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Super Rules, OK?

2008-06-30T00:16:00.021-07:00

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

2008-06-30T00:16:00.019-07:00

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

2008-06-30T00:16:00.017-07:00

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

2008-06-30T00:16:00.015-07:00

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

2008-06-30T00:16:00.013-07:00

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

2008-06-30T00:16:00.011-07:00

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?

2008-06-30T00:16:00.009-07:00

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

2008-06-30T00:16:00.007-07:00

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

2008-06-30T00:16:00.005-07:00

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

2008-06-30T00:16:00.003-07:00

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?

2008-06-30T00:16:00.001-07:00

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

2008-06-30T00:15:00.003-07:00

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

2008-06-30T00:15:00.001-07:00

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

2008-06-30T00:14:00.015-07:00

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

2008-06-30T00:14:00.013-07:00

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

2008-06-30T00:14:00.011-07:00

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

2008-06-30T00:14:00.009-07:00

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

2008-06-30T00:14:00.007-07:00

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

2008-06-30T00:14:00.005-07:00

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

2008-06-30T00:14:00.003-07:00

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

2008-06-30T00:14:00.001-07:00

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

2008-06-30T00:13:00.019-07:00

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

2008-06-30T00:13:00.017-07:00

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

2008-06-30T00:13:00.015-07:00

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

How to Buy to Let

2008-06-30T00:13:00.013-07:00

Find out everything you need to know about buy to let. Learn what to buy, where to buy and what not to buy. All this information about buy to let won't cost you a penny.

buying

? If the area is full of buy to let property investors the supply of property to let might outweigh tenant demand and create pressure to reduce rents.

? Consider established areas with good communications links

? Research tenant demand as your highest priority. Find a letting agent to discuss this.

? Consider ongoing costs, e.g. maintenance, service charges etc.

? Be prepared to buy tired investment properties and refurbish them.

? Build a team of reliable tradesmen so that you can react quickly.

? Find a good buy to let mortgage provider. Finding the correct buy to let mortgage is crucial to your success when you are buying and selling investment property.

To Buy or Not to Buy an investment property for sale?

? As soon as you find a property you would like to buy, run a To Let advert in the local press. If the phone rings a lot buy it. If not walk away.

? A variation on the theme would be to run a display advert "Seeking long term tenants" I am a portfolio landlord. You find your perfect property and I will consider buying it and letting it back to you"

Demand and professional guidance

Find a letting agent and discuss the demand for properties in the areas you are interested in. They should also be able to indicate the level of rent you could expect to achieve and what type of tenancy is more suitable for the property and area.

University Lettings

Talk to Student letting officers - build rapport so they promote your property above others. They too can give you good advice on demand, i.e. where, why, how much etc.

Buying Privately

* With more and more people turning to the internet to source suitable investment property for sale and for sellers looking to save on selling agent fees, more people are having the opportunity to buy and sell privately. The main difference being that you will liaise directly with the seller of the property. This may be via email or telephone. Viewings will be arranged directly between the buyer and seller and the negotiations regarding the price will be dealt with directly between the buyer and seller. However, you will still need to both appoint a solicitor to act on your behalves.

Buy to Let Mortgages

Finding the right buy to let mortgage is crucial to your success as a property investor. Unlike other forms of property investment, a lot of the capital you invest into a buy to let investment property is likely to be borrowed. Over the last few years, the buy to let mortgage market has boomed, with more and more lenders bringing out products making borrowing money to invest in this way even simpler than before. There are a number of different buy to let mortgage products available from fixed rates, discounted variable rates, base rate trackers to name a few. It is worth remembering that different products may be suitable for different investment properties.

However it is very important that you get the correct guidance with your finance. Questions that are worth considering when finding a suitable buy to let mortgage:

1. Do they have access to lots of different buy to let products in the market place?

2. Do they have the ability to create a long term investment property strategy for you?

3. Are they able to secure exclusive buy to let products?

4. Are they able to arrange buy to let mortgages within 10 working days?

Most lenders will offer a maximum loan of 85% requiring you to fund at least a 15% deposit. The buy to let mortgage industry is very competitive with new products being launched on a very regular basis.

Some brokers may charge a brokerage fee up to 2% to arrange the buy to let finance for you but don't let this put you off because if they do have the ability to secure exclusive buy to let products for you, it could be very beneficial to your cashflow as a landlord. Plus, if they are able to reach formal mortgage offer stage in a very short space of time, this could result in you being able to secure investment property at very competitive prices if you have the ability to tell the vendor that you can have the deal completed within a matter of a few weeks. Find out more about buy to let mortgages, landlord inventories, tenancy agreements, landlord insurance, landlord tax, furnishing your buy to let and credit checking your tenants and see how you can start your investment property portfolio.

There are a few simple steps to remember:

? Make sure you have done your research

? Source a good buy to let mortgage provider and make sure that your own personal credit file is clean.

? If you are unsure, then you can request a copy of your personal credit file on a number of different websites which allow you to download a copy instantly.

? Once you have agreed an offer for the buy to let investment property for sale with the vendor, you will need to appoint a solicitor and exchange solicitor details with each other.

? At this point your respective solicitors will then begin the necessary legal work on your behalves to arrange the legal ownership of the investment property to transfer to the new investor.

? Contact your buy to let mortgage provider and confirm the purchase price and loan amounts required.

? A surveyor will then need to visit the investment property for sale to carry out a valuation of the property and a rental assessment. Some buy to let mortgage brokers can arrange this on your behalf. Other buy to let mortgage companies will advise you when this will take place. However, it is worth bearing in mind that if a buy to let mortgage provider is a fully packaging company then they may be able to reduce the timescales that it takes for your formal buy to let mortgage offer to be issued.

? Whilst waiting for the valuation report on the investment property for sale to be returned, use this time to complete all the legal paperwork that your solicitor will forward to you for completion and the application forms which will be forwarded to you from your buy to let mortgage provider.

? If the valuation report comes back and is satisfactory, you should then receive your buy to let mortgage offer shortly afterwards. On occasions, you may be requested to obtain specialist reports which may include a structural engineers report, damp and timber report and coal mining report.

? A copy of the buy to let mortgage offer should go directly to you and your solicitor.

? Your solicitors will then liaise with each other regarding suitable exchange and completion dates and will arrange to do the necessary completion paperwork for you on your new buy to let property.

Buy to Let Insurance

? Insuring your buy to let property is just as important as insuring your own home. As a landlord you have certain liabilities so make sure you get the necessary cover that your investment property needs. There are a number of different options available depending on the type of investment property you have for example if it is an apartment, block of flats, commercial property etc. But do shop around to make sure you secure the best buy to let insurance product.

Preparing to let the investment property yourself?

? This is an investment and cashflow is the key factor. Stick to neutral colours that will go with anything. For example, a red sofa might not match a green carpet, however, all colours look good on beige.

? Carpets - light beige looks great when clean. Light colours make room look lighter, brighter and bigger. They also encourage cleanliness and are easy to justify cleaning when a tenant vacates. Look for felt backed bleach cleanable carpets which do not require underlay. Replace carpets every 3-5 years, clean every tenant change and debit from damage deposit.

? Check with the local letting agent whether there is more demand for furnished or unfurnished property in the area.

Join your local Landlords association

? This is the easiest way to keep up with legislation and to obtain advice on getting your paperwork right.

? Other landlords in your area will be keen to share good and bad experiences. Learn from their experiences rather than making your own mistakes.

Tenant Application form

? Obtain full details including names, addresses and contact numbers of referees and emergency contacts. Also obtain previous addresses, NI numbers, employer details and proof of earnings. This makes life easier if you ever need to track down an absconding tenant.

? If possible, fill in an application form at the prospective tenants home. This will at the same time allow you to see how they look after it.

Credit Check your Tenant

? It is now possible to credit check your tenants on-line. Just because they are of smart appearance and drive a nice car doesn't guarantee that your rent will arrive each month. We all know how easy it is to get credit these days so it is important that you have peace of mind that your tenants have the genuine ability to pay.

Fees

Charge a fee to tenants of around £100 for completion of tenancy agreements, referencing, inventory etc.

Deposit-take 5 - 7 weeks rent plus one months rent monthly in advance

Tenants often cancel standing orders on the month prior to final payment - if this happens you still have some money to cover damages

Landlord Inventory

Get prepared. As much as we all like to think we can trust everyone, it is very important that 'buy to let' landlords protect their investment property as thoroughly as possible. Having an inventory in place will protect you against unnecessary costs and ensure that you are maximizing your profit at all times. For example; if your teaspoons kept going missing and the curtains kept leaving the poles when the tenants vacated, this could start to add up. Imagine if you had freshly decorated the buy to let property in a very neutral magnolia colour throughout to discover that your tenants had become creative one day and turned their hand to a bit of decorating to brighten the place up! Not only will this cost you in paint, but could potentially lose you income on rent whilst you are having to leave the investment property empty whilst it is being redecorated. And most importantly how can you prove that the property was that colour or condition in the first place. Its simple. A Comprehensive Landlord Inventory.

? Purchase a Landlord Inventory On-line Now - include everything including starting colour, condition of walls, ceilings, doors, fixtures & fittings etc and get it signed so you can prove damages when the tenant vacates. The more detail the better, even include the colour of light switches and door handles and what they are made of. Comments like "carpets have just been professionally cleaned" or "walls are freshly painted" will also help to prevent disputes on checkout.

? Ensure that you arrange a check out inspection and make sure the tenant is present - get them to sign to agree to any damages and/or required repairs.

? Complete utilities meter checks and ensure the incoming/vacating tenant signs to confirm meter readings.

? Inform the utilities companies and local authorities in writing of incoming/outgoing tenants and any applicable meter readings

Tenancy Agreement

You will need to purchase a tenancy agreement. This will protect you and your tenants. There are a number of tenancy agreements that can be purchased off the shelf but it is important that you check the tenancy agreement to make sure it is suitable for the type of tenants you have. For example whether it is a family let or a property being let to sharers where they could be joint and several liability. A good solicitor would be able to draw up a suitable agreement and for your own peace of mind, this small investment could be a very worthwhile exercise.

Look after your tenants - They are a valuable asset to your investment property!!

Happy tenants will respect your property and will refer other potential tenants to you.

If the above is not cost effective or convenient for you then you should seriously consider employing the services of a property/Lettings manager.

Find out more about buy to let and how you can start.

By Jennifer Tweed

The High Price of Oil

2008-06-30T00:13:00.011-07:00

In less than four years, the price of oil has risen about 300%, or over $50 a barrel. The Light Crude Continuous Contract (of oil futures) hit an all-time high at $67.80 a barrel Friday, and closed the week at $67.40 a barrel. Persistently high oil prices will eventually slow economic growth, which in turn will cause oil prices to fall, ceritus paribus.

The two charts below are same period daily charts of SPX (S&P 500) and OIH (an oil ETF, which is a basket of oil stocks). Over 15% of SPX are energy & utility stocks. The two charts below show SPX started the recent rally about a month before OIH. Also, the charts imply, non-energy & utility stocks fell over the past week or so, while energy & utility stocks stayed high or rose further.

SPX held its 10 day MA until just over a week ago, while OIH continues to hold its 10 day MA. The Parabolic SARs (red dots) indicate SPX is on a sell signal, while OIH continues to maintain the buy signal. SPX would need to rise to about 1,242 3/4 to trigger a buy signal, and OIH would need to fall below 115 3/4 to trigger a sell signal (see upper left corner of chart).

Perhaps, the safe play would be to wait for OIH to close below its 10 day MA, or fall below the Parabolic SAR buy level. However, I believe, if oil tests $70 (e.g. next week or the following week), that will be the OIH sell signal, and perhaps an excellent opportunity to buy OIH Sep puts (or puts on overvalued oil stocks).

SPX has sold into weekends over the past three weeks, which is typically bear market behavior. However, next week is options expiration week. So, direction will be somewhat skewed next Friday. The following are current August Max Pain expirations: SPX 1,225 with the value of calls about three times the value of puts (which is bearish, since the put/call is a contrarian indicator). SPX closed at over 1,230 Friday. OEX (S&P 100) 570 with the value of puts over three times the value of calls (which is bullish). OEX closed at about 571 Friday. QQQQ 39 with the value of puts twice the value of calls. QQQQ closed at about 39 1/4 Friday. It's interesting that the OEX put/call is roughly the mirror image of the SPX put/call, which may suggest institutions, which tend to buy large cap stocks, are skeptical of a rising stock market.

Economic reports next week are: Mon: Empire State Index, Tue: CPI, Industrial Production, Capacity Utilization, Building Permits, and Housing Starts, Wed: PPI, Thu: Unemployment Claims, Leading Indicators, and Philadelphia Fed. Fri: None. Recent data showed slowing and above trend growth with disinflation. A higher Capacity Utilization Rate would indicate future inflation. The high price of oil tends to slow economic growth rather than cause inflation (in part, because the high price of oil is a tax on consumption, which lowers demand for non-energy goods).

The big play may be buying Sep puts when OIH and overvalued oil stocks bounce, because OIH may continue to lag SPX. Also, options expiration week tends to be volatile, and the trading range may continue. So, there may be several other excellent trading opportunities next week.

Charts available at PeakTrader.com Forum Index Market Overview section.

By Arthur Albert Eckart

Do You Need A Financial Planner?

2008-06-30T00:13:00.009-07:00

No matter how much money you make, it pays to keep on top of money coming in and going out. Even if you do a good job of that, there are important times in your life when talking with a professional adviser makes sense.

Almost every major life event - finding or losing a job, getting married or divorced, having a baby, buying a home -- is likely to have a major impact on your finances. A new job may mean you are making more money -- no problem there as long as you know the best way to invest it. Getting married may mean you have a second income to count on, but now you have someone counting on yours as well. Buying a house means you have to come up with a hefty sum of cash for a down payment, get used to monthly mortgage payments and meet the expense of house repairs.

Let's look at what happens if a baby comes into your financial picture. First, medical bills need to be paid, so having good medical insurance is important. Few insurance plans cover everything, so you'll need to have a cash reserve to cover deductibles and extras, not to mention the furniture, clothing and sundries you'll need when the newborn comes home.

With a new addition to the family, you'll want to make sure that the entire family (baby, too) is protected if something should happened to you -- that means reviewing life and disability insurance to be sure it's adequate for your new responsibilities.

There's the future to start thinking about, too. Will your child go to college? If so, the College Board estimates that secondary education costs are rising 7% to 8% annually, a rate much higher than the rate of inflation. To afford the average $7,000 total costs for a state university, you need to start saving $195 a month. Wait until your child is 7 years old and the monthly amount jumps to $240! So, it's smart to put away a little sum each month.

What can you do to accommodate new strains on your paycheck? How can you meet all of your new responsibilities? With an important financial goal (such as educating a child) you'll want to work with a generalist -- a financial planner. A lot of professionals specialize in areas such as taxes or stocks, but a financial planner helps you understand the "big picture." A qualified financial planner can help you sort through your current financial situation, help you set short- and long-term goals and objectives, then present a "blueprint" designed to show you how you can meet your goals while staying within your means.

There's nothing more certain than change. And just as you learn to adapt to the changes life throws your way, you can count on things changing with your finances as well.

By Trevor J. Wisniewski, MS

Moving Average Convergence Divergence ( MACD ) Charts

2008-06-30T00:13:00.007-07:00

The Moving Average Convergence Divergence charts, or MACD charts for short, are a technical indicator that is derived from the more simple moving average.

The MACD charts are oscillating indicators, meaning that they move above and below a centerline or zero point. As with other oscillating and momentum indicators, a very high value indicates that the stock is overbought and will likely drop soon. Conversely, a consistently low value indicates that the stock is oversold and is likely to climb.

THE 12-DAY AND 26-DAY EMAS

The MACD charts are based on 3 exponential moving averages, or EMA. These averages can be of any period, though the most common combination, and the one we will focus on, are the 12-26-9 MACD charts.

There are 2 parts to the MACD. We will focus first on the first part, which is based on the stock's 12-Day and 26-Day EMA. The 12-Day EMA is the faster EMA while the 26-Day is slower.

The logic behind using a faster and slower EMA is that this can be used to gauge momentum. When the faster (in this case 12-Day) EMA is above the slower 26-Day EMA, the stock is in an uptrend, and vice versa. If the 12-Day EMA is increasing much faster than the 26-Day EMA, the uptrend is becoming stronger and more pronounced. Conversely, when the 12-Day EMA starts slowing down, and the 26-Day begins to near it, the stock movement's momentum is beginning to fade, indicating the end of the uptrend.

THE MACD LINE

The MACD charts use these 2 EMA by taking the difference between them and plotting a new line. Very often, this new line is depicted as a thick black line in the middle chart.

When the 12-Day and 26-Day EMA are at the same value, the MACD line is at zero. When the 12-Day EMA is higher than the 26-Day EMA, the MACD line will be in positive territory. The further the 12-Day EMA is from the 26-Day EMA, the further the MACD line is from its centerline or zero value.

THE 9-DAY EMA

This line on its own doesn't tell much more than a moving average. It becomes more useful when we take into account its 9-Day EMA. This is the third value when we talk of 12-26-9 MACD charts. Note that the 9-Day EMA is an EMA of the MACD line, not of the stock price. This EMA (the thin blue line alongside the MACD line) acts like a normal EMA and smoothes the MACD line.

The 9-Day EMA acts as a signal line or trigger line for the MACD. When the MACD line crosses above the 9-Day EMA from below, it indicates that the downtrend is over and a new uptrend is forming. Time to consider bullish strategies. Conversely, when the MACD line drops below its 9-Day EMA, a new downtrend is forming and its time to implement bearish strategies.

