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Value Investing Using The Enterprise Multiple

2012-02-19T21:02:00.000-08:00

Value investing refers to investing in companies trading significantly below their historic averages and below the market. Cyclical companies, such as energy, materials, and metals and mining are considered to be value stocks during times when the cycle is in the bottom half. However, any company, regardless of industry, can be considered value at different points in the business cycle. Read on to find out how you can take advantage of value investing by using the enterprise multiple.

Valuing a Stock

Value stocks are characterized by low multiples, high payout ratios and strong yields. Common multiples, such as price to earnings (P/E), price to book (P/B), enterprise value (EV), earnings before interest, taxes, depreciation and amortization (EBITDA) or the enterprise multiple, are applied to ascertain the trading value of a stock. P/E looks at today's stock price relative to the earnings. P/B relates today's stock price to the book value of the company. The enterprise multiple takes into account a company's debt and cash levels in addition to its stock price and relates that value to the firm's cash profitability. Each of these multiples has flaws, but the enterprise multiple is the most encompassing and generally considered the most useful in analyzing the current valuation of a stock. High payout ratios indicate the firm is returning cash to the shareholder in the form of dividends, rather than re-investing the profits in the company. Strong yields, particularly free cash flow yield, determine the return to the shareholder after all the cash expenses for operating a business and investment in capital expenditures are spent.

Enterprise Value

Enterprise value is the total value of a company. Whereas multiples that use the stock price look only at the equity side of a stock, enterprise value includes a company's debt, cash and minority interests. It is calculated as market capitalization (stock price times shares outstanding) plus net debt (total debt minus cash and equivalents) plus minority interest. Investors use enterprise value to determine how debt financing, corresponding interest payments and joint ventures impact a company's value. (Read EV Gets Into Gear for more information on comparing companies with different capital structures.)

EBITA

EBITDA is calculated from the income statement. As the name implies, it is calculated as operating profit, adding back depreciation and amortization. Analysts and companies use this as a measure of the true cash operating profit of a company since depreciation and amortization are non-cash items and taxes and interest are not considered part of the operations of the company even though these two items impact earnings. (For further reading, see EBITDA: Challenging The Calculation.)

Measurements

Proper and optimal capital structure is the key to a company's ability to operate profitably and thus should be considered when valuing a stock.

EV is an appropriate way to measure the value of the entire company rather than just the stock price, which looks only at the equity market capitalization of the stock, ignoring the company's cash, minority interests and debt. The enterprise multiple compares the total value of a company relative to its cash profits. It is often more desirable than P/E because EBITDA is considered less manipulable than earnings and than P/B because it is a better measure of cash profitability than book value. However, it is not without its flaws. Consider using more appropriate multiples when valuing highly levered companies where debt servicing, long lived assets or book value drives profitability.

Stocks with an enterprise multiple of less than 7.5x based on the last twelve months (LTM) is generally considered a value. However, using a strict cutoff is generally not appropriate because this is not an exact science. Often investors will consider enterprise multiples below the market, the company's peers and its historical average of a stock as a good entry point. However, cyclical stocks usually have a wide dispersion between the peak (high) and trough (low). This creates the need to take the current multiple in context, including where the industry and company are in their cycle, the fundamentals of the industry, and the catalysts driving the stock relative to its peers. Considering these factors will determine whether the LTM multiple is inexpensive or expensive. (Discover the differences between stocks in different industries, in Cyclical Versus Non-Cyclical Stocks.)

Value Traps

Value traps are stocks with low multiples; this creates the illusion of a value investment, but the fundamentals of the industry or company point toward negative returns. (Check out Value Traps: Bargain Hunters Beware! for further reading.)

Investors tend to assume that a stock's past performance is indicative of future returns and when the multiple comes down, they often jump at the opportunity to buy it at such a "cheap" value. Knowledge of the industry and company fundamentals can help assess the stock's actual value. One easy way to do this is to look at expected (forward) profitability (EBITDA) and determine whether the projections pass the test. Forward multiples should be lower than current LTM multiples; if they are higher, it generally means the profits will be declining and the stock price is not reflecting this decline. Sometimes forward multiples can look extremely inexpensive. Value traps occur when these forward multiples look overly cheap but the reality is the projected EBITDA is too high and the stock price has already fallen, reflecting the market's cautiousness. As such, it's important to know the company's and industry's catalysts.

Conclusion
Investing in stocks requires knowledge of a company's fundamentals, assessing its peers and using a common denominator, such as the enterprise multiple. The enterprise multiple is a proxy for how inexpensive or expensive a stock is trading today based on past and expected cash flows. However using the enterprise multiple is not foolproof and even if a stock is cheap on a multiple basis, market sentiment may be negative.

To learn from the original value investor, read The Intelligent Investor Benjamin Graham.

Source : Read more: http://www.investopedia.com/articles/fundamental-analysis/08/enterprise-multiple.asp?partner=basics021710#ixzz1mtXocg6E

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

5 Common Mistakes Young Investors Make

2012-02-14T03:53:00.000-08:00

When learning any skill, it is best to start young. Investing is no different. Missteps are common when learning something new, but when dealing with money, they can have serious consequences. Investors who start young generally have the flexibility and time frame to take on risk and recover from their money-losing errors, but sidestepping the following common mistakes can help improve the odds of success. (In addition to this article, read Eight Financial Tips For Young Adults.)
Tutorial: 20 Investments To Know

1. Procrastinating

Procrastination is never good, but it can be especially detrimental while investing because the markets move so quickly. Good investment ideas are not always easy to find. If, after doing research, a good investment idea arises, it is important to act on it before the rest of the market takes note and beats you to it. Young investors can be prone to not acting on a good idea out of fear or inexperience. Missing out on a good idea can lead a young investor to two very bad scenarios:

1. The investor will revise his opinion upward and still purchase an asset when it is not warranted. Perhaps the investor rightly develops an opinion that an asset priced at $25 should be worth $50. If it moves up to $50 before he or she buys it, the investor may artificially revise the price target to $60 in order to rationalize the purchase.

2. The young investor will look for a replacement. In the previous example, the investor who failed to buy the asset that rose from $25 to $50 may quickly try to identify the next asset that will double. As a result, the investor might purchase another asset quickly, without doing the proper work and research, in order to try to make up for the previous "missed opportunity." (Young investors often find themselves with too many options and not enough money. Read more in Competing Priorities: Too Many Choices, Too Few Dollars.)

2. Speculating Instead of Investing

A young investor is at an advantage in his or her investing life. Holding the level of wealth constant, an investor's age affects how much risk an he or she can take on. So, a young investor can seek out bigger returns by taking bigger risks. This is because if a young investor loses money, he or she has time to recover the losses through income generation. This may seem like an argument for a young investor to speculate, but it is not.

Any young or novice investor will have an inclination to speculate if they do not fully understand the investment process. Speculation is often the equivalent of gambling, as the speculator does not necessarily have a reason for a purchase except that there is a chance that it may go up in value. This can be dangerous, as there are many experienced professionals waiting to take advantage of their less-experienced counterparts.

Instead of speculating and gambling, a young investor should look to invest in companies that have higher risk but greater upside potential over the long term. So, while a diversified portfolio of small-cap growth stocks would not be appropriate for an investor nearing retirement, a young investor is better equipped to take on that risk and can take advantage accordingly.

A final risk of speculation is that a large loss can scar a young investor and affect his or her future investment choices. This can lead to a tendency to shun investing altogether or to move to lower or risk-free assets at an age when it may not be appropriate. (For more insight, see Personalizing Risk Tolerance.)

3. Using Too Much Leverage

Leverage has its benefits and its pitfalls. If there is ever a time when investors have the ability to add leverage to their portfolios, it is when they are young. As mentioned earlier, young investors have a greater ability to recover from losses through future income generation. However, similar to speculation, leverage can shatter even a good portfolio.

If a young investor is able to stomach a 20-25% drop in his or her portfolio without getting discouraged, the 40-50% drop that would result at two times leverage may be too much to handle. The consequences of such a drop are similar to those resulting from a loss due to speculation: the young investor may become discouraged and overly risk averse for the rest of his investing life. (Want to learn more about leverage? See Leverage’s "Double-Edged Sword" Need Not Cut Deep for more.)

4. Not Asking Enough Questions

If a stock drops a lot, a young investor might expect it to bounce right back, but more often than not, it is down for good reason. One of the most important factors in forming investment decisions is asking why. If an asset is trading at half of an investor's perceived value, there is a reason and it is the investor's responsibility to find it. Young investors who have not experienced the pitfalls of investing can be particularly susceptible to making decisions without locating all the pertinent information.

5. Not Investing

As mentioned earlier, an investor has the best ability to seek a higher return and take on higher risk when they have a long-term time horizon. Investors have their longest time horizons, and therefore a high tolerance for risk, when they are young. Young people also tend to be less experienced with having money. As a result, they are often tempted to focus on how money can benefit them in the present, without focusing on any long-term goals (such as retirement). Spending money now instead of saving and investing can create bad habits and contribute to a lack of savings and retirement funds. (For more on this, read Young Investors: What Are You Waiting For?)

The Bottom Line

Young investors should take advantage of their age and their increased ability to take on risk. Applying investing fundamentals early can help lead to a bigger portfolio later in life. There are also many risks that a young/less-experienced investor will face when making decisions. Hopefully, avoiding some of the common mistakes above will help young people learn investing early and embark on a fruitful investing career. (If you're a parent looking to teach your child about investing, take a look at our article Teach Your Child About Investing.)

Source : http://www.investopedia.com/

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

The 6 Most-Traded Currencies And Why They're So Popular

2012-02-01T05:33:00.000-08:00

The forex market is the world's largest and most liquid market, with trillions of dollars traded on any given day between millions of parties. For those just getting started in the forex market, one of the first steps is to gain familiarity with some of the more commonly traded currencies and their popular uses in not only the forex market but in general as well. Let's take a look at several popular currencies that all forex observers should be acquainted with and some of the underlying traits and characteristics of each. (Learn about the forex market and some beginner trading strategies to get started. For more, see Forex Trading: A Beginner's Guide.)
TUTORIAL: Introduction to Currency Trading

1. The U.S. Dollar

First and foremost is the U.S. dollar, which is easily the most traded currency on the planet. The USD can be found in a pair with all the other major currencies and often acts as the intermediary in triangular currency transactions. This is all because the USD acts as the unofficial global reserve currency, held by nearly every central bank and institutional investment entity in the world. (For more, see Profiting From A Weak Dollar.)

