Investment And Bussiness Tips Online

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Portfolio decisions are taken by experienced, professional investment managers =
Have the assurance that you will be supporting companies with a good ethical behaviours
The chance to support companies actively working to improve life on this planet

The Living Planet Fund invests in companies that have a proactive commitment to environmental and social issues and which are leaders in their industry sector.

Companies included in the Fund are measured against four sets of indicators:

environmental policy
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social behaviour
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Sources: Today World

Reference:

http://todayworldissues.blogspot.com/2008/11/invest-in-living-planet-fund.html

2008-11-22T22:32:00.001-08:00

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Japanese economy enters recession for 1st time since 2001 as companies slash spending

2008-11-16T19:48:00.001-08:00

Japan's economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.

The world's second-largest economy contracted at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.

The result was worse than expected. Economists surveyed by Kyodo News agency had predicted an annualized 0.1 percent rise in the third quarter.

Japan's Economy Minister Kaoru Yosano said following the data's release that "the economy is in a recessionary phase," according to Kyodo.

But the worst may be yet to come in the wake of the global financial crisis, especially with dramatic declines in demand from consumers overseas for Japan's autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.

Toyota Motor Corp., for example, has cut net profit full-year profit forecast to 550 billion yen ($5.5 billion) -- about a third of last year's earnings.

Compared to the previous quarter, gross domestic product shrank 0.1 percent, the Cabinet Office said. Business investment -- a main driver of Japan's six-year economic recovery since 2002 -- dropped 1.7 percent from the previous quarter.

"As the global economy is expected to slow down for the time being, downward movements (in Japan) are expected to continue," Yosano said, according to Kyodo.

Since taking office in late September, Japanese Prime Minister Taro Aso has unveiled two economic stimulus packages in an effort to cushion the blow. His latest 27 trillion-yen ($275.7 billion) proposal includes expanded credits for small businesses and a total 2 trillion yen ($20.4 billion) in cash disbursements to households.

At its last meeting, the Bank of Japan cut its key interest rate for the first time in more than seven years, lowering it to 0.3 percent, joining central banks around the world in trimming borrowing costs.

In its semiannual outlook report, the central bank slashed its projection for economic growth to just 0.1 percent for the year through March, compared with a 1.2 percent gain it projected in July. It said both exports and domestic private demand have weakened.

The deteriorating conditions also recently led Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo, to downgrade his outlook on the Japanese economy.

"We are now looking for a severe recession, similar to that during Japan's own financial market crisis in 1997 to 1998, and to the current US recession, in terms of depth of real GDP contraction," he said in a report.

Monday's data showed that net exports sapped 0.2 percentage point from growth, as the high cost of importing fuel eclipsed a slight increase in outbound shipments. Imports rose 1.9 percent, while exports grew 0.7 percent.

Private consumption, which accounts for more than half of inflation-adjusted GDP, increased 0.3 percent from the previous quarter. However, the rebound in consumer demand is unlikely to last, economists say.

Where Everyday U.S. Costs Are Cheapest and Priciest

2008-11-15T22:33:00.001-08:00

Think your last grocery bill seemed pricey? Be happy that you don't live in Sacramento, where a half-gallon of milk costs $2.97 on average. In fact, Sacramento's milk prices rank the highest of any major metropolitan city in the country.

New York City is another pricey spot. Not only are the city's average monthly mortgage, rent and energy bills the highest of any major city in the country, iceberg lettuce rings in at $2 per head, on average--double the price found in other cities.

Sure, $2 isn't going to bankrupt you, but as prices of everyday goods continue to rise and the economy continues to tank, seemingly small costs such as these begin to add up.

And things aren't getting any better. Just last week, the government announced unemployment was at 6.5%. It hasn't been this high in 14 years. No wonder consumer spending was down 0.3% in September, according to the Commerce Department.

As the economy continues its decline, those in San Antonio are far less likely to feel the pinch--at least when it comes to food prices. Residents there pay just $3.08 for an 11.5 oz. can of freeze-dried coffee, compared to $5.91 in San Francisco. And when it comes to bread, San Antonians win again: The average cost of a loaf of white bread is just $.79. In Manhattan, bread costs over three times that amount, at $2.68 per loaf.

Behind the Numbers

To determine the cities where everyday costs are the cheapest and most expensive, we turned to Council for Community and Economic Research (C2ER), an Arlington, Va.-based organization that works with local government and research groups to determine the costs of common goods in metropolitan statistical areas (MSAs) across the country. C2ER provided the average price of 10 different everyday costs in the urban areas of the top 40 largest MSAs in the third quarter of 2008.

An urban area is defined as an area of 50,000 or more people within an MSA. That means "satellite cities"--smaller cities within the MSA--are separated from the larger cities in this survey. Take Boston. Although a small city like Quincy, Mass. is a part of Boston's MSA, it was considered a separate city when compiling this research. Only Boston proper--which boasts an estimated 2008 population of 616,535--was included in the information offered about "Boston." Places like Brookline and Cambridge, which are also part of the overall Boston MSA, were not included.

But why are there such huge disparities across the country when it comes to everyday items? Sure, with its overpopulation and disproportionately high incomes, it makes sense that New York has the highest per-month mortgage rate, on average, or that Seattle--with its government-run energy supply--boasts the lowest monthly energy costs.

But what is it about San Antonio that keeps its food prices so low? Or New York's energy costs so high?

Erol Yildirim, director of data products at C2ER, says that in the simplest terms, it has to do with supply and demand. In San Antonio, for example, the median household income was $36,214, according to the U.S. Census Bureau. In Manhattan, the median income per household is $47,030. "People who make less money demand less, which means suppliers can't afford to charge more," says Yildirim

Prices Rising Everywhere

Of course, there are seasonal, local and economic variables that factor in to the prices.

For example, the total rise in food costs over 2008 is expected to be 5% to 6% nationwide, according to the U.S. Department of Agriculture. That's the biggest increase since 1990, which means we're all, on average, paying more to eat than we were in 2007.

And on a microeconomic level, prices have a lot to do not only with personal income in specific areas, but with the health of the city's very specific economic woes or triumphs. For example, part of the reason why many cities in California report high food prices has to do with the fact that energy and fuel costs in the region are high.

In Boston, a pair of denim jeans for boys cost $40, on average, in the third quarter of 2008. Why were they nearly three times more expensive there than in Indianapolis? There were fewer markdowns at the first city's retailers, meaning the demand was higher and the economy was stronger. And while the median household income in Boston is $52,792, it's just $40,051 in Indianapolis.

Unfortunately, as the economy worsens, this disparity between cheap and expensive isn't going to go away.

It's really a matter of the chicken or the egg: Workers in cities that provide a service or product that is in high demand need bigger salaries because costs are higher, and costs are higher because salaries are bigger. That's a difficult--if not impossible--cycle to break.

"If wages are higher to adjust to higher costs, then as long as the city/region can still produce a good or service that is in great demand elsewhere (e.g. finance in New York or software in Silicon Valley), then differences can certainly persist," says Dr. Dean Baker, co-director of the Center for Economic and Policy Research.

And then again, it's all relative. For the 250,000 auto workers in Michigan fearful for their jobs, $40 may be a heck of a lot for a pair jeans. For others, that's chump change.

Why GM Says Bankruptcy Is an Impossibility

2008-11-08T02:45:00.001-08:00

WSJ colleague John Stoll files this dispatch on the troubles at the biggest U.S. car maker.

One must be careful when using the B word, as the mere mention of the word bankruptcy can be a self-fulfilling prophecy.

Then there is General Motors, which posted a staggering third-quarter loss and surprised the market with the rate at which it is burning cash. The auto maker today declared that its cash position, at $16.2 billion, isn’t enough to keep it going through next year without immediate government intervention. It needs $11 billion to $14 billion on hand just to pay its monthly bills.

It wants money. It needs money. And that is causing some to throw around that B word: The “third-quarter results made it clear that, without government intervention, GM is headed for bankruptcy,” Gimme Credit auto analyst Shelly Lombard said.

And yet GM executives refuse to blink, sticking to their guns when it comes to insisting that the General isn’t interested in a Chapter 11 filing to fix its problems. On Wednesday night, in a speech given to auto suppliers, GM North America President Troy Clarke said there are a few reasons the company isn’t rushing to bankruptcy court. First, obtaining debtor-in-possession financing would be practically impossible, given the state of the credit markets and the size of GM’s obligations.

Clarke then went on to say that GM has worked to solve two of the issues that many companies use Chapter 11 to fix: legacy costs and capacity utilization. Last year, GM brokered a historic deal with the United Auto Workers allowing it to eventually shed health-care obligations and potentially cut labor costs, such as wages and benefits. On the capacity side, Clarke said GM has worked extensively in the past three years to shave its manufacturing footprint in the U.S. to an appropriate size.

Of course, GM has to wait until 2010 and pay out $7 billion to take advantage of that UAW deal. And, with U.S. automobile demand collapsing further each month, GM’s capacity issues look to be far from solved. Interestingly, he avoided any mention of the concern GM often attaches to bankruptcy speculation: that people won’t buy cars from bankrupt auto makers.

GM Chief Executive Rick Wagoner wasn’t as circumspect Friday. During an interview with Fox Business News, he was asked why the company doesn’t just utilize the bankruptcy method to recapitalize itself, given that some observers suggest such a method would be much easier than the out-of-court headaches GM has been managing over the decade.

“The analysis is wrong,” Wagoner said. “What is left out in that is it assumes people will keep buying your cars, and unlike airlines–(where people) pay $300 for a ticket and use it three days from now–it’s quite a bit different than paying $25,000 and paying on getting service and support for the car you just purchased for the next five or 10 years.

“In fact, there has been some independent research that was done as recently as June of this summer which asks for every manufacturer, ‘if this manufacturer were in bankruptcy would you buy a car from them?’ Eighty percent of the people said they would immediately take that manufacturer off their list.”

Wagoner said that, in light of people’s reluctance to shop a bankrupt car company, a Chapter 11 filing may actually be impossible for GM. “If your revenue line falls, you would not be talking about a reorganization, you would be talking about a liquidation.”

In a conference call Friday, Mr. Wagoner said “this is the kind of thing we could speculate (on) endlessly.…We’re convinced the consequences of bankruptcy would be dire.”

GM’s solution? “We’re going to get creative, we’re going to get creative here,” Chief Financial Officer Ray Young said.

Jobless ranks hit 10 million, most in 25 years

2008-11-08T02:37:00.001-08:00

Jobless ranks hit 10 million, most in a quarter-century; unemployment hits 14-year high

WASHINGTON (AP) -- The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It's only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Barack Obama, in his first news conference as president-elect, said the nation was facing the economic challenge of a lifetime but expressed confidence he could deal with it.

"Immediately after I become president, I'm going to confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity," he said after meeting with economic advisers in Chicago. "I'm confident a new president can have an enormous impact."

Wall Street revived somewhat after two days of big losses. The Dow Jones industrials rose 248 points.

Still, the Labor Department's unemployment report provided stark evidence that the economy's health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.

About 10.1 million people were unemployed in October, the most since the fall of 1983. More people have jobs now, since the population has grown, but it's still a staggering jobless figure. With employers slashing jobs every month so far this year, some 1.2 million positions have disappeared, over half in the past three months alone.

Like Obama, President Bush expressed confidence that things would get better: "Our economy has overcome great challenges before, and we can be confident that it will do so again."

But economists were much less upbeat than politicians.

"There is no light at the end of the tunnel, and the outlook is pitch black," said Richard Yamarone, economist at Argus Research.

And Bernard Baumohl, chief global economist at the Economic Outlook Group, said the report "depicts an economy still in free fall and without a safety net anywhere in sight."

All the economy's woes -- a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval -- will confront Obama when he assumes office in January. Unemployment is expected to keep rising during his first year in office, while record budget deficits will crimp his domestic agenda.

October's jobless rate was the highest since March 1994 and now has surpassed the 6.3 percent 2003 high after the most recent recession. The government also said job losses were worse than first reported for the preceding two months, 284,000 rather than 159,000 in September and 127,000 rather than 73,000 in August.

