Investment Blog

E.U. Details $957 Billion Rescue Package

2010-05-10T13:47:00.000+08:00

By JAMES KANTER and LANDON THOMAS Jr. Published: May 9, 2010

BRUSSELS — European leaders agreed on Monday to provide a huge rescue package of nearly $1 trillion in a sweeping effort to combat the debt crisis that has engulfed Europe and threatened markets around the world.
In an extraordinary session that lasted into the early morning hours, finance ministers from the European Union agreed on a deal that would provide $560 billion in new loans and $76 billion under an existing lending program. Elena Salgado, the Spanish finance minister, who announced the deal, also said the International Monetary Fund was prepared to give up to $321 billion separately.
Officials are hoping the size of the program — a total of $957 billion — will signal a “shock and awe” commitment that will be viewed in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008.

The package was much higher than expected, and represented an audacious step for a bloc that had been criticized for acting tentatively, and without unity, in the face of a mounting crisis.

Underscoring the urgency of the situation, President Obama spoke to the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, on Sunday about the need for decisive action to restore investor confidence. And in a sign of the spreading anxiety, the United States Federal Reserve, along with the European Central Bank and the central banks of Canada, Britain and Switzerland, announced the establishment of instruments known as swap lines. The swaps are intended to ease pressure on European banks and money markets by providing more liquidity.

In addition, the European Central Bank announced after the deal was completed that it would intervene in the government and corporate bond markets, also to provide liquidity.

The actions by the United States represented significant concern that the European crisis could spill over and hinder the American recovery.

Stock markets in the Asia-Pacific region rose early on Monday. The leading indexes in Japan and South Korea both rallied about 1.3 percent soon after the deal was confirmed, recouping some of the losses they had suffered last week. The Hang Seng index in Hong Kong gained 1.3 percent soon after the open. In Australia, the benchmark S&P/ASX 200 climbed 2.1 percent.

The markets in Singapore and mainland China also opened higher.

New political complications in two of Europe’s most important countries added to the challenge faced by the finance ministers as they met to find a solution. In Germany, voter anger at the effort to save Greece cost Mrs. Merkel an important regional election Sunday, undermining her leadership, and in Britain the government remained in a state of suspended animation because of the inconclusive Parliamentary elections last week.

Financial unease has been mounting. Riots in Greece, ever-tightening terms of credit and the unexplained free fall in the American stock market last Thursday have compounded the sense that the European Union’s inability to address its sovereign debt crisis might lead to the type of systemic collapse that followed the fall of Lehman Brothers.

The debt crisis began with Greece teetering toward default, and fear quickly spread about other weak economies like Portugal, Spain and even Italy. Previous efforts by the European Union to shore up investor confidence were viewed as too little, too late, with the markets making clear that they were looking for a bolder plan.

Olli Rehn, the European commissioner for monetary policy, described the arrangement as “a consolidation pact” that would be “particularly crucial for countries under speculative attacks in recent weeks.” He specifically mentioned Portugal and Spain.

Mr. Rehn said the I.M.F. would provide “half as much as the European Union” following lengthy talks with fund officials.

“We shall defend the euro whatever it takes,” Mr. Rehn said.

What emerged from the discussions, which covered more than 10 hours, represented a partial retreat from a system discussed earlier in the day that would have radically expanded the powers of the European Commission to raise funds.

Instead the ministers devised a system that would speed up the pace at which states that use the euro could lend to one another, but on a bilateral and voluntary basis.

One of the crucial decisions that ministers made was to create a so-called special purpose vehicle to disburse the $560 billion in new loans, should that support be required by member states in economic difficulties.

The use of such a financial instrument reflected the difficulties that individual European governments — and Germany’s in particular — had in committing huge sums to a central authority. Having a body like the European Commission, Europe’s executive body, oversee the economic management of the bloc was seen by some countries as a clash with national sovereignty.

In a statement after their meeting, the ministers emphasized that the special purpose vehicle would expire after three years and that its use would be strictly dependent on “national constitutional requirements.”

The language most likely reflected the reservations of some governments to providing even more money than is available in bailout packages already approved.

Ministers said their first line of defense against financial turmoil was to employ an existing loan program, which they expanded by $76 billion, and to use the further loans approved Monday as a “complement” as required.

While the sums being discussed are eye-catching, some bankers questioned whether they would be enough to calm the markets over the long term. One banker said that, with more European economies coping with rising deficits, raising, guaranteeing or backing such a large sum would not be an easy task.

But that concern may be addressed by a more forceful posture by the European Central Bank. The bank has rebuffed calls to inject liquidity into the markets by buying back European bonds, but in a statement Monday morning it said it would take whatever steps were necessary to smooth out the secondary markets for public and private debt, suggesting it would have the flexibility to intervene in the markets as needed.

There were many complications in trying to forge a consensus. They included defining the role of Britain, which lies outside the euro zone and had said it would not help in propping up the euro, as well as the European Central Bank. The fractiousness underscores the frailty of a monetary union in which its richest member, Germany, is also the most opposed to a financial rescue.