In addition, due to the U.S. dollar's global acceptance, it is used by some countries as an official currency, as opposed to a local currency, a practice known as dollarization. As well, the U.S. dollar may be widely accepted in other nations, acting as an informal alternative form of payment, while those nations maintain their official local currency.

The dollar is also an important factor in the foreign exchange rate market for other currencies, where it may act as a benchmark or target rate for countries that choose to fix or peg their currencies to the USD's value. For instance, as of 2011, China has its currency, the renminbi, still pegged to the dollar, much to the disagreement of many economists and central bankers. Quite often countries will fix their exchange rates to the USD to stabilize their exchange rate, rather than allowing the free (forex) markets to fluctuate its relative value. (For more, see The Pros And Cons Of A Pegged Exchange Rate.)

One other feature of the USD that is important for novices in forex to understand is that the dollar is used as the standard currency for most commodities, such as crude oil and precious metals. So what's important to understand is that these commodities are subject to not only fluctuations in value due to the basic economic principals of supply and demand but also the relative value of the U.S. dollar, with prices highly sensitive to inflation and U.S. interest rates, which directly affect the dollar's value.

2. The Euro

Although relatively new to the world stage, the euro has quickly become the second most traded currency behind only the U.S. dollar. As well, the euro is the world's second largest reserve currency. The official currency of the majority of the nations within the eurozone, the euro was introduced to the world markets on January 1, 1999, with banknotes and coinage entering circulation three years later.

Along with being the official currency for most eurozone nations, many nations within Europe and Africa peg their currencies to the euro, for much the same reason that currencies are pegged to the USD- to stabilize the exchange rate..

With the euro being a widely used and trusted currency, it is very prevalent in the forex market, and adds liquidity to any currency pair it trades within. The euro is commonly traded by speculators as a play on the general health of the eurozone and its member nations. Political events within the eurozone can often lead to large trading volumes for the euro, especially in relation to nations that saw their local interest rates fall dramatically at the time of the euro's inception, notably Italy, Greece, Spain and Portugal. The euro may be the most "politicized" currency actively traded in the forex market. (For more, see Top 7 Questions About Currency Trading Answered.)

3. The Japanese Yen

The Japanese yen is easily the most traded currency out of Asia and viewed by many as a proxy for the underlying strength of Japan's manufacturing-export economy. As Japan's economy goes, so goes the yen (in some respects). Many use the yen to gauge the overall health of the Pan-Pacific region as well, taking economies such as South Korea, Singapore and Thailand into consideration, as those currencies are traded far less in the global forex markets.

The yen is also well known in forex circles for its role in the carry trade. With Japan having basically a zero interest rate policy for much of the the 1990s and 2000s, traders have borrowed the yen at next to no cost and used it to invest in other higher yielding currencies around the world, pocketing the rate differentials in the process. With the carry trade being such a large part of yen's presence on the international stage, the constant borrowing of the Japanese currency has made appreciation a difficult task. Though the yen still trades with the same fundamentals as any other currency, its relationship to international interest rates, especially with the more heavily traded currencies such as the greenback and the euro is a large determinant of the yen's value. (For more, see The U.S. Dollar And The Yen: An Interesting Partnership.)

4. The Great British Pound

The Great British pound, also known as the pound sterling is the fourth most traded currency in the forex market,. It also acts as a large reserve currency due to its relative value compared to other global currencies. Although the U.K. is an official member of the European Union, it chooses not to adopt the euro as its official currency for a variety of reasons, namely historic pride in the pound and maintaining control of domestic interest rates. For this reason, the pound can be viewed as a pure play on the United Kingdom. Forex traders will often base its value on the overall strength of the British economy and political stability of its government. Due to its high value relative to its peers, the pound is also an important currency benchmark for many nations and acts as a very liquid component in the forex market. (For more, see The Greatest Currency Trades Ever Made.)

5. The Swiss Franc

The Swiss franc, much like Switzerland, is viewed by many as a "neutral" currency. More correctly, the Swiss franc is considered a safe haven within the forex market, primarily due to the fact that the franc tends to move in a negative correlation to more volatile commodity currencies such as the Canadian and Australian dollars, along with U.S. Treasury yields. The Swiss National Bank has actually been known to be quite active in the forex market to ensure that the franc trades with a relatively-tight range, to reduce volatility and keep interest rates in line. (This is the relationship between the euro and the Swiss franc currency pairs. For more, see Forex: Making Sense Of The Euro/Swiss Franc Relationship.)

6. The Canadian Dollar

Last on our list we take a look at the Canadian dollar, also known as the loonie. The loonie is probably the world's foremost commodity currency, meaning that it moves in step with the commodities markets, notably crude oil, precious metals and minerals. With Canada being such a large exporter of such commodities the loonie is very volatile to movements in their underlying prices, especially crude oil. Traders often trade the Canadian dollar to speculate on the movements of these commodities or as a hedge to their holdings of those underlying contracts.

Additionally, being located in such close proximity to the world's largest consumer base, the United States, the Canadian economy, and subsequently the Canadian dollar is highly correlated to the strength of the U.S. economy and movements in the U.S. dollar as well. (For more, see Canada's Commodity Currency: Oil And The Loonie.)

The Bottom Line

As we have seen, every currency has specific features that affect its underlying value and price movements relative to other currencies in the forex market. Understanding what moves a currency and why is a pivotal step in becoming a successful participant in the forex market. (For more, see Using Pivot Points In Forex Trading.)

by Investopedia Staff

Investopedia.com believes that individuals can excel at managing their financial affairs. As such, we strive to provide free educational content and tools to empower individual investors, including thousands of original and objective articles and tutorials on a wide variety of financial topics.

Read more: http://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp?partner=fxweekly1#ixzz1l8WjSym0

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

Three Essential Numbers for Your Finances

2012-01-14T10:01:00.000-08:00

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.

By Mark Ford

Source : http://pro.palmbeachletter.com/1108PBLGANVD/PPBLM915/

[Ed. Note: If you're not happy with your financial situation, you're in the perfect position to change it for the better – right now. I've just recorded a special video from my office that covers five profit plays you can use to start growing your wealth. To watch this short video, click here.]

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

6 Dangerous Moves For First-Time Investors

2012-01-08T04:34:00.000-08:00

Thanks to online discount brokerages, anyone with an Internet connection and a bank account can be up and trading stocks within a week. This ease of access is great because it encourages more people to explore investing for themselves, rather than depending on mutual funds or money managers. However, there are some common mistakes that first time investors have to be aware of before they try picking stocks like Buffett or shorting like Soros. (To learn more, see Billionaire Portfolios: What Are They Hiding?)

TUTORIAL: 20 Investments To Know

Jumping In Head First

The basics of investing are quite simple in theory – buy low and sell high. In practice, however, you have to know what is low and what is high in a market where everything hinges on different readings of a variety of ratios and metrics. What is high to the seller is considered low (enough) to the buyer in any transaction, so you can see how different conclusions can be drawn from the same market information. Because of the relative nature of the market, it is important to study up a bit before jumping in. (To learn more, see Stochastics: An Accurate Buy And Sell Indicator.)

At the very least, know the basic metrics such as book value, dividend yield, price-earnings ratio (P/E) and so on, and understand how they are calculated and where their major weaknesses lie. While you are learning, you can see how your conclusions work out by using virtual money in a stock simulator. Most likely, you'll find that the market is much more complex than a few ratios can express, but learning those and testing them on a demo account can help lead you to the next level of study. (Watching metrics like book value and P/E are crucial to value investing. Get acquainted with 5 Must-Have Metrics for Value Investing.)

Playing Penny Stocks

At first glance, penny stocks seem like a great idea. With as little as $100, you can get a lot more shares in a penny stock than a blue chip that might cost $50 a share. And, if the two blue chip shares you bought went up $1 you'd only make $2, whereas if 100 shares of a $1 stock went up a $1 you would double your money. Unfortunately, what penny stocks offer in position size and potential profitability has to measure against the volatility that they face. Penny stocks can shoot up. It happens all the time - but they can also crash in moments, and are exceptionally vulnerable to manipulation and illiquidity. Getting solid information on penny stocks can also be difficult, making them a poor choice for an investor who is still learning. (To learn more, read The Lowdown On Penny Stocks.)

Going All In with One Investment

Investing 100% of your capital in a specific market, whether it is the stock market, commodity futures, forex or even bonds is not a good move. Although you may eventually decide to throw diversification to the wind and put all your available capital into these markets once you are familiar with them, it is better to risk a little bit of capital at a time. This way, the lessons learned along the way are less costly, but still valuable. (Diversification entails calculating correlation, learn more about it by reading Diversification: Protecting Portfolios From Mass Destruction.)

Leveraging Up

Leveraging your money by using a margin is similar to going all in, but much more damaging. Using leverage magnifies both the gains and the losses on a given investment. Some forms of leverage, such as options, have a limited downside or can be controlled by using specific market orders, as in forex. Learning to control the amount of capital at risk comes with practice, and until an investor learns that control, leverage is best taken in small doses (if at all). (Read more with Leverage's "Double-Edged Sword" Need Not Cut Deep.)

Investing Cash Reserves

Studies have shown that cash put into the market in bulk rather than incrementally has a better overall return, but this doesn't mean you should invest to the point of illiquidity. Investing is a long-term business whether you are a buy-and-hold investor or a trader, and staying in business requires having cash on the sidelines for emergencies and opportunities. Sure, cash on the sidelines doesn't earn any returns, but having all your cash in the market is a risk that even professional investors won't take. If you only have enough cash to invest or have an emergency cash reserve, then you're not in a position financially where investing makes sense. (To learn more about liquidity's importance, read Understanding Financial Liquidity.)

Chasing News

Trying to guess what will be the next "Apple," a revolutionary produce or a rumor of earth shaking earnings, investing on news is a terrible move for first time investors. The best case scenario is that you get lucky, and then keep doing it until your luck fails. The worst case scenario is that you get stuck jumping in late (or investing on the wrong rumor) time and time again before you give up on investing. Rather than following rumors, the ideal first investments are in companies you understand and have a personal experience dealing with. This connection makes it easier to stomach the time and research that investing demands. (For more on the psychology of trading, read How The Power Of The Masses Drives The Market.)

