Monday, December 19, 2011

The World's Biggest Bargain Is Here

I was talking with a colleague a few weeks ago and she wondered aloud whether the economic and political chaos in Italy -- mainly the result of Europe's ongoing sovereign debt crisis -- was creating an opening for bargain-hunting investors. After all, we're talking about the fourth-largest economy in Europe (after Germany, France and the U.K.), an economy that has a fairly impressive industrial base. My initial thought was to steer clear as the open-ended economic crisis in the region could really hurt Italy in 2012, as the county enacts a set of belt-tightening moves. But if you are a regular reader of my articles, then you know I'm an assiduous bargain hunter.

So I decided to dig deeper.

Indeed, Italy's economic woes merit investors' attention. At least the iShares MSCI Italy Index Fund (NYSE: EWI) does. The fund holds a basket of Italy's top companies, many of which can be trusted to deliver steady results in any economic climate.

But because this fund is down from $20 to $12 this year, and down from $35 at the end of 2007 many may think its holdings are in deep trouble. This is not the case. For example, 22% of the fund is invested in Eni (NYSE: E), which is sort of the "ExxonMobil of Italy." Eni's performance is a lot more beholden to oil prices, which are quite firm, than any Italian economic trends. The oil giant generates about $145 billion in annual sales and typically earns about $5 per American depositary receipt (ADR).

In fact, Eni has little to do with Italy in terms of either revenue or expenses. This is a company with a strong presence in Europe, Asia, Oceania, Africa and the Americas, a true multinational. As Morningstar recently noted, "Eni stands out from many much-larger global integrated oil peers ... because of strong diplomatic ties forged by management. This allows the company to operate more effectively in difficult markets such as North Africa, the Middle East and Russia, and is well illustrated by the fact that Eni is the largest international oil and gas producer in Africa." Morningstar's analysts say that shares, trading at a recent $41, are worth $65.

The EWI's second-largest position is in ENEL, which comprises 12% of the fund. ENEL is one of Europe's largest utilities, with operations in a number of countries. As with all other utilities, ENEL has a guaranteed rate of return on a cost-plus basis. Its operating margin has never wavered from the 15% to 18% range in the past eight years, and there's no reason to expect this to change.

But here's where things get a bit tricky. The third- and fourth-largest holdings are in a pair of banks -- Intesa SanPaolo and UniCredit. Taken together, they comprise about 13% of the fund. How will these banks fare in the current crisis? Nobody knows, but it's instructive that Italy's new political leadership is focusing on austerity measures and not seeking to fix the debt problem by welching on loans. To be sure, these banks may post weak results for the next year or two as the Italian economy weakens further, but barring any change in policy that leads to loan write-offs, these banks could represent deep-value plays once the crisis has passed. Their shares have fallen 50% or more from their 52-week highs and now trade well below tangible book value.

Moving further down the list are holdings such as Telecom Italia (NYSE: TI), tire maker Pirelli, eyewear purveyor Luxottica (NYSE: LUX) and automaker Fiat (Pink Sheets: FIATY). A slowing European economy will likely dampen results in 2012 for these firms, which the plunging share price for this fund already appears to anticipate.

As we saw in the United States in late 2008 and early 2009, it's darkest before the dawn, so turning aggressive when the news appears to be extremely bleak can make for a profitable trade for long-term investors. Italy has myriad problems, but remains as one of the most dynamic hosts of industrial firms in Europe and elsewhere. The fact that the euro is trading at multiyear lows against the dollar, the yen and the yuan should make Italy's industrial base that much more competitive.

Risks to Consider: This is an intriguing set up, but it pays to watch events in the next week or two before making a move. The fund is unlikely to quickly surge in value, so you can exercise patience before making a move.

Action to Take --> Jumping into Italian stocks after a sharp sell-off looks to be a wise long-term play. But you can't ignore the risk that economic conditions could spiral even lower before they improve. As a result, a paired trade would be ideal to protect yourself in terms of potential downside. A short position in the PowerShares DB 3x Italian Treasury Bond ETN (Nasdaq: ILTI) off-setting a long position in the Italy fund may be the best play. When a solution to the economic crisis finally comes into focus, the equity fund is likely to appreciate much more robustly than the short position in the bond fund is to depreciate.

The Baltic Dry Index Tells The Real Story Of China's Economy

There is a growing chorus of analyst voices calling for an economic collapse in China. This is based in part on how poorly Chinese stocks have done this year, and it sets up all sorts of worries about what an economic slowdown in China might do to prices of commodities, and to other world financial markets.