Many economists believe the unemployment rate will climb to 8 percent or 8.5 percent by the end of next year before slowly drifting downward. Some think unemployment could even hit 10 or 11 percent -- if an auto company should fail.

In any case, the rate is likely to move higher even if the economy is on somewhat stronger footing by the middle of next year as some hope. That's because companies won't be inclined to ramp up hiring until they feel certain that a recovery has staying power.

Joshua Shapiro, chief economist at consulting firm MFR Inc., said another reason the unemployment rate can keep climbing -- even after a recession is over -- is because people tend to flock back to the labor market when they sense their job prospects might be better. "It takes (people) awhile to figure out, 'Hey, there's jobs out there,'" Shapiro said.

In the 1980-1982 recession -- considered the worst since the Great Depression in terms of unemployment -- the jobless rate rose as high as 10.8 percent in late 1982 just as the recession ended, before inching down.

Friday's report was worse than analysts had expected. They had been forecasting a jobless rate of 6.3 percent with payrolls falling about 200,000.

Factories, including auto makers, construction companies, especially home builders, retailers, mortgage bankers, securities firms, hotels and motels and educational services, all cut jobs. As did temporary help firms -- a barometer of future hiring. All those losses more than swamped the few gains elsewhere, including in the government, health care and in accounting and bookkeeping.

Private companies cut 263,000 jobs, the most since the country was beginning to emerge from the 2001 recession. It marked the 11th straight month of such reductions.

The grim numbers spurred calls from Democrats on Capitol Hill to provide fresh relief. House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, will push to enact another economic stimulus package of around $100 billion, possibly including provisions to create jobs through big public works projects.

Obama said if the session doesn't bring passage, the measure will be his first priority as president in January.

He has called for about $175 billion in new stimulus spending, including money for roads, bridges and aid to hard-pressed states. He wants a rebate of $500 for individuals, $1,000 for families and a new $3,000 tax credit for businesses for each new job created.

Workers with jobs saw only modest wages gains in October. Average hourly earnings rose to $18.21, a 0.2 percent increase from the previous month. Over the past year, wages have grown 3.5 percent, but paychecks aren't stretching far because high food, energy and other prices have propelled overall inflation at a faster pace.

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since the 2001 recession, and reflected a massive pullback by consumers.

As consumers watch jobs disappear, they'll probably retrench even further, spelling more trouble. Analysts say the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

"The U.S. recession is deepening," said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a "particularly ugly" start.

Companies start competing for bailout money

2008-10-26T07:24:00.001-07:00

Insurance firms, auto companies and foreign banks petition for part of $700 billion bailout

The bailout is now the hottest lobbying game in town.

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.

These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.

The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.

Lobbying efforts are intensifying.

The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.

As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.

Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for the stock purchase program.

"The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," Bartlett wrote Neel Kashkari, the Treasury Department official running the bailout program.

Referring to U.S. subsidiaries of foreign companies, Bartlett said, "This is a global crisis and to not recognize the U.S. firms controlled by foreign banks or companies would create further impediment to the market's recovery."

A financial industry official said Treasury Secretary Henry Paulson met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because the Treasury has not made a decision.

This official said the discussions with insurance industry executives were being held in advance of what are expected to be disappointing earnings reports by some insurance companies in the coming week.

The official said the insurance industry would like to get government purchases of their stock on a mandatory basis, duplicating the agreement Paulson struck two weeks ago with nine major banks.

Paulson pressured the big banks to go along with the program as a way of removing the stigma that might be attached to the payments if only a few major banks had received them.

Some insurers technically would be eligible for stock purchases now if they own subsidiaries that are savings and loan institutions regulated by the Office of Thrift Supervision.

Last month, American International Group, the country's largest insurance company, received an $85 billion loan from the Federal Reserve. Since then, it has gotten further support in an effort to withstand the biggest upheavals on Wall Street since the Great Depression.

Complicating the government's decision-making is that the Bush administration will not be in charge after Jan. 20. Paulson, who has said he has no intention of staying on the job, has pledged to consult with both campaigns on his bailout actions.

Democrat Barack Obama's presidential campaign said Friday it supported the effort by the auto industry to get money from the $250 billion made available for stock purchases. That would be in addition to $25 billion recently approved by Congress for low-interest loans to help the struggling industry retool and build fuel efficient vehicles.

The debate over expanding the bailout comes as the Treasury is rushing to get money out the door to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump.

Lawmakers are pressuring the Treasury to do more in the foreclosure area, as well.

Sheila Bair, head of the Federal Deposit Insurance Corp., told Congress about efforts to provide government-backed loan guarantees for mortgages that are reworked to help homeowners in danger of default. That would give banks an incentive to speed up refinancing efforts because the government would back part of the reworked loan.

The Treasury also is moving ahead to get bank stock purchases approved. It announced on Oct. 14 that it was spending $125 billion to buy stock in nine of the largest financial institutions. An announcement was expected Friday about a second round involving 20 to 22 other banks.

But it was decided each bank would announce its own agreements with the Treasury, out of concern that excluded banks could suffer a stock sell-off from disappointed investors.

PNC Financial Services Group Inc. announced Friday it was acquiring National City Corp. for $5.58 billion, in what was the first instance of a bank using fresh investments from the bailout program to make an acquisition. PNC said it had received $7.7 billion in cash through selling stock to the government under the program.

What Going on With Federal Reserve FED Bailout?

2008-10-25T23:13:00.001-07:00

Do you sure the bailout will work?

The Federal Reserve's latest move to make credit markets more liquid could deepen problems in the banking system and actually cause the markets to be even more illiquid.

Let see this interesting video.

Wall Street's crisis

2008-10-24T20:46:00.001-07:00

What went wrong in the financial system—and the long, hard task of fixing it

THE marvellous edifice of modern finance took years to build. The world had a weekend to save it from collapsing. On March 16th America's Federal Reserve, by nature hardly impetuous, rewrote its rule-book by rescuing Bear Stearns, the country's fifth-largest investment bank, and agreeing to lend directly to other brokers. A couple of days later the Fed cut short-term interest rates—again—to 2.25%, marking the fastest loosening of monetary policy in a generation.

It was a Herculean effort, and it staved off the outright catastrophe of a bank failure that had threatened to split Wall Street asunder. Even so, this week's brush with disaster contained two unsettling messages. One is analytical: the world needs new ways of thinking about finance and the risks it entails. The other is a warning: the crisis has opened a new, dangerous chapter. For all its mistakes, modern finance is worth saving—and the job looks as if it is still only half done.

Rescuing Bear Stearns and its kind from their own folly may strike many people as overly charitable. For years Wall Street minted billions without showing much compassion. Yet the Fed put $30 billion of public money at risk for the best reason of all: the public interest. Bear is a counterparty to some $10 trillion of over-the-counter swaps. With the broker's collapse, the fear that these and other contracts would no longer be honoured would have infected the world's derivatives markets. Imagine those doubts raging in all the securities Bear traded and from there spreading across the financial system; then imagine what would happen to the economy in the financial nuclear winter that would follow. Bear Stearns may not have been too big to fail, but it was too entangled.

Gordian conduits

As the first article in our special briefing on the crisis explains, entanglement is a new doctrine in finance (see article). It began in the 1980s with an historic bull market in shares and bonds, propelled by falling interest rates, new information technology and corporate restructuring. When the boom ran out, shortly after the turn of the century, the finance houses that had grown rich on the back of it set about the search for new profits. Thanks to cheap money, they could take on more debt—which makes investments more profitable and more risky. Thanks to the information technology, they could design myriad complex derivatives, some of them linked to mortgages. By combining debt and derivatives, the banks created a new machine that could originate and distribute prodigious quantities of risk to a baffling array of counterparties.

This system worked; indeed, at its simplest, it still does, spreading risk, promoting economic efficiency and providing cheap capital. (Just like junk bonds, another once-misused financial instrument, many of the new derivatives will be back, for no better reason than that they are useful.) Yet over the past decade this entangled system also plainly fed on itself. As balance sheets grew, you could borrow more against them, buy more assets and admire your good sense as their value rose. By 2007 financial services were making 40% of America's corporate profits—while employing only 5% of its private-sector workers. Meanwhile, financial-sector debt, only a tenth of the size of non-financial-sector debt in 1980, is now half as big.

The financial system, or a big part of it, began to lose touch with its purpose: to write, manage and trade claims on future cashflows for the rest of the economy. It increasingly became a game for fees and speculation, and a favourite move was to beat the regulator. Hence the billions of dollars sheltered off balance sheets in SIVs and conduits. Thanks to what, in hindsight, has proven disastrously lax regulation, banks did not then have to lay aside capital in case something went wrong. Hence, too, the trick of packaging securities as AAA—and finding a friendly rating agency to give you the nod.

That game is now up. You can think of lots of ways to describe the pain—debt is unwinding, investors are writing down assets, liquidity is short. But the simplest is that counterparties no longer trust each other. Walter Bagehot, an authority on bank runs, once wrote: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” In our own entangled era, his axiom stretches to the whole market.

A question of priorities

This mistrust is enormously corrosive. The huge damage it could do to the world economy dictates what must now be done first. No doubt, there are many ways in which financial regulation needs to be fixed; but that is for later. The priority for policymakers is to shore up the financial system. That should certainly be done as cheaply as possible (after all, the cash comes from the public purse); and it should avoid as far as possible creating moral hazard—owners and employees should bear the costs of their mistakes. But these caveats, however galling, should not get in the way of that priority.

To its credit, the Fed has accepted that the new finance calls for new types of intervention. That is the importance of its decision on March 16th to lend money directly to cash-strapped investment banks and brokers and to accept a broader array of collateral, including mortgage-backed and other investment-grade securities. If investment banks can overcome the stigma of petitioning the central bank, this will guard them against the sort of run that saw Bear rejected by lenders in the short-term markets. Henceforth, the brokers will be able to raise cash from the Fed. The Fed is now lender-of-last-resort not just to commercial banks but to big investment banks as well (a concession that will surely in time demand tighter regulation).

Even if that solves Wall Street's immediate worries over liquidity, it still leaves the danger that recession will lead to such big losses that banks are forced into insolvency. This depends on everything from mortgages to credit-card debt. These, in turn, depend on the American economy's likely path, the depth to which house prices decline and the scale of mortgage foreclosures—and none of these things is looking good. Goldman Sachs's latest calculations, which suppose that American house prices will eventually fall by 25% from their peak, suggest that total losses will reach just over $1.1 trillion. At around 8% of GDP that is not to be sniffed at. But it includes losses held by foreigners, and “non-leveraged institutions” such as insurers. Goldman expects eventual post-tax losses for American financial firms to be around $300 billion, just over 2% of GDP, or about 20% of their equity capital.

The rebuilders' dilemma

That suggests a serious problem, but not a catastrophic banking crisis. And with the world awash with savings, banks ought to be able to raise new capital privately and continue lending. Unfortunately, things are not quite so simple. It would not take many homeowners to walk away from their debts for the losses to grow rapidly. Also, bank shareholders may prefer to cut back on lending rather than raise new equity. That would suit them, as equity is expensive and dilutes their stake. But it would not suit the economy, which would be pushed further into recession by sudden cuts in leverage.

By lending money to more banks for longer against worse collateral, the Fed hopes to stem panic and buy time. It wants Wall Street's banks to assess their losses and strengthen their balance sheets without the crippling burden of dysfunctional markets. And it hopes that cheaper money will ease that recapitalisation, inject confidence and cushion the broader economy. But that lingering risk of insolvency means that the state needs to be ready to take yet more action.

One option is to keep on intervening as events unfold. The other is to shock the markets out of their mistrust by using public money to create a floor to the market, either in housing or in asset-backed securities. For the moment, gradualism is the right path: it is cheaper and less prone to moral hazard (ask investors in Bear Stearns). Yet it is not easy to pull off—again, ask Bear Stearns's backers, who could possibly have been saved had the Fed begun lending to brokers sooner. If the crisis drags on and claims more victims, gradualism could yet become more expensive than a more ambitious approach.