The Bottom Line

When you are starting to invest, it is best to start small and take the risks with money you are prepared to lose. As you gain confidence and become more adept at evaluating stocks and reading the market sentiment, you can start making bigger investments. None of these investments are bad in and of themselves, but they do tend to be very unforgiving towards rookie mistakes. Leverage, penny stocks, news trading, etc. can all become part of your investing strategy as you learn, should you choose it. The trick is learning to invest in more stable markets before you jump into the wilder areas.

by Andrew Beattie

Andrew Beattie is a former managing editor and longtime contributor at Investopedia.com. He operates the Wandering Wordsmith blog, and can be reached there.

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

4 Factors That Shape Market Trends

2011-12-29T10:15:00.000-08:00

Trends are what allow traders and investors to capture profits. Whether on a short- or long-term time frame, in an overall trending market or a ranging environment, the flow from one price to another is what creates profits and losses. There are four major factors that cause both long-term trends and short-term fluctuations. These factors are governments, international transactions, speculation and expectation, and supply and demand. (For more, see Trading Trend Or Range?)

Tutorial: Economic Indicators To Know

Major Market Forces
Learning how these major factors shape trends over the long term can provide insight into why certain trends are developing, why a trend is in place and how future trends may occur. Here are the four major factors:

•Governments
Governments hold much sway over the free markets. Fiscal and monetary policy have a profound effect on the financial marketplace. By increasing and decreasing interest rates the government and Federal Reserve can effectively slow or attempt to speed up growth within the country. This is called monetary policy.

If government spending increases or contracts, this is known as fiscal policy, and can be used to help ease unemployment and/or stabilize prices. By altering interest rates and the amount of dollars available on the open market, governments can change how much investment flows into and out of the country. (Learn more in our Federal Reserve Tutorial.)

•International Transactions
The flow of funds between countries impacts the strength of a country's economy and its currency. The more money that is leaving a country, the weaker the country's economy and currency. Countries that predominantly export, whether physical goods or services, are continually bringing money into their countries. This money can then be reinvested and can stimulate the financial markets within those countries.

•Speculation and Expectation
Speculation and expectation are integral parts of the financial system. Where consumers, investors and politicians believe the economy will go in the future impacts how we act today. Expectation of future action is dependent on current acts and shapes both current and future trends. Sentiment indicators are commonly used to gauge how certain groups are feeling about the current economy. Analysis of these indicators as well as other forms of fundamental and technical analysis can create a bias or expectation of future price rates and trend direction. (Read more on this closely watched economic indicator; see Understanding the Consumer Confidence Index and Investors Intelligence Sentiment Index.)

•Supply and Demand
Supply and demand for products, currencies and other investments creates a push-pull dynamic in prices. Prices and rates change as supply or demand changes. If something is in demand and supply begins to shrink, prices will rise. If supply increases beyond current demand, prices will fall. If supply is relatively stable, prices can fluctuate higher and lower as demand increases or decreases. (See more on this subject in Economics Basics: Demand and Supply and Monetarism: Printing Money To Curb Inflation.)

Effect on Short- and Long-Term Trends

With these factors causing both short- and long-term fluctuations in the market, it is important to understand how all these elements come together to create trends. While these major factors are categorically different, they are closely linked to one another. Government mandates impact international transactions, which play a role in speculation, and supply and demand plays a role in each of these other factors.

Government news releases, such as proposed changes in spending or tax policy, as well as Federal Reserve decisions to change or maintain interest rates can have a dramatic effect on long term trends. Lower interest rates and taxes encourage spending and economic growth. This has a tendency to push market prices higher, but the market does not always respond in this way because other factors are also at play. Higher interest rates and taxes, for example, deter spending and result in contraction or a long-term fall in market prices.

In the short term, these news releases can cause large price swings as traders and investors buy and sell in response to the information. Increased action around these announcements can create short-term trends, while longer term trends develop as investors fully grasp and absorb what the impact of the information means for the markets.

The International Effect
International transactions, balance of payments between countries and economic strength are harder to gauge on a daily basis, but they play a major role in longer-term trends in many markets. The currency markets are a gauge of how well one country's currency and economy is doing relative to others. A high demand for a currency means that currency will rise relative to other currencies.

The value of a country's currency also plays a role in how other markets will do within that country. If a country's currency is weak, this will deter investment into that country, as potential profits will be eroded by the weak currency. (Unique features of the forex market may allow larger players to get a jump on smaller ones; check out The Currency Market Information Edge also read Forex Trading Rules: Always Pair Strong With Weak for more on weak and strong currencies.)

The Participant Effect
The analysis and resultant positions taken by traders and investors based on the information they receive about government policy and international transactions create speculation as to where prices will move. When enough people agree on direction, the market enters into a trend that could sustain itself for many years.

Trends are also perpetuated by market participants who were wrong in their analysis; being forced to exit their losing trades pushes prices further in the current direction. As more investors climb aboard to profit from a trend, the market becomes saturated and the trend reverses, at least temporarily. (Find out what effect institutional investors have on the stock market and individual traders, read The Market Participant Playbook.)

The S & D Effect
This is where supply and demand enters the picture. Supply and demand affects individuals, companies and the financial markets as a whole. In some markets, such as the commodity markets, supply is determined by a physical product. Supply and demand for oil is constantly changing, adjusting the price a market participant is willing to pay for oil today and in the future.

As supply dwindles or demand increases, a long-term rise in oil prices can occur as market participants outbid one another to attain a seemingly finite supply of the commodity. Suppliers want a higher price for what they have, and a higher demand pushes the price that buyers are willing to pay higher.

All markets have a similar dynamic. Stocks fluctuate on a short and long-term scale, creating trends. The threat of supply drying up at current prices forces buyers to buy at higher and higher prices, creating large price increases. If a large group of sellers were to enter the market, this would increase the supply of stock available and would likely push prices lower. This occurs on all time frames. (The A/D line highlights buying and selling pressure to confirm existing trends; check out Trend-Spotting With The Accumulation/Distribution Line.)

The Bottom Line

Trends are generally created by four major factors: governments, international transactions, speculation/expectation, and supply and demand. These areas are all linked as expected future conditions shape current decisions and those current decisions shape current trends. Government affects trends mainly through monetary and fiscal policy. These policies affect international transactions which in turn affect economic strength. Speculation and expectation drive prices based on what future prices might be. Finally, changes in supply and demand create trends as market participants fight for the best price.

by Cory Mitchell

Cory Mitchell is an independent trader specializing in short- to medium-term technical strategies. He is the founder of www.vantagepointtrading.com, a website dedicated to free trader education and discussion. After graduating with a business degree, Mitchell has spent the last five years trading multiple markets and educating traders. He has been widely published and is a member of the Canadian Society of Technical Analysts and the Market Technicians Association.

Source :
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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

The History Of Money From Barter To Bank Notes

2011-12-07T06:05:00.000-08:00

Money, in and of itself, is nothing. It can be a shell, a metal coin, or a piece of paper with a historic image on it, but the value that people place on it has nothing to do with the physical value of the money. Money derives its value by being a medium of exchange, a unit of measurement and a storehouse for wealth. Money allows people to trade goods and services indirectly, understand the price of goods (prices written in dollar and cents correspond with an amount in your wallet) and gives us a way to save for larger purchases in the future.
Money is valuable merely because everyone knows everyone else will accept it as a form of payment - so let's take a look at where it has been, how it evolved and how it is used today. (To learn more about money itself, see What Is Money?)

A World Without Money

Money, in some form, has been part of human history for at least the last 3,000 years. Before that time, it is assumed that a system of bartering was likely used.

Bartering is a direct trade of goods and services - I'll give you a stone axe if you help me kill a mammoth - but such arrangements take time. You have to find someone who thinks an axe is a fair trade for having to face the 12-foot tusks on a beast that doesn't take kindly to being hunted. If that didn't work, you would have to alter the deal until someone agreed to the terms. One of the great achievements of money was increasing the speed at which business, whether mammoth slaying or monument building, could be done.

Slowly, a type of prehistoric currency involving easily traded goods like animal skins, salt and weapons developed over the centuries. These traded goods served as the medium of exchange even though the unit values were still negotiable. This system of barter and trade spread across the world, and it still survives today on some parts of the globe.

Oriental Cutlery

Sometime around 1,100 B.C., the Chinese moved from using actual tools and weapons as a medium of exchange to using miniature replicas of the same tools cast in bronze. Nobody wants to reach into their pocket and impale their hand on a sharp arrow so, over time, these tiny daggers, spades and hoes were abandoned for the less prickly shape of a circle, which became some of the first coins. Although China was the first country to use recognizable coins, the first minted coins were created not too far away in Lydia (now western Turkey).

Coins and Currency

In 600 B.C., Lydia's King Alyattes minted the first official currency. The coins were made from electrum, a mixture of silver and gold that occurs naturally, and stamped with pictures that acted as denominations. In the streets of Sardis, circa 600 B.C., a clay jar might cost you two owls and a snake. Lydia's currency helped the country increase both its internal and external trade, making it one of the richest empires in Asia Minor. It is interesting that when someone says, "as rich as Croesus", they are referring to the last Lydian king who minted the first gold coin. Unfortunately, minting the first coins and developing a strong trading economy couldn't protect Lydia from the swords of the Persian army. (To read more about gold, see What Is Wrong With Gold?)

Not Just a Piece of Paper

Just when it looked like Lydia was taking the lead in currency developments, in 600 B.C., the Chinese moved from coins to paper money. By the time Marco Polo visited in 1,200 A.D., the emperor had a good handle on both money supply and various denominations. In the place of where the American bills say, "In God We Trust," the Chinese inscription warned, "All counterfeiters will be decapitated."

Europeans were still using coins all the way up to 1,600, helped along by acquisitions of precious metals from colonies to keep minting more and more cash. Eventually, the banks started using bank notes for depositors and borrowers to carry around instead of coins. These notes could be taken to the bank at any time and exchanged for their face values in silver or gold coins. This paper money could be used to buy goods and operated much like currency today, but it was issued by banks and private institutions, not the government, which is now responsible for issuing currency in most countries.

The first paper currency issued by European governments was actually issued by colonial governments in North America. Because shipments between Europe and the colonies took so long, the colonists often ran out of cash as operations expanded. Instead of going back to a barter system, the colonial governments used IOUs that traded as a currency. The first instance was in Canada, then a French colony. In 1685, soldiers were issued playing cards denominated and signed by the governor to use as cash instead of coins from France.