I have a different view, and it is based on the comparison we see in this week's chart. The Baltic Dry Index (Source: BDIY:IND) is an index of dry shipping lease rates. In other words, it reflects how much it costs to rent a freighter for hauling non-liquid stuff. The Baltic Exchange also tracks lease rates on oil tankers, and on specialized ships like Panamax ships designed to transit the Panama Canal, and Capesize ships that are too big to fit through the Suez Canal and which thus must go around Cape Horn. The Baltic Dry Index includes pricing for Handymax, Supramax, Panamax, and Capesize dry bulk containers.

Economists and analysts like to watch the Baltic Dry Index because its pricing reflects demand for shipping stuff across the ocean. Because the supply of such ships is fairly inelastic, changes in demand will flow through very quickly into lease rate pricing. It takes a while to build new freighters in response to high lease rates, and that is part of the explanation for why BDIY crashed in late 2008. A lot of shipyards had ramped up production earlier that year, and then those new freighters flooded a collapsing freight market during the 2008 financial meltdown. This is a classic case of what's know as the Avocado Effect, or the Hog Cycle.

Baltic Dry Index

It is not surprising to see a correlation between Chinese stock prices and some indicator of world economic activity. China is a mercantilist country which seeks to export a large amount of what it produces. So when there is a change in world demand for "stuff", that is going to affect the country producing the stuff. And because stock price movements can often precede changes in GDP, the big drop in Chinese stock prices during 2011 has people understandably concerned.

But the Baltic Dry Index is not confirming that drop. BDIY bottomed in January 2011 and has been trending higher, in direct disagreement with the Shanghai B Stock Index. When the two disagree, I have found that it is worth listening to what BDIY is saying.

BDIY did not confirm the higher highs in the Shanghai B Index in late 2010 and early 2011. Now, as Chinese stocks are unwinding that big top, BDIY is saying that things are actually not as bad as the stock price decline seems to imply.

Merv`s Precious Metals Newsletter: Gold Downtrend Looks Like the Direction Ahead, Projections for 2012

Ouch, that hurts. I could see a negative move in the works but I don’t think anyone expected a plunge like this past week. Friday upside move was very unimpressive so, although we might get a bounce here, the downside still looks like the direction ahead.


Back in 1981 stock market Guru Joseph Granville sent out an urgent Early Warning to his subscribers to SELL, SELL. Markets around the world immediately (within hours) took a severe plunge with the NYSE having its heaviest volume sell-off in history.

Fast forward to this week, Dennis Gartman predicted gold would go to $1475 and bang, he is credited (?) with this week’s gold decline (I think I made a similar prediction (?) about 2 ½ months ago). Timing is everything.



A look at my long term P&F chart shows the following, based upon action to the Friday close. A long term bear projection to $1400 during the Sept. move through the $1700 mark. Following a failed rally and lower top the P&F gave a more recent prediction to the $1500 level on its move through $1600 a little over a week ago. Unfortunately, a move to $1525 would trigger two more projections, one to the $1150 level and one to the $800 level. So, we have possible projections all over the place. A technician’s dream. Whichever projection is met I can then say I told you so. Of course most readers would have forgotten all the other projections that may not have been met. Stock market memories are a short term thing.

Trend: Back to reality. This week’s action has taken gold below its long term moving average line and the line has just turned to the down side.

Strength: The long term momentum indicator stopped just short of breaking below its neutral line and finished the week just above the neutral line in its positive zone. It is, however, below its negative sloping trigger line.

Volume: The volume indicator has dropped below recent lows and heading lower. It is below its negative sloping trigger line.

At the Friday close the long term rating is now BEARISH. The short term moving average line has moved below the long term moving average line for the first time since Dec of 2008. I don’t use this as a confirmation indication but it is significant.


I guess one can guess that the intermediate term does not look so good. There seems to be nothing in the indicators to be encouraged about.

Trend: Gold is now well below its intermediate term moving average line and the line slope is now well pointed in the downward direction.

Strength: The intermediate term momentum indicator has now dropped below its neutral line and is at its lowest level in the negative zone since its highs of a few months back. It is also below its negatively sloping trigger line.

Volume: As with the long term the volume indicator is moving ever lower below its negative sloping trigger line.

At the Friday close the intermediate term rating is BEARISH. This rating is confirmed by the short term moving average line having moved below the intermediate term line.


