Commentators have recently been pointing out the fact that the VIX is higher recently and that “sentiment is all over the place.”  The major profit-taking has already happened and apparently there is now a lot of indecision in the markets.  While these are not statistical measures, I do think they are telling us something.

The “official story” that the news media has been following since October 2008 may have largely come to an end.  By that I mean the majority of the predictions, forecasts, “if, then” scenarios and expectations have all played out.  TARP money has been returned (not all of it, true); businesses are posting slight earnings; consumer confidence is coming back a bit; loan-losses are mostly taken care of.  Australia’s raised its central bank rates back from “emergency provisions” levels and in general we’re all back from the brink.

So what now?

In the past week, I’ve listened to one analyst who has provided the most confident report yet that we’re at the beginning of a “mega bull market” and another who has come around to the view (after being neutral for quite some time) that we are likely to see a “double-dip” or “W-shaped” recession (or recovery, if you prefer).

The Most Bullish Call Yet On Markets in 2010

My opinion?  The world economy will decouple and improve, but the U.S. is going to take much longer to recover. If there’s a double-dip, it is largely going to affect the U.S. and the rest of the world much less so.  Time will tell, but here are some of the main reasons in favor of the double-dip argument.

Potential Causes of a Double-Dip Recession

U.S. Residential Real Estate.

One analyst recently argued that the only major problem still existing in the U.S. economy (or world economy, for that matter) is the systemic problems in the U.S. housing market.  A Deutschebank study recently reported that by the first quarter of 2011, 48% of U.S. homes are expected to be under water, i.e., owing more on the mortgages than the market value of the home.

Top this with the next wave of ARM-foreclosures and the “recovery” doesn’t look like much of a recovery at all.  There are expected to be another 7 million foreclosures throughout the U.S. continuing into 2010 and 2011.

U.S. Commercial Real Estate.

Commercial real estate, largely in the U.S. but to some potential degree in Canada as well, is widely expected to be running into some problems soon as retailers’ earnings fail to recover very quickly in light of continued consumer spending weakness.

Some analysts have referred to it as the “other shoe to drop,” although we haven’t yet seen it.  If consumer sentiment remains weak, it could very well be part of the second market dip.

Oil Prices/USD relationship.

I’ve mentioned previously that whatever gains made on the US export front will be offset by higher oil prices, because oil is priced in US dollars.  Global shipping of exports is one big oil suck, so oil prices eat into export profits.

It is also widely acknowledged that higher oil prices might not only be a contributor to economic weakness (by stalling or clipping a recovery short), but some, like Jeff Rubin, have even argued that oil at $147 caused the credit crisis/ Great Recession.

I haven’t heard any analysts who expect to see oil at $147 anytime again soon, but it is not uncommon to hear forecasts of $90 already during 2010.  Right now, $80 seems to be an important psychological and technical resistance level.  Once safely broken, oil could easily pop to $90 by the end of the year.

Short-Term Advantages of a Weak US Dollar Won’t Last

Worsening Unemployment.

Layoffs show only mild signs of slacking.  Just this past week, Johnson & Johnson laid off more workers around the globe – and J&J is a major player, defensive company, and excellently-run.  Even if layoffs have abated somewhat, there is still the problem of having no new hires on the horizon.

We can talk about a “jobless” recovery all we want, but consumer spending still comprises 70% of the U.S. economy.  When higher percentages of these consumers don’t have jobs, we are left with either a shrinking GDP or the US government doing more of that spending on consumers’ behalf.

Reserve Currency Problems.

The US dollar has been the so-called “world reserve” currency since 1944. While many major currencies are held by central banks as part of their reserves, the US dollar has traditionally been the most-held currency and in the largest numbers.  Why?  Because oil and commodities are priced and traded in greenbacks.  Also, traditionally, the US dollar has been perceived as a safe, stable barometer of the US economy (which, during the time of Bretton Woods, was actually the world leader in goods production).

Although the official world reserve currency status seems unlikely to change in the short-term, it is no secret that many central banks have already begun the process of further diversification of their reserves.  Just this past week, India bought the largest-ever single purchase of gold from the IMF, sending gold prices up $20 in one day.  Buying gold (and thus selling rupees), India is able to “weaken” its own currency against the US dollar.

Everyone is aware by now of the massive inflation in the US money supply since 2008.  Although much of this new money has not actually trickled past the banks yet (it’s still sitting in their capital reserves), central banks have begun reacting to what is expected to be imminent inflation following a sustained economic recovery.  When the US dollar weakens, it makes every other country’s exports more expensive – so naturally, other countries want to weaken their own currencies downward, too. One analyst referred to this as the “competitive debasement” of currencies.  One efficient way to do this is for a central bank to buy gold – it kills two birds with one stone, too, by hedging against the US dollar.

Expect to see continued reserve diversification, gold purchasing, and US dollar weakness.

Gold Standard “2.0:” Gold Currency to Replace USD

Another Rush to the Dollar?

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It is possible that another market crash might send global wealth rushing back into the US dollar, as it did in October 2008, but I wouldn’t bet on it.  If anything, it will cause central banks to rush into gold now that it is clear where the economic troubles really lie and most structural problems have been fixed around the world.  For example, most companies and banks have undergone significant cost-cutting procedures, boosted their capital reserves, and put loan-loss provisions in place.  Another market crash is not going to effect the worldwide economy in the same way as the first one did.

