Despite America's economic problems, the US dollar has maintained its respected status the world over - and has even managed to maintain value in comparison to other currencies. It appears that the dollar will likely finish 2010 at the same levels that it started. Even today's announcement of more tax cuts and stimulus, which will guarantee widening federal deficits for years to come, could not put a dent in the dollar. The dollar's charmed life stands in strong contrast to the euro, which is currently suffering from its internal flaws and the Europeans' unfortunate recognition of reality.
Given Washington's monetary irresponsibility over the past decade and a half, many market observers have wondered if the euro could one day become the world's top currency. In the early to mid-2000s, when the euro surged more than 60% against the dollar, this was in fact a popular view. But unlike all other currencies on the planet, the euro is not a sovereign currency managed by a single country. It is dependent on the collective political will of the leaders of the European Union (EU).
In the bust that followed the Greenspan/Bernanke dollar-based boom, the US economy started to deleverage significantly. Unwilling to accept the political cost of a possible failure of its banking system, the Federal Reserve decided to re-inflate out of deflation and devalue the US dollar. Meanwhile, the European Central Bank (ECB), heavily influenced by Germany, decided that deflation was necessary and inevitable. As painful as it was likely to prove, the Europeans had appeared until recently ready to face the music and delever their economies.
Unfortunately, Europe's banks had, for years, invested enthusiastically in the debt of their member sovereign states. In addition, they had greedily invested in the debt securities of US and domestic real estate. The collapse of real estate prices on both continents exposed these massive risks and revealed the high degree of interconnection between the world's major banks.
As the EU is not yet a super state with a single government, the response to austerity is far from even. For instance, German voters are extremely angry at bailing out what they see as nations with profligate governments - the likes of Greece, Portugal, Italy, et al. They feel that those who invested or, as the Germans see it, speculated in European sovereign state bonds should suffer at least some of the downside. The problem is that the speculators were largely European banks. Acceptance of the real losses would bankrupt major banks, likely creating a chain reaction across the European and even US banking sectors. European politicians are now showing less inclination to tolerate such an outcome.
But European citizens are growing restless. They are vehemently opposed to the idea that their governments should incur massive debts to rescue what they term 'banksters.' European politicians are becoming panicked, not knowing where to turn. Some urge quantitative easing (like the Americans!). Others maintain that this will only magnify the problem and that austerity must be continued. Varied and often-conflicting public statements by government officials are creating an air of political and monetary uncertainty for the euro.
The situation within the EU has become so serious that the future of the world's second major reserve currency is now in question.
Meanwhile, sentiments expressed by the American Tea Party movement have gained considerable weight. Americans have received the Fed's second wave of quantitative easing with far less enthusiasm than the first. Increasingly uncertain statements now emanate from Washington. Furthermore, the US government has still to face the problem of default threatened by many politically important states, such as New York, New Jersey, and California. This political uncertainty has spread to the dollar.
In response, some major nations, led by China and including Russia, are soliciting political support for the removal of the US dollar's privileged status as reserve currency. Together, the US dollar and the euro account for some 70 percent of world central bank reserves. But both currencies face great internal political uncertainty and high relative volatility. As a result, global investors are looking for alternatives.
In these uncertain circumstances, precious metals continue to establish new nominal price records. Unless there is a miraculous internationalization of the yuan, I think precious metals have a rare opportunity to regain their historic status as the global reserve, a status subverted by the dollar only in the past century.
View the original article here
Friday, December 31, 2010
Why You Don’t Want To Hold Euros In 2011
It's safe to say that the trials and tribulations of Europe and the euro currency in 2010 resemble a wild rollercoaster ride.
Except for the adrenalin rush, of course.
Back in February, we covered the problems with the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and the impending European crisis that would follow. The story has played out according to the script so far… except for one aspect.
The euro.
It's obvious that Europe's litany of deficit-born woes have hit the single currency. But the surprising thing is that the problems haven't dented the euro as much as they should have. In other words, the euro should be trading a lot lower today than it is.