“The fact that they are worried is clear,” said David Marsh, the author of “The Euro,” a book on the history of monetary union. “But I don’t think that there is enough commitment or economic firepower in Germany to provide the massive loan guarantees to satisfy the markets.”

Predictably, politicians blamed speculators for the market upheaval. The Swedish finance minister, Anders Borg, said immediate action was needed to tackle “herd behaviors in the markets that are really pack behaviors, wolf pack behaviors.” Mr. Borg warned that volatility in markets could “tear the weaker countries apart.”

Since it became clear that Greece would not be able to meet its financial obligations and fears spread that other indebted nations like Spain, Portugal and Ireland would have similar troubles, Europe has responded fitfully.

Even now, despite the lashing rhetoric and the Sunday night meeting, there is still a feeling that Europe should be doing more — notably with regard to freeing the European Central Bank to go against its charter and print money by buying back distressed European bonds from the secondary market.

The meetings on Sunday represented an extraordinary convergence of diplomatic activity, crammed into a tight time frame. Political leaders including Mr. Sarkozy of France said early Saturday, at the end of an earlier summit meeting, that a loan mechanism intended to restore confidence should be ready by Monday morning. That effectively left the European Commission and finance ministers a single weekend to change the way the European Union operates its finances.

Mrs. Merkel of Germany attended a victory parade on Red Square in Moscow on Sunday, a sign of how seriously Germans consider reconciliation with Russia. Mr. Sarkozy and the Italian prime minister, Silvio Berlusconi, opted not to attend, regarding the financial crisis as more urgent.

Mr. Sarkozy held a strategy meeting with ministers on Sunday.

“At stake is the euro and the euro zone,” a French official said. “We need to give a clear signal to markets.”

James Kanter reported from Brussels, and Landon Thomas Jr. from London. Sewell Chan contributed from Washington and Bettina Wassener from Hong Kong.

Is this the time to press the button?

2010-05-09T10:56:00.000+08:00

Europe’s Web of Debt

2010-05-09T10:55:00.000+08:00

Nick Vujicic - Are you going to finish strong?

2010-03-21T17:59:00.000+08:00

Nick Vujicic (born 4 December 1982) is a preacher, a motivational speaker and the director of Life Without Limbs, an organization for the physically disabled. He regularly gives speeches across subject of disability and hope.

Best Strategies for Passive Income

2010-02-28T19:56:00.002+08:00

3 Top Passive Streams of Income

Passive income is the best kind of income to receive. With passive income, you have set up a cash flow that generates income without you having to work for your money. Initially, there is some amount of effort required to set up the "stream" of income. If you don't want to work every day, it's crucial to set up several forms of passive income to build your wealth.

Linear income is the type of income you receive when you go to a job, work and then get paid on payday. The effort you put in is directly related to the pay you earn. Unfortunately, if you cannot work anymore or don't want to work anymore, your income will cease.

Here are three of the best kinds of passive income strategies you can set up now and be paid for many years down the road.

Passive Income Strategy #1 - Real Estate

How often do you hear about people getting wealthy from real estate? Or how many books have you read on how to buy investment properties? Real estate is a proven path to wealth.

With real estate, the safest strategy is to buy and hold. Mike Summey, the author of The Weekend's Millionaire's Secrets to Investing in Real Estate, advises the novice real estate investor to start out purchasing only single family homes in a 10 mile radius of where you live. This way, you will be able to familiarize yourself with the neighborhoods in which you will be buying properties.

As long as your cash flow is positive, even if it by only $50 per month, after you collect rent from your tenants and pay the mortgage, taxes, property manager and repairs, you will be on your way to investing in more properties.

Mike Summey states that because each year, you can raise the rent by a certain percentage and your mortgage principal will be lowered, your positive cash flow will increase every year until the loan is paid off. At that point, you will get to keep almost all of the cash flow from the properties.

Passive Income Strategy #2 - Royalties

Another type of passive income is earned from royalties. If you are a songwriter, author or actor, it's possible to be paid royalties on your work when someone plays your song, buys your book or when your show is syndicated on television.

Another way to earn royalties if you are not a songwriter, author or actor is to write articles for websites like Associated Content or Triond. Associated Content pays you both up front for writing an article and per page view when someone clicks on your articles.

Triond does not pay upfront for articles but they do share one half of the residual income they receive when someone clicks on an ad shown on the same webpage as your article. Triond and Associated Content pay monthly royalties.

Passive Income Strategy #3 - Dividend Reinvestment Program

Dividend Reinvestment Programs, otherwise known as "DRIPS", are offered by certain companies to shareholders as a way to be able to buy stock directly from the company, instead of using a broker. You can buy stocks in small amount in this type of program.

According to Motley Fool (fool.com), the plans also reinvest all or part of the quarterly dividends back into the company's stock. This is an easy way to set up passive income because you can set up automatic deposit in to the company's stock account and then set it up to automatically reinvest the dividends.

If you invest in 3 different stocks that have a staggered quarterly dividend payout, it's possible to be paid dividends each month of the year. For example, General Electric pays dividends in January, April, July and October. Clorox pays out in February, May, August and November. 3M pays out in March, June, September and December.