THE MACD HISTOGRAM

So far, we have covered the most simple form of interpreting the MACD charts. We now look at the MACD histogram. Just as the MACD line is the difference between the 12-Day and 26-Day EMA, the MACD histogram is basically the difference between the MACD line and its 9-Day EMA.

So when the MACD line crosses above its 9-Day EMA, the MACD histogram will cross above zero. In order words, a bullish signal is obtained when the MACD histogram crosses above zero, and a bearish signal is obtained when it crosses below zero.

POSITIVE AND NEGATIVE DIVERGENCE

The MACD histogram forms valleys and peaks. Sometimes, multiple peaks are formed, with each subsequent peak becoming lower and lower. These progressively lower peaks constitue what is known as a negative divergence. A negative divergence on the MACD histogram is an indication that the current uptrend might reverse in the near future. This could happen even though the actual stock price seems to be making higher peaks in the chart. Basically, the MACD histogram negative divergence is a warning that the stock might turn down soon.

Similarly, the positive divergence on the MACD histogram predicts the subsequent uptrend. However, sometimes these divergences can create false alarms. If we follow these signals, we could have bought into a downtrend.

As such, I would like to remind you that individual indicators such as the Moving Average Convergence Divergence (MACD) charts should not be used on their own, but rather with one or two additional indicators of different types, in order to confirm any signals and prevent false alarms.

By Steven

Short Selling for Investors

2008-06-30T00:13:00.005-07:00

Shorts. Let's see. If there are shorts there must be longs. Which is best? Longs or shorts?

If you are trading in the stock the stock market experts like longs better than shorts. If you are "long" that means you own stock and that is "good". If you are short you have sold stock and that is "bad". At least that is what Wall Street preaches. And why do they want to make you believe this and is it true? Let's examine the facts.

Today I hear stories on the financial news and there are articles in the paper that people who are "short" driving the market down. They have sold more stock than they own and this is causing the market to collapse. I even hear that Congress is trying to pass a law that will not allow people to sell short. They are blaming hedge funds who are allowed to sell short. The basic flaw in this concept is when a short sale is initiated it must be done on an up tick. That means the stock must be going up in order to make a "short" sale. No short sale may be made to pressure the market down. That is a fatal pin in the balloon of that lie.

There are reasons people will make the sale of a stock. If you own it you may just need the money now or if it is going down you may not want to lose money should the downward trend continue. There is on old saying in the market - "the trend is your friend". If you see a stock that is declining you may want to sell it first and when it declines further you will buy it back at a lower price later on. This actually puts a floor under that stock because some time in the futures you MUST buy it. Whoever is doing the shorting does not matter whether it is an individual or a hedge fund. They are actually doing two things that are both good for the market. They are providing a future buy to support the price at a lower level that keeps it from going lower and they are providing liquidity to the market.

When you buy long you want it to go up so you can sell it later at a profit. When you sell short you sell it now with the idea of buying it back after it declines. Both are driven by the profit motive. How can one be good and the other bad? It is like saying there is good electricity and bad electricity.

If company CEOs don't want people to short their stock I suggest they look in the mirror to find out who is at fault. The CEO is not running his company properly and that is why the stock is declining. No outside person or group can drive a stock lower that is making a good profit. There is a good reason for the price decline.

Buying short does not put the market down. The ultimate outcome of a short sale (covering the short) is very positive for the market.

High Volatility Investments

2008-06-30T00:13:00.003-07:00

Penny stocks and options are high volatility investments that attract both the trader and the long term investor because of the small amount of capital required to make substantial gains as compared with less volatile higher priced stocks. The long term investor buys a stock believing that a company's value will increase over time and the stock price along with it. When he buys an option it is usually to reduce the risk in owning the underlying stock. The short term trader looks at things a little differently. Typically a trader looks for large percentage price movement over a short period of time. Large percentage, short term price movements can be found both in options and certain penny stocks.

Penny Stocks are often defined as stocks priced below $5. It is often implied, but not necessarily the case, that penny stocks are also micro caps with capitalizations of less than about $250 million. Penny stocks can be found across the full range of capitalizations from micro caps to large cap stocks. For example, Sun Microsystems (NASDAQ: SUNW) met the definition of a penny stock for much of 2004, trading between $4 and $5. In late 2004, trading between $5 and $6 per share, its capitalization was over $18 billion. The price of a large cap $18 billion stock would rarely be expected to move by a large amount over a short period of time. The largest percentage daily price gainers, of say 50% or more are typically stocks that started from $5 or less. But they are typically micro caps.

As a group, micro cap penny stocks are avoided by large funds because prices are too easily affected by sizeable buy and sell orders and capitalizations are too small to affect a large fund's bottom line. Buying more than 10% of a publicly held company carries with it certain insider responsibilities. Large funds must wait until stock prices rise typically above about $20 before they can become seriously involved without moving the price and still have price movement impact their financial results. The small investor has a distinct advantage over large fund managers when he takes an early position in a good micro cap penny stock.

Short term options are best suited when the underlying stock has a higher price, say above $50. While it is more likely that a micro cap penny stock will gain 50% in a single day than it is for a higher priced stock, the typical 5 or 10 to one leverage that options provide makes it only necessary for a higher priced stock to move 5% to see a 50% gain in the corresponding option price. There are several additional considerations involved in choosing an option. Not the least of these is the market environment. When chosen properly, options for higher priced stocks provide the same large daily price movements of penny stocks. Lower priced stocks need to move by a larger percentage in order to see a similar percentage move in the corresponding option. They are only likely to do so if they are micro cap penny stocks.

By James Andrews

Trading For A Living - Part 2

2008-06-30T00:13:00.001-07:00

In part 1 of this article I started to look at the financial implications of giving up the day job to instead start trading full time for a living. There are more than just monetary considerations as we will see later, but for now, there are some more costs to ponder.

More Costs!

Let's move on to equipment. Presumably you already have a PC and internet connection by virtue of the fact you are reading this on the internet. But are these both up to the job of trading full time? Again the specifications for both hardware and ISP will depend largely on your trading style, but if you're relying on a 100Mhz Pentium II and a dial up service, you're setting yourself up for failure. So budget for quality equipment, budget to keep it up to spec, and budget for some repairs too - expect the unexpected.

Many traders make the mistake of saying "This will do me whilst I start out, and I'll get something better when I make some real money". This is quite simply false economy, you are unlikely to ever make real money with a substandard setup (and this applies equally to substandard software and data feeds). This is a cut-throat business and 95% fail, you must give yourself every advantage you can. You wouldn't enter the Indy 500 in a go-kart with the intention of buying a better car when you've won a few races, and the same thing applies here.

Earnings

When you've added this all together, you have a pretty good picture of how much money you need to generate from your trading in order to live. Does your past performance suggest you will be able to meet this target? It's tempting to say "When I go full time I'll make much more", but how do you know this is the case? Perhaps you can take a couple of weeks holiday and try it out - if you don't make enough in that two weeks then you're not ready. A few weeks really isn't enough time to know if you're going to succeed though. An ideal next step then is to cut your day job hours to part time and trade maybe two or three days a week. This way you know you have some money coming in, you get to trade for real, and if it all goes horribly wrong you are probably better placed to get back into full time employment than someone who quit the working world completely.

The option of part time work is a luxury many of us don't have however. So does it have to be all or nothing - trade or work? Why not keep the day job and trade outside your working hours as well. If you are trading and end of day strategy, then this is easily achieved by doing your research in the evening and placing the appropriate combinations of Stop and Limit orders with your broker. For day traders, certainly practising is easier if your intended market is not your home market, for example if you want to trade the US and you live in the UK where you can come home and paper trade in the evening.

There are other try before you buy options open to the day traders who want to practise trading their home market outside of normal hours though. eSignal allows you to download tick data for any symbol and play it back in real time or speeded up so you could trade the whole day in an hour. Other vendors have similar offerings, and if you have an IB account you can use AutoTrader to record tick data during the day for playback into a demo version of SierraCharts or QuoteTracker for free.

The bottom line here is that before you take the plunge, you need to have done everything in your power to prepare yourself for what lies ahead. It will still be harder than you ever thought, but it will be nigh on impossible with no preparation whatsoever.

Other Considerations

There are a few non-financial aspects to consider before going full time with your trading. If you have a family, how will the change impact them? Do you have the space to work uninterrupted during the day? It's important that the family don't assume that because you are at home you are automatically available to take the kids to school, or walk the dog. Make sure from the start that everybody knows the ground rules and that you can separate your working time from your free time effectively.

Consider also the social impact of leaving your full time employer. Again, if you have a partner or family are you going to drive each other nuts being in the same house all day? Relationships can be tested to the limit! Or if you live alone, are you going to drive yourself nuts being on your own all day? Trading full time can give you enormous amounts of free time, but if you have nothing to fill that time with you can quickly lose the plot - I've seen it happen and it's not pretty.

Is It Worth It?

Nobody can tell you if trading for a living is for you, it's something you have to find out for yourself. I've seen traders go through highs and lows to challenge those of any stock chart, but for most it has proved to be a good move. The long list of benefits are all there for the taking, as with any change of career or indeed any major life change, as long as you go into it with your eyes open, and above all prepare, then there is no reason why it cannot work for you.

About The Author

By Geoff Turnbull

Trading Systems

2008-06-30T00:12:00.017-07:00

A trading system consists of a set of rules for viewing markets and making trades. The advantages of trading systems can be hidden when they become associated with trading platforms involving trade order submission and processing. A clarification of their roles can help explain the benefits of using a trading system. This can be done without identifying a particular platform or system. Once the platform infrastructure is isolated, a brief look can be taken at why a trader can benefit from a trading system.

An online trading platform consists of the infrastructure for viewing market prices and making trades. While platforms make use of user provided hardware and the internet itself, platforms consist of software linked to a database while displaying price quotes, enabling order entry and routing orders to an exchange. A platform of software and order routing services is provided by many brokers. It often includes programmable charting software that allows a user to select from an array of formats for price, volume and technical indicators. Links to real time databases are used by day traders while free delayed quotes are quite adequate for position traders who analyze data after the markets close to minimize the emotional stress of changing prices. Platform software saves time and reduces errors by automating repetitive tasks.

Some platform tools have become quite sophisticated, allowing a user to add his personal rules for making trades. Rules tell the software which set of indicators and prices to monitor and the levels at which traded instruments are to be bought and sold. Automated systems trading software are preprogrammed with trading rules enabling them to make trades with minimal user input. These software modules, designed by third party vendors to operate under existing platforms, are based on algorithms that identify price trends and market turning points. Since their accuracy is limited by the presumed market volatility, an algorithm is needed to recognize when market volatility falls outside the envelope for which the software rules were designed. The quality of a set of rules can be estimated from historical back testing on past market prices stored in a database. It is often pointed out that back testing lacks the realism of real time emotional stress and that past performance is not an indicator of future performance. While the latter is valid in all cases, the nature of trading system rules reduces emotional stress to the degree that the rules are consistently followed.

In any case, it is the rules themselves that comprise the trading system. In their purest form, trading systems take the form of a compact set of rules written on paper.

The ability to consistently make error free decisions amid changing prices in an environment of fear and greed is unlikely without the discipline that rules provide. It does little good to have all the price monitoring, charting, order submission and routing infrastructure if one does not have a consistent set of rules for making trades. Most of us find this out the hard way, judging from the statistic that only about 12% of stock traders are successful. For futures traders the number is closer to 5%. It is not just a coincidence that the percentage of traders that rely on a proven trading system is near these same levels. The consistent use of a proven trading system can be most beneficial to traders with all levels of experience.

Seeing the difference between trading systems and platform infrastructure makes the characteristics of a good trading system more obvious. A good trading system explains when trading should not be attempted, thereby, avoiding forced trading under inopportune conditions. It should specify how to independently generate a strong watch list of candidate trades to eliminate the need to chase after the latest hot tip from an advisor. For obvious reasons, a trading system should be easy to use, totally objective, take little of a trader's time and make consistent profits. It should also avoid large draw downs and give clear trading signals.

A trading system is best learned from a master trader who remains actively engaged in teaching. The master can help the student tailor the system to his personality, financial means, risk tolerance and skill level. The next best approach is to simply read what has been written and adopt it to one's personal situation. But under no circumstances should one try to wing it without the support of a set of trading rules. The advantage of rule based trading systems lies in their objectivity and consistency. When followed consistently, emotional trading and its associated errors are removed from the equation. As an investment, trading systems more than pay for themselves, not only in profits gained, but also in the amount of capital preserved. This is true not only for advanced automated trading systems but also for a compact set of rules on paper.

By James Andrews

Selecting Rules for Investing and Trading

2008-06-30T00:12:00.015-07:00

There are three important differences between investing and trading. Overlooking them can lead to confusion. A beginning trader, for example, may use the terms interchangeably and misapply their rules with mixed and unrepeatable results. Investing and trading become more effective when their differences are clearly recognized. An investor's goal is to take long term ownership of an instrument with a high level of confidence that it will continually increase in value. A trader buys and sells to capitalize on short term relative changes in value with a somewhat lower level of confidence. Goals, time frame and levels of confidence can be used to outline two completely different sets of rules. This will not be an exhaustive discussion of those rules but is intended to highlight some important practical implications of their differences. Long term investing is discussed first followed by short term trading.

My mentor, Dr. Stephen Cooper, defines long term investing as buying and holding an instrument for 5 years or more. The reason for this seemingly narrow definition is that when one invests long term, the idea is to "buy and hold" or "buy and forget". In order to do this, it is necessary to take the emotions of greed and fear out of the equation. Mutual funds are favored because of they are professionally managed and they naturally diversify your investment over dozens or even hundreds of stocks. This does not mean just any mutual fund and it does not mean that one has to stay with the same mutual fund for the entire time. But it does imply that one stays within the investment class.

First, the fund in question should have at least a 5 or 10 year track record of proven annual gains. You should feel confident that the investment is reasonably safe. You are not continually watching the markets to take advantage of or to avoid short term ups and downs. You have a plan.

Second, performance of the instrument in question should be measured in terms of a well defined benchmark. One such benchmark is the S&P 500 Index that is an average of the performance of 500 of the largest and best performing stocks in the US markets. Looking back as far as the 1930's, over any 5 year period the S&P 500 Index has gained in price about 96% of the time. This is quite remarkable. If one widens the window to 10 years, he finds that over any 10 year period the Index has gained in price 100% of the time. The S&P500 Index has gained an average of 10.9% a year for the past 10 years. So the S&P500 Index is the benchmark.

If one just invests in the S&P500 index, he can expect to earn, on average, about 10.9% a year. There are many ways to enter this kind of investment. One way is to buy the trading symbol SPY, which is an Exchange Traded Fund that tracks the S&P500 and trades just like a stock. Or, one can buy a mutual fund that tracks the S&P500, such as the Vanguard S&P 500 Index Fund with a trading symbol VFINX. There are others, as well. Yahoo.com has a mutual fund screener that lists scores of mutual funds having annualized returns in excess of 20% over the past 5 years. However, one should try to find a screener that gives performance for the past 10 years or more, if possible. To put this into perspective, 90% of the 10,000 or so mutual funds that exist do not perform as well as the S&P500 each year.

The fact that 10.9% is average market performance for the past 10 years is all the more remarkable when one considers that the average bank deposit yield is less than 2%, 10 year Treasury yields are about 4.2% and 30 year Treasury yields are only 4.8%. Corporate bond yields approximate those of the S&P500. There is a reason for this disparity, though. Treasuries are considered the safest of all paper investments, being backed by the United States Government. FDIC regulated savings accounts are probably the next safest while stocks and corporate bonds are considered a bit more risky. Savings accounts are possibly the most liquid, followed by stocks and bonds.

To help you calibrate the safety and liquidity question, the long bond holders are comparing bond yields they now receive with next year's anticipated stock yields. Consider that next year's anticipated S&P500 yield is around 4.7% based on the reciprocal of its average price to earnings ratio (P/E) of 21.2. Yet the 10 year annualized return of the index has been 10.9%. Bond holders are prepared to accept half the historical yield of stocks for added safety and stability. In any given year, stocks may go either up or down. Bond yields are not expected to fluctuate widely from one year to the next, although they have been know to do so. It is as if bond holders want to be free to invest short term, as well as, long term. Many bond holders are thereby traders and not investors and accept a lower yield for this flexibility. But if one has decided once and for all that an investment is for the long term, high yield stock mutual funds or the S&P500 Index, itself, seem the best way to go. Using the simple compound interest formula, $10,000 invested in the S&P500 index at 10.9% a year becomes $132,827.70 after25 years. At 21%, the amount after 25 years is more than $1 million. If in addition to averaging 21%, one adds just $100 a month, the total amount after 25 years exceeds $1.8 million. Dr. C. rightly believes that 90% of one's capital should be allocated over a several such investments.

Now that you've allocated 90% of your funds to long term investing, that leaves you about 10% for trading. Short to intermediate term trading is an area that most of us are more familiar with, probably due to its popularity. Yet it is significantly more complex and only about 12% of traders are successful. The time frame for trading is less than 5 years and is more typically from a couple of minutes to a couple of years. The typical probability of being right on the direction of a trade approaches an average high of about 70% when an appropriate trading system is used to less than about 30% without a trading system.

Even at the low end of the spectrum, you can avoid getting wiped out by managing the size of your trades to less than about 4% of your trading portfolio and limiting each loss to no more than 25% of any given trade while letting your winners run until they decrease by no more than 25% from their peak. These percentages can be increased after there is evidence that the probability of choosing the correct direction of a trade has improved.

Intermediate term trading is based more on fundamental analysis which attempts to assign a value to a company's stock based on its history of earnings, assets, cash flow, sales and any number of objective measures in relation to its current stock price. It may also include projections of future earnings based on news of business agreements and changing market conditions. Some refer to this as value investing. In any case, the objective is to buy a company's stock at bargain prices and wait for the market to realize its value and bid up the price before selling. When the stock is fairly priced, the instrument is sold unless one sees continuing growth in the value of the stock, in which case he moves it over into the investment category.

Since trading depends on the changing perceived value of a stock, your trading time frame should be chosen based on how well you are able detach yourself from the emotions of greed and fear. The better one can remove emotions from trading, the shorter the time frame he can successfully trade. On the other hand, when you feel surges of emotion before, during or immediately after a trade, it's time to step back and consider choosing your trades more carefully and trading less frequently. One's ability to remove emotions from trading takes a great deal of practice.

This is not just a moral statement. An entire universe of what's called technical analysis is based on the aggregate emotional behavior of traders and forms the basis of short term trading. Technical analysis is a study of price and volume patterns of a stock over time. Pure technicians, as they are called, claim that all pertinent news and valuations are imbedded into a stock's technical behavior. A long list of technical indicators has evolved to describe the emotional behavior of the stock market. Most technical indicators are based on moving averages over a predefined time period. Indicator time periods should be adjusted to fit the trading time frame. The subject is far too large to do it justice in less than several volumes of print. The lower level of confidence involved in trading is the reason for the large number of indicators used.

While long term investors may use only a single long term moving average with confidence to track steadily increasing value, traders use multiple indicators to deal with shorter time frames of oscillating value and higher risk. To improve your results and make them more repeatable, consider your expectations of changing value, your time frame and your level of confidence in predicting the outcome. Then you will know which set of rules to apply.

By James Andrews

Maniac Investment

2008-06-30T00:12:00.013-07:00

Let's first understand what maniac means. According to Webster a maniac is "mad; raging with madness; raging with disordered intellect". You don't know anyone like that, do you?

There is a book that is still in print today that was originally published in 1841 with the title Extraordinary and Popular Delusions of Crowds by Charles Mackay. He explains in rather horrific detail how people were caught up in the madness of buying property in the South Seas in 1720, the numismatic coin craze of 1980 and the tulip bulb trading in 1637. You wonder how people could have been so gullible to have bought a single tulip bulb or land they would never see for huge amounts of money. Could anything like this ever happen again?

I was floor trader on the commodity exchange in 1973 when the Hunt brothers drove silver from $2.00 per ounce to $54. That mania lasted a few months and quickly tanked to $6.00. I took part in that mania. I was one of the maniacs.

When it was taking place it seemed like the thing to do and very few questioned the sanity of those participating. In fact, if you weren't part of the crowd there was something wrong with you. When there is a stampede it is best to run with the herd or be trampled to death. However, there were a few who were not mesmerized.

Today we are participating in one of those manias only now it is called a bubble and still is not being taken too seriously. Yes, it is the stock market mania. Many are still trapped in the madness of the crowd of the 1990's who believe the "market always comes back". They are clutching their tulip bulbs, sorry, stock certificates, and refuse to let go of them because they know their value will grow back to what it was 3 years ago. Stock owners have become mad with what - greed? fear? denial?

When something, almost anything, drops 50% in price it will take a 100% increase in value to get back to "even". With today's economic and world conditions that could be a long time and maybe not in our lifetime.

Years ago I heard a story about how they used to catch monkeys. A small hole just big enough for the monkey to slip his empty hand inside would be drilled in a coconut and candy and fruit would be put in it. The coconut was tied to a stake in the ground. When the monkey grabbed a fistful of goodies he would not let go even when the hunter came for him. Greed holds him in an invisible grip.

Many investors today are like those monkeys. They refuse to sell what is remaining of the stocks and mutual funds they own even though they can clearly see the major trend continues down. They became mad with greed and now fear of loss entraps them.

Until this madness is recognized investors will continue to see their portfolios become smaller and smaller. They must learn to let go.

Written 3/10/03 but still applies today.

INVESTMENT LETTER 3 month free trial. http://www.mutualfundmagic.com

By Albert W. Thomas

Copy Cat or How to Use a Successful Trading System

2008-06-30T00:12:00.011-07:00

How many books have you read about successful traders? How they did this or that and made a fortune and are still doing it. You say to yourself, "I'm going to follow his method and get rich".

So you subscribe to his newsletter (they all have one, $250) and buy his course on CD Rom ($495)and next time he is anywhere near you attend his seminar with a $500 discount for only $2495. You do understand you must do exactly as he does and you try your best to follow the directions, but for some reason you still are not making money. At least you are not losing as much as you did before (I hope).

Go look in the mirror. You are not Richard Russell, Richard Wyckoff, Bill O'Neil or any one of the great gurus of the market place. Each one of them has devoted every minute of his life to understanding the market. Each one is very successful and each one has a completely different way of approaching trading. Can you copy any one of them? It is very doubtful.

These great teachers can help you, but you have to develop your own method and style of investment. Whether it is long term or short term it must be something with which you resonate. When I was a floor trader there were a thousand guys trading and I know there were a thousand different guide lines. No one had the same buy or sell signal. If they all followed a pat program they would all be buying and selling at the same time so it could not work.

I have stood in the pit and watched the same person offer to buy and when there was no seller he would then offer to sell usually at the same price. Yes, he was scalping for one or 2 ticks, but he knew what he was doing even if it looked strange. A friend of mine could arbitrage by standing in the middle of the gold pit and hit buys and sells that were off by one or two ticks because they could not hear each other due to the noise of other traders who were shouting their offers.

You can look at the basic trading style of one of the "greats", but you must adapt it to your method. I have not seen anyone able to successfully copy a trading program exactly. You will improvise and find a slightly new approach that becomes "yours". It then becomes part of your cellular being. It works for you and probably won't work for anyone else.

If the programs the hype masters are selling work so well why aren't there more rich traders? And if the programs are so darn good why are they telling you?

To be a successful trader you can't copy cat an existing program, but you can take a basic trading vehicle and modify it your own plan. Turn that cat into your own tiger.

By Al Thomas

A Secret Revealed: Why Most (Day) Traders Fail

2008-06-30T00:12:00.009-07:00

The following perspective on (day) trading comes from my many years of experience of active day trading or being the moderator of one of the largest day trading chat rooms on the Internet.

One of the biggest problems I see with new traders (and even some old ones) has nothing to do with the software or the broker they are using. Nor is the problem a result of buying too high or selling to low; or not having enough money. The problem isn't any of those things.

It has to do with not having a trading plan. A good trading plan will go a long way towards solving the problems mentioned above.

Ted Williams was once asked how he hit the baseball so much better then everyone else. He said he had no idea and that he just went up to the plate and swung at the ball. There has only been one Ted Williams and as great as he was at hitting a baseball, I don't think he would have made a great day trader with that approach. Most great hitters have an idea what they are going to do every time they step up to the plate. Traders need to know exactly what they expect every time they enter a trade.

Everyone should start out with a basic trading plan and use it. As the old saying goes, "Plan your work and work your plan". However, you also have to be ready to be flexible. That has to be part of your planning. As Clint Eastwood said as his character in "Heartbreak Ridge", "You got to adjust, you got to learn to improvise. And if all else fails, you to learn to survive!" Traders that are not able to make adjustments, improvise and survive will experience their own Heartbreak Ridge.

Your trading plan can't be one where you simply figure you are just going to follow someone else. That may be one way to get a start and a bit of experience, and it can be a part of a much bigger overall plan. But it cannot start and end there. You have to learn to trade on your own so you don't accidentally follow someone off a cliff. You have to know who to follow and who not to follow.

When I was trading I made a lot of good trades knowing who to follow and who not to follow. Yet, in the long run, I do not believe you can make a living doing that. The biggest problem in following other traders is being too far behind the trade because you are "following" and not leading. I think each and every trader has to become the very best trader he can possibly be, on his own. He needs to get there as fast as he can. Following more experienced traders can be a means to this end and can help get you started, but it cannot be the end. This takes planning.

A basic trading plan will take in your long-term goals and objectives as a trader. You'll have to decide if you want to try to make a career out of trading, or just be a part time trader. Once you have decided this you can make other decisions such as how much money you would like to make at either full time or part time trading. Your money goals have to be realistic. They can't just be, "I want to make as much money as I can". These basic decisions will determine the time and money you will have to commit.

Your trading plan should be on going, constantly evolving and eventually contain things like how many days, weeks, and hours you will need to trade to meet your goals. If it is as detailed as I think it should be, you would know how many trades per day and how much profit per trade you will have to average. Of course, these things will have to be developed over time and added to your plan as you go and as you gain more knowledge.

There are many excellent books on learning to day trade. My favorites are found at http://www.TraderAide.com/books

No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and included. We do request that we be informed of where it is posted and reciprocal links will be considered. Email floyd@sbmag.org.

By Floyd Snyder

The Perfect Mutual Fund

2008-06-30T00:12:00.007-07:00

The Perfect Mutual Fund is the one you build yourself!

The perfect Mutual Fund you build should have the objective of owning no more than 12 to 15 companies; owning shares in 12 companies would allow the diversity needed to sleep well at night and would provide a cash dividend every week of the year.

The 12 companies (with staggered dividend payout dates) in your perfect Mutual Fund should not only provide a cash dividend every week of the year, the companies should also have a historical record of raising their dividends every year for at least the past 8 years (to eliminate risk).

The perfect Mutual Fund would have no fees attached, every cent put into the Fund would work toward your return on investment (ROI).

There would not be any commission fees, load fees, management fees or advertising fees, and there would be no illegal trading practices, hidden fees abuses or any type of hidden fee. The perfect Mutual Fund would benefit you and your family and no one else.

The perfect Mutual Fund would require a savings plan to add to your holdings every quarter, until retirement. This would allow your perfect Mutual Fund to dollar-cost average (buying the same stock at different prices through the years) into your holdings every quarter (your dividends from the companies would be doing this for you, automatically, commission free; your quarterly investments would also be commission free).

With this in mind, every dividend received from a company in the Fund would be higher than the previous dividend from that company (as long as the company, at least, maintains their dividend and in the perfect Mutual Fund every company has a history of raising their dividend every year).

In the perfect Mutual Fund, when prices of your stock holdings in the Fund decline, the cash dividend income from the Fund simply accelerates. The reason for this is simple - the lower the stock prices the higher the dividend yields. A company, for example, may pay a dividend of 50 cents a share. Whether that company's share price is 70 dollars a share or 40 dollars a share, the company pays 50 cents a share. At a lower stock price your reinvested dividend and quarterly investment purchases more shares.

In the perfect Mutual Fund your money is not spread too thin. For example, putting $5,000.00 into, lets say, the S&P 500 Index Fund, you would end up owning around $10.00 worth of 500 different companies. Other than the obvious fact that your money is being spread too thin, any dividends from the companies in the Fund could possibly be eaten up by management and other Mutual Fund fees.

The perfect Mutual Fund is real and you can build one for yourself!

For more excerpts from the book 'The Stockopoly Plan - Investing for Retirement' visit http://www.thestockopolyplan.com

By Charles M. O'Melia

Building The Foundation For Wealth

2008-06-30T00:12:00.005-07:00

You wouldn't build your home on anything less than a solid foundation. Similarly, you can't build wealth and financial independence without first having sound foundational principles to build upon.

I have found that many people are working on wealth building strategies such as maximizing their 401K returns, aggressive stock trading, and real estate investing without such a foundation.

Most of my clients are coming from a "one step forward, two steps back" cycle of wealth building that gets them nowhere in the long run.

There are steps you can take to make sure that you are maximizing and protecting your gains at the same time. Without these steps, you are destined to experience the gain-loss cycle which, in the end, is like spinning your wheels in the mud.

Discover how your employment circumstances affect your wealth building strategy and have more of the things you want by identifying your biggest expense and managing it without having to make more money.

Most people take gains in their cash flow to mean they can spend more on things they don't need. It is human to want to surround yourself with the things you want to match how you feel about your new income from investments or a raise at work.

But what happens here is that you lose future earning power and you rip out pieces of your wealth building foundation because you are not putting new income to work by investing in your debt.

People talk a lot about returns on investments. Think of the return on a 13% credit debt that you pay off in 5 months aggressive debt investment. It's NOT just 13% you are saving by investing in your debt!

Once that debt is paid off you can turn the payments you were making toward a larger debt, sometimes doubling the rate at which you are able to pay off that bigger debt. Combined, the return on your investment here is massive compared to regular stock investing!

Wealth building, in the beginning, is actually started with debt reduction and strict management. A change in attitude about your debt, from "liability" to investment, is the first step in true wealth building.

Today you should sit down and find the monthly expenses that truly don't mean as much to you as building wealth does. See how you can eliminate some of your spending to invest in your debt in order to maximize your cash flow faster, giving yourself a raise!

Take most of what you now have available per month and turn it toward the next debt - raising the regular monthly payment by as much as you can while rewarding yourself with a little thing to note your accomplishment.

Before you take on another investment, think about the wealth you can build with the money that currently goes to debt. Once you have mastered your debt, all that money can go toward investments, savings, and living expenses that far outstretch what you are able to experience now.

The only aggressive investment strategy that has absolutely zero risk is debt investment. You cannot lose and the gains are always tremendous compared to any other form of investing.

Live your retirement years free of financial stress, relaxed and enjoying life due to automatic income streams you create through the powerful investments you can afford AFTER investing in your debt.

By C.C. Collins

How to Calculate the Value of Your U.S. Savings Bonds

2008-06-30T00:12:00.003-07:00

If you're like many Americans over the age of 55, you've probably had money taken out of your paychecks for years and years in order to purchase U. S. savings bonds. Those bonds are probably sitting in a safe deposit box at your local bank or in a drawer safely tucked away at home. But, while you might know where those bonds are right now, do you have any idea how much they are actually worth?

It seems to be a fact of life that World War II-era Americans purchased U. S. savings bonds for any number of reasons. First, it was the patriotic thing to do. America needed the money to support the war effort and Americans were more than willing to lend their support. Second, it was an excellent way to save for retirement, or for a child's education, or for any other reason. Third, the interest paid on U. S. savings bonds was competitive and the income taxes were deferred until the bonds were actually cashed in.

For some reason, though, many of the U. S. savings bonds that were sold never did get cashed in until after the owner's death. Then, a family member would discover them and wonder how much they were actually worth.

Of course, if you're in that situation today, you could take the bonds to your local bank and have them figure it out. But, there is another way to get the information. The Bureau of the Public Debt, Department of the Treasury, has a web site that provides all that information, including a calculator with instructions so that you can figure out how much your bonds are worth today - and you can do it all by yourself.

So, if you have any questions about your savings bonds, go to http://www.publicdebt.treas.gov/. And don't forget to bookmark the site for future reference.

By Attorney Michael Pancheri

Preholiday Trading

2008-06-30T00:12:00.001-07:00

The Light Crude Continuous Contract closed at $66.13 a barrel Friday, after hitting an all-time high at $67.95 a barrel earlier in the day. A week from Monday is Labor Day, which marks the end of the summer driving season. Consequently, I believe, oil hit a short-term top Friday or will top next week.

Recent economic data show persistently high oil prices, along with higher interest rates, are slowing U.S. economic growth. Durable Goods Orders fell about 5% last month, and Walmart announced sales will be lower than expected. However, business inventories are lean. A slower economy will lower demand for oil.

The SPX daily chart below shows an orderly pullback in August. Currently, SPX is oversold enough to bounce into the Labor Day holiday. Major support is around 1,200, i.e. the 200 day MA, and Price-by-Volume bar. There are several major resistance levels working together to create strong resistance, i.e. the 10, 20, and 50 day MAs, the Parabolic SAR sell signal (red dots), and the Price-by-Volume bar, all between 1,220 and 1,225.

There's typically a bullish bias the week before a holiday, and over the first few days of a new month. However, the market has been selling into weekends (and into rallies last week), which is bear market behavior, it's a seasonally weak period, and SPX has open gaps at 1,174, 1,143, and 1,138. Oil prices and economic data will continue to move the market.

There are many important economic reports next week, which should generate a great deal of volatility, in the seasonally low volume market: Mon: None, Tue: Factory Orders, Consumer Confidence, and FOMC Minutes, Wed: Revised Q2 GDP & GDP Chain Price Deflator, and Chicago PMI. Thu: Personal Income, Personal Spending, Unemployment Claims, Construction Spending, ISM Index, and Auto Sales. Fri: Non-Farm Payrolls, Unemployment Rate, and Hourly Earnings.

The Dow Industrials were hit hard by high oil prices recently, and closed below 10,400 Friday, while Nasdaq held up relatively well. If oil prices top next week, DIA calls (and puts on some oil stocks) may be buys on pullbacks. Also, there are several Dow components that were hit particularly hard recently.

Charts available at PeakTrader.com Forum Index Market Overview section.

By Arthur Albert Eckart

Oil and Gasoline Price Uncertainties

2008-06-30T00:11:00.005-07:00

The Light Crude Continuous Contract hit an all-time high at $70.85 a barrel, while Unleaded Gasoline Futures spiked 50% or $1 a gallon on Tuesday. However, oil closed the week at $67.57 a barrel, while gasoline finished the week up 15%. There's still uncertainty over the extent of oil and gasoline disruptions in the Gulf, over the next few weeks or months, caused by hurricane Katrina. However, there are many forces keeping a lid on oil and gasoline prices.

The summer driving season ends after Labor Day. President Bush urged Americans to conserve gasoline. Many Americans canceled driving plans for the Labor Day weekend, because of price spikes in retail gasoline. There were thousands of complaints about price gouging at gas stations last week. European governments are shipping oil and refined products to the U.S. The U.S. government opened the Strategic Petroleum Reserve, to oil firms, and suspended restrictions on regional gasoline standards. The strong U.S. economic expansion has been slowing, and may continue to slow in coming months.