Zhou Xiaochuan’s Proposal For World Reserve Currency is Accepted by UN (March 29, 2009)
U.S. Dollar Up For Debate At G8 Meeting (July 5, 2009)
Supracurrency Coin Proposed As New World Reserve Currency (July 12, 2009)
China Diversifies Reserves (July 29, 2009)
World Bank: Don’t Take USD Reserve Status for Granted (Sept. 27, 2009)
Sucre, New Latin American Currency To Replace USD for Trade (Oct. 19, 2009)

If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon.  I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).

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Here are two basic tips for making the most of your latte money at Starbucks.

Misto Instead of Latte: Save $0.50

Your latte is one or two shots of espresso, then filled with steamed milk (or soy milk).  Did you know you can get the same caffeinated effect by opting instead for a “misto” instead of a latte?  It’s a good fifty to seventy cents cheaper. On a daily basis, that really adds up.

A “misto” (sometimes called a “London Fog” or even, in some other coffee retailers, lumped in with the “cafe au lait;”) is basically half coffee, half steamed milk (or soy milk).  From my own experience, I can tell you it tastes the same as a latte for up to a third of the price.

Interestingly, most Starbucks menus don’t advertise the misto.  I found out about it when I was explaining the kind of drink I wanted one day.  I’ve never ordered a latte since!  If you drink soy instead of cow, ask for a “soy misto.”

Milk “Top Up” Instead of Misto: Save Additional $0.60

After you’re used to ordering a misto instead of a latte, you can save an extra sixty or so cents (prices vary by region) by simply ordering your usual size coffee but asking for a milk “top up” (if you need soy milk) or just topping your coffee up yourself at the bar.

A misto is about 50% coffee, 50% milk.  But that’s a lot of calories coming from the milk.  A great, simple way to cut back on calories is to stop drinking them in all your beverages.  Coffee contains next to no calories.  So you’ll want to pare back on your milk product intake.

If you only want about 25% soy milk in your coffee, just ask for a top-up.  You won’t get steamed soy milk, but does it really make much of a difference to the taste anyway?  I find it doesn’t.  If you drink milk with your coffee, realize that simply topping up your coffee with one-quarter milk can usually get you the same basic taste (and caffeine!) as a latte, for well over a dollar cheaper each time.  Plus, you’ll save a considerable amount of calories at the same time.

If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon.  I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).

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Canadian business income trusts won’t all turn into pumpkins at the strike of midnight on December 31, 2010

I’m not a taxation expert, but I’ll cover a few of the scenarios I know about here.  Consider these points before you think about buying new positions in income trusts now, or whether you are thinking about selling the ones you currently own.

List of Top 45 Canadian Companies Still Operating As Income Trusts

New Laws Governing Taxation of Business Trusts Begin in 2011

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As you probably already know, back in October 2006 Canadian Finance Minister Jim Flaherty announced new legislation that would affect the tremendously popular income trusts.  These trusts have until 2011 to decide whether they will remain in the trust structure, and pay taxes accordingly, or convert to a corporation for more favorable tax treatments.

Some income trusts, such as the former NewAlta Income Fund (TSX: NAL.UN) (now NewAlta Inc. (TSX: NAL)) made their decisions well in advance and have already made the transition to a corporate structure.  Other business trusts are expected to do the same sometime between now and 2011.  It is up to the company.  Some might wait until 2011 to convert, if they convert at all.

Other trusts, such as the Cineplex Galaxy Income Fund (CGX.UN), will be able to continue operating for a couple of years after 2011 in the trust structure due to the tax pools they have accumulated, as well as company losses which work in their favour in relation to the new tax treatment.  Cineplex is expected to convert to a corporation some time after they run through their tax pools.

Some Distributions May Be Lowered

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One caveat that must be considered, especially for investors who might be jumping into trusts just now, is that some distributions might be lowered upon conversion to a corporation.

While this is not mandatory, and will not necessarily happen with each trust, there are a few trusts expected to need to lower their distribution/dividend.  Some trusts will certainly be able to maintain their current level of distribution.

Need yield? See Canada’s Top Dividend-Paying Multinationals

REITs Are Not Subject To the New Laws

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If you own REITs (real estate investment trusts), don’t worry. Nothing will change; since these are not income trusts for taxation purposes, they are not subject to the new 2011 rules. 

Some analysts expect that because of this, REITs might experience an uptick in price as they become more attractive to yield investors looking for new sources of monthly income following possible distribution cuts with many of the trusts.  This could be a nice benefit to owning some REITs, but I wouldn’t go out buying any hoping for this to happen.   Regardless, REITs will experience some new independence on the monthly income front as many of its monthly income peers disappear.

Put Your Monthly Income To Work In A Dividend Reinvestment Plan

So how do you know if you should buy or sell that income trust you’re thinking about?

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Check the company’s website under “Investor Relations” and “FAQ” or “News Releases” – there may be mention of their plans in there.  Otherwise, don’t hesitate to contact the company’s transfer agent directly to ask them their plans.  If there is a general contact address, use that or just make a phone call.