On a closing basis we are now below the Sept low but not on an intra day basis. We have a little more to go to make that a new low.

Trend: No confusion here, gold is below its short term moving average line and the line slope is to the down side.

Strength: The short term momentum indicator remains in its negative zone below its negative trigger line. It is, however, attempting to bounce up above the line but has not quite made it yet.

Volume: The daily volume action remains pessimistic. The highest volume during the week was on the Wednesday plunge while the lowest volume day was on the Friday up day. Not encouraging action.

The short term rating on the Friday close can be nothing other than BEARISH. This is confirmed by the very short term moving average line moving below the short term line.

As for the immediate direction of least resistance, I’m going with the up side just to be a little optimistic. The Stochastic Oscillator is in its oversold zone and does look like it wants to reverse to the up side (but not yet). Friday’s price action just might be the start of a rally, or at least a short bounce. So, I’ll go with the up side.


As with gold silver is now at new closing lows for this phase of its latest bear market but it has not quite made it into new intra day lows. That will take just a little more down moves.


Trend: Silver closed the week below its negative sloping long term moving average line.

Strength: The long term momentum indicator is in its negative zone and below a negative sloping trigger line.

Volume: The volume indicator just touched a support level that it has reached a few times now over the past several months and is starting a possible bounce. In the mean time it is in a downward trend and below its negative sloping long term trigger line.

The long term rating, at the Friday close, remains BEARISH.


Trend: The week’s activities took the silver price further below its intermediate term moving average line and the line slope continues to point downward.

Strength: The intermediate term momentum indicator remains in its negative zone below its negative sloping trigger line. There is some possible comfort in that the low this week in the momentum indicator has been slightly higher than its previous low during the Sept plunge. One might look at this as a gentle positive divergence.

Volume: Despite a small perk-up at the end of the week the volume indicator remains below its negative sloping trigger line.

The intermediate term rating, at the Friday close, remains BEARISH. This is confirmed by the short term moving average line moving even further below the intermediate term line.


As with the gold price, silver has closed at a new closing low for this bear trend but not quite at a new intra-day low. That occurred during the Sept plunge.

Trend: silver remains below its negative sloping short term moving average line.

Strength: The short term momentum indicator remains in its negative zone below its negative sloping trigger line. Again, as with gold, the momentum indicator is making a positive divergence suggesting that a rally may be ahead.

Volume: The daily volume remains very low and unfortunately, especially on the Thursday and Friday up days.

The short term rating, at the Friday close, has moved back into the BEARISH camp. The very short term moving average line is confirming this bear.

Bloomberg Businessweek - 19 December 2011

Bloomberg Businessweek - 19 December 2011
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Each issue of Bloomberg Businessweek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Bloomberg Businessweek's timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.

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10 Traits Of A Successful Options Trader

Options are one of the most versatile instruments in the financial markets. They are flexible in that they allow you to leverage your position to boost returns, manage risk by using them for hedging, or to make profit from upside, downside and sideways movement in the market.

Despite its many benefits, options trading carries substantial risk of loss, and it is very speculative in nature. It’s not for everyone and not everyone can become a successful options trader. Like any other business, becoming a successful options trader requires a certain skillset, personality type and attitude. This article will help you understand the 10 must-have characteristics that you need to become successful at options trading.

Numeracy - Keep Sharpening Your Quantitative Skills

1. Manage risk:
Options are high-risk instruments, and it is important for traders to recognize how much risk they have at any point in time. What is the maximum downside of the trade? What is the implicit or explicit position with respect to volatility? How much of my capital is allocated to the trade? These are some of the questions that traders will always have to keep in their minds. Traders also need to take appropriate measures to control the risk. In particular, if you are a short-term options trader, you will regularly come across loss-making trades. For example, if you hold a position overnight, your bet may go bad because of adverse news. At any time, you need to be able to minimize the risk of your positions. Some traders do so by limiting their trade size and diversifying into many different trades so that not all their eggs are in the same basket. An options trader also has to be an excellent money manager. They need to use their capital wisely. For example, it wouldn't be wise to block 90% of your capital in a single trade. Whatever the strategy you adopt, risk management and money management cannot be ignored.

2. Be good with numbers:
While trading in options, you are always dealing with numbers. What’s the implied volatility? Is the option in the money, or out of the money? What’s the breakeven of the trade? Options traders are always answering these questions. They also refer to option Greeks, such as the delta, gamma, vega and theta of their options trades. For example, a trader would want to know if his trade is short gamma. It is important for the traders to be able to easily calculate and interpret numbers. You don’t need to be a rocket scientist, but you should train as an aspiring “quant jock.”