Oil and gasoline may have hit short-term tops on Tuesday, while it seems oil stocks had "blow-off" tops (opposite of capitulations) Wednesday and Thursday. Consequently, oil stocks may be in a volatile range over the next few weeks, along with the stock market in general.

The first chart below is an OIH weekly chart. Last week, OIH, an oil ETF (i.e. basket of oil stocks) traded between 112 and 122. I suspect, the volatile trading range will continue, while oil stays in the $60s. OIH has major resistance in the low 120s and major support in the low 110s. So, there may be excellent opportunities to trade OIH options (or options on other oil stocks) next week.

The second chart is an SPX daily chart. There's significant short-term support around 1,200 (i.e. psychological support, 200 day MA, and Parabolic SAR buy signal). Last week, 1,225 was resistance. If SPX holds 1,225, it may trade up to 1,245 (recent high), and 1,253 (multi-year Fibonacci level). However, SPX has open gaps at 1,174, 1,143, and 1,138.

September options expire in two weeks. Some current September Max Pain expirations are: SPX 1,220 with the value of calls 150% more than the value of puts (which is bearish, because the put/call is a contrarian indicator). SPX closed at 1,218. OEX 565 with the value of puts 130% greater than the value of calls (which is bullish). OEX closed at just over 563. QQQQ 39 with the value of puts 15% more than the value of calls. QQQQ closed at 38 3/4. Volatility normally picks-up two weeks before options expiration.

Economic reports next week are: Mon: None (market closed for Labor Day), Tue: Revised Productivity, and Fed's Beige Book, Wed: Unemployment Claims, and Wholesale Inventories, and Fri: Export & Import Prices. Also, in September, the FOMC meeting, earnings warnings, and end-of-the-quarter window dressing should influence the market.

The uncertainty of oil and gasoline prices, and economic data, caused by hurricane Katrina should contribute to volatility over the next two weeks. The stock market may continue to consolidate, short-term, until earnings warning season in late September, and third quarter earnings in October.

Charts available at PeakTrader.com Forum Index Market Overview section.

By Arthur Albert Eckart

The Benefits of Laddering Your CD Investments

2008-06-30T00:11:00.003-07:00

If you've decided to stock some money away in a certificate of deposit, why not reap the highest benefit over time by laddering your CD investments? What's a CD latter? I'm glad you asked.

A CD ladder is made up by purchasing several CD's at one time with different maturity dates. One example of a CD ladder is to have maturity dates of one year, two year, three year, four year, and a five year CD. These five investments make up the rungs of your CD ladder with one certificate maturing every year for the next five years.

For example, let's say you had $10,000.00 to invest. You would buy 5 CD's for $2,000 each with each one invested for one year more than the first. So you'd have a $2,000 CD maturing in one year, another in two years, and so on up to the last one which matures in five years. Every year for the next five years one of your CD matures and earns you interest on your $2000 principal.

When your certificate of deposit matures, you roll it over into another CD. The best strategy is to purchase a new CD at the longest term, which in our example above would be five years. This strategy allows you to take advantage of the higher rates normally associated with longer-term CDs while maintaining more frequent access to part of your funds.

Another advantage to laddering your CD's is that over time it evens out the high and low interest rate cycles. Some years interest rates will be high, other years the rates will be lower. Currently banks are paying some of the highest CD rates we've seen in the last decade.

Before deciding on laddering your CD's, make sure you can afford to do without that money for a period of time. You'll pay a penalty for withdrawing your funds before your CD reaches maturity.

Also, don't get stuck on the idea that you have to invest in a 5-year ladder. You may be more comfortable with a three year ladder based on your financial needs. Or you may want to try a ladder with a 3 month, a 6 month, a 12 month, and a 24 month maturity.

The benefits of laddering your CD investment is that you lower your risk of losing money when rates are low, increase your returns when rates are high, and still have access to a portion of your money should you need it for an emergency.

By James H. Dimmitt

The Economys Greatest Depression Downturn Ever Is Now Just A Few Years Away

2008-06-30T00:11:00.001-07:00

What really controls the economy? Forget interest rates, forget deficits, forget the Fed, forget IRAQ, forget which party is in office. In fact, forget just about everything that permeates the news. The greatest force that has controlled the long-term trend of the economy for at least the last century doesn't give a fig about any of these side-shows. And just what is this "greatest force" now telling us in 2005? The same thing that it has been telling us for at least the last twenty years - that the onset of a catastrophic depression, unprecedented in history, has been marching silently and steadily towards us, and that it is now just a few years away.

It has long been suggested (and feared) that the 77 million or so US Baby Boomers will tank the economy big-time as they begin to pull their savings out of Wall Street when they start retiring around 2011. Well, first of all there are not 77 million. There are really over 100 million American Baby Boomers because the birth upswing actually began in the late thirties not the, "traditionally" chosen, erroneous, post war year of 1946. This means that whatever problems they might created just got 30% worse, and true earliest Baby Boomer retirement began around 2001. Secondly, the hard evidence of nearly a century shows that people retiring has never been a force in the overall trend of the economy. Let's get back to basics to see why.

It is a well established economic fact that around 60-70% of the GDP (gross domestic product) is simply consumers spending just about all of their hard-earned income. What many people don't know, or at least don't think about, is that it's more than 90% when national and local government expenditures, first taken in from consumers' incomes as taxes of all kinds, are included. The bottom line is that the consumer is always the greatest force in the economy - and it is overwhelming! It's just a simple, hard economic fact. It is therefore only common-sense that the long-term trend of the economy must be controlled somehow by this absolutely massive consumer spending component. In the short-term (1 to 3 years) many factors, such as war, terrorism, oil and corporate scandal can seriously affect the economy, but they are always side-shows to the much bigger "hidden" picture.

To figure out what is happening in this hidden picture we must look at who we the consumers are with regard to our ability to spend. Obviously, a thousand middle-aged men or women earning and spending $40,000 a year are going to have a vastly different effect on the economy (GDP) than a thousand 15 year-old teenagers spending an allowance of $1000 a year. According to data published by the US Bureau of Labor Statistics the group with the biggest spending by far is the 45-54 year-olds. This makes total sense of course. They are at their peak earnings with huge matching expenditures to support teenage and college kids, their biggest mortgage, their best cars etc. If five year groupings (45-49 in 1920, progressing for logical reasons to 50-54 by 2000) within the 45 to 54 year-olds in the US population is plotted against the Dow Jones Industrial Average (the economy), adjusted for inflation using the CPI (Consumer Price Index) issued by the US government, a breathtaking, near glove-fit correlation covering the best part of a century is revealed. (See the chart within the referenced website). This isn't conjecture. It's a hard economic fact.

The greatest force in the economy can be indisputably demonstrated to be consumer demographics, and within that the 45 to 54 year-olds demographic is just as clearly all-powerful. Things like interest rates, deficits, who is elected, and inflation are followers or consequences of the economy, not the makers of it. The Fed raises or lowers rates because the economy tells it to. Stock market crashes don't cause recessions or depressions. It is the other way around. The DJIA is simply following the 45 to 54 year-olds demographic down to reflecting the new lower value of stocks as the economy declines. For easy to understand, fundamental reasons the economy has followed the big-spending 45-54 year-olds demographic for nearly a century. History shows that the economy always declines when the number of big-spending 45 to 54 year-olds in the population declines, a full 11 to 20 years before they retire. This happened rapidly in the early 1930s, slowly thank goodness in the 1970s, and will happen again from 2013 to 2025, rapidly, relentlessly and catastrophically. This must not be confused with Baby Boomers retiring. They retire 11-20 years after their peak spending years end. While their retirement independently creates major unprecedented problems with social security and Medicare, the inevitable depression they cause by stopping their big-spending, happens first. If you accept their inevitable, later demographic impact on social security and Medicare, you must, for the same underlying reasons, accept their earlier bigger impact on the economy, even though tragically virtually no one is talking about it - yet.

Picture this: The great American economy is an ocean whose total depth is made up overwhelmingly of the combined spending of all the various age groups. The heaving waves on the surface of this deep ocean are always the big-spending of the 45 to 54 year-olds group. These waves produce the peaks and troughs of the economy - the long-term booms and busts. They can and have both raised and sunk ships. We will soon have to man the lifeboats as the greatest demographic wave in history crashes down with a thunderous roar! Like the great Titanic, there will not be enough time or enough lifeboats onboard, and only very limited rescue available. The USA has just a few more years left of solid economic growth with an accompanying rise in the DJIA. After that, starting no later than 2012-13, and perhaps as early as 2009-10, an economic decline of terrible proportions begins and lasts until about 2025. Unlike their parents, Baby Boomers everywhere are truly not going to have a pleasant retirement. Starting in 2003-2004, the economy resumed its march upwards right in line with the 45-54 demographic, accompanied by the matching rise in the DJIA. The next several years up until 2012 latest represent the last chance for a very long time to make any money by traditionally investing in stocks. From 2013 to 2025 the big-spending 45 to 54 year-olds that control the trend of the economy will only be there in relentlessly declining numbers. Just how big is this catastrophic depression going to be financially? In the US stock market crash from 1929 to 1932, the value of stocks dropped approximately $90 billion. When expressed in year 2000 dollars and adjusted to match the size of the population now versus then (284M vs 123M), this is a drop of about 2.6 TRILLION dollars. It directly affected the less than five percent of the US population who owned stocks at the time. The population at large was affected by job loss and the ensuing poverty. When the 2013 to 2025 decline of the DJIA is converted with simple arithmetic to the loss in the value of all stocks in the same year 2000 dollars, it is a staggering 18 TRILLION dollars. This is seven times as bad as 1929 to 1932. This is all awful enough, but there is a terrible difference this time. This time the loss directly affects the more than fifty percent of the US that now own stocks either directly, or indirectly in mutual funds, pension plans, IRA or 401K type plans. It will be a financial holocaust. This however will be just the beginning.

In the depths of the depression of the 1930s US unemployment reached 25%. With a depression that is financially about seven times as deep as the 1930s, what will unemployment reach this time? As in the 1930s, home values will also plummet destroying much of homeowners' equity, or all of it for those who buy homes in the years leading up to 2012-13. It is rightly said that when America sneezes the world catches a cold. If in a few short years America contracts pneumonia, what on earth will the world contract? Will what is happening in China change things? In a word, no! Our economy is driven overwhelmingly by consumer spending, no matter what we spend it on, including gasoline. Boomers will continue to unavoidably spend until their big-spending age limit is reached. When that happens the depression begins, regardless of China. China will however feel the impact in terms of the plummet in our imports that will then take place.

This catastrophic depression will happen. Our immutable demographics make it absolutely inevitable. It's nobody's fault. It cannot be fixed or wished away. The federal and state governments cannot prevent it anymore than they could prevent 2000-03. It's just as unstoppable as a tidal wave. We have to accept the reality that it is coming, and plan for it as best we can. Imagine it is 1925 and you know with certainty that the crash of 1929-32 and the depression of the 1930s are coming. What will you do? The precious few years that are left before this coming 2013-2025 depression, that will dwarf the 1930s, must be used to their fullest starting immediately. It still won't be enough time for many, but at least forewarned is forearmed. © Copyright 2005 Daniel Arnold

By Daniel Arnold

How to Use Annual Report

2008-06-30T00:10:00.013-07:00

There are many steps in calculating the fair value of a company. However, before we even do that, it is imperative to know how a company earns its profit. Does it do that by selling to consumers? licensing its technology to other companies? or extracting natural resources from the ground?

The sensible way to do it is by reading the company's annual report. What is an annual report? Annual report is yearly publication by public companies to better inform investor about the company's line of business. Annual report gives investors a glance of the company's line of business, financial health as well as management's strategies for doing business.

Let's look at CNET Networks Inc. The company trades in the NASDAQ market with symbol: CNET. What does CNET do? I know CNET owns cnet.com. But do you know that it also owns download.com, MP3.com, ZDnet.com and News.com ? How do I know that? Yep, you guess it. CNET's Annual Report will gives you all that.

From CNET's annual report, we can do a little digging for CNET's internet traffic. As of August 27th 2005, these websites of CNET attracts 3 % of all internet traffic. Pretty impressive, considering that Google holds 23% of all internet traffic. On April 2005, Google had 78.6 million unique visitors. By comparing this metric, we might have an idea CNET's revenue potential for the month of August. I will not go into that but this shows how useful reading CNET's annual report is. Reading an annual report serves as the first step towards investing in a particular company.

How do we obtain annual report? There are several sources for this. First is the companies own website. You are interested in knowing more about CNET Networks? You can get the annual report by going to http://www.cnet.com and go to its shareholder relation. After several clicks, you can then download the annual report.

Or ... you can go to some websites that offer complete annual report for a number of different companies in alphabetical order. Our website is one of them. Admittedly, while having hundreds of annual reports in one place is convenient, it is not as thorough as what the company's own website has to say.

By Hari Wibowo

Investment Rowing

2008-06-30T00:10:00.011-07:00

You have rowed a boat at some time haven't you? Yes, put the oars in the water and pull. Of course, you don't know where you are going because you are sitting backwards. Every so often you have to turn to look ahead to see if you are pulling in the right direction.

Reminds you of the stock market doesn't it? You have your money invested and you are pulling hard (working) trying to get to that rainbow where the pot of gold is supposed to be, but you are sitting backwards and you can't see where you are going.

The stock market is more like one of those Olympic shells with a bunch of people rowing together to the finish line. Unfortunately, in the stock market each person is putting his oar in the water at a different moment and some are even pushing on their oar. What a mess. How is anyone ever going to win if they don't all pull at the same time? Let me give you a clue. They won't.

And why won't they?

You, the little guy in the row boat, doesn't have a coach or the coach you might have doesn't know what he is doing. Those coaches have been taught how to row by the big guns on Wall Street and the big guys don't care about you.

In order to become a stock broker the person must pass a very tough test. That test has nothing to do with helping investor make money. It is all about rules to keep them from lying to you and cheating on your account. That's good and it works, but they are not taught how to trade or protect your money.

When the broker or financial planner does pass that test he is given two manuals. The first one is a copy of all those rules and regulations. The second is how to open account in other words get you to send him your money.

There is no third manual on how to protect a customers' money. You can't expect to row your boat in the right direction if your coach doesn't know what he is doing. When your boat starts to leak (the market starts down) your coach has no idea how to patch those leaks and you slowly sink. Does this sound familiar?

You have to learn how to row your boat in the right direction by steering through the maze of Wall Street lies. The first rule is not to let your boat sink. When you see a leak you must patch it immediately. In the stock market that is called selling a losing position. Stop the leak so your boat won't sink.

Wall Street coaches are not taught this simple technique and the brokerage house always wants you to have a position. When you sell you have cash and learn this - CASH is a position. Many times it is better to be out of the market than sinking with it.

That way you will still have a boat to row.

By Al Thomas

Sell Discipline for Investors: Importance and Execution

2008-06-30T00:10:00.009-07:00

Investors usually don't have an aversion to buying an asset. The real gut wrenching decision is when - and if - to sell. What most don't realize (or don't want to realize) is the overwhelming importance of the sell decision. Let's explore the reasons why and the techniques that can calm a seller's nerves.

Finding reasons not to sell an asset is as easy as finding a reason to avoid a root canal. Have you ever heard (or told yourself), "I can't sell now, it's too low!" or, "The analyst at XYZ brokerage says the price is going through the roof!" or, "I don't want to pay the capital gains tax!"

Let's look at each of these "justifications" in the context of their impact on an investment portfolio and techniques to avoid having to come up with them:

"I can't sell now, it's too low!"

If an asset's price has fallen dramatically, there is usually a fundamental problem. Often, that fundamental problem then becomes a technical problem. In other words, as market participants see dramatic declines in price charts, panic sets in and the "heard" starts to chase the price down even more (reference the NASDAQ Index from February of 2000 to September of 2002). Once an asset has been trampled, it is extremely difficult and time consuming to resuscitate.

Sell technique: First of all, don't let prices fall "too low". Set a predetermined point to sell if the asset price drops and stick to it. Execute a stop loss order so discipline is not an issue. Note - selecting a selling point doesn't have to be complicated process. Either determine where your "pain threshold" is in terms of market value or percentage losses and mark that point. Or look at a historical price chart and look for "floors", which are price points where the price seems to repeatedly bounce back up. If the price falls below that point, it's often a point of no return.

If you continue to "like" the security even though the price has declined, determine a price to repurchase the asset AFTER a positive price trend has developed. Finding the absolute price bottom is like trying to catch a falling knife. Use a "buy stop" order to make sure you purchase the security at your predetermined point.

"The analyst at XYZ brokerage says the price is going through the roof!"

We have observed numerous cases in which Wall Street analysts have been penalized for lining their pockets, or those of their firm, by producing biased research articles designed to impact prices in their favor. Analyst hype can only take a security to a point, after which it must stand on its own merits. Investors beware!

Avoidance technique: Let's assume that analyst Rich Buyhype is right and the asset advances upward. First of all, let's follow the previous technique and execute a stop loss order. Then, if the asset appreciates in price, periodically move the stop loss price up proportionately with the price increase. This is known as a "trailing stop". Most brokerages will allow their investors to change their stop losses easily without a charge.

"I don't want to pay the capital gains tax!"

An overwhelming amount of stock investors would have loved to have paid capital gains taxes in 1999. Most would have paid considerably less than they ended up losing in market value over the next 2 years. Keep in mind the capital gains tax applies only to the amount of the gain, not the value of the asset. A 15% capital gains tax payment is less than a 15% loss in market value, unless the asset has no cost basis.