It’s not a bad thing if a trust converts to a corporation, nor is it disadvantageous if it remains as a trust.  Each trust must be judged on a case-by-case basis.

If you do nothing, your trust units will be automatically switched over to shares inside your discount brokerage account.  If you hold the income trust through a dividend reinvestment plan (DRIP), the transfer agent will likely mail you announcements with regard to how to proceed.  You may have to mail in your original unit certificate to have it exchanged for a new corporate share certificate.

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The primary advantage of purposefully driving the value of the US Dollar down, as Bernanke and Geithner both know, is that it makes US exports more attractively priced for foreign buyers.  This, of course, helps the US economy in theory (if more goods are purchased as a result, etc.).

A corollary advantage to cheaper US exports, if more of them are bought around the world, is that export sales will also help narrow the monstrously wide US trade deficit.

But as Larry Berman said earlier this week, and I agree – these will act as cushions on the US dollar in the short term only.  Longer term, currencies can decline quite a bit.  Short term there are limits to a currency’s decline, because countries will act to preserve their own exports economies by weakening their own currencies (eg., buy releasing their currency onto the market in exchange for more gold reserves – one theory behind Tuesday’s sharp $20 pop in gold).

Weekly Auction Amounts of US Treasuries Expected to Increase

Weak USD Advantage Won’t Last

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There are at least three reasons why the inherent advantages in a weak US dollar aren’t going to last long.

Competitive Debasement.

As mentioned above, the more the USD weakens, the faster other countries attempt to weaken their own currency against the USD in order to protect their own export trades.  How long can this competitive debasement continue?  No one knows.  Countries like China and Canada are slowly working to diversify their export economies, however, so as to not need to play this card.

Lowest the USD Has Ever Been Against the Canadian Dollar

Oil Priced in Dollars.

A big problem not many people have been talking about recently is the fact that the weaker the USD gets (presumably tolerated in order to help US exports), the more expensive oil becomes for as long as it continues to be priced in greenbacks.  Ironically, oil costs are a HUGE part of the export business as companies need to pay for global shipping of their goods.  Rising oil prices thus cancel out a large part of any gains made by a weaker currency.  In this sense, the US is shooting itself in the foot.

More Debt than the Trade Deficit.

Finally, even if the export trade is improved, and perhaps some of the US GDP numbers with it, the fact remains that the trade deficit is only one deficit (there is also a budget deficit), and there is still the national debt to contend with (current and future obligations!).  Solving the trade deficit problem, as good as that would be, doesn’t even touch the other two gorillas in the room.

For all of these reasons, investors should still be wary about the direction of the US dollar.  Average consumers may have less to worry about (except rising prices, of course) if they don’t travel outside the US and thus never need to buy other currencies, but they will not be immune from the side effects of a weak US dollar long-term.

Solution?  Buy other currencies.  Invest in non-US companies, especially foreign oil stocks or gold stocks.  Invest in US companies that get much of their profits from abroad.  Don’t keep all your money in US dollar bonds.

If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon.  I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).

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Ever wondered what a hedge fund really does, or how it works?  Think you should teach yourself some hedging strategies for your own portfolio?  It’s time to take a look at Hedgeable.com, “the world’s first “hedge fund for the common man.”  Hedgeable is a small start-up attempting to radically shake up the trillion dollar investment advisory business with a new set of investment tools that will help level the investment playing field.  Founder and CEO Mike Kane agreed to a short interview to explain the hedging business and what you can do with Hedgeable.com to better protect your own assets.  *Disclaimer: This article is provided for information purposes only.  This is not a paid post and should not be taken as a service endorsement.

“The Hedge Fund For the Rest Of Us”

Don’t Wait Until You’re Rich To Start Investing Like The Rich

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Quick Facts About the S&P/TSX 60 Index

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The S&P/TSX 60 is a basket of the 60 largest Canadian companies by market capitalization (the number of shares outstanding times the market value of those shares).  The index is thus a listing of some of the most-traded and most liquid companies in Canada, similar to the Dow Jones Industrial Average (DJIA), which is a listing of the 30 largest publicly-traded companies in the United States.

• managed by 4 reps from Standard & Poors, 3 from the TSX
• represents 73% of Canadian equity market cap
• covers 10 industry sectors in line with weights in the Composite
• designed for investment managers for ease of portfolio construction
• criteria available at www.indices.standardandpoors.com
• only Canadian incorporated companies are eligible
• committee attempts to minimize turnover

Trading the S&P/TSX 60 in ETFs, Futures and Options

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If you don’t want to hold individual stocks, you can play the S&P/TSX 60 through a number of ETFs as well as futures and options.  Standard & Poors does not sponsor or endorse any of the following products, however.

Exchange-Traded Funds (ETFs)

iShares CDN LargeCap 60 Index Fund
Horizons BetaPro S&P/TSX 60 Bull Plus
Horizons BetaPro S&P/TSX 60 Bear Plus
Horizons AlphaPro Managed S&P/TSX 60

Futures

S&P/TSX 60

Options

iShares CDN LargeCap 60 Index Fund
S&P/ TSX 60

60 Largest, Most-Traded Canadian Companies

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So here’s the index as of November 2, 2009.  Remember, it doesn’t change very frequently at all – only if one company loses enough market cap to another, or if it ceases to be Canadian (eg., is bought by another, or merges), or similar reasons.