Money Travels

The shift to paper money in Europe increased the amount of international trade that could occur. Banks and the ruling classes started buying currencies from other nations and created the first currency market. The stability of a particular monarchy or government affected the value of the country's currency and the ability for that country to trade on an increasingly international market. The competition between countries often led to currency wars, where competing countries would try to affect the value of the competitor's currency by driving it up and making the enemy's goods too expensive, by driving it down and reducing the enemy's buying power (and ability to pay for a war), or by eliminating the currency completely.
Despite many advances, money still has a very real and permanent effect on how we do business today. (Follow the development of money in the United States in The History Of Money: Currency Wars.)

by Andrew Beattie

Andrew Beattie is a former managing editor and longtime contributor at Investopedia.com. He operates the Wandering Wordsmith blog, and can be reached there.

Read more: http://www.investopedia.com/articles/07/roots_of_money.asp?partner=fxweekly12#ixzz1frCtudBT

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

How Gold Affects Currencies

2011-11-24T00:12:00.000-08:00

Gold is one of the most widely discussed metals due to its prominent role in both the investment and consumer world. Even though gold is no longer used as a primary form of currency in developed nations, it continues to have a strong impact on the value of those currencies. Moreover, there is a strong correlation between its value and the strength of currencies trading on foreign exchanges. (For related reading, see Gold: The Other Currency.)
TUTORIAL: Commodities Introduction

To help illustrate this relationship between gold and foreign exchange trading, consider these five important aspects:

1. Gold was once used to back up fiat currencies.

As early as the Byzantine Empire, gold was used to support fiat currencies, or the various currencies considered legal tender in their nation of origin. Gold was also used as the world reserve currency up through most of the 20th century; the United States used the gold standard until 1971 when President Nixon discontinued it. (For more, see The Gold Standard Revisited.)

One of the reasons for its use is that it limited the amount of money nations were allowed to print. This is because, then as now, countries had limited gold supplies on hand. Until the gold standard was abandoned, countries couldn't simply print their fiat currencies ad nauseum unless they possessed an equal amount of gold. Although the gold standard is no longer used in the developed world, some economists feel we should return to it due to the volatility of the U.S. dollar and other currencies.

2. Gold is used to hedge against inflation.

Investors typically buy large quantities of gold when their country is experiencing high levels of inflation. The demand for gold increases during inflationary times due to its inherent value and limited supply. As it cannot be diluted, gold is able to retain value much better than other forms of currency. (For related reading, see The Great Inflation Of The 1970s.)

For example, in April 2011, investors feared declining values of fiat currency and the price of gold was driven to a staggering $1,500 an ounce. This indicates there was little confidence in the currencies on the world market and that expectations of future economic stability were grim.

3. The price of gold affects countries that import and export it.

The value of a nation's currency is strongly tied to the value of its imports and exports. When a country imports more than it exports, the value of its currency will decline. On the other hand, the value of its currency will increase when a country is a net exporter. Thus, a country that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices increase, since this increases the value of the country's total exports. (For related reading, see What Is Wrong With Gold?)

In other words, an increase in the price of gold can create a trade surplus or help offset a trade deficit. Conversely, countries that are large importers of gold will inevitably end up having a weaker currency when the price of gold rises. For example, countries that specialize in producing products made with gold, but lack their own gold reserves, will be large importers of gold. Thus, they will be particularly susceptible to increases in the price of gold.

4. Gold purchases tend to reduce the value of the currency used to purchase it.

When central banks purchase gold, it affects the supply and demand of the domestic currency and may result in inflation. This is largely due to the fact that banks rely on printing more money to buy gold, and thereby create an excess supply of the fiat currency. (This metal's rich history stems from its ability to maintain value over the long term. For more, see 8 Reasons To Own Gold.)
exceptions.

5. Gold prices are often used to measure the value of a local currency, but there are
Many people mistakenly use gold as a definitive proxy for valuing a country's currency. Although there is undoubtedly a relationship between gold prices and the value of a fiat currency, it is not always an inverse relationship as many people assume.

For example, if there is high demand from an industry that requires gold for production, this will cause gold prices to rise. But this will say nothing about the local currency, which may very well be highly valued at the same time. Thus, while the price of gold can often be used as a reflection of the value of the U.S. dollar, conditions need to be analyzed to determine if an inverse relationship is indeed appropriate.

The Bottom Line

Gold has a profound impact on the value of world currencies. Even though the gold standard has been abandoned, gold as a commodity can act as a substitute for fiat currencies and be used as an effective hedge against inflation. There is no doubt that gold will continue to play an integral role in the foreign exchange markets. Therefore, it is an important metal to follow and analyze for its unique ability to represent the health of both local and international economies. (This article explores the past, present and future of gold. For more, see The Midas Touch For Gold Investors.)

by Kalen Smith

Kalen Smith is a frequent contributor to the Money Crashers personal finance blog and writes about financial topics like investing in the stock market, insurance options, saving for retirement, and behavioral finance theory. Kalen holds an Master of Business Administration degree in finance from Clark University in Worcester, Mass.

Source:
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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

ASEAN Economic Blowing Recovery Warm Air

2011-11-21T06:47:00.000-08:00

Closer look at Indonesia, Malaysia, Cambodia and other country's economy, giving people the feeling is full of vigor and vitality. Indonesia since the Asian financial crisis of 1997 triggered by the political and social upheaval, and after 10 years of reflection, adjustment and reform, emergence of stable social and economic situation of gradual development; Since 2003, Malaysia in the "civilian politics" to adjust gradually entered a new development path; Cambodia in recent years, the economic and social development successes.

In fact, more than the three countries, the ASEAN economic recovery in blowing warm air. An official with the words of the ASEAN Secretariat, the 2008 U.S. financial turmoil on Wall Street blew a severe impact on the ASEAN countries the general economic decline, but one year after the ASEAN economy bottoming out. In 2009, the average economic growth of ASEAN countries, 0.9%, Vietnam, Indonesia, the best performance, were up 5.3% and 4.5%. Singapore is a completely open economy, there will be 10% of the original estimate of negative growth, negative growth of only 2% of the results. Sustained due to political turmoil in Thailand, was a large drag on the economy, and finally fell only 1%. From the first quarter of 2010, the ASEAN economies to a strong rebound. It is estimated that this year's ASEAN economy is expected to grow by 6%, of which 13% -15% in Singapore, Indonesia, 6% -7%, Vietnam 6.5%, Malaysia 6%, 5% of Cambodia, Laos, 5%, 4% in Thailand, Myanmar 4 %.

In ASEAN, and now a popular general view that the ASEAN economy to bottom out quickly, mainly due to two factors: First, driven by strong economic recovery; Second, after the 1997 Asian financial crisis, ASEAN countries are on their own financial system has been adjusted to enhance regional cooperation, improve the ability to resist risks.

After World War II, Southeast Asia, there have been two major developments. Once in the last century 60's to 80's. The Japanese economy, led by the Asian "tigers." Singapore is one of them rely mainly on export-oriented, labor-intensive mode of development, a large number of solving the employment, and to promote economic growth. Singapore's success had a positive impact in Southeast Asia. The second time was in the 90s of last century. Southeast Asian countries follow the "Four Dragons", in chased each other in the emergence of the "four tigers", ie Malaysia, Thailand, the Philippines and Indonesia. Southeast Asia was unprecedented flourishing scene.

Closer look at Indonesia, Malaysia, Cambodia and other country's economy, giving people the feeling is full of vigor and vitality. Indonesia since the Asian financial crisis of 1997 triggered by the political and social upheaval, and after 10 years of reflection, adjustment and reform, emergence of stable social and economic situation of gradual development; Since 2003, Malaysia in the "civilian politics" to adjust gradually entered a new development path; Cambodia in recent years, the economic and social development successes.

In fact, more than the three countries, the ASEAN economic recovery in blowing warm air. An official with the words of the ASEAN Secretariat, the 2008 U.S. financial turmoil on Wall Street blew a severe impact on the ASEAN countries the general economic decline, but one year after the ASEAN economy bottoming out. In 2009, the average economic growth of ASEAN countries, 0.9%, Vietnam, Indonesia, the best performance, were up 5.3% and 4.5%. Singapore is a completely open economy, there will be 10% of the original estimate of negative growth, negative growth of only 2% of the results. Sustained due to political turmoil in Thailand, was a large drag on the economy, and finally fell only 1%. From the first quarter of 2010, the ASEAN economies to a strong rebound. It is estimated that this year's ASEAN economy is expected to grow by 6%, of which 13% -15% in Singapore, Indonesia, 6% -7%, Vietnam 6.5%, Malaysia 6%, 5% of Cambodia, Laos, 5%, 4% in Thailand, Myanmar 4 %.

In ASEAN, and now a popular general view that the ASEAN economy to bottom out quickly, mainly due to two factors: First, driven by strong economic recovery; Second, after the 1997 Asian financial crisis, ASEAN countries are on their own financial system has been adjusted to enhance regional cooperation, improve the ability to resist risks.

After World War II, Southeast Asia, there have been two major developments. Once in the last century 60's to 80's. The Japanese economy, led by the Asian "tigers." Singapore is one of them rely mainly on export-oriented, labor-intensive mode of development, a large number of solving the employment, and to promote economic growth. Singapore's success had a positive impact in Southeast Asia. The second time was in the 90s of last century. Southeast Asian countries follow the "Four Dragons", in chased each other in the emergence of the "four tigers", ie Malaysia, Thailand, the Philippines and Indonesia. Southeast Asia was unprecedented flourishing scene.

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

Currency Positions You Can Take Now

2011-11-16T06:22:00.000-08:00

Bank for International Settlements (BIS) data indicate that the global foreign exchange markets boast over $4 trillion in average daily trading volume, making it the world's largest financial market.

The forex market entices traders of all levels, from novices just learning about the financial markets to well-seasoned professionals. With nearly round-the-clock trading sessions, access to considerable leverage and low costs, it is relatively easy to enter the forex arena. Current economic conditions and volatility in the overall markets, however, can be intimidating to the forex trader. Fortunately, traders have a variety of choices, including more conservative plays, when it comes to investing in currencies. (If forex interests you read How To Become A Successful Forex Trader.)

TUTORIAL: Forex Tutorial

Foreign Currency Certificates of Deposit

The interest rates in the U.S. are so low right now that it is difficult to make any money off certificates of deposit (CD). That said, they do offer a safe place for money; investors may not earn much, but they will not lose any money either. Another option for certificates of deposit that may provide the opportunity to earn higher interest rates is the foreign currency CD.