Consider the fact that after bailing out Greece and Ireland, in addition to the previous stimulus and bank bailout packages, it's cost Europe close to one trillion euros. So with many more euros printed, it's quite surprising that the euro's only down around 15%. Moreover, most of that decline occurred during the first quarter of 2010… even though the rate of printing increased as the year went on.
How can this be possible? And what are the next twists and turns for the European rollercoaster in 2011?
Thanks, Uncle Sam
The only logical conclusion for the euro's failure to disintegrate lies at the feet of the U.S. dollar.
If this were just a self-contained euro crisis, the currency should have – and would have – fallen off a cliff. But since this is a global crisis in a global economy, the euro is falling… but at a diminished rate, due to the fact that the monetary authorities have printed just as many dollars.
However, this trend might not continue in 2011 and the euro's slide may resume, which would take the currency to new lows.
Not Just One Shoe to Drop in 2011… But Two
If you had just one word to define the economic climate over the past couple of years, "bailout" would probably rank very near the top.
Hot on the heels of the banks, auto companies, Greece and Ireland, we're likely to see two more next year – Spain and Portugal. Why?
Simple.
View the original article here
Except for the adrenalin rush, of course.
Back in February, we covered the problems with the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and the impending European crisis that would follow. The story has played out according to the script so far… except for one aspect.
The euro.
It's obvious that Europe's litany of deficit-born woes have hit the single currency. But the surprising thing is that the problems haven't dented the euro as much as they should have. In other words, the euro should be trading a lot lower today than it is.
Consider the fact that after bailing out Greece and Ireland, in addition to the previous stimulus and bank bailout packages, it's cost Europe close to one trillion euros. So with many more euros printed, it's quite surprising that the euro's only down around 15%. Moreover, most of that decline occurred during the first quarter of 2010… even though the rate of printing increased as the year went on.
How can this be possible? And what are the next twists and turns for the European rollercoaster in 2011?
Thanks, Uncle Sam
The only logical conclusion for the euro's failure to disintegrate lies at the feet of the U.S. dollar.
If this were just a self-contained euro crisis, the currency should have – and would have – fallen off a cliff. But since this is a global crisis in a global economy, the euro is falling… but at a diminished rate, due to the fact that the monetary authorities have printed just as many dollars.
However, this trend might not continue in 2011 and the euro's slide may resume, which would take the currency to new lows.
Not Just One Shoe to Drop in 2011… But Two
If you had just one word to define the economic climate over the past couple of years, "bailout" would probably rank very near the top.
Hot on the heels of the banks, auto companies, Greece and Ireland, we're likely to see two more next year – Spain and Portugal. Why?
Simple.
View the original article here
Thursday, December 30, 2010
Electronic Storage Stocks Showing Strong Move Back To The Upside
After showing a strong upward move at the open, electronic storage stocks are continuing to see notable strength in late-morning trading on Tuesday.
The strength among electronic storage stocks is reflected by the 1.6 percent gain currently being shown by the NYSE Arca Disk Drive Index. With the advance, the index is bouncing back from yesterday's weakness and is on target to end at its best level since late April.
Hutchinson Technologies (HTCH) is turning in one of the sector's best performances, with the maker of disk drive parts currently up by 3.4 percent. The upward moving is lifting the stock off of the three-week closing low it set on Monday.
Western Digital Corp. (WDC) is also helping to lead the sector higher, advancing by 2.3 percent. With the gain, the stock has risen to its best intraday price in nearly six months.
Buying interest has also elevated Seagate Technology (STX) to one of the leading gainers in the sector, posting a gain of 2.7 percent. Shares set a five-week intraday high in earlier dealing.
Shares of STEC Inc. (STEC), SanDisk Corp. (SNDK), Imation Corp. (IMN) and NetApp Inc. (NTAP) are also on the rise, climbing by varied gains.
View the original article here
The strength among electronic storage stocks is reflected by the 1.6 percent gain currently being shown by the NYSE Arca Disk Drive Index. With the advance, the index is bouncing back from yesterday's weakness and is on target to end at its best level since late April.