If you have built up your volume of stock and are paid a substantial amount of quarterly dividend, instead of reinvesting the dividends, you can opt to be paid by check and use this as your passive income. A good resource to find out more about DRIPS is the website www.dripcentral.com.

As you can see, there are many ways to build up your passive income so that you can avoid working for linear income. I have only touched the surface of this fascinating subject.

(Article taken from: http://www.associatedcontent.com/article/636787/best_strategies_for_passive_income.html?cat=3)

The Bull is Dead...

2010-01-30T22:56:00.002+08:00

Friendship - Christian The Lion (Part II - The Final Farewell)

2010-01-25T20:55:00.000+08:00

Friendship - Christian The Lion

2010-01-23T17:46:00.002+08:00

In 1969, two friends, Ace Berg and John Rendall, saw a lion cub for sale in Harrods Department store. Cramped and lonely in a small cage, they decided to bring it home. A local vicar allowed them to exercise the cub, now named Christian, in the church grounds.

When they brought Christian home he weighed only 35 pound. A year later the little cub had grown and he weighed 185 pounds. The only thing they could do was to reintroduce him to Africa, which they managed to do. A year later they wanted to visit Christian but were told that he was the head of his own pride and as such was completely wild and would not remember them. Undauntedly, they went anyway

And the rest you will have to watch for yourself...

Correction Next Week — If Dow Breaks This Number: Strategist

2010-01-23T14:34:00.001+08:00

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped on Friday. What does the rise mean for the markets going forward? Brent Wilsey, president of Wilsey Asset Management, and Alan Valdes, vice president of Kabrik Trading, shared their best investment ideas.

“We’ve had a major run-up, it’s about time to have some pullback,” Wilsey told CNBC.

“But I love this volatility because we sold some companies in December when they were higher, now we’re seeing things come down a little bit.”

Wilsey said he hopes for a buying opportunity based on volatility levels.

"We’re hoping that [volatility] comes down some more because I have three companies that I’ve been waiting to buy for the past six weeks and I’m hoping for today or next week to buy them," he said. "So volatility is good.”

In the meantime, Valdes said if the Dow closes below 10,340 today, then investors should expect to see a correction next week.

“I think this is a buying opportunity,” he said. “I like the utilities.”

Dollar's Rise Could Lead to 5-10% Correction: Gartman

2010-01-21T23:12:00.003+08:00

Reuters | 21 Jan 2010 | 06:48 AM ET

Given the fact that the dollar has become so strong — which not enough people are paying attention to — and the tendency for stock prices to fall as a result of the dollar's strength, investors must be very careful, Dennis Gartman, founder of The Gartman Letter, warned Thursday.

Gartman said he expects a market correction because all of the good new is already priced into stocks.

"You should be aware of the fact that a correction is probably setting in (and) that this could be a bit more than a two or three percent correction, that perhaps something along the lines of five to ten percent is upon us, and I think you need to be very, very careful," Gartman told CNBC.

"All of the good news, all of the anticipation of good news, probably is incumbent in prices already, and the ability to be surprised to the upside as far as earnings are concerned, I think, is relatively limited," he added.

Everyone is aware of the fact that earnings are doing better than we might have though three months ago, Gartman pointed out. He added that his suspicion is that the tendency of earnings to beat expectations is "highly unlikely" to continue in the future.

"I think there will be some disappointment rather than some surprises to the upside," he said.

Ahead of U.S. economic data like weekly jobless claims out Thursday, Gartman told "Squawk Box Europe" that the market is unlikely to be data driven. He called the markets' recent lack of reaction to economic data "a quiet and subtle change in psychology more than anything else."

"Everybody is aware of the fact that the recession ended long ago. Everybody is well aware of the fact that productivity numbers have been much better than expected," he said.

On whether the Federal Reserve will tighten monetary policy anytime soon, Gartman said he doubts it, predicting that the Fed may hike rates "at best" in the third quarter, but possibly not even then.

"The Fed understands one thing and that is the best way to repair the damage done to the banking system is to absolutely insure that the yield curve remains positively sloped and becomes even more positively sloped over time," he said. "If that means giving rise to inflationary concerns, that drive rates at the long end up a bit, the Fed will love that notion. They'll keep short rates as low as they can, as long as they can, and probably longer than anybody anticipates."

The Edge (14th Jan 2010)

2010-01-14T20:59:00.001+08:00

Financial One offers 20% stake in Chailese unit
Thursday, 14 January 2010

Ezra posts 93% rise in net profit to $25.5m for 1Q
Thursday, 14 January 2010

AusGroup unit wins integrated services contract worth $6.5m per year
Thursday, 14 January 2010

Oceanus to Buy 2 Companies, Spin Off Restaurant Unit

2010-01-11T23:00:00.003+08:00

Jan. 11 (Bloomberg) -- Oceanus Group Ltd., the world’s largest operator of abalone farms, plans to buy two companies this year to expand its food business and sell shares of its restaurant unit as early as 2012.