EverBank offers a WorldCurrency CD that earns interest rates based on the local rates of a specific country or a basket CD that offers exposure to a variety of currencies. These foreign currency CDs are subject to fluctuations in exchange rates, but generally offer higher interest rates than dollar-denominated CDs. Investors can lose money if the dollar strengthens against the foreign currency as the CD matures.
Only U.S.-based FDIC-insured banks should be used; in fact, many websites that offer foreign currency CDs at fantastic rates are scams. The FDIC insurance protects against bank insolvency, but not against the currency price fluctuations so money can be lost in this type of CD.

Currency Exchange Traded Funds

Exchange traded funds, commonly referred to as ETFs, are investment funds that are traded on a stock exchange. Investors have a wide variety of ETFs from which to choose including those that track a major market Index, target gold or track a basket of foreign currencies. Currency ETFs provide investors with exposure to a particular currency or a basket of currencies, allowing access to multiple foreign currencies.

In 2005, Rydex SGI launched CurrencyShares Euro Trust (NYSE:FXE), the first currency exchange-traded fund. Since then, there has been significant growth in the entire currency ETF market, with assets of all funds now totaling more than $6 billion. Approximately 40 funds are now available that offer investors currency exposure.

The largest of the currency ETFs is the PowerShares DB U.S. Dollar Index Bullish (NYSE:UUP) with $1.05 billion in net assets. Incidentally, an advantage in trading ETFs is that they can be shorted, so investors could actually short the bullish fund if they felt the dollar was headed down. The fund invests by going long USDX futures contracts (to replicate the performance of being long the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc). (To learn more about Currency ETF, read Profit From Forex With Currency ETFs.)

Emerging Markets

The demand for U.S. currency has waned worldwide as developing economies like China begin to pay for cross-border transactions using domestic currency rather than dollars. As the demand abroad decreases, the supply of dollars has grown as a result of the Federal Reserve Board's second round of quantitative easing efforts that pumped a total of $900 billion into the money supply. The changing climate has some foreign exchange investors looking towards new markets for trading opportunities.

Investors and traders can play the emerging markets in a number of ways, including emerging market exchange traded funds or directly in an emerging economy's currency, such as the Hong Kong dollar, Singapore dollar, South African rand and the Brazilian real.

WidsomTree Dreyfus Emerging Currency Fund (NYSE:CEW), for example, has more than $599 million in net assets and is an actively managed fund that invests in eight to 12 emerging markets currencies currently including those found in Latin America (Brazilian real, Chilean peso and Mexican peso); Europe, Middle East and Africa (Polish zloty, Russian ruble, South African rand and Turkish new lira) and Asia (Chinese yuan, Indian rupee, Indonesian rupiah, Malaysian ringgit and South Korean won).

Currency Futures

Currency futures are futures contracts where the underlying commodity is a currency exchange rate. These contracts offer investors the ability to enter the foreign exchange market in an environment that is similar to other futures contracts. Currency futures, also called forex futures or foreign exchange futures, are exchange-traded futures contracts to buy or sell a specified amount of a particular currency at a set price and date in the future. Like other futures products, currency futures are traded in terms of contract months with maturity dates falling in March (H), June (M), September (U) and December (Z).

Popular currency futures contracts include:

- AUD/USD Futures (Australian dollar/US dollar)

- CAD/USD Futures (Canadian dollar/US dollar)

- EUR/USD Futures (Euro/US dollar)

- GBP/USD Futures (British pound/US dollar)

- CHF/USD Futures (Swiss franc/US dollar)

- EUR/GBP Futures (Euro/British pound)

- EUR/CHF Futures (Euro/Swiss franc)

- EUR/JPY Futures (Euro/Japanese yen)

- JPY/USD Futures (Japanese yen/US dollar)

- NZD/USD Futures (New Zealand dollar/US dollar)

An advantage in trading the currency futures markets is that they are regulated the same way as other futures markets. They have a great deal more oversight than the spot forex market which is largely unregulated. Currency futures brokers must follow regulations enforced by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).

The Bottom Line

The foreign currency market is the largest financial market in the world. Investors who are interested in exposure to this market have many options. Each investor should adequately research investment opportunities and consult with a qualified advisor before making any investment decisions. (To start investing in forex, see Getting Started In Forex.)

Posted: August 30, 2011 10:02AM by Jean Folger

Please note: At the time of publication, the author did not hold any positions in any instrument mentioned in this column

Source : http://financialedge.investopedia.com/
Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

The Swiss Franc: What Every Forex Trader Needs To Know

2011-11-10T01:54:00.000-08:00

Foreign exchange, or forex, trading is an increasingly popular market for investors and speculators. The markets are huge and liquid, trading occurs on a 24-hour basis, and there is enormous leverage inherent in the system. Moreover, it is opportunity to trade on the relative fortunes of countries and economies as opposed to the idiosyncrasies of companies. (For related reading, see 10 Ways To Avoid Losing Money In Forex.)

TUTORIAL: Introduction To Currency Trading

Despite many attractive characteristics, the foreign exchange market is vast, complicated and ruthlessly competitive. Major banks, trading houses and funds dominate the market and quickly incorporate any new information into the prices.

Foreign exchange is not a market for the unprepared or ignorant. To effectively trade foreign currencies on a fundamental basis, traders must be knowledgeable when it comes to the seven major currencies. This knowledge should include not only the current economic stats for a country, but also the underpinnings of the respective economies and the special factors that can influence the currencies.

Introduction to the Swiss Franc

Switzerland has seemingly always had an outsized significance to the global financial community, and its currency is no exception. The Swiss franc is the sixth-most traded currency on the foreign exchange markets, even though its economy (in nominal GDP) ranks just 19th in the world. Despite a long-held reputation for conservatism and prudence, the Swiss franc is not a common reserve currency. (For related reading, see Forex: Making Sense Of The Euro/Swiss Franc Relationship.)

The central bank behind the Swiss franc is the Swiss National Bank. As befits the country's reputation for sober and conservative economic management, the SNB does target a consistent inflation rate of around 2%. Generally speaking, the SNB does not engage in stimulative monetary policy in response to economic downturns.

The Economy Behind the Franc

Switzerland's economy is small overall, but it has some outsized significance in the global banking community.

Financial services make up more than 11% of Switzerland's GDP and the country's strict policies regarding neutrality and bank secrecy have made it an exceptionally popular destination for global funds. While Switzerland has been cajoled into rolling back some of its secrecy, there are widespread rumors that as much as one-third of the world's offshore funds are held in Swiss banks. Due in part to its neutrality and its long reputation as a banking center, the Bank For International Settlements is based in Basel. (Learn the underlying theories behind these concepts and what they can mean for your portfolio. For more, see The Importance Of Inflation And GDP.)

Although Switzerland's central bank targets stability in prices, stability in growth has eluded the country. GDP growth has gone negative four times in the last 20 years and has frequently been below 2% a year. Switzerland has indeed been quite successful at controlling inflation over the last 20 years, however, and debt (as a percentage of GDP) has held steady around 55% for a number of years.

Switzerland does boast an exceptionally low rate of unemployment and though manufacturing has been in long-term decline, the country is still competitive in some industries like chemicals, pharmaceuticals and electric machinery. That said, services (particularly financial services) are a major component of the economy and a major factor in the high per-capita income of Swiss citizens.

Drivers of the Franc

There are several theories that attempt to explain foreign exchange rates. Purchasing power parity, interest rate parity, the Fisher effect and balance of payments models all offer explanations of the right exchange rate based upon factors like relative interest rates, price levels and so forth. In practice, these models do not work especially well in the real market – real market exchange rates are determined by supply and demand, and that include a variety of market psychology factors. (4 Ways To Forecast Currency Changes will introduce you to four of the most popular methods for forecasting exchange rates.)

Major economic data includes the release of GDP, retail sales, industrial production, inflation and trade balances. These come out at regular intervals and many brokers, as well as many financial information sources like the Wall Street Journal and Bloomberg, make this information freely available. Investors should also take note of information on employment, interest rates (including scheduled meetings of the central bank) and the daily news flow – natural disasters, elections and new government policies can all have significant impacts on exchange rates.

Trading in the Swiss franc is certainly influenced by the global demand for Switzerland's services as a confidential offshore holding area for funds. The franc also trades as a more stable alternative to the dollar, euro or British pound in times of turbulence and uncertainty. While there are really not enough francs in circulation to use it as an alternative to these currencies, traders and speculators nevertheless seem to prefer the franc when conditions get dicey in other economies.

Carry Trade

When talking about the carry trade (which involves borrowing in a currency with low interest rates and using it to buy government debt in a currency with high rates), most of the conversation revolves around the Japanese yen. Nevertheless, the Swiss franc is also a significant player in the carry trade due to the low rates, stability and liquidity. Carry trades with the Swiss franc often involve the euro or pound, and traders must keep an eye the interest rates in those areas as they can influence demand for the franc. (For more on currency carry trading, see Currency Carry Trades 101.)

Unique Factors for the Swiss Franc

Switzerland's famous neutrality is a significant factor in its economy and currency. Though Switzerland harmonizes many of its policies with the Eurozone countries, it is not a member and it maintains its independence. What's more, as a global destination of choice for expatriated capital, Switzerland is less sensitive to the economic performance of its neighbors.

Switzerland does have some risks with its heavy reliance on its banking sector. Under pressure from countries like the United States and Germany, some of Switzerland's bank secrecy laws have been relaxed. That is likely a concerning development for dictators, criminals and businessmen who want to keep their wealth both safe and secret. As a result, other countries like Singapore have begun tightening their rules and promoting themselves as emerging alternatives to Switzerland for offshore accounts.

Another odd aspect to the Swiss franc is that, in many ways, it is a currency and not a country. While the U.S. dollar is certainly boosted by its heavy weighting as a reserve currency and its safe haven status, trade in the dollar is still largely dictated by the economic conditions of the United States. For the Swiss franc, it sometimes seems that only the interest rate decisions of the SNB really matter. Perhaps this is because Swiss governments have maintained largely consistent economic policies (no one expects anything wild from the Swiss), or perhaps it is because demand for the Swiss franc is dominated more by its utility as a liquid, stable and reliable alternative currency. (For more on the U.S. dollar, see The U.S. Dollar: What Every FX Trader Needs To Know.)

The Bottom Line

Currency rates are notoriously difficult to predict, and most models seldom work for more than brief periods of time. While economics-based models are seldom useful to short-term traders, economic conditions do shape long-term trends.

As Switzerland is not likely to move away from its conservative low-growth, low-debt philosophy and is likely to remain a key banking center, the fundamental supports for the franc seem to be firmly in place. What's more, so long as Switzerland's policies continue to result in low rates, it is likely to remain an attractive option in carry trades and a currency with a significance far outstripping the size of its home economy. (For related reading, see Play Foreign Currencies Against The U.S. Dollar - And Win.)

by Stephen D. Simpson, CFA

Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.

