Alan's Finance Blog

Options Trade Alerts From Experts

LAST CHANCE:

On Wednesday, March 31st, The guys over at Options University will
be unveiling their new Trade Alert service where you can get potentially
profitable trade ideas delivered right to your inbox…

Here’s the best part: they are going to let you test drive it for 14 days.

-AND-

Some of you will get a bonus valued at $497 just for trying it out.

Here is the link to register:

http://www.optionsuniversity.com/iscript.php?3440_A97484_21788

Elliott Wave International’s Understanding the Fed eBook is now available

Dear reader,

My friends at Elliott Wave International have just released a free 34-page eBook, Understanding the Fed. It’s the free report the Federal Reserve doesn’t want you to read!

This eye-opening free report, which represents more than 10 years of research by Robert Prechter, goes beyond the Fed’s history and government mandate; it digs into the Fed’s real motivations for being the United States’ “lender of last resort.” In this 34-page report, you’ll discover how the Fed’s actions, combined with public outrage, may ultimately lead to its demise, plus much more about its secret activities and how it affects your money.

Download your free copy of EWI’s Understanding the Fed eBook, here.

Warmest regards,
Alan
———-
About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

Discover the easiest way to find profitable option trades (Webinar)

Hi,

I have some exciting news for you…

Options University is about to open the doors to a new service
that is the closest thing to being on the trading floor that I’ve
ever seen.

That’s saying a lot.

And here’s the best part… you don’t need travel to New York or
Chicago to take advantage of this powerful new trading ‘weapon’.

If you’re interested in learning about this new service that
practically takes all of the guesswork out of trading options, go
ahead and register for one of two preview webinars that are on
Wednesday, March 31st.

Follow the link below to register:

*******************************************************************

==> http://www.optionsuniversity.com/iscript.php?3440_A97484_21788

*******************************************************************

Options trading expert Greg Loehr, who’s responsible for managing
an options portfolio that EXCEEDED $100 Million… is now running
this new service that alerts you when he finds his next
potentially profitable trade.

Sound too good to be true?

And the best part is…

He doesn’t leave you hanging after that. He’ll be working that
trade for profit, and sending you an email at the exact moment he
sees the perfect trade setup.

Let’s face it. Life is busy enough.

Most of us don’t have time to sit in front of the market all day.

So this service is perfect for those of you who:

- Have little time to trade.

- Just want to have profitable trades sent to you.

- Want to spend less time trading and more time living.

No classes to sit through, no courses to read, no software to
subscribe to…all you have to do is open up his email, read a
few paragraphs of what he will be trading and why, and then
decide for yourself if it fits into your trading portfolio.

If it does, GREAT! Game on.

If it doesn’t, wait for a trade that is more in line with your
risk level.

You don’t even have to know the reasons for the trade. Just trade
it.

So, here’s what’s happening…

There will be two preview webinars for this dynamic service on
Wednesday, March 31st.

Seats are limited, so I urge you to follow the link below to
reserve your “virtual seat” right now before they fill up…

==> http://www.optionsuniversity.com/iscript.php?3440_A97484_21788

Attend this webinar. You can thank me later.

Happy trading!

Here Is A Time Sensitive Video Trade Alert For You

Options University’s resident professional Options trader
Greg Loehr, (a 20 year trading veteran responsible for managing an
Options portfolio in excess of $100,000,000.00), just identified
a potentially profitable trade that he wanted me to get over to
you right away…

To watch the quick video, follow the link below:

http://www.optionsuniversity.com/iscript.php?3440_A97484_21778

So check it out right away, because his trade alerts are time
sensitive and if you don’t act quickly, this trade opportunity
may pass.

Here is that link again:

http://www.optionsuniversity.com/iscript.php?3440_A97484_21778

Good luck!

Cheers!

The Dividends Are Flowing Again

Last year’s dividend numbers were the worst in more than half a century, as corporations large and small struggled with a lack of financing, weak economic conditions, and poor earnings. But now, things are finally looking up …

According to the latest data from Standard & Poor’s, February was a very solid month:

•45 S&P 500 constituents increased their dividends vs. 30 a year earlier

•Two companies initiated new payments (vs. none in the same month last year)

•And only one company decreased its payment vs. 18 cuts in February 2009 …

Plus, for the first two months of 2010, dividend-paying stocks also outperformed non-dividend-paying stocks in terms of capital appreciation — 1.57 percent vs. -0.24 percent!

Source: S & P Index Services

Does that mean everything is easy from here on out? Of course not.

Actual cash payments still fell on a year-over-year basis, and it will probably take a few more years before total dividend payments return to the highs previously reached in 2008.

So I still think you need to be selective in terms of the sectors and specific issues you choose.

Where Do I See Dividend Opportunities Right Now?

I try to diversify the Dividend Superstars portfolio in terms of sectors and industries. But I can think of at least four areas that I really like right now …

Dividend Hotspot #1: Big-brand consumer staples.

These are the firms that sell products that people won’t — or can’t — live without. Basic necessities like food, beverages, cigarettes and toothpaste.

As such, their businesses tend to be very stable. They often boast big brand names and long track records of success. And it would be very hard for an upstart to compete with them effectively.

In short, they thrive whether the economy plunges into recession or is growing like gangbusters.

Even better, my favorite consumer staples firms almost always boast big operations in foreign countries. That means they’re profiting substantially as fast-growing emerging markets adopt Western lifestyles and flock to American brands.

Most importantly — precisely because these companies are so darn stable and profitable — they typically reward their investors very handsomely by mailing out big, fat dividend checks like clockwork.

Dividend Hotspot #2: Utilities with strong dividend histories.

Wall Street brokers love to call these “widow and orphan” stocks because they’re supposedly so boring. And it’s true that these companies just chug along year in and year out, providing the basic services we need to live our daily lives. Water, electricity and gas are hardly exciting things to talk about.

At the same time, what’s not boring about utilities is that many have been paying dividends with amazing regularity and raising their payments every year for decades. And that means investors who buy these stocks get fatter and fatter checks every year.

Dividend Hotspot #3: Select master limited partnerships (MLPs).

While MLPs can operate all kinds of businesses, most are engaged in the transportation of oil, gas and other natural resources … typically through a vast network of pipelines that can span entire continents.

I think of these companies as “trolls at the oil bridge” because whenever oil or gas needs to get from a production field to an end destination, it generally has to go through an MLP’s pipeline. And when you own that pipeline, you get to collect a very nice toll in the process!

Plus, the fact that these companies generally engage in just the transportation of resources also limits the downside they experience when commodities prices take short-term dips.

Dividend Hotspot #4: Unfairly-punished Canadian royalty trusts (CANROYs).

As I mentioned three weeks ago, a lot of investors have written off these Canadian firms that buy the rights to royalties from the production and sale of natural resources. And for a while, I was one of them.

Reason: There has been massive uncertainty surrounding these companies. Namely, a law change that is going to affect them in a major way starting in 2010.

However, I recently did an in-depth analysis of individual CANROYs, including an examination of what would happen to them under a revised legal structure. And my conclusion was that a few of these former dividend darlings are worthy of new investment money right now.

Bottom line: Based on the latest dividend data, payments should only continue rising from here. And if you select the strongest stocks in the strongest sectors, you stand to not only collect fat income checks but also benefit from capital appreciation, too.

Best wishes,

Nilus

About Money and Markets

For more information and archived issues, visit http://www.moneyandmarkets.com

Value investors take refuge in tech

Ten years ago you wouldn’t find a value fund holding a single technology stock.

Today, many of the world’s top-performing U.S. and global equity funds hold significant positions in these companies as they’ve transitioned from bubble-stocks to cash-rich darlings…

Value funds typically seek to isolate those companies trading at or below book-value, accompanied by rising free cash-flow per share.

They also seek low price-to-earnings ratios (P/Es) and, if possible, dividends. Benjamin Graham’s The Intelligent Investor remains the standard source of investment theology for this market discipline dating back to the 1930s.

Though the majority of actively managed mutual funds have consistently failed to beat their respective benchmarks historically, there’s still a case to be made for owning these
products. Indexing is no panacea.

Investors have wholly embraced this investment style over the last several years, brainwashed by low fees but forgetting that most benchmarks in the major markets have gone nowhere since 2000; adjusted for inflation, most indices are down since 1998.

Value funds typically made money in the first bear market of the last decade (2000-2002) and generally suffered a bit less than indexes in the 2008 market romp. It was almost impossible not to lose money in 2008. Every investment category save Treasury bonds, gold bullion or the Japanese yen shed big dollars. The 2000-2002 bear market saw value funds return en vogue after lagging benchmarks in the tech-mania in the late 1990s; many value funds made healthy profits avoiding tech stocks in 2000 and by over-weighting consumer non-durables.

Longer term, the leaders in this category like U.S. domiciled Fairholme Fund (FAIRX) and First Eagle Global Fund (SGNEX) have smashed the averages.

Offshore, Optima Platinum Fund and Orbis Global Equity Fund (both unavailable to U.S. investors) have trounced the MSCI World Index over the last five, ten and fifteen years.

Perusing some of the leading offshore equity global funds’ Top Ten, including Optima Platinum and Orbis Global, reveals that stocks like Microsoft, Cisco Systems, and Apple are among their biggest holdings.

In 1999, none of these actively managed funds held a position in technology. But they do now.

Microsoft, one of their favorites, has increased its dividend for the last several years and, although still low compared to big dividend-paying stocks, now yields just a bit less than the S&P 500 Index. Microsoft holds $30.1 billion dollars in net cash or 12% of its market-cap.

And Apple, making all sorts of inroads over the last ten years with its iPhone, the iMac and iTunes hoards $25 billion dollars in net cash or 13% of its market-cap.

According to the Bloomberg World Technology Index, 69% of the 169 companies forming that benchmark have no net debt. Collectively, the sector has a net $260 billion dollars in cash or 12% of its market-cap.

The Bottom Line:

Technology stocks are rapidly becoming the new safe-havens in the market.

High free cash flow and low net debt is exactly what investors should strive to isolate in hard economic times. But investors also like to see their cash put to work. Increasingly, it looks like tech stocks will start a new wave of acquisitions before interest rates rise much higher over the next few years. The cost of doing deals is still inexpensive, especially if you’re cash-rich.

Sincerely,

Eric Roseman

Investment Director for The Sovereign Society

Source: Sovereign Society

Why you should worry when banks hoard cash

Dear A-Letter Reader,

Banks are holding a lot of cash these days… over $1 trillion according to the latest estimate. It’s a trend that’s been accelerating for the most part, despite the stock market’s intense rally over the course of the last year.

Here’s why it’s troubling…

Excess Reserves Skyrocket in the wake of Lehman’s Failure

There are two reasons why banks are stuffing their vaults with money…

The first is that the pendulum on risk management has swung to ultra-conservative levels. You see, a few years ago, at the height of the economic boom, banks were lending to anyone who asked for money. You could buy a million-dollar home via a so-called “NINJA” loans— meaning No Income, No Job.

And we all saw how that trend ended.

So it makes sense that the banks are now asking for everything short of a DNA sample to make sure that any new loans they write will be completely repayable. And with their books still packed with “toxic” loans from the freewheeling bubble era, banks would rather keep the cash in the vault than reinvest the profits by offering more loans.

But the second reason is the real kicker—it’s the growing problem in commercial real estate (CRE), which we’ve been reporting on for the past year as markets have rallied and shrugged off the information…

The days of commercial refinancing are at hand.

Specifically, the type of commercial real estate loans that were being made while everyone was becoming a realtor and learning to ‘flip’ houses. Despite the extra $1 trillion in cash held at banks, there’s actually $1.4 trillion in CRE loans that are going to reset in the next four years.

And dollars to donuts says some of them won’t qualify for refinancing. Many will be refinanced on existing terms, irrespective of the decline in cash flow and value of the property—extending and pretending on both sides that some of the destroyed value still exists, or will again someday.

But don’t take my word for it. Elizabeth Warren, head of the Congressional Oversight Panel overseeing TARP funds, had this to say about the banks, “We’re seeing banks that don’t want to lend because they see every dollar that comes in the door and say I’ve got to hold on to it to try to fill my commercial real estate hole or else I will be gone.”

Obviously, some banks will be more affected than others—particularly those with a high CRE exposure. These banks are the next downleg in the ongoing credit-crunch.

The best and most profitable course for banks is usually to expand their loan portfolio. Right now, they’re not doing that. And there’s a stark possibility of further contraction when CRE loans come due. Add all that up and it’s “Watch out below!” for America’s weary banking system.

Stay Sovereign and Stay Short!

Andrew Packer

Editor of The Credit Crunch Short Report

Source: Sovereign Society

JP Morgan CEO…headed for the slammer?

I’m always keeping my eye on the banks… and there are a few developments that will eventually give me a reason to go on a shorting spree.

The first is how banks are treating the properties they foreclose on…

I won’t mince words: banks are deadbeats on assets they acquire through foreclosure. And that’s not even counting the properties banks should be foreclosing on for non-payments, but aren’t.

It’s an ugly picture for real estate, with or without federal stimulus.

Now banks are in the business of lending, and only want to seize these properties when the borrower defaults. They’re not in the business of owning, managing, or maintaining real estate. But some banks have been pretty aggressive about foreclosing—I’ve written about Bank of America’s shenanigans in this area.

But what you might not realize is that once banks do foreclose, they often don’t do anything with the property. This is a huge problem for condominiums or other communities that are dependent on an HOA (Home Owners Association) for common area maintenance, utilities, and the like.

Nevertheless, some banks have been so derelict in paying HOA fees on properties they’ve foreclosed on, that the HOA themselves have then had to foreclose on the property for failure to pay their HOA fees (so if you’re thinking of skipping on your mortgage but still want to live in your house, be sure to pay the HOA).

And it’s not just homeowners facing problems.

Consider the city of Atlanta, who had problems with illegal tire dumping on a property.

After looking at the books, they determined that J.P. Morgan Chase owned the property through one of their subsidiaries, and tried to take them to court for failure to pay fines. The bank never showed up. So here’s where it gets crazy…

The city issued an arrest warrant for CEO Jamie Dimon for illegal dumping. Of course, running the bank through New York means Dimon was nowhere near Atlanta… but that got the bank’s attention, and a judge cancelled the arrest warrant.

Nevertheless, as banks foreclose on properties, they’ll have to learn to take responsibility for them, lest the properties further decline in value due to the bank’s negligence.

Markets, however, are rewarding banks for refusing to lend, as well as refusing to maintain foreclosed properties. That will change… but until it does, expect the bank stocks to continue rallying (which will make put options cheaper). We’re still up on our Wells Fargo option that triggered, and we’ve got a pending recommendation on J.P. Morgan that isn’t cheap enough yet. If some of the regional banks show any weakness, I’ll have a recommendation in that area as well.

So… is there anything banks can do competently?

After all, they’re not doing much in the way of lending… yield spreads make it a better option for banks to borrow nearly for free from the Fed, then buy riskless assets like Treasuries. They know how to drag defaulting borrowers to court, but then prove worthless at managing properties themselves.

Banks are looking overvalued to me based on their inability to act like a bank… and markets will reach that conclusion eventually too.

Stay Sovereign and Stay Short!

Andrew Packer

Editor of The Credit Crunch Short Report

Source: Sovereign Society

Wag the Dog…AIG style…

Equity Markets Are About As Rational
As the High School Rumor Mill

There are some things I miss about being a kid.

Like playing with Legos, blowing off chores, and letting someone else do the cooking (thanks for all the years of meals, mom).

But some things I’m glad to put behind me. For instance, in high school, I was often hearing about the latest “juicy gossip” about someone that invariably was not only false, but often amusingly so…

I’m guessing the kids that did that never grew out of it… and got jobs on Wall Street. You see, rumors about a company can affect markets, and often in a completely irrational way.

For instance, take a look at AIG in the past week:

What happened?

A juicy rumor! Apparently, word went around to Wall Street traders that the SEC was considering a short sale ban on certain stocks. Namely, companies it had a major ownership stake in courtesy of the bailouts: Citigroup, AIG, and so on.

Naturally, if you can’t short a stock, the bias shifts upward. So traders jumped into shares, sending the price and volume up. Anyone short the stock either had to sell to cover, or throw in more capital to cover his or her margins. So what we had here was a classic example of a short squeeze (good thing I’m not shorting Citigroup or AIG—yet).

But don’t fret, following the market close, the SEC released a statement, “There is no truth to the rumor that we are considering restricting the short-selling of stocks in which the government has a stake,” John Nester, Securities and Exchange Commission.

In other words, the rumors were unsubstantiated.

But for those seeking to profit from the failure of these companies by shorting them, the damage has been done, and the message was made clear. Sure; these bank stocks are floating on thin air, but short selling that illusion is best left to the pros…

Stay Sovereign and Stay Short!

Andrew Packer

Editor of The Credit Crunch Short Report

Source: The Sovereign Society

Why you will absolutely fail in trading if you don’t master this

There are many misconceptions about money management. Most think it means trading with stops, but that is only a small part of it. Below is a short part of the complimentary report I’ve found called “How to Safely Double Your Profits in 2009 Trading ETFs.” This little tip alone could save your trading account.

Why use risk controls?

Every trader/investor must guard himself against drawdowns, which refers to the percentage drop in his account size after one losing trade or consecutive losing trades. For example, imagine that after losing a few trades in a row, your $20,000 account is reduced to $12,000; that would be a drawdown of 8,000/20,000 = 40%. If I were to ask some new traders, “In order to be back up to $20,000, what percentage return do you need to generate?” Many would answer, “Since I lost 40%, I have to make back 40%!” This couldn’t be more wrong! Note that after losing 40%, the trader now starts with a lower base, i.e. to undo the $8,000 loss, the return he needs to generate is 8,000/12,000 = 66.6%! That is why I share free training videos on my website to help dispel some of the myths of trading.

The more severe the drawdown, the harder it becomes to undo the damage, as shown in the numbers below.

Drawdown % %Required to get back to break even
10%                  11.1%
20%                  25%
30%                  42.8%
40%                  66.6%
50%                  100%
60%                  150%
70%                  233.3%
80%                  400%
90%                  900%

That is why all professional money managers only risk 1-2% per trade. It’s because no matter how good your trading system is at some point it is a statistical fact you will have 10 losers in a row. Based on risking only 1-2% per trade this is only a 10-20% drawdown and easily recovered. 99% of the hype trading and investing courses in existence don’t say or do this. They say risk 5-10% per trade. It is wrong and will cause you serious financial pain if you follow their advice.

Many of them also use arbitrary stop loss advice. For example, they say, “Place your stop at $100.10 because that is on the other side of a major support or resistance, trend line, MA, etc.”

This makes your risk based on the size of the stop. That is also wrong because the risk can be too large and it’s not the same risk on each trade.

Others reverse this and say risk only 2% total period and let that determine your stop. This is also wrong and will hurt you because it is important to have the correct technical stop.

The answer is to do both. Use a percentage and technical stop together. It works like this. Let’s say the technical stop is $100.10, but based on your entry price that is a 3% risk. Since your plan calls for a 2% risk you simply lower the number of shares you are trading. This lets you stay within your 2% risk and have the correct technical stop. This is exactly what most professional money mangers do.

Some say that this will lower their profits because of trading fewer shares. So what! Study the numbers above again. You know the old quote, “More risk equals more reward.” Well it’s not always true. Sometimes more risk equals more risk! If you lose your money you have no chance to make a profit. Even losing 50% is disastrous because you would then need to make 100% to get back to even.

Like Warren Buffet says, there are only two rules in investing. Rule #1: Don’t lose money. Rule #2: Don’t forget rule #1.

I’d like to add a third rule. Correct money management and position sizing must be mastered to ensure your long term success.

The good news is that it is easy to have correct money management and position sizing. I just explained how to use a combo of a % stop and a technical stop. If you want more of an explanation please visit the free video area on this website and click on the “Why have risk controls” video.

The system of entries, stops and profits taking is only half of your key to success. The other half is money management. If you get this part wrong you will lose your account every time regardless of how good your system is.

Click here for a newsletter on how to safely average 6% per month trading Exchange-Traded Funds.

http://www.etftrendtrading.com/cmd.php?af=1115334

Thanks, and good luck!

PS- In order to access these powerful FREE videos you must first opt in for the complimentary report.