Something important happened on Wall Street this week. It was not just the demise of a firm that traded through the Depression. Financiers discovered that they had created a series of risks that the market could not cope with. That is not a reason to condemn the whole system: it is far too useful. It is a sign that the rules need changing. But, first, stop the rot.

Wall Street crisis: Investment banks succumb to collapse in confidence

2008-10-24T20:40:00.000-07:00

• Morgan Stanley sells up to 20% to Japan's Mitsubishi UFJ

Morgan Stanley's boss John Mack said the change offers 'certainty about the strength of our financial position and our access to funding'. Photograph: Mark Lennihan/AP

The concept of a Wall Street investment bank was in its death throes today as Morgan Stanley and Goldman Sachs succumbed to a collapse in confidence in their financial stability by converting themselves into lower risk, tightly regulated commercial banks.

Beset by plunging share prices and alarmed by the demise of competitors, the two remaining standalone Wall Street banks accepted licences from the Federal Reserve which allow them to take deposits from the public backed by federal government guarantees.

While safeguarding customers' money, the change will radically restrict the firms' activities by imposing strict regulatory limits on the risks their traders can take on the markets and on the amount of money they can borrow.

Morgan Stanley further shored up its financial position by selling a stake of up to 20% in itself to Japan's Mitsubishi Financial Group for an estimated $8bn to $9bn.

Against a backdrop of an ongoing global financial crisis, the hurriedly agreed change in the two US banks' status happened without the usual 30-day waiting period for such applications. It came as Congress began scouring legislation to enact a $700bn government bail-out for banks through the creation of a state-sponsored body to suck up toxic, underperforming mortgage-backed assets.

Goldman Sachs' chief executive, Lloyd Blankfein, said his firm would be viewed as an "even more secure institution" under the new regime while Morgan Stanley's boss John Mack said it offered "certainty about the strength of our financial position and our access to funding".

Only last week, both firms were vigorously defending the viability of their business models in spite of a sell-off which sent their stock plunging by 20% to 30% on consecutive days.

They insist that unlike rivals such as Lehman Brothers and Bear Stearns, they are profitable and suffering few financial problems. But insiders accept that the landscape has changed - once source said: "Given the events of the last few months, particularly the last week, it's become very clear that the market places a premium on safety and certainty."

The conversions end a chapter in US banking history which opened in 1933 when the Glass-Steagall act separated investment banking from high-street banking. Bill Isaac, a former chairman of the Federal Deposit Insurance Corporation, said it was the end of Wall Street banking as we know it.

"They're the only two left and the handwriting was on the wall," said Isaac. "It's a shame because this country was built, in part, on risk-taking by Goldman and Morgan and by a whole bunch of firms before them."

Analysts say the banks' new status will limit their ability to dabble in the types of exotic derivatives and credit instruments which contributed to the credit crunch. Banks' risks are generally judged by a leverage ratio of assets to borrowing. Morgan Stanley's ratio reached 33 last year and Goldman Sachs' touched 28 while high-street banks are typically in the low teens or below.

David Williams, an analyst at Fox-Pitt Kelton in New York, said: "The regulatory tide is moving against the investment banks. There are going to be higher levels of regulation, lower leverage ratios, greater scrutiny on what they do."

Neither Goldman nor Morgan Stanley has immediate plans to open networks of high-street branches. Morgan Stanley already has about 300 branch offices and is expected to offer a broader range of services at the counter.

Goldman intends to bid for deposits on a wholesale basis - for example, by stepping in to become custodian when local banks struggle in the US.

Between them, the banks hold about $56bn of customers' deposits in their wealth management businesses for rich private clients which, as of today, are guaranteed by taxpayers' money.

Bear Stearns' collapse in March was the beginning of the end for Wall Street's "big five" standalone investment banks. Lehman Brothers went bankrupt last week, although its US operation re-opened yesterday under Barclays' ownership. Merrill Lynch is set to be swallowed through a $50bn buyout by Bank of America.

Alarmed by the speed of the industry's unravelling, the Bush administration is pushing for swift legislation on a $700bn bail-out plan. Democrats in Congress are fighting to insert measures in which would give the government a stake in banks benefiting from aid and would cap executive pay.

Critics of the industry say the money ought to be used to help homeowners in danger of losing their houses. Bruce Marks, chief executive of the Neighbourhood Assistance Corporation of America, said: "We are rewarding companies whose only motivation was greed. This is truly moral hazard bearing its ugly head."

During early trading, Wall Street stocks were sharply down with the Dow Jones Industrial Average losing as much as 200 points.

Investment tips for crisis times

2008-10-21T20:06:00.001-07:00

In an uncertain market where stock prices are witnessing a free fall, it is time for investors to rejig their portfolio to limit losses and opt for stocks that offer stability and decent returns.

Among the two key barometers of the Indian equity markets, the Sensex has fallen by more than half from its January 2008 peak of 21,206 points. The gradual decline over the last nine months, and the sharp fall over the last couple of weeks, have eroded a substantial chunk of investor wealth.

With the demand situation not looking good and liquidity problems persisting, investors are clueless as to where the markets would be headed over the next year.

The Smart Investor spoke to money managers to assess what their outlook on the market is and what strategies one needs to adopt to tackle the meltdown.

The negatives

The main macroeconomic parameters, be it the GDP, interest rates, the fiscal situation, credit growth, the IIP numbers -- all point to a muted phase of growth over the next few quarters. The International Monetary Fund in its World Economic Outlook projections for 2009 has cut India's GDP growth forecasts to 6.9 per cent.

While this is marginally down from the estimated 2008 GDP of 7.2 per cent, it is substantially down from the nearly 9 per cent GDP growth rate experienced in 2007. Compounding this is the fact that advanced economies, which are engines of world consumption, are expected to grow at just 1 per cent in 2009.

Indian manufacturing activity, too, is down with IIP (manufacturing) growth restricted to 4.9 per cent during April-August 2008 (against 10 per cent in the previous corresponding period); it was just 1.3 per cent in August 2008. Credit growth to the consumer durables sector and autos, good indicators of spending trends are hardly encouraging.

While credit for durables has fallen by 33 per cent for the year till June 2008 y-o-y, auto loans have barely moved registering a growth of just 1 per cent in the same period.

India's current account balances too are precarious as compared to China's, which continues to attract investments on top of a huge trade surplus. While FIIs together own only 25 per cent of Indian equity, it is their high ownership of free floating stock that makes it difficult to stop the markets slipping down dramatically when they decide to pull out and which results in a worsening of the current account deficits.

While factors such as fund flows and economic growth are external, elections to state assemblies and to Parliament over the next six months are internal factors which will significantly impact sentiment. Pre-poll uncertainty, a vote-on-account Budget and a delay in investment and policy decisions mean that positive cues may emerge only in the third quarter of 2009.

The positives

However, all the information is not negative. Inflation, which has been responsible for the monetary policy tightening and subsequent rise in interest rates, and which has also brought spending and investments to a grinding halt, is trending down at 11.4 per cent for the week ended October 4.

A dip in commodity prices (crude oil and metals) means that the figure would dip below the double digit market much before the current fiscal runs through. A cut in interest rates, which is on the cards sooner than later, could boost business and consumer confidence and keep the sentiment quotient on the markets high.

Thus, analysts believe that while fundamentals might take some time to improve, sentiment (the other key determinant of equity prices) might improve as speed of response is much better now than in the past crashes. Says Nilesh Shah, deputy managing director, ICICI [Get Quote] Prudential AMC, "The response to the 1929 crisis came four years later in 1933 and was to the tune of $ 78 billion in value. The response to the current crisis has been much swifter. Governments across the world have swung into action and pumped more than $3 trillion so far."

However, the bounce back won't come in a hurry. Says Amitabh Chakraborty, president equity, Religare Securities "Don't expect a V shaped recovery, there is still pain left in the system." A more prolonged U-shaped recovery would mean that markets are likely to be move sideways for at least two quarters. While the fiscal situation due to high oil prices has worsened, Srividhya Rajesh, fund manager, Sundaram BNP Paribas, believes that India's growth numbers, though lower, will top most other markets.

Combined with cheap valuations, a 10 per cent downside from these levels and falling commodity prices, she believes, could make the markets attractive once more to domestic and foreign investors.

What should you do?

While the list of unknowns seem quite long and affect every company large and small, experts advise that you be prudent with decisions related to your equity portfolio.

While existing investors, who do not have need for funds, should not panic and exit their equity holdings as they are likely to book heavy losses, for new investors with a surplus to invest this is a good time to fish for quality stocks at reasonable prices. Says Hemant Rustagi, CEO, Wiseinvest, an investment advisory, "Adopt a bottom up approach and commit smaller amounts rather than make a lump sum investment at one go and time the market." Agrees Dinesh Thakkar, CMD, Angel Broking, "Invest 25 per cent of your surplus now and the remaining in dips spread over the next three months." This way you will not only benefit from an upside in stock prices but investment at these levels will also keep your downside to a minimum.

But, coming back to existing investors, they must also learn to book losses (reshuffle portfolio), if need be. That's because, if you don't, you may get stuck with companies that may be going nowhere, thereby losing an opportunity to make good the losses (by investing in a better company). Stocks like DSQ Software, during the dotcom rally in 1999-2000 are proof of the pudding.

Where to invest?

Stick to disciplined investing and do your homework thoroughly before committing your funds or you will be speculating which is not advisable on both counts of managing risk and enhancing returns. Preferably, add companies that are leaders in their respective businesses. In that context, let there be no size bias. But, what is important is that the companies should have reasonably decent prospects, sound management and strong entry barriers, apart from healthy financials that will help them tide the current rough patch. Besides these qualities, there are some more factors that need to be considered. They are:

High cash, low debt: To benefit from your investment in the current environment, follow the traditional conservative principle of cash is king. Look for companies which have a record strong positive free cash flow as it can be used to buy out businesses at firesale prices or strengthen operations. Moreover, in a worsening situation where equity markets are down and debt comes at a high price, raising money is not only going to be difficult, it might stretch the balance sheet. Companies that are less leveraged can expand and do not have to cough up cash at regular intervals to pay for interest costs.

While software and FMCG companies bring in a lot of cash due to high margins and low leverage, investors need to keep an eye out on how global demand plays out before investing in the IT sector. While FMCG and pharmaceuticals are defensive sectors, within the sector one could look at ITC (a diversified play), Ranbaxy [Get Quote] (valuations) and Sun Pharmaceuticals (growth prospects).

Funding blues: Resources locked in a current expansion or funding of acquisition allow little flexibility in operations. Notice that the market is already punishing companies, which have taken up huge expansion plans and need funds to take them forward.

Here, an example could be Jaiprakash Associates [Get Quote] (50 per cent price erosion over the last month), which is building India's largest private sector hydroelectric project at a cost of Rs 5,600 crore (Rs 56 billion), tripling its cement capacity and has aggressive plans in the real estate sector.

The company's intention to raise funds through the rights issue route also indicates its need for capital and comes at a time when established names such as Hindalco [Get Quote] and Tata Motors [Get Quote] have struggled to get their pricing right for their issues in a bearish market.

In contrast, NTPC was sitting on a cash pile of Rs 15,000 crore (Rs 150 billion) at the end of FY08 and can fund its mega plans by a combination of internal accruals and debt. It is also generating a cash profit of about Rs 10,000 crore (Rs 100 billion) a year. The fixed return nature of the power sector and internal accruals will ensure it grows at stable rates irrespective of market conditions.

Substantial price decline=value buy?: A sizeable decline in the share price of a company does not qualify automatically for investments. Some also tend to look at stocks in relation to their valuations a few months back, indicating that after a 50-60 per cent decline, their valuations look cheap.

But, that does not necessarily hold true. Says P K Agarwal, president, research, Bonanza Portfolio, a financial services firm, "Companies (in the capital goods sector for example) which performed in the earlier bull run might not be the best bets due to high interest rates, large capex and muted industrial and economic growth." Avoid construction and realty stocks which have dropped substantially as they require large amounts of capital to sustain their business.

