Senin, 30 Juni 2008

Super Rules, OK?

Do you rule your superannuation or does it rule you?

It's easy to fall for some myths about your super unless you do some clear thinking about who is in charge. Virtually all Australian employees now have a superannuation account, many have several, even more than they know about. We all hope to use this money to fund our retirement, but unless you look after your super then you are in danger of losing some of your money along the way.

Myth number 1. Someone else can look after my super. Only partly right. It is possible go through your working life letting your super run on autopilot, but you may be in for an unpleasant surprise if you don't keep an eye on your super. Make sure your employer is paying the correct amount, and that if your employer goes broke your super is still available.

If you change jobs you need to decide if you wish to 'roll over' the money into another fund. This is especially important if you change jobs frequently. You can find that you have relatively small amounts scattered over several funds, and in each you will be paying a management fee before you earn any distribution or interest. In the long term inflation will eat away at the value of your principle, even though the dollar amount stays the same. Many super companies provide a free service to consolidate small accounts for you. Use them.

Myth number 2. It's not my money until I retire. Dead wrong. It's your money, just like the rest of the money in your pay packet. Super funds are providing a service of managing your money until you can legally access it when you retire. You have control of it. After July 2005 you will have even more say about your money. If you are not happy with the service you should tell the service provider. If they can't fix your problem, then you can sack them and put your money elsewhere.

Myth number 3. I don't need to worry about it until I am at least fifty-something. Not really. Australians are enjoying longer lives and better health. You will need more money if you want to have more options in retirement. You will probably need to top up your super to achieve financial independence in your golden years. The sooner you start the better.

The Australian Government is generously giving away our money to help lower and middle income earners top up their super. It's called the superannuation co-contribution scheme. If you, or your spouse, are eligible you should make sure you get your share.

Fact number 1.Our superannuation is our money. To look after your super you need to learn about your rights and options. It's a long term task. You need to get information and advice. Don't rush, but start soon.


By Darby Higgs


Rules for Simplified Employee Pension Plans better known as a SEP Plans

A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP automatically belongs to the employee. Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company.

Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. The SEP IRA rules dictate that if the business contributes for one employee, (i.e., the owner), then the business must contribute proportionately for all of the employees. With few exceptions, anyone who works for the business must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who:

1. Has not worked for the company during three out of the last five years.

2. Has not reached age 21 during the year for which contributions are made.

3. Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.

SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). The SEP IRA contribution limit goes up to $42,000 for 2005, and is subject to cost-of-living adjustments for later years. SEP-IRA rules do not provide for additional catch-up contributions for those 50 years old or over.

A growing number of self-employed individuals with no employees are abandoning the SEP-IRA for a newer type of retirement plan called the Solo 401(k) or Self-Employed 401(k). The two main reasons for the switch are 1) they can generally contribute much more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are allowed under a Solo 401(k), whereas loans are prohibited under a SEP-IRA.

Example: Henry, age 52, a realtor received $60,000 in compensation from self-employment income in 2004. For 2004, he could contribute a maximum of $27,152 in a Solo 401(k) versus a maximum of $11,152 under a SEP IRA.

However, the Solo 401(k) does not work for businesses with employees. Thus, if your company plans to hire employees or has a handful of employees, the SEP IRA may be your best choice as a retirement plan that is inexpensive and simple to operate.



By Daniel Lamaute


Justify Social Security ... Dont Save for Retirement

It is a common question when investors review their retirement plan-should we include social security benefits into our retirement income projections?

It seems the closer an investor is to retirement, the more likely he/she will include social security benefits into the analysis. Younger investors, however, may feel compelled to omit such benefits. They must then become mavericks on the retirement front. The choice is yours, but before you decide the influence of social security on your future, remember the following points:

When Franklin D. Roosevelt signed the social security act in 1935, he stated that social security gives some protection to American families. One reoccurring theme of his statement focused on assistance, not 100% protection. In the President's words, "the law will flatten out the peaks and valleys of deflation and of inflation (source: http://www.ssa.gov)

For many, the Social Security Administration has raised the age of full retirement from 65 to adopt a more stringent schedule. This may be an addition of a couple of months or a couple of years. The administration justifies the increases due to longer life expectancies and general healthier life styles.

For example, those born after 1960, your full retirement age is 67. Going forward, we should ask ourselves "what other changes will be made to social security?" If you would like a complete schedule of retirement ages for full benefits, I recommend you visit Social Security's website at http://www.ssa.gov

An opinion adopted by many is to consider social security in part the closer you are to retirement. For example, if you are sixty years of age and plan on full retirement in five years, you should consider an analysis based on your current projected benefits. Even with the proposed reform plans, preservation of benefits is a priority for eligible citizens age 50-55 and older.

If however you are thirty, it may be better for you to omit such projections. The result will be overfunded personal savings. Thus social security will be an added benefit and not the benefit.

Consider the troubling issues of the 2004 OASDI Trustees Report: future scheduled benefits for today's young workers could be reduced by 27% or more if amendments to the current plan are not adopted.

Young workers should take note of this report. Do not rely on social security and concentrate on personal savings.

In conclusion, you have a risky option-there is only one way to justify social security, don't save for retirement. If this is your chosen route, be prepared for difficult times ahead.



By Wardlaw's


Overbought/Oversold

Has your broker ever told you that a stock is "overbought" or "oversold"? He probably went on the explain that the stock you own (I hope you didn't) had gone down so far that it now was oversold and due for a rally. He might also have encouraged you to buy an equal amount to "dollar cost average" your position so that when ("if"- he didn't say that, I did)) it did go back up you could "get out even". He might even say you "could make a fortune".

Waiting to get out even is the great trap that is preached by all the big Maul Street brokerage houses. What is even worse is most brokers and financial planners believe it. What happened to all those beautiful company reports sent to you telling how wonderful this stock was before you bought it. Maybe you better read those back to him. Brokerage companies do not want you to sell.

When any stock is going either up or down for any extended period of time it does seem logical that it can become overbought or oversold, but let's examine what that means to your ownership.

The reason a stock started up is because the underlying profit projection is going to produce substantial profits that will make the stock more valuable. At some point it is going to reach a true valuation and should stop advancing. What usually happens is it goes beyond true valuation to what could be called overbought (over valued) and then starts down. You may be encouraged to buy when a particular stock becomes "hot" and everyone is buying it. When all the sheep are buying you want to be a seller or you will also be sheared.

Suppose all this was in anticipation of future profits that did not materialize? Then the rise would turn over and head down. This would be more likely for a smaller company than one of the giants, but giants have been toppled. If any fraud was involved the company might even go bankrupt.

Think back to WorldCom that went to the moon and was finally flushed down the sewer. Did it EVER while it was tanking become oversold for a rally? Not hardly because there was no value. Unless you truly understand how to trade overbought and oversold situations the best thing to do is keep your hands in your pockets.

Beauty is in the eye of the beholder. Overbought and oversold is in the mind of the buyer/seller.


By Albert W. Thomas


Is Starting A Business For Me? What To Consider Before Starting A Business

Do you have the right temperament?

Starting a small business is one of the most serious decisions that a person can take in life. Positively, it often results in higher income levels than one could achieve as an employee together with the unique buzz of being your own boss but conversely it also can be stressful, will demand longer working hours and will probably reduce your ability to take long holidays.

Do you have a definite business idea?

The desire to be your own boss is not enough to succeed. Empirical evidence clearly shows that those who do best normally have previous work experience in their chosen business field or have conducted thorough research.

Research, Research, Research!

Before committing to setting up a new business carry out as much research as possible, perhaps contacting any representative and professional bodies for their input and advice. In addition, it is important to note local market conditions as, unless you have a unique selling point, it is very difficult to succeed where a local market is saturated with established competitors. In addition, it is always wise buy a few pertinent general business books as most will encapsulate the basics of creating a successful business - The formula being remarkably consistent from sector to sector.

Hope for the best but expect the worst!

By definition most entrepreneurs are positive but ironically such optimism can often be their worst enemy, so always leave a sufficient financial safety blanket.

Keep non-essential costs to a minimum.

Many new business people overspend on hardware, expensive computers, printing etc. If your business does not require people physically coming to a shop or office do not waste money on office rental or even employing a secretary. In many cases, a serviced or virtual office will create the right impression at a fraction of the cost of having your own office.

Get Expert Advice

Today many government bodies and banks offer free business start up advice. In general such advice may not be all encompassing and may have certain vested interests but by seeking such advice from a number of different suppliers you should end up with a fair understanding of how to develop your new business.

Consider a Franchise.

The risks of establishing your own business are considerably reduced by buying a well known and established franchise. In many cases, the franchisor can often help with finance, computer software and business methodology. The downside is that if you really are aiming for the heavens then becoming a franchisee is unlikely to result in untold riches!

Austen Osborne


Protecting the Tax Advantage of Your Deferred Compensation

The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.

Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization's benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.

Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

An option for independent corporate directors and individual board members who receive 1099 income for their services may consider is to freeze their nonqualified plan and adopt a qualified plan such as the "one person defined benefit plan", called the Solo-DB Plan. Qualified retirement plans are exempt from the requirements of the American Jobs Creation Act.

The Solo-DB plan allows the highest deductible contributions possible in a qualified retirement plan. For example in 2005 one can contribute up to $170,000 of compensation into a tax-deferred Solo-DB plan.

Defined benefits plans have been around for a long time. But, recent pension legislation has raised the contribution and deductibility limits as well as simplified plan fund requirements. Thus, defined benefit plans like Solo-DB have become much more attractive to upper-income individuals with self-employment income. The Solo-DB plan will allow you to aggressively fund your retirement while cutting your taxes significantly.