Hutchinson Technologies (HTCH) is turning in one of the sector's best performances, with the maker of disk drive parts currently up by 3.4 percent. The upward moving is lifting the stock off of the three-week closing low it set on Monday.
Western Digital Corp. (WDC) is also helping to lead the sector higher, advancing by 2.3 percent. With the gain, the stock has risen to its best intraday price in nearly six months.
Buying interest has also elevated Seagate Technology (STX) to one of the leading gainers in the sector, posting a gain of 2.7 percent. Shares set a five-week intraday high in earlier dealing.
Shares of STEC Inc. (STEC), SanDisk Corp. (SNDK), Imation Corp. (IMN) and NetApp Inc. (NTAP) are also on the rise, climbing by varied gains.
View the original article here
Wednesday, December 29, 2010
Gold Stocks Moving Lower Along With Gold Prices
Gold stocks are extending a recent slide in late morning trading on Thursday, despite some strength in the broader markets. The weakness in the gold sector comes amid a steep drop by the price of the precious metal, which is backing further away from the record highs set earlier this month.
Reflecting the weakness in the sector, the NYSE Arca Gold Bugs Index is currently posting a 2.1 percent loss. The move comes as the price of gold for February delivery is currently down $18.50 at $1,367.70 an ounce.
Within the gold sector, Agnico-Eagle Mines Ltd. (AEM) is turning in one of the worst performances and is currently down by 4.4 percent. The stock is now on pace for its lowest closing price in nearly two months.
The loss by Agnico-Eagle Mines comes even though the company announced that it would begin paying a quarterly cash dividend of $0.16 per share instead of the current annual dividend of $0.18 per share.
Additionally, shares of Buenaventura (BVN) and Gold Fields Ltd. (GFI) are also under pressure, posting losses of 2 percent and 2.2 percent, respectively.
Buenaventura is on target for its lowest closing price in almost three months, while Gold Fields is falling from its highest level in three years, set earlier this week.
Notable losses by Barrick Gold (ABX), Harmony Gold Mining (HMY) and Goldcorp (GG) are also weighing on the sector.
View the original article here
Reflecting the weakness in the sector, the NYSE Arca Gold Bugs Index is currently posting a 2.1 percent loss. The move comes as the price of gold for February delivery is currently down $18.50 at $1,367.70 an ounce.
Within the gold sector, Agnico-Eagle Mines Ltd. (AEM) is turning in one of the worst performances and is currently down by 4.4 percent. The stock is now on pace for its lowest closing price in nearly two months.
The loss by Agnico-Eagle Mines comes even though the company announced that it would begin paying a quarterly cash dividend of $0.16 per share instead of the current annual dividend of $0.18 per share.
Additionally, shares of Buenaventura (BVN) and Gold Fields Ltd. (GFI) are also under pressure, posting losses of 2 percent and 2.2 percent, respectively.
Buenaventura is on target for its lowest closing price in almost three months, while Gold Fields is falling from its highest level in three years, set earlier this week.
Notable losses by Barrick Gold (ABX), Harmony Gold Mining (HMY) and Goldcorp (GG) are also weighing on the sector.
View the original article here
Tuesday, December 28, 2010
Housing Stocks Standing Out On Otherwise Lackluster Trading Day
While most market segments are seeing subdued movement, housing stocks are showing notable strength in late morning trading on Monday. The move comes despite a lack of any first-tier economic data, although new and existing home sales reports are due out later in the week.
The strength among housing stocks is reflected by the 1 percent gain being show by the Philadelphia Housing Sector Index, which reached its best intraday level in six and a half months earlier in the session. KB Home (KBH) is turning in one of the housing sector's best performances, advancing by 4.3 percent. The stock also reached a six and a half month intraday high.
Lennar (LEN) and D.R. Horton (DHI) are also posting strong gains, rising by 3.5 percent and 2.2 percent, respectively. Lennar has set a six and a half month intraday high, while DR Horton has reached a monthly intraday high.