If you like buying individual stocks, this list provides an excellent starting point for your research.  With the right data, you could even make your own “Canadian ETF” without needing to purchase all 60 of these companies (for example, if you know there are a few you definitely don’t want to invest in for whatever reason).  You get the benefit of the broad-based index without the companies your research tells you aren’t good bets for what you’re after.

Barrick Gold (TSX: ABX) – Materials
Agnico-Eagle Mines (TSX: AEM) – Materials
Groupe Aeroplan (TSX: AER) – Consumer Discretionary
Arc Energy Trust (TSX: AET.UN) – Energy
Agrium (TSX: AGU) – Materials
Brookfield Asset Management (TSX: BAM.A) – Financials
Bombardier (TSX: BBD.B) – Industrials
BCE Inc. (TSX: BCE) – Telecommunications
Bank of Montreal (TSX: BMO) – Financials
Bank of Nova Scotia (TSX: BNS) – Financials
Biovail (TSX: BVF) – Health Care
Cameco (TSX: CCO) – Energy
CIBC (TSX: CM) – Financials
Canadian Natural Resource (TSX: CNQ) – Energy
Canadian National Railway (TSX: CNR) – Industrials
Canadian Oil Sands (TSX: COS.UN) – Energy
Canadian Pacific Railway (TSX: CP) – Industrials
Canadian Tire (TSX: CCT.A) – Consumer Discretionary
EnCana (TSX: ECA) – Energy
Eldorado (TSX: ELD) – Materials
Enbridge (TSX: ENB) – Energy
Enerplus Resources (TSX: ERF.UN) – Energy
First Quantum Minerals (TSX: FM) – Materials
Fortis (TSX: FTS) – Utilities
Goldcorp (TSX: G) – Materials
Gildan Activewear (TSX: GIL) – Consumer Discretionary
Husky Energy (TSX: HSE) – Energy
Iamgold (TSX: IMG) – Materials
Inmet Mining (TSX: IMN) – Materials
Imperial Oil (TSX: IMO) – Energy
Kinross Gold (TSX: K) – Materials
Loblaw Companies (TSX: L) – Consumer Staples
Manulife (TSX: MFC) – Financials
Magna Int’l (TSX: MG.A) – Consumer Discretionary
Metro (TSX: MRU.A) – Consumer Staples
National Bank (TSX: NA) – Financials
Nexen Inc. (TSX: NXY) – Energy
Potash Corp. (TSX: POT) – Materials
Power Corp. of Canada (TSX: POW) – Financials
Penn West Energy Trust (TSX: PWT.UN) – Energy
Rogers Comm. (TSX: RCI.B) – Telecommunications
Research In Motion (TSX: RIM) – Information Technology
Royal Bank of Canada (TSX: RBC) – Financials
Saputo (TSX: SAP) – Consumer Staples
Shoppers Drug Mart (TSX: SC) – Consumer Staples
Shaw Communications (TSX: SJR.B) – Telecommunications
Sunlife Financial (TSX: SLF) – Financials
SNC Lavalin (TSX: SNC) – Industrials
Suncor (TSX: SU) – Energy
Telus (TSX: T) – Telecommunications

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One thing that is for sure is that analyst sentiment seems to be all over the place.  Some even suggest we are at the beginning of a mega, multi-year bull market.  And recent increases in the VIX (volatility index) indicator show that something is certainly afoot – be that profit-taking or investors coming in off the sidelines, or more likely, both.

Analysts also agree that stimulus programs have been the key driver of growth in the US so far and that more stimulus measures are yet to come.  Going forward, investors have to start cherry-picking stocks driven by genuine fundamentals.

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General Market Sentiment

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According to Dean Orrico, analyst at Middlefield Capital Corp., we are still in some form of recovery.  Orrico sees continued volatility and recommends being selective in this market.  Orrico expects that we might see a stronger correction here, but since there is still a lot of cash on the sidelines, it will mitigate some of the downside.  Orrico expects we will still see recovery fully into the end of the year, but agrees with others that so far, market growth has been driven by stimulus.

Monthly Auction Amounts of US Debt To Increase

Anna Piretti, economist with BNP Paribas concurs that most of the recovery is based in government support at the moment.  Piretti notes that the indicators of private demand remain very weak and we are likely to see continued weakness in GDP as a result.  Inflation?  Not yet.  Piretti thinks we will see low rates past mid-2010 and in fact, doesn’t see the Fed raising rates until 2012.  Even rental prices are easing in the US, according to Piretti. Regarding housing, labour and credit, Canada’s economy has not suffered as much as the US and has rebounded sooner than the US.

Oil and Gas

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Orrico advises investors to primarily look in the resource sectors for true fundamentals growth: oil and gas in particular.

Craig Machel, portfolio manager at Blackmont Capital, favors natural gas over oil at this stage of the game.  Machel says demand will pick up with the colder weather.  Drill count in the US has been cut in about half, and won’t be able to come back on all at same time or quickly.  So nat gas stocks look good until next spring.