Individuals who qualify for the Solo-DB plan include sole proprietors, independent contractors, and small business owners age 45 or older who can contribute more than $41,000 annually to the plan for at least three years.


By Daniel Lamaute


Are You An Investment Dummy Like Me?

I am good at a few things. I can certainly market well and I consult with others about how to bring more attention to their products and services on the internet for a living.

I am a fair musician. I love music and play all sorts of percussion instruments and even dabble with the guitar.

I can cook better than most guys. I can survive in the wild with nothing more than a good sharp knife.

But ask me how to best manage my investments and grow and protect my wealth, and I am like a deer staring into the headlights of oncoming traffic. Paralyzed with doubt, fear, and inexperience.

Much like my clients are when they come to me for marketing advice.

It wasn't until a new client came to me with an idea for a new book he had written on active investment strategies called "Scientific Wealth Strategies" that I realized I might not be far from figuring this whole investment and wealth protection thing out for myself.

In fact, just by consulting with him on the marketing of his book I picked up a lot of new information that has taken a grand portion of my doubts and fears away.

As I began to wrap up our contract I found I was looking more and more at the information in his book from a personal interest as a solution to my worries about whether I was doing everything right with my investments.

First thing I learned is that I was following the vast majority of others who think the same way about investing. "Throw it in something we think is safe and leave it there." And I realized that we are all being lulled into low return funds and investments masked as great returns in a bad economy.

Then I learned what I could do to take the same amount of capital I had in low return investments and actively manage it for far greater returns than what most people generally assume are the best returns you can get these days with 401ks, IRAs, and stocks.

In short, I was learning about investing on my terms. I was learning because my client, C.C. Collins, had chosen to write for people like ME instead of a bunch of learned investment "geeks."

Finally someone had written about investing strategies in a language that I could understand and about strategies I could feel comfortable in applying without feeling as though I was being a risk taker or putting my money in jeopardy.

This is no small feat. I feel most people who are like me are conservative with their investing, and don't become active in the management of their investments, because we much prefer the relative piece of mind we get from letting a "professional" handle the decisions.

Now that I feel more comfortable in the knowledge I have gained from this easy to understand yet incredibly powerful source of investment and wealth buidling knowledge, I have no doubt my investment future is much brighter and is going to bear much more fruit than the track I was on before I met C.C.!

So if you are an investment "dummy" like me, I strongly urge you to take the first step in becoming a relative investment "whiz" by checking out Scientific Wealth Strategies for yourself.

It will really empower you to take charge of your investments and push you to get more from your hard earned dollars than you are currently netting!

Scientific Wealth Strategies

eBook and Software with calculators, investment terminology definitions, and many, many more useful tools.

http://wealthscientist.com

By Jack Humphrey


The Realities Of Market Timing

Market timing systems are based on patterns of activity in the past. Every system that you are likely to hear about works well when it is applied to historical data. If it didn't work historically, you would never hear about it. But patterns change, and the future is always the great unknown.

A system developed for the market patterns of the 1970s, which included a major bear market that lasted two years, would have saved investors from a big decline. But that wasn't what you needed in the 1980s, which were characterized by a long bull market. And a system developed to be ideal in the 1980s would not have done well if it was back-tested in the 1970s. So far in the 1990s, any defensive strategy at all has been more likely to hurt investors than help them.

If your emotional security depends on understanding what's happening with your investments at any given time, market timing will be tough. The performance and direction of market timing will often defy your best efforts to understand them. And they'll defy common sense. Without timing, the movements of the market may seem possible to understand. Every day, innumerable explanations of every blip are published and broadcast on television, radio, in magazines and newspapers and on the Internet. Economic and market trends often persist, and thus they seem at least slightly rational. But all that changes when you begin timing your investments.

Unless you developed your timing models yourself and you understand them intimately, or unless you are the one crunching the numbers every day, you won't know how those systems actually work. You'll be asking yourself to buy and sell on faith. And the cause of your short-term results may remain a mystery, because timing performance depends on how your models interact with the patterns of the market. Your results from year to year, quarter to quarter and month to month may seem random.

Most of us are in the habit of thinking that whatever has just happened will continue happening. But with market timing, that just isn't so. Performance in the immediate future will not be influenced a bit by that of the immediate past. That means you will never know what to expect next. To put yourself through a *timing simulator* on this point, imagine you know all the monthly returns of a particular strategy over a 20-year period in which the strategy was successful.

Many of those monthly returns, of course, will be positive, and a significant number will represent losses. Now imagine that you write each return on a card, put all the cards in a hat and start drawing the cards at random. And imagine that you start with a pile of poker chips. Whenever you draw a positive return, you receive more chips. But when your return is negative, you have to give up some of your chips to *the bank* in this game. If the first half-dozen cards you draw are all positive, you'll feel pretty confident. And you'll expect the good times to continue. But if you suddenly draw a card representing a loss, your euphoria could vanish quickly.

And if the very first card you draw is a significant loss and you have to give up some of your chips, you'll probably start wondering how much you really want to play this game. And even though your brain knows that the drawing is all random, if you draw two negative cards in a row and see your pile of chips disappearing, you may start to feel as if you're on *a negative roll* and you may start to believe that the next quarter will be like the last one. Yet the next card you draw won't be predictable at all. It's easy to see all this when you're just playing a game with poker chips. But it's harder in real life.

For example, in the fourth quarter of 2002, our Nasdaq portfolio strategy, with an objective to outperform the Nasdaq 100 Index, produced a return of 5.9 percent, very satisfactory for a portfolio invested in technology funds only. But that was followed by a loss of 7.8 percent in the first quarter of 2003. Most investors in this strategy, at least those we know of, stuck with it. But they experienced significant anxiety at the loss and the shock of a sharp reversal in what they had thought was a positive trend. The same phenomenon happened, with more dramatic numbers, in our more aggressive strategies.

Some investors entered those portfolios in the winter of 2002, and then were shocked to experience big first-quarter losses so quickly after they had invested. Some, believing the losses were more likely to continue than to reverse, bailed out. Had they been willing to endure a little longer, they would have experienced double-digit gains during the remainder of 2003 that would have restored and exceeded all of their losses. But of course there was no way to know that in advance.

Most timers won't tell you this, but all market timing systems are *optimized* to fit the past. That means they are based on data that is carefully selected to *work* at getting in and out of the market at the right times. Think of it through this analogy. Imagine we were trying to put together an enhanced version of the Standard & Poor's 500 Index, based on the past 30 years. Based on hindsight, we could probably significantly improve the performance of the index with only a few simple changes.

For instance, we could conveniently *remove* the worst-performing industry of stocks from the index along with any companies that went bankrupt in the past 30 years. That would remove a good chunk of the *garbage* that dragged down performance in the past. And to add a dose of positive return, we could triple the weightings in the new index of a few selected stocks; say Microsoft, Intel and Dell. We'd get a new *index* that in the past would have produced significantly better returns than the real S&P 500. We might believe we have discovered something valuable. But it doesn't take a rocket scientist to figure out that this strategy has little chance of producing superior performance over the next 30 years.

This simple example makes it easy to see how you can tinker with past data to produce a *system* that looks good on paper. This practice, called *data-mining,* involves using the benefit of hindsight to study historical data and extract bits and pieces of information that conveniently fit into some philosophy or some notion of reality. Academic researchers would be quick to tell you that any conclusions you draw from data-mining are invalid and unreliable guides to the future. But every market timing system is based on some form of data-mining, or to use another term, some level of *optimization.* The only way you can devise a timing model is to figure out what would have worked in some past period, then apply your findings to other periods.

Necessarily, every market timing model is based on optimization. The problem is that some systems, like the enhanced S&P 500 example, are over-optimized to the point that they toss out the *garbage of the past* in a way that is unlikely to be reliable in the future. For instance, we recently looked at a system that had a few *rules* for when to issue a buy signal, and then added a filter saying such a buy could be issued only during four specific months each year. That system looks wonderful on paper because it throws out the unproductive buys in the past from the other eight calendar months. There's no ironclad rule for determining which systems are robust, or appropriately optimized, and which are over-optimized. But in general terms, look for simpler systems instead of more complex ones.

A simpler system is less likely than a very complex one to produce extraordinary hypothetical returns. But the simpler system is more likely to behave as you would expect.

To be a successful investor, you need a long-term perspective and the ability to ignore short-term movements as essentially *noise.* This may be relatively easy for buy-and-hold investors. But market timing will draw you into the process and require you to focus on the short term. You'll not only have to track short-term movements, you'll have to act on them. And then you'll have to immediately ignore them. Sometimes that's not easy, believe me. In real life, smart people often take a final *gut check* of their feelings before they make any major move. But when you're following a mechanical strategy, you have to eliminate this common-sense step and simply take action. This can be tough to do.

You will have long periods when you will underperform the market or outperform it. You'll need to widen your concept of normal, expected activity to include being in the market when it's going down and out of the market when it's going up. Sometimes you'll earn less than money-market-fund rates. And if you use timing to take short positions, sometimes you will lose money when other people are making it. Can you accept that as part of the normal course of events in your investing life? If not, don't invest in such a strategy.

Even a great timing system may give you bad results. This should be obvious, but market timing adds a layer of complication to investing, another opportunity to be right or wrong. Your timing model may make all the proper calls about the market, but if you apply that timing to a fund that does something other than the market, your results will be better or worse than what you might expect. This is a reason to use funds that correlate well you're your system.

