Archive for category Investing
How to Invest in Commodities, Carefully
Posted by Oksana Grebenjuk in Investing on Декабрь 22nd, 2010
All through the year, commodity prices have been rising: Copper has soared 24.5% since 2010 began, while gold is up 23%. Wheat, corn and oil also have continued to climb. Unsurprisingly, that growth has attracted many investors. Is this a good time for small investors, too, to put some money in commodities?
Adrian Day, a financial adviser who has just published a book about commodities called Investing in Resources, cautions small investors that commodities are incredibly volatile. «Trying to play commodities in the short term is a recipe for disaster,» he says. Commodity prices have already climbed so high in the last couple of months that he has become a «little bit cautious,» he adds.
But Day remains bullish about using long-term commodities investments to diversify portfolios, even for the little guy. After all, some good fundamentals are behind the commodities’ growth, including the continuing strength of the Chinese economy — which has created huge demand for many commodities — and signs that the U.S. starting to improve. «With many metals, they’re unable to increase production, and the price is just continuing to go up» as demand increases, Day says.
First Steps
How can small investors best tap into this trend? There are myriad ways to invest in commodities, of course, such as via futures and options offered by CME Group. But those types of commodities futures and options require sophisticated knowledge and can be very risky for a novice investor, Day warns. Read the rest of this entry »
Never Too Small To Be A Shareholder
Posted by Oksana Grebenjuk in Investing on Декабрь 10th, 2010
I am not sure about you, but nowadays, the only time my phone calls ever get picked up by a live human on the first try is when i’m calling my mom, bless her heart. So when i’m not calling my mom, i’m mouthing the message i’m going to leave on the voicemail as i dial. as investors, we’d love it if say, Google’s CFO picked up the phone when we call to answer our questions. Never say never, but i bet that’s never happened. however when you’re a small cap investor, «crazy» things do occur and i’m constantly surprised by how often i get a live voice whenever i call company management. And that’s the joy in researching small cap companies — you’re never too small to be a shareholder.
Regardless of whether you own ten, a hundred or a million shares, i’ve found that small cap company management will take your calls (and if they stop, that may clue you in to something too). as the CFO of a small cap tech company once told me, he was amazed by how few shareholders bothered to call. Now as a bottom-up research investor, i love talking with management because behind every stock price is a hot-blooded company run by real people. They are dealing with real issues all the time not just four times a year when most investors tune in to listen to the quarterly conference calls.
Stocks move based on expectations and when a stock goes up or down (crazy flash crashes aside), it’s because something unexpected happened. there are times when truly the unexpected occurs and there’s no way you would have know (or if you did, you’d go to jail for acting on inside information). Other times, the «unexpected» was there to be expected had you just followed up with management about something already disclosed in a company press release, something their customer/competitor/supplier had disclosed or a development in their industry. Read the rest of this entry »
Seven Stocks In Financial Sector For Next Year
Posted by Oksana Grebenjuk in Investing on Декабрь 9th, 2010
Year to date (YTD), NYSE Financial Index is the third best performer, among the major NYSE indices, with a return of 25.9%. Those sub sectors (real estate services; thrifts and mortgage lenders) that pulled down the performance of finance sector in the year ago period seem to have recovered a major portion of their lost ground. Should you expect good times continue into 2011?
YTD financial sector (10.02%) has outperformed S&P 500 (7.79%) by nearly 2.23 percentage points and I see this margin widening further in 2011. The reason being most of the problems (capital shortage, asset value write downs, etc) that faced financial sector are nearly behind us. For the financial services industry, 2009 was among the toughest operating environments in many decades. The year 2010 has been relatively good and 2011 is expected to be better.
On a broad level, we can classify financial sector into 10 sub sectors namely — Consumer Financial Services, Insurance (Accident & Health), Insurance (Life), Insurance (Miscellaneous), Insurance (Prop. & Casualty), Investment Services, Misc. Financial Services, Money Center Banks, Regional Banks, and S&Ls/Savings Banks.
Since life insurance sector is yet to return to positive territory, I will avoid picking stocks from this sub sector. Read the rest of this entry »
Surety Bonds: Investments That Protect Investments
Posted by Oksana Grebenjuk in Investing on Ноябрь 2nd, 2010
Anybody who contributes their time, effort, and, of course, finances to a project feels more confident about the decision if the commitment can somehow be assured. When it comes to finances — whether personal or corporate — surety bonds provide this guarantee. Most industries in America utilize surety bonds to provide protection for those investing in business deals, as well as those who might be vulnerable after a contractual agreement has been made.