Orrico agrees: we will see a recovery in gas prices late this year.  Not to 12 or 13 dollars, but higher than other analysts are predicting.  We will probably average around 6-7 dollars, which Orrico considers are healthy prices for gas companies.  A recommendation?  Orrico likes NuVista, which he sees as high-beta, but you want this exposure if you think gas is going higher.

As for oil, Orrico believes a large part of oil’s rise this year has been the production cut by OPEC in summer 2008; they pulled a lot of barrels off the market and have kept them off the market.  It will slowly be restored, but not for the next year, so we will continue to see strength in oil prices.  Orrico thinks these will probably stay in the $70-$90 range, but with some volatility.

An oil stock recommendation?  Orrico likes Imperial Oil (TSX: IMO) – It has great exposure to Syncrude, is using innovative extraction technology for cost-effective production, and it provides a more conservative exposure to oil.  Imperial is without a doubt one of Canada’s top oil companies.  If you want something slightly less conservative, go with Canadian Oil Sands Trust (TSX: COS.UN), which allows you to get more yield; they also increased their quarterly dividend yesterday, too.

Betting on the Bull? Go With Railroad Stocks
Bears Not Out of the Woods Yet?  Canadian Defensive Plays

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With the end of the recession and real recovery now “officially” in sight, it is perhaps not surprising to start hearing some more cautiously bullish views on the market.

But extremely bullish views? – we haven’t heard much of those, yet.  Until yesterday.

Webb Asset Management Calls Beginning of an Extreme Bull Market

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Derek Webb, CIO of Webb Asset Management is an extreme bull right now.  In an interview yesterday on BNN, Webb says we’re just seven months into the beginning of a multi-year bull market.

“This is a mega bull market.  A mega bull market.  I mean, bottom line is we’re seven months in to a bull market, bull markets are usually two to five years; this is as good as it gets; the strength of the market, the breadth of the market, the volume of the market… this is a bull market… most people are scared to get in, a lot of people sitting on the sidelines… and if you look at the technicals of the market they don’t get much stronger than that.  Since we bottomed in March, every decline has been a buying opportunity.”

According to Webb’s research, which is based upon momentum investing and technical indicators, we’re currently in the first stage of the bull market, in which we see earnings declines alongside serious cost-cutting.  Webb argues that the cost-cutting is a good sign because it means businesses will be more operationally leveraged  towards the upside when more economic factors improve.

Other factors pointing the way to a continued climb in the markets are the massive stimulus given by governments around the world, but particularly the U.S., strong technicals; and strong current economic indicators such as improving consumer sentiment and a slower pace of job losses.

Where To Invest Your Money Now

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To position himself and his clients’ capital for the ride, Webb has 100% of his funds long equities and doesn’t recommend shorting anything at this time. He also strongly recommends that you don’t leave your money in overly conservative investments right now, since according to him most things are still going up.

Stay away from U.S. residential real estate and related U.S. consumer financials.  According to Webb, the U.S. real estate market is the last problem which caused the credit crisis which still exists and doesn’t look like it will be solved anytime too soon.  He recommends staying away from U.S. consumer financial stocks like Wells Fargo (NYSE: WFC) and other savings and loan companies.

Webb is extremely bullish on oil, gold and base metals.  Commodities in general are going up, and they’re priced in US dollars, which are going down.  This causes the price of commodities to go up even more in and of itself.  As for oil, Webb thinks it’s possible that oil will take out its old highs at $147, regardless of whether that matches oil’s fundamentals or not.  Webb is less a fan of natural gas, however, as an investment, due to its volatility and current supply situation.

Webb is also much more bullish on stocks rather than bonds right now.  Interest rates have a higher chance of rising than dropping, which is bullish for equities, and if equities go up, bonds go down.  Webb likes the life insurances companies for anyone who has a long time horizon (he says you can’t go wrong with Manulife (TSX: MFC), for example, which has little competition); and in the U.S., he likes Goldman Sachs (NYSE: GS) – since it is an investment bank (safe from the consumer credit problems still troubling the U.S. real estate market) and has knocked out 60% of its competition.  Webb also says General Electric (NYSE: GE) “is a screaming buy” right now.

Apple (NYSE: AAPL) or RIM (TSX: RIM)? Although Webb is a Blackberry user and finds RIM to be an excellently managed company, he sees Apple’s iPhone as eating into the Blackberry’s market for the foreseeable future.  With Apple’s open app system, higher-than-expected earnings, and pent-up iPhone demand, and RIM’s lower-than-expected earnings results last quarter, Webb thinks Apple is the smarter investment right now.  Investors will have to “wait and see” with RIM to see where the momentum on the stock goes.  Webb also sees an even stronger future in Apple’s computer business, which will help buoy the stock and its market share long-term.

Outlook For U.S. Economy and Currency

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Webb pulls no punches with his analysis of the U.S.  If it were a business, it would be bankrupt.  If it were a third world country, its currency would be down 90%.  The only reason the currency is still floating where it is is because it also acts as the world reserve currency.