The bottom line for me is that timing is very challenging. I believe that for most investors, the best route to success is to have somebody else make the actual timing moves for you. You can have it done by a professional. Or you can have a colleague, friend or family member actually make the trades for you. That way your emotions won't stop you from following the discipline. You'll be able to go on vacation knowing your system will be followed. Most important, you'll be one step removed from the emotional hurdles of getting in and out of the market.


By Robert van Delden


Profitability And Stock Turn Rate

The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant's chief source of operating profit. Thus, the way in which this merchandise investment is put to work is of utmost importance in achieving a profitable operation.

To illustrate, a retailer may carry an average retail inventory of $200,000, with sales of $400,000, resulting in a 2.0 Stock Turn Rate. If this retailer had the same $400,000 sales but a 3.0 Stock Turn Rate, the average retail inventory would be $133,300. This is a difference of $66,700 at retail or approximately $32,000 at cost.

The cost of owning excess inventory is approximately 2½% per month, or 30% per year. This is due to increased expenses such as interest, insurance, buying expense, receiving department expense, property taxes, markdowns and shrinkage. Therefore, a retailer can reduce these expenses by reducing his average inventory level. In the example above, the annual savings would be approximately $10,000 ($32,000 times 30%).

All other things being equal, a higher stock turn rate tends to lead to higher sales and a higher profit, which should be an essential goal of every merchant. I will discuss this more later, but first we must have a good understanding of what Stock Turn Rate is and how it is to be computed.

WHAT IS STOCK TURN RATE?

Stock Turn Rate can be computed using units, cost dollars or retail dollars. For comparative purposes, it is desirable that the Stock Turn Rate calculation be standard. We advocate retail, which is the generally accepted method in the retail industry.

Stock Turn Rate is the ratio of sales to average inventory. It is computed as follows: Stock Turn Rate = Total Annual Sales divided by Average Inventory at Retail

Example A
Annual Sales = $900,000: Average Retail Inventory = $450,000:
Stock Turn Rate = 2.0

Example B
Annual Sales = $900,000: Average Retail Inventory = $300,000:
Stock Turn Rate = 3.0

COMPUTING AVERAGE INVENTORY

The chief problem in computing Stock Turn Rate is to determine the average stock carried during the period. This can be a problem since there are so many variations in use. The chief methods are:

1. Average of the inventory at the beginning and end of year.

2. Average of inventory at the beginning, middle and end of year.

3. Average of monthly inventory levels.

The standard is to use the average of the monthly inventory levels which is computed as follows:

Inventory at the beginning of the year plus the inventory at the end of each month, divided by thirteen.

WHAT STOCK TURN RATE IS NOT

While Stock Turn Rate is the ratio of sales to average stock, it is not the actual number of times a physical stock of goods is bought and sold during a period. A simplified example follows:

A retailer purchases a 4-month supply of socks, a staple item, and does not restock until the old stock is completely sold out. During the year, three purchases, each $4,0000 are made and three lots are sold, for a total of $12,000 but the Stock Turn Rate is not three. The average stock is about a 2-month supply, since four month's supply is on hand only at the start of each 4-month period and virtually none is on hand at the end of each 4-month period. THus the average stock is about half the amount received each 4-month period, or $2,000. This results in a Stock Turn Rate of approximately six, and a lot of lost sales due to having such a low supply on hand during much of the year.

WHAT IS THE IMPORTANCE OF STOCK TURN RATE?

The Stock Turn Rate ratio measures the effectiveness of inventory planning control. A Stock Turn Rate that is too low indicates poor planning and lack of control. A classification having a very low Stock Turn Rate usually will not be achieving its sales potential due to having too much old merchandise in stock and too little new, fresh merchandise. It is also likely to have higher than normal markdowns, thereby reducing Gross Profit. Stock Turn Rate can also be used to calculate the proper beginning-of-month inventory level for each classification on the Open-To-Buy.

ADVANTAGES OF A FAST STOCK TURN RATE

In retailing it is important to realize a large volume of sales on as small an inventory investment as possible while maintaining sufficient inventory to meet customer demands. Also, it is important, as fashions and seasons change, to turn the inventory quickly so as to avoid excessive markdowns or carryover of out-of-season inventory. Another advantage is that a fast Stock Turn Rate will actually increase sales due to the increased flow of fresh new merchandise.

LIMITATIONS OF A FAST STOCK TURN RATE

While a fast Stock Turn Rate has many advantages, the Stock Turn Rate can be too fast for a particular classification. When that happens the store risks losing sales due to inadequate assortments.

WHAT CAN BE DONE TO IMPROVE STOCK TURN RATE?

From a study of the basic Stock Turn Rate formula, it is clear that there are three ways to increase Stock Turn Rate:

1. Increase sales without increasing the average stock assortment.
2. Decrease stocks without interfering with sales.
3. Increase sales and at the same time reduce stocks.

The approach used depends on the circumstances. Probably the surest way to increase Stock Turn Rate over a period of time, is to increase sales volume without a proportionate increase in inventory levels. However, since a retailer has greater control over his inventory than over his sales, this should be where attention should be given first. THe first step to increasing Stock Turn Rate and sales, incidentally, is the preparation of an Open-To-Buy. This should be based upon planned sales, planned markdowns and planned Stock Turn Rate. Once the Open-To-Buy has been prepared, the retailer can turn his attention to taking the necessary steps to reduce the actual inventory on hand to bring it in line with the planned inventory on the Open-To-Buy. A few suggestions on how to do this follow:

1. Buy more frequently, in smaller quantities.


2. Reduce number of assortments (vendors, styles, colors, sizes, prices).


3. Eliminate slow-selling merchandise.


4. Buy closer to the selling season.

SUMMARY

Stock Turn Rate is an important ratio used to measure the effectiveness of merchandise planning and control. Its two most important uses are in Open-To-Buy planning and then in measuring performance against this plan. Most retailers I see that are having problems achieving adequate profits have a poor Stock Turn Rate due to lack of planning, which results in overbuying, excessive markdowns and a low Gross Margin.

by Linda Carter


Types of Investment

The word 'investments' is one that most of us are familiar with hearing in financial context. For many of us, it may make us thing of big business and vasts sums of money, but there's much to the world of investments than multi-million dollar deals.

Although it's true that, at the top level, investments may run into many millions, it is possible for the average person in the street to invest smaller amounts of money and to invest it wisely. If you've ever thought about trying to help your money to grow, then maybe you've wondered what opportunities are available.

In truth, investments can cover a wide range of options. One of the most traditional types of investing is in the stock market. This has been viewed by some as being a difficult type of investment to get into, but times are changing. The new range of online stockbrokers available mean that it's now easy (and fairly inexpensive) to get involved in buying and selling shares. If you're interested in share dealing yourself, then you'd be wise to remember that there is a risk involved ("shares may go down in value, as well as up"). It's vital that you investigate the area thoroughly before taking the plunge and you should view shares as a medium to long-term investment. If you invest expecting to make a quick buck, then you're likely to be disappointed.

An alternative type of investment, which has become particularly popular in the UK, is that of property. Putting money into residential properties and then taking a rental income is seen by many as a win-win situation. The largest downside to this type of investing is that you'll need a large capital sum to begin with, or else you'll need to take out a sizeable loan. As with the stock market, property should be looked at as a long-term investment.

If you'd like to know more about investment opportunities, then there's lots of good, free information available online. The www.financefacts.co.uk web site is one of many sites that deals with personal finance.


By David Johnson


Is Your Mutual Fund the Right One for You?

Mutual Funds are considered to be one of the best investments one can get hands on. They're very flexible and cost-effective. An excellent investment for people with restricted knowledge, time or, money.

For beginners, who might have a perplexed expression on their faces at the mention of mutual funds; let me first acquaint them with what the mutual funds are all about.

A mutual fund is a financial instrument that enables a group of investors to pool their money together. There's a fund manager who takes care of the pooled money and invests them into specific securities (stocks or bonds). Investing in mutual funds basically means buying shares of the mutual fund and becoming a shareholder.

Having read this, you may have now decided to buy a mutual fund. But you've over 10,000 mutual funds to choose from. So how do you make sure that the one you've picked up is the right one?

For those who're new to this investment thing, let me apprise you with 'load' and 'no load' mutual funds. 'Load' is basically a commission that has to be paid to the broker when you buy the fund while 'no load' mutual funds are free from such commission hassles, as they're sold directly by the investment company.

It's best to consult an investment counselor before plunging into this venture. These finance mentors will charge a certain fee from you. They get no commission from the firms. Getting paid from their clients, these counselors make sure that you get the best out of any deal you make. Hence, you're sure of getting a reliable advice from your counselor. And obviously, they'd always advise you to go for 'no load' mutual funds. Why?

Well, it goes like this. 'Load' mutual funds are sold by brokers who get paid by the firms. Right? So, I don't see any reason why they'd be concerned whether you make or lose money. They're only interested in persuading you to buy funds often, so that they can relish their rewards from the firms. Moreover, 'load' mutual funds consist of front-end charges, back-end charges, or deferred charges. Quite loaded!

Any savvy investor would certainly ensure that all of his/her investments are worthy. The investors get to choose the funds on their own, the way in which it happens with the 'no load' mutual funds, as they are free from charges.

However, at the end of the day, the presence or absence of a broker has got nothing to do with the success of your investment. It's actually the advice you get from your counselor that really matters. A well-planned decision and a loyal advice on when to buy or sell are vital for securing a bright financial future. So, keep your mind wide open and invest! Good luck!