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How to Go Green with Home Building Materials

2010-01-28T23:58:00.000-08:00

Many people use recycled materials to build or renovate their homes. This is a great saving in cost for them and it also helps to save the earth's resources. Sometimes you can get timber pieces that are brand new, but because they are excess they will simply be thrown away. Home building materials need not cost the earth. Going green with home building materials simply means using timber and other products that have been recycled. In fact, just because other people have thrown it out does not mean that there is anything wrong with it. They may simply be renovating and have decided to change from one product to another.

And it is not only from home renovations that such timber and other building materials can be sourced. Construction sites have quite a bit of waste that is thrown into the dumpster and taken out to go into landfill at the local tip. This is timber, tiles and many other building materials that have been over-ordered and are now excess to the job in hand. Builders usually over order so that there will be no problems with replacing things such as tiles that may get broken. Very often it is impossible to get an exact match, so over-ordering is considered cheaper than having to throw the lot away because you were a few tiles short.

Timber excess sometimes comes from off-cuts but often you can also get full lengths of timber that are ideal for the home handyman. There is excess here because builders buy timber in set amounts and even if they only use half of it, the full amount must be purchased.

Using home building materials from recycled sources means that the earth's resources have been saved. It is not only the trees that now don't need to be cut down, but the fuel and cost of cutting them up and transporting them that has been saved.

by Melanie Cath
submitted 2010-01-28

About the Author

Mel writes about home building materials among other automotive related topics.

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WHAT IS IN A GOLF BALL

2009-11-07T23:20:00.000-08:00

In the chemistry of air pressure, turbulence, and aerodynamics, surface structures are vital physical element. History has it that there are things that seem to be peculiar on their make-up hundreds of years ago which eventually came up with a better composition based on scientific research. And a golf ball is the best paradigm of this theoretical stand in history.

During the earliest days of golf on the eastern coast of Scotland, most players used ancient apparatus in order to play the game in a more disorganized and informal way. Here, the first clubs and golf balls are made up of wood.

It was on 1618 that the feather golf ball was finally introduced. This was commonly known as the "Featherie". This feather golf ball was a handcrafted ball made with goose feathers securely pressed into a horse or cowhide sphere. This is being done while the ball is still wet. After drying, the leather shrank and the feathers expanded creating a hardened ball.

But because these kinds of golf balls are specially handcrafted, they usually cost higher than the clubs. In doing so, only a few privileged people could afford to play golf during those times.

Next came the Guttie golf ball. This prehistoric kind of golf ball was made from the rubber like sap of the Gutta tree that can be found in the tropics. Normally, these Guttie balls can be easily shaped into a sphere when hot and eventually used as a golf ball. With its rubber nature, guttie balls can be cheaply reproduced and can be easily repaired by reheating and reshaping.

However, between the two earliest forms of golf balls, the feather golf ball was said to travel farther than the gutties. This is due to the smooth surface of the gutties that limits the capacity of the golf ball to cover more distance.

With this new scientific analysis, the developers of golf ball finally came up with balls with the "dimples" that are predominant in modern golf balls nowadays.

Dimples are crafted into golf balls so as to reduce the aerodynamic drag, which will be acting on the ball if it were totally smooth. This is because smooth balls, when sailing through the air, leave a huge pocket of low-pressure air in its stir therefore creating a drag. With the application of drag, the ball slows down.

Hence, by having dimples on golf balls, the pressure differential goes down and the drag force is reduced. These dimples create turbulence in the air surrounding the golf ball. This, in turn, forces the air to clasp the golf ball more closely. By doing so, the air trails the warp created by the ball towards the back instead of flowing past it. This results to a smaller wake and lesser drag.

Dimples also help players to put backspin on a shot making the golf ball break off on the putting green.

The idea of putting dimples on golf balls can be traced back during the gutta percha phase. Coburn Haskell introduced the one-piece rubber cored ball encased in a gutta percha sphere. It was during this time when the players observed how their shots become more and more predictable as their balls turned rough from play.

When William Taylor applied the dimple pattern to a Haskell ball in 1905, golf balls finally took their modern form.

From then on, dimpled golf balls were officially used in every golf tournament. In 1921, the golf balls took its form with standard size and weight.

Today, there is an abundant selection of golf balls to fit different golf game and condition. There are golf balls that offer control, while some offer distance. In whatever ways golf balls vary, only one thing is common and known. Golf balls are not just elements of the sports arena; they are more than ever paradigm of a concept in physics.

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A very short history- Hybrid cars

2009-10-30T23:01:00.000-07:00

The first hybrid was built over a hundred years ago - the Mixte built by Porsche. The Mixte even won a car rally. It used a gasoline engine to power a generator which ran an electric motor.

Dual-fuel vehicles were not uncommon in the 1930s and 40s. Many buses and other heavy transport vehicles had systems which allowed them to run on petrol or diesel.

Most modern hybrids are HEVs - Hybrid Electric Vehicles.

The technology to power the hybrids of today really began in the 1970s. Victor Wouk is usually seen as the "Godfather" of the hybrid car after he developed a hybrid drive-train for a Buick. Progress stalled when the US EPA ditched the Federal Clean Car Incentive Program in the mid seventies.

The next technical innovation which was crucial to modern hybrid design was the regenerative braking system. Regenerative brakes harvest electrical energy from the process of braking. The energy is used to recharge the battery and reduce fuel consumption. David Arthurs developed the first one in the mid 1970s. He was able to reach 78mpg in a modified Opel GT sports car.

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Which is Truly the Best Hybrid Car Available Today

2009-10-26T22:53:00.000-07:00

Saving the environment through less gas emissions from cars have been becoming sort of a sacred statement today. More and more people are voicing out their concerns about saving the environment from deadly gas emissions from vehicles and yet are still buying cars. Well, the convenience a car gives is incomparable, but the damage it brings is astounding. That is why Hybrid Cars have become a viable solution in answering the call for convenient and easy modes of transportation and lessening or eradicating air pollution.

Many car manufacturers have seen the potential of hybrid cars and have developed their own versions of this revolutionary vehicle. At the forefront is Toyota and Honda who was the first ones to come up with mass produced hybrid vehicles and has a number of hybrid vehicles in their line up. GM has also come out with their Hybrid vehicles as well as Ford. With many Hybrid vehicles out in the market already, a consumer may wonder which is truly the Best Hybrid car available today?

With the advent of technology and science, more and more gadgets and equipments are being offered today to suit different tastes, styles and preferences. That’s why declaring one to be ultimately the best and perfect for all is quite impossible. This goes the same for cars. Depending on where you will be using the vehicle, what is best for you may not be necessarily be the best for another. But, they could be divided into categories and the best among them could be chosen.

According to recent researches and surveys, here is the recent list on what is considered the "best" by the consumers.

The Best Sedan Hybrid Car distinction was awarded to the latest Honda Civic Hybrid. Improving significantly over its previous model, it has the sleek and sporty look the conventional Civic has and doesn’t announce its being a hybrid. But being its owner, you will certainly feel the difference. You still get the high quality and comfort conventional Civics provides, but you go to gas stations to fill up less.

The Best SUV Hybrid award is given to the first ever SUV Hybrid in the market, the Ford Escape Hybrid. Its inception in the Hybrid market was such a huge success that although it already has competitors from Toyota and Lexus, it still reigns supreme. With many features and accessories plus the power of a small SUV, the Ford Escape is seen to just keeping better and would be hailed as the Majesty of Hybrid SUV's for many years to come.

Voted for Best Hybrid car in terms of economy in pure fuel is the Honda Insight. Combining its distinctive aerodynamic body design and its lightweight finish plus of course its superb hybrid technology, the Insight produces the best figures in fuel economy. Although not as multi awarded nor as comfortable and powerful as its stable mate the Civic Hybrid, the Insight is best if you want fuel economy, and with the oil prices still surging upward, this is not a bad idea after all.

But gaining a lot of nod of approval from the Hybrid enthusiasts is the league leading and multi awarded Toyota Prius. Garnering the largest number of votes as the Hybrid vehicle with over all great value, performance and design, this could most probably be the Hybrid car that most likely deserves to be called as the best hybrid car available today.

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A hybrid car definition: A hybrid car is a car which can run on two or more fuel sources.

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Golf Tips Involving Golf Equipment

2009-07-02T02:18:00.000-07:00

Blaming your moves, shots and swings for your golf mishits and mishaps? Well, no matter how much time and effort you have been spending over practicing your moves to perfect your game, you still won’t achieve your goal if you use unsuitable or defective types of golf equipment, will you?

Now is high time for you to consider the following golf tips that involve checking on your equipment’s quality.

If you plan to choose used golfclubs as beginner’s tools, scrutinizing before purchasing is a must. The clubheads, the shafts, and the grips are golfclub parts that should pass inspection first before landing a decent spot in your golf equipment cabinet. Another excellent golf tip that will get you through the game is making sure that the set of used golfclubs you’re eyeing have set consistency. It will also help a lot if you check first the price of new clubs vs. used.

A golf tip for a golfer that plans to regrip his clubs: Be cautious. This is because the grips are the only contact points one can access to affect the shot. Before carrying out the regripping, know the core grip of the club and your hands grip size. To determine your core size grip, measure the diameter of the butt of the shaft you’re going to re-grip. The shaft’s diameter should match the grip’s core diameter. In determining your hands grip, the available size grips are regular, mid-size, oversize and jumbo. Use only the best re-gripping materials that will provide optimum performance for your golf clubs.

Another golf tip or advice is that using ill-fitted clubs will be an obstacle to your golf playing success. A golfer must consider his or her body type in choosing the best-fitting equipment to support and deliver his backswings efficiently. Too steep angles in carrying out backswings may be avoided if one selects the perfect fitting equipment available.

Custom golfclub fitting makes a better option than just buying new golf clubs. Getting custom fitting golfclubs is a golf tip that translates to a very worthy investment. The uniqueness of each person is attributed to the need of this way of buying new golf clubs. A custom fitting produces golfclubs that specifically suit the height, strength, swing characteristics and clubhead speed of the golfer.

The type of club shaft also helps in predicting whether you’ll do good in a game or you won’t. There’s a choice between a steel club shaft and a graphite-made club shaft. This golf tip aims to make you realize which type of golfclub shaft will benefit your game. Observations tell that the steel club shafts are more preferred by professional golfers while graphite shafts become more popular with women, senior players and beginners. Steel shafts are less expensive than graphite shafts though.