Behavioral – Develop the Right Attitude

3. Practice discipline:
To become successful, the options traders must practice discipline. Doing extensive research, identifying opportunities, setting up the right trade, forming and sticking to a strategy, setting up goals, and forming an exit strategy are all part of the discipline. A simple example of deviating from the discipline is to go with the advice of the herd. Never trust an opinion without doing your own research. You can’t skip your homework and blame the herd for your losses. Instead, you must devise an independent trading strategy that works for your situation.

4. Be patient:
Patience is one quality that all options traders have. Patient investors are willing to wait for the market to provide the right opportunity, rather than trying to make a big win on every market movement. You will often see traders sitting idle and just watching the market, waiting for the perfect timing to enter or exit a trade. The same is not the case with amateur traders. They are impatient, unable to control their emotions, and they will be quick to enter and exit trades.

5. Match your trading style with your personality:
Each trader has a different personality; therefore, each trader should adopt a trading style that suits his or her traits. Some traders may be good at day trading, where they buy and sell options several times during the day in order to make small profits. Others may be more comfortable with position trading, where they form trading strategies to take advantage of unique opportunities, such as time decay and volatility. And others may be more comfortable with swing trading, where traders make bets on price movement over periods lasting five to 30 days.

Learning – Become an Active Learner

6. Read and understand news:
It is crucial for traders to be able to interpret the news, separate hype from reality, and make appropriate decisions based on this knowledge. You will find many traders who will be eager to put their capital in an option with promising news, and the next day they will move on to the next big news. This distracts them from identifying bigger trends in the market. Most successful traders will be honest with themselves and make sound personal decisions, rather than just going by the top stories in the news.

7. Learn from losses:
The Chicago Board of Trade recently reported that 90% of options traders make losses. What separates successful traders from average ones is that successful traders are able to learn from their losses and implement what they learn in their trading strategies.

8. Be an active learner:
The financial markets are constantly changing and evolving; you need to have a clear understanding of what’s happening and how it all works. By becoming an active learner, you will not only become good at your current trading strategies, but you will also be able to identify newer opportunities that others might not see or that they may pass over.

Administrative – Develop the Right Routine

9. Plan your trades:
An options trader who plans is more likely to succeed than one who flies on instinct and feel. If you don’t have a plan, you will place random trades, and consequently, you’ll be directionless. On the other hand, if you have a plan, you are more likely to stick to it. You will be clear about what your goals are and how you plan to achieve them. You will also know how to cover your losses or when to book profits. You can see how the plan has worked (or not worked) for you. All these steps are essential to developing a strong trading strategy.

10. Maintain records:
Most successful options traders keep diligent records of their trades. Maintaining proper trade records is an essential habit that can help you avoid making costly decisions. The history of your trade records also provides a wealth of information that can help you improve your odds of success.

The Bottom Line
Top options traders get a thrill from scouting and watching their trades. Sure, it’s great to see a pick come out on top, but much like sports fans, options traders enjoy watching the whole game unfold, not just finding out the final score. These characteristics will not guarantee your success in the options trading world, but they will definitely increase your chances at it.

Nuclear Stocks at Historic Lows: SHAW, ES, SCG, URRE

I wrote an investment idea for last spring that discussed the benefits of nuclear as an alternative energy. But about a week later, a tsunami ripped across the coast line of Japan, hitting a nuclear facility and setting off renewed concern about the health and environmental implications of this advanced technology.

Needless to say, critics of nuclear energy came swarming out of the woodwork on the news, condemning it as being too high risk for human beings and the environment. But now that the dust has settled a bit, I wanted to circle back around and see how the sector and various companies are holding up.

Global Energy Crisis

At the very top, the world is dealing with a serious energy crisis. But don't take it from me, go ahead and turn to the International Energy Agency out of Paris, saying that, "There are few signs that the urgently needed change in direction in global energy trends is underway."

Wind and Solar are a Joke

That news comes on the heels of a recent push to develop wind and solar energy resources, providing hope for many that a new wave of "green" energy will hit the Street and change the scene. Well let's get back to reality for a second. Wind and solar are both insanely expensive and not particularly scalable, still struggling to make any dent in total energy production.