By James Marriott


Scots Beat Yanks in China Bank Deal

With visions of an ATM in every neighborhood in China, foreign banks and investment firms are queuing up to join the "China Club."

Moneybags Communism

The initiation fee for the "China Club" is straightforward and pure moneybags communism: invest cold hard cash in its largely insolvent state-owned banks, put your reputation on the line, reassure nervous foreign investors about upcoming IPO's, and share your risk management, corporate banking and other expertise with eager Chinese executives. The benefits of membership in the China Club are alluring but mostly maybes. Perhaps you will get some of your money back by underwriting an IPO or working in China with the bank in the areas of wealth management, credit cards or corporate banking.

But the temptation is too much too resist and they are lining up for membership. Bank of America, the German bank Allianz, Goldman Sachs, Merrill Lynch, UBS, and the Royal Bank of Scotland (RBS) have all agreed to or are in ongoing negotiations to take equity stakes in China's big four state-owned banks. There is another twist to the tale. Membership fees are not the same for everyone but are negotiated one by one and this can leave a sweet or sour taste depending on the deal that's cut.

Paying More for Uncertainty

The recent deal inked by the Royal Bank of Scotland led consortium is the best so far and beats the well publicized Bank of America deal hands down.

Bank of America purchased a 9% stake in China Construction Bank for $3 billion. The Royal Bank of Scotland (RBS) invested $1.6 billion for a 5% stake and brought along Merrill Lynch and Hong Kong tycoon Li-Ka Shing along to share the risks bringing the total investment to $3.1 billion for a combined 10% stake. The RBS group also paid less than Bank of America which paid 1.2 times stated book value. Even better than putting up less cash and getting slightly better value, the Scots were able to extract a life preserver from their Chinese partners. While details have not been released, the RBS group will get some of their money back if there are black holes in the books, if the IPO scheduled for early next year is cancelled or if the banks just don't see eye to eye.

Thank You. May I Have Another

The question is will membership fees decrease over time or get steeper? Goldman Sachs and Allianz are in talks to pay about $1 billion for a stake in China's largest state-owned bank - the Industrial and Commercial Bank of China. China favored UBS is also discussing an investment of $500 million in the Bank of China to cement its lead underwriting role in next years IPO.

This rush by foreign banks to get a piece of the China action should make shareholders pause. Just like when you join the local country club, there are unforeseen risks and expenses. Soon the monthly dues are raised and then there are the dreaded "special assessments" for new greens, a swimming pool or a new irrigation system.

Risk, Return - Maybe?

China's large state-owned banks have an enormous burden of non-performing loans made over the years to poorly performing state-owned companies. With a small minority stake, foreign banks will have very limited say about the management of their partner bank. As the old banking adage goes, if you owe the bank a little money, the bank owns you, if you owe the bank a lot of money, you own the bank. For investment banks, the payoff seems even slimmer. Investment banking and underwriting fees are notoriously slim in Asia and IPO after market appreciation will have to be substantial to enjoy a risk-adjusted return.

And don't even think of missing a payment. Last year Citigroup was chosen to underwrite a $5 billion listing for China Construction Bank after offering to purchase an equity stake. It was later dropped like a hot potato after failing to follow through.

I hope all of these banks make lots of money in China - but it may not be wise to trade billions of hard earned capital for a maybe.

By Carl Delfeld


Chile Leads the Latin Pack

Everyone's talking about China. Don't miss the opportunities in the other CHI..

Yes. Chile with an "LE" not "NA"

While the whole region is back in favor with investors, it seems appropriate to highlight Chile which is the economic star of Latin America.

Chile is about two times the size of Montana and has an incredible coastline of 2,650 miles. While only 3% of its land is arable, it has an amazing variety of climates and rich agricultural production. It gained its independence from Spain in 1810 and has 16 million citizens of which 90% are Catholic.

The Chile story is somewhat similar to Ireland before its economic takeoff. From 1978 to 1988, per capita income increased only $100 to reach $1,510.

Next, both a military government followed by democratically elected governments initiated market reforms and opened up the economy. Exports and foreign investment took off and debt levels came down. Foreign investors in Chile are treated the same as Chilean investors.

Chile's Take Off and Steady Growth

From 1991-1998 economic growth increased an average of 8% and per capita income on a purchasing power basis has grown to $10,700. Since then growth has moderated to a 4-5% range but a total Chilean public and foreign debt at 50% of GDP is very low relative to other Latin countries.

Trade is very important to Chile with exports accounting for 25% of GDP. It is rich in natural resources (copper, timber, fruit and fish) and has been busy signing free trade agreements. A Free Trade Agreement (FTA) with the US took effect in January 2004 and now 90% of Chile's exports to the US enter duty free. After a similar trade pact with South Korea last year, exports rose 50%.

Current President Ricardo Lagos Escobar is under pressure to improve economic growth rates and bring down the stubbornly high 8% unemployment rate. On the positive side, inflation and interest rates are low at 2-3%. Chile has demonstrated fiscal discipline and enjoys both a trade surplus and a budget surplus.

How to Take Advantage

There are no country- specific ETF's for Chile but there is the Chile Fund (CH) which is a closed-end fund managed by Credit Suisse Asset Management. It is up 53% over the past year, trades at a 7.7% discount to its net asset value and sports a 4.6% yield. Keep in mind that 19% of the fund is invested in just one copper company Empresas Copec S.A. and the annual fee is high at 1.80%.

Another alternative would be the iShares Latin America 40 (ILF) which invests in Mexico, Brazil, Chile and Argentina. It is up an eye opening 67% over the past twelve months with an annual fee of only 0.55%. Currently, 49% of this exchange-traded fund is invested in Brazil, 38% in Mexico, 10% in Chile and 3% in Argentina.

Interested investors might also consider the ADR for Banco Santander (SAN) which is an excellent bank and a good proxy for the overall economy. It is up 42% over the past year and up 11% so far this year. Banco Santander is one of the 30 companies in the Chartwell Global 30 Index which is an alternative to the Dow Jones Industrial Average.

By Carl Delfeld


How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share class instead. If you're a no-load investor who is determined to buy a fund that's primarily broker-sold, go through a supermarket and opt for the D shares.

If you are using a broker or planner, the decision about whether to opt for the A, B, or C share class boils down to your own time horizon and, to a lesser extent, how much you're investing. If you plan to invest for the long haul--say, 10 years or more--the A shares will invariably make more sense for you than the B or C shares. That's because A shares' lower ongoing expenses will offset the higher fee you'll pay to get in. At Morningstar, we believe in long-term investing, and that's why we tend to recommend A shares over B or C shares; if you're a Morningstar.com Premium Member, you'll notice that our Analyst Reports of broker-sold funds typically apply to the A shares, too.

So should you ever use B or C shares? Possibly, if you expect to hold a given fund type for a short period of time. If you plan to own a fund for just a year or two, for example, you may want to opt for C shares, and if your time horizon is in the neighborhood of five years or fewer, B shares may be the way to go. Morningstar's Cost Analyzer tool can help you determine the correct share class given your anticipated time horizon and the amount of money you have to invest. (Cost Analyzer is available to Premium Members of Morningstar.com; for a free trial membership, click here.)

Protect Yourself: Know Your Rights and Ask Questions Many brokers and planners work hard to select the correct share class for their clients, but you should also be aware of unscrupulous practices in this area. B and C shares carry higher expenses, and part of those fees, called 12b-1 fees, go straight to the broker each year. Thus, some brokers might be inclined to recommend B or C shares even if they're not the best deal for their clients. Some fund shops--including Franklin--have stopped selling B shares altogether.

To help ensure that you get into the right share class for your needs and time horizon, it never hurts to ask your broker why he or she is recommending a certain share class of a given fund. What assumptions is he or she making about your holding period? Does he or she have a financial incentive to recommend one share class over another?

Also be sure to ask whether your total investment with a given fund family qualifies you for a discounted sales charge. These breakpoints often kick in when your total investment across the fund family reaches $25,000 or more, and they can save you substantial amounts of money. And even if you don't meet the minimum asset level yet, you may still be able to qualify for the discount if you sign a "letter of intent" that states you plan to invest enough money to qualify for the discount within a specified period of time (usually one year). Some brokerage firms have recently gotten into trouble for failing to provide these bulk discounts, so your broker should be well aware of the issue and able to tell you whether you qualify.

By Brian Dylan


The Convertible Craze Brightens The Future Of Equities

Convertibles are stealing the show with their safe investment image in today's "protective" market. They seem to be overshadowing the stocks and bonds, and this holds true for the mediocre issuers.

A convertible bond, as the name suggests, can be converted into a company's common stock. The bonds are a source of additional profit for the investors. Although investors are particular about short-term performance of stocks, they're upbeat about a long-term, fixed-income instrument that gives them profit on converting to common stock, if the stock price soars within a range of 20 to 40 percent.

Why the sudden craze for convertibles? The chief reason is the strong desire of the investors for "safe" instruments to lock up their precious life savings into. And the issuers have been smart enough to grab this lucrative opportunity. A few years back, liquid issuers-considered to be the stalwarts of the market-were ruling the roost in the convertible bond market, with the average size of a convertible issue touching $300 million to $350 million. But today, nearly nine convertibles have a whopping size of $1 billion and one has even crossed the $3 billion mark. The fall in stock prices and the frequent quivers in the credit markets have created a strong wave of demand for convertibles.