Surety bonds essentially work as a legal contract between three parties:
1. The Principal: the entity required to purchase the bond to guarantee the quality of work to be done
2. The Obligee: the entity that requires the bond to protect its interests
3. The Surety: the agency that issues the bond to the principal and assures the obligee with a financial guarantee
The bond is written to assure the obligee that the principal will fulfill all duties appropriately, whether developing construction projects, collecting debts, or signing official documents as a notary. If the principal fails to uphold the guarantee outlined in the bond’s language, then the obligee can make a claim on the bond. If the principal is unable to compensate the obligee, the surety will be held accountable for reparation, whether achieved financially or otherwise. Read the rest of this entry »
Are There Bubbles All Around?
Posted by Oksana Grebenjuk in Investing on Октябрь 26th, 2010
One thing we learned in the 1990s and the 2000s is that there can be asset bubbles in the economy without growth in either money stock variables or increases in consumer (flow expenditure) price inflation. The financial system seems to be flexible enough so that it can leverage up where it wants to even though monetary policy and consumer spending seem to be «in control». This is the lesson of modern «financial engineering.»
However, the monetary statistics are not benign for most of the time period from January 1961 up to September 2008. During this time period, the monetary base which is supposedly under the control of the Federal Reserve System rose at a compound annual rate of slightly more than 6%. Total credit during this time period rose much more rapidly. Consequently, the United States experienced a period if «credit inflation» that dominated everything going on during this 47 years or so. This secular inflation drove the financial innovation that took place as the whole financial system took on more-and-more leverage and more-and-more risk.
Since September 2008, the Federal Reserve has caused the Monetary Base to increase explosively by more than 130%. However, the banking system is not lending and much of these funds seem to have ended up on the balance sheets of the banking system. Excess reserves in the banking system went from about $2 billion in August 2008 to almost $1.2 trillion in February 2010. Excess reserves for September 2010 averaged slightly below $1 trillion.
Even with all of these excess reserves, the current concern is whether or not the economy will go into a period where prices actually decline. That is, might the United States be headed for a period of deflation? Read the rest of this entry »
Beyond Gold: 6 Overlooked Alternative Investments
Posted by Oksana Grebenjuk in Favourites, Investing on Октябрь 18th, 2010
There are those who will tell you that gold still has room to roam: that you ain’t seen nothing yet. That even though an ounce right now tops $1,300, you should hock your kids to buy some.
At least, that’s the advice of Dan Oliver and Dan Mahony, who think gold could peak at over $10,000. The two Dans follow the gold market.
«Gold is hardly over-owned,» Mahony says. «All the gold in the world, at today’s prices, is only worth eight-tenths of a percent of financial assets, versus nearly 5 percent in the 1960s.
«If you adjust gold’s price for increases in the money supply — which the Fed keeps raising — gold is actually near its all-time low,» Oliver says.
Be that as it may, if you’re skeptical and feel you can’t afford to buy in now, here are other opportunities you might consider:
Shale
If you own land with oil shale on it, you’re in luck. Shale deposits cover North Dakota, much of Montana and parts of Colorado, Kansas, Nebraska and Wyoming. Read the rest of this entry »
4th Quarter Investment And Recommended List Thoughts
Posted by Oksana Grebenjuk in Investing on Октябрь 8th, 2010
The low for the year appears to be in and we are in a Presidential Cycle rally which should eventually take us back to the highs made earlier this year.
However, we are into October which is well known for the two previous crashes and not a generally positive month overall. October is one of the worst performing months for Gold so investors looking to add to Gold and Silver positions would be well advised to look for a buying opportunity as it comes becomes available this month.
For equities, it appears as though we are making a short-term top formation as worries are beginning to appear over not just third quarter earnings but the fourth quarter as well.
In addition, we have the unemployment rate on Friday along with 3rd Quarter GDP at the end of the month. Initial estimates have the GDP number coming in under 2% but we may just see a little boost given to the number, which has been the case over the past few quarters, only to see about a percent taken off in the revisions.
Investors would be well served to continue to follow the guidepost I put up at the beginning of the year focusing on blue chip stocks with solid dividends. Large institutions are just beginning to jump back on the dividend bandwagon and small investors would be well served to get aboard first. Read the rest of this entry »
What Inflation Means For Investors
Posted by Oksana Grebenjuk in Favourites, Investing on Сентябрь 27th, 2010
During a period of inflation, a dollar purchases less goods and services than in the past. Inflation is negative when it comes to most investments because it undermines real asset values and increases required yields. Smart investors know that purchasing dividend stocks with a yield greater than four percent and buying dividend stocks are two effective ways to deal with inflation.
Growth stocks are shares in companies with expected above-average earnings growth in relation to the market. These stocks do not usually pay dividends because the company instead uses the earnings for capital project re-investments. Many technology companies are considered growth stocks.
Investors should be aware that some growth company stocks are not classified as such. In many cases, growth company stocks are undervalued. This creates an ideal situation for an investor because there is the opportunity to purchase the stock at a bargain price. Inflation affects the price/earnings ratios of companies, so investors should put their money in companies whose growth can offset this situation.
Dividend stocks provide passive income to investors throughout their holding period. During times of inflation, investors should purchase dividend stocks with yields higher than four percent. This will allow the amount of dividend income to outpace the inflation rate. If the dividend growth rate is increasing, these investments will yield an even more positive result. Read the rest of this entry »
Cash Is Cheap
Posted by Oksana Grebenjuk in Investing on Сентябрь 8th, 2010
The first half of 2010 has been dominated by questions lacking immediate answers: Will Europe disintegrate, will financial regulation cripple capital markets, will Brett Favre finally retire? Investors, businesses, and sports fans alike have grappled with plenty of ambiguity, and maybe that’s why private firms are finding such a huge, cheap market for their debt. Indeed, only the latest in a lengthening line of firms to offer bonds at ultra-low rates, IBM sold $1.5 billion worth of 3-year notes for 1% on Tuesday. US firms successfully raised $90.1 billion in July alone, with an average yield of 5.01%—an amount not matched since 1999 at the lowest rate since 2004.
Investors may be betting deflation’s on the way (making future interest payments more valuable) or they may be seeking the perceived safety of fixed income plus a little extra to top Treasuries. But unless current dour appraisals of economic health prove true (unlikely in our view), the corporate bond binge is hugely encouraging. For all the talk of broken credit markets, corporate bond sales show credit is amply available for the creditworthy. And investors don’t accept ultra-low rates unless they’re confident corporations are healthy and low-risk. Indeed, balance sheets are solid, costs under control, and profits up hugely.
Businesses holding record levels of cash are wisely building those piles higher by leveraging them at today’s ultra-low rates. Firms may be a little conservative at the moment, but they aren’t borrowing money to sit on it and pay interest. They expect investment in future economic growth will yield a return at least above what they’re paying to borrow—and likely quite a bit more. One metric shows this clearly—the earnings yield on global stocks is 8.2%—much higher than today’s borrowing costs for highly rated companies.* Said another way, firms can borrow funds on the cheap, reinvest them in new business investment opportunities, mergers, or share buybacks and reap a rich reward. Read the rest of this entry »
Dealers Digest Central Bank Views And Buy Bonds
Posted by Oksana Grebenjuk in Investing on Сентябрь 1st, 2010
Friday’s initial response to the words from Ben Bernanke is being reversed on Monday. Bond yields jumped sharply as the Fed Chairman said that the FOMC stood ready to perform whatever action necessary to safeguard the economy from failing. Investors immediately looked beyond the action of further quantitative easing and took this as a sign that ultimate economic recovery would be bearish for bonds.
Eurodollar futures – Short-end Eurodollar futures are making gains again on Monday with the rise in deferred maturities almost at a double-digit pace. September treasury note futures have climbed by a half-point this morning to stand at 125-23 to yield 2.59%. The initial response to the speech at Jackson Hole in Wyoming was a fear that meaningful measures to support the U.S. economy would revive growth sufficiently so as to put the era of extremely low interest rates at risk. But as dealers ponder further this morning the renewed buying suggests that they recognize that although the Fed is prepared to act, it can’t go the distance without a confluence of other resources pulling in the same direction at once.
European bond markets — September bunds have recovered from Friday’s slump to 133.25 as weaker longs were knocked out of the market. The contract has climbed once again on Monday to 134.19 where the yield of 2.13 stands seven basis points below that at Friday’s close and compares to last Monday’s record low of 2.09%. The demand for German bunds remained firm despite the headwind of relatively bullish economic data. A European Commission report showed a rise to a two-year peak in confidence in the economic outlook. An unsourced report running in today’s Financial Times says that the ECB will extend its emergency aid to the region’s banking system through 2011. Euribor futures made minor gains on the story. Read the rest of this entry »
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