http://www.investorbootcamponline.com/_rss/bootcamp.xml Market insightsen-caSat, 04 Sep 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Interest_Rate_Boom_to_Bust.html http://www.investorbootcamponline.com/blog/Interest_Rate_Boom_to_Bust.html The current phase in the cycle of interest rates markets is a huge opportunity for those that take advantage of it. For every other fixed income investor it may turn out to be a financial disaster. The Fed. has sent a clear signal, again, that they are holding their key rate at a record low indefinitely. So what does that mean for the bond market where interest rates are established and price trends play out? It’s obvious that short term interest rates have virtually no room to go lower. Accordingly, in the long run they can only go higher. As interest rates rise, the market value of bonds decline. The longer the term to maturity the greater the impact is. Longer dated bonds have greater leverage on price. The issue is that many retail investors don't pay attention to the biggest risk to a bond portfolio.The idea that sitting, passively, with a fixed income portfolio to earn interest is sound. But there are pivotal turning points in interest rate cycles. The next one is coming and it may be here at any time. Interest rate cycles tend to be twenty years in length. Rates peaked in 1989 at lofty double digit levels. Twenty one years later the bottom in rates is on the horizon. It may have occurred August 25th when bonds peaked after a torrid four month run up in price that netted a capital gain near 10%. But what if your bond portfolio loses 10% or more? It would take years to recover the loss in capital and that’s assuming there isn’t more erosion due to rising rates. So what does the Fed. have to do with it? By making it evident they are holding short rates down it gives investors a chance to profitably restructure their bond portfolios. Bond investors are, in a sense, getting lucky with a chance to go through a process of selling longer dated debt instruments and reinvesting into shorter terms. Both ends of the market are making money right now. Sophisticated institutional investors are taking advantage of it. When rates start going higher, across all maturities, investors in shorter term maturities won’t suffer a capital loss (assuming they hold to maturity which presumably most would). When short term bonds and T-Bills mature, investors may reinvest at a higher rate. That’s an increasingly profitable bond portfolio at work. But investors who sit with their long term bonds may suffer potentially large losses over time. Paul Thornton is the Chief Research Strategist with Investor Boot Camp Online, an independent investment information service offering trade strategies and tips for managing portfolios. He can be reached at paul@investorbootcamponline.com.Fri, 27 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stop_The_Stop_Loss.html http://www.investorbootcamponline.com/blog/Stop_The_Stop_Loss.html Investors with trade experience will know what a stop loss order is. For those that don’t it’s a sell order at a price lower than the current market that is executed when the market value of the security declines to the price specified in the order. The stop loss order has the specific purpose of protecting capital in the event of further decline. Unfortunately, it works against retail investors far too frequently. One of the issues with stops is the price the order is filled at may be substantially lower than the price specified in the order. Technically, the order becomes a market order as soon as the security’s market value trades once at the price set in the order. In some cases, the security may be trading far below that price and the lower fill on the order is directly related to the action in the security. However, that’s just the way the security is trading which doesn’t make the type of order the issue. The three issues associated with stop loss orders are as follows; You can specify a stop limit order but they are frequently not accepted by most discount brokers or ECN’s (exchanges). Even if they are accepted, they will be overlooked and potentially remain unexecuted if market conditions are volatile.Industry pros, i.e. traders and ECN’s, will take advantage of small stop loss orders and use them to make a potentially much larger profit than normal. To them, the stop loss is an invitation to make as much as they can. During periods of extreme volatility, such as crashes, stop loss orders may be filled at the lows of the session. Complaining about it will accomplish nothing because the price on the order will remain unchanged. Stops Are "Sitting Ducks"Last but not least, the other issue with stops is the risk of the "sitting duck" sell. Larger volume traders, or market makers, in a security may be well aware of the quantity of stop orders. In certain circumstances, they might decide to trigger a quick and deep decline in the price of the security, sweeping all the stop orders out buying the stock up at much lower prices and then running the stock higher again. If 100,000 shares over a $3 price range are executed, that’s a quick gain of $150,000 to the vulture trader (at an average fill of $1.50 lower).The numbers can of course be much larger over many securities in a system wide sell off as they were in the “flash crash”. The stop loss is useful if you are in the jungles of Borneo and completely out of touch. But the rest of the time investors may be better off paying attention to their holdings and entering a live order when protecting capital is necessary. In certain circumstances, why wait for a lower price? Sell the security now and avoid the risk. Wed, 25 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Energy_ETFs_Trading_Badly.html http://www.investorbootcamponline.com/blog/Energy_ETFs_Trading_Badly.html Want to know what’s trading badly? Energy; Oil has broken its up trend following the lows of the bear market and natural gas is at an all time low after a four month attempt to put in a bottom. You’d think alternative energy would be chomping higher but First Trust Wind Global Wind Energy E.T.F. (FAN-u.s.) is at a 52 week low and closing in on the all time March 2009 low. The weakness in energy markets is somewhat perplexing. The global economy is recovering and the dark days of the credit crisis are farther behind us than the headlines care to admit. The U.S. government’s role in converting G.M. to Green Motors seems to have catapulted electric vehicles (E.V.) into the critical mass phase of advancement around the world. But others will argue energy is acting as a leading indicator for the economy with the implication the economy is headed for the dreaded double dip recession. There’s more to the story when it comes to the markets. In fact, it’s a bigger issue that applies to E.T.F.’s beyond the energy sub sectors. As of late August, the markets, stocks and otherwise, are at a pivotal juncture in their trend. Technically, some markets are past that pivotal price level as they have entered down trends. But bear, or inverse E.T.F.’s, haven’t exactly flashed the green light that they are in solid up trends. You’d think with two times performance E.T.F.’s they'd be screaming buys. But they’re not. Some of them look like they’re still running into technical resistance. E.T.F.’s have provided investors with the benefit of variety and access to markets they previously couldn’t trade particularly in registered accounts. But E.T.F.’s are better business for the issuers, not investors. Issuers make their fee on their bull and bear E.T.F.’s regardless of the direction of the underlying market. But contrary to what many of them are telling investors, two and three times performance E.T.F.’s do not track the underlying market the way investors think they do. They trade like options with decay in price that is magnified depending on momentum in the underlying market. Many E.T.F.’s are baskets of securities (stocks) or trade based on an index which is a basket of securities. Those securities may change without notice. How do investors know it’s to their advantage? There are no rules on how this is handled. Some E.T.F.’s may be sexy because the sector is relatively new and promises great long term growth. However, price performance has been hampered by various fund components, i.e. companies that are essentially experimenting with other people’s money. Tue, 17 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Credit_Card_Rates_Are_Excessive.html http://www.investorbootcamponline.com/blog/Credit_Card_Rates_Are_Excessive.html The yield on 10 year Irish government bonds is 5.33%. The spread on yields between financially ruined Ireland and Germany is 290 basis points. Accordingly, German government bonds are yielding 2.43%. This is the bond market’s assessment of the additional return required to compensate for the significantly higher default risk of the Irish government compared to