Avoidance technique: Unfortunately we can't avoid paying taxes on realized gains. But we can sell assets and avoid losses greater than the tax paid. Don't let the tax tail wag the investment dog. If an asset hits your stop point, sell it and don't look back, whether it's at a gain or a loss. After all, unless the tax law changes, you'll have to pay gains on the sale at some point.

Summary

Selling a security to lock in your profits can be a very useful strategy, but it is sometimes difficult to execute. If you don't have the discipline to sell at a predetermined point (most investors don't), set a stop loss order so the trade will happen automatically. Use the trailing stop loss technique if your asset is appreciating to lock in your gains. These strategies work especially well in situations where capital gains taxes aren't an issue. However, keep in mind the many of the wealthiest investors pay substantial taxes because they identify the right points to lock in profits and avoid large losses.

Please visit our website at www.limestone-capital.com to learn more about sell discipline and active investing.

By Rob Hounshell

Can Your Annuity Do This?

2008-06-30T00:10:00.007-07:00

Okay, so I can tell you I have sat in front of countless numbers of people who have made mistakes when purchasing and owning annuities. And I have visited people who wish they never got involved in an annuity. And I have seen people who say that their annuity is their worst nightmare...So what is it that makes the annuity such a bad thing for some people and such a great vehicle for others??? Well I am about to tell you...and it all goes back to the annuity owners biggest MISTAKE. Yes, not mistakes but mistake.
Let me explain to you. Most annuity and insurance agents out there have what is called their "best product." IT is the product that can supposedly solve every investment need for any investor. And they make it sound so good that when someone is shopping for annuities, they ask the salesperson, "what is the best annuity?" and this is the biggest mistake. For all you know, the best annuity to the salesperson may be the one that pays the best commission to him. This question gets more people in trouble than any other question in the investment world..."What is the best ____________ (annuity, stock, mutual fund, etc)? Like I say all the time, there is no best investment because everyone's needs are different. Each investment has it's own benefits which have to be matched to an investor's needs.
So in essence, the biggest mistake is searching for the "best" investmtent. So how do you avoid the annuity owner's biggest mistake? By asking a better question? The best question is "What is the best investment FOR ME?" That question is totally different. You see, to further elaborate, the biggest mistake involves not doing your homework. When you don't do your homework and you look for the "best" investment, you will probably end up with something that you don't want. By doing your homework, you can figure out what you DO want and what you DON'T want. And when a salesperson presents something to you, you can quickly see if it fits your needs or not. If it does not, then the salesperson probably didn't do his job.
One tool to assist you in this search is the book, "Annuities: The Shocking Truths Revealed ." Yes, you guessed it; it is not free. But it is valuable. It not only tells you what annuities can and cannot do, it gives you the right questions to ask your agent. It helps you avoid all of the annuity owner mistakes that are made. This is because it tells you everything the agnets, banks, and insurance companies don't. And it revolves around the premise of doing your homework so an annuity doesn't become your worst nightmare.
The bottom line is, always ask, "what is the best annuity for me?" And if the salesperson starts shooting out answers without asking you about your situation, then run...run and find another person. And before they ask you about your situation, it's a good idea to know your own situation. The more you can help a GOOD salesperson, the more they can help you. And remember, there is no "best investment." There is only a best investment for each person relative to their situation and their needs. And please remember...
Ignorance is not bliss...
By Tony Bahu

Introduction To FOREX

2008-06-30T00:10:00.005-07:00

The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day, and American stock markets exchange about $100 billion a day.

The Foreign Exchange Market was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX expanded from trading levels of $70 billion a day to the current level of $1.5 trillion.

Who Trades in FOREX?

The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency. There is no centralized location of FOREX; major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. All trading is done by telephone or Internet. Businesses use the market to buy and sell their products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.

Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements.

With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

Advantages to Trading in FOREX

Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day ensures there is always a buyer or a seller for any currency.

Accessibility - The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.

Open Market - Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time--there can be no 'insider trading' in FOREX.

No Commission - Brokers earn money by setting a 'spread'--the difference between what a currency can be bought at and what it can be sold at.

How does it work?

Currencies are always traded in pairs: the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor, and a number of software tools exist to minimize loss.

By Ron King

Trading Expert Discovers Ways To Beat Stock Market Odds With Money Management

2008-06-30T00:10:00.003-07:00

The first point to mastering money management is that you have to understand when you're trading on the stock market is that you are playing the odds - but unlike many forms of gambling, you can make money. The key to making this money is to respect the risk that is part of the market, and manage it. Money management is a set of rules and guidelines that enables you to turn a profit. By being triumphant with your money management skills, you can keep your risk at a level at which you're comfortable with, keep from making poor trading decisions, and ensure you don't loose your trading capital. This is why it is so important to follow money management rules.

Why do these money management rules work? You know, it's funny. I once thought I had a fool-proof way of making money on roulette. You see, I'd bet on red and black. I'd sit at the table. After the ball had landed on black or red five times in a row, I would start betting on the opposite color.

Let's say I had five reds in a row. I would then start to bet on black. If I was wrong, I would go ahead and double down, so that if I started my bet at one dollar, the next time I would be able to bet two dollars, then four dollars, then eight, then 16. With this system, eventually I'd win and I'd come out one dollar ahead.

So, here I am at 23 and I've set up my computer program to test my theory. I made a ridiculous amount of money in the program. I really thought I had the Holy Grail here. But, if it's so easy for an 23 year old to figure it out, why aren't all the casinos out of business and why aren't we're all millionaires? Unfortunately, roulette doesn't work this way.

You see, if we're flipping a coin, heads has a 50 percent chance of turning up on each flip of the coin and so does tails. But, each flip is independent of the last. The last coin toss has nothing to do with the one before it, each flip is a random event. This means it's possible to get a hundred heads in a row if you do it long enough, and believe it or not, that's what happened to me. When I first played roulette in a casino, I saw a string of 23 blacks in a row. I went home defeated.

Trading is the same. A percentage of your trades will not work out. A certain percentage will not go in your favoured direction, and the next trade has nothing to do with the last one. Even if you have the world's most accurate method, over time you will go broke if you don't practice good money management.

Money management rules include defining your trading float, setting your maximum loss, calculating your stop loss, and most importantly learning how to choose your position size. Once these rules are in place, it's important to stay with them. They will keep you from making snap decisions, and playing the odds longer than you should. This is why money management rules are a critical part of any effective trading system.

By David Jenyns

Raising Capital Using a Public Company

2008-06-30T00:10:00.001-07:00

Going public in this manner is ideal for companies that may not be large enough to attract an underwriter for an IPO and those that don't need to raise capital immediately. They want to go public because of the many benefits that being a public company offers such as increased valuation, using public stock as currency to acquire other companies and assets, liquidity, prestige and to reduce the need for expensive venture capital and other financing sources. It also makes it easier to raise capital since once you become public it gives you credibility and a benchmark trading price to raise capital against.

Public companies are typically valued higher than their private counterparts. So, what many sophisticated CEO's and CFO's do is go public without simultaneously raising capital and thus receive a higher valuation and benchmark stock trading price. Then, as a public company, they do a private placement at a deep discount to the market with the provision that the investors hold the stock for 1 year. That is why investors get the discount from the open market trading price.

As an example, a company goes public without initially raising capital and begins trading on the open market at US $10.00 per share. An individual can go on the internet or walk into any stock brokerage firm and buy stock at $10.00 per share. Public companies in this situation often sell stock in a private placement at a very substantial discount to the open market price (in this example, perhaps $5.00 per share). The investors agree to hold the stock for a period of time. (The issuers can sell the stock themselves or have small broker/dealers assist them.) Because investors can buy the stock at a deep discount to the open market price it give them quite an incentive to invest. Thus making it easier to raise capital.

This is extremely valuable and a very helpful tool when you are raising capital. It may help some to re-read the above example to fully comprehend how it makes it easier for you to raise capital. The president of our company is a very experienced Securities Attorney.

We assist companies in going public on the NASDAQ, the NASD OTCBB (National Association of Securities Dealers Over the Counter Bulletin Board) or the NQB (National Quotations Bureau - Pink Sheets).

In fact, if a company is interested in Going Public they may want to begin trading on the Pink Sheets. There are NO audits, NO periodic SEC reporting and they do not have to deal with Sarbanes Oxley. It also is very fast and relatively inexpensive. A company can initially begin trading on the Pink Sheets if they want to become public quickly and, if they choose, can trade on the OTCBB later very easily.

By Andrew Green

Landlording 101, Tricks of The Trade

2008-06-13T22:32:00.001-07:00

Looking Inside Your Tenant's Mind
Basic Mind-Reading Report 101 for Landlords

It goes without saying but I will say it anyway. The better you understand your tenants and their personal situation, the better you can serve their needs and your own. Notice that your needs come after your tenants. Always put your tenants' needs before your own and they will buy real estate for you in return. That's a fair trade. Take it!

Many cold-hearted, self-serving, money-grudging, wanna-be landlords don't understand human nature. Let me tell you right now, if you can't put yourself in another person's shoes and see a problem from that person's perspective with empathy, you will fail miserably in the "landlording" business and in life. Wise up!

Fear not. If your not quite sure what I'm talking about, here come the stories and details of how to be loved and adored by those kind people called tenants.

Let me first dispel the horror stories about landlording. If you follow my advice and teachings, you should have very few tales of woe to tell. You've heard the stories and they sound like this: Those damn lowlife tenants. They trashed our house, they disturbed the neighbors, they ruined our lawn, they were filthy pigs who never paid the rent on time, they never did what we told them to do and it cost us a fortune to get rid of them and repair our investment once they finally did move.

Well, guess whose fault that is. Yep, it is completely and unequivocally the fault of the so-called person that is calling themselves a landlord. The real name for this type of so-called landlord is uneducated dummy and because of these lazy fools the whole industry gets a bad rap!

There is a plus side to the scenario above and that is this: It sets up a perfect opportunity for you to do the exact opposite of the fools and create for yourself an unlimited market supply of excellent trouble-free tenants for life!

Tenants, believe it or not, are human beings. They are not animals or things to be mistreated, abused or taken advantage of. If you will prepare your rentals as if your mother was going to be moving in, your mindset would be realigned in short order. In effect, you will start looking at it from a compassionate point of view. You will not cut corners. You won't let things go that need fixing. You will use more care, skill and diligence in preparing that dwelling for another decent human being to begin calling home. That's what you want to achieve.

You want to provide a trouble-free, pleasurable, aesthetically pleasing, creature comfortable, needs fulfilling, safe, secure, affordable and convenient place to live. When you provide those things and screen the population, it's like striking gold.

The process of getting good tenants begins in your mind. By that, I mean you have to educate yourself to be able to recognize value and acquire properties that are structurally sound, aesthetically pleasing, physically functional and provide safety, security, affordability, convenience and a feeling of pride in your tenant's mind.

Sounds like a daunting task, doesn't it? Well it's not. In fact it is so simple to achieve that once you understand the process you won't even have to think about it. It will come naturally to you. I promise you that this is true and I intend to prove it to you as well.

I absolutely guarantee that you can do it. So for now, just take my word for it as being a fact, because it is. Here's an example of using a motto to align your thought process in relation to all the things I just said. Repeat the following:

Landlord's Creed

I vow never to rent to someone else, something that I myself would not be happy living in.

Mansions not included!

Now apply that to every prospective property that you evaluate as a potential rental property investment. Human nature is immutable. We all have basic needs, wants, desires and expectations that include fear. When you remove fear and provide comfort and security, you will own your market.

So what you first have to do before you can be a great landlord is to find great places to rent to other people. I explain how to do this in the book at www.magicbullets, so I won't go into it here.

The screening process is also outlined in that book as well. I will hit upon a few things that weren't touched upon already in the processes in the main body of the book, so here are a few nuggets for you now.

The following observations are done after you have already performed the formal screening procedures. I'm rushing you up to the day that your face-to-face meeting occurs with the tenants who have passed your telephone interviews and have succeeded in getting an appointment with you to see your wonderful rental.

Now, here are some things that your uneducated dummy-type landlords can't begin to recognize, plan for or evaluate when it does appear before their very eyes.

As soon as your potential renter shows up to view your property, take note of the time. Are they on time? Can they keep their first promise to you? Can they follow directions? If their late, did they get lost? I'm sure you gave them good directions and also used landmarks like churches, stores or monuments, so they could find you easily. If they can't follow simple directions, do you think a lease agreement and those directions are going to be any easier? No, they are harder to follow.

O.K. They showed up on time. This says they respect your time, are able to follow directions and are serious about finding a nice place to live. How did they arrive, on foot, by bike, bus, cab, truck, motorcycle or tractor-trailer? Preferably they arrived in a clean, well-kept passenger car that is in a clean condition.

Now who was driving the vehicle? If it's a couple are they both going to be renting or is your tenant without wheels. Let's assume your prospect drives up in their own car. It runs fine so you won't have cars on blocks and a parts yard for a front lawn in six months when they buy more cheap junk to get around with.

So the car looks O.K. on the outside but how about the interior of the car? Do they smoke and have smashed down McDonalds bags pushed so far into the floorboards that it now resembles carpet? Does this vehicle look like a home on wheels, with garbage bags filled with clothes, a crying baby and a cat in the back window? Watch out if you see this type of telltale evidence. I don't think I need to paint the picture of what will result if you miss this investigative step.

Pickup trucks with camper-shells can also be loaded to the gunnels with personal effects, including small zoo animals. I encourage you to get a look back there, too!

The bottom line here is people will generally treat your property the way they treat their own, if you're lucky! So see how they've done with their own stuff up to this point and choose wisely based on intuition, gut-feeling and physical evidence.

So the car inspection is over now. How are the appearances of the folks? Are they clean and well groomed? Do they seem to fit the profile of what you had envisioned over the phone interviews or are they 180 degrees out? Have they successfully fooled you or deceived you into believing something else up to this point? Now that they have appeared before you, is it blatantly evident that these persons are con artists?

If you get an uneasy feeling within the first few minutes of meeting these people, don't brush it off as just some crazy thought. That's your self-preservation instinct operating and you better listen to it. The book, Magic Bullets will help to protect you, so do not fear. Use this information to protect yourself from the events that lead to horror stories. Don't give it another thought. Let's get on with our interview, shall we?

So far they are on time. They have a good clean car and they appear to be honest and decent people who indeed do give you the same impression you developed over the phone. In fact, these people are really more than you expected. Yes, if you've done it right that will often be your experience and it is almost always a pleasure and privilege to rent to such high quality individuals.

Have you noticed something about the process here? There has been no mention of race, religion, national origin, sex, age or marital status. That is discrimination based on federally protected human rights and it's against the law to discriminate on those issues. This includes the handicapped and a few others groups I may have overlooked.

My point is simply this: If they meet all the criteria that makes for a good quality tenant, than you would be ruling out a potentially excellent long-term tenant based on preconceived notions and that is dummy landlording in the first degree! So don't discriminate on basic human rights issues.

So many people screw this process up. They also make mistakes by choosing management companies to do this highly developed type of intuitive researched and planned-for event. I honestly know of no management companies who can be as thorough as an owner who takes the time to protect their own interests in this way.

I don't care how much management companies protest about the above statement. The fact of the matter is, they are not you, so they can never find a tenant that satisfies your own personal preferences the way you can.

I like to personally screen potential tenants because in all cases, I have total control and that's what real estate is all about - control!

Think of the opposite of control. That would be the stock market for the small investor. The way I see it, I don't want to be on the sidelines rooting for someone else to make money for me or more often, hoping they don't lose it, steal it or mismanage it to my certain demise.

With the way I approach real estate, it is a 100% guarantee every single time that I am going to outsmart, outwit, outperform, over deliver and under promise to the point that I crush my competition. I am in a league of my own.

My tenants are the winners and they know it, too. What kind of loyalty do you think develops in the minds' of people that look to me for protection? It stands as a testimony and irrefutable, self-evident, empirical fact that I care enough about the people who have entrusted me with their welfare, their time, their money and their trust to deliver on my promises. My tenants don't move. They either pass away due to old age or they end up buying it from me when I want to sell it. It happens that way all the time.

So think again when you hear a dummy landlord talking about all the trouble they had and then ask yourself one question. Did they read Magic Bullets before they became a landlord? It's 100% certain they did not. If they had, then their tenants would have loved them and paid for their real estate time and again, and made them rich beyond their wildest expectations?

Snap out of it! Hey, are you with me? OK, your back. Good let's get back to reality here. What I do works and the only thing about landlording I don't like is cashing all those darned checks. I'm not kidding. Bank tellers look at you like your some kind of thief because you have so many checks to cash.

Here are a few things that you won't find out unless you have been around a while but I'm going to save you from the pain of learning the hard way. Now of course you're going to do everything right by following my advice in real estate but there are a lot of things I don't know. Yes, I admit it. I don't know everything but I do know what I'm going to tell you about next and that is?drum roll, please! Watch out for real estate investment property that comes with existing tenants! Here's why. In general, the new owner takes the property subject to the existing lease and rights of the tenant or tenants. Most often, whatever existing lease or rental agreement that was made with the previous owner will remain in effect.

What could happen if you don't thoroughly review existing tenants lease agreements? What if the previous owner rented a unit to his good-for-nothing, drug-addicted brother for $1.00 a month for the next five years? That's a valid lease. You may take them to court for misrepresentation but it's going to cost you lost rent, lost sleep and maybe your safety.

Anyway, that's an extreme example of an intentionally designed below-market rent lease agreement but it illustrates my point. Here's another. Let's say you're getting a great deal and you buy it, and find out the reason the owner sold it to you was because the tenants were very difficult and had him over a barrel. And all the while, they are paying lower than average rents and complaining about everything. Now you get them and you can't raise the rent and they refuse to move. Here comes your eviction lawyer and you have attorney's fees and more lost rent to boot.