Another stock that looks cheap is Reliance Communications [Get Quote] considering the scorching pace of growth in telecom. The company, however, is in the middle of a pan-India expansion of GSM network and is expected to spend Rs 50,000 crore (Rs 500 billion) in FY08 and FY09.

Despite sound business potential and growth prospects, the markets have drubbed the shares by 35 per cent over the last month. If you can handle volatility and adopt an aggressive approach to stock buying, you could add this to your portfolio.

Among other sectors where one can find stocks that offer value are financials, believe fund managers such as Sandip Sabharwal, executive director-equity and CIO of J M Financial AMC. He says that, with a likelihood of interest rates easing, investors could look at companies in the banking and financial sector space (PSU banks) which are available at cheap valuations and will outperform the market.

Other parameters: Dipping equity prices also make high dividend earning stocks a good idea. Check for past dividend record and the cash flow situation in the first two quarters and you will get a fair idea of what the annual picture will be like to arrive at a list of companies that are likely to make higher payouts.

Bongaigaon Refineries and Chennai Petro with a high dividend yield are two names that come to mind and fit the high dividend yield criteria at current prices. For investors who wish to invest in markets but don't have the patience or time to track every company, try index funds.

The benefit? You get a diversified collection of the bluest of the blue chips packaged in one instrument which is not only easy to track but is the cheapest low cost mutual fund scheme available in the market. Here, the Nifty BeES from Benchmark Mutual Fund could be looked at.

Despite a gloomy outlook and uncertainty, the current levels offer a great opportunity to invest. Historically a price-earnings multiple of 10, or 50-60 per cent off the top signals a bottom. At a consensus FY09 EPS of Rs 980, you are getting the entire Sensex basket, at just a little over 10 times.

While an investment now could give a substantial boost to your equity portfolio over the next two years, expect the medium term (up to 12 months) to be choppy in light of the global turmoil (still far from having achieved stability), domestic slowdown and impending state and national elections.

Only the new government will be able to bring significant reforms aimed at bolstering economic growth. So, for the time being, give a higher weightage to safety and thereafter, ensure that you don't pay a high price for stocks, even if they are expected to report robust numbers.

Investing in gold and silver

2008-08-29T05:20:00.001-07:00

the easiest way to invest in gold and silver -- by buying bullion, coins, and scrap. This can be done at a rate appropriate to one's income and interest.

Humans have always had an eye for things that glitter, whether those objects be stones, metals, or organics. Ironically, the most hallowed of treasures have proven to have qualities that made them more useful for industry than for ornamentation. Nothing’s harder than diamonds, so they make great drill bits, blades, and grinding powders. Silver and gold have wonderful conductive properties; nothing conducts electricity better than silver, and both metals are both strong and ductile. Gold never tarnishes, even in salt water; silver does, but that is its strength. Its ability to chemically react with many other elements makes it ideal as the basis of most compounds used in modern photography. Silver and gold (not to mention their cousins platinum, palladium, and rhodium) have always been held dear, but once the industrial revolution hit and Wall Street roared to life, they became hot industrial commodities.

Back in 1980, gold hit an all-time of $850 an ounce. Silver tagged along, rising somewhat. It really took off, however, when the Hunt brother of Dallas (Buckey, James, and Lamar), managed to corner the silver market and drive the price to over $50. At one point, the Hunts became $195 million richer every time the price went up by a dollar an ounce. By the same token, they lost $195 million for every dollar the price of silver dropped. Not surprisingly, they overdid it and eventually the price of silver tumbled to less than $11 an ounce, virtually overnight. The Hunts fell hard, losing a great deal of money, above and beyond the slap on the wrist the got from the government. After all, cornering the market was illegal. By the turn of the millenium, silver had stabilized at about $4.50 per ounce

Warren Buffet and others have suggested that silver alone may rise to $20 per ounce by 2005, and where silver goes, gold usually follows -- and vice-versa. The Hunts aside, you needn’t be a millionaire to invest in either silver or gold. These days, coin dealers and the federal government have made it easy for you. And if you’ve a sharp eye, you can find a bit of good silver in everyday circumstances. What’s the secret? Read on.

Dribs and Drabs

Who says you have to buy silver and gold in bulk? Nobody, that’s who. You can buy pounds are a time, if you have the cash, but you can also invest at a rate appropriate to your income and interest. One easy way is by buying bullion and coins. The term “bullion” refers to any small, portable form of metal, which may take the form of bars, ingots, grains, or coins. Indeed, most gold and silver coins may be treated as bullion “in the round.” Gold was rarely used for coinage after the late 1800s, and silver was removed from US coins in 1964. Anything minted earlier, however, has a significant value simply as precious metal. Coin gold is very pure, but coin silver, as it’s called, tends to be 90% pure (as compared to sterling at 92.5%); the balance is copper. Typically, coin silver is worth about 75% of the current price per troy ounce (there are 12 troy ounces to the pound). Coin silver is easily obtained through auction services or at your local coin shop. Remember that some bullion and most coins have a collectible value as well as a pure precious metal value. If you’re collecting coins only for silver or gold, please be sure to pick only the most worn coins available. Anything in better condition should never be melted down. Remember, as a coin, its value is likely to increase as the years pass.

Since 1986, the United States government has been providing its citizens with an attractive and simple way to obtain silver and gold. They do this by minting bullion coins of extreme purity. The gold eagles (so named because of the eagle depicted on the reverse) come in several denominations: $5, $10, $25 and $50. In reality, they’re worth quite a bit more, and their value fluctuates with the market. Even the tiny tenth-ounce $5 pieces are usually worth more than $25, and they’re exceedingly easy to store in large quantities. The lovely $1 silver eagle, which weighs a troy ounce and consists of 99.93% pure silver, typically goes for $6-10 from a retailer. Their silver value averages about $5; the premium comes from their pure beauty as coins. Platinum eagles depicting the Statue of Liberty on the obverse have been available since 1997, but are for serious and wealthy investors only. These coins come in $10, $25, $50, and $100 denominations. An ordinary tenth-ounce platinum eagle is worth about $75; $100 eagles are worth 6-10 times their face value. Like gold eagles, they can easily be stored in large quantities in a small space -- or example, a safe deposit box or safe. Whatever form of government minted-bullion you choose, you can buy it from dealers by mail order or in person, or you can get it directly from the U.S. Mint.

Scrap and Garage Sales

Gold is scarce in everyday life, but this isn’t necessarily the case for silver. Bullion and coins are just two ways to collect it; you can also collect it by buying sterling silver utensils or objets d’art. Where can you find them? Try garage sales, flea markets, estate auctions, and online auction sites. Old sterling pieces have high collectible values, but modern sterling usually does not. Sterling silver can usually be identified by the word “sterling” stamped somewhere on the object, or by the number code “925” (meaning it’s 925/1000ths pure silver). If the object lacks these marks, it’s probably silverplate. While buying silverplated objects and restoring them can be quite enjoyable, these objects aren’t worth nearly as much as sterling. The silver in silverplate is extremely pure, but it’s merely a veneer over a base metal such as steel.

Occasionally, you might be able to acquire scraps or fragments of silver too small for normal use. Take them and add them to your silver horde; you can sell them enmass once you’ve accumulated enough metal to make selling worth the effort. And don’t ignore those broken or damaged items: flawed jewelry and cutlery are especially common. Many people recognize the value of a sterling object if it’s unmarred, but may lose sight of its value if it isn’t in perfect shape. Recently, I purchased a broken sterling fork at a garage sale. For days, I tried in vain to fix it; then it occurred to me that I was trying to mend 1.3 troy ounces of very pure silver worth more than $5 on the market. I got it for 25 cents, about one-twentieth of its actual value. The seller had failed to realize its value and, at first, so had I. Once I remembered that I had only one utensil of that type anyhow, and had proven to my satisfaction that I’d never be able to fix it properly, into my silver hoard it went.

I’ll be looking for more sterling this weekend, and probably will until garage sale season is over. Then I’ll move inside to the flea markets; they can be excellent sources of both silver and coins. Who knows: I may find that low-priced silver ladle, or a dinged teapot worth much more than I’ll pay for it. Whatever the case, I’ll enjoy the chase. See you there!

Investment tips: recognizing dishonest online brokers

2008-08-29T05:10:00.001-07:00

Sadly, dishonest brokers and brokerage firms are lurking on the Internet. This article gives tips for spotting and avoiding these scam artists.

Low transaction costs can make online trading an attractive investment option. Sadly, dishonest brokers and brokerage firms are lurking on the Internet, waiting to cheat trusting investors. The good news is that knowledge and research are great tools to help you spot and avoid dishonest brokers.

An investor should always ask plenty of questions and listen carefully to the answers. Ask for references and call them. Find out how long the company has been around, and ask about their history. Look hard at new firms, since dishonest firms often close and reopen under new names.

Check the broker’s record with the National Association of Securities Dealers (NASD), the leading private-sector regulator of securities services in the United States. If any disciplinary actions show up, don’t invest.

Find out how much of the money is spent on fees and commissions. Request a fee schedule in writing, and see how the prices compare to other firms’ fees. Make sure you read all the details of any documents you are given and are aware of any hidden costs, such as high fees for selling the investment. Keep in mind that a broker should never ask you to write a check to him.

Find out what customer service is available through the brokerage firm. Will you be able to talk to a live person if you have questions after you’ve invested your money, or will you be directed to a recording? Is the firm’s web site confusing, or informative and easy to navigate?

Make sure you have all the information you need about a proposed investment to make a sound decision. If the broker threatens that taking the time to research and consider the investment will cause you to miss out, be suspicious. You should also be cautious if the sales representative makes promises about the investment’s incredible profitability. Ask about the risks and request a risk disclosure statement and a prospectus. Beware of the investment if the broker cannot provide them.

Suggest that the broker discuss the investment opportunity with your financial planner. If he comes up with reasons why he can’t, it’s a scam. Also, see how the broker responds to a request for a written description of the investment. Dishonest brokers don’t like to put anything in writing since it could be used against them at a later date.

Ask on which exchange the investment is traded. Fraudulent securities are never traded on exchanges, such as the Chicago Stock Exchange, while most valid investments are. Also, ask what regulatory agency oversees the investment. You can investigate the investment’s status through its regulatory agency and find out the agency’s guidelines for resolving disputes.

If after careful consideration you decide to go ahead with the transaction, always carefully read and file any information you are sent about your investment, as well as any letters or email from the broker. Check paper statements against online account statements to make sure they match. If you see anything suspicious, contact the broker at once with your concerns. Go to the brokerage firm’s compliance representative or manager if you’re unhappy with the broker’s answers to your questions.

Investing your money is an important decision, and one that should be made only after much research and reflection. Educate yourself through books or classes about investing. Carefully select the broker and firm to whom you entrust your money, and when considering investments remember that old adage: if it sounds too good to be true, it probably is.

10 Tips to Successful Options Trading

2008-08-22T23:04:00.001-07:00

By Mark Louie

Options can be a menacing trading practice. Once you think you have it figured out, it shifts. Like any investment, there’s going to be some sort of gamble. Although viewed by bitter traders as confusing, risky and unprofitable at times, options can produce monstrous gains that can far outweigh the risks if played right.

Trading options is all based on anticipation. Yet with the volatility of the market, trading can be very frustrating with the market being unpredictable. There are several strategies and tips that you could practice that will increase your odds…

Here are 10 helpful tips that will contribute to minimizing risk and pull in huge profits when trading options:

10) Develop a game plan

How practical is this statement in life? You must always have a game plan when trading or investing. Otherwise, you’ll most likely trade irrationally and insensible and end up losing more than you had hoped. Developing a plan and strategy will have better odds than trading randomly. This should always be your first step to investing.