So unless the Federal government has a few trillion Dollars laying around to install wind and solar farms all across the country and develop an infrastructure to distribute, support and store it, neither is a viable option to displace fossil fuels.

Which is exactly why the International Energy Agency is suggesting that governments embrace nuclear energy. Because it is cheap, scalable, and most of all, produces zero emissions. Here's what the agency said;

The World Needs Nuclear Power

"A low-nuclear future would also boost demand for fossil fuels: The net result would be to put additional upward pressure on energy prices, raise additional concerns about energy security and make it harder and more expensive to combat climate change."

So with the global energy picture becoming increasingly dire, the question isn't wether the world wants to live without nuclear, the question is can it?

If the answer to that question is no, then this is a good time to be looking at nuclear stocks. Because as Warren Buffet says, be greedy when others are fearful. And the market has clearly had a fairly emotional response to what happened in Japan, beating nuclear stocks into the ground while earnings held up much better. So let's go ahead and take a look at four stocks that will benefit from a rebirth in the nuclear story.

Top 4 Nuclear Stocks

Shaw Group, Inc. (SHAW) designs and builds nuclear plants and facilities and has a market cap of $1.6 billion. Shares have taken a beating over the last 8 months, falling from $44 to $23. But in spite of that downward pressure, estimates have held up pretty well, currently trading at less than 10X forward earnings. And with a PEG ratio of .6, SHAW is trading well below its medium PEG of the last 10 years of 1.4. So it could be a chance to step in and buy a stock that has a solid valuation while the rest of the market yawns with a lack of interest.

Energy Solutions (ES) is a highly specialized company, offering waste transport and management services to the nuclear industry with a market cap of $256 million. ES has also been weak over the last 9 months, falling from over $7 to below $3. But with the next-year estimate calling for earnings of 32 cents, shares trade at just 9X forward earnings. And with barriers to entrance, this company also looks well insulated from competition.

Scana Group (SCG) would be the most conservative nuclear play on our list, an electric utility that owns a few nuclear plants. The company has a market cap of $5.6 billion and solid 4.5% dividend. Shares are actually up over the last 9 months, most likely because of its dividend in the volatile market. Looking forward, with footprints in nuclear power generation, this company has the knowledge and infrastructure to be a leading player in the space.

Urranium Resources, Inc. (URRE) is a micro cap uranium miner, with a market cap of $75 million. But that belies the company's status in the uranium market, where it has one of the worlds largest supplies of the special ingredient required for nuclear energy production. Shares have been hammered, currently trading at just 80 cents, but with an all-time high over $15, this is a great high-risk, high-reward pick out of nuclear.

The Takeaway

The market hates nuclear stocks right now, so act like Warren Buffet and be greedy when others are fearful.

50 Economic Numbers About The US That Are "Almost Too Crazy To Believe"

The Economic Collapse Blog does a terrific job of periodically putting together a compilation of the scariest data points about the US economy. Today is one such day, and the list of 50 economic numbers presented is indeed, as the author puts it, "almost too crazy to believe"... Almost. As noted: "At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point. Hopefully many of you will use the list below as a tool to help you share the reality of the U.S. economic crisis with your family and friends. If we all work together, hopefully we can get millions of people to wake up and realize that "business as usual" will result in a national economic apocalypse." Or, far more likely, 99% of the population can continue watching Dancing with the Stars, as what little wealth remains is terminally transferred to those who are paying attention right below everyone's eyes.

From the Ecopnomic Collapse Blog:

The following are 50 economic numbers from 2011 that are almost too crazy to believe....

#1 A staggering 48 percent of all Americans are either considered to be "low income" or are living in poverty.

#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be "low income" or impoverished.

#3 If the number of Americans that "wanted jobs" was the same today as it was back in 2007, the "official" unemployment rate put out by the U.S. government would be up to 11 percent.

#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.

#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.

#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.

#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million.

#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.

#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.

#11 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#12 Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job.

#13 One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

#14 The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.

#15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

#16 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.

#17 The U.S. Postal Service has lost more than 5 billion dollars over the past year.

#18 In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.

#19 Nevada has had the highest foreclosure rate in the nation for 59 months in a row.

#20 If you can believe it, the median price of a home in Detroit is now just $6000.

#21 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant. That figure is 63 percent larger than it was just ten years ago.

#22 New home construction in the United States is on pace to set a brand new all-time record low in 2011.

#23 As I have written about previously, 19 percent of all American men between the ages of 25 and 34 are now living with their parents.

#24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

#25 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.

#26 One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.