My point is this: Make the seller get rid of bad tenants before you close on the deal. Do a pre-closing inspection and personally walk through the empty apartment, house, condo, trailer or doghouse yourself. Bring extra locks or call a locksmith and have the locks changed the day before closing. An honest seller will not have a problem with that so long as the title company holds those keys until your check is accepted at the closing table.

The lesson here is it's always better to install your own tenants because you control the process from start to finish. Don't follow a dummy landlord or by default, you could be a dummy, too!

Remember this too: When you install new tenants, you are generally going to get a higher rent from the property because inflation creeps along and landlords have a hard time raising rents on people. I have seen 10-15 year long-term tenants paying the same price for 15 years. You will go broke if you let that happen.

Adjust your rents accordingly every time you fill a vacant unit and if people want to renew their leases, then inform them of an economic reality that currently exists called inflation, and you are just keeping up with it! The Annual Consumer Price Index may be used as a reference. If they don't understand, they have an option and that would be to go look for a similar rental to yours at a lower price. If you have followed my advice, this elusive lower rental price will not be found and your tenants will be grateful to you for renting out such a clean place at the new price-adjusted rate.

There is a lot of garbage held out for rent and prices may be lower, but no one wants to live in a pigsty with lime green shag carpet and Brady Bunch orange counter tops, where the roaches tell you what to do.

So the lesson here: Encourage balking tenants to find something comparable to yours at a lower price. If they find it, let them go. Odds are, they won't. After all I told you, it's often next to impossible, if you're a hands-on owner. There is no 10% fee to management companies either. So you can even ask 5% less than investors who use professional management to do their job. So many ways to slaughter your competition?so little time!

Dan Auito is a dual-licensed real estate agent and appraisal assistant. In addition to being a 20-year veteran of the United States Coast Guard, Dan has also founded a non-profit drug prevention corporation, a real estate consulting group and is the author of "Magic Bullets in Real Estate." This 300-page power-packed book (due out in late Sept 2004) comes with a website (on line in late Sept 2004) that further supports its readers. Dan lives with his wife Kimberly and their two children, Brandon and Briana, on the emerald isle of Kodiak Island, Alaska.

Sitcom Investing

2008-06-13T22:31:00.013-07:00

A fickle stock market encourages good-humored mockery.

Recently, as I watched the premiere of a sitcom, an obvious omission breached television etiquette. Silence followed every exaggerated comedic set-up. There was no laugh track. Where were the premeditated giggles from the show's "audience?" At last, the viewer determines the funny moment.

It then occurred to me, the writers of this new show adopted an aspect used by investment news programs.

I will be the first to admit, in addition to the miscellaneous printed and electronic financial information, the television provides an abundance of supplemental financial news. However, the shows often leave me asking, "What's missing?" In addition, the shows may very well leave viewers with the ultimate responsibility, which segment is entertainment and which is practical advice.

Perhaps you may recognize one of the canned statements below that investment show gurus continuously utter. Although each may be applicable (and in may cases vital to successful financial planning), notice the missing "laugh tracks."

How many times have you heard "Invest For the Long Term?" The analyst may be leaving out "because I hope you forget my last appearance and the short term disaster I have caused for the viewers who actually acted on my recommendation." Each investor's long-term outlook is somewhat different for the other's and you should always review the guests' recommendations with caution. What is his or her reasoning for such revelation?

"Buy and Hold." The missing part: "because I have no idea of an exit strategy to recommend." True enough, the more successful investors are those who invest according to a well-planned strategy and stick to it. They generally hold onto their winners. There are, however, times that will dictate an exit strategy.

Finally, there's "Use Asset Allocation." The missing part: "because I cannot tell you which asset historically does better in this particular market environment." There are many ways to accomplish diversification in your portfolio and it does not always have to revolve around the division of stocks, bonds, and cash. Depending on your particular objectives, time horizons, and risks, an appropriate allocation may be derived from the use of just one type of asset. Either way, there are no guarantees when you place your money in the stock market and it is best to remind yourself of the risks of each investment. Try including real estate, collectibles and insurance products in your general financial plan.

We can all watch the appearance investment gurus make on financial shows. Perhaps we can include light-hearted follow-up statements as if we were watching a Rocky Horror film. We often enjoy the amusement provided by television personalities, however, it is important to review your investments regularly. Always examine your motive behind each buy and sell.

In actuality, your financial future is no laughing matter and should be guided with thorough commentary. Television shows come and go; your finances may one day be a legacy.

Trading Is Not Rocket Science!

2008-06-13T22:31:00.011-07:00

Despite what some people may lead you to believe; day trading, swing trading and trend trading is not anywhere as difficult as they would like you to think. It really boils down to two key components.

First, you have to have an approach that helps you identify trades that have a consistently high probability of making money. Once you have this you must exploit this "edge" over and over again.

The only way to do this is to use the necessary discipline to never deviate from your system. The minute you start tinkering or tweaking things is when you will lose your edge!!!

You will most likely be tempted to do this after you have had a few losers. This is the time however to keep your focus and remind yourself that your system has a statistical advantage that has held up over time.

Think about this for a moment? If you go gambling in Las Vegas and can even gain a 1% advantage over the house you can make a literal fortune by exploiting this edge. That little one percent advantage can make the casino lose a whole lot of money over time. As a matter of fact the minute they notice that you have a viable system they will label you a cheat and ban you from the playing. It sure is a good thing that can't happen to traders!

Now consider what happens if you have a trading strategy that produces trades that go into the money more than 60 to 80% of the time?

Now the second step to success is to manage your emotions. Two of the biggest indicators of a trader who is not managing their emotions are FEAR & GREED. These two emotions will wipe out every trader over time, both experienced and inexperienced alike.

Let's talk about them for a minute...

FEAR: Fear of losing money or fear of being wrong is what causes traders to have this emotion.

"Trading with scared money" often causes the fear of losing money. This is when a trader is risking money that should be used for the rent, food, children's education etc. If this is the case the only solution is to find additional funds that you are willing to put at risk. This helps to put the mind at ease and reduces the fear.

Fear of being wrong is simply the part in all of us that just doesn't like to be wrong. The cure for this is to simply realize and accept that losses are part of this game. Think about this? A baseball player only need hit the ball once for every three times at the plate and this will get him into the Hall of Fame.

I feel this every once in a while and remind myself that... My approach for trading has both historically and real-time produced consistent winning trades. This gives me the confidence to step up to the plate and keep swinging. Also I tell myself that the only way to earn the big money is to get into the game.

GREED: Traders who are greedy are often the exact opposite of the ones who are fearful. They have no fear and this can get them into trouble. They will tend to over trade, not follow the rules and basically "wing it". Sometimes this will work, but it always ends up back-firing.

One of the biggest problems when greed sets in is the inability to know when to take profits. These traders are so bent on making a killing that they are never happy. If they are up 10, 20 or 30% they don't even think about cashing out, as they want more. This often leads to the inability to see the trade turning against then and they will allow winning trades to turn into big losing ones.

One solution for this is to realize that making 3, 5, 10 or 15% on a regular short time basis adds up really quick. I know for me personally, once I was confident in my methodology, I no longer felt the occasional feelings of greed. Now I don't worry about "going for broke" as I know that there is always another good trade waiting for me.

By Dr. Jeffrey Wilde

How to Setup a Profitable Trading Business

2008-06-13T22:31:00.009-07:00

In my opinion trading is the most exciting and best way to earn a living in the world. With just a small amount of equipment and space you can do it from anywhere on the planet.

When you think about it, it is one of the least expensive businesses to set up - no rent, staff advertising etc... Plus no pain in the ass bosses, backstabbing co-workers or the usual office politics B.S.!

What's even more amazing is that soon wireless technology will be convenient and affordable enough so that you will be able to sit with your laptop at a Cafe in Paris or on a beach in Tahiti and trade. To me it doesn't get any better than that!

Anyway, I want to talk about the various things that you do need to set up your trading business.

*Hardware: This would consist of a good computer that has plenty of memory (at least 512MB) and high quality processing power of a Pentium 4 or AMD Athlon chip. Having the latest and greatest mega-computer is nice, but not necessary and will not make you one bit more profitable. You are still the most important part of this equation! The great thing nowadays is that you can buy an absolutely amazing computer for under a grand.

NOTE: If you are using two or monitors you should have at least 1 GIG of ram as these setups have huge memory appetites!

*UPS: This stands for Uninterrupted Power Supply and is a device that will keep your computer running in the advent of a power blackout. This is vital if you trade all day because, the worst thing is to be in a losing trade and the power goes out and you then have to spend 5 panic filled minutes rebooting your system and wondering what is happening.

*Trading Software: This would be your charting software that gives you a wide range of choices for displaying graphs, quotes and data in real-time. Just a few to name are... Omega Trade Station, Meta-Stock, E-Signal or Omni-Trader. These programs are not cheap, but if you plan to make a full time living from this, then they will be essential.

If however, you trade part-time and have a full-time job then you can get by with very simple charting software which is only a few hundred dollars

*Real-time data: The ability to have access to real-time intra-day charts is extremely important. Live quotes are not good enough because they don't tell you where the stock has been. You need to be able to visually see how the stock is reacting at your entry levels. Also charts will allow you to see where all the support and resistance levels are. This is important to know because these levels can give you profit targets as well as to know where your stock may run out of steam.

Some companies that offer real-time data are E-Signal, Omega Trade Station Pro, Realtick, Quote.Com, Ensign etc... Modems/DSL/Cable: These are obviously the means to which you can receive your data. If available I would definitely get DSL as my first choice and cable second.

In my experience I have had temporary outages of cable service from time to time, versus the phone, which never seems to go out. Another advantage for DSL/Cable is that have a huge speed advantage over a dial-up-modem. Quick and efficient as well as uninterrupted access to your data is extremely important.

If you are really serious about trading then high speed access is essential!

*Routine Maintenance: It is vital for you to perform regular maintenance on your computer doing things like scandisk and defrag. This will keep your computer running optimally and help it reboot really fast if your computer crashes during a trade. You can lose a fortune each extra minute it takes to restart your machine!

One last I should mention is that I see way too many traders trying to skimp on buying the right trading equipment. As they say you get what you pay for. Also consider that 95% of traders lose money and you can bet that the 5% who do win use the quality equipment.

This does not mean you have to run out and spend a fortune, rather just to make sure you do spend money on the right places. Please note that regardless of whether you are a swing trader, day trader or position trader in stocks, bonds, forex, futures or options this information will apply.

By Dr. Jeffrey Wilde

Trading Baskets Part I

2008-06-13T22:31:00.007-07:00

Q. What is a basket?

A basket is a group of up to 50 stocks that you can trade, manage and track as one entity.

In another article, I wrote about a rather conservative method of being in the stock market. See: "A Triple Dipper: How to Make 3 Profits on 1 Stock" at http://www.traderaide.com/Selected_Articles/Tripple_Dipper.html.

This time let's talk a little about trading "baskets". The definition above maybe needs to be expanded just a bit. You can trade baskets using longer term buy and hold strategies, a shorter-term swing trading approach or as a day trader. A basket of stocks is nothing more then any group of stocks that someone has grouped together for any of a number of reasons. They may be of the same sector, or they may be made up of a number of stocks in different sectors.

An example of a few baskets could look like what is sited below. To save time and space I'll use the stock symbols only. You can look them up later if you are interested. Let's say you see stem cell research as the thing of the future and wanted to be invested in it. If you don't know which stock is going to fair the best, you may want buy a basket of stocks that is made up of ASTM GERN and STEM. This would be a basket of stem cell stocks. Now let's say you think the Internet stocks look good and, again, you are not sure which ones will do the best. In your Internet basket you may want to pick up some shares of EBAY, YHOO and AMZN. Obviously your basket can contain any number of stocks you want. Many online brokers will actually allow you to set up baskets in your account, and you can put in a sell order all at once on the entire basket or pick and chose which ones you want to sell. I'm not recommending these stocks in any way, shape or form, but merely using them as examples.

Okay, that's pretty basic, but I'm sure you get the picture. The examples above would more or less be the type of baskets you would probably be thinking of holding for some time and not day trading.

Most day traders have an entirely different kind of basket of stocks. A day trader may have any number of stocks in his trading basket that he or she has been become very familiar with. They have studied them and even charted them for intraday movement (I hope) for some time and have learned the trading habits of the individual stocks. They have a fairly good idea of how the stock moves on a daily basis with or without news. They have knowledge of how it reacts to earnings, analyst upgrades, analyst downgrades and other events that may be reoccurring. They have also probably learned how they trade when hit by surprise events as well. They know which market makers to watch the closest. They also know who the main market maker in the stock is, often referred to as the axe.

A day trader's basket may be any number of stocks. A good average could be somewhere between 25-50 stocks. But it may also be larger or smaller. I have known traders that traded one stock all day long and nothing else. I have known others that were able to watch 300 stocks. Personally, I think that is way too many.

When I was trading I had a basket of about 75 stocks. Some I knew were only going to be in play on news or when reporting earnings. Others were fairly reliable moves on a daily basis. And still others were extremely sensitive to any sort of news or event.

Today, if I was going to put together a basket of stocks, I would be looking at the following symbols: GOOG, TASR, TZOO, AIRT, QLGC, SYMC, PLMO, KMRT, EBAY, SINA, RIMM, RMBS, PCLN, and DCLK as well as other NASDAQ stocks. I would not over look New York Stock Exchange stocks, although many do. I would be looking at: MO, PFE, CAT, GE, GM, TYC, MRK, MOT, and others as well. Keep in mind, I am not recommending any of these stocks specifically for you to buy or trade. I am merely trying to give you an example of what a basket may look like. You have to decide yourself what stocks you would add to you your basket based on your own knowledge gained through experience and research on each stock.

I think every trader should have a basket of stocks he or she follows and trades. Day trading without your own basket raises the risk level and puts you in a position where you are always looking for something to trade. On slow days where the market is just not offering up much in the way of trading opportunities, you may have a tendency to jump on stocks, that under different circumstances, you would have passed on. Having your own basket of stocks will lower your exposure to risk. They may not move any better under slow market conditions, but at least you will have some knowledge of how they move. In Part II I will tell you about a special trading basket technique I used during the early boom days of day trading. It may still be a valid concept today.

No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and hot links included. We do request that we be informed of where it is posted so reciprocal links can be considered. Email floyd@sbmag.org.

By Floyd Snyder

Larry, Moe and Curley, Investment Brokers

2008-06-13T22:31:00.005-07:00

Larry, Moe and Curley were sitting in their favorite restaurant just off Wall Street having their usual 3 martini lunch and were discussing the day's events and their client portfolios.

Larry:"I had 12 calls this morning from customers wanting to know why the market was going down".

Moe: What did you tell them?"

Curley: "Yeah, what", taking another gulp of his libation.

Larry: "You know, the usual. This is a normal correction and not to worry. I am watching your account. The market always comes back."

Moe: "That's the same BS I tell them."

Curley: " I have more than 300 accounts and I can't watch them except my 5 big traders. Who cares about the others anyway? My company won't let me tell them to sell when their stock starts down and they believe the old saw about 'hang in there for the long haul'. I blew out of all my stocks last week. Thank goodness. The market has dropped 300 points since then.

Moe: "It would be better for the customers if our company would let us tell them to use stop loss orders."

Larry and Moe, shouting in a single voice: "Don't say that or we'll get fired". They both bonk him on the head spilling his drink. "Nyuk. Nyuk."

Yes, it may sound funny, but there is more truth than fiction in that imaginary conversation.

Why don't brokerage companies tell their customers to sell when the market is declining?

There are two reasons. First any large brokerage does not want to get on the bad side of a company. That company might have a public offering later on and they will definitely not be asked to sell any of the stock or bonds. This is where the big money is on Wall Street. The second reason is they don't want the customer to have cash in his account. He might take it out. Brokers make money even if you do not trade. It is not much, but it does keep the pilot light lit.

Brokers also discourage customer stop loss orders because it is more paper work for them and then they do have to watch your account. Unless your account is high 6-figure or 7-figure you are not on the radar screen. Mr. Broker (an appropriate name for what he does with your money) has an average of 300 accounts and many have 600 or 700. As new guys come into their office they give them the little accounts.

When a broker passes his securities license he is given two manuals. One is SEC regulations that must be followed and the second is how to open accounts. There is no third manual on how to protect customers' money or trade. Brokerage companies want their salesmen to follow the company line and push certain products. There is no thought of customer protection.

Part II of Day Traders and Swing Traders and Options? Maybe!

2008-06-13T22:31:00.003-07:00

Before every protective put trade it is possible to calculate
your anticipated maximum loss. Use the formula: (stock price
minus strike price) plus option price. For example, suppose you
will pay $30.00 for your stock, and you want no more than a $3.50
loss on the position. Then you would choose the $27.50 strike
put which costs $1.00. Following the formula, you take your
stock price ($30.00) and subtract the put's strike price (27.50)
which leaves you $2.50. To this $2.50 loss, you then add the
amount you spent on the option ($1.00), which gives you a
combined, maximum loss of $3.50 for this position. You can set
your loss limit by the strike price of the put you buy and the
cost of the put. This formula will work every time. Remember,
stock loss, (stock price paid - strike price), plus option cost
(option price) equals maximum potential position loss.

The protective put strategy, when used correctly, will allow
investors to take advantage of the same opportunities that could
provide large potential gains, but without being exposed to the
extreme risks the position could potentially present. In these
scenarios, the protective put strategy deserves consideration.

For example, a stock in the process of a steep decline would be a
good opportunity to implement a protective put, when trying to
pick a bottom. Quite often, stocks experience bad news or break
down through a technical support level and trade down to seek a
new, lower trading range.