One more golf tip that could help you is that the golf clubs that must be the main content of your bag must suit your skill level. Since various skill levels need various golf clubs, it won’t be wise to just use or bring a golf club that is just lying around. And, don’t ever forget about the maximum golfclub load your bag is allowed to hold. You can only bring 14 golf clubs in your bag. No more. No less. Aside from your skill level contemplation, your mastery of a certain golfclub and your being comfortable with using it must also be put into consideration in deciding which golfclub to hit.

A good combination of the right moves and good choice of equipment will better arm you to become the best golfer you could ever be.

Good luck…and…GoGreen

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Rental Property Investment

2009-05-25T20:58:00.000-07:00

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The chief goals of any property investment are appreciation, cash flow and tax savings. Rental property investment is the only property investment that provides you all these three benefits at the same time.

The main rental property categories consist of single family rental properties, multi-unit residential rental properties, commercial rental properties and holiday homes. The first category includes long term single family renting, the second category includes apartments, buildings for multiple families while the last category includes shopping centers, office buildings etc. for a long tem renting purpose. Here are other points to consider with real property investments:

1) Methods like repossessions, ugly homes, and probate homes are useful for buying property. Lease purchases can be extremely useful which help you to leverage investment money and reach a positive cash flow from renting. Buying fixer upper homes or repossessions can help to reduce investment money and improve cash flow and appreciation.

2) One cannot expect a considerable cash flow from property with one tenant. In this case, the main goal is to cover the mortgage and current expenses.

3) Research on a potential rental home should include significant financial planning for years ahead, like expenses of property management, repairing, vacancy, emergency etc.

4) The apartment and the 2-4 unit homes are the main classes of the multi-unit residential property investments.

5) With apartment investments the main profit comes from the rental cash flow. A lease to purchase option and leveraging investment money is quite useful in this case. The most significant factors in this case are the financial evaluation and property management. With a steady cash flow from a number of tenants, it is possible to hire a manager for the property management. It helps to increase the cash flow and the value of the apartment building. Underestimation may damage the investment and lead to loss.

6) Commercial properties investments include office buildings, retail shopping centres, industrial properties and the like. The market value of these properties is decided on the cash flow (net rental income). The main objective of rental in these cases is to generate enough cash to exceed the cost of mortgage, insurance, maintenance, future improvements. This is not an easy task to handle. It requires analysis of many things. But if done properly it could prove to be lucrative.

Changes in the economic conditions usually have a pronounced impact on these types of real estate investments than on residential property investments. And as office buildings and industrial properties are more susceptible to these changes, it is wise to keep extra capital to support those investments if something does not go as expected. In this case, a money-leveraging approach (lease to purchase option) is very useful.

7) A holiday home can be used in two ways. It can be a property home or an investment property. This category includes resort properties, mountain homes, or beach homes. With holiday rentals, the main profit comes from the appreciation. Cash flow generated from renting is usually used for current expenses like property management, mortgage and insurance. These are short-term rentals and require intensive maintenance.

About The Author: Parmdeep Vadesha is the founder of the largest online community of property entrepreneurs who buy below market value properties from distressed sellers facing repossession, divorce and bankruptcy. Join 70,000 property investors & subscribe to his FREE newsletter www.property-system.com/

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Owning Real Estate in Puerto Vallarta by Joshua Geary

2009-03-14T23:30:00.000-07:00

Imagine the joys of a summer home that makes you money whenever you are not staying in it. This kind of place would be beautiful to visit, comfortable and easy to live in, and ready for you whenever you want because it would be yours. A timeshare cannot offer you all of that no matter how desirable the location, since it can be difficult to get the time slots that you want and even harder during peak vacation time. A timeshare cannot give you everything you need to have the perfect getaway whenever you want, but a condo in a place like Puerto Vallarta, Mexico can.
Puerto Vallarta is one of the most incredible real estate location in Mexico. Invest in Mexico and you can retire to your beachfront condo whenever you wish to enjoy days filled with sun, sand, golfing, fishing, and anything else you could desire from a tropical paradise. Your oceanfront condominium will be waiting for your return whenever you are away, and you will surely wish to retire to Puerto Vallarta's idyllic setting after spending vacation after vacation in sunny bliss.

Owning real estate in Puerto Vallarta can also be a greatly profitable adventure. The typical American has only two to four weeks of vacation time per year, and for the other forty eight weeks, your vacation property would normally sit empty, awaiting you. To keep your property on the Pacific Ocean working for you, hire a local property management company to keep your place looking fresh and lovely and rent your condo out as a vacation rental to others looking to enjoy the wonders of Puerto Vallarta.

Real estate in Puerto Vallarta is a flourishing business because of the high profitability and constantly increasing prices of the local properties. Even just a couple of years of property ownership could translate into big money for interested investors, and getting a great vacation home that pays for itself is no small benefit either. You may become so enamored with your property in Puerto Vallarta that you will not be willing to sell it!

Owning real estate in Puerto Vallarta means living in the lap of luxury. You can enjoy a tropical paradise on the Pacific Ocean and never worry about a thing. The beautiful and luxurious condominiums and other properties in this city are made for the comfort and delight of their residents, even short term residents like yourself. Glance out the window of your Puerto Vallarta condo and watch the dolphins play in the Pacific Ocean. Enjoy sunshine on the beach or adventures beneath the waves, and fall in love with this incredible location.

Prices on properties in Puerto Vallarta seem to rise by the day, so now is the time to do your due diligence and learn more about investing in Mexico. Your investment property may be just waiting for you in sunny Mexico, but it won't wait forever. The time has come for you to make the smart move that you have been dreaming of and invest in Mexico.

Investing in a condominium in Puerto Vallarta could be a smart investment choice for those who are looking to invest in Mexico. You will have a vacation home to enjoy that practically pays for itself, you will be able to enjoy the beautiful Pacific Ocean on your future vacations, and you could potentially be able to resell the condo for a great profit if you don't decide to retire to Mexico entirely. With all of these incredible benefits, what could be better?

About the Author
Real Estate in the US maybe cooling, but real estate opportunities are heating up in Puerto Vallarta. Puerto Vallarta is a destination that likely going to be a hot bed for real estate development for years to come. Visit http://www.PrimePuertoVallartaRealEstate.com and subscribe to get information on how to purchase condos in Puerto Vallarta Mexico.

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Invest in Farmland

2009-03-05T05:14:00.000-08:00

Mark Twain once said, “Buy land, they're not making it anymore”, and he was absolutely right. Farmland is a tangible asset that will hold its value no matter what happens. Farmland is an appealing investment because you can receive income from rents and get appreciation that tends to run ahead of inflation.

My family is in the orange farming business and we don’t make much money by selling the oranges after all the labor costs. But on paper, we have made a boatload of cash from land appreciation. That really doesn’t matter because we will never sell our land, as it’s a great long- term investment. Let me explain.

Many farmers are getting a lot more income due to higher crop prices, growing food demand and increasing demand for bio-fuels. So it’s not surprising that farmland prices are on the rise.

A government can always print more currency, but it can’t make new farmland.

Investing in farmland is a great idea because the world’s population will continue to grow and so will the demand for farmland. The farmland is necessary to grow the food for all these extra people. So land is essentially the most valuable thing that you can possibly own.

How to invest in farmland

If you have the time and money, then buy a farm in Iowa and farm it or rent it out for the income. Good farmland in Iowa goes for about $4,500 per acre and you can aim for a 12% per year return with rental income and land appreciation.

If you have lots of time, you could pick up cheap land in a developing country for a few hundred bucks an acre and bring it into production or improve it to raise yields. My wife and I looked at some farmland the last time we were in Brazil in 2004 and we could have picked up some cheap land for only $100 an acre. The problem is the land was in an extremely remote area. We decided against it because it would have been difficult for us to develop since we live in the US and don’t speak Portuguese.

If you don’t have the time to become a farmer, then I suggest you buy stock in a timber producer. One of my favorites is Plum Creek Timber (PCL). PCL owns and manages millions of acres of timberland in the United States and its products include lumber products, plywood, medium density fiberboard, and related by-products, such as wood chips.

Best Wishes,

Ted Peroulakis

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell

The index of pending home resales climbed

2009-02-05T01:46:00.000-08:00

The number of Americans signing contracts to buy previously owned homes unexpectedly rose in December, signaling that foreclosure-driven declines in prices are boosting demand.

The index of pending home resales climbed 6.3 percent to 87.7, the first increase since August, from a revised 82.5 in November, the National Association of Realtors said in a report today in Washington. Other reports showed a record number of houses for sale stood vacant last quarter and property values sank by more than $3 trillion last year.

Builder shares jumped on the increase in contracts and on reports the Obama administration, in seeking to stem record foreclosures, is considering offering government guarantees to mortgage lenders that modify loan terms.

“The biggest gains were in areas with the biggest improvements in affordability,” Lawrence Yun, the group’s chief economist, said in a statement. The NAR’s affordability index reached a record high in December.

Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in the Realtors’ monthly existing-home sales report. That report for January is scheduled to be released Feb. 25.

Purchases of previously owned homes, which account for about 90 percent of the market, climbed 6.5 percent in December from the prior month as foreclosures helped drive median prices down 15 percent from a year earlier.

-Bloomberg.com

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There Is Still Money To Be Made In The Housing Market

2009-01-29T18:27:00.000-08:00

A little over a week ago, in my Monday column, I correctly predicted that the December Housing Starts and Building Permits reports would miss the mark by a wide margin. I even correctly picked the actual number. This past Monday, my prediction was that the December Existing Home Sales report would also likely disappoint. I wasn’t such a good fortune teller the second time around.

The December Existing Home Sales report actually surprised to the upside, posting a gain of 6.5 percent versus November. This equates to roughly 290,000 units.

It turns out that I just underestimated how bad the housing market is. These sales aren’t from eager buyers who got priced out of the market during the run up over the last few years. The buyers are vultures, swooping in and cleaning the carcass. Over 45 percent of the sales were “distressed” according to the report.

That is bad news for the market. It is just the beginning of a viscous cycle.

Foreclosures continue to drive down prices in all markets. As a result, more and more homeowners see their equity vanishing. Many more find themselves underwater. This leads many to simply throw in the towel and let their own home go into foreclosure, feeding the cycle.

Another item to consider is whether or not all the bank-owned foreclosures are even back on the market yet. There is growing evidence that banks are holding back properties from being re-listed to avoid flooding the market, which would result in prices being driven down below what they hope to get for the repossessed homes. This means there could be an additional backlog of properties that we aren’t even aware of yet. This will delay any recovery.