A convertible bond is issued at a strike price, 25 to 40 percent higher than the market price of the general stock issued by the company. The convertible bond has a 7-year maturity period and can be called after three years. The issuer can call the bond, if the market price exceeds the strike price. But if the strike price manages to remain high till maturity, the investors have two options: they can either get back the par value of the bond, or convert it to common stock. However, in case of a mandatory convertible, there is no choice-the bond has to be converted to common stock.

Convertible bonds are legally debt securities, which are above all equity securities in a default situation. Similar to other bonds, their value is also influenced by the existing interest rates and the credit worthiness of the issuers. However, convertibles have opened two ways for the investors to earn dollars. One way is by selling the convertible bond when its price soars in the market, and the other way is by converting the bond to common stock and selling the shares.

The best way for an individual investor to indulge in the convertible bonds business is buying a mutual fund. This is because convertibles are complex securities and, unlike common stocks, it's not easy for beginners to get all the information about them. Hence, the investors should check out certain things before buying a convertible bond. These are: the interest rate and yield of the bond, the number of years prior to maturity, the common stock price during conversion of the bond, the features of the bond that make it different from a usual bond, the negative aspects of the bond, and the benefits while converting to a common stock.

Besides this, the investors should also inquire about the company that is issuing convertibles. Any bond, either convertible or the general one, is a loan. Hence, the investors should ensure that their issuer has the capability to pay back what they owe. Therefore, going for a convertible bond demands an extensive homework on the part of the investor.

When we compare convertible bonds to convertible preferred stocks, the former are safer. There are two reasons for this: the interest on convertible bonds is paid before any stock dividends, and, if the company suffers a loss, the investors of convertible bonds have an upper hand over the investors of stocks while claiming the money.

However, it's not prudent to get carried away by the benefits of convertibles. Firstly, convertible funds happen to be costlier than domestic stock funds, as the former come packed with sales charges. Secondly, a majority of the convertibles are issued by companies involved in technology and telecommunications, which are characterized by unpredictable markets. And lastly, convertible bonds don't guarantee a risk free investment just because they are convertible.

By James Marriott


Investing Psychology Today Requires All Traders to Awaken Their Speculator Minds

Stock trading strategies are as rampant today, as they were during the Great Bull Market. Yet, can you truly master the stock market like so many investing books propose?

Consider this: When you can't even trust the financial reports of analysts, and the company bean counters that feed them with data, how can you? What's needed are robust, stock trading strategies; the type that enables you to think above the crowd, but not apart from them! The kind of strategies in touch with your speculator mind response!

Witness the Enron fiasco. It is a classic case of corporate character gone sour. The accounting firm that assigned to do the books also got paid to advise. Even the board members failed in their fiduciary responsibilities to guard and plead the cause of the stock holders. Result: The crowd got lied to and cheated!

That's what causes many to follow technical analysis whereby the fundamentals are considered reflected in the market action, and leads the investors to never have to trust anything beyond the tape itself. So, what if you developed a dynamite system that would track such reflections? Would that be sufficient?

I personally do not believe it would for one, very simple reason: There is no mastery of indeterminate arenas like markets; and they most certainly qualify as being indeterminate. At best, in my opinion, you may merely flow with them.

There is, however, a form of mastery that you can learn. It is the mastery of the self, whereby you can become a student of your own attitudes and behavior as much as a student of market behavior. Relative to conditions with potential uncertain outcomes as in the markets, this is probably the most underestimated of all trading methods.

With all due respect to your intelligence and financial background, that is a lot more difficult to achieve than you might now imagine. First, simply arousing your market senses is not a simple task. Pre-existing mindsets, supported by memories and emotions, often hinder the process. It truly takes an awakening that a new method of thinking far beyond what your formal education has groomed you to think thus far may be necessary.

Second, that awakening further requires an act of acceptance that is sufficient to instill the discipline to change. The initiating belief for all of this, in my judgment, is accepting the stark reality of cause and effect; that speculative markets are not the true cause of you making or losing money. You are! And many market psychologists teach their clients that.

After all, the markets exist merely as trading arenas with fixed rules of engagement, and neutral ones at that. They may appear at times to operate like living, breathing organisms, but they have no bias and no intimidating authority to issue you orders to personally lose or gain money.

Markets cannot even force you to trade in any particular way any more than they can coerce you to interpret their conditions. Only you can do that through your own mental framework; and therein lays the enigma that haunts traders as they attempt to garner their share of the market's riches.

Discrediting your mental framework with its emotional ties perhaps explains why outperforming any market on a consistent basis is such a difficult task, even for professional fund managers. It requires that profit-making senses become honed and kept razor sharp at all times; and that definitely requires full mental attention in league with self discipline.

After all, the nature of speculation centers on a collection of random events, and is by definition an uncertain environment at every moment. The very act of dealing with markets, especially on your own, exposes you to personal challenges not found in any other endeavor.

My own research and personal market experiences confirm this. So, I have defined at least four dominant drivers just to achieve some semblance of parity:



Personal conditioning that provides mental clarity and emotional stamina;



A process that supports goals through implementation of in-line strategies;



Technology that accesses timely and useful information;



Research that avails probabilities.

The greatest, in my opinion, is often the most neglected: Personal conditioning.

So, what is the status of your conditioning? Have you cultivated your own profit-making senses? Or has the market actually re-conditioned you to wonder and perhaps doubt your very own capabilities and market intuition?

What about the next wave of market changes? Are you truly prepared? Have you refined yourself into a dynamic, forward-thinking market edge, one that is fully capable of extracting and protecting profits from the market arena for years to come?

You see, some may interpret an edge as merely a system or a method of trading. I view it as the whole trader.

How about simply viewing yourself as an investing professional? If not, why not? After all, taking risks in any speculative arena is certainly not an amateur's game. Each of us expects to get paid. The only difference is that the average investor is on a 100% pay-for-performance basis, not a salary or commission like brokers and fund managers.

Considering that the public has been groomed over many years to attribute the term "speculation" to gambling, few have ever defined themselves as speculators. Investing, it appears, has been and is now still considered more noble and worthy of honor than speculating or trading.

For the record, the Commitment of Traders Report (CoT) already legitimizes the special position that the speculator has. Speculators, especially the large ones, are not hedgers like the large commercial traders such as those in the food industry. Neither are they small, one-lot traders like the average small investors. They range from large fund managers to large-account individuals.

While the big-money fund managers move markets like four-hundred pound gorillas, the large-account individuals, more commonly tagged as speculators, are so astute that they read those gorillas like a web page, and end up making millions over their careers.

In my mind, though, there is little difference between the words, "investor", "speculator" and "trader". Those merely ascribe handles along a continuum of time, cycles, expectations and needs; and the only real difference appears to be trading styles. Speculation is, nevertheless, still the true name of the market game; and, with every thesaurus I checked, never even associated with gambling at all.

Now, I'm sure one of your goals is to make money with as little risk as possible. In my judgment, associating your mind and learning with the ideas of the famed speculators is about the best way to establishing a path toward reaching your goal.

Regardless of your own distinction, though, the "long haul" of speculating is surely not an easy one. In all likelihood, the challenge of keeping profits through cycles of high volatility and bearish tests over time will verifiably increase for everyone, professional and novice alike.

The fact that the investment-selection process already encompasses so many combinations of value, safety and time factors is a testament that even the criteria itself will continue to morph just like the market. A daunting task for seasoned professionals, the process will intensify even more unnerving for the lesser-experienced, independent investors; that is, unless the speculator within you is awakened and cultivated.

So, that leads me now to ask the obvious: What have you done to awaken your inner speculator? Are you even aware that one exists? How about the presence of the power within the speculator mentality? Probably not, but it's not entirely your fault either; for it is clear that our educational system has seldom taught entrepreneurism, let alone any wisdom that the speculator model and its mental framework might bring.

It is still astonishing, though, considering the degree of education in today's world, that the trading public is still so susceptible to the conniving marketing ploys of the brokerage and mutual fund industries. All of us may be encouraged to lead our own paths but through the comforting arms of their professional advice and management. Our own judgments, however, are politely encouraged to relinquish to a back seat.

Caveats exist with financial outsourcing, contrary to these many sales ploys. By every rational count, we are supposed to know better and thereby in charge of our own wealth at all times. Misplacing trust there can be as financially fatal, if not more than personal misjudgments. Witness the holders of Enron stock who were lied to unto the very end.

Even following the so-called, safe, undervalued selections of the many acclaimed professionals, for example, does not guarantee a profit let alone consistency over the long run. It's even written in their fine print. Simply witness the record whereby 80-90% of fund managers seldom beat the S&P 500.

It's no wonder, then, that brokerage advice hasn't faired much better either. Touting their own analysts' picks with the fervor of snake-oil salesmen, they seldom give an actual sell direction to their clients until it's usually too late. Another case in point is e-Toys. A sell direction there was never given until its price dropped below $2 from over $70; and, by the way, was later delisted.

The general market, on the other hand, is no respecter of personal stock selections either. When it acts with bearish tendencies despite good news, all bets can especially be off. Regardless of fundamental value, the best of the best stocks can go down literally with the rest. That explains why purchasing pseudo right stocks at the wrong time can still erode capital.

So, what should you do? Should you solely trust the buy-and-hold mantra of the so-called professionals? Or should you go it alone, trusting your own judgments? If so, how would you develop a mindset and a method that avails the best of all there is to know in this arena we call "the market"?

