Monday, August 23, 2010

12 New Rules for Your Money

In this era of high unemployment, flat home prices and do-it-yourself retirement savings, some traditional rules of saving and investing are due for an overhaul.

Renting may beat buying.
Buying wins hands down when home prices are rising. But when they're flat or falling, it makes sense only if you get a great deal, your monthly payment won't exceed rent on a comparable home by much, and you'll own the home long enough to recoup your costs for both buying and later selling your home.

Consider a Roth. Although the traditional rule of tax planning is never to pay a tax bill today that you can put off until tomorrow, Roth IRAs and Roth 401(k) plans stand that rule on its head. With a traditional IRA or work-based retirement plan, you get an upfront tax deduction, but every dime you withdraw in retirement is taxed at your ordinary income-tax rate. With a Roth, you forgo the upfront tax break, but all withdrawals — including decades of earnings — can be withdrawn tax-free. If income-tax rates rise, a pot of tax-free retirement income could be a financial lifesaver. To contribute to a Roth IRA, your income in 2010 can't top $120,000 if you're single or $177,000 if you're married. Anyone, regardless of income, can now convert a traditional IRA to a Roth IRA, but you'll owe taxes on the entire amount. There are no income-eligibility limits to contribute to a Roth 401(k), but not all employers offer them. (more)

Credit Suisse: China Will Drive Up Copper Price

By: Julie Crawshaw / Newsmax
Credit Suisse metals analyst Michael Shillaker says a Chinese economic acceleration beginning in late 2010 and continuing through 2011 will drive copper prices up almost one-third higher, The Business Insider reports.

“We still think that copper will reach $10,000 a ton by 2012 and relatively simple supply-demand analysis supports this,” Shillaker told Metal Miner.

“We believe there is 30 percent upside potential to current share prices for the miners into year-end and in some cases potentially more than 100 percent upside over the next two to three years,” Shillaker is quoted as saying.

Not only will China increase demand through 2011 and into 2012, but demand “normalization” in the rest of the world will add fuel to the fire, says Shillaker.

Shillaker believes that copper will be the next catalyst for the out performance of mining shares, similar to those witnessed in 2001, 2005, 2007 and 2009. (more)

Technically Precious with Merv, Aug 20, 2010

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Rethinking Gold: What if It Isn't a Commodity After All?

By JEFF OPDYKE / Wall Street Journal

This won't sit well with some people: Gold isn't a commodity. There. I've said it.

But before you fire off an angry response, hear me out. The facts might change your view of gold's role in a portfolio.

For a long time, we've all heard that gold is a commodity—no different, really, from silver or wheat or pork bellies. Its price ebbs and flows (supposedly) with inflation, which historically drives commodity prices.

Odd, then, that gold's elevated price hasn't fallen in response to tepid U.S. inflation numbers. The Consumer Price Index as of July pegged inflation at just 1.2% for the previous 12 months, not counting seasonal adjustments. Nor has gold reacted to what Mohamed El-Erian, Pimco's chief executive, recently called "the road to deflation" on which he sees the U.S. traveling.(more)

Why Most Investors and Nearly All Traders Lose Money, Part 2

If you are following the Economic Indicators over the past few months you will agree that there has been an increase in the Negative and that is quite similar to the Negative that flowed in the summer of 2007.

Note: At that time I decided take a step back out of retirement (just a little bit) and to start writing again. I began to publish a stock market - Update for the local community. In my first issue, October 2007, I called / identified the Market Top and recommended Selling All and going to Cash. Please see my Bio. My flow of these Articles – Why Most Investors and Nearly All Traders Lose Money ! I thru x is to share my many years of Economics and the Marketplace Analytics and Asset Management Experience, I sincerely hope it helps. . .

This Negative (Economic and Otherwise) has now been flowing again for a few months and the mis-guided and uncensored information that has been presented of late about Earnings being so wonderful has continued to buoy up the General Market. However, if you will look internally, since the April highs, it is clear that there are many Companies that are – well below their Market peaks of that time-frame. I’m talking 30% - 40% - 50% and more! (more)

Inc. - September 2010

is the only major business magazine edited exclusively to guide CEOs and owners of small-to-midsize companies to success. Inc. provides fresh, insightful analyses to give the major players in the business world the tools they need to excel. Each issue uses real life examples of strategies, case studies, and successes and failures edited specifically to illuminate new ways in which its readers can benefit. Big and small organizations alike turn to Inc. to make sense of ever-changing business world.

read more here

In Striking Shift, Small Investors Flee Stock Market

Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking. (more)

How to reduce the risk of making bad stock choices

Rob Carrick, Globe and Mail

Choosing from among the three Canadian-market dividend ETFs traded on the Toronto Stock Exchange is faster, easier and safer than picking individual dividend stocks.