the German government. Preceding the credit crisis corporate bond yield spreads were very narrow implying the market had been strong and investors were willing to accept low returns for higher risk. Corporate bond yields from Turkey, for example, were only 5-10 basis points above U.S. government bond yields. Clearly, the market’s assessment of risk was due for a correction. Credit Card DebtSome credit card companies offer balance transfers with rates as low as 2.99%. But these loans are short term, typically less than a year. On the other hand, the standard interest rate on balances carried beyond the payment due date is around 22%. Compare that to the ten year Canadian government yield of 2.92%. The spread is nearly 19 basis points or more than six times higher. Consumers who resort to carrying debt with a credit card are, technically, on the road to bankruptcy. A significantly higher rate on unpaid balances represents the risk of possible default. But there are some serious issues with a 22% rate applied to everybody including those whose banks fail to transfer online credit card payments on the day indicated. How many people, realistically, are going to default on their credit card payments and go bankrupt? Furthermore, credit card companies, such as Visa and Mastercard, do not carry the default risk. They securitize or insure credit card debt and sell it off to investors and other third parties. They couldn’t care less if someone defaults or not.The ridiculously high spread, and rates, for credit card debt is out of step with the stats. and the economic environment. Meanwhile, the U.S. government and Secretary Treasurer are spending their political capital looking at ways of kicking the banking sector and investment industry around. Hundreds of billions of dollars has been wasted trying to revitalize the economy. What obviously needs to be corrected, and is completely off their radar, are the practices of credit card companies. How much economic stimulation would be generated if consumers saddled with credit card debt weren’t being gouged to death? Sat, 14 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stock_Market_Technical_Outlook.html http://www.investorbootcamponline.com/blog/Stock_Market_Technical_Outlook.html The stock market suffered a sharp three day decline that, at first glance, appeared to be driven by comments from the Federal Reserve Board. The Fed. rekindled the belief the economy is headed for a double dip recession. Surprising weakness behind the Chinese trade surplus and a drop in U.S. productivity in the second quarter added to the fuel behind the sell off. All is not lost in the stock market, if you’re a bull. The market is still trading within a relatively narrow range. Volume during the decline was below average on the New York Stock Exchange and TSX and average on the Nasdaq. However, the price-volume relationship has proven to be unreliable as a secondary indicator since last September. Eventually, the low volume on price advances is going to catch up to many stocks. Perhaps this is it! The market has offered a range trading strategy, rather than momentum driven, since establishing a low on May 26th. It may continue that way if the current price level holds. Mark that as the 2140-2165 level on the leading Nasdaq. The S&P 500 is still nearly 3% above the bottom of its range and, frankly, it doesn’t look very good. Thursday and Friday the 13th indicated this broad average is unable to climb above the 50 day moving average. The market’s best performing stocks, “the leaders”, are typically a better indication of near term trend. Many of them were hit hard but are holding in their up trends. However, semiconductors, which have been the big guns in the rally, suffered, in many cases, huge declines putting them at risk of being effectively removed from investor’s radar for a considerable time frame. What is going to replace technology as the preferred choice? It could be resource stocks but those stocks are still battling the overhead from the big sell off in April. The correction, which started April 26th, and featured the “flash crash”, looks like a “handle” on the longer term base that represents the bear market. A handle is the final point of absorbing overhead selling before launching a new up trend. However, with individual securities it’s supposed to be a quiet low volume period. The big picture for the markets has not fit that criterion. But if the market can hold its ground in the short run and turn boring, we would have the final chapter before launching a major long term up trend. But be aware the ten year picture is against a renewed bull market. Long Term View Is DownThe Nasdaq along with the semiconductor index are near the top of their now ten year secular bull market. Fundamentals may finally serve to snap the decline but for now, investors need to stay alert. Another round of selling would trigger a bear market with a further intermediate term decline of over 30% on the horizon. But that's the picture for growth stocks. Resource stocks are still in a secular bull market and should take the reins of leadership. They are, by nature, volatile so further declines may represent a huge "buy low" opportunity.Thu, 12 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/No_Confusion_Here.html http://www.investorbootcamponline.com/blog/No_Confusion_Here.html Following a short but perhaps surprisingly constructive rally in the stock market, the market has been blindsided following the statement of the Federal Reserve Board. The sell off seems confusing. The comments from the Federal Reserve Board makes the Fed. appear confused. The outlook on the economy may also appear confusing. Mainstream thinking has been calling for a double dip recession while others think the global, and U.S. economies, are in a mild gradual recovery mode. The Fed. have triggered a sell off because they, along with some stats., suggest the economic recovery is sputtering. The trillions of dollars pumped into the system doesn’t appear to be working. But that’s not a surprise to those who live and die in the capital markets. Quantitative easing (Q.E.), pumps money into the markets which has served to drive markets higher since the bottom on March 9, 2009. The money has been used by hedge funds and investment dealers to make pair trades where they can lock in a net gain for a predictable period of time. They can, and have, made millions trading that way at a time when U.S. government action is predicted to bring down the American financial empire. The Fed. Has Done Their JobThe Federal Reserve Board’s actions over the last year and a half have been specifically directed at resurrecting the banking system. What it does for the economy is incidental to their efforts. Not that a healthy banking system doesn’t lead to better economic activity. But the Fed. isn’t going to publicly tell us that. The apparent confusion, to certain observers, can be quickly resolved by recognizing the position of the U.S. central bank. Managing The PortfolioDoes the confusion have to mess up traders? No, not at all. If you’re canoeing down a winding river and rough waters suddenly show up deal with the current wave and rock. You don’t need to concern yourself with what’s farther down stream until you get there. Individuals can take advantage of the ability to be nimble by micromanaging their positions. In fact, take advantage of it. If a security continues to go lower, sell it and target a buy it back at a lower price. A modest 10% from the selling price is potentially a 10% gain in your pocket rather than a hole in the portfolio. There’s nothing confusing about that. Tue, 10 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Wealthier_Canadians.html http://www.investorbootcamponline.com/blog/Wealthier_Canadians.html BMO Capital Markets pointed out that U.S. household net worth relative to disposable income has plunged and based on this measurement Canadians are now wealthier than Americans. The beating in the U.S. housing market is of course the reason for the dramatic decline in U.S. household wealth. The credit crisis and collapse of U.S. housing markets has brought the Canadian banking system out of the shadows with many around the world trumpeting its stability and sensibility. But this isn’t, completely, something to crow about! The banks are cited for their differences from the U.S. banking system which has been kicked around for apparent recklessness. Conservative lending practice by the limited number of excessively dominant Canadian banks is perhaps a reflection of the polite and not so risky approach that Canadians seem to embody. At times like this, it’s easy to say that it has paid off. But Canadian business, and the economy, could use a dose of risk taking. Flexibility and resourcefulness is the backbone of productivity and making money. But Canada is awash in red tape and social economic policies. If a small emerging business manages