Oceanus may buy a Taiwan food-packager by mid-2010 and an Australian company later in the year to boost its supply of wild abalones, Chairman Ng Cher Yew said. Ah Yat Tian Xia, its chain of restaurants, will sell shares in Taiwan or Hong Kong, he said. Oceanus stock rose by the daily limit in Taipei.

The company is expanding to ride on China’s growing consumer market as the central bank estimates the economy will grow 9 percent this year.
Oceanus became the first foreign company to list shares in Taiwan last year as ties between the island and the mainland reached their warmest since the two were separated after a civil war six decades ago.

“We want to see how we can basically acquire at least one Taiwanese packaging and processing entity and look at the Chinese market,” Ng, 50, said in a Jan. 8 interview in Taipei. The Taiwan listing “gives us a better profile with the government and an image in the market that will help the business.”

The company is based in Singapore, while its operations are mainly in China, where 137.9 million abalones are grown in 24,000 tanks along the country’s southern coast.

Stock Surges

Oceanus stock surged by the 7 percent daily limit to NT$12.30 at the close of Taipei trading, increasing the advance to 29 percent since the Taiwan depositary receipts were sold at NT$9.5 apiece in December. The benchmark Taiex index has added 2.6 percent since then. The shares in Singapore are unchanged today, and 7.7 percent since the Taipei listing on Dec. 31.

“The proposed acquisition would help the company save costs and increase profit,” said Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong. “Investors probably heard about the listing plan and are positive about it.”

Oceanus has 20 restaurants in markets including Singapore and China, according to Ah Yat’s Web site. The company aims to increase the number to 170 next year, with at least 120 on the mainland, Ng said.

The restaurant business may be worth as much as 2 billion yuan ($293 million) in two years, said Jeffrey Lau, an analyst at Polaris Capital (Asia) Ltd. in Hong Kong.

“It will be positive for Oceanus, as investors are in favor of Chinese catering companies,” Lau said.

Oceanus is considering the listing in Hong Kong or Taiwan because of demand for abalones from consumers in the two markets, Ng said. The restaurant chain may become profitable by the end of the year, said Ng, declining to give details.

“The restaurant has a different risk profile, so eventually if it’s independent, it makes more sense,” Ng said.

To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

Last Updated: January 11, 2010 04:46 EST

China Begins Stimulus Exit

2010-01-09T23:10:00.003+08:00

Chinese policy makers will likely raise interest rates and allow the yuan to appreciate this year

China January 8, 2010, 8:50AM EST

(Bloomberg) — China's move to raise the cost of three-month bills will probably lead to the nation's first interest-rate increase in almost three years by September, a survey of economists showed.

The People's Bank of China will lift the benchmark one-year lending rate to 5.85 percent by year-end from 5.31 percent now, according to the median estimate of 15 economists surveyed by Bloomberg News today. The survey was after the central bank yesterday sold the bills at a higher interest rate for the first time in 19 weeks.

Premier Wen Jiabao's government may keep the increase in borrowing costs this year to less than 1 percentage point because it wants to ensure a sustained economic rebound. Policy makers need to support "relatively fast" growth while managing inflation expectations, the central bank said in a statement this week after an annual work meeting.

"There's still a lot of uncertainty over the strength of the recovery," said Ken Peng, an economist with Citigroup Inc. in Beijing. "Policy makers are concerned about inflation but they will see how that plays out before moving on rates in the second half of the year."

Stocks stabilized after tumbling yesterday in the aftermath of the PBOC's move. The MSCI Asia Pacific Index added 0.5 percent to 123.93 as of 3:10 p.m. in Hong Kong after a 0.6 percent drop. The Shanghai Composite Index closed up 0.1 percent after a 1.9 percent slide that was led by Bank of China Ltd. and Industrial & Commercial Bank of China Ltd.

Reserve Ratio

Along with higher rates and an increase in banks' reserve ratio, officials are projected to allow the yuan to appreciate this year after preventing gains since July 2008.

The proportion of deposits that big banks are required to hold as reserves may increase by 50 basis points to 16 percent as early as the second quarter, according to the median estimate of 11 economists. China's currency may rise almost 3 percent to 6.63 per dollar by year-end, while banks are expected to extend 7.5 trillion in new yuan loans, the median forecasts show.

In the first 11 months of 2009 officials allowed a record 9.21 trillion yuan ($1.4 trillion) of new bank loans, a credit surge that fueled construction spending and business investment. Domestic demand helped counter what economists estimate was the first annual decline in exports in a quarter century.

Timing of Moves

Policy makers may raise the benchmark rate to 5.58 percent in the third quarter, with a further 27 basis point move in the final three months of the year, according to today's survey. They have kept the one-year lending rate at a five-year low since five reductions in the last four months of 2008.

In yesterday's step, the PBOC offered 60 billion yuan of three-month bills at a yield of 1.3684 percent, 4 basis points higher than at last week's sale, it said in a statement yesterday.

Daiwa Institute of Research and Royal Bank of Scotland said that accelerating inflation may prompt the central bank to tighten monetary policy more quickly. Daiwa forecasts a 27 basis point rate increase and a 50 basis point move in the reserve ratio as early as next month.