#27 If you can believe it, one out of every seven Americans has at least 10 credit cards.

#28 The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

#29 It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.

#30 The retirement crisis in the United States just continues to get worse. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

#31 Today, one out of every six elderly Americans lives below the federal poverty line.

#32 According to a study that was just released, CEO pay at America's biggest companies rose by 36.5% in just one recent 12 month period.

#33 Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

#34 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.

#35 According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.

#36 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

#37 A higher percentage of Americans is living in extreme poverty (6.7%) than has ever been measured before.

#38 Child homelessness in the United States is now 33 percent higher than it was back in 2007.

#39 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.

#40 Sadly, child poverty is absolutely exploding all over America. According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.

#41 Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.

#42 In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for more than 18 percent of all income.

#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

#44 Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.

#45 For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars. That was the third year in a row that our budget deficit has topped one trillion dollars.

#46 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

47 Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars. When Barack Obama first took office the national debt was just 10.6 trillion dollars.

#48 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

#49 The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.

#50 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

As for the culprit, there is no surprise here - all central planning, all the time.

Of course the heart of our economic problems is the Federal Reserve. The Federal Reserve is a perpetual debt machine, it has almost completely destroyed the value of the U.S. dollar and it has an absolutely nightmarish track record of incompetence. If the Federal Reserve system had never been created, the U.S. economy would be in far better shape. The federal government needs to shut down the Federal Reserve and start issuing currency that is not debt-based. That would be a very significant step toward restoring prosperity to America.

During 2011 we made a lot of progress in educating the American people about our economic problems, but we still have a long way to go.

Hopefully next year more Americans than ever will wake up, because 2012 is going to represent a huge turning point for this country.

Indeed it will - in it America will pick yet another president that it so rightfully deserves.

Five Things That Should Never Be On Your Resume

I guess you could call me a professional resume reader, since I review hundreds of resumes every month.

Lately, I've seen a number of resumes that included information that would have been better left off.

Here are five things your resume is better off without:

1. Pictures and graphics

A photo can be helpful in a job search, because it can communicate a lot in an instant, but research shows it can also work against you, depending on your sex and how good-looking you are.

A recent study done in Israel, where photos are acceptable on resumes, showed that when a picture is included the resume, attractive men were 50% more likely to get the interview than plain men or men with no photo, while attractive women were 30% less likely to get the interview than plain women or women with no photo.

Even if you think it could help, photos on a resume are simply not standard in the U.S. Instead, put a professional and friendly photo on your LinkedIn profile, where a photo is expected.

Fancy graphics are also out of place in a resume.

I recently saw a resume with a photo of a forest as the background of the page. Not only did it make the document impossible to read and likely to be unrecognizable to a computerized Applicant Tracking System, but the photo had absolutely no relation to the job at hand. I filed that one into my "worst resumes ever" file.

More tips at:
Six Quick Tips to Bring Your Resume into the 21st Century
Five Steps to a Powerful LinkedIn Profile

2. Jobs from your distant past

I've had candidates point me to a job they did 25 years ago as their qualification for a similar job today. Unfortunately, those 25 years brought us a digital revolution with the internet, personal computers and cell phones, and jobs today are just not like they were then.

The hiring world cares about what you can do right this minute. Experience from more than 20 years back has lost its relevance to today's workplace, so unless you have a good reason otherwise, play those earlier years down leave them off your resume entirely.

It's a new world and old experience isn't your best selling point. Sell what you bring to the table right now.

Are there exceptions to this? Sure, if you were Miss America 1985 or founded a company that is now a household name, you may opt to include these to help tell the way-back story of your life and pique the reader's interest.

But only recent jobs are going to help you show you have the current know-how for the job at hand.

More about the changing workplace:
10 Great Jobs that Didn't Exist Ten Years Ago

3. Salary history

Your resume is a marketing document, and unless your salary is a feature or benefit to a potential employer (and I can't think of an instance where it might be), it has no place on your resume.

If you are asked to provide compensation information, then you can give an idea of your salary level in your cover note so they know you're not evading their question entirely. But it's never appropriate to list salaries on your resume.

More about salaries:
11 Win-Win Salary Negotiation Secrets
Women: Negotiate for What You're Worth

4. Irrelevant personal details

I'm a believer that there are times that including some personal information can make you more real and appealing to the reader, but the details need to have some bearing on the job at hand.

For instance, if you're applying for a job with a food company, it could be a good thing to include that you won the bake-off contest at the county fair three years running, but if you're looking for a position as a software engineer, it makes no sense to include it.