to make money, they’ll give up a big chunk of it in taxes as does the Canadian consumer’s pay cheque. Canada’s strong economic position hasn’t been because of brilliant economic engineering. It’s because the nation has the world’s mightiest economic power right next door. Canadians have been living in a economic mirage for a long time. The belief that Canada has a better health care system than the U.S. is blind ignorance. So is the idea that a Liberal government is good for the relatively large percentage of the population who are immigrants. Lower tax rates, and more efficient programs administered by business not government could go a long way to improving the quality of life and economic status of most Canadians. Canada has a huge opportunity to emerge as the word’s strongest western economic power.But it isn’t going to happen with the status quo being what it is. Regional governments would do well to look at the dynamics of their economies and target areas of productivity and creativity to fire up a weakening economy. Canadians may be wealthier than the U.S., for now, but don’t expect it to last long. The U.S. has risen from the ashes of recessions on their resourcefulness before and they’ll do it again. Sun, 08 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Semiconductors_Stand_Out.html http://www.investorbootcamponline.com/blog/Semiconductors_Stand_Out.html Many analysts and economists continue to stress the huge wave of growth in the emerging markets. Investors see the opportunities in resource markets from huge demand for everything from food to base metals and industrial products. However, the big play in the markets isn’t in emerging markets nor is it in resources. The huge growth, fundamentally and stock market action is technology and semiconductors in particular. There are a remarkable number of semiconductor related companies reporting triple digit growth in earnings and sales growth. That’s the fuel for gigantic stock returns. Not that it’s a problem, but there are so many solid semiconductor stocks that isolating just the best one or two is difficult. That’s a problem investors can live with! The issue for Canadian investors is there are very few Canadian traded semiconductor stocks. That’s typical for the Canadian equity market which is thinly traded and dominated by managed products with little to offer outside of resources.But that’s not a problem. Investors around the world are envious of the opportunity Canadians have for trading in the fertile U.S. market where not only U.S. companies trade but many other inter-listed companies from around the world. The technology group has been out of favour, in the stock market, for ten years. That, on is own, isn’t a reason for investors to be attracted to it. But it does imply that institutional money is in the early phase of capital inflows to technology following the crushing bear market of 2000-2002. With interest rates at multi decade lows and a new cycle in semiconductor sales underway, this sector could go a lot higher before the sun sets. Semiconductor stocks are an emerging markets play as new high growth markets emerge for products and services that have been advancing and undergoing refinement since the froth of the ‘90’s. But the advantage, for North American investors, is these hot stocks are traded in their own back yard.Sat, 07 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Telemarketing_And_Spam_Marketing.html http://www.investorbootcamponline.com/blog/Telemarketing_And_Spam_Marketing.html In our capitalist, free market, sales driven action oriented economy businesses get kicked around for some of their sales practices. In particular, telemarketing and so called spam emailing. These two widely used tactics continue to, apparently, bother people or two reasons; 1. They work. 2. The rules related to telemarketing and spam marketing are both ineffective and, to some degree, idiotic. Telemarketing: A “do not call” registry is created with the intention that telemarketers will not call those who have asked to be added to the registry. Great idea! But there’s one issue with telemarketers using the lists. They are exorbitantly expensive. Why would a company, especially a small one that pays your salary, pay $100,000 for a list of who not to call? They’re better off to take their chances and build their own internal do not call list that is organized with the systems their staff choose to use. Spam Email Marketing: Email recipients and internet host providers are too quick to jump to a conclusion that the sender of an email is a ‘bad guy”. Since when is a communication on a product or a service a bad element in our dollar driven society? If junk mail shows up in your mail box what do you do with it? You throw it out! Therefore, the next time an email shows up in your in box and you don’t want it, click on unsubscribe. It’s at the bottom of the email. Do it once and the autoresponder that sent the email will remove your email address permanently. The issue with this is that opening the email may trigger a virus to invade your computer. But where are the government and consumer protection agencies when it comes to this particular matter? They’re invisible. If you are adamant about reducing the so called spam you’re receiving then send your local politician a note (not an email of course). Tell him or her that you want tougher laws accompanied by a serious attempt to enforce the laws on those who are sending malicious viruses. The rules around spam email are absurd. It’s clear that no one has really taken the matter seriously since the internet is technically still in its infancy. But you cannot allow an internet host provider to black list an email sender because the return address, provided for direct communication purposes, is different than the website address the autoresponder is operating from. Guaranteed, there will be a law suit over this one of these days. Here’s what it comes down to; we have a nicely organized list of who not to call, which businesses won’t pay for, and another list (i.e. email addresses) that businesses pay for that the rules prohibit them from using! Now you know why the so called rules aren’t working! Fri, 06 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Laughable_Obamanomics.html http://www.investorbootcamponline.com/blog/Laughable_Obamanomics.html The Obama governments handling of matters related to the economy is so bad that it would be laughable if it weren’t such a serious matter. Of course, most U.S. media won’t tell it that way unless it’s programming that targets business people. But CNBC telling viewers that good economic management matters is preaching to the converted. U.S. citizens, left wing and right wing, can only hope that the fall elections bury the Democrats. This column could be dedicated to the economic policy foul ups by government for the next hundred days. However, we’re not going to list the specific issues or explain them at any length. What we are going to revisit is our position for some kind of an agency to manage fiscal policy at the federal level. You wouldn’t hire a politician to run your business, so why are we wasting time voting for politicians to run the country’s finances? Monetary policy is run by central banks in most reasonably civilized countries in the world. Nobody questions this on a serious level except for the occasional renegade who thinks lending money is a bad idea.The point is that professionals with academic training and real world experience need to manage the massive and often complex task of managing a country’s finances. The road to changes in policy related to the credit crisis could have taken a much different route. What would have been useful is to recognize that finance ministers, on all government levels, should be people with experience in the investment industry. The importance of the capital markets to the entire economy doesn’t seem to be recognized by even those who work in them. This isn’t a suggestion to give the markets more importance but to recognize that those who are knowledgeable and experienced in dealing with the capital markets more frequently than not understand the impact of economic and market policies on the real world. There are still a lot of investment bankers and investment advisors out of work thanks to the bear market, investment industry bankruptcies and an aversion to risk by investors. Why not assemble a committee of them and give them some useful work like running the country. Wed, 04 Aug 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Improving_Trading_Results.html http://www.investorbootcamponline.com/blog/Improving_Trading_Results.html An unfortunate hurdle in the process of improving trading results is psychological self analysis. But there are different approaches to analysis that may not trigger the failure issue. One possibility for self research is to go back and compare actual results against what might have