“The U.S. is in a world of pain,” he says.  Webb expects massive domestic financial restructuring and likely reforms of the world reserve currency system.

Zhou Xiaochuan’s Proposal For World Reserve Currency is Accepted by UN (March 29, 2009)
U.S. Dollar Up For Debate At G8 Meeting (July 5, 2009)
Supracurrency Coin Proposed As New World Reserve Currency (July 12, 2009)
World Bank: Don’t Take USD Reserve Status for Granted (Sept. 27, 2009)
Sucre, New Latin American Currency To Replace USD for Trade (Oct. 19, 2009)

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But how often do you see meetings, books, or announcements about the reasons you should not do a grad degree?  About the fact that it’s not for everyone and knocks the wind right out of many?

Thinking about whether grad school is right for you?

I think we can all agree there are definite bubbles in the law and MBA degree markets.  In fact, there are even already too many people graduating with bachelor’s degrees (the actual number of jobs which really need a BA or BSc for reasons of actual skills or specific knowledge is much lower than the number of grads.  Competition is what has boosted graduate rates.  Setting aside all the arguments for how great a liberal education is (arguments that I agree with, by the way).

Does this really mean you should go do a grad degree in order to stand out?  My conclusion: unless you’re going to a specific program with a specific educational or career goal in mind (and I do mean specific: you already know it, and you know this is the only program that can give it to you), then you are probably going to be disappointed.  You need a lot of passion to make it through and finish your degree.  Just “showing up” or doing the work won’t do the trick anymore.

So here are a few things I think people should know.  Please add your own below, I am sure this doesn’t cover them all.  Before you think of applying, consider these.

Things They Don’t Always Tell You About Grad School

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1. It might take you longer than you think.  Maybe a lot longer. For all kinds of reasons.  Yeah, the Master’s says it’s a one-year program, but there can be all kinds of delays, including – gasp! – you might not be able to write fast enough, conduct your research soon enough, analyze data in time – or correctly – you might have to redo it; you might have to wait on a supervisor.  In short, you were accepted because you’re so smart and amazing a scholar or budding scientist, but you still might not make it out “on time.”

2. It might cost more than you think.  Partly due to #1, but also for all the unseen costs involved.  You won’t find these listed on your favorite department’s website: conference costs; research costs related to courses; costs of buying books and paying late fees; costs of photocopying, ordering in rare or unique materials; fieldwork costs.  And more.  Yes, there are always “travel grants” to offset some of these, but don’t expect you automatically get one.  You have to apply, and even if you get one, it’s not going to cover everything.  Just sayin’.

How Much It Costs To Apply To Grad School
Reasons You Will Need Extra Cash For Your Master’s or PhD Thesis

3.  It might depress the hell out of you.  Seriously; studies have shown higher proportions of anxiety among graduate students than in the rest of the population.  Sure, it will be nice to have another degree on your wall or cv, an outward sign of all your hard work and accomplishments – to say nothing of your brilliance – but you might have to go through personal hell and high water just to get there.  See reasons #1, and #2, but also read: imbalance, health problems, isolation, failed relationships, a disappearing social life, evil supervisors and all sorts of messes can conspire to make your time that much more troubling.   More on this below, of course.

4.  You might not even be able to do the research you are really interested in.  I’m not joking.  Depending on your faculty and their foibles, depending on who’s around and the chemistry you have with them, don’t assume you’ll be writing or working on that amazing thesis topic you imagined in the final year of undergrad, when you knew everything there was to know about your field.  Most thesis topics change anyway, even if you’re still trying to work on your undergrad idea.  But beyond that, your topic might still even have to change halfway through the process.  You’ll have to get used to this.  Adaptation is the key to success.

5.  The feeling (and reality!) of falling behind your age/peer group.  While you spend years in the library basement with no fresh air or sunlight, tethered to your laptop and files of innumerable research notes, this will be the time when your friends start getting raises, bonuses, buying new cars, homes, and taking swell vacations.  If you’re married or engaged, you might be able to offset some of this if your spouse is in such a position, but if you’re single it can be hard.  Also, watch out for those younger siblings who will now jump ahead of you in earnings power and general ability to do-what-you-want-in-life.  It’s never good to keep up with the Joneses, but it’s also a very disturbing feeling to see your earnings power decline as you age with no immediate payoffs.  It makes you constantly question if you’re doing the right thing.

6.  Lack of social support for what you’re going through.  Most people have a basic idea of why people go to law school or business school, but if you’re doing further academic work, don’t expect to get the same level of understanding you had as an undergrad.  Everyone and their dog goes to college now, and it’s a social ritual that ignites the best in seasonal advertising and media hype around the bliss of your “college days.”  But once you start pursuing your Master’s or PhD, you’ve basically gone off the deep end.  Not only will most people not have a clue about the general field you’re working in (unless, say, it’s history or “psychology” – everyone thinks they know what that is), but they will not be able to relate to you about your own area of research, so this can make it even harder to talk about what presumably matters most to you at this point.