More about resume mistakes:
11 Executive Resume Blunders

5. References

Your references are one of your most valuable tools in your job search. Treat them with great respect, and keep their contact information confidential.

References never belong in a resume. Instead, create a separate document that lists email and phone contact information, and only give this list on request.

If you want potential hiring managers to know that you have high-level references, link them to your LinkedIn profile, or make a note in your cover letter with the name or position of the person you'll be giving as a reference.

More about references:
Great References are No Accident

As I said, every resume should be different, and I admit there are some cases where some of these five don'ts might be appropriately used, but you'll be safest if you just leave these five things off of your resume.

Three Numbers That Are Essential to Your Wealth

In marriage, there are three numbers you must know by heart: your spouse’s birthday (October 18), your anniversary (April 19), and how many minutes you can be late before you are in trouble (twelve).
To run a business, there are also three vital numbers you must know: net cash flow, the cost of acquiring a new customer, and that customer’s lifetime value.
It is no different when it comes to financial planning. The three numbers you should know are:
1. Your lifestyle burn rate (LBR)
2. Your start-over-again fund (SOF)
3. Your take-a-hike target (TaH)
If you don’t know these numbers, it is difficult to retire and nearly impossible to feel comfortable about the state of your finances.
And yet, most people go through their lives, striving for financial independence, without any idea of what these numbers are or should be. As a result, financial peace of mind is always around the next corner. (By the way, this is just as true for high earners as it is for working class people.)
Perusing wealth without a specific knowledge of these three numbers is like driving around a city searching for a particular restaurant without any idea of its address.
It doesn’t have to be that way. You can chart a direct path to wealth with these three numbers, and you can do it today. I’ll show you how.
Lifestyle Burn Rate
Your lifestyle burn rate (LBR) is how much you need to spend each year to enjoy the lifestyle you want.
It’s easy to determine this number. Simply calculate how much you are currently spending each year, and then increase that by the yearly cost of all the extra things you’d like to have that you don’t have now. (If you have everything you want, good for you.)
When you do the calculation, group the expenses into five categories: housing (including maintenance and taxes), basic living expenses (i.e., food, clothing, health care, etc.), education (if applicable), entertainment (including travel), and charity (if you believe in it).
This exercise may be illuminating. (When I redid it recently, I was shocked to find how much money I’m spending on cigars—$14,000!) You may find that it alters your idea of a quality life. (I’m cutting back to one stogie a day.) It will also make it easier to make adjustments in the future, if your lifestyle changes (see sidebar).
Don’t guess at these numbers. Guessing, in my experience, is synonymous with grossly underestimating. Use your actual costs from the past year. An hour or two with your check register is all the time you’ll need.
Your LBR is a critical number. Without it, you can’t make any other financial planning calculations. Your LBR tells you how much money you need to earn and how much money you can put aside each year for saving and investing.
The Three Stages of Your Financial Life
Your lifestyle burn rate (LBR) is likely to change three times.
The first stage is up until you have your first child. The second stage begins when you have your first child and continues until your children are gone and their college expenses (if you are paying them) are taken care of. The third stage begins after you are free and clear of dependencies, and it continues till you kick off.
For most people, the first stage has the lowest burn rate. You are young and relatively unburdened. If you are wise, you will limit your expenses to necessities and drink cheap wine.
The second stage typically has the highest burn rate. You have larger home expenses, bigger basic living and entertainment expenses, and educational expenses for your children. For some people, this stage may be extended by the need to provide for aging family members.
The third stage has a burn rate that will likely be at least twice that of the first stage, but significantly less than the second stage. This is—or can be—a wonderful part of your life during which you can enjoy traveling, hobbies, and entertainment without working more than you want to.
To complete this exercise, you’ll need to calculate your LBR for your current stage and any stages you haven’t completed. If you are in stage one, you’ll need to figure out your current LBR and estimate it for the second and third stages as well.
Start Over Again Fund
The next of the three key numbers you need to know is your start-over-again (SOA) fund. This represents the amount of money you would need if—for whatever reason—you lost all your possessions and all of your savings.
Your SOA number is basically your monthly LBR expenses, multiplied by the number of months you would need to get back on your feet, plus whatever money you might need to start a new business (if you are an entrepreneur or professional).
Most financial planners recommend establishing an emergency fund of three to six months’ living expenses for “emergencies.” I hate that idea because it is arbitrary and vague. Why three to six months? What if you need twelve or eighteen months to get started again? You determine your SOA number based on what you calculate you would really need to start over.
The other reason I hate the emergency fund idea is that almost anything can be considered an emergency: an unexpected dental bill, a broken car axle, a Christmas bonus that was half of what you expected. These events are not true emergencies. They are part of everyone’s financial life. In planning your LBR, you must allow for them. My recommendation is to add 5% to 10% to your LBR. And then, if you are lucky and have no such little emergencies, you can save half of it at the end of the year and spend the other half as a reward for having an emergency-free year.
Your SOA money should sit in its own account, in CDs, or short-term bonds, appreciating for—if you are lucky—the rest of your life.
“Take a Hike” Number
The third number you need to know by heart is your “Take a Hike” (TaH) number. This is the amount of money you need socked away so that, if you ever want to, you can tell your boss to take a hike.