The Message of Years of Research

It's one thing to recognize the difference between assets and liabilities. It's quite another to be astute enough to know where and when to trade them. There are factors beyond the strict asset-liability definition that is just as important and further requires your full attention.

The behavior of crowds and its effects is a case in point that confirms economics and its markets as indeterminate issues. That explains why all of us, esteemed professionals and novices alike, are still in some state of constant search for some grail that will enable us to deal with them sufficiently to make us rich.

Economics and finance, on the other hand, are also adaptive systems by nature. That explains why speculating their derivatives, the markets, is so difficult to predict. There's so much adapting and morphing going on that it appears that the only way to respond to them is to somehow become adaptive along with them. After all, the only true constant is their element of uncertainty.

The ability to recognize and adjust the self, though, just may be the key to that grail, if not the grail itself, which allows us to engage that uncertainty. Therefore,my goal here is to inspire a simple realization that a market edge is possible within you. If you address the uncertain nature of the markets, the importance of your internal character, and the awakening of your speculative perspective, your edge will be sharp.

Your own internal mental control must then be viewed as crucial to your independent success. Learning the posture of thinking which facilitates successful speculators in their quest for success is, according to my research, a required element in developing your own. With character as its ally, it is a powerful enabler to wealth being protected as well as simply being accumulated.

I also confirm that awakening your inner speculator is not a quick and easy process. It's a wrenching procedure not much different than any other life-changing event. The only difference is that this one must be totally self wrought, totally self driven and totally self actualized.

Point: The process of awakening the speculator within is between you and nobody else; and only you can get in the way. By the way, you probably will!

It may be easier for some to understand the premise of the speculative mindset than others; likewise, when it comes to practicing it. Nevertheless, egos and preset notions about markets and trading are quick to run interferences, regardless of the personal ease or difficulty. That explains how we lose winning positions.

Training books need to focus more on paradigm shifting than just a bunch of trading techniques and strategies. Without the priority of setting your mental framework to humbly accept the market' reality, your success is limited, in my opinion; and has a lesser probability of being achieved, not by the market's obstacles, but by the greatest obstacle of all: You, coerced through your own emotions.

Learning to think and self manage like a clever speculator is far more important to your market success than any other, because trading techniques and strategies alone often fade as markets morph over time.Just be aware that attaining the humble adaptability to achieve and maintain success will forever be a major challenge. After all, as humans, we always seem to get in our own way. I know I do!

You are not alone in this battle either. Even the best of the best who have ever succeeded in the markets have had their share of failures. They sweated their first trade; they battled their own internal fears and greedy impulses; and they will tell you outright that they experienced the losses to prove their early ignorance! In other words, few succeeded in the beginning; and all continue to battle themselves unto this very day.

There is hope for all of us

If the master traders learned from their mistakes to gain and maintain, then so can we!

Absolutes are difficult to define. In this case, I believe these two are the vital ones: market uncertainty and personal responsiblity. You have the responsibility and the duty to deal with the market's nature of uncertainty; otherwise, you put your wealth at even greater risk.

By developing your inner speculator into a more dynamic one, you will automatically take personal responsibility to the necessary higher level; and, considering the morphing power of every era's market, there is no time like the present to begin accepting the market's uncertain nature; that is, since you want to make money and keep it, too.

By Frank Sherosky


Waiting 20 Years Can Cost You Millions - Dont Wait Start Today

Many Young people live for Today. They really don't fully understand the power of compound interest. The Difference between investing as little as $20 a week at age 20 or waiting until age 50 can be over $3,000,000 (yes 3 Million). Don't wait start today!

Recently I was in a 7-11 and I watched as a young man Purchased $10 worth of Lottery Tickets. As he was walking away from the counter he started talking to me. He told me he just turned 21 and he was going to buy $10 worth of Lottery Tickets for every Pick six as long as he had a steady Job. In Missouri they have 2 Pick Six Drawings Weekly. I said to him Here is my card give me a call and I will show you a surefire way to become a Millionaire.

He looked at me and said sure sure. I looked back at him and Said I will meet you tomorrow across the street at the coffee shop and Coffee is on me would morning or afternoon be better. He Replied I get off work at 2pm So I can be here at 3pm. I said 3pm it is.

I went home and plugged some numbers in an Excel Spreadsheet. Remember I did promise to make this 21 Year old kid a Millionaire. I was going to do for him what no one ever did for me.

The Results are very telling. If my young friend were to invest his $20 a Week and receive a 10% Return on his investment

In 20 Years when he is 41 he will have a little over $66,000



In 30 Years when he is 51 he will have a little over $198,000



In 40 Years when he is 61 he will have a little over $550,000.



In 45 Years when he is 66 He would have a little over 920,000



In 50 Years when he is 71 He would have over $1,500,000.



If my young friend were to be able to average a 12% return the numbers are even more staggering

In 20 Years when he is 41 he will have a little over $86,000



In 30 Years when he is 51 he will have a little over $307,000



In 40 Years when he is 61 he will have a little over $1,000,000.



In 50 Years when he is 71 He would have over $3,400,000



The Above numbers are very telling. Not only do they show my young friend the power of Compound interest but the Show my Young friend the Power of Waiting. As an Example if my young friend Continues to Buy lottery Tickets for 10 Years until he 31 and then decides to take my advice and invest the $20 instead of having $1,500,000 when he is 71 at 10% he would only have $550,000. Waiting 10 Years cost him almost $1,000,000.At the 12% Return My Young Friend would loose over $2,400,000 the Difference between $3,400,00 and $1,000,000

Now if my Young Friend were to Play the Lotto for 30 Years and Wait until he is 51 to take my advice he would loose over 3,300,000 at 12% the Difference between $3,400,000 and $86,000.

By Mike Makler


Volatile Oil

The Light Crude Continuous Contract fell from $67.70 a barrel on Monday to $62.75 on Thursday, and closed at $65.79 on Friday. Consequently, oil stocks followed the sharp move in oil prices last week.

The first chart is an OIH (basket of oil stocks) daily chart, which suggests a consolidation or correction over the next few weeks. The Price-by-Volume bar (on left side of chart) indicates OIH may trade between 111 and 114 short-term. There's also resistance around 115, i.e. the 10 & 20 day MAs. There's further resistance at 117.88, which is the current Parabolic SAR sell signal (red dots). However, if oil tests $70 a barrel, then the high at 119.30 is another barrier. Oil is less than $5 a barrel below $70. So, OIH may rise and fall quickly.

OIH major support is at the (rising) 50 day MA, currently just over 108. However, if OIH closes below the 50 day MA, then next major support is around 105, i.e. the longer Price-by-Volume bar. Around 105 may be the bottom of the consolidation zone, while a correction may result somewhere in the 90s or 80s. The short-term price of oil is largely dependent on the rate of global economic growth, reflected in monthly economic data, and supply disruptions, including geopolitical events and hurricanes in the Gulf.

The second chart is an SPX (S&P 500) same period daily chart. SPX lead OIH higher and then lower recently. If OIH continues to lag SPX, then OIH will rise next week, perhaps to the Parabolic SAR sell signal, trade around the 10 & 20 day MAs, and then fall to a new recent low, e.g. 105. SPX created a bullish doji at the 50 day MA. However, a volatile trading range may continue next week, perhaps between 1,200 and 1,235.

Next week is a light economic data week: Mon: None, Tue: Existing Home Sales, Wed: Durable Goods Orders and New Home Sales, Thu: Unemployment Claims, and Fri: Revised Michigan Consumer Sentiment. The weekly oil inventory report is Wed at 10:30 AM ET. There are several other excellent trading opportunities next week, where large gains can be made quickly. "Chance favors the prepared mind"-Louis Pasteur.


By Arthur Albert Eckart


Asset Allocation Lessons: The 70% Inflation Solution

For investors only... and for speculators who need to invest their winnings.

Lesson One: Asset Allocation is an Investment Planning Tool, not an Investment Strategy... few investment professionals understand the distinction, because most think that Investment Planning and Financial Planning are the same thing. Financial Planning is a broader concept, and one that involves such non-investment considerations as Wills and Estates, Insurance, Budgeting, Trusts, etc. Investment Planning takes place within the Trusts, Endowments, IRAs, and other Brokerage Accounts that come into existence as a result of, or without, Financial Planning.

Lesson Two: Asset Allocation is a planning tool that allows the Investment Manager (you, if you have not hired one) to structure the investment portfolio in a manner most likely to accomplish the goals of each specific investment portfolio AND of the investment program as a whole. Asset Allocation is the process of planning how an investment portfolio is to be divided between the two basic classes (and only these two classes) of investment securities: Equities and Fixed Income. Security sub-classes have little relevance.

Lesson Three: Equities are the riskier of the two classes of securities, but not because of the price fluctuations that are their basic character trait. They are riskier because they represent ownership in a business enterprise that could fail. The risk of capital loss can be moderated or minimized in the security selection process and with a management control activity called diversification. The primary purpose for buying Equities is to sell them for capital gains, not to save them as trophies to brag about in chat rooms. They are less risky than other, non-fixed income endeavors.

Fixed income securities are less risky because they represent debt of the issuing entity, and owners have a claim on the assets of the issuer that is superior to that of Equity holders and their salivating class action attorneys. With proper selection criteria and diversification, the risk of capital loss is negligible and price fluctuations can be ignored except for the trading opportunities that they provide. The primary purpose of these securities is income generation, either for current consumption or for use later in life. Capital gains here should be taken?and bragged about in chat rooms!