Everyone wants to find the bottom to buy and go long, catching
the technical rebound, or to start accumulating the stock at
lower levels for the longer term.

There is a potential for a very big reward if you pick the
"right" bottom. However, with the big potential gain comes the
big potential loss that is common in these types of risk/reward
scenarios. Here is a perfect opportunity to employ the protective
put strategy! It will provide protection against substantial
loss, while allowing room for potential gains if the stock should
bounce.

Remember, the protective put allows for a large potential upside
with a limited, fixed downside risk. If you feel that the stock
has bottomed out and is starting to consolidate, you purchase the
stock and then purchase the put at the same time as insurance
against further decline in the stock.

If you are right, and the stock runs back up, the stock profit
will well exceed the price paid for the put. Once the stock
trades back up, consolidates, and develops its new trading range,
the need for the protective put is over. At this time, if you
still like the stock and want to hold on to the long position,
you could always start selling calls against it.

Use the formula for maximum loss discussed earlier. Calculate the
loss in the stock and the amount you paid for the put and add
them together for your maximum loss in this position. The
protective put has limited your loss.

Maximum Loss = (Stock Price - Strike Price) + Option Price

This protection will save you enough money when you pick a false
(wrong) bottom that you may, if you like, try to pick the bottom
again at a lower point. The exhaustion scenario, as described
here, is a perfect opportunity to apply the protective put
strategy.

As seen with the exhaustion example, the protective put strategy
is best used in situations where the stock has a potential for an
aggressive upside move and the chance of a big downside move.

Another potential opportunity for using the protective put is in
combination with Technical Analysis. Technical Analysis is the
study of charts, indicators oscillators, etc. Charting has
proven to be reasonably accurate in forecasting future stock
movements.

Stocks travel in cycles that can and do form repetitious
patterns. These patterns are predictable and detectable by the
use of any number of charts, indicators and oscillators.

Although there are many, many forms and styles of technical
analysis, they all have several similarities. The one we want to
focus on is the technical "break-out." A break-out is described
as a movement of the stock where its price trades quickly through
and beyond an obvious "technical resistance" or resistance point.

For a bullish breakout, this level is at the very top of its
present trading range. Once through that level, the stock is
considered to have "broken out" of its trading range and will now
often trade higher, and establish a new higher trading range.

The "break-out" is normally a rapid, large upward movement that
usually offers an outstanding potential return if identified
properly and acted upon in a timely fashion. However, if the
break-out fails, the stock could trade back down to the bottom of
the previous trading range.

If this were to happen, you would have incurred a large loss
because you would have bought at the upper end of the previous
trading range. As you can see the "break-out" scenario is an
opportunity that has large potential rewards but can on occasion,
have a large downside risk.

However, if you were to apply a protective put strategy with the
stock purchase, you can drastically limit your downside exposure.
For instance, say you were to buy the 65 strike put for $2.00.
If the stock trades up to $75.00, you would make $9.00 if done
naked but only make $7.00 if done with the protective put.

This difference is the cost of the put. This $2.00 investment is
more than worth it should the stock go down. If the break-out
turns out to be a "false" break-out and the stock reverses and
trades down, your 65 put will allow you to sell your stock out at
$65.00 minus the $2.00 you paid for the put. This limits your
loss to $3.00 instead of a potential $8.00 loss. This is a much
better risk/reward scenario.

Most professional traders, including day traders and swing
traders can reap huge rewards for the protective put strategy.
The reason is in how most traders attain profits and losses.
Normally, successful traders make a little money on a consistent
basis. They make a little bit day in and day out. But when it
comes to losses, they lose in large chunks. They spend a month
building up profits only to lose that money in one day usually in
one stock. If a trader could figure out how to avoid even a
handful of these large losses, his or her profitability would
soar. My answer is to start using the protective put when buying
on breakouts and when bottom fishing.

What My Horse Had For Breakfast

2008-06-13T22:31:00.001-07:00

Let's see, he had some oats, fresh alfalfa and his vitamins. I know from the mixture that is great food and he will win the seventh race this afternoon. He can't lose because of his diet and a great jockey will be riding him.

Kinda reminds me of what my broker (horse trainer) told me to do when I was selecting a mutual fund to buy. He said to check out what was in the fund (the mixture of stocks, like my horse's breakfast) and to see if there was a good fund manager (the jockey). I did what he said and carefully read the annual report and the prospectus too. Sounds great so I bought it.

What I can't understand is I did all the things the horse trainer said I should and "Rocket", my horse's name, still came in 6th in an 8-horse race. All I wanted him to do is come in first and I can't say I'm crazy about that mutual fund either.

That fund has a 5-star rating, is managed by one of the great names on Wall Street and has 60 of the best known company stocks I can think of and yet it is going down. I am doing everything that conventional wisdom says I should, but I continue to lose. Is there and answer?

I am not so sure about the horse, but I know the conventional wisdom of Wall Street is mostly smoke and mirrors. I read the Annual Report, but I forgot that "annual" means that much of the information is over a year old. How much help can that be? And I forgot that the prospectus was not written to enlighten me, but for the bean counters in Washington. It is supposed to make available to me all the financial information I need to make a decision to buy. All of this research is nonsense, as it will not tell me the one most important thing I need to know - will the price increase so I can make a profit? Unfortunately, my broker is not going to be much help here either as he has been trained by the Wall Street method which has nothing to do with making money or protecting my capital.

Anyone can look up all kinds of information, but when it comes down to it ask this question: Will knowing all that stuff make me any money? I always figure that if I can find it out it isn't worth knowing any more because that information is already reflected in the price of the stock or mutual fund. So why bother?

Wall Street brokerage companies want you to do all that "research" because if what you buy doesn't go up they can say you knew everything about it before you bought it. It wasn't their fault you did not understand it.

I think I'll sell that horse. And quit listening to my broker.

By Al Thomas

Credit Cards For People With Bad Credit Scores

2008-06-13T22:29:00.019-07:00

Sometimes life lands you in a situation that causes your credit to suffer. A job loss or illness can send your credit rating south leaving you with nothing to do about it. Some creditors may let you slide a month or two, but your records will still show a delinquency. A stolen identity can also leave you feeling violated and unable to resume a normal life with credit. It is during these times you may have to search a little harder to find companies that wan to deal with people who have bad credit. There are a handful of lenders who will help you re-establish your creditworthiness by using one of their credit cards.

The price you will pay

Searching the Internet will give you a good idea of what types of credit card companies will deal with bad credit. Companies like Capital One, Orchard Bank, Providian Financial and even Citibank have plans to help you get back on your feet again. But at what price will you have to pay? The price is interest. Interest rates from these companies can be up to 25-30% annually. So it is important to manage your money and credit more wisely.

One of the many benefits of using one of these preferred lenders is that they report positively to the major credit scoring repositories. That means if you make timely payment it will be in your favor and will help boost your credit rating back up. The interest you pay is a small price to pay to get back on your credit worthy feet.

The secured credit card route

Most of the major banks and lending institutions may seek a deposit matching mechanism called a secured credit deposit before backing a credit card for you. This card is used the same way that a normal credit card is, however the cardholder must fund it before using. If the cardholder deposits $100 into the interest bearing account their credit card is funded at 100% of their deposit. Some credit cards can at their disposal issue double or triple matches to boost the amount the creditor can spend. The deposit of $100 can return $300 in credit terms. Secured credit cards also report positively to the credit agencies and will eventually become normal revolving accounts and the balances held for deposit are credited back to the cardholder's account. A very positive way for people with bad credit to obtain the financial vehicles they need.

Jakob Jelling

Credit Establishment 101

2008-06-13T22:29:00.017-07:00

There will come a day when you need credit. You may want to buy a home or a car and your credit rating will become very important to help make these dreams come true. One of the first things you will need to learn is the basic principle of money management, especially the ability to repay your creditors on time within the 30-day grace period they establish for you. Most people secure credit cards as the first way to establish credit in High School or College. Upon getting the credit card, usually a low spending limit, the ability to repay the card in an orderly fashion will help you establish a positive credit rating with the major repositories.

How your score is recorded

Upon making your monthly payments to the Credit Card Company or bank, your information is electronically transmitted to a credit-reporting agency. Trans Union, Equifax and Experian are the three major credit agencies. Once you have made your payments consistently your rating will rise accordingly. Once your rating has hit 650 or better, your mailbox will become flooded with attractive offers for credit cards and loans. People will want to give you the world because you can pay your bills in a timely manner.

What else is affected with the credit rating?

You may be surprised but if you do not act financially responsible, it can prevent you from getting a job, renting an apartment or even opening a bank account. The fact of the matter is that your credit rating is very important in today's society. Your ability to keep it up to date by monitoring it is crucial. Once a year you can pull a free credit report from each agency. Check the report for accuracy, should it be reporting errors contact them immediately to resolve the issue. Some people might think a simple phone call can fix everything. That couldn't be farther from the truth, repairing damaged credit takes time and only you can do it. Once you file a claim, stick with it and make sure it gets resolved. Once a correction has been made you will receive notification or an amended report from the agency showing the change. Your credit report has much more at stake for you in the present and in the future, watch it closely.

Jakob Jelling

How Creditors Measure Your Credit Rating

2008-06-13T22:29:00.015-07:00

Creditors will measure your credit rating based on the following three main things.
Capacity
Collateral
Character
The three "C's" show creditors your:
"Capacity" or income to pay the debt
"Collateral" or assets to secure the obligation
"Character" shows your compliance to repay the debt

1. Capacity

The very first question is whether you have sufficient income to repay the debt. Creditors will definitely check to see if your income exceeds your expenses so that you ca comfortably pay the debt. A creditor will then want to know:

Your income - from all sources
Your fixed expenses
Your other debts

The amount remaining from your total net income, after deducting your fixed monthly expenses and other debts, is your capacity. If your net income is $3,000 a month and your total living expenses is $2,500, then your credit capacity is an amount that requires no more than $500 in monthly payments.

If you now pay $400 a month for other credit obligations, then your remaining capacity is a $100 a month, and a creditor should extend you that amount of credit.

There are three techniques that will allow you to maximize your income:

Increase your income

Decrease your expenses (easier to do than the first one)

Reduce your other debts

2. Collateral

A lender or creditor can be secured or unsecured. Secured lenders hold a lien against specific assets, such as real estate, an automobile, or boat. If you fail to pay, the secured lender can sell the pledged asset to recover debt owed. Secured lenders seldom loan more than the auction value of the collateral.

Secured credit, is an almost guaranteed way to rebuild your credit. Even with poor credit, a lender may advance your credit if you ca secure the credit with a lien against some valuable asset. Many creditors extend credit entirely on the strength of the pledged assets.

Other credit considerations are either ignored or carry comparatively little weight in the credit decision.

What can you use as a collateral to secure your debts and rebuild your credit? You may be appreciably wealthier than you think. Add the value of your various assets (property that you own) and subtract any existing mortgages or lies against those assets. The difference is your equity or net worth in the asset.

This is what you have available to secure a loan. Do not overlook any asset:

Home
Investment real estate
Stocks, bonds, mutual funds,
Automobile
Boats, planes, recreational vehicles
Notes and mortgages due you
Art, jewelry, antiques
Pensions, IRAs, and Keoghs
Royalty income
Income from trusts

You may have other assets to pledge. The point is that collateral gives you a borrowing power approximately equal to your equity in your assets. Regardless of your credit history, if you have collateral worth a solid $100,000, you should be able to borrow close to that amount.

3. Character

Creditors next consider your character. How important this is depends upon the type of credit, and who your creditors are. Asset based lenders rely chiefly on collateral, and they are less concerned with your character than are unsecured creditors who can only rely on your prior reliability for honoring your obligations.

When creditors check your character, they basically look at how you satisfied your past obligations. Meaning they want to know:

How many credit defaults have you had?
What was the reason for the defaults?
How recent are they?
Do you own your own home?
If you rent, for how long have you rented the same apartment or house?
Do you have a checking account?
Do you have a savings account with regular deposits?
Do you have a payroll savings plan at work?
Do you have a telephone in your own name?
Do you have a criminal record?
Have you filed bankruptcy?

Positive answers to these nine questions will often offset an otherwise negative credit report. Basically your credit character boils down to your credit history in the past. In the eyes of creditors, if your past credit character is good, there is no reason to believe why your future won't look promising.

By Omar M. Omar

Lower Your Credit Card Interest Rate Now!

2008-06-13T22:29:00.013-07:00

With today's credit card companies, there are many opportunities to get your cards rate of 21% or more reduced. The higher the amount of interest your card charges will cost you more for a simple purchase and ultimately may take you years to pay off instead of months, should you make the minimum payment allowed. People often just pay the minimum balance as a way to improve their credit rating; this couldn't be a more dangerous way to increase your credit score. Leveraging the credit card company to say "Uncle" to your ability to switch over is easier than you think.

The switch over tactic

If your credit card interest rate is over 20% you should definitely seek relief in several ways. One of these ways is to let them know you are thinking of moving to a competitor's credit card because they are offering a lower rate. They will move promptly to earn your dollars and interest. Let them know how unsatisfied you are about their ability to reduce your percentage rate commensurate with your ability to pay your bill in a timely manner. They will probably put you on hold immediately and speak with a manager to get your rate reduced.

Don't be afraid to move to another credit card company

Some credit card companies will not budge when it comes to reducing your rate: even if you threaten to leave them. That is when you look for another credit card that meets your immediate financial needs. Shop around to the major credit card companies and seek out the best possible rates. You can also search on the Internet for sites that give the best credit card ratings. This will allow you to make a financial decision that can save you hundreds if not thousands in the long run.

There are a dozen reputable credit card companies in the market who are willing to sign you up to earn your interest. These cards will even offer to assume your previous credit card debt to help reduce the interest you are bearing on those accounts.

By Jakob Jelling

Negotiating Rates with Your Credit Card Company

2008-06-13T22:29:00.011-07:00

Ok, let's face it, everybody hates high credit card rates, and they drain hard earned money out of your wallet. As a valued consumer, it is apparent that you learn how to negotiate to get the absolute best rate that you possibly can. The good news however is that it doesn't have to be a difficult or time-consuming process. In fact, it can be very easy indeed if you know what you're doing. In this article we will discuss the ins and outs of credit card negotiating to ensure that you get the best possible rate with the least amount of effort.
First and foremost, you should figure out if you even want to continue using your current credit card company ( http://www.the-credit-card-centre.co.uk/best-credit-cards.html ). Are you pleased with the overall service that you are receiving? Do you like their benefits? If the answer is yes then you can proceed. If not, you should stop reading this article and start looking for a better company.

Second, you should evaluate your paying history and make sure that it is positive before you call to negotiate. If it is positive then you have power and if it isn't then you'll be negotiating from a position of weakness and that might not be good. Instead, you should wait until it is more positive before you call them to negotiate rates.
Third, if you have a good history then remember this when you call. In essence, you'll have extremely high negotiating power. The company needs your business in order to be successful and with clients they lose big time. Therefore, you should always display this "take them or leave them attitude" while conducting your negotiations.
Draft up a script and memorize it. It can be as simple as "Hello, my name is Bill and I have been a cardholder for X years and I consistently pay my bills on a time. Well recently I have been receiving all types of credit card offers from XYZ bank indicating that I qualify for an extremely low interest rate of X and am considering leaving you and going there if you can't offer me a lower rate. Is this something that you can help me with?
Practice, practice and practice some more with your script until you are completely and totally used to it. Once you are, contact the company. Read your script and see what happens.
If you get a hard nose customer service representative then don't threaten her. Be agreeable and ask to speak to his/her supervisor. If that is not possible, be nice to her and try again she may have some leeway. If you like your present company, you can even try negotiating interest rates, annual and even those yucky late fees.
However, if you're fed up, have an alternative company in the wings, and your current company won't budge with their rates then be willing to take your business elsewhere. After all, you hold the power so don't be afraid to use it! They key however is to not bluff but to follow through with your threat. Close the account, ask for them to send you notification in the mail, cancel the credit card and use another card.

In conclusion, you can be successful with the negotiating process if you follow the above mentioned tips. If your current company is unwilling to cooperate then you should simply take your business elsewhere. You're better off with another credit card company that values your savvy negotiating skills!
By Claire Bowes

How to Dispute Credit Report Errors

2008-06-13T22:29:00.009-07:00

Your credit report--a type of consumer report--contains information about where you work and live and how you pay your bills. It also may show whether you've been sued or arrested or have filed for bankruptcy. Companies called consumer reporting agencies (CRAs) or credit bureaus compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, employment, and other purposes allowed by the Fair Credit Reporting Act (FCRA), it's important that the information in your report is complete and accurate.

Some financial advisors suggest that you periodically review your credit report for inaccuracies or omissions. This could be especially important if you're considering making a major purchase, such as buying a home. Checking in advance on the accuracy of information in your credit file could speed the credit-granting process.

Getting Your Credit Report

If you've been denied credit, insurance, or employment because of information supplied by a CRA, the FCRA says the company you applied to must give you the CRA's name, address, and telephone number. If you contact the agency for a copy of your report within 60 days of receiving a denial notice, the report is free. In addition, you're entitled to one free copy of your report a year if you certify in writing that

(1) you're unemployed and plan to look for a job within 60 days,

(2) you're on welfare, or

(3) your report is inaccurate because of fraud. Otherwise, a CRA may charge you up to $9.00 for a copy of your report.

If you simply want a copy of your report, call the CRAs listed in the Yellow Pages under "credit" or "credit rating and reporting." Call each credit bureau listed since more than one agency may have a file on you, some with different information. The three major national credit bureaus are:

Equifax, P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111.

Experian P.O. Box 2002, Allen, TX 75013; (888) EXPERIAN (397-3742).

Trans Union, P.O. Box 1000, Chester, PA 19022; (800) 916-8800.

Correcting Errors

Under the FCRA, both the CRA and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under the law, contact both the CRA and the information provider.

First, tell the CRA in writing what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the sample below. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures.

CRAs must reinvestigate the items in question--usually within 30 days--unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. l Disputed information that cannot be verified must be deleted from your file.

If your report contains erroneous information, the CRA must correct it.

If an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the CRA must show that you're current.

If your file shows an account that belongs only to another person, the CRA must delete it.

When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request, the CRA must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.

Second, in addition to writing to the CRA, tell the creditor or other information provider in writing that you dispute an item. Again, include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct-that is, if the disputed information is not accurate-the information provider may not use it again. Accurate Negative Information When negative information in your report is accurate, only the passage of time can assure its removal. Accurate negative information can generally stay on your report for 7 years. There are certain exceptions:

Information about criminal convictions may be reported without any time limitation.

Bankruptcy information may be reported for 10 years.

Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.

Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.

Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Criminal convictions can be reported without any time limit.

Adding Accounts to Your File

Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to CRAs: Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't. If you've been told you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that don't appear in your credit file, ask the CRA to add this information to future reports. Although they are not required to do so, many CRAs will add verifiable accounts for a fee. You should, however, understand that if these creditors do not report to the CRA on a regular basis, these added items will not be updated in your file.

Sample Dispute Letter

Date

Your Name

Your Address

Your City, State, Zip Code

Complaint Department

Name of Credit Reporting Agency

Address

City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute are also encircled on the attached copy of the report I received. (Identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.)

This item is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

Omar M. Omar

Beware of Bogus Credit Repair Companies!

2008-06-13T22:29:00.007-07:00

So-called "credit repair" companies claim they can remove negative information from credit reports. Advertising as "Credit Advisors," "Credit Rating Correction Services" or "Credit Consultants," they trumpet variations on this message: "Turned down because of bad credit? We can help!" Many of these companies charge hundreds if not thousands of dollars for the promise to "clean up" bad credit reports. But the truth is, these companies can only do what you could do yourself--at no charge.

Nobody can remove negative information that is accurate from your credit report. No company has a "secret" ability to remove all negative information.

But this doesn't stop their claims. This deceptive quote is from a credit repair company brochure: "Charged-off accounts, collection accounts, judgments, tax liens, repossessions, and even bankruptcies can be removed from your credit records in less than one year (five to seven month average)."

One tactic is to bombard credit reporting agencies with requests to verify information. If a credit reporting agency cannot verify an entry within 60 days, it will remove the information from the report. But if the information is later verified to be accurate, it will go back in the report.

Before you even consider signing a contract with a company that promises to repair your credit, remember these facts:

You may obtain a copy of your credit report on your own.

You have the right to dispute entries in your credit report.

Beware guaranteed credit offers!

Credit repair and other companies often claim they "guarantee" to get you a credit card, regardless of your credit history. In fact, these companies do not always honor their guarantee. Sometimes, they'll just take your money and run--you will not get any credit, regardless of what they promised.

If they get you a card at all it often will be a "secured" bank credit card, with high up-front "application" fees, that requires you to deposit and keep several hundred dollars in a savings account, or a card that only allows you to buy items in a catalogue from a business that you probably never heard of. (You can apply for a secured credit card by yourself. For a free list of banks that do not charge application fees for secured cards, see the information from Consumer Action in the "For More Information" section below.)

Credit repair companies often advertise on television, in newspapers and even on matchbooks. Sometimes they require consumers to dial a "900" telephone number to get more information. Calls to 900 numbers can cost $2 or $3 a minute, so listening to a few minutes of information about the cards can be expensive.

Some companies try to get people a credit card by having them apply using financial information of other people with good credit histories. It is a criminal act to apply for credit under someone else's name--do not do business with one of these companies.

Law enforcement agencies have shut down many credit repair outfits, but it is hard to stop a fraudulent credit repair outfit unless people complain about it. Therefore, be careful about responding to credit repair ads and be sure to complain to the agencies listed below if you think a credit repair company took advantage of you.

For more information

The Federal Trade Commission (FTC) publishes information for consumers on the subject of credit and enforces federal laws on credit. For a list of free publications, write to the FTC's Public Reference Department at the address given below. While the FTC does not handle individual cases, it can act when it sees a pattern of possible law violations develop. Complaints about credit reporting agencies and credit repair scams must be in writing. Send them to: FTC Credit Practices Division, 6th St., N.W., Washington, DC 20580.

Contact your local consumer protection agency or your state Attorney General's office. Many Attorneys General have toll-free consumer hotlines. These numbers may be listed in the "self-help" or government sections in the front of your phone book. These agencies can offer you advice and may also be able to help resolve your complaint.

Consumer Action's free complaint/information switchboards offering non-legal consumer advice and referrals can be reached from 10 a.m. to 2 p.m. on weekdays. Chinese, English and Spanish are spoken. Call either (415) 777-9635 (San Francisco office) or (213) 624-8327 (Los Angeles office). Consumer Action has a free list of secured credit card banks that do not charge application fees. To receive a free copy, send a self-addressed stamped envelope to: Consumer Action Secured Credit Card Survey, 717 Market St., Suite 310, San Francisco, CA 94103. (Available in English only.)

The Consumer Credit Counseling Service (CCCS) assists consumers who have problems in paying their bills--before their good credit ratings suffer. Your local CCCS office can help you work out flexible payment plans to make debt repayment more feasible. Call (800) 388-CCCS for an interactive recording that will provide you with the phone number of the office nearest to you. Spanish-speakers can call (800) 68-AYUDA (800-682-9832) between 8 a.m. and 7 p.m. central time.

Before you sign a contract with any company, check it out with the local Better Business Bureau (BBB), a non-government service which advises consumers on fraud prevention. Call your local BBB. If you cannot find a local number listed in the phone directory, call the Council of Better Business Bureaus at (703) 276-0100 for a referral to the office nearest you.

By Omar M. Omar

Can You Acquire Good Credit Overnight? You Bet

2008-06-13T22:29:00.005-07:00

Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to credit bureaus : Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't.

If you've been told that you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that don't appear in your credit file, ask the credit reporting agency to add this information to future reports.

Although they are not required to do so, many credit bureaus will add verifiable accounts for a fee. However, understand that if these creditors do not report to the credit bureau on a regular basis, the added items will not be updated in your file.

Sample Letter to Add Positive Information to Your Credit Record

Date

Credit Bureau Name

Address

City, State Zip

To Whom It May concern :

After reviewing my recent credit report from your company, I noted that my credit report does not include information that I know is important to providing a complete picture of me as a credit using consumer.

Therefore, I request that you add the following account information on my credit file.

Creditor :

Address :

Account Type :

Date Opened :

Credit Limit :

Balance : ( If it's an open account )

If there is any fee for this service or for any additional information you might need from me, you can reach me at ( your phone number ).

Thank you in advance for your unparalleled assistance.

Sincerely,

your signature

Your Name

Address

Social Security Number

Date Of Birth

For Example :

Suppose you had bought a used car from a used car lot 4 years ago. And the cost for your used car was $8000.00, which you have paid off in 2 years. If you can show on your credit report the auto loan you've paid off, that can dramatically change your credit report. Therefore, what you can do is contact the your used car dealership and demand for your account to be reported.

Or you can request a copy of your auto loan payment history to be mailed to you so you can mail it yourself to the credit bureaus. It's important to ask yourself why a certain account was not reported on your credit report.

In most cases small businesses avoid reporting to credit bureaus because it cost businesses money to report your payment history to credit bureaus every month. To put it simply, every business who wants to report their clients account payment history will have to subscribe to these credit bureaus and the subscription cost the business money.

Omar M. Omar

SuperCharged Secret 1 of 5 - Credit Card Utopia

2008-06-13T22:29:00.003-07:00

I AM THE CONSUMER. AND I HAVE LOW-RATE SUPER-POWERS!

Note: The following is part 1 of a 5 part series. Over the course of these next 5 articles, I am going to introduce you to several methods for maximizing the use and benefits of the best Credit Cards and offers on the market today. This information, when used in conjunction with one another, is unlike anything you've ever seen before. I like to call this approach, the "5 SuperCharged Secrets to Credit Card Utopia."

SECRET 1: I AM THE CONSUMER. AND I HAVE LOW-RATE SUPER-POWERS!

SECRET 2: INTEREST BEWARE, THERE'S SAFETY IN NUMBERS!

SECRET 3: TURBO-CHARGED KILLER RATE SAVING INFORMATION!

SECRET 4: YOU SCRATCH MY BACK, AND I'LL BUY SOME MORE BEER!

SECRET 5: LIVING IN CREDIT CARD UTOPIA

Without further Ado, let's get started:

SECRET 1: I AM THE CONSUMER. AND I HAVE LOW-RATE SUPER-POWERS!

1) How would you like a zero interest credit card?

WHAT? Did you say ZERO interest? That's like 0.00%, or .0000000%, or nothing, or nada, or no interest? Tom! Can't be!!!

2) Actually, that's exactly what I mean.

You can have zero interest on a perfect day, or, can you live with 4% interest? I just received a credit card offer for 4% interest (which I turned down?), but if I needed it, that is completely reasonable, don't you think?

3) You see, you are the consumer, and you have Low-Rate Super Powers!

This is a hot, credit-hungry market we're in. There are banks and lending institutions that would do just about anything to entice you in to their little web of plastic loanery.

4) Here's Secret #1 revealed:

Credit Card companies are competing with each other, by offering consumers like us, low-interest, to no interest, balance transfers on already existing debt. Granted, these are usually (but not always?) limited to a time period like 6 months?

But, what do you care? 6 months of zero interest is certainly MUCH better than 6 months of 19% interest, RIGHT?

5) The first, most important thing you need to do, is examine if you have outstanding balances on other credit cards. If you do, then wisen up!

Let me be your Dad for a second?"Stop being lazy!" Go shop for a new credit card, and ask them if they offer balance transfer opportunities. Virtually ALL OF THEM DO! When you get the answer you're looking for, apply. They'll send you a nifty letter in the mail with a bunch of blank checks. Have a feel day! Go pay off your other credit cards, transfer the balances, and start enjoying zero to low interest! Pretty cool, huh?

6) But TOM, what do I do in six months?

Oh please. You know what you need to do. Mark your calendar, or your Franklin Covey, or your PDA, or whatever you use, and repeat the procedure again in 6 months (hot-tip: look for no-time limit zero interest balance transfers.)

This is easy stuff, folks. But it does take a couple extra steps.

That's why people AREN'T DOING IT, if you can believe that!

Well, it's your turn to be the smart consumer, right? Take this BIG, HUGE, sensible first step, and you are well on your way to the pearly gates of Credit Card Utopia!

We've enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, and never turn your back on your own common sense.

Publisher's Directions:

This article may be freely distributed so long as the copyright, author's information, disclaimer, and an active link (where possible) are included.

Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Tom Levine

SuperCharged Secret 2, Credit Card Utopia

2008-06-13T22:29:00.001-07:00

INTEREST BEWARE, THERE'S SAFETY IN NUMBERS!

Note: The following is part 2 of a 5 part series, Over the course of these 5 articles, I am going to introduce you to several methods for maximizing the use and benefits of the best Credit Cards and offers on the market today. This information, when used in conjunction with one another, is unlike anything you've ever seen before. I like to call this approach, the "5 SuperCharged Secrets to Credit Card Utopia."

SECRET 1: I AM THE CONSUMER. AND I HAVE LOW-RATE SUPER-POWERS!

SECRET 2: INTEREST BEWARE, THERE'S SAFETY IN NUMBERS!

SECRET 3: TURBO-CHARGED KILLER RATE SAVING INFORMATION!

SECRET 4: YOU SCRATCH MY BACK, AND I'LL BUY SOME MORE BEER!

SECRET 5: LIVING IN CREDIT CARD UTOPIA

Without further Ado, let's continue with Secret #2:

SECRET 2: INTEREST BEWARE, THERE'S SAFETY IN NUMBERS!

1) This secret method isn't for everyone.

I would venture to say that this turbo-charged low rate secret is really for those with reasonably good credit.

But with that said, you may have good ENOUGH credit, and it doesn't hurt to TRY. If you don't succeed, then you've been blessed with the one thing most people don't have, and that's a GOAL?

You know what you want, better credit, and there are TONS of resources out there to help you get from point A to point B, much faster then you can imagine.

When you get there, this method is for you for sure! Work towards this! It's worth it.

2) If you have pretty good credit, it's time to use it to your MAXIMUM ADVANTAGE.

Do you like to shop at Costco®? I do. I LOVE shopping at Costco®. I know it costs me a membership fee every year, but I save money like CRAZY!

Why? Because Costco® can buy in bulk, and get huge deals from their merchants.

You see, there's safety in numbers. Costco® Members enjoy the benefit of pooling together their buying power, and extracting huge savings from vendors and suppliers.

3) And here we go! Secret #2 revealed: Take that concept, and apply it to Credit Cards! Interest Rates beware, because there's safety in numbers!

I'm talking about the big BLUE! I'm talking about American Express®.

Now, most of us who have not yet climbed on board to AMEX® are comfy with having a Visa®/MasterCard® in our wallets. I know. I was one of you at one time. You think it's better, because Visa®/MasterCard® are more widely accepted. Right?

I'll grant you that in some smaller "ma/pa" operations, you may not be able to swipe your BLUE. But other than that, AMEX® is widely, widely accepted everywhere?Worldwide.

4) Go check it out for yourself.

AMEX® is generally available at all nationwide chains like department stores, grocery stores, restaurants, and many, many other fine establishments. My wife and I spend money, just like you do. We use AMEX® as much as we can, and we don't have a problem with the ability to swipe it virtually everywhere.

5) I believe, firmly, American Express® is using the concept of pooled membership, to give you KILLER interest Rates, and amazing perks too.

I believe that the benefit of this pooled power is passed on to you, as a member of American Express®.

How do I know this? Because I'm a member, and I can attest that the interest rates are low, low, low!

For example, as of today's date, my American Express® Blue (no annual fee, by the way) is carrying a 9% interest rate (I also get balance transfer checks all the time?See Secret 1.)

6) Are there lower rates out there?

Well, maybe. But, I don't care. I like the fact that I don't have to go shopping for a low rate. I just KNOW that American Express® IS the lowest, if not one of the lowest.

It's just so much less work for me as a consumer, to be a member of AMEX®. No more shopping around.

7) Go with the Credit Card Company that takes care of the CONSUMER FIRST! .

I don't mean to sound like a commercial. I also have a Citibank®, and other fine credit cards in my wallet, and our website provides information on ALL major credit card companies, not just AMEX®, so I have no vested interest in one over another.

But the secret knowledge here is that American Express® seems to have the BUYING POWER to consistently give consumers some of the lowest interest rates on the market, and that's what makes them the BEST.

8) Check it out for yourself. Do your own research.

Don't rely solely on this writer's testimony. Go look around. Compare all the benefits, and the rates, and the rewards programs, and you'll see. AMEX® has no competition. Not for the consumer, anyway.

And in Credit Card Utopia, we always go with the best. As powerful consumers, we come first. We NEVER settle for less.

We've enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, and never turn your back on your own common sense.

Publisher's Directions: This article may be freely distributed so long as the copyright, author's information, disclaimer, and an active link (where possible) are included.

Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Tom Levine

Evaluating A Money Manager

2008-06-06T00:52:00.000-07:00

Scams and frauds are designed to take your money through false promises and phony claims. Money management is supposedly designed to increase your net worth. Sometimes these two worlds meet and the results are not in your favor, i.e., you have a considerable decrease in net worth.
The information in this article won't keep future money managers honest but it will help you find the one who is right for your situation. There are four criteria you must consider before you give your money to anyone to manage.
1) Philosophy-- This is the thought theology used by the money manager to make your money grow. In other words, does (s)he focus on stocks, options, mutual funds, annuities, a blend of investment vehicles, etc.? Does this philosophy coincide with your risk tolerance? If stocks are too risky, a manager concentrating in that arena isn't for you. The philosophy also points you to their performance.
2) Performance-- We all know the markets are not stagnant. They go up, they go down. No investment manager can predict the market with absolute certainty. But, they should perform well, or even above average, in their specialty. For example, a stock focused money manager in today's market environment should have performance numbers that would make even Warren Buffet take notice. You want as long a performance record as possbile. To be fair, one market cycle should give you a decent indication of the manager's performance in his/her area(s) of expertise.
3) Process-- This is the means the manager uses to select securities for the portfolios. For example, does (s)he relyonly on in house research or does (s)he incorporate researchfrom outside sources? If so, who are they and on what frequency are they used?
4) Personnel-- Besides wanting to know the manager's experience, you'd be wise to learn all you could about the folks working in the office. Who actually manages the portfolio? His/her experience? How long has (s)he been in business? Who will manage your account when (s)he is out of the office, on vacation, on business?
Some people would say cost is one of the criteria. I say it is, but to a lesser degree. In over 30 years in this business, I can guarantee that paying the highest commission did not necessarily result in receiving the best advice. Paying the lowest commission did not necessarily result in receiving the worst advice.
Cost comes in the form of fees and commissions. ALL money managers charge. Cost, initially, should not be in your criteria because it often becomes the ONLY determining factor. That will skewer your thinking and could result in not having awinning team working for you. Make the above four parameters yourprimary criteria and cost will take care of itself.
How? You will be quoted a charge. If you are not comfortable with that price, negotiate. All fees and commissions are negotiable. If the manager refuses to negotiate, then and only then, make cost a member of the criteria team.
This article won't solve all of the money management problems or costs associated therewith. However, it'll at least start you thinking in the right direction and keepyour money in your pocket until you are ready to hand it over.