7.  Politics and hierarchy.  You might carry around some ideal version of higher education in your head that you feel will be actualized by your spending another two or three or seven years in school “learning what you love.”  One tip: get rid of that idealistic idea as soon as you can and make it easier for yourself.  Too often idealism is highly correlated with perfectionism, wanting to do a good job with your research, and adopting standards of academic integrity.  While I’m not saying these ideals have to be broken – and I’d never condone doing anything academically dishonest – adhering to lofty standards is only going to slow you down and lengthen your time to degree.  More specifically, though: you will encounter a degree of hierarchy that you didn’t know existed in your undergrad and you’ll also come face-to-face with serious disciplinary politics, which you may also not have had a chance to see much of in undergrad.

8. You’ve already got a great job offer.  Who knows – maybe you did an internship or a friend’s friend got you hired, but it’s a job you’d love to do or think would give you great experience.  Take it!  That doesn’t happen everyday.  There will always be grad programs waiting to take your money.  Think of it as a healthy break from academic work (not that it’s unrelated to academic work, but it will have a different pace and involve different tasks).  It’s a good idea to vary up one’s experiences, anyway.  And having done some work will help differentiate you from other grad school candidates later on.  My advice here: work hard, save a lot of that money and you can use that for grad school.  Having worked will also help give you some sense of self-worth when you’re feeling stuck in psychological quicksand later on.

9. You Might Be Able To Learn or Achieve What You Want Without It.  Don’t waste two, three, eight years if you can do it more efficiently yourself.  Unless you’re really aspiring to become a university professor, you can probably get close to what you need to do without the extra degree.

10. You’re Suffering From Grass Is Greener Syndrome. Maybe your friends got accepted, or your parents went to grad school and you’ve got ideas about what you should be doing there, too.  If this is a primary motivator, please stop now.  It’s not the right time for you.  Think harder about what you want to do.  If that’s too difficult, it may mean you need more experience.

Advice On Grad School From My Twitter Followers: “Show Me the Money!”

Cost Considerations

@SimpleLlama - Reasons not to go? Massive, crushing debt, if you don’t have the cash on hand to pay for it. That’s a biggie.  And the degree may not pay for itself. Not all of them do.  How about missed opportunity? 2-4 yrs in grad school are 2-4 yrs u don’t earn $, get experience, meet business contacts.

@studenomics – You want to start making some damn money!

@MyMoneyMinute – the sheer debt amount. Schools promise the world, but raise tuition and admit more students = surplus of grads, lack of jobs.

@EverydayFinance – If you’re paying for it yourself and it’s not ivy league, the ROI is horrendous. 2) Time commitment is often not worth results.

@SuburbanDollar – It is bloody expensive and depending on your profession could be virtually worthless compared to experience.

Career Considerations

@mbhunter – Payoff may not be there at the end. You sacrifice a few years, earn less (or go into debt) and get a late start on retirement.

@MyLifeROI – Do not go as a last resort, and do not go if you have limited (relevant) work experience.

@Matt_SF – Going to grad school just to delay your entrance into the ‘Real World’ is a mistake. But if you must, make it a high ROI degree.

@amabaie - It really depends on the career you are heading for. Some careers require advanced certification, others don’t.

@wisermiser – I’d say unless it was for something you needed an advanced degree for (like law, or being a professor) or that would greatly increase your earning power, not worth it. it seems almost never to get you more money otherwise and it is so expensive, unless, of course, your employer is paying for it. then I say go crazy!

@extremejacob – in grad school you may end up as a glorified technician. Like a regular job, but paid worse.

@arohan – Grad school teaches you to avoid risk. You are less likely to become an entrepreneur & add great value to society (or your wealth).

Clare’s note: Just to qualify a few of these points: it’s not necessarily true that you can’t also network, meet business contacts, develop entrepreneurially at the same time as doing a Masters/MBA/PhD, but it can be more difficult.  The point about conformity that @arohan brings up is a good one.  By its nature, academia is a conservative place (methodologically and professionally: not politically).  Professors even encourage students sometimes to not work on the topic you really love until after you’ve got tenure; and you might feel inhibited within your own department as to what sorts of areas/angles you can work on.

All that being said, you can see there is still a surprising degree of concurrence in the advice I got from others: make sure you’re focusing on ROI: Return On Investment.  If a grad degree is nothing else, it is definitely an investment. It has to be a good one.

Don’t let any of these points hold you back from applying if you really feel you have a case for why you should go – but at the same time, please don’t ignore these points, either.

If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon.  I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).

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Just take a look at any random sampling of what the kids bring back in their pumpkins and pillowcases, and you’ve got most of the stock ideas you need: Hershey’s; Cadbury; Nestle; Tootsie Roll.  Wrigley’s also commands massive candy market share, but they were acquired by Mars, Inc. in 2009.

What I like about all (but one) of the following stocks is that they pay dividends.  And, for the most part, they are somewhat defensive, if not fully recession-proof stocks.  Although junk food isn’t what you can call a “staple,” it is really cheap – and this helps it out when consumers are feeling stretched.  Just think about it – it’s the whole reason McDonald’s continues to thrive.