transpired if a previous sell had been bought back. A simple statistical comparison would be the performance of a previous sell as if it had been held. There is a tendency amongst stock traders to move capital around from one stock to another. This shows up in two ways; Available cash in the portfolio is allocated to a different security increasing the total number of securities in the portfolio. When a security is sold, it is rarely bought back. The longer the elapsed time from a sell, the less likely the same security will be bought back. There may be a misconception on imputed performance in buy and sell transactions. Traders are assuming that they can do better moving capital around.It is obvious that selling a security going into a deep down trend and repositioning the proceeds in a security with an ongoing up trend is a superior decision. This principle, referred to as “trading up” is difficult for some retail investors but this is a different matter for another day. It's a strategy Investor Boot Camp Online "pounds the table on"!Suppose a trader has been buying and selling securities that are amongst the stock market’s best performers. Consider a buy and sell of Green Mountain Coffee (GMCR), a buy of Baidu.com (BIDU), and subsequently sold, with the capital redeployed into Netflix (NFLX). Was performance better with these transactions or would performance have been better if; GMCR was bought back with possible subsequent sells and buy backs of GMCR, or, GMCR had been held from the original purchase. These securities all occupy the same category based on relative condition. This study looks at trade decisions of securities in the same condition.A comparison of results, as proposed, may be quite illuminating for investors who manage their own portfolios.It's possible one or more assumptions never considered may be hindering better performance. Fri, 30 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Penny_Stock_Scams.html http://www.investorbootcamponline.com/blog/Penny_Stock_Scams.html Every investor wants to land the big one. We want that one stock that makes a huge amount of money. It’s the lure of the stock market. It can also be a trap for investors whose uncontrollable greed sucks them into garbage companies that have become nothing more than a marketing program. We have come across a heavily promoted company whose stock is one of the worst investments you’ll ever see. But there’s nothing illegal with their marketing efforts. They’re not breaking securities laws by saying something that implies some pie in the sky type of return. After all, it is possible the stock may blast higher. But it is so unlikely that only gullible uninformed investors can get drawn into it. The only reason we’re not telling you about it is because we’re not going to draw more attention to them. The obvious question is “how do you know if it’s nothing more than a marketing scam”? When it comes down to it, you don’t. Unless there is no operating company, it has some business merit. But a quick look at two things will tell you if you’re wasting your time and your hard earned money. The price trend: Is the stock in a consistent down trend that has shaved a significant percentage off its value from the high? If the stock is worth only pennies and it was substantially more at one time this is not the next Google. Don’t kid yourself about that. Great companies have stocks that trade higher from the first day they I.P.O. and they are worth at least $25-$35/share. The higher the price the stock is the more likely it is going to continue to go higher. These are the ones you get rich on! The capital structure: Somebody has a vested interest in paying for a heavy internet marketing campaign. Where are they located and what percentage of the stock do they hold? Most importantly, what did they pay for their position? Even though the stock may be down substantially it could be very profitable for them to sell the stock to you at .02. if they acquired their original position for .01. If you can’t tell what they paid for it, pass on the stock. They’re lining their pockets at the expense of naive retail investors. True investments are not lottery tickets. If you’re thinking about wasting what you think is a little bit of money on a long shot spend the money on lottery tickets. Your payoff is much greater and the odds of losing all your money on both are just about the same. Wed, 28 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/No_Transparency_No_Analysts.html http://www.investorbootcamponline.com/blog/No_Transparency_No_Analysts.html The public markets are intended to provide transparency and disclosure. There is plenty of legislation and the enforcement departments of the regulators are forever buzzing around looking for violations. That’s the difference between investing in publicly traded securities and private companies. In an effort to gather meaningful information, for the purpose of making money, investors may look to experts. That would include investment industry analysts. However, there is a problem with this process and the reason is analysts are inherently useless! The inability to deliver timely and useful information is not the fault of the analyst. Most analysts are well above average in intelligence with personalities characterised by diligence and detail. The problem lies in the legislation that was intended to ensure transparency and disclosure. Imagine a routine effort by an analyst to gather information on the company they publish reports on. He or she calls up the C.E.O., or some other management person, and asks pertinent questions. This is how the conversation might go; Analyst: George, how is earnings growth shaping up this month? Management: Can’t tell you! You’ll see it in the quarterly report. Analyst: You recently said that you will be considering growth through acquisition, are there some targets you are negotiating with? Management: Can’t tell you! If, and when, it happens you can read it in the press release. How is this the outcome of increased transparency? How do investors make money when all investors receive limited information at exactly the same time and, as a result, the effect is priced in? U.S. traded stocks are far too frequently a land mine in someone’s portfolio when earnings are released. Thanks to legislation it is too risky to hold stocks following an earnings report. If you call up the management of a private company, they are typically quite eager to tell you what’s going on. They are under no obligation to do so and some of them may lie through their teeth but eventually their investors will disappear. That’s no different than publicly traded companies who also have a history of management that isn’t exactly telling it like it is until it’s too late. When was the last time management of a publicly traded company told us that, basically, “we stink”? Where is that disclosure?Many people will argue it’s not fair that someone who calls up management gets information that others aren’t privy to. But what’s unfair about it? Nobody is stopping others from calling them. If you, or your chosen analyst, make the effort to get some information, you should have the right to get that information. What industry operates on holding information back and succeeds? If capital markets are going to serve investors, and issuers, information flow should be free and easy. The lack of transparency is precisely what triggered the credit crisis. The more efficient information flow is the faster poor management, including the criminals, will be revealed.That’s the advantage the public markets could have. Fri, 23 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Weekend_Investor_Volume_2.html http://www.investorbootcamponline.com/blog/Weekend_Investor_Volume_2.html Markets The stock market ground investors down and then suddenly, extremely heavy buying came into the market’s top rated stocks. South American stocks, banks in particular are very strong. Technology stocks remain in play particularly in the semiconductor sector. Commodity markets appear to be coming out of a long funk. Top commodity markets are oddballs with coffee, sugar, and tin. Copper is also regaining upside momentum. Canadian mining giants were early buys with momentum as the market turned higher.The Yen remains the best trading currency. The Canadian dollar remains both range bound and volatile. Sentiment Investment market pessimism hits extremes. Markets responded right on cue by bottoming out and barging higher. That's why sentiment, at its extremes, is a contrarian indicator.Economics Euro Banks facing “stress test”. U.S. and Canadian central banks suggest the economy is fragile and unpredictable. Bernanke says rates will stay low for a long time but the Bank of Canada raised rates again, by .25%. A number of countries around the world have been raising rates including Australia.Earnings season has been a disappointment for some, explosive for