"Policy makers are quietly implementing an exit strategy and paving the way for interest-rate hikes," said Kevin Lai, an economist with Daiwa in Hong Kong. "This is reasonable because inflation is likely to shoot up in the next few months."

Inflation Outlook

Consumer prices probably rose 1.6 percent in December after a 0.6 percent gain in November, Qing Wang, Morgan Stanley's chief Asia economist, said in a research note this week. Inflation expectations in China are likely to advance this year in the face of "very loose" monetary policy, Wang said.

"Yesterday's rise in yields was only the beginning," said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. He forecasts that the reserve ratio may be changed this quarter and rates in the following three months.

Because commercial banks allocate their lending at the start of the year, yesterday's bill sale is a signal to them "not to overindulge," said Alaistair Chan, an economist with Moody's Economy.com in Sydney. "They're going to tighten in various ways," including using the benchmark rate and required capital reserve ratio for banks, he said.

The central bank may this month start issuing guidance to banks on how much credit they can extend, Bank of China Ltd. said today. New credit may fall to less than 2.6 trillion yuan in the first quarter from 4.58 trillion yuan in the same period a year earlier, Bank of China analyst Shi Lei wrote in a note.

Central bank Governor Zhou Xiaochuan this week reiterated government warnings that investment in industries with excess capacity and in redundant infrastructure projects could threaten banks' loan quality.

The PBOC will guide credit, seeking to avoid volatility in lending, Zhou said in an interview on the Web site of China Finance, a central bank publication. Investment in duplicated projects or industries with overcapacity could "pose a risk to the quality of banks' loans," Zhou said.

—Kevin Hamlin, Paul Panckhurst, Jay Wang and Li Yanping. Editors: Chris Anstey, Paul Panckhurst.

The Capricorn Effect

2010-01-08T20:20:00.001+08:00

Are we experiencing the much talked about Capricorn effect with the market surging in the first few trading days of January?

What is the Capricorn effect?

Basically, the Capricorn or January effect refers to the tendency for stock prices to rise in the month of January. This is mainly due to the result of investors opting to sell their stocks before the year-end in order to claim capital loss for tax purposes. This happens in countries such as the United States where individuals are taxed for capital gains. Once the tax year passes, they will reinvest their money in the stock market again causing price to go up. Other than this, the Capricorn effect is also attributed to individuals investing their year-end bonuses in stocks in January.

More Stocks May Not Make a Portfolio Safer

2009-12-14T21:41:00.002+08:00

By JASON ZWEIG NOVEMBER 21, 2009

Not putting all your eggs in one basket is the most basic principle of investing. It also may be the hardest to get right.

Investors have long been told by stockbrokers and financial planners that to have a properly diversified stock portfolio, you need shares in only 10 to 40 companies. Even the great investment analyst Benjamin Graham urged "adequate though not excessive diversification," which he defined as between 10 and about 30 securities.

As many studies have shown, at least 40% of the variability in returns can be reduced by moving from a single company to 20. Once a portfolio contains 20 or 30 stocks, adding more does little to damp the fluctuations in wealth over time.

But this research on diversification was based on the average results of a large number of portfolios randomly generated by computer.

Something entirely different happens when flesh-and-blood humans try to pile up stocks one at a time.

Don Chance, a finance professor in the business school at Louisiana State University, asked 202 business students to select one stock they wanted to own, then to add a second, a third and so on until they each held a portfolio of 30 stocks.

Prof. Chance wanted to prove to his students that diversification works. On average, for the group as a whole, diversifying from one stock to 20 cut the riskiness of portfolios by roughly 40%, just as the research predicted. "It was like a magic trick," says Prof. Chance. "The classes produced the exact same graph that's in their textbook."

But then Prof. Chance went back and analyzed the results student by student, and found that diversification failed remarkably often. As they broadened their holdings from a single stock to a basket of 30, many of the students raised their risk instead of lowering it. One in nine times, they ended up with 30-stock portfolios that were riskier than the single company they had started with. For 23%, the final 30-stock basket fluctuated more than it had with only five stocks in it.

The lesson: For any given investor, the averages mightn't apply. "We send this message out that you don't need that many stocks to diversify," says Prof. Chance, "but that's just not true."

What accounts for these odd results? Leave it to a professor called Chance to show that even a random process produces seemingly unlikely outliers. Thirteen percent of the time, a 20-stock portfolio generated by computer will be riskier than a one-stock portfolio.

Humans are even more fallible. Prof. Chance's students started by picking companies they were familiar with: Exxon Mobil, Wal-Mart Stores, Apple, Starbucks, Nike and the like. But after a handful or two, they ran out of household names. By the fifth company, they were picking stocks that had less than half the market capitalization of the one they started with. Adding these riskier small stocks made their portfolios more volatile. And one in five students picked 1-800-Flowers.com as a top holding, perhaps because Prof. Chance happened to schedule the assignment near Valentine's Day, when they may have had bouquets on their minds. (They weren't just picking from the top of an alphabetical list; almost nobody chose 1-800 Contacts.)