The TaH number is basically the amount of money you need to retire. I showed you how to calculate this in our October issue. To reiterate briefly: take your LBR, subtract any side-business income you have (and expect to continue to have after you quit your main job), and then multiply that by thirteen.
Why thirteen? Because your TaH money should be held in safe vehicles (such as municipal bonds or rental real estate) that distribute regular income. It’s reasonable to expect a 5% yield from municipal bonds and a 10%-plus return from rental real estate. If your TaH funds are divided fifty-fifty, this will give you an average return of 7.5%. And the inverse of that, in percentage terms, is thirteen.
As an example, say your LBR is $88,000 and you have a side business generating $1,500 a month or $18,000 a year. You’d subtract $18,000 from $88,000 (leaving you $70,000) and then multiply that by thirteen. This would give you a TaH number of $910,000, which would provide you with a tax-free income of $68,250 a year at 7.5%.
Do these three calculations today. Your LBR is first and foremost because it determines, as I said, whether you need to get a better job, add a second income, and adjust your expenses. It will also tell you how many years it will take you to accumulate your SOA and your TaH goals.
A Lesson Learned
In my thirties, I managed to make and save a lot of money without paying much attention to these numbers. But I found out how much they mattered when, at age thirty-nine, I retired and began to live on my savings. It didn’t take me long to realize that my LBR was higher than I had anticipated. It was so high, in fact, that the millions I had saved were sufficient to generate the income I needed to support my desired lifestyle. Shortly after that, I hit a bump that set me back more than a million dollars. I was still a multimillionaire, but I was not financially independent.
I had done so many things right in my career, but I didn’t know my numbers. And because I didn’t know them, I couldn’t retire. I had to go back to work. That was a rude awakening. But it taught me the importance of paying attention to these three numbers.
I remember the day I made the decision to go back to work. I went to bed that night angry with myself, but I woke up the next morning roaring with ambition. Knowing the numbers had somehow inspired me. I was going to do it all again, but intelligently this time. I was going to do it by the numbers.

And that’s what I did. I opened a municipal bond account and funded my SOA goal immediately. Then I opened up a second one (with another broker) and put my remaining money in that account to take care of my TaH goal. Then I created a new, realistic LBR and stuck to it.
These three decisions allowed me to achieve my new TaH target before I turned fifty. I’m quite sure that, had I not paid attention to those numbers, my current LBR would be so high today that I’d still be a slave to my money.
That’s the greatest advantage of determining these three numbers. They will give you a precise knowledge of what you have to do to achieve all your financial goals. More importantly, they will set a fire inside of you that will keep burning until you achieve them.

US Weekly Economic Calendar

time (et) report period Actual forecast previous
10 am Home builders index Dec.
20 20
Tuesday, DEC. 20
8:30 am Housing starts Nov.
635,000 628,000
Wednesday, DEC.. 21
10 am Existing home sales Nov.
N/A 4.97 mln
Thursday, DEC. 22
8:30 am Jobless claims 12-17
375,000 366,000
8:30 am GDP 3Q
2.0% 2.0%
9:55 am Consumer sentiment Dec.
68.7 67.7
10 am Leading indicators Nov.
0.3% 0.9%
10am FHFA home price index Sept.
-- -0.1%
8:30 am Personal income Nov.
0.2% 0.4%
8:30 am Consumer spending Nov.
0.2% 0.1%
8:30 am Core PCE price index Nov.
0.1% 0.1%
8:30 am Durable goods orders Nov.
3.6% -0.5%
10 am New home sales Nov.
315,000 307,000