But don’t get the idea that any dividend-focused, exchange-traded fund will do. Each of the three choices has unique characteristics that make them good for some portfolios and not so good for others. Ready to dig down into the three to find out which is right for you?

Before we get going, let’s review the strategy of seeking dividends through ETFs rather than individual stocks or mutual funds. Two of the dividend ETFs we’re looking at here track indexes that are constructed to represent the best of this country’s dividend-paying corporations, while the third is run by an experienced manager who selects what he considers to be the best stocks.

Whichever you choose, you’ll benefit from a owning a diversified package of stocks that pays out dividend income monthly or quarterly. The risk of making bad stock choices is much reduced when you own a dividend ETF, and so is the need to keep on top of how individual companies are doing. (more)

At £4.8 Trillion In Total Debt Including Unfunded Liabilities, UK Debt Is Six Times More Than The Official Number,

Everyone knows that the total US debt is over $120 trillion when accounting for such underfunded liabilities as Medicare and Social Security. Well, it appears that the bankrupt US welfare state is not alone. According to the UK's Institute of Economic Affairs (IEA), the country's national debt is £4.8 trillion once state and public sector pension liabilities are included, or £78,000 for every person in the UK. This number translates to about 330% of UK's GDP. Which of course is nothing compared to the total US adjusted debt-to-GDP number which when accounting for all off balance sheet items is roughly 10x the US GDP of $13.6 trillion, a number which is Rosenberg and Bridgewater are correct, may decline quite soon. (more)

12 Latin Investments to Spice Up Your Portfolio

By James K. Glassman

The most unlikely part of the world to thrive in the aftermath of the global financial crisis might be Latin America, a region with a vivid history of economic mismanagement and corruption. Yet, although risks always lurk in this part of the world, Latin American economies and stock markets have outpaced those of Europe and the U.S. in recent years, and prospects for investors are excellent.

An exchange-traded fund that holds shares of the largest companies in the region, iShares S&P Latin America 40 Index (symbol ILF), returned an annualized 21.7% over the past five years through July 9. (By contrast, the main U.S. benchmark, Standard & Poor's 500-stock index, lost 0.2% annualized.) What's remarkable is that, despite the huge run-up in Latin American share prices, many strong companies in the region are trading at price-earnings ratios in the low teens and less.

Success Stories

What underlies rising stock prices is strong economic growth. Take Peru, a nation known until fairly recently for poverty, terrorism and incompetent governments. After growing at a brisk 9% in 2007 and 10% in 2008, gross domestic product slowed in 2009, although it still inched ahead by a percentage point. The economy is expected to grow by 6% this year. Inflation remains tame, and the unemployment rate is a good deal lower than in the U.S.

Peru impressed me during a recent visit with its political stability and entrepreneurial spirit, and it's not alone in the region. The consensus of economists, as reported by The Economist, is that the average GDP of Argentina, Brazil, Chile, Colombia, Mexico and Peru will rise 4.8% in 2010, compared with 3.3% in the U.S., 2.7% in Japan and 1.1% in euro-zone countries. (more)

Trading Week Outlook: August 23 - 27, 2010

With the Fed, the Bank of Japan and the European Central Bank recently deciding not to withdraw stimulus to their economies, next week’s crucial data from the U.S., Japan and the Euro-zone should help investors to determine whether the economic recovery is faltering.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that every currency trader should pay attention to.

1. EUR- Euro-zone Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring the activity of purchasing managers in the manufacturing and services sectors, Mon., Aug. 23, 4:00 am, ET.

The preliminary flash estimate of the Euro-zone Composite PMI could reveal the early signs of a slowdown with the manufacturing index forecasted to pull back slightly to 56.4 from 56.7 and the services index remaining flat at 55.8.

2. USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Tues., Aug. 24, 10:00 am, ET. (more)

US Economic Calendar, Aug 23-27

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Aug 2410:00 AMExisting Home SalesJul-4.60M4.75M5.37M-
Aug 258:30 AMDurable OrdersJul-2.5%3.1%-1.2%-
Aug 258:30 AMDurable Goods -ex TransportationJul-0.5%0.5%-0.9%-
Aug 2510:00 AMNew Home SalesJul-300K330K330K-
Aug 2510:30 AMCrude Inventories08/21-NANA-0.818M-
Aug 268:30 AMInitial Claims08/21-475K485K500K-
Aug 268:30 AMContinuing Claims08/14-4500K4515K4478K-
Aug 278:30 AMGDP - Second EstimateQ2-1.3%1.4%2.4%-
Aug 278:30 AMGDP Deflator - Second EstimateQ2-1.8%1.8%1.8%-
Aug 279:55 AMU Michigan Consumer Sentiment - FinalAugust-69.669.469.6-