Lesson Four: An Asset Allocation Formula is a long-range, semi-permanent, planning decision that has absolutely nothing to do with market timing or hedging of any kind. It is designed to produce the combination of Capital Growth and Income that will achieve the long-range personal (pay those bills) goals of the individual. Thus, it must not be tinkered with because of expectations about anything, or rebalanced arbitrarily because of natural changes in the market values of one asset class or the other. Thus, an asset allocation fund is an oxymoron.

Lesson Five: Asset Allocation is the only proven cure for inflation. If properly managed using "The Working Capital Model", it will almost certainly increase the level of portfolio income by more than the rate of inflation, which is a measure of the purchasing power of your dollars, not the dollar value of your purchased securities. Six figure portfolios allocated 100% to Equities are not nearly as inflation proof as those that are more balanced? see Lesson Six.

By Lesson Six


Dumb Money

Many people have, at one time or another, taken some of their hard-earned funds, and decided to put them in the stock market. These well-meaning individuals either acted on a tip they saw on CNBC, or actually believed one of those crazy faxes/emails that said XBXB @ $0.17/share was the next Microsoft. These people thought they were being smart, but they probably just ended up lining the pockets of brokers and mutual funds when they lost money on their 'investment'. I know, because I've done it, too.

Part of the problem we face is that we are big underdogs in the investment channel. We, as individuals, have access to hordes of information. Yet, we don't even scratch the surface of our knowledge potential. We invest without carefully reading financial statements and company reports, looking instead to message boards and TV stock 'experts' for guidance. If you own mutual funds, do you know what companies those funds are holding? Most people have no clue.

Investors can be lumped into two categories: smart money and dumb money. Most individuals are 'dumb money'. Smart money regularly beats the market, and includes many mutual funds. Dumb money generally loses. Dumb money often over-reacts to market pressure.

There are a few ways to avoid becoming 'dumb money'...

First, forget about short-term investing. If you plan to rapidly buy & sell stocks, statistics show that, on average, you will lose, and maybe lose big. Long-term investors don't easily get scared off by market fluctations, 10% price swings, or a bad earnings report. Plus, they don't have to pay the transaction fees over and over like the day traders do. The best way to ensure that you will make money investing is to find your initial investment vehicle, and leave your money alone.

Second, don't go along with the crowd. Example: Walmart's stock has been a great investment over the last 5 years, right? Wrong! It's actually lost about 5% during that time. Yet, if you watched CNBC, you'd swear that Walmart was the best thing since sliced bread. Find a strategy that makes fundamental good-sense, and don't throw your money into a stock or fund because it's a big name. Finally, diversify! If you're in it for the long-haul, you need to make sure that some really bad news doesn't keep the kids from going to college.

That's it for now. Check out


Use this Simple Trick its to Buy $100 Bills Direct from your Bank for only $97

Most People just don't understand the power of using their home as a Wealth Creation Tool. How many people do you know who have lived in the same house for 10, 15 or more years and have virtually no mortgage, You know the Type 'House Rich Cash Poor'. There are strategies these homeowners can use to put that House Rich Part to work Building Wealth.

Did you miss the Going out of Business sale at the Bank Last Week? They were selling $100 bills for only $97. Darn you missed it. Ok the Bank didn't have a going out of business sale but if they did how many $100 Bills would buy? I'd back up the SUV to the bank and see how many Bills I could get in and then go back for as many Trips as I could. Your Bank is Selling $100 Bills for $97 Back up the SUV.

The Equity in your Home is like that Bank. If you Qualify you can Borrow money at 2% or Less and turn around and Achieve Returns of 5% or More fairly safely with Equity Indexed Annuities. In Most cases the money you borrow is Tax Deductable while the money you place in the Equity Indexed Annuity is Tax Defered.

Taking a Closer Look, If you Borrow money at 2% and turn around and get a return of 5% that means your net return is 3%. For Evey $100 you Borrow you are placing $3 in your pocket. Wow the bank really is selling $100 Bills for only $97.00

Many lenders are offering Mortgages with the payment fixed at 2% for the first 5 Years. What are you waiting for back up that SUV and get your $100 Bills Today.

By Mike Makler


Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart Investors

The move by China's central bank to drop the yuan's rigid peg to the dollar on the day of my return after a three-week trip to Asia left a host of questions unanswered. The basket of currencies that will allegedly determine the value of the yuan going forward was not disclosed. What sort of band the currency will be allowed to fluctuate within is not at all clear. The 2% revaluation in the currency on Thursday followed by a slight strengthening on Friday week may actually encourage further short-term speculation since most economists believe the yuan is undervalued by roughly 10% to 20%. With $1 trillion of trade transactions each year and hot money capital inflows equivalent to 5% of its GDP, the uncertainty concerning the Chinese currency is high.

Not In the Mainland
In the near term, this uncertainty gives investors an opportunity to benefit not just from the expected strengthening of the Chinese currency but the overall rise of Asian currencies against the dollar. In early 2005, I advised clients that the Euro's rise against the dollar was over and that Asian currencies would be the next area to appreciate versus the dollar. It may turn out that many of your best China investment options don't involve investing in mainland Chinese companies at all.

Direct Currency Approach
The cleanest direct currency play on the expected rise in the yuan (also referred to as the renminbi) is to open a renminbi currency account at Everbank. A leading online bank ranked "Best of the Web" by Forbes, Everbank offers a variety of world currency accounts as well as FDIC backed three and six month CD's which offer attractive rates.

Direct iShare Approach
Another direct equity China play is through the China iShare (FXI) that tracks the FTSE/Xianhua China 25 index that is comprised of 25 of the largest and most liquid China names. FTSE is a UK based index company and Xianhua is a China based media company.

All of the 25 stocks included in the China iShare are listed on the Hong Kong Stock Exchange. Some of them are incorporated in mainland China (H shares) and some of them are incorporated in Hong Kong (red chips). The total market capitalization of the index is $170 billion. The broadest Xinhua China index includes 1,355 listed companies with a total market cap of $550 billion.

To put this in perspective, the average market capitalization for a company in the S&P Global 100 Index is $70 billion. Again, that's for one company. The China iShare provides good exposure to three key sectors of China: energy (20%), telcom (19%) and industrial (18%). This concentration can be viewed as a plus or a minus depending on your perspective. For example, some smart investors are placing a bigger bet on China's consumer markets. The top five companies represent 40% of the index. The annual operating expenses of the China iShare are only 0.74% compared to 2% plus for other alternatives out there including actively managed Asia and greater China region funds. Keep in mind that most of these companies are still largely controlled and owned by the Chinese government.

Indirect Approach
The best way to invest in China may be through more indirect vehicles that benefit from Chinese growth and its currency moves. One example of an indirect investment in China is through the Hong Kong iShare (EWH). It has sizable allocations to Hong Kong real estate (33%), utilities (17%) and banking (16%). Having just returned from a trip to Hong Kong, it seems clear to me that real estate markets have a way to go before becoming too pricey. Supply is inflexible and even if prices rise as expected 30% during the next 18 months, price levels will still be about 50% below where they were in 1997. Being the last Asian currency pegged to the dollar should encourage capital inflows. Furthermore, the Hong Kong market has been much more successful than the Shanghai and Shenzhen stock exchanges signaling that it will be China's financial capital for the foreseeable future.

Indirect Currency Play
China's move last week will also increase pressures for a number of other undervalued Asian currencies to appreciate. To compete with the China export machine, many Asian countries have resisted letting their currencies rise but now they have a bit of room to maneuver. The Malaysian ringgit was released from its peg to the dollar last week and it rose 0.7% the first day. While currency appreciation will somewhat dampen export growth it will also reduce the cost of rising energy import costs and analysts expect the economy to grow 5.5% this year. The easiest way to invest in Malaysia is through the Malaysia iShare (EWM) which tracks a basket of leading companies listed on its exchange. Another attraction - the annual fee for the Malaysia iShare is only 70 basis points.

The Play for the Informed
Malaysia is oftentimes overlooked by investors even though it has progressed quietly but remarkably from a relatively poor producer of raw materials to a bustling and broadly diversified middle income country.

Malaysia, positioned along the strategically important Straits of Malacca , should be on every investors radar screen for the following reasons: It has little external debt and healthy foreign exchange reserves. In area, it is slightly larger than New Mexico.

Malaysia has a balanced economy with strong industrial and service sector, important natural resources and openness to foreign investment.

It has a parliamentary system and divided powers between central government and 16 states and federal territories.

Malaysia is well situated to benefit from growth in the region with key export and investment partners being Japan, China and the USA.

Natural resources include tin, petroleum, natural gas, timber, copper, iron ore, bauxite. Small but consistent exporter of oil and natural gas.

It has a young and increasingly well-educated population with a median age of 24 and a literacy rate of 90%.

Malaysia's per capita income is approaching $5,000. Solid middle-income country with growing middle class.

The Kuala Lumpur Stock Exchange, also known as Malaysia Bursa has over 800 companies listed.Canada?
Another smart indirect China play would be to invest in the Canada iShare (EWC). The Chinese are going on a buying spree investing in Canadian energy companies and recently plunked down $2 billion to build a thousand mile pipeline from Alberta tar sands to port on the west coast and onward to Beijing and Shanghai. The Canada iShare tracks the MSCI Canada Index that has 40% exposure to Canada's energy and materials sector.