others. Overall, many companies continue to report excellent growth in earnings and sales.For up to date reporting on events in the financial markets including trend changes read Market News: Useful, timely portfolio management information for investors who care.Thu, 22 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/You_Can_Play_Too.html http://www.investorbootcamponline.com/blog/You_Can_Play_Too.html The interesting thing about the stock market, or investing in general, is that anybody of legal age can open an account, deposit any amount of capital and trade. It’s a game that everybody can play.The other interesting thing about it is that just about everybody who plays thinks they're an expert.The markets are dominated by some very sophisticated deep pocketed managers who know a lot more about everything from economics and finance to the inside workings at a publicly traded company than most individuals can dream about. The rest of the herd operates as if the miniscule random piece of information they picked up somewhere is significant.Investing isn’t like being an armchair quarterback on Monday night football. Sports fans understand it is perfectly normal to think and talk like you’re smarter than the coach, you can make better trades than the G.M. and feel free to criticize players like you’re some kind of guru scout. It’s fun even though most people are aware they are nowhere near capable of playing or managing in professional sports. But those same people don’t handle their investment accounts accordingly. The reality is, the investment markets are a professional’s game and millions of amateurs are deluding themselves as if they were watching another sport.If you think that’s bad, just about anybody can be an investment advisor and the enforcement staff at the regulators are people who just happened to have dropped off a resume at the right time.The next time the stock market is making headline news the untold story will be that millions of amateurs are swimming in shark infested waters. Just like other times in history, the amateurs won’t recognize they are operating on a lack of evidence preferring instead to believe things that are essentially psychologically motivated. Institutional pros watch the herd behaviour of retail investors as a timing mechanism. Unfortunately, for those retail investors they’re on the wrong side of the trades.In the last ten years, a number of developments in the markets have created the appearance the retail investor is at the mercy of institutional investors more than ever. But the reality is probably the other way around. If individuals managed objectively, they could easily out perform big money.Tue, 20 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Earnings_Galore.html http://www.investorbootcamponline.com/blog/Earnings_Galore.html With the economic headlines and the stock market’s challenging year, you’d think capitalism is coming to an end! But the stock market is actually abundant with companies reporting strong earnings growth.What's remarkable is the way the stocks of these companies are amongst the worst performers. It’s clear that investors have adopted the belief the economy is in trouble and a double dip recession is probable. The tilt to selling, since September 2009, is the process of pricing in an underperforming economy. It’s not the first time the stock market has acted like this. It’s a case of “sell now, we’ll see how things shape up later”. From a stock technician’s perspective, the process that is clearly in play is the shift from optimism to pessimism. It’s a variable in the stock market that has a way of overriding nearly every other influence including fundamentals. In fact, understanding the cycle of the psychological pendulum is a key to successful transacting. There are several hundred companies out of China that trade in North American markets. More than 30% of them have earnings and sales growth that any business manager strives for. The rest of them are well above average. Yet, these stocks continue to drift lower in what have become ugly bearish trading patterns. The drift has been going on for so long that it is tiresome watching them for a break out. But a “break out” will eventually occur and when it does watch out. The headlines have already proven to be wrong on several fronts. While another recession may yet develop, it hasn’t yet and we are half way through 2010, nearly two years since the credit crisis took hold. Everybody was calling for interest rates to shoot higher and while several countries are raising central bank rates, there has been a very profitable rally in the bond market especially in the U.S. The cry of inflation by gold bugs has trapped a great deal of money in gold stocks that has turned out to be one of the biggest underperformers since last fall. Given the market’s track record of being wrong, why can’t these high growth companies that continue to wrack up great growth eventually turn out to be gigantic stock winners? Those who are full of doom and gloom are trying to make the rest of us believe the trillions of dollars injected into the economic and financial system is a bad thing.Think about it; trillions of dollars falling out of the sky, 40% of the world’s population is turning capitalist and interest rates are at multi decade lows. How horrible can it be? Mon, 19 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Parking_Tickets_Wars.html http://www.investorbootcamponline.com/blog/Parking_Tickets_Wars.html What is it about parking tickets? Big cities rake in significant revenues from them along with paid parking. Economically, charges for parking make more sense than other taxes because it is a user fee. But parking in your own back yard has the feel of being restrictive to the point of punishment. Some cities, such as Toronto, have been getting press on how certain streets have been off the hook for receiving parking tickets. The Toronto Star, a left winged newspaper, takes the view that this is some kind of evil favouritism. But what about the rest of us? Wouldn’t you like to have your street where you live or some other street you park on frequently exempt from parking fines? Toronto is an expensive place to park, especially in higher traffic areas such as the downtown core. If you park on the street and get hit with a fine it’s $30. That’s not cheap by any measure. In the City’s defense (mismanagement aside), they need the revenues to meet the billions in expenses in their annual budget. It seems to me that you should not have to feel like a criminal for getting a parking ticket. I don’t know what the solution is because I’m certainly not going to suggest getting rid of parking fines. That would just shift the cost burden elsewhere and that doesn’t make sense. But perhaps some kind of middle ground would be a compromise. What if the cost of a parking ticket was reduced by the parking paid on the date of the fine? If, for example, you paid $2.50 in parking, the $30 parking ticket would be reduced to $27.50. Someone might argue that reduces the city’s revenues. However, those who are up on their gaming theory might reason the city may receive substantially more in revenues. There must be thousands of big city drivers who routinely play parking roulette in an attempt to avoid high priced parking costs. If they thought they could reduce the impact of a potential fine, they might be more willing to pay for parking. Or perhaps, a parking account, set up with a credit card, could be used where drivers are offered air miles, coupons or some other incentives to pay up. That would save the city millions in administration costs by eliminating the involvement of over paid unproductive employees. Why do I have to think of everything? Investor Boot Camp Online is a premier investment information service providing timely market information with useful portfolio management concepts including portfolio management, trade execution and mindset management strategies.Sat, 17 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Feed_The_Food_Industry.html http://www.investorbootcamponline.com/blog/Feed_The_Food_Industry.html Canadian grocery chain Loblaws (L-tsx), has apparently decided to revisit their quarter chicken deli dinner due to high levels of sodium. Somebody did a good job of putting the heat on Loblaws, rather than the chicken, to get them to actually consider giving the chicken the hook. They got some press out of it too. But despite the obvious serious health consequences, food producers continue to serve a side dish of food with your main course of death by salt.Subscribers to Nutrition Action are used to reading about the onslaught of unhealthy new food products as well as the creative deception in the labelling and advertising of the products. It’s not that the food companies are breaking the newer labelling laws, but rather, they are using misdirection the same way magicians do. It isn’t new either. There is a cereal ad that