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Top 10 Chocolate, Gum, Costume and Candy Manufacturers and Retailers

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Hershey’s (NYSE: HSY) – I’ve never liked Hershey bars themselves, but the company does have good brands like Reese’s Peanut Butter cups, Twizzlers, and Hershey’s Kisses.  Headquartered in Hershey, PA. (USA). Market Cap: $8.6 billion. Yield: 3.13%

Cadbury Plc (NYSE: CBY) - Cadbury is a UK company that originated in Birmingham in 1824.  Shares are traded as ADRs on the NYSE.  With all due respect to the success of their company, they have built it on sub-par chocolate quality.  Go here for the lower-end chocolate brands.  After you’ve compared the taste with Lindt, and maybe Ghirardhelli, you’ll agree. Market Cap: $17.4 billion. Yield: 1.47%

Nestle SA (OTC: NSRGY) – Nestle is a European company based in Switzerland.  The shares trade on the SIX Swiss Exchange, but you can get them in the U.S as ADRs on the OTC markets under NSRGY.  Nestle doesn’t just make chocolate, either, it is a quintessential Swiss company, involved with dairy products, pharmaceuticals, and even pet care products.  Dividends are only paid once a year, usually between April and June. Market Cap: $167.2 billion.

Mars Inc. – Perhaps I shouldn’t be listing this one, because you can’t actually invest in it.  It’s a privately-held company.  Yes, that surprised me, too.  And since they’ve bought out Wrigley’s, that’s now private, as well. But since Mars is so big and predominant a candy brand, let’s look at all the products it owns which you now know you cannot invest in: Mars bars (obviously); Snickers; Dove chocolate; M&Ms; Juicy Fruit; Spearmint gum; Twix; Milky Way; 3 Musketeers; Extra; Orbit; Skittles; Starburst; Hubba-Bubba; Lifesavers and Combos (the cheese-filled pretzel snacks).

Tootsie Roll Industries (NYSE: TR) – Is this whole company seriously built around that one little Tootsie Roll?  Nope.  You’d be surprised at some of the other products they develop: Andes chocolate mints (these were always a Christmas staple) and Junior Mints (another favorite, especially at the theater!); the rest are really low-end kiddie candy products.  Market Cap: $1.4 billion. Yield: 1.3%

PepsiCo (NYSE: PEP) – Unlike Coca-Cola, PepsiCo is about way more than beverages.  They also own the Frito-Lays’ line of chips: Doritos, Lay’s, Tostitos, Sun Chips and Cheetos.  Some of these are sure to line the trick or treat bags of kids all over Canada and the U.S. Market Cap: $94.4 billion. Yield: 2.95%

CVS Caremark Corp (NYSE: CVS) – Don’t forget all the places that sell most of the candy, chips and pop.  Better known just as “CVS,” this small drugstore/supermarket doesn’t only sell Hallowe’en treats, but the costumes and other paraphernalia that go with Hallowe’en, too.  Market Cap: $52.7 billion. Yield: 0.82%

Walgreen Company (NYSE: WAG) – Known simply as “Walgreen’s,” it is almost seemingly constantly packed with bags of mini bars, jumbo bars, lunch candies, and other combinations of sugar.  When it’s not Hallowe’en season, the packaging changes, but the candy comes in a neverending supply. Market Cap: $38.5 billion. Yield: 1.41%

Target (NYSE: TGT) – We all shop at Target for something.  Target has done a good job of marketing itself to fit within the lower prices niche while at the same time branding upward to give itself a sense of style.  You can find all the usual candy goodies here, and of course all your favorite Hallowe’en decorations, too.  Market Cap: $36.8 billion. Yield: 1.39%

Wal-Mart Stores Inc. (NYSE:) – Granted, stores like Target and Wal-Mart sell a much wider variety of goods even than CVS and Walgreens, so their share of profits from Hallowe’en alone is going to be limited.  Nevertheless, these retailers are sure to see an uptick in holiday-related sales, too.  Market Cap: $192.2 billion (that’s larger than the entire GDP of Singapore). Yield: 2.16%

Dollarama: Canada’s First Publicly-Traded Dollar Store

Stocks For All Holiday Seasons

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Most of these consumer discretionary stocks and retailers, of course, do well all year round.  Isn’t it funny how there is at least one big candy-requisite holiday each fiscal quarter? Hmm.  New Year’s, Valentine’s Day, Easter… maybe there’s a bit of promotional hiatus during the notoriously slow summer months… then things kick off again with back-to-school (back to eating junk food because students don’t cook on their own?), and, of course, Hallowe’en.

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Are these sin stocks?  Should you really be trying to “cash in” on something like Hallowe’en? (To set aside the whole financial question of risk, etc.)

Well, you or your children are probably participating in Hallowe’en on the consumer end anyway, you might as well get the benefits from owning on the producer’s side. You can pick individual companies’ stocks or you can look for consumer/retail/discretionary ETFs like those at iShares.  Unfortunately there is no ETF solely composed of candy or holiday stocks, per se, that I know of.

Do your own research, but you can use this list as a guide.  Check out the differences between each of the stocks and know your investment objectives.  Pepsi and Coke may seem like similar products, but their companies and product line up are very different.  Also, if you’re in it for the long term, you might come up with different readings of these stocks than if you are hoping to make some quick gains (in other words, don’t buy these stocks and expect them to shoot up two days before Hallowe’en or Christmas.  It doesn’t quite work like that.)

If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon.  I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).

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