9) Select a good broker

Even with today’s easy access to a variety of resources, trading options are still very difficult to do on your own. Unless you’re a pro at trading, it would be to your best interest to select a brokerage firm for guidance. There is a plethora of different services out there offering different products. Shop around and learn their tract records. Make sure you choose one that’s compatible with your objectives and personal requirements. Remember, these are the people investing your money. Also, be aware of commission fees.

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Evaluate yourself

What are you trying to accomplish? How much money do you hope to make? How much can you take in losses before it affects your life? These are simple questions you should ask yourself when deciding to trade. Evaluating yourself will help you reduce of risk as well as help you plan your trading.

7) Know and understand the market

There are so many strategies and tactics when buying or selling options that you could trade in all market trends. Whether the market is bullish, bearish, or neutral, understand the trends and correlate it to your trading strategies.

Different markets will require different trading strategies. For example, you’re going to want to buy calls in a bullish market and sell calls in a bearish market.

News and press releases will have an impact on a stock price. Don’t buy from what sources are saying despite if they’re true. Chances are you’ll get in too late. Wait for a favorable price.

6) Separate and dilute your capital

There’s no other word more commonly used when preventing risk than diversification. This practice is so widely used in all investing practices. Like stocks, buy in several different sectors and equities to minimize risk.

Never trade with money needed for future obligations. Have a separate portion of your capital for trading options. The worst thing you would want is to lose your mortgage payment or retirement savings on one single sour trade.

5) Don’t get out early

You may have just had a few consecutive losses on several trades and you now have the mindset that all your trades will continue to negatively streak. Initially, you panic and tell yourself to get out to minimize your losses. That might be the worse thing you could do. If you get out too early, you could lose out on potential huge gains. In options, huge gains are what overcompensate any losses.

4) Don’t hold too long

Pay attention to the expiration date. Time value is one of the most important factors when trading options. Having the entire option expire and losing its value would be bad. Understand that options decay over time. If you feel it’s time to sell, sell. It’s better to take a small loss than losing everything.

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3) Secure your gains

Losing money right after you make it is a horrible feeling. With the volatility of the market, it’s easy to see a stock jump one week and then drop the next. If you don’t decide to sell after a stock is up in anticipation that it will continue to increase, a simple way to secure your gains is by setting up a trailing stop. A trailing stop is a stop whose price you raise as your profits grow. This will help you lock in any gains you make.

2) Establish a break-even point

A break-even point is the price at which the underlying instrument must shift by the expiration date, to produce an intrinsic value equal to the price you paid when you purchased the option. Defining a break-even point will ultimately help you tell whether the stock is worth selling or buying.

To find the break-even point, use the strike price and premium. If you’re buying a call, add the premium to the exercise price. If you’re buying a put, subtract the premium to the strike price. For example, if you were to buy a $40 put contract on Company XYZ for 5 1/2, the break-even point would be $34.50.

1) Research

This is a no brainer. Researching is the most useful and important thing to do when trading in anything. Pay attention to market trends. The best way to beat the market is to know the market. Great research is the key to consistent success in the market. Outside sources like your broker, news, TV etc. are great ways for information, but it all comes down to you. Your own personal information is more valuable than any other resource.

Options can be confusing and frustrating at times. Yet options can produce enormous gains. The collaboration of these 10 highlighted tips will help you increase your chances of making profits while minimizing risk when trading options.

Source: Ten Tips to Successful Options Trading

Competition in the Mutual Fund Business

2008-08-21T12:36:00.001-07:00

Key Points

The U.S. mutual fund business operates in a highly competitive financial services market. The
600 organizations that offer mutual funds compete among themselves and with other investment
services and products.
Three types of pressures stand out as drivers of mutual fund competition. The 90 million fund
shareholders’ demand for investment performance and services at a competitive level of fees and
expenses continually impacts mutual funds.
Mutual fund shareholders are heavily invested in lower-cost funds with above-average, long term
performance. More than three-quarters of stock and bond fund assets are invested in funds
charging below-average operational and management expenses; nearly two-thirds of stock and
bond fund assets are held in funds with above-average, 10-year performance records.

A Large Number of Mutual Fund Sponsors Compete for Investors

The U.S. market for mutual funds is highly competitive
and dynamic and provides strong market incentives
that reward or discipline fund sponsors based on their
ability to meet their shareholders’ investment and
service needs and demands.

More than 600 fund organizations offer funds
that manage investors’ assets, and fund investors can
redeem their shares in a fund at any time, requiring
fund sponsors to continually compete with one another
to retain and attract investors. In 2005, for example,
shareholders redeemed about one-quarter of their
stock and bond mutual fund assets and, in every year
since 1990, between one-quarter and one-half of fund
sponsors experienced net outflows from their long term
funds (Figure 1).

Mutual funds not only compete among themselves
for investors, they also compete with other investment
services and products. Mutual funds manage about 20
percent of household fi nancial assets. Investors and
their fi nancial advisers can also choose to invest in
bank deposits, insurance products, separately managed
accounts, direct holdings of stocks and bonds, hedge
funds, real estate investment trusts, exchange-traded
funds, and other investment products.
The large number of fund sponsors and the
dynamic nature of the financial services market have
kept market concentration of the largest fund sponsors

stable for the past 15 years. For example, in 1990,
the 10 largest mutual fund sponsors managed 53
percent of mutual fund assets; in 2005, the 10 largest
firms managed 48 percent of the assets (Figure 2).
Competition and other market dynamics have also
altered the rankings among fund companies, such
that many funds once ranked among the largest
firms no longer exist or have fallen in their assets under-
management ranking. Of the 10 largest mutual
fund sponsors in 1990, five were not ranked among the
top 10 in 2005.

Shareholders Place Competitive Pressures on Funds

Approximately 90 million investors, with a wide range
of financial objectives and service needs, currently
own mutual fund shares. These shareholders can
use a variety of resources to choose the funds that
best meet their investment goals and service needs.
For example, funds provide a large amount of
information — available through disclosure documents,
media sources, online search tools, and fund
web sites—that helps investors select funds.

Fund shareholders often receive additional
assistance in processing this information when
selecting funds. Nearly two-thirds of all fund
shareholders invest in mutual funds through retirement
plans at work, and employers sponsoring these plans
rely on this information to choose the funds and
other investments that they offer to their employees.
Among shareholders who own funds outside of work

retirement plans, 80 percent use financial advisers, who
help investors identify the funds or other investments
that best meet their financial goals.

Competition, in general, drives firms to
innovate and thereby differentiate themselves in the
marketplace. This differentiation can take the form
of fees, service, and other factors that allow funds to
target particular groups or types of investors. Over
time, however, shareholders reward funds that are
best able to deliver performance and service at a
competitive level of fees.

Pressure to Compete through Performance.
Shareholder demand for performance is one of
the most widely documented competitive forces.
Numerous academic papers have demonstrated that
the best performing funds receive most of the net
new cash flow.1 Moreover, mutual fund assets are
concentrated in long-established funds with above average
performance histories.

Investors, with the help of their financial advisers
and retirement plan sponsors, appear to favor long tenured
funds. From one year to the next, investors
have held roughly three-quarters of their stock and
bond fund assets in funds that have operated for at
least 10 years (Figure 3). Fund shareholders’ tendency
to invest in these funds is striking because during the
past two decades there has been tremendous growth in
the creation of new funds to meet the growing investor
demand. In fact, only 10 to 20 percent of all stock and
bond funds in any given year since the mid-1990s have
been open for a decade or longer

When shareholders choose among funds with
long performance records, they favor those funds that
have the best long-term performance. Those stock
and bond mutual funds ranked among the top half
of their peers, as measured by 10-year performance,2
manage more than three-quarters of the assets held by
funds with performance histories of 10 years or longer
(Figure 4). Taking together investors’ preference for
long-tenured funds with above-average performance,
investors held nearly two-thirds of all of their stock and
bond fund assets in funds with above-average, 10-year
performance records.

Pressure to Compete with Service Innovation.

Shareholders also pay close attention to fund services.
Mutual funds offer a broad range of services as
competition drives them to innovate and offer new
and better services. For example, fund organizations
typically maintain elaborate web sites that provide
current and prospective investors with information
about mutual funds and investing, and upgrade
their web sites with information and services not
available 15 years ago (Figure 5).3 Fund companies
have also significantly expanded the scope of other
shareholder services, including information provided
on shareholder statements and via the telephone.

Other, more tailored services appeal to particular
groups of investors. Walk-in offices in multiple
locations serve shareholders that prefer the option of face-to-face contact with fund service personnel.
Many shareholders use a financial adviser when buying
funds, and fund organizations offer share classes
designed for investors who choose to employ advisers.
These share classes serve to bundle financial adviser
services with the services that funds provide.

Another service that varies among funds is the size
of the investor account that a fund will accommodate.
Funds that offer low account minimums must hire
more staff and devote more resources to service the
additional shareholders than do similarly sized funds
with fewer investors and larger account balances.
Consequently, funds that make investing more
accessible by offering low initial minimums often
have higher expenses than funds that have larger
average accounts

Pressure to Compete on Cost. Although
shareholders purchase funds for performance and
service, they also are heavily invested in lowercost
funds. Investors hold most of their stock and
bond fund assets in funds charging below-average
operational and management expenses (Figure 6).
This trend is observable when examining investor
ownership of both index and actively managed
mutual funds (Figure 7).

The demand for lower-cost stock funds seems
particularly notable in recent years. About 90 percent of
the net “new cash” fl owing into stock funds since 2003
went to funds with costs lower than the median fund,
compared with 75 percent of the flows to funds below
the median in the mid-1990s.

The use of fee waivers to attract and retain
investors provides further evidence that funds compete
on cost. Small funds tend to have higher operational
costs, when measured as a percentage of assets, than
larger funds. This largely occurs because funds often
experience operational efficiencies as they grow in size,
helping to keep costs down. Small funds’ expenses
typically do not reflect their full operational costs
because many small funds waive a portion of their fees
in order to compete with the larger funds (Figure 8). If
competitive market forces were not at play, these small
funds would not have to waive fees and could charge
the level of fees necessary to operate the fund and
provide a profi t to the fund sponsor.

Conclusion
Hundreds of fund sponsors compete aggressively
for investors’ business. No mutual fund sponsor
has a guaranteed base of investors because mutual
fund investors can move their assets at any time to
another fund or a competing product. In this dynamic
marketplace, fund sponsors must continually strive

to deliver performance and service at a competitive
level of fees to their shareholders. These forces, along
with the widely available information about funds
that investors and their financial advisers use to
compare funds, provide a strong market discipline to
organizations that sponsor funds.

Notes

For example, see Diane Del Guercio and Paula Tkac, “Star
Power: The Effect of Morning star Ratings on Mutual Fund
Flows,” Federal Reserve Bank of Atlanta Working Paper, 2001–
15, August 2001; Erik R. Sirri and Peter Tufano, “Costly Search and Mutual Fund Flows,” Journal of Finance, 53, 1589–1622; and Judith Chevalier and Glenn Ellison, “Risk Taking by
Mutual Funds as a Response to Incentives,” Journal of Political
Economy, 105, 1167–1200.
Funds were ranked within their CRSP investment categories.
The investment categories used to rank funds by performance
were asset allocation, domestic equity, global equity, global
fixed income, domestic tax-exempt fixed-income, and domestic taxable fixed-income.
Many services that major fund companies now offer were not
available in 1990. Investor statements now list holdings of
outside funds, benchmarks, cost basis, portfolio summary, and personal returns, none of which were offered in 1990. Newer services now available through phone service representatives include balance information, ability to conduct exchanges and redemptions, make address changes, and make direct deposits and payments. Automated phone services now provide transaction history, balances, and the ability to conduct exchanges and redemptions and order tax forms and additional
statements.

Investment tips: investment strategies for after retirement

2008-08-21T12:00:00.001-07:00

Tips on investment strategies after retirement. Includes advice for keeping your principal balance safe from risky investments and reducing the effects of taxes.

So you have spent your life saving for retirement, and now that you’re here, you’re probably wondering what to do with your retirement savings. Most likely, your retirement nest egg is a combination of pension, IRA and/or 401(k) accounts. You probably also have monthly income from social security, and possibly from a part-time job or hobby. So how do you manage both the money you have saved and the money that is coming in, and build a retirement strategy that will see you through your golden years?