is at least 40 years old that says” A bowl of (the cereal) with 8 oz. of milk is a good source of protein”. Of course it is because milk is a good source of protein. The cereal itself has not protein content at all. Like most businesses, they’ll say they are simply giving consumers what they want. Next time you’re in a shopping mall visit the food concourse and you’ll find a line up at McDonalds but you won’t see one at Cultures or the Mom and Pop operation that serves an excellent fish with vegetables and salad. But how do the accountants and cost conscious C.E.O.’s justify the cost of salt they load their products with? Why don’t they eliminate it, save money and take advantage of an advertising and image opportunity? Energize The EconomyPerhaps the government has to kick the food industry around the same way they seem to have taken over the gas guzzling auto industry and turned G.M. into Green Motors. But what are the food companies waiting for? Do it yourself and make more money from serving better food. The purpose of adding salt, originally, was to use it as a preservative. But this isn’t 1950 anymore. There are refrigerated rail cars, refrigerated tractor trailers, computer controlled refrigerators in warehouses, retail outlets and grocery stores and customized inventory control systems. If the shelf life of the salt bomb beverage labelled as V-8 juice has its shelf life reduced because of no added sodium then don’t stock so many of them. If the expiry date has come and gone, recycle it by using it as fertilizer. It’s the cost of doing business and throwing out old food products is not new. Put a creative spark into the labelling and advertising businesses with a simple communication that says “tastes great, fresher than ever and live longer”. What impact would that have on the economy? Why do I have to think of everything? Wed, 14 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Credit_Crisis_Issues_Unresolved.html http://www.investorbootcamponline.com/blog/Credit_Crisis_Issues_Unresolved.html The credit crisis was exacerbated by an inability to assess market value of securitized securities. That included mortgage pools, credit default swaps (C.D.S.) and other derivatives. Since then, the U.S. government has looked at options for reform to the banking sector as well as the capital markets. Investor Boot Camp Online undertook an extensive analysis of the matter including a study to determine what might be the best solution to the issue. Our observation of the government and the investment industry’s response to the matter has frankly been shocking. The possibilities that they might have at least proposed don’t seem to have even come up for consideration. The investment industry has been strangely silent as though they are hiding. Given the U.S. government’s use of the media to bludgeon Wall Street, it’s not a surprise. The issues that led to the credit markets putting up a “closed for business” sign in late 2008 still appear to be in play. Our proposal for ensuring a relatively effective and efficient market valuation mechanism of securitized investments is to provide useful disclosure of the individual assets in the pool. What it comes down to is quite simple. What’s in it? Our proposal is to provide the following classifications on mortgage pools allowing for cross pool comparisons. Average percentage down payment relative to property value. Average term to maturity of the mortgage. Number of individual mortgages in the pool. Average mortgage size. Geographical location. Given these classifications, you can impute a reasonable market value on a relative basis. The following two pools are an illustration where Pool A would be worth considerably less than Pool B. Investors will be able to make reasonable relative comparisons with publicly available information. Information for disclosure Pool APool B% down payment/property value 4% 58% Term to maturity 6 months 4 years Number of mortgages 375 225 Average mortgage size $205,000 $440,000 Geographical location FloridaVancouver, B.C. The investment industry could have made billions of dollars with government money, back in 2008, proposing the government pay them to assemble the paperwork of every single mortgage in every single mortgage pool. The government would have spent far less on misdirected bailout money and the money would have hit the bullseye resolving the issue permanently. This doesn't address C.D.S.'s and other derivative products but the beleagured housing market may be in much better condition if mortgage pool disclosure followed something like the proposal here. Fri, 09 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Weekend_Investor_July_9.html http://www.investorbootcamponline.com/blog/Weekend_Investor_July_9.html Markets The stock market is attempting a recovery from a blindsided ten day downturn that undercut the lows of the correction. Investor Boot Camp Online’s “Trade Risk” indicator is now very high against a backdrop of a potentially weakening global economy and no apparent catalyst for the stock market to spark a rally. The bond market peaked July 1st following an impressive run up that has pushed rates to 2009 levels. Coffee emerges as the strongest commodity market. The Canadian dollar, Euro and the Yen are the stronger currencies in global currency markets. Economics Last week: Slowing economy. This week: Improving economy. Sentiment Relatively high level of pessimism but not at extremes. Headline News Barron’s claims the Russian spies arrested in the U.S. were sabotaging the stock market. The government sells a large portion of its common share holdings in Citicorp. Investor Boot Camp Online believes the government, and possibly Citicorp, may have violated securities laws. Basketball star LeBron James signs with the Miami Heat in a television exploitation of the hype in sports. James makes more money than everybody else. He plays a game. Central banks sell more gold reserves than anticipated. Canada recovers all of the job losses during the recession. Unemployment statistic is 7.9%. H.S.T. in effect in B.C. and Ontario. U.S. mortgage rates at multi decade lows. What’s coming up? Report on why another mess is brewing for investors. E.T.F.’s will be the next target for regulators after investors finally blow the whistle on two times and three times performance E.T.F.'s.For up to date reporting on events in the financial markets including trend changes read Market News. Useful, timely portfolio management information for investors who care.Thu, 08 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Bounce_These_Numbers_Around.html http://www.investorbootcamponline.com/blog/Bounce_These_Numbers_Around.html It’s free agency time in the N.B.A. and the big stars are getting huge media attention. But it’s not just basketball fans who are watching. The dollars that some of these players will receive in new contracts has just about everybody’s eyeballs rolling. Many people, including sports fans, can’t get their heads around the money the players receive especially when the owners are crying about annual losses. But it’s actually quite simple and it has nothing to do with sports. It’s a matter of numbers. In North American sports, there are approximately 600-700 player positions available depending on the league. For every one of those positions, there are tens of millions of guys dreaming of playing. Contrary to the fantasy of many men, there are considerably fewer who are remotely capable but the pool of talent that has a chance is still very large compared to the number of paid positions. Doctors make substantially more money than most people. It’s no wonder given the very rigorous academic standards, a long education process (the farm team), and a limited number of graduates determined by the medical profession. In the U.S., there are less than three doctors for every thousand people in the population. That’s why it’s one of the highest paying professions. What percentage of the population is available to work in a manufacturing job? If you are a plumber, a receptionist, or a customer service person there are, perhaps, millions, of jobs available. If you quit your retail job, the store will quickly fill the spot with minimal investigation into the new employee’s skill. There is no farm team for construction workers or sales people. Pro Athletes: $3 million/year. Doctors and other professionals: $250-$500K/year. Everybody else: $45,000/year. Tue, 06 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/No_More_Free_Work.html http://www.investorbootcamponline.com/blog/No_More_Free_Work.html Unemployment might be the number one economic issue. It certainly has the headlines and the efforts of governments around the world especially in the U.S. The financial markets seem to react to every jobless claims and unemployment statistic as if it’s a major catalyst for trading. The official unemployment number remains just above 9%. However, some economists