Finally, a major question that needs to be answered is how many people actually qualify to buy a home? Fannie and Freddie are said to be toughening up on standards, and banks are just flat out not lending. That means short of a huge down payment or an all-cash purchase, buying any home, foreclosure or not is going to be difficult. And the housing market needs buyers to move the inventory.

With all this gloom in the market, it is going to take quite some time for a recovery. That leaves you plenty of time to profit from the slide in the housing market. One way is shorting the iShares Real Estate Index (IYR), another is shorting the Vanguard REIT ETF (VNQ). Both have already seen a significant down leg, but with the housing market the way it is, there is still plenty of room to the down side.

A more speculative play could be the UltraShort Real Estate ProShares (SRS). This ETF moves inverse to real estate, so it goes up as the market goes down. A quick look at the chart shows a huge spike in November and a drop since then. It is now trading at two-year lows, so you could view it as a more speculative play on the continuing decline of the housing market.

By Christian Hill

Posted 28Jan2009

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The Next Big Thing in Autos

2009-01-21T20:27:00.000-08:00

The auto industry is reeling so badly that it’s hard to imagine it generating a huge money-making market.

Auto companies are in horrible shape. Will GM survive? Has Toyota seen its best days? Is Ford’s funk temporary or permanent?

You should stay away from them. But why not invest in the next big technology the auto companies will need?

All of them have plans to introduce or step up production of battery-driven cars beginning around 2011-12.

The batteries these cars are using today won’t be the batteries they will be using in a few years. Nickel-cadmium batteries are on their way out. And on the way in are lithium-ion batteries.

The lithiums have twice the capacity and half the weight of nickel-cadmium batteries. Plus, unlike the nickel-cadmium ones, they work fine in hot and cold weather.

This market is flying under the radar. From $9 billion today, it could reach $150 billion in the next ten years.

There are about 30 car companies around the world dying to get their hands on this new technology. The race has already begun. And those companies that have already begun production have the best chance of becoming big players in this market.

With the market getting ready to experience explosive growth, the stakes are huge.

By Andrew Gordon

Posted 20 Jan 2009

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell

Six Predictions for 2009

2008-12-31T04:34:00.000-08:00

Hello 2009. What do you have in store for us? Will you finally put the immense problems of the economy behind you? What surprises are you going to spring on us?

Nobody gave me a crystal ball for Christmas. Then again it doesn’t take one to predict a lousy 2009. “More of the same” isn’t much of a prediction, is it? It’s more like a status report projected into the future.

I don’t believe in “more of the same.” Either things will get better or worse. The one thing they won’t do is stay the same. Here are six things I think will happen in ‘09.

1. The BRICs (Brazil, Russia, India and China) will have a terrible year. China will compete with the U.S. on who has the bigger government-led infrastructure program. They will also compete on whose is more effective. China’s will be building roads and schools. In addition to roads and infrastructure projects, President- Elect Obama’s will be building wind mills and broadband networks for schools. Both will fail in creating permanent jobs.

2. Iran will save oil. OPEC’s spotty execution in cutting oil output will not stop oil prices from falling further. But Iran’s refusal to stop its nuclear development program will beget serious sanctions from the West, threatening Iran’s oil exports. Oil prices will hit $20 per barrel and then start rising again.

3. Solar stocks (and other alternative energy companies) will spike after Obama gives his first state of the union address at the end of January or early February. Then, when investors realize that the actual legislation is still months away, prices will slink back to their previous low levels.

4. One of the big three auto makers will disappear. Here’s a hint: It won’t be Ford. It will, however, mark the beginning of the auto industry’s recovery.

5. The fourth quarter will cough up earnings reports that manage to disappoint rock-bottom expectations. The Dow will plunge and flirt with the 5,000 mark. Obama’s big stimulus plans will pick the market up before investors realize how horrible the economy must be for Obama to be spending another $1 trillion trying to revive it.

6. Americans fall in love with big cars again.

It’s going to be an interesting year.

Happy New Year,

Andrew Gordon

Posted 30Dec2008

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell

The Large Black Cloud on the

2008-12-26T07:39:00.000-08:00

There is some very startling evidence that the housing bubble has not even reached the half-way point yet. While the cause of the current stage of the collapse is mostly due to risky subprime loans falling into default, the misery will likely spread to the larger Alt-A and prime markets very soon. This includes Option ARM loans, which combined with Alt-A products, went to better credit risks than the subprime loans, but commonly with no income (and sometimes no asset) verification.

We have already passed the point where most subprime loans reset, thus most that were going to fall into default have. That’s why we are where we are today.

But the amount of Alt-A and Option ARM loans that are just now beginning to reset is absolutely staggering.

Here’s a chart that should scare even the most optimistic housing expert.

I added the red line to show where we are now. As you can see, the subprime resets are waning, and the Alt-A (and even prime loans) are slowly growing.

Next year a growing amount of Alt-A loans begin adjusting, but the stuff really hits the fan in 2010 when the Alt-A and Option ARM adjustments explode.

Here’s the sobering part:

Looking at the chart for this year, when the housing market imploded, approximately $30 billion subprime loans reset, and about $25 billion of the other loan types during any given month.

During 2011, the projections are for approximately $30 billion in Option ARMs, $20 billion in subprime, $20 billion in Alt-A, $10 billion in prime, and $10 billion in agency loans to reset every month. That’s nearly double the amount of this year.

So if this year was bad, 2011 could be catastrophic.

If there is any difference between the two years, it could be in quality of borrower. The ones who got the subprime loans a few years ago simply couldn’t qualify for a new loan, and when the rate adjusted, simply couldn’t afford the payment and the house went into foreclosure.

The types of loans that are about to reset went to better quality borrowers, so there may be a lower default rate because these borrowers should be able to qualify for a new loan when the times comes.

That of course is a large assumption, but one that I think will play out.

By Christian Hill

Posted 24Dec2008

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell

One Sector Destined to See Higher Prices

2008-12-13T09:02:00.000-08:00

Predicting the market can be easy, once you know what to look for. And one of the biggest catalysts for higher stock prices in a sector is government spending.

We all know one of the biggest spenders we’ll ever see is Barack Obama.

So there should be plenty of sectors he will prop up, but there is one that is my favorite. Not only do I love the sector because it makes me feel better about myself, but I love it because up until this year, it had been growing by nearly triple digits every single year.

I’m talking about alternative energy. And despite lower gas prices, alternative energy consumption will rise over the next five years.

Obama will make sure of it. He has plans to pump $150 billion into this sector over the next ten years. $15 billion a year is nothing to sneeze at. And the truth is, who knows how much more money will pour into this sector in the coming years.

I say that because Obama also has plans to allocate money to alternative energy from his upcoming $500 - $700 billion stimulus package due early next year.

With hundreds of billions pouring into this sector in the next few years, I don’t see how stock prices can’t move higher. It’s not that the government will directly buy shares of solar and ethanol producers. The government will instead incentivize installing solar panels to your home. The government will also force utilities to get more of their power from alternative energies.

It’s something that’s already happening, really. Most states require that utilities get 10 percent of their power from renewable energy. But that’s nothing.

Governor Arnold Schwarzenegger signed an executive order calling on utilities to provide one-third of their power from renewable resources by 2020.

Florida, Power and Light just broke ground on a 75-megawatt solar / natural gas hybrid plant (it generates solar power during the day and at night runs on natural gas) that would power about 11,000 homes. And because it uses solar during the day, it would prevent 2.75 million tons of greenhouse gasses from hitting the atmosphere. That’s like removing 18,700 cars from the road.

More and more, I’m hearing of proposed solar and wind power plants all across the globe. Wind power alone has grown more than fivefold globally from 2000 to 2007. In recent years, the US has added more wind power to the grid than any other country. Just last year, it grew by 45 percent, making the US the world’s largest wind power producer.

This trend will undoubtedly slow down due to the global credit problems. If people can’t finance new plants, then they can’t install wind power. It’s as simple as that.

And that has really slammed the prices of alternative energy stocks. Some of them are down over 80 percent from their peaks. This is a good thing.

It’s good because what this recession will do is help eliminate the weakest alternative energy producers. Any company that can survive this downturn should do extremely well once the economy picks up speed again. So really, it’s separating the wheat from the chafe.

It’s also letting you buy shares of solid companies at steep, Wal-Mart like discounts.

This is one of the most attractive buying points I’ve seen in years. But I’m still holding back from buying until I see a solid bottoming pattern.

A bottoming chart pattern basically shows you when stocks have stopped dropping. And there are various patterns to look for. For the sake of simplicity, I’m going to highlight two here.

The Double Bottom

The double bottom is one of the easiest patterns to spot. The pattern is made of two bottoms that are roughly equal, with a moderate peak in between. Take a look at the chart below (thanks to stockcharts!).

The trick to this pattern is waiting for confirmation once you believe you’ve seen a double bottom. Confirmation happens once the stock price goes over the peak between the two bottoms (in this case, $39). Once the pattern is confirmed, you should buy.

Another similar pattern is the triple bottom. It’s the same as the double bottom, but with two peaks and three troughs. Again, it’s important to wait for confirmation before becoming a buyer because theoretically, the stock could stay range bound for years.

The Rounding Bottom

Another reversal pattern is the rounding bottom. This is a longer-term pattern that can take upwards of 30 weeks to finally form. It’s easy to spot because a) it takes a long time and b) the prices look rounded on the chart. Take a look at the chart below…

Again, waiting for a confirmation of the rounding bottom is essential if you plan on making money. In this case, the confirmation point would be the high before the stock began the rounding pattern (in this case four bucks a share). Once you see the stock pass that previous high, you should become a buyer.

Other Bottoms

There are various other bottoming patterns you can look out for like an inverted head and shoulders and a falling wedge. I suggest you become acquainted with these patterns so that you’re more likely to find a bottom with any stock you are watching.

As with everything, these patterns won’t always signal a bottom. But more often than not, they can be relied on. In the end, you’ll want to use these patterns along with other signals to make your own determination if a bottom has been found.

You can be sure though, that with all the government money pouring into alternative energy, combined with the historic sell-off we’ve seen, the odds on are our side when it comes to buying opportunities.

It’s quite likely that in the next two to three years, we’re going to see much higher alternative energy prices.

I hope you can enjoy them as much as I will.

Stay free,

By Charles Delvalle

Posted 13Dec2008

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell