It finally dawned on me while watching the channel 7 ABC news broadcast tonight 2010/02/23, that the weakness in the stock market was clear as a bell.  I knew it was getting weak back in December. I thought that China might break down and the sovereign debt crisis might really lead the fall in stocks. I also figured that real estate had a ways to go and that it might take it's toll on banks.  I also figured that the rising dollar would have a significant effect on earnings for multinational companies.  I also figured on the Republicans taking over the Senate in 2010.  The real answer had nothing to do with the above and was really easy. Stock prices are based on earnings.

US companies are hiring.  For those of you who don't have real company experience of what it takes to implement real change in a company, it takes time.  Well guess what happens with time?  Time cost money.  Everyone of us underestimates time.  My company www.shelvingplus.com just hired a new person.  This new person is creating a world class website and we are 4 months into this project and only 30% complete.  It will take at least another 4 to 8 months before the site is fully populated and completely ready.  Time is the real #1 lesson in stock picking.

It costs a company a substantial amount of money to hire someone.  If you want to know what it cost to create our web site to-date send me an email or call me and I will tell you exactly and for free.  A new employee will not generate any profits for at least 3 to 6 months or more.  All the while that costs the company earnings.  Hence the stock prices for the next 3 to 6 months will be hindered.  As companies absorb new employees they will go through the cost of training them before they become productive.

The most important lesson in stock evaluation is what will the company be doing 6 to 12 months down the road?  How much will they earn.  Yes you could look at sales to price ratio's, but if the company is losing money for an extended amount of time that will bring their stock price down.

Companies are feeling good right now and have been since Christmas.