inflation, the weak dollar, and any economic slowdown caused by an increase in oil prices. The volume of trading of the USO ETF more than hints at the public’s raised interest in the price of oil.

I’m no oil expert, so I’m not going to pretend like I have some special insight into the supply/demand fundamentals of oil. However, one thing I consider myself pretty good at is spotting where the ‘dumb’ money is placing its bets. From what I can tell, these investors seem to love the oil trade, since they it seems like oil will only go higher and higher. They keep repeating the same old logic of the raised demand/stagnant supply, which while it merit’s a rise in oil prices, doesn’t mean that oil prices will rise forever.

Disclaimer: Author is short USO

Now, however, there are increasingly viable, cheap alternatives. Google docs, its free online service, is almost identical to Word/Excel, except you don’t have to pay a dime. Also, since it is saved online, there is no worries that your computer may crash. You can also access these documents from any computer, as well as easily collaborate on them with other people. In the past, I did all of the accounting for my businesses on Excel. Now, I use Google Docs because it is both free and superior in my opinion.

In addition to Google Docs, the increasing use of Macs should be cause of concern for Microsoft. Right now, Apple is the “hot” brand and people can’t get enough of these types of computers. No Mac user in his right mind will shell out $300+ for Microsoft Office for Mac, when he can get Apple’s version for about $89.

I also don’t see Microsoft expanding its online presence anytime soon. Few people use the msn.com search engine, and it’s likely not going to attract anymore users anytime soon. There’s simply no reason to, as Google is still the superior search engine. Its portal, msn.com, is also vulnerable if Google starts a portal site similar to it. Google is already moving into the portal space, with the launch of its beta finance site (finance.google.com), as well as the success of Gmail.

In my opinion, Microsoft’s failed attempt at buying Yahoo is a sign that the company has run out of ideas and is desperate to remain a player in the consumer sphere. Microsoft’s products are no longer cutting edge; the main reason people use them is simply because they have been using them in the past. With Google and the increasing competition from Apple, Microsoft is increasingly on the defensive, and I expect its stock price to take a hit over the next couple of years.

Disclosure: Author is short Microsoft (MSFT) and Yahoo (YHOO) and long Google (GOOG).

When most people see a stock continually going up, they think “buy.” On the other hand, when they see a stock going down, they think “sell.” Instead of thinking of the reasons why these stocks are going up or down or the fair value of the company, they mainly think of the trend of the stock. Also, most people want to invest in “hot” or “safe” stocks. If everyone else is investing in a stock, they figure, it must be a good buy! In reality, since everyone is investing in the stock, it is vastly overvalued.

The extreme cases of “buying high” result in asset bubbles. The most famous of asset bubbles is probably the Dutch tulip bubble,when people were mortgaging their homes and businesses to buy tulip bulbs in the hopes that someone else would pay a higher price for that tulip bulb. The most recent bubbles were the tech bubble of the late 90’s and our most recent housing bubble.

When stocks were at their March lows, many individual investors were panicked and sold out (or certainly did not put new funds in the market). The market has since recovered by about 8%. Since the market is still risky, it is likely that many investors won’t invest until the market goes up more and more, at which point, the market may well be due for another contraction.

Our emotions are not our friends when it comes to investing. Relying on emotions is a quick way to buy high and sell low. This is because people give into their greed when they see everyone else making money in a specific stock or asset class, and then they give into their fear when that stock or type of asset plummets from being overvalued.

The downsides of going short are obvious. In general, the stock market goes up. If you think a particular stock goes down, and you are wrong, you are liable to lose an unlimited amount of money if that stock keeps on going up forever. Of course, practically speaking, if you short $5,000 of a stock, it is unlikely that the stock will increase 100X anytime soon, but the dangers are pretty clear.

A major reason investors to choose short a stock if they think that company has become grossly overvalued. For example, during tech boom, many tech companies that had few revenues and negative earnings were valued in the billions. Investors kept buying these stocks on the hope that they would somehow, magically have future profitability. Those that shorted these stocks often made a fortune.

Shorting a stock and betting that it is a bubble is a nice way to make some money. It also lowers your overall exposure to the stock market (assuming you have a significant amount of money in stocks). Stock bubbles can be broad-based, such as the late 90’s tech bubble, or individual stocks. For example, Crocs (CROX) zoomed up from its IPO price in the teens up to $80 a share and then quickly cratered back to its IPO price. Those that bet that its shoes were nothing more than a one-trick-pony fad were right. Here are some tips if you hope to short bubbles:

1. The news and commentary about the stock should be almost universally optimistic. There should be a lot of talk of pie-in-the-sky growth, without clear indications how the company will ever be able to realistically achieve that growth.

2. It is very important that you understand the company and its sector in question. The way you have an edge in the market, in general, is by understanding a company better than the market does. If you are going to bet against a stock, you better be able to justify to yourself why you are making that bet.

3. Just because a stock has a high PE does not mean it is overvalued. Its last year’s earnings may have been artificially depressed or there may be extremely good reason to believe that its earnings will significantly expand soon.

4. Often, the dumb, hot money will chase bubbles. You know the type of guy that always bets on the hot sports team or was sure that Amazon and Yahoo could only go higher in 1999? If you see the type of dumb money chasing a certain stock or sector, it may be time to short them.

After outperforming in its recent quarter, the stock is trading around $575 right now. I’ve taken a bit off the table, but I still have about 80%+ of my shares. I’m still deciding what sort of price I’d sell it at. To me, it was an obvious and clear buy when it was in the low $400’s, but now I’m not so sure. Here are my pros and cons:

Pros:

Google is the clear tech leader in the web industry, period. Other companies are 5+ years behind. Everything Google does is better than its competitors. Some of this has more monetization possibilities than others. For example, as someone who uses adsense, I can tell you that no other advertising network can match its quality (and its Adsense program makes up about 30%+ of its income). To match Google, an advertising network would need to A) serve ads contextually how Google does and B) draw advertisers as effectively as Google does. The technology really isn’t that difficult to do A, but most networks still seem to struggle (Yahoo can’t seem to roll out its YPN network out of Beta). As for B, that is the most difficult to replace, giving Google the biggest moat.

As for search, I don’t see anyone catching up to Google. Even if other search engines can get almost as good as Google, people are so used to using Google that they will likely continue. It seems Google has won the search engine wars for good. Google’s main threat is people stop using search engines, or use them less in the future.

I see web advertising just getting bigger in the future. Web advertising has the capability of being much more targeted than TV or radio advertising. You know your audience’s general demographic, as well as their exact location (using IP addresses). You can test conversion far better as well. With the expansion of broadband, video ads will become more common (though annoying). I believe we’ll begin to see more traditional branding campaigns on the Internet, instead of just advertisers just looking for leads. Well, I suppose people have been saying that for years, but with the advent of DVRs and such, it will happen more and more.

Cons:

PPC is currently very high on the Google ad network. This is of course because when everyone thinks of web advertising, they immedietly think of Google. We have to assume that most advertisers are already paying top dollar for their ads. This might not be the case in 3-4 years as other advertising networks have viable alternatives.

It’s not clear how much more Google can grow. Yes, it can stay on top, but how else will it expand its revenues? Some of its programs, like Google Analytics, are amazing, but it’s not clear if Google will ever be charging for these programs. Gchat/Gmail are great, but how value added are they really?

Taking all of these things into account, I think Google’s a hold for me for a year or so (unless it hits like $750 or something and becomes a tad overvalued). We’ll see how everything plays out. Should be very interesting!

Disclaimer: Author owns shares of Google, (GOOG)

I was attracted to Apple because of its brand. Right now, Apple is hot. It’s iPhone is the coolest phone the market. Mac sales are soaring (because Mac is cool). Ipod sales are slowing, but that’s because everyone already owns an iPod. Pretty much anything Apple sells, there’s going to be a demand for the product.

Apple is now trading just shy of $170. It was previously trading at $200 during its October highs, and it may get back up there. With Apple being the hottest brand on the market, who knows how much it will beat Wall Street estimates. Why did I sell then?

Well, quite frankly, it’s because Apple’s brand is hot right now doesn’t mean its brand will continue to be hot in a few years. Right now, everyone needs an iPhone. People who have absolutely no practical reason to shell out $400 for an iPhone are buying them. I use an Iphone and love it. But I run an Internet business, so I have a reason to check my email every 5 minutes. My little sister in college wants an iPhone or at least a blackberry (she was whining at my parents to buy her one). I told them, under no uncertain terms, should they shell out the money for one since she simply does not need it.

Apple had a great quarter because Mac sells soared. Apple’s brand and image led people to want to buy more Macs (my sister in fact begged my parents to buy her a mac). I have a Mac laptop, and it’s ok. But I chose a PC for a dekstop since, pound for pound, PCs are a far better value for the dollar right now (and shit, I’m rich!) People are buying Macs right now because they are cool, not out of any need.

Apple could leverage its brand into more fields and could continue to grow at a rapid pace. Apple TVs? Apple microwaves? Apple cars even!? Who knows. A hot brand sells. But, a hot brand can also cool off. In my opinion, unless Apple expands its product line even more, it’s going to run into growth issues.

Apple’s moat is its brand. A brand can be a great moat, but who knows how long a ‘hot’ brand will stay ‘hot.’ After all, the appeal of Apple’s products is a sort of quality/elitist sense. If everyone has an iPhone, I’m going to want to buy some sort of souped up Blackberry instead.

Disclaimer: Author is a former Apple shareholder at the time of his posting.

This simply shows that the trend during those recession years showed some familiarity. The rise from bottom was around for 5 to 6 months, and returned between 28 and 35 percent. What shall be the picture this time?

A long recession is not in the interest of the US, nor is it in the interest of the world. The US is expecting changes in the Government this time. If the recession is not reversed in the next 6 months, then we can assume it then to be a longer version this time. Assuming this recession to be a shorter one, like the earlier ones, we should be expecting a similar trend this time too. The market hitting the bottom around October, and then turning upwards for the next 6 months. This is a possibility. It is therefore prudent to watch the downwards trend carefully, especially 6 months hence. There could be a return between 15 to 40 percent if the trend follows the past pattern!

Some experts have already suggested that the markets have already hit the bottom levels this January, and if the recession is a shallow recession this time, then it is a good time to pick growth companies in healthcare, industrials, energy, and technology.

These are assumptions, and one should invest very carefully. But, a study of the history of the trends will display some interesting patterns and may well give directions to investing. The Fed interest rate cuts, the tax stimulus rebates, and the November presidential election might just boost the stock markets around the end of the year.

It is interesting to also read what Chris Orndorff, a portfolio manager in Los Angeles, says that there are always ways to make money, even during the recession. According to him, investors place their faith in the companies with stable earnings. Other analysts say this is the time for such growing and earlier proven companies with good stability to begin their rise now after the stocks took a beating during January 2008, due to the housing, financial, and other issues sank the stock markets. Some expert analysts say that this is the right time to look for a good buy!

* Don’t hold on to stocks that are making losses. People do this in the hope that there will be a turn around in the price and then they can exit at the buying price.

* Not diversifying sufficiently. Diversification is the basic rule to observe if you desire success, at least desire to minimize risks associated with the stock market investment.

* Investing without studying the stock. You must study every aspect of the company that you wish to “buy” on the stock market. Details of the company’s financial aspects are available everywhere, but still it is found that people just rush in to buying a stock without proper investigation.

* Don’t get attached to the stock. Often people have “favorite” stocks and they hold that stock forever even when it is either not moving, or is going down! Review your portfolio regularly and take actions, even sell it, if a stock is showing negative trends or losses. Emotional investment is not a part of the successful stock market investor.

* Ignoring risks. Don’t ignore the risk factors in the investment.

* Using tips from friends and other sources without doing appropriate research and analysis.
Investing and finding the right stock is never an easy job. To become successful investor, you must do research and analysis of every stock that interests you. Even if you trust the friend, you must still do further analysis before buying the stock.

* Following the crowd. You should avoid crowd mentality in stock market investing. To quote Warren Buffet,” You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” He echoed the same thoughts while warning the investors against following the crowds. “Be fearful when others are greedy and greedy only when others are fearful,” he said.

*Frequent trading.

* Not listing your mistakes and failures. Even the great Warren Buffett, one of the richest man in the world who made his billions on the stock market, lists his mistakes and failures. He then vows not to repeat them. So, knowing your mistakes will make you cautious and will force you to take the right actions the next time a similar situation occurs.

* Focusing on earnings per share and not on return on equity. Earnings per share is a smokescreen, because usually the company retains earnings to increase their equity base.

* Buying a stock and not the business! Warren Buffett has advised investors to buy the business and not just its stock! He has good reasons to say so.

To quote Warren Buffett:
“An investor should only buy shares in a company which he would be willing to purchase outright if he had sufficient capital. From this perspective, an investor should look for a company with business operations that are understood, has favorable long-term prospects, is operated by honest and competent people and is available at an attractive price.

The decision to buy a business is based on:
Business tennets
Management tennets
Financial tennets
Market tenets.”

‘‘The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do.’’

– Warren Buffett

If you look a LUB stock chart, you’ll notice the stock has been in a slide since September of 2007. This slide has largely been unrelated to the company itself.

The entire market has been down significantly due to the housing credit crunch. To an extent, Luby’s has suffered along with the rest of the market. Since the company’s market capitalization is only $200M, the stock price can move significantly when one major holder has a margin call placed on his account from other suffering investments. This basically means that there has been a lot of forced selling of LUB for reasons that have nothing to do with the company itself.

A second major reason for the decline has been due to a hedge fund who has been unloading their 15% holding in the company. Last year, this hedge fund tried to take over the company’s board of directors. The shareholders held a vote and determined they would prefer the company continue to be managed by the Pappa brothers (who have an extensive history of running successful restaurants around Texas). After they lost, the hedge fund threw itself a pity party of sorts and began unloading their position.

There is a ton of upside to LUB. First, they own the land on which 94 of their 128 properties sit. Just this land itself is almost enough to comprise the stock’s current value of 7.20 per share. Additionally, Luby’s has no debt and they’re making money. In the past two quarters, more selling has been triggered when Luby’s failed to meet their projected earnings. By the way, it’s worth noting that only one financial firm makes projections on Luby’s, so there is anything but a mean earnings projection of which they aspire to achieve. Much of the reason they company missed its earnings projection was because of increasing food costs and the expenses of the shareholder proxy vote I mentioned earlier.

To summarize, LUB has been kicked repeatedly, but there’s only so much more it can possibly be kicked. At the end of the day, the stock has no debt, owns most of its land, and it selling a product that people line up for to get their hands on. This is not a get-rich-quick stock. But if you have some money with which to exercise a little patience, bet on LUB to climb to spectacular heights relative to its current basement bargain price.

Disclaimer: The author of this article is a shareholder in Luby’s Inc. (LUB).