These results are no surprise to Allan Roth, a financial planner at Wealth Logic in Colorado Springs, Colo. "Humans can't think randomly," says Mr. Roth. "Once people think of Exxon Mobil, they're a lot more likely to think of Chevron or another oil stock. For a lot of investors, diversification is like doing a word-association game."

Gur Huberman, a finance professor at Columbia University, points out that investors tilt toward stocks that match their own beliefs about risk. People who regard themselves as risk-averse will assemble portfolios of highly similar stocks that all seem to be "safe." The result, paradoxically, is a risky portfolio with every egg in one basket. As bank-stock investors learned last year, owning a greater number of the same kind of company isn't diversification at all.

According to the Federal Reserve's Survey of Consumer Finances, 84% of households that own shares directly have no more than nine stocks; 36% hold shares in only a single company.

That's way too few. But 30 or 40 isn't enough either. If you want to pick stocks directly, put 90% to 95% of your money in a total stock-market index fund, which will give you a stake in thousands of companies at low cost. Put the rest in three to five stocks, at most, that you can follow closely and hold patiently. Beyond a handful, more companies may well leave you less diversified.

http://online.wsj.com/article/SB10001424052748704533904574548003614347452.html

Shop for Dividends in This Aging Bull Market

2009-12-02T20:04:00.002+08:00

By BRETT ARENDS
NOVEMBER 22, 2009

Wall Street has rallied a long way since the dark days last winter. But there are still plenty of blue chips offering big dividend yields.

Screen the market for yields over 3% that are well-backed by earnings and a surprising number of big household names come up -- Kraft Foods, Clorox, Sara Lee, Sysco, Johnson & Johnson, Merck, BP, NStar, Verizon Communications and AT&T.

A lot of these steady Eddies have been left behind by this year's mad stampede for higher-risk, higher-excitement investments -- from China to the Cheesecake Factory.

It's a good time to remember that high-excitement stocks often end up providing investors with high drama and high blood pressure instead.

More boring "value" stocks -- established companies in more stable or "defensive" industries -- have usually proven a better long-term investment. (Defensive industries include food and beverages, health care, personal care, household goods and even telecoms.) And even if they make fewer profits for you on the way up, they lose a lot less on the way back down.

Tempting for Income Investors

Right now top dividend stocks have extra appeal. That's because they offer a tempting alternative to cash or bonds for those who need income.

Many savers are trapped between short-term savings like bank accounts or CDs, paying virtually no interest at all, and longer-term bonds, which pay a little bit more -- and leave you at the mercy of inflation.

"Why own bonds when you can own 'defensives'?" asks Bijal Shah, strategist at investment company Icap.

Such stocks "are cheap in absolute terms," Mr. Shah says. "The dividend yield of U.S. defensives now equals the yield on 10-year Treasurys.... And the dividends and earnings of defensives grow very steadily, unlike the earnings stream for the overall equity market."

Where should the dividend hunter look? And what should you avoid?

Watch out for a dividend that's too high, especially anything in or near the double digits. That's usually a red flag. It means the stock market expects the payout to be cut, or even -- in the case of some smaller companies, such as mining stocks -- that management is slowly winding down the business.

It's also probably best to avoid companies in the most volatile industries, like financials or industrials. Many years ago, Guy Hands, one of London's top private-equity managers, explained to me that he tended to steer clear of manufacturing companies because the cash flow was too volatile. It's still true.

Investors in General Motors thought they had locked in a great double-digit dividend yield -- before the payout, and the stock, went to zero. So, too, did investors in Washington Mutual. There are easier ways to make a living.

Check Out the Finances

Judy Saryan, a fund manager at Eaton Vance in Boston who specializes in dividend stocks, says the first thing she checks with a stock is the company's balance sheet: Does it have big, or unknown, potential liabilities that could blow up the company's finances? Paying attention to balance sheets steered her fund around many icebergs over the past few years.

The second thing to check is the cash-flow statement. Is the company earning enough to keep paying dividends? How much of a cushion is there if business turns down?

Her favorite sign: A company that's actually raising payouts. "If a company grows its dividend," she says, "that's the best signal the management and the board can give that they have confidence in the future."

What are her picks right now? Ms. Saryan likes many big drug companies, seeing strong cash flow and solid balance sheets at the likes of Merck, Abbott Laboratories, and overseas firms Sanofi-Aventis, Novartis and AstraZeneca.

Also on her list: Major consumer-product firms like Procter & Gamble, PepsiCo, Colgate-Palmolive and McDonald's.

Technology stocks have boomed this year, but a few big companies still offer reasonable yields, including Analog Devices and even Intel.

But some of the fattest yields are to be found in telecoms. "Verizon is very attractive," Ms. Saryan says. "It has the best quality network" and a 6%-plus yield. And there's possible upside if the network can offer customers an Apple iPhone next year, as some rumors suggest could happen.

She also likes overseas mobile giant Vodafone, and Spain's Telefonica, whose U.S.-listed shares have a 4.7% yield. Telefonica has emerging-markets growth because Latin America now accounts for about half of its sales.

Pay Attention to Funds, Too

Picking individual stocks can be risky as well as time-consuming. Those looking for an easier life can look at "equity income" mutual funds. These invest in dividend stocks, and they will do the work and spread your bets for you.