The two main principles of investing after retirement are 1) invest conservatively and 2) use funds in a tax-savvy way. When you reach retirement, it may be tempting to take the large sum of money in your retirement accounts and use them to invest in risky investments that promise high yield in a short amount of time. However, this is not a wise move, since these types of investments also have a high probability of losing large sums of money quickly. Instead, look for investment options that are relatively stable, such as bonds, certificates of deposit (CDs) and money market accounts. Although these accounts have much lower annual percentage rates and thus will not produce as much profit as other types of investments, they are much more secure and will keep your principal balance much safer. If you are worried about maintaining the principle balance of your accounts, choose accounts that are guaranteed by the Federal Reserve, such as CDs and money market accounts. However, be sure to ask about the limits on how much of the account is protected under federal regulations, should the bank go under.

The second step to a good post-retirement investment strategy is to use funds in a tax-savvy way. The rule of thumb is to first use funds that have the lowest tax liability. Such a strategy allows you to maintain your principal balance at as high a level as possible because the more taxes are taken out of your withdrawals, the more of your principal balance you will have to draw on to meet your every day expenses. First, take into account how much money you have coming in from sources such as social security, pensions and annuities, and determine how much you will need to withdraw on a regular basis to meet your expenses. You first want to withdraw money from any non-retirement savings accounts that you have, such as CDs and money market accounts. You have already paid taxes on these funds, so withdrawal won’t cost you a dime. Once these funds are depleted, the next money sources should be your IRA and 401(k). The best way to tap into this money is to roll over your IRA and 401(k) into a single annuity that pays a monthly income. This allows you to accrue income while guaranteeing a monthly income. If you do not need an annuity to live on, move these funds to a Roth IRA, which will allow the money to grow tax-free for your heirs. By using this conservative approach, you will ensure a long, financially secure retirement.

Earn Money From Your Blogs

2008-08-20T22:23:00.000-07:00

Earn Revenue With Adsense

Tuesday by PINOY

Adsense as defined by google...

"Google AdSense is a program enabling online businesses to earn revenue from serving ads precisely targeted to specific web content and search pages. With service levels ranging from online sign-up to dedicated support management, a broad range of sites profit from AdSense. Thousands of Google advertisers also benefit from AdSense by gaining exposure on sites across the Google Network, which includes many of the Top 100 Media Metrix sites such as AOL, About.com, Amazon, Ask.com, and Lycos."

Earning from your blogs could mark the defining moment on which your hobby will turn into business. You can build up your passion to write and maintain blogs by getting financial support from Adsense. Google serves ads through Adsense with a precise content matching to ensure that Ads being displayed on your site are related to your subject. this in turn serves as a complement to your site since your content and ads being displayed are correlated. With your rich and relative content, you can genereate high traffic from users looking for specific subject.

Setting up Adsense is very easy that it may took only 20 minutes of your time but what is more impressing is it's superb Ad relevance with your content as one publisher testifies under the "Success Stories" section of Adsense,

"Google's ability to deliver targeted ads is remarkable, in fact, because the ads are so relevant to the content on any given page, we believe that they are a very useful resource for our visitors. This is evidenced by the fact that, on many of our pages, more than 10 percent of our visitors click through to the advertisers for more information."

Another publisher says...

"It’s almost as if a specialist hand-picked ads for every page. The ads match our content so perfectly, it’s amazing."

Optimizing your ads is also a factor of increasing your revenues. You can build channels in Adsense to help you identify more clearly which Ad placement earn better. You can also experiment different colors which you think more appealing to your visitors.

So make Adsense your strategic partner to monetize your site without the requirement of sales staff and to provide a way to fill spaces within your site with possible revenue. Don't have to expect your income to rise excessively with Adsense in a litle time but with continous improvement on your site, I'm sure your smile will be more visible as days go by...

Summarizing possible gains in placing Ads on your site:

1. Generate Income from your site - With a revenue on every click for Content Ads or sign-up on customer referrals, this is certainly a good revenue generating hobby for yourself. You did not only find a way to do your passion but earn money from it. It will also help you cover your expenses in maintaining your blog like monthly hosting fee or annual fee you need to pay for your domain name.

2. Additional Resources for your visitors - With complimentary Ads related to your topic, your readers will find supplementary resources by clicking related ads served by Google Adsense.

3. Gain more traffic - With content richsite plus the content matching ads, you can look forward to more visitors coming into your site your previous readers coming back.

4. Site improvement from Help center - You can find a lots of helpfull tips in Adsense Help center including advance reports for a clearer understanding regarding visitor clicks to maximize your site's potential in generating revenue.

It's a wise decision if you invest back a portion of your revenue to promote your site and gain additional traffic. This is an opportunity where possible audience wasn't able to navigate your site directly or through search engine querries but through ad placement on their favorites sites. with specific keywords you tied on your advetisement, a click on it will find your site helpfull when they are diverted back to your site. Remember, more traffic generates more possible revenue.

Things To Considers

So, you finally decided to start blogging. There might be several factors that certainly stimulate your interest in blogging but sometimes it's a good practice of not expecting too much out of it. It is better to just enjoy yourself on what you are doing, have fun and then see your blog grow with your past time. Sometimes, with the encouragement of several professional bloggers who quit their full time job because they are making enough money out from their blogs. Remember, most of them had spent lots of time putting together their contents before they achieve their current status. How about the unheard blogger which could be even more who failed to monetized their websites as much as they hope for? I mentioned this not to discourage you but first of all, we should put our interest in what we are doing after which we can find ways to earn or at least monetize what we are doing. Here are some practical items we might consider while we do our blgging. Remember, this may not be expert-wise tips but from a beginner who just find his interest ;-)

1. We have something to share
Experiences, Knowledge or useful tips we learned, are we willing to open our secret? This may not necessarily include personal things but our expertise which could help others.

2. Keen to read and write
Blogging requires writing. We might not be as good writer as professional journalist do but at least we can reach to our target audiences clearly and be understood. We also need to read to keep us informed on what is going around us. Reading also enables us to learn from each other.

3. Willing to open ourselves to public
In blogging, there is no telling who will be able to read what you are writing. There are things we intend to keep within ourselves and things we can share. Are you willing to be known to the world through what you are writing?

4. Accept critics
We may not be able to satisfy everyone with what we intend to contribute. Some comments could be positive as much as negative. Are we prepared to appreciate and learn from these reviewers?

5. Keep up the excitement
Are we taking pleasure on what we are doing. It is really important to see ourself pleased and satisfied with what we are doing. This is to sustain our energy blogging.

Discover the Fun

Probably most of us have been enjoying writing some blogs and express ourselves to the world. It's an avenue to communicate to the world. Many thanks to the internet, reaching friends and people around the world have never been this easy. One article you publish and probably there’s no telling who will be able to read it or how far will it reach. Pretty fun huh!

But how about making money on your blogs while enjoying the freedom of being in touch to almost everyone? Millions of people already do so, but it’s never too late to dip ourselves in the pond of these bloggers and ad publishers. Try searching what online advertising and tons of information will be listed before you. It’s an opportunity to monetize our amateur skills in writing articles about almost everything. I’m quiet new here as well but I’m really enjoying it. I’ll share you some of whom I encountered to convert my hobby into money. Not sure yet the result but I’ll update you as soon as I can. You can try subscribing to some of the listed Ad vendors online. Certainly lots of them out still there so feel free to discover and share them.

Concept of Building a High Traffic website or Blogs

How to create a High Traffic Website or Blogs

Since the first inception of internet I saw the different ways or methods of earning online. But Over the years one important factor never changed and that is, you must first have a high traffic website to earn. In this article I will cover some basic principle of building a high traffic website. I dont want you keep wainting so lets get started.

Below are some of my suggestion on building your high traffic website.

read on..

1.) Best Possible Content - Before creating your website or blogs, plan first on what content you are suppostedly going to publish.. always think of the content with a question in your mind that is it worth being read by millions of online users? Does your site bring any value to users? Give your readers the very reasons to come back and visit your site again. When creating a content for a particular topic, write the best possbile content for your readers.

2.) Create a Timeless Content - One of the great criteria for writing a content is that it should be timeless, information that you publish in your website should have no expiration or maybe long term in nature if timeless is not possbile. What Im trying to say is that your content should not just be of value today but in years to come or probably a lifetime. Could you imaging how your users will treasure the information you have provided? they would definitely come back for more. (That means more traffic at your end right? =)

3.) Create Origianl Content - When creating a content make sure that what you post in your website or blogs are originally written. As a rule of thumb please never copy content from other websites, just remember sooner or later your users will know about it and it will just give your site a bad reputation. You dont want that do you?

4.) Get a domain name - These days creating a website under free portal doesnt look very enticing. Give your site some credibility,register and pay for your domain name with a high relevance to what your going to intend to write. After all domain name registration this days are not too expensive.

5.) Optimize Your Website - Optimizing your website or blogs is a huge topic, Promise I'll cover this in my next posting. Be sure to comeback and have the detailed information on how to do that. Of course its Free...

I know I've only scratch the surface, I'll be writing more about on how to build traffic on website soon. Just continue to visit the blog or if you want you can bookmark it for future reference. =)

To Blog or Not To Blog

First stumbling block could be, you are not a tech guy so you'll probably got lost if you do some blogging. Your thought would be, you need to learn this HTML thing or some scripting language such PHP and asp. The truth is, you might not even need to know them (or you can read a little -_- ). OK, you need to know how to use a computer and surf the web but most people already know this right? What is important is if you have something to express. You have lots of things to write and want to share it with some friends.

What is interesting in blogging is it's a form of communication. you can share your thoughts with the public. You can write virtually anything of your interests. From the hobbies you take pleasure in to the events that draws crowds like the super bowl. You can write your personal experiences or actual events you witnessed. Also, you can add in statistics from the just concluded basketball championship. You might consider presenting your blogs in interesting way to make your readers enjoy their stay at your site. This way, you'll be able to attract as many audiences with the same interest. And what a fulfilling feeling it is to get some compliments from your readers. You may also get negative comments but this should not distract you rather take it the positive way. Learn from them and improve your writings just as they would like it. But don't push yourself too much. We really cannot satisfy everyone so as long as you know you're doing your best and doing the right thing. Just go ahead, it's not them your trying to do a favor anyway, it's yourself.

You see, the exchange of thoughts is way to build an online community giving feedback at each other. You can gain friends from as many places as you can imagine and that would be lots of fun. So, why not start contemplating on what topic you probably most enjoy sharing with other people and make that first step? Go ahead, lots of people already do.

There are several tools available in the internet like Blogger, WorPress, LiveJournal and TypePad that offers means to start a blogging hobby. Some offer a free blog hosting and some charges at a very low cost. This is on cases where you don't want to pay expensive hosting fee on monthly basis. These sites includes an easy navigation and building blocks to easily configure your site. But that is not the end of it. From the fun you enjoy, you can actually monetized your site by putting some relevant advertisements based on the contents of your website. You can offer an advertisement space from other companies for a fee or subscribe to ad serving website and gain a shared revenue. Not bad right?

So, start your blogging fun now and lets find ways to earn money from it.

Welcome to the world of Blogging

Blogging has taken our time most of these days. Certainly you can find millions of blogs out there with the advent of free blogging tools like Blogger and WordPress. Each blog is different from the others so you may find some blogs attract more visitors while others may not. So, it’s very nice thing if we make our blogs simple yet attractive. This may spawn loyal readers hence create traffic for our site. And guess what, it may give you more revenues. So, stimulate the interest of your readers and show quality on your works.

You may want to post constantly on your blog so your readers may find new information when they revisit your site. This gives your readers a reason to come back to your site from time to time. For non-professional writer like me, it needs one to be creative in making a blog. Look constantly for new information that you can share with your readers. Keep your readers up-to-date to useful information. But make sure all that is written is the truth!

Probably, one way to communicate with your readers is through comments about your blog except if you publish your contact information where readers may keep in touch with you anytime. Be open minded, the truth is we can never satisfy everyone. Be thankful for positive feedbacks but take negative comments as way to improve your blog.

So, there’s some tips I actually learned from the community. Enjoy and Happy blogging!

Google Adsense Strategies and Tips

2008-08-20T11:56:00.001-07:00

Adsense is beginning to make a huge impact on the affiliate marketing industry today. Because of this, weak affiliate merchants have the tendency to die faster than ever and ad networks will be losing their customers quickly.

If you are in a losing rather than winning in the affiliate program you are currently promoting, maybe it is about time to consider going into the Adsense marketing and start earning some real cash.

Google is readily providing well written and highly relevant ads that are closely chosen to match the content on your pages. You do not have to look for them yourselves as the search engine will be the doing the searching for you from other people’s source.

You also don't have to spend time in choosing different kind of ads for different pages. Google makes it very easy for you, with no codes to mess around for different affiliate programs.

You will be able to concentrate on providing good and quality content, as the search engines will be the ones finding the best ads in which to put your pages on.

You are still allowed to add Adsense ads even if you already have affiliate links on your site. It is prohibited, however, to imitate the look and feel of the Google ads for your affiliate links. One of the things you can do, however, is to utilize Google's custom palette to customize your Google ads, making them to appear a part of the web page itself. The idea here is to match background and links to match the theme of your site. People on the internet today are trained to click on a link that is blue, and if your Google ads have the same theme as your web page, it makes the Google ads appear to be a portion of your "content."

You can also filter up to 200 URLs. This gives you a chance to block ads for the sites that do not meet your guidelines, and also block competitors. Remember that it is unavoidable that Adsense may be competing for some space on web sites that all other revenues are sharing.

Owners of small sites are allowed to plug a bit of a code into their sites and instantly have relevant text ads that appeal to your visitors appear instantly on your pages. If you own many sites, you only need to apply once. Then ,you are issued a unique "publisher ID", which can be used on any site you currently own. A small snippet of Javascript is placed on your site in the location you wish the ads to appear in, and generally speaking, the ads from Goggle will appear in minutes. This ends the hassle of having to apply to many affiliate programs, and keeping track of many different URL's and user ID's and passwords.

As Google ads are very easy to customize, and can be placed anywhere on your site you wish, you can experiment with placement, colors, and themes. Many tricks are available to the resourceful webmaster, including adding images in conjunction with your Google ads to make them more noticeable.

The payment rates can vary extremely. The payment you will be receiving per click depends on how much advertisers are paying per click to advertise with the use of the AdWords. Advertisers can pay as little as 5 cents and as high as $10-12, sometimes even more than that too. Some savvy lawyers are currently paying as high as $75 for advertising the keyword mesothelioma! And you, as the ad publisher, are earning a share of that money generated.

If your results remain stagnant, it can help if you try and build simple and uncluttered pages so that the ads can catch the visitor’s eyes more. It sometimes pay to differ from the usual things that people are doing already. Google has many tutorials, including a "heat chart" which shows you where the best placement for ads are. You will need an account to access these tutorials. Sign up for an Adsense account at https://www.google.com/adsense/?sourceid=aso&subid=ww-et-awhome&hl=en_US. It is also a refreshing sight for your visitor once they see something different for a change.

It is still wise to look at other people’s information and format your Adsense in a like manner. A wise old business axiom is to "find a good business model, then copy it." Let others do the hard work for you, and learn from a successful site. Just think about it as doing yourself a favor by not having to work too hard to know what content to have. Look to sites that have high page rank, and carefully observe their layouts, their content, and placement of their ads. A little time spent doing research can put dollars in your pocket down the road.

Publishers have the option of choosing to have their ads displayed only on a certain site or sites. You can also have them displayed on a large network of sites if you so desire. Google now has the option to allow other people to advertise on your site. This only makes good sense. If you are marketing to a tightly defined niche, you can place your own ads, written by you, on site that allow this option. The choice is yours, depending on what you think will work best to your advantage.

It is important to note that you cannot choose certain topics only. If you do this, search engines will not place Adsense ads on your site and you will be missing out a great opportunity in making hundreds and even thousands of dollars cash.

Topics to be avoided includes gambling, firearms, ammunition, tobacco or drugs. If you are being offered more cash in exchange of doing Adsense with these kinds, it is just like signing your own termination paper.

With all the information that people need in your hands already, all you have to do is turn Google Adsense into your own cash cow. It all boils down to a win-win situation both for the content site owners and the webmasters or publishers.

Our website, http://www.for-the-record.biz, is a good source of information for the beginning marketer. We present a lot of content for those needing more information on a variety of subjects.

Investment Tips

2008-08-20T09:27:00.001-07:00

Investment Tips: The Top 5 from Great Investors
By Dr. Steve Sjuggerud, Chairman, Investment U

Editor's Note: Please see our 'Stock Market Predictions for 2006' issue for new investment tips from Dr. Mark Skousen and the Investment U Research Team.}

One of my personal keys to investing success and learning investment tips to last a lifetime has been learning how "the greats" did it.

And I always like to follow up on what they're thinking now. In the latest Fortune Magazine 2004 Investment Guide, the magazine offers up "Top Picks from 50 Great Investors."

However, 40 of those picks are stocks, which I'm not particularly interested in at the moment. Why? The rule about stocks is "a rising tide raises all ships." So if the market goes up, most stocks will go up as well. However, the market is expensive by any historical yardstick. If the tide goes out (as it may), no matter how fancy my ship is, that ship will likely go with it.

But 10 of the greats had non-individual-stock ideas. Let's take a look at five of those investment tips, all set to provide us with the greatest opportunities for profit (outside of the stock market) in 2004.

1) Jim Rogers (famous hedge fund manager, www.jimrogers.com):

Bet against the dollar…

"The decline in the dollar is major and horrible, and it's going to go on for a long time," Jim Rogers says. He recommends owning foreign currencies, like the euro (www.everbank.com has foreign currency denominated CDs).

2) Bill Gross (head of PIMCO, manages more $$ than anyone, www.pimco.com):

His top investment tips? Protect yourself from inflation…

The Fed controls the money-printing press. You need to protect yourselves. The core investment tip from Bill Gross is to buy symbol TIP. "It's not very sexy," he says, "but safe and sensible - sort of how I think of myself" (learn more about it at www.etfconnect.com).

3) Jeremy Siegel (Wharton School professor and author of Stocks for the Long Run, www.jeremysiegel.com):

Go for high-quality dividend-paying stocks.

Siegel recommends symbol "DVY," which gets you the top 50 dividend-paying stocks (learn more about it at www.etfconnect.com).

4) Jeremy Grantham (money manager with an outstanding multi-decade track record, www.gmo.com):

Among Jeremy's leading investment tips, he most recommends buying timber…

"Timber is the only asset class that's very negatively correlated with the stock market," Grantham says. One such timber stock is PCL.

5) Robert Shiller (Yale professor, historian, and author of Irrational Exuberance http://www.econ.yale.edu/~shiller/):

Buy real estate stocks…

Real estate stocks are a big class of assets and "should be a major part of people's portfolios," he says.

Investment Tips or Investment Knowledge: What to Do?

You're welcome to buy their picks, if you'd like.

But what I'd recommend instead is visiting the websites mentioned in this article, and learning more about each of these guys and how they think. If you find you agree with them, then read books they've written.

Reading as much as possible from the famous names really has been one of my own personal keys to success. It's how I've learned what REALLY works… and what doesn't.

You ought to give it a try too…

Good investing,

Steve

What's Next for Your Gold Investment?

2008-08-20T02:41:00.001-07:00

Gold is down 20% from its highs... So what should we do? What's next for gold?

Gold peaked at around $1,000 an ounce in March of this year. Now it's around $800. Does that mean the bull market is over?

Before you write off gold... let's take a look at gold's last bull market – the decade of the 1970s – and compare it to today. First, let's look at today:

Gold Is Up 200% Since 2002

The chart looks great – and then it looks bad...

From January 2002 to earlier this year, gold soared from less than $300 an ounce to $1,000 an ounce – an incredible run. Even better, the run was remarkably pain free... with the exception of a fall of 20% or so in May 2006. Even though gold has recently given back $200, investors are up about 200% since the beginning of 2002.

Now let's consider the same time frame above (six years and eight months). Only this time, let's start from the beginning of 1970:

Gold Fell Nearly 50% in 1975-76

As you can see, gold soared from $35 to near $200 by 1975. But then, by the six-years-and-eight-months mark, gold had fallen to around $100 – nearly a 50% fall!

Looking at a chart like that, you might have thought the gold bull market was over. But if we extend that chart out for the rest of the 1970s... The 50% decline turned out to be just a blip:

By 1980, Gold Had Soared Past $800

From 1970 to January of 1980, gold ran from $35 to $800. Despite its 50% fall in 1975-76.

Our friend John Doody – an economics professor turned editor of Gold Stock Analyst (GSA) – told his subscribers today a similar story yesterday:

The current "bear" market is simply a painful correction in Gold's ongoing bull market. What should happen is Gold resuming its gains versus all currencies. In GSA's opinion, the only uncertainty is "when."...GSA sees no change in the Dollar's fundamentals to end Gold's bull market.

Gold is priced in U.S. dollars. And the dollar has had its finest one-month run in a very long time... The Aussie dollar has lost over 10% of its value in a month versus the U.S. dollar. And other currencies, including the euro and the Swiss franc, lost nearly as much. (To see the carnage, check out the currency charts at the DailyWealth Market Window.)

Our friends at Seabridge Gold (SA) also have some strong comments on the gold market, in their just-released second-quarter report. As Seabridge sees it, the dollar's rise has combined with other market factors "to create a perfect storm for gold, a storm which should be relatively short lived, in our opinion." (Click here to read the rest of Seabridge's gold-market commentary.)

You can explain at least half of gold's fall by the nearly 10% rise in the dollar. And as John Doody and Seabridge explain, the rise of the dollar is probably a temporary phenomenon.

The Best Speculation in the World Right Now

Is This the End of the Gold Bull Market?

We have no guarantees that gold will resume its bull market now, or ever. But history shows gold has fallen as much as 50% before continuing a huge bull market. That helps put the recent 20% fall in perspective.

If history is any guide, over the course of the next five years, gold could fall farther than you think... and then soar higher than you can imagine.

Good investing,

Steve

Google AdSense Tips

2008-08-19T10:54:00.001-07:00

Google AdSense program is a popular web advertising program which provides a good income source for many websites. There are well defined terms of service to strictly adhere to when participating in the program.

On my visit through sites and forums, I daily notice several instances of misuse of AdSense ads. So here a few helpful Google AdSense tips, probably many you already know, and few you might gain by knowing now. These AdSense faq are all picked from the Program Policies, Terms and Conditions and FAQ itself and presented in a simplified manner.

1. Never click your own AdSense ads or get them clicked for whatever reason. You know this one very well. This is a surefire way to close you AdSense account. Never tell your office associates or friends to click on them. Keep a check if your family or children are busy increasing your income by clicking your ads and indirectly trying to stop your income. Don't even think of offering incentives for clicks, using automated clicking tools, or other deceptive software. AdSense is very smart to detect fraudulent clicks. Check the ads which appear on your pages by the Google Preview tool if required.

2. Never change the AdSense code. There are enough means of AdSense optimization & customizations available to change the colour, background or border to suit your needs. Do whatever you want to do outside the code, never fiddle within the ad or the search code. They know it when you do. The search code has more limitations to colour and placement, but you should adhere to the rules. The code may stop working and violates the TOS.

3. Do not place more than 3 ad units and 3 ad links or 2 AdSense search boxes on any web page. Anyway, ads will not appear in those units even if you place more ad units. But this is the limit they set, so it is better to stick to it.

4. Do not run competitive contextual text ad or search services on the same site which offer Google AdSense competition in their field. Never try to create link structures resembling the AdSense ads. Never use other competitive search tools on the same pages which have AdSense powered Google search. They do allow affiliate or limited-text links. Update: Google has allowed you to run contextual advertising like Yahoo ads, Chitika etc provided the ads do not resemble AdSense ads.

5. Do not disclose confidential information about your account like the CTR, CPM and income derived via individual ad units or any other confidential information they may reveal to you. However, you may reveal the total money you make as per recent updates to the TOS.

6. Label headings as "sponsored links" or "advertisements" only. Other labels are not allowed. I have seen many sites label ads with other titles. Dont make your site a target in a few seconds gaze.

7. Never launch a New Page for clicked ads by default. AdSense ads should open on the same page. You may be using a base target tag to open all links in a new window or frame by default. Correct it now as they do not want new pages opening from clicked ads.

8. One Account suffices for multiple websites. You do not need to create 5 accounts for 5 different websites. One account will do. If you live in the fears that if one account is closed down for violation of TOS, believe me they will close all accounts when they find out. You can keep track of clicks by using channels with real time statistics. They will automatically detect the new site and display relevant ads.

9. Place ads only on Content Pages. Advertisers pay only for content based ads. Content drives relevant ads. Although you might manage some clicks from error, login, registration, "thank you" or welcome pages, parking pages or pop ups, it will get you out of the program.

10. Do not mask ad elements. Alteration of colours and border is a facility to blend or contrast ads as per your site requirements. I have seen many sites where the url part is of the same colour as the background. While blending the ad with your site is a good idea, hiding relevant components of the ads is not allowed. Also do not block the visibility of ads by overlapping images, pop ups, tables etc.

11. Do not send your ads by email. Html formatted emails look good and allow placement of these javascript ads. But it is not allowed as per TOS. You do not want impressions registering on their logs from any email even once. They are watching!

12. Keep track of your content. So AdSense is not allowed on several non content pages. But it is also not allowed on several content pages too. Do not add it on web pages with MP3, Video, News Groups, and Image Results. Also exclude any pornographic, hate-related, violent, or illegal content.

13. Do not alter the results after ad clicks or searches - Ensure you are not in any way altering the site which the user reaches to after clicking the ads. Do not frame, minimize, remove, redirect or otherwise inhibit the full and complete display of any Advertiser Page or Search Results Page after the user clicks on any Ad or Search results.

14. Avoid excessive advertising and keyword stuffing - Although the definition of 'excessive' is a gray area and is subject to discretion, yet Google AdSense with correct placement, focused content and high traffic will get you much more income than other programs, so excessive advertising is not required. Keyword stuffing does target better focused ads, but overdoing it is not required.

15. Ensure you Language is Supported - AdSense supports "Chinese (simplified), Japanese, Danish, Korean, Dutch, Norwegian, English, Polish, Finnish, Portuguese, French, Russian, German, Spanish, Hungarian, Swedish, Italian and Turkish. In addition, AdSense for search is available in Czech, Slovak, and Traditional Chinese. If your web pages language is not supported, do not use the code on such pages.

16. Maximum 2 referral button per product per page - With the launch of the Google AdSense referral program, you are allowed to put only 2 referral buttons for AdSense referral, AdWords referral, Google pack and Firefox with Google toolbar referral.

17. Do not specify Google ads as your alternate ads. - Several services like Chitika eminimalls allow you to place alternate urls, when a targeted paying ad cannot be displayed. This involved creating an simple html page and putting the ad to be displayed instead. Even AdSense allows an alternate url feature instead of displaying public service ads. But never use AdSense ads as alternate urls.

18. Do not confuse with adjacent images - It was a common policy to increase CTR by placing same number of images as the number of text ads, which falsely gave the impression that the text ads represented an explanation to these images. Inserting a small space or a line between the images and ads is not allowed. Make sure that the ads and images are not arranged in a way that could easily mislead or confuse your visitors.

Did you find this article useful? For more useful tips & hints, Points to ponder and keep in mind, techniques & insights. Do please browse for more information at our website: http://www.infozabout.com

Article Source: http://EzineArticles.com/?expert=Wazir_Singh

How To Get Started Investing

2008-08-19T06:48:00.001-07:00

The Investment U E-Letter: Issue # 103
January 10, 2002

How To Get Started Investing: Checklists, Common Mistakes, and Avoiding the Fastest Way to the Poorhouse
By Dr. Steve Sjuggerud, Chairman, Investment U

"Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little."
--Fred Schwed, from the book "Where Are the Customer's Yachts?" 1940

As a stockbroker years ago, I saw hundreds of individual investors doing dumb things with their money. At first, when I was certain what they wanted to do was dumb, I'd try to talk them out of it. But I quickly learned that once someone has his mind made up, it's hard to change it. It occurred to me that an educational guide on How To Get Started Investing is what many new investors could benefit from.

While I didn't particularly enjoy being a broker, I did learn many lessons. The lessons can be boiled down to two truisms: everyone thinks differently about money . . . and people would rather be proven right than make money.

Next as a head trader, I saw the dumb things Wall Streeters do. I learned that most financial types in Manhattan don't know how to invest either. Most are actually WORSE investors than individual investors. Their primary concern is not successful investing, but extracting their cut from the customer.

Then as a head of research, I saw the "sham" of brokerage research. Most research departments exist only to come up with material that helps their brokerage employer look good; their aim is not to do, well, actual research.

It was only by working for an independent research outfit that I was finally able to crunch some numbers about what really works on Wall Street…

The Four Paths Taken by Investors

Ultimately, there are two conscious approaches that people take when they get started investing. Let's call them: 1) the "GET RICH QUICK" investing approach, and 2) the "GET RICH SLOW" investing approach.

And while people don't realize it, there are two other approaches as well: 3) the "GET POOR SLOW" approach, and the dreaded 4) "GET POOR QUICK" investing approach.

Unfortunately, a great percentage of investors, probably most of them, actually end up using approach number four…

The goal of these Investment U E-Letters is to show you how to get started investing and/or how to become a better investor. Obviously, I can't cover everything in a single e-mail . . . but I can mention some of the things that have consistently proven themselves to be part of the "GET POOR QUICK" approach.

How To Get Started Investing: First, Avoid These Six Mistakes Made by "Get Poor Quick Investors"

1. Buying and selling options as a "novice." Getting lucky and hitting a big winner in options is the worst thing for an options trader who has just started investing. That almost ensures that he'll eventually lose everything by going back for more, always looking for that big score, until all his money is gone. Options can be traded successfully - with the right tools, the right knowledge and the right advice.

2. Buying and selling futures. Same story as options.

3. Buying an expensive computer trading program and trading with it blindly. (If someone truly figured out the Holy Grail, why would they sell it to anyone who wanted it for just $2,000?)

4. Putting all your eggs in one risky basket. Like options, if you were to happen to get lucky once, and make a zillion dollars, you'd lose it the second time around (or the third). Eventually, it will all be gone.

5. Throwing good money after bad, and buying more as the price falls…definitely belongs on the "what not do do" on our How To Get Started Investing guide. This is nearly always what investors do after the stock they've put all their eggs in starts to go down. Instead of getting out - or lowering their risk - they mortgage the house, the car, the family cat, whatever, just so they're not proven wrong. And if they ultimately are right (which is very rare), they'll do it again the next time around. Then they'll definitely lose it all.

6. Speaking of mortgaging . . . leveraging up, using margin, or any type of borrowing money for stock trading is generally a bad investing idea. It's not that the debt is bad in itself. But it's generally a sign of people who are gambling. And if they lose it all, they're still responsible for paying back the money they borrowed.

Then there are a lot of just generally bad investments…

Four "Get Poor Quick" Investments

1. In general, private placements are incredibly risky. If you're throwing $50,000 into a telecom start-up, you should be prepared to just mentally write that money off. If it happens to turn into millions, be thankful. But don't buy that yacht just yet . . .

2. Thinly traded stocks are generally bad investments. The share price may go up as you're buying, but you'll never get out when it's falling. Before you get started, look for minimum average daily volume of at least 200,000 shares in stocks you're considering getting into. But if you do get in under that volume, again mentally write off that investment. If it turns into a big winner, be thankful.

3. Secretive investments. There have been tons of frauds here - offshore prime bank debentures, promissory notes, offshore investing club programs - all promising things like 10% a month or more. Folks, it's just not possible.

All their secretive stuff, saying that "this is what the big banks really do with their money" is B.S. $10,000 compounded at 10% a month for 10 years would turn into a billion dollars. Even Warren Buffett can't touch that.

4. Wiring money offshore. Generally, these secretive investments require you to wire money to strange lands. I saw one once promising 8% a month that was a Panama corporation with a P.O. Box in Costa Rica, asking you to wire your money to Latvia. Who do you go after when your money disappears?

By the way, I've done business offshore, managing an offshore hedge fund based in the Bahamas. If you know the people you are doing business with are reputable and have been doing business for a long time, you're probably fine. But wiring your money to Latvia on behalf of a Panamanian corporation using a P.O. Box in Costa Rica?

How To Avoid the "Get Poor Quick" Approach

I could go on (and on, and on). The list of bad investments and investing mistakes is far longer than the list of smart investments. But these things described above are the major ones to avoid to keep you off the "GET POOR QUICK" track.

Below, I've included a How To Get Started Investing checklist for you to follow to avoid making major mistakes in your investments. By making sure you follow this list - along with the lessons you've learned from Investment U - you should be able to steer clear of the "GET POOR QUICK" track.

How To Get Started Investing "Common Sense" Checklist

1. Is the source of this recommendation trustworthy? (Do I know this for sure?)

2. Have I taken the necessary steps (such as trailing stop-losses, etc.) to prevent a major loss in this investment?

3. Where does this stock trade? Is it widely traded enough that I will be able to sell when I need to?

4. Have I verified the claims made about this stock's performance? (Do NOT rely on what a broker's research department tells you!)

5. Am I sending my money offshore to people I do not know to be reputable?

6. Have I done enough of my own research to know all I need to about this company?

Today's IU Crib Sheet

Most investors are unaware of the two "hidden" approaches to investing: the "GET POOR SLOW" approach and the "GET POOR QUICK" approach. These, of course, are distant cousins of the more popular "get rich slow" and "get rich quick" approaches.
Investors who unknowingly choose the "GET POOR QUICK" approach generally make the same mistakes - and chase after the same investments. Recognizing - and avoiding - these will help prevent you from going down this path.
Make your own How To Get Started Investing checklist - including the items mentioned above - that you can refer to each time you make an investment decision. Too often, the most critical mistakes are made when investors let EMOTION and "gut feeling" win out over a more rational approach. Make a commitment to avoid this trap by building your own personal checklist . . . and sticking to it!

We'll cover some of these "GET POOR QUICK" investment schemes in more depth in future Investment U E-Letters. But for now, if you decide to do any of the above, please realize that you are going down the "GET POOR QUICK" road, where experience shows you'd be better off going to Vegas. There, you'll at least have fun while you go broke . . .

Good investing,

Steve

Related Articles:

Learn How To Invest: Advice for a Novice
Investment Tools: The Top 5 You'll Need To Succeed
When To Sell Stock: The Only 2 Reasons To Unload an Investment

How to get Free Money in Runescape Quick

2008-08-19T06:45:00.001-07:00

Steps to help you make quick free money by air running.

Instructions

Difficulty: Easy

Things You’ll Need:

25 Rune essence
Air talisman or Air tiara
Optional: completed Rune Mysteries Quest

Step1

Get 25 Rune essence by mining(Rune Mysteries Quest) or buying for 20gp each.

Step2

Put on your Air tiara or put Air talisman in inventory.

Step3

What inventory should look like. Take 25 unnoted Rune essence to Air temple located below Falador.

Step4

Switch to world 16.

Step5

Map of Air temple. Enter Air temple by clicking "enter mysterious ruins"(Air tiara) or using Air talisman on mysterious ruins.

Step6

What trade screen should look like. Trade anyone saying open to receive 2k and 25 NOTED Rune essence.

Step7

Drop money off to bank and take NOTED Rune essence and UNNOTED them.