estimate that, in the U.S., the “underemployed” statistic is closer to 22%. That includes those who have given up looking for work and are ineligible for jobless benefits. But there is another element of the economy. The new economy is characterized by; People, and companies, working for free or significantly less than the true value of their services or product(s). Potential customers and clients who want products and services for free. There is some economic merit to this dynamic. It’s “prove it and I’ll pay for it”. But it’s a process that can only go on for so long, and it has been going on for nearly two years. It doesn’t pay the bills. Companies looking for customers who actually pay are going to have to end their free marketing campaigns and demand a payment or cut the contact loose. Working for free doesn’t actually accomplish anything in the long run and it doesn’t help the customer. Over time, a recipient of free goods or services has become conditioned to getting things for free. Ask them for a small payment and they’ll move on because they won’t see the value. The reality is people want to pay for things in order to impute value. In fact, people want to pay a lot of money for some things because they think it makes their purchase valuable and emotionally special. Otherwise, nobody would pay $250,000 for a Ferrari. Perhaps the log jam in the economy, and the underemployed issue in particular, is for businesses and individuals to stop offering freebies. Charge for it and rev up the engine of the economy which has always been “doing business”. Mon, 05 Jul 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Ten_Percent_Doesnt_Exist.html http://www.investorbootcamponline.com/blog/Ten_Percent_Doesnt_Exist.html Look in the business section of national newspapers and you’ll find one or more companies advertising investment returns of 10% p.a. Here’s the background on why I’m bringing this matter up for investors everywhere. It has to do with the millions of ordinary investors out there who feel, rightfully, that they have been ripped off. The U.S. government has put in place reforms in the banking industry. Investment industry regulators have been busier than usual with Ponzi schemes. Credit rating agencies are under fire for failing to disclose the risks of securitized investment pools. The issue of clearing and improved transparency in securitized investments remains unresolved. Bear markets that wipe out portfolios during the credit crisis creating the worst mutual fund performance in history. With interest rates still near historical lows, investment alternatives offering 10% per year, or more, are available. What is missing from the ads is the headline “great returns for suckers”, or “If you are so naive to believe this, then we have a deal for you”. There is nothing illegal about these ads. They aren’t saying anything that is factually incorrect or in violation of security laws (I’m assuming). But hear this, “you can’t make 10% per year in guaranteed profits”.Most of these advertising investment plans are in real estate related products such as mortgages. Suppose, an investor places $25,000 with one of these products; how can they say you’ll receive 10% per year? Very simple! It can show up in one of the following ways; Cash flow of $2,500 is paid out in the first year. That’s easy to do when they have $25,000 of the investor’s money. $2,500 is paid out consisting of a blend of capital and income. The income component might be miniscule. In fact, it could be zero. Year two, or three, comes around and perhaps another $2,500 is paid out. Or maybe it isn’t. Did the fine print say anything about year two? The company you invested with then explains that the mortgages were reinvested and the terms of those mortgages changed. Perhaps the regular payment from the mortgages decreased or stopped entirely or any other perfectly legitimate explanation that anybody who knows real estate would understand. Or here’s another plausible answer. The 10% per year, stated in the ad, is projected to be capital. So when no payment shows up in the first year it’s because the security, whatever it is or isn’t, has been sold or hasn’t matured and therefore there is no payment. That doesn’t mean there won’t be but the 10% per year may be a long way down the road assuming it is ever realized.Perhaps the 10% per year is a projected blend of income and capital but again the capital gain can only be a forecast.This isn’t intended to slam the companies offering these securities despite their questionable marketing tactics. They know it will attract investors who are well entrenched in naivety. Rather, it is a sad reminder that no matter what regulation, transparencies or disclosures are made the naive will never be sufficiently served and somebody will prey on them. Fri, 25 Jun 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/G20_Is_Worth_The_Billion.html http://www.investorbootcamponline.com/blog/G20_Is_Worth_The_Billion.html Canada is center stage at the G8 and G20 meeting held in Toronto. Up for discussion is a proposal for a bank tax to provide funds to bail out the banking industry, if and when, they run into trouble again. Canada is also front and centre since not only are they the host but they are leading the argument there shouldn't be a bank tax. Canada’s public argument is that Canadian banks didn’t suffer during the credit crisis so why should they be taxed.It’s a valid point. However, members of the self regulated investment industry in Canada pay into the Canadian Investor Protection Fund (C.I.P.F.) and that includes larger payments from larger firms who are unlikely to ever need a bail out themselves. Bank account holders are also protected up to $100,000/account by a fund that the banks contribute to in the event that a bank fails. But should the Canadian situation extend to contributions to a fund that is global in nature?The drawback to a global fund is that it is inherently a socialist program. Countries like Canada and the U.S. have little impact on the structure of the banking system in other countries and even less in individual financial service firms. Domestically, Canadians have been questioning the merits of spending nearly $1 billion to host the summit. It seems like a colossal amount of money for something that can hardly be expected to produce any tangible results. After all, how are twenty different interests, many of them very different, going to come to an agreement about anything? But this event is a huge opportunity for Canada to shift economic and political trends in the global economy. Canada has seemingly had a back seat on the international stage particularly with big brother, the U.S., dominating. But the U.S. is beginning to lose its shine thanks to the credit crisis and the dismal state of affairs in the housing market. Now is Canada’s chance to assert their influence. What better timing to do so than the G20 summit hosted right at home? The long term implications of Canada rising to the occasion are much greater than a $1 billion price tag. It is a “must seize opportunity” for Canada to launch itself as the dominant Western nation in a global climate of emerging market growth. Mon, 21 Jun 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/BPs_Dividend_Payment_Would_Be_A_Bad_Sign.html http://www.investorbootcamponline.com/blog/BPs_Dividend_Payment_Would_Be_A_Bad_Sign.html BP Plc’s costs are rising as rapidly as oil and gas from the bottom of the ocean as the deadly rig explosion continues to defy solutions. BP has apparently paid out $105 million to claimants for related damages and that doesn’t come from the $20 Billion fund they recent agreed to set up. Meanwhile, BP’s share price (BP-ny) has plummeted nearly 50% without any kind of a bounce since April 26th. So, “what’s a shareholder supposed to do”? Answer: File a claim in the “victim” fund. It would seem that shareholders have suffered a huge loss, many of them substantially more than the business and individuals in the Gulf. Those claimants appear to be poised for a quick cash payment from the fund in a process not unlike the fund set up after Hurricane Katrina. But the idea of shareholders making a claim in the fund is preposterous! It's an absurd idea, made tongue in cheek in a matter that is not the least bit funny. Let's not forget that eleven people were killed in the rig explosion. But the victim fund money is coming from BP, not the government. BP’s obligation is first and foremost to their shareholders. Why shouldn't they be compensated? There is an argument that could only be made by BP shareholders that management should not have agreed so quickly to the huge $20B. victim bail out fund. It’s a valid point. But BP management may have succumbed to public pressure, the President of the United States and the desire to fix the problem. On June 3rd, we suggested in “American’s Oil Crisis Thickens”, that BP may not have been fulfilling