One option: a low-cost exchange traded fund like the iShares Dow Jones Select Dividend Index Fund, which currently has a 3.9% yield. Keeping your fees low is a sound principle in investing.

Another possibility: shares in a closed-end fund that invests in dividend payers. Closed-end funds are mutual funds that trade on the market like stocks. You can sometimes, like now, buy them at a discount to their net assets.

Ms. Saryan's Eaton Vance Tax-Advantaged Dividend Income Fund is one. It has a payout rate of nearly 9%. It's trading for about 10% below the value of its investments, and has further goosed returns by borrowing money cheaply at short-term interest rates to buy more shares. Be aware that borrowing can increase volatility.

http://online.wsj.com/article/SB125883907931359241.html

Dubai Debt Crisis

2009-11-28T18:45:00.002+08:00

Investment Mistakes

2009-11-26T21:35:00.001+08:00

By Christopher Davis November 24, 2009

Whether it's the Dutch tulip craze of the 17th century, the dot-com mania of the late 1990s, or the most recent rush into real estate, there's no shortage of examples of investors behaving irrationally.

In the world of traditional economists and finance professors, though, that's not supposed to happen. If investors are rational decision-makers, then emotion-driven bubbles shouldn't be possible. Yet human weaknesses can limit our ability to think clearly. Many studies of investor behavior have shown that investors are too willing to extrapolate recent trends far into the future, too confident in their abilities, and too quick (or not quick enough) to react to new information. These tendencies often lead investors to make decisions that run counter to their own best interests.

The idea that investor psychology can result in poor investment decisions is a key insight of an increasingly influential field of study called behavioral finance. Behavioral-finance theorists blend finance and psychology to identify deep-seated human traits that get in the way of investment success. Behavioral finance isn't just an interesting academic diversion, however. Its findings can help you identify--and correct--behaviors that cost you money.

What commonplace mistakes should investors avoid? Here are a few key behavioral-finance lessons worth heeding.

1) Don't Read Too Much into the Recent Past

When faced with lots of information, most people come up with easy rules of thumb to help them cope. While useful in some situations, these shortcuts can lead to biases that cause investors to make bad decisions. One example is "extrapolation bias," the overreliance on the past to assess the future. Instead of doing all the necessary and possibly tedious homework in researching a potential investment, investors instead "anchor" their expectations for the future in the recent past.

The problem, of course, is that yesterday doesn't always tell you what tomorrow will bring. If you don't believe us, just ask investors who swarmed red-hot technology- and Internet-focused stocks in 1999 and 2000 expecting the good times to continue. They didn't, and most folks ended up suffering huge losses.

That's worth keeping in mind if you're drawn to the strong performers of recent years, whether it's Latin American stocks or precious metals. The recent volatility in those areas is a reminder that the past is no guarantee of future performance.

2) Realize That You Don't Know As Much As You Think

In a 1981 study asking Swedish drivers to assess their own driving abilities, 90% rated themselves as above average. Statistically speaking, that's just not possible. But most of us are just like the Swedes: We think we're more capable and smarter than we really are. As an investor, you should check your excessive optimism at the door. You might believe you're more likely than the next guy to spot the next Microsoft, but the odds are you're not.

According to several studies, overconfident investors trade more rapidly because they think they know more than the person on the other side of the trade. And all that trading can be hazardous to your wealth, as University of California, Berkeley professors Brad Barber and Terrance Odean put it in their 2000 study of investor trading behavior. The study looked at approximately 66,000 households using a discount broker between 1991 and 1996 and found that individuals who trade frequently (with monthly turnover above 8.8%) earned a net annualized return of 11.4% over that time, while inactive accounts netted 18.5%. Investors who traded most often paid the most in brokerage commissions, taking a huge bite out of returns.

All that trading might've been worthwhile if investors replaced the stocks they sold with something better. But interestingly, the study found that, excluding trading costs, newly acquired stocks actually slightly underperformed the stocks that were sold. That means that rapid traders' returns suffered whether or not fees were taken into account. Some researchers have come to a similar conclusion studying fund manager trading--standing pat is often the best strategy.

3) Keep Your Winners Longer and Dump Your Losers Sooner

Investors in Odean and Barber's study were much more likely to sell winners than losers. That's exactly what behavioral-finance theorists would predict. They've noticed that investors would rather accept smaller but certain gains than take their chances to make more money. On the flip side, investors are reluctant to admit defeat and sell stocks that are underwater in hopes of a rebound. As a result, investors tend to sell their winners too early and hang on to their losers for too long.

One way investors can avoid leaving too much money on the table is to rebalance their portfolios less often. Rebalancing involves regularly trimming winners in favor of laggards. That's a prudent investing strategy because it keeps a portfolio diversified and reduces risk. But rebalancing too frequently could limit your upside. Instead, rebalance only when your portfolio is out of whack with your target allocations. Minor divergences from your targets aren't a big deal, but when your current allocations grow to more than 5 percentage points beyond your original plan, it's time to cut back. This article discusses rebalancing in depth.