Ryland Group (RYL), Toll Brothers (TOL) and PulteGroup (PHM) are also markedly higher, further contributing to the strength in the sector.
On the other hand, weakness is visible among shares of Vulcan Materials (VMC), Radian Group Inc. (RDN) and Fidelity National Financial (FNF). Notably, Vulcan Materials is down by 1.2 percent, falling further from a five-month closing high set earlier this month.
View the original article here
The strength among housing stocks is reflected by the 1 percent gain being show by the Philadelphia Housing Sector Index, which reached its best intraday level in six and a half months earlier in the session. KB Home (KBH) is turning in one of the housing sector's best performances, advancing by 4.3 percent. The stock also reached a six and a half month intraday high.
Lennar (LEN) and D.R. Horton (DHI) are also posting strong gains, rising by 3.5 percent and 2.2 percent, respectively. Lennar has set a six and a half month intraday high, while DR Horton has reached a monthly intraday high.
Ryland Group (RYL), Toll Brothers (TOL) and PulteGroup (PHM) are also markedly higher, further contributing to the strength in the sector.
On the other hand, weakness is visible among shares of Vulcan Materials (VMC), Radian Group Inc. (RDN) and Fidelity National Financial (FNF). Notably, Vulcan Materials is down by 1.2 percent, falling further from a five-month closing high set earlier this month.
View the original article here
Monday, December 27, 2010
Software Stocks Elevated After Upbeat Adobe Results, Forecast
After opening higher, software stocks are seeing notable strength in late morning trading on Tuesday. The sector is being led higher by Adobe Systems Inc. (ADBE) after the firm beat fourth-quarter earnings estimates and projected first results above expectations.
The strength in the software sector is reflected by the 1 percent advance currently being shown by the NYSE Arca Software Index. With the upward move, the index is moving higher for a fourth straight session and is on target for its best closing level since early 2002.
Adobe is currently up by 4.5 percent after setting a three-month intraday high following its fourth quarter earnings results.
Excluding items, the firm reported fourth quarter earnings of $0.56 per share amid a revenue surge of 33 percent to $1.01 billion. Wall Street analysts expected the company to earn $0.52 per share on revenue of $988.07 million for the fourth quarter.
Looking forward to the first quarter, Adobe expects earnings in a range between $0.54 and $0.59 per share on revenues of $1.00 billion to $1.05 billion. Analysts had expected the company to earn $0.51 per share on revenue of $992.19 million for the first quarter.
In other action within the sector, Openwave Systems (OPWV) is up by 2.7 percent, bouncing off of a one-month closing low. SAP (SAP) is posting a 1.5 percent gain and is on target for a five-week closing high.
Nuance Communications (NUAN), Oracle (ORCL) and Microsoft (MSFT) are among the other gainers in the sector, while Tibco Software (TIBX) is posting a modest loss of 0.3 percent.
View the original article here
The strength in the software sector is reflected by the 1 percent advance currently being shown by the NYSE Arca Software Index. With the upward move, the index is moving higher for a fourth straight session and is on target for its best closing level since early 2002.
Adobe is currently up by 4.5 percent after setting a three-month intraday high following its fourth quarter earnings results.
Excluding items, the firm reported fourth quarter earnings of $0.56 per share amid a revenue surge of 33 percent to $1.01 billion. Wall Street analysts expected the company to earn $0.52 per share on revenue of $988.07 million for the fourth quarter.
Looking forward to the first quarter, Adobe expects earnings in a range between $0.54 and $0.59 per share on revenues of $1.00 billion to $1.05 billion. Analysts had expected the company to earn $0.51 per share on revenue of $992.19 million for the first quarter.
In other action within the sector, Openwave Systems (OPWV) is up by 2.7 percent, bouncing off of a one-month closing low. SAP (SAP) is posting a 1.5 percent gain and is on target for a five-week closing high.
Nuance Communications (NUAN), Oracle (ORCL) and Microsoft (MSFT) are among the other gainers in the sector, while Tibco Software (TIBX) is posting a modest loss of 0.3 percent.
View the original article here
Sunday, December 26, 2010
Financial Planning
What is financial planning anyway? It sounds important, yet hard to define. When it’s hard to define, it’s hard to figure out why it’s important.
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
Saturday, December 25, 2010
The Return of the Cocktail Party Stock Picker
Environmentalists might cheer the re-population of a previously endangered species, but cocktail party-goers shouldn't. With the Nasdaq up almost 100% since in March 2009, and an increase of 23% in the last 2 months, stock pickers have become much smarter and they're starting to tell others!
Stock pickers are happy to tell you about the stock that they bought six months ago at $12 and is now at $50, but their memories are selective. This kind of result does not typically reflect their investment portfolio, but rather is just a lucky guess. Speculation is not investing. What they don't tell you about are the 3 other stocks they bought at $12 and are now trading a $6. Or the "investments" they made during 2008 that are now worthless. When the stock market is shooting up, anyone can pick a winning stock.
But the direct hit is seductive. The first thought that comes into someone's head is, "Should I invest in that stock?' or "This guy must know a lot about investing." But here are the questions that should pop into your head - "Where has this guy been for the last 10 years?", "I wonder what the investment return for his entire portfolio has been during bull and bear markets?", and "Does he have an investment philosophy, or is he just throwing darts at a board?" At CoPilot Financial, we don't advise investors to buy individual stocks, and we approach concentrated positions in company stock conservatively.
Stock picking is fun when you get it right, but it is not investing and it should have a limited role in any financial plan. Remember, only one in five professional investment managers beat the market in any one year, and practically no one does it over time. What makes you think you, or anyone else you meet at a cocktail party, can do it?
You should think of stock picking like a responsible investor thinks about gambling in Las Vegas (but please remember that stock picking is not investing and that investing is not gambling, when done correctly). When you decide to play craps at the casino, you take out a set amount from the ATM (which should represent a ridiculously small percentage of your income or investment portfolio) and are prepared to lose it all - it's entertainment, right? Right! Stock picking is the same - take a ridiculously small percentage of your investment portfolio (if you must) and have fun. Enjoy the direct hits, but be prepared to lose it all. And if you have direct hits, don't tell anyone at a cocktail party, unless you're ready to tell them about all your trades...
View the original article here
Stock pickers are happy to tell you about the stock that they bought six months ago at $12 and is now at $50, but their memories are selective. This kind of result does not typically reflect their investment portfolio, but rather is just a lucky guess. Speculation is not investing. What they don't tell you about are the 3 other stocks they bought at $12 and are now trading a $6. Or the "investments" they made during 2008 that are now worthless. When the stock market is shooting up, anyone can pick a winning stock.
But the direct hit is seductive. The first thought that comes into someone's head is, "Should I invest in that stock?' or "This guy must know a lot about investing." But here are the questions that should pop into your head - "Where has this guy been for the last 10 years?", "I wonder what the investment return for his entire portfolio has been during bull and bear markets?", and "Does he have an investment philosophy, or is he just throwing darts at a board?" At CoPilot Financial, we don't advise investors to buy individual stocks, and we approach concentrated positions in company stock conservatively.
Stock picking is fun when you get it right, but it is not investing and it should have a limited role in any financial plan. Remember, only one in five professional investment managers beat the market in any one year, and practically no one does it over time. What makes you think you, or anyone else you meet at a cocktail party, can do it?
You should think of stock picking like a responsible investor thinks about gambling in Las Vegas (but please remember that stock picking is not investing and that investing is not gambling, when done correctly). When you decide to play craps at the casino, you take out a set amount from the ATM (which should represent a ridiculously small percentage of your income or investment portfolio) and are prepared to lose it all - it's entertainment, right? Right! Stock picking is the same - take a ridiculously small percentage of your investment portfolio (if you must) and have fun. Enjoy the direct hits, but be prepared to lose it all. And if you have direct hits, don't tell anyone at a cocktail party, unless you're ready to tell them about all your trades...
View the original article here
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