Starbucks?
And what about Starbucks (SBUX) as a China play? Starbucks has about 9,000 stores worldwide and in the first quarter of 2005 its sales were up 27% and revenue exceeded $100 million. It entered the Chinese market in 1999 and has about 300 stores that have performed beyond expectations. The company hopes to expand to 30,000 stores and China is a key part of its expansion strategy. With 250 million Chinese approaching middle-class and millions of new affluent status conscious youth, Starbucks expects that before long China will be its second most important market. During my recent trip to China trip, I visited ten Starbucks stores and all of them had brisk activity with a lot of young Chinese enjoying not only coffee products but the higher margin specialty drinks. Think the Chinese will always prefer tea? Japan shows that when income levels reach certain tipping points, consumer preferences change from tea to coffee. Starbucks always looks expensive but many great companies always are. Starbucks investors have made 43 times their investment in its 1992 IPO and revenue was up 27% in July.

China represents an enormous opportunity for long-term investors but an indirect approach may be the smartest strategy.

Next week: find out what is the next great Asian Bull Market in the 21st century - hint" It's not China!

By Carl Delfeld


Chinas Great Missed Opportunity

While a U.S. Representative to the Asian Development Bank Executive Board of Directors during the first Bush Administration, I consistently called for China to "bite the bullet" and privatize its state-owned companies as soon as possible. Representatives from European and other Asian countries would just shake their heads and mutter about impatient Americans while counseling that China adopt a slow, incremental approach to privatization.

Here we are more than twelve years later and this bullet has turned into a time bomb that could derail China's impressive economic growth and a better life for its people. The fact that a majority of China's large companies are still owned and controlled by the Chinese government has three negative economic consequences.

First, it has stunted the growth of China's financial markets and prevented many companies from tapping equity capital markets. Almost 70% of the shares of China's 1,377 listed companies are substantially owned by the state and cannot be traded. This is the dreaded "overhang" which bedevils the Communist Party leadership and bureaucrats anxious for private Chinese shareholders to have share prices mirror economic growth. The Shanghai Composite Index recently dipped below 1,000 for the first time since 1997. The problem is that when the government sells these shares, private shareholders are diluted and share prices decline. The use of public funds to compensate private shareholders for this dilution has been considered and rejected as too expensive.

The Chinese government announced a $15 billion buyout fund to invest in state-owned companies but markets are deeply skeptical. My view is that only solution is auction off equity to private investors and de-list poor performers and let them struggle for survival.

Meanwhile private firms hungry for capital are denied a chance to list on these exchanges. The result is that private Chinese companies rely on banks for 99% of their financing! This lopsided dependence on bank financing is unhealthy and furthermore many Chinese banks are bogged down by mismanagement, bloated bureaucracies, corruption and saddled with politically motivated non-performing loans

In addition, China's stock market slump is putting its brokerage firms in intensive care. China's 114 brokerage firms that depend largely on stock trading commissions suffered a 45% decline in revenue in the first half of this year. Trading in the China A shares (for Chinese citizens only) market has virtually disappeared. The Shanghai Composite Index is down 15% this year. The Chinese government also has an unofficial moratorium on new listings.

Second, maintaining state ownership and control of so many Chinese companies leads to a lack of transparency and openness that is necessary for China to fully participate as a member of the global investment community. Foreign institutional investors tend to favor investing indirectly in China through the Hong Kong Stock Exchange to gain better disclosure and listing requirements. As an investment advisor, I recommend clients participate in Chinese growth primarily through investing in Hong Kong (EWH) Malaysia (EWM), Canada, (EWC) Australia (EWA), and other Asian countries. The issue of dysfunctional Chinese financial markets has also led to our recommendation to clients that India, not China, may be the best performing Asian stock market in the next ten or twenty years.

The recent announcements of Bank of America and HSBC to invest in two leading Chinese Banks is a welcome step but falls far short of the mark. Both are relatively small investments and both foreign investors will have little authority nor any meaningful management responsibilities. The Chinese want the publicity, the brand and the opportunity to learn but are clearly unwilling to relinquish any control.

Look at what Indonesia is doing to open its financial sector to international investment. International investors are now allowed majority and management control and just last week a large Singapore and Malaysian bank announced plans to make sizable investments in Indonesian banks. The Indonesia government is also drawing up a list of which of its 145 state-owned enterprises will be sold to investors. International investors have taken notice - the Indonesian stock market is doing well and our recommended Indonesia Fund (IF) is up 29% this year.

Third, as the recent high profile cases of Lenovo, Haier and CNOOC demonstrate, as state-owned Chinese companies seek to acquire or invest in foreign companies, the reaction is wariness, skepticism and outright political hostility. The Chinese leadership is trying to groom about 100 of its largest companies to go global in a big way and "brand hunting" of leading multinationals firms with its surplus cash ($700 billion in foreign exchange reserves) is the fastest way to achieve this objective. If you thought the Japanese spending spree during the 1980s was controversial in America - fasten your seat belt.

The U.S. Congress and other foreign governments will resist these bids since they have little interest in having a foreign government, especially an economic rival enjoying a $200 billion bi-lateral trade surplus, purchase its most prized companies. The issue of Chinese bidders using government financing is also a red flag. Then there is the issue of reciprocity - foreign companies can only obtain minority interests in Chinese state-owned companies and approval for even these minority stakes is not transparent and highly political.

Finally, there is the broad policy question as to the intent of the Chinese Communist leadership. The slow and grudging pace of privatization could reasonably be read as an indication that the Chinese government has no intention of relinquishing control of state-owned companies. This, in turn, has serious consequences as countries evaluate how to treat a rapidly growing authoritarian country that seeks to participate and benefit in the global economy by using state-owned and state-sponsored companies.

The Chinese adage of "crossing the river by feeling the stones" may be a wise policy at times but in this case a plunge into the river ten years ago would have been much better for the Chinese economy and people. It is by no means too late to take the plunge and the US should be ready to help in any way it can.

Find out more insights at http://www.chartwelladvisor.com

By Carl Delfeld


The Switzerland of Asia Shines

In many respects, Singapore is the Switzerland of Asia.

Begun in 1819 as a British trading colony, the Republic of Singapore was founded in 1965 under the leadership of the current Prime Minister's father, Mr. Lee Kuan Yew. While it is only 1/5 the size of Rhode Island and three times the size of Washington D.C., it is perhaps the most strategically important global trading, finance and service nexus in Asia.

Here is why you should consider investing in Singapore.

While Hong Kong and Shanghai will argue, Singapore is the busiest port in Asia situated next to the vital trading channel, the Straits of Malacca.

Unlike South Korea and Taiwan, which are heavily dependent on the cyclical electronics industry, Singapore has a well-diversified economy. 70% of its GDP is attributable to finance and services.

Singapore's accounting rules and regulations are amongst the most conservative in the world. For example, its rules on inventory accounting and the expensing of stock options are more conservative than those in the United States.

Trade Surplus

Despite only 1.6% of its land being suitable for agricultural activities and having to import almost everything including water, Singapore manages to have a trade surplus.

Singapore has a balanced budget, a stable currency and still manages to allocate 5% of GDP for defense.

It represents a multi-ethnic society with 77% Chinese, 14% Malay and 8% Indian.

Singapore has a parliamentary form of government, an English common law judiciary system and is corruption and drug free. Slowly but surely, a freer political climate is developing with a Speaker's Corner instituted in 2000 and the ability to express one's views freely anywhere with the exception of the sensitive topics of race and religion

Singapore's educational performance is legendary. The fact that it has twice as many Internet users as television sets is telling.

Singapore's New Resorts

Singapore is also changing with the times. To generate more investment, tax revenue, and add a bit of sparkle, Singapore recently approved the development of two large casino resorts. It is part of a strategy to reduce the country's dependence on manufacturing and to position itself as a livelier tourism destination. Of course, there will be restrictions. Singaporeans will have to pay a $60 entry fee and the gambling areas will be restricted to just 5% of the resort. According to projections, the resorts will lead to $4 billion in investments, $3.5 billion in annual revenues, 35,000 jobs and $350 million per year in taxes and fees.

Singapore has also made great strides in patching up misunderstandings with its neighbor to the north, Malaysia, from whom it split in 1965. Tax issues, water supply agreements and transportation arrangements are all moving much more smoothly.

Singapore is adept at holding on to its manufacturing base even as several large semiconductor manufacturers such as National Semiconductor announced plans to move plants to China and Malaysia. For thirty years, Singapore has relied on electronics as the backbone of its manufacturing sector but is making the transition to a more service and R&D economy. Electronics is about 40% of manufacturing output but accounts for only 5% of employment. Surprisingly, some firms are moving manufacturing centers from China to Singapore due to its infrastructure, logistics and laws protecting intellectual property. Exxon Mobil, Shell and Sumitomo are expanding petrochemical facilities and Singapore added 27,000 manufacturing jobs last year by moving up the food chain.

After 8.4% GDP growth in 2004 and a weak start early this year, Singapore's economy posted 12% plus growth in the second quarter and should be a solid performer over the next few years. Continued strong global demand for transportation, communications and logistics services, increasing IT spending, rising consumer spending and property prices and expanded tourism all point to continued growth.

An easy and smart way to invest in Singapore is through the Singapore iShare (EWS) which tracks the Singapore Straits index. It is up 26% over the past year and up 9.4% year to date. Its largest positions are in Singapore Telecom, United Overseas Bank and DBS Bank. Even better, it is tax efficient and has an annual expense ratio of only 0.59%. Trading at 14 times projected earnings, the Singapore market is still attractive. By comparison, the Switzerland market and iShare (EWL) is trading at 18 times earnings.

The epitome of quality and increasingly creative, Singapore is a great core holding for any global portfolio.

By Carl Delfeld