You also shouldn't be afraid to sell a loser because it will turn a paper loss into a real one. Hanging on to a dog in hopes of breaking even is a bad idea because you may be forgoing a better opportunity. The trick is knowing when it's time to cut bait. That's why it pays to have clear reasons in mind for your purchase of any investment right from the get-go. If your expectations don't pan out, then it's time to sell.

It's All about Discipline

Fortunately, you don't have to be a genius to be a successful investor. As Berkshire Hathaway chief and investor extraordinaire Warren Buffett said in a 1999 interview with Business Week, "Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." It's true that not everyone is gifted with Buffett's calm, cool demeanor. But challenging yourself to avoid your own worst instincts will help you reach your financial goals.

(http://finance.yahoo.com/news/Avoid-These-Three-Investment-ms-1812220823.html?x=0)

Company Hierarchy

2009-11-25T23:33:00.001+08:00

Sounds familiar? :)

'Greatest Trade': How You Can Make $20 Billion

2009-11-20T23:02:00.006+08:00

By GREGORY ZUCKERMAN (NOVEMBER 15, 2009)

Even as the financial system collapsed last year, and millions of investors lost billions of dollars, one unlikely investor was racking up historic profits: John Paulson, a hedge-fund manager in New York.

His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.

How did he do it?
Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson's insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed.

And are there any investing skills that average investors can learn from his success? Yes. There are no guarantees, of course, but the success of Mr. Paulson and a few other underdog investors lends encouragement to individuals trying to compete with Wall Street's pros.

Here are eight investing lessons of Mr. Paulson's $20 billion gamble, the greatest trade in financial history:

1 Don't Rely on the Experts

Many investors lost big in 2007 and 2008 as housing crumbled and the stock market tumbled. But no one lost more than commercial and investment banks caught with toxic mortgage-related securities. These bankers were the very same ones who created these investments, and Wall Street's top analysts had vouched for their safety, even as Mr. Paulson and others bet against the investments.

Lesson: When Wall Street is wheeling out its latest can't-miss product, be skeptical.

2 Bubble Trouble

Some academics argue that financial markets have become more efficient. But a rash of financial bubbles in recent years -- including housing, energy, technology and Asian currencies -- suggests that markets are becoming harder to navigate, and are more prone to overshooting. Today, investors of all sizes read the same articles, watch the same business-television programs and chase the same hot tips. They invariably head for the exits at the same time.

Lesson: Have an exit strategy -- and cash to cushion any tumble.

3 Focus on Debt Markets

Most investors track the ups and downs of the stock market but have only a vague sense of moves in debt markets. That's a mistake. Early signs of trouble were seen in sophisticated markets that don't get much limelight, like the subprime-mortgage bond market. These problems eventually felled the housing and stock markets, and the overall economy, a set of falling dominos that Mr. Paulson and his team correctly anticipated.

Lesson: Debt markets can do a better job predicting problems than stock markets.

4 Master New Investments

Mr. Paulson scored huge profits by buying credit-default swaps, a derivative investment that serves as insurance on debt. When risky mortgage bonds tumbled in value, Mr. Paulson's insurance soared. But many experts were flummoxed by CDS contracts or shied away from educating themselves about these relatively new investments.

Mr. Paulson and his team had no experience with CDS contracts. But they put the time into learning about them.

Lesson: Educate yourself about the range of exchange-traded funds being introduced, some of which can play a valuable role in a portfolio.

5 Insurance Pays

A number of investors worried about a bursting of the housing market, but few did much about it, even though insurance, such as CDS contracts, at the time were selling at dirt-cheap prices. Out-of-the-money put contracts -- options that pay off only if the market tumbles -- also were trading at reasonable levels. As cheap as this insurance was, many pros ignored it.

Lesson: Don't underestimate the value of a safety net, such as put options.

6 Experience Counts

Some of the biggest winners in the meltdown were middle-aged investors dismissed by some as past their prime. But they had experienced past market downturns, while some of the bankers and analysts caught flat-footed knew only good times.

Lesson: A historical perspective can be a valuable tool.

7 Don't Fall in Love With an Investment

In early 2009, Mr. Paulson became more bullish about the banks and financial companies that he had wagered against in 2008, after determining that these companies had improved their balance sheets. The moves resulted in profits this year.

Lesson: Even the greatest trade doesn't last forever.

8 Luck Helps

In early 2006, Mr. Paulson determined that housing was in trouble and set out to profit from the impending fall. But some housing experts already had determined that real estate was overpriced; others had wagered against housing but could no longer stomach their losses. Just months after Mr. Paulson placed his historic trade, U.S. housing prices began to fall.

Lesson: Don't risk too much in any one trade, even one that seems like a sure thing.

Write to Gregory Zuckerman at gregory.zuckerman@wsj.com

(http://online.wsj.com/article/SB125823321386948789.html)

Oceanus Group Limited: Earnings Announcement

2009-11-13T20:38:00.001+08:00

Oceanus Group Limited posted a 91% increase in profit before tax of RMB334.7 million for the 9 months ended 30 September 2009 compared to the corresponding period.