their fiduciary duty to shareholders by disclosing the full extent of issues related to plugging the well and the material costs that now seem to have no end in sight. In a June 21stpress release, BP says “it is too early to quantify other potential costs and liabilities associated with the incident”! Is that because they won’t say, or do they continue to be caught off guard with the sequence of events from the time of the explosion and collapse of the rig?BP appears to want to console shareholders by committing to making quarterly dividend payments. But this message may be interpreted differently. When you consider BP’s seemingly sheepish position on the spill, they might actually be indicating to shareholders that they are ultimately going to fail as a going concern. Through dividend payment(s), they are taking the easiest and, realistically, only route to making good to shareholders. After all, if you’re going to go bankrupt due why not pay out the cash you have in the form of dividends? This is another example of shareholders being left in the cold to suffer the consequences of unforeseen risks. While many Gulf residents will be compensated, more or less, shareholders who hang onto the stock in blind hope may be left with nothing. We’ve seen this many times before. Most recently, it was Bear Stearns, Countrywide Financial and GM. Unfortunately, the hard working investor who is effectively an uninformed investor takes the brunt of the “fall out” when things go wrong. Investment advisors frequently do the same. Wed, 16 Jun 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stock_Market_Reenergizes.html http://www.investorbootcamponline.com/blog/Stock_Market_Reenergizes.html After nearly two months, of a sometimes violent correction, the stock market has triggered a buy signal. The buy signal, from a meaningful market average, is referred to as a confirmation rally. This event is a gain that must be large enough, 1.5% in the current environment, on higher volume than the day before, typically four to seven days from the low. William J. O’Neill & Co. have identified this event at the beginning of every rally since the mid ‘50’s. On June 15th, the Nasdaq led all averages with a 2.76% gain.Not all confirmation rallies, or buy signals, work. In fact, the June 2nd confirmation rally from the Nasdaq failed just two days later. There’s no guarantee that this one will work either. But investors don't have to use the market averages in isolation when making buy and sell decisions. The "Leaders" Are The Market's Crystal BallA more meaningful indication of the market’s true underlying conditions is the action of certain high quality companies accompanied by the right kind of trading action. We are now getting that heavy buying, strong percentage gains action along with a significant number of “break outs”. The “break out”, as we call it, is a powerful gain on heavy buying, measured by volume, that clears a range referred to as a base. It marks day one of a renewed up trend. Many stock investors ignore bases and their significance at their peril. For seasoned investors who categorize a stock’s condition into either an up trend, down trend or a base know a base is one of the most significant indicators for gauging a stock’s health and the ability to trade it successfully. Since the bear market ended March 9th, 2009, the stock market’s advance has been a classic rally in that the most powerful stocks outperform everything else. They also undergo a trend change before the rest of the herd follows. Hence, the term “leaders” for the markets hot stocks. Members of Investor Boot Camp Online who bought them profited nicely. Early picks following the bear market included Green Mountain Coffee (GMCR), Netflix (NFLX), Baidu.com (BIDU), Priceline.com (PCLN), Canadian construction company Churchill (CUQ), and Chinese online video gaming company Perfect World (PWRD). Some of these stocks are no longer leaders. But historically, the group of stocks to emerge as the big winners tend to repeat their performance over the long term cycle. After all, they have massive sales and earnings growth to propel their stock to great gains. New entrants may emerge at the beginning of new up trends such as the one that appears to be underway. There is also an interesting new commodity market that is suddenly hot and there is always a powerful trend in the currency markets. A wise man once said “timing is everything”. This appears to be one of those times for investors to evaluate their portfolios and position themselves. Ignore the noise and follow the tracks of heavy buying, and selling, left by “big money”. Tue, 08 Jun 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Investors_Injured.html http://www.investorbootcamponline.com/blog/Investors_Injured.html The latest two day decline in the stock market established a new closing low for the growth oriented Nasdaq. In the process, investor hopes for a new rally have been quashed. The stock market had held at correction lows seven times before undercutting them June 7th. That makes this decline particularly significant since it adds increasing bearishness to investment conditions. It’s possible the current action will serve as a “shake out” which prompts nervous shareholders to sell and then the market sweeps higher. But the recent return to the lows is consistent historically with the nature of severe declines that precedes it. Whenever the market, or security, suffers either a significant percentage decline or a rapid decline, or both, the market (price) has a tendency to return to the low. In the process, portfolios and investor psyche are damaged. The deeper the decline is the more extensive the financial and emotional impact is. The effect is not unlike an illness or injury. The more severe the injury is the greater the probability of having bad days and a longer healing period become.Think Of Market Declines Like An Injury.A paper cut might make you cry like a baby for a minute but then you get back to what you’re doing. Break your leg and you know that even when the cast comes off there is a lengthy convalescence. Falling stocks have the same impact on investor behaviour. It’s unreasonable to think a new sustainable up trend can develop following a sharp sell off such as the “flash crash”. Historically, it just doesn’t happen that way. There are other indicators, also from historical precedence, that it has been too early to launch a new up trend. The basing period, i.e. the price trend since the peak, is too short. After some very lofty gains in a fourteen month advance, at least two months of basing are needed. Most markets have been inversely correlated to the U.S. dollar. Given the extreme weakness in the Euro and related strength in the dollar, the stock market is challenged to run higher. It doesn’t have to stay that way forever, but until it does a rising dollar means falling markets. Sentiment has been deteriorating but bullishness still exists with many investors. Until it is truly wrung out, the selling cycle has not been completed. The declines from June 4th and 7th don’t technically end the chances for a new rally but the confirmation rally from June 2nd is effectively dead. This event, which is a buy signal from the market index, has been identified by Investor’s Business Daily as a common characteristic of new rallies. However, they don’t all work. Given the failure of the first confirmation rally attempt it has implications for a longer correction rather than a shorter one. Just like the tendency to return to the low, a failed rally attempt implies more is coming. The trading pattern in the market since the mid April peak is reminiscent of the same pattern in the fall of 2008. It has implications for going lower. The “bears” have been calling for a double dip in the economy and stock market since the rally began March 2009. They should be careful what they wish for, they just might get it! Thu, 03 Jun 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Americas_Oil_Crisis_Thickens.html http://www.investorbootcamponline.com/blog/Americas_Oil_Crisis_Thickens.html The Obama government has apparently opened criminal and civil investigations into the Gulf of Mexico oil spill. The target of course is BP PLC but the reality is it’s another attack on the entire American oil industry and the American people. The stock market is, once again, putting the impact of decisions on full display. BP’s stock getting hammered is understandable but look at the severity of declines in exploration/production companies and the drillers. They are getting blasted! Ensco (ESV) has plunged 32%, Pride International (PDE) 34%, Atwood Oceanics (ATW) 34%, Plains Exploration (PXP) 44% and Anadarko Petroleum (ADP) 44%. These declines are extreme thanks to the government and Attorney General’s office who are wagging the Oil Pollution Act and the Clean Water Act just to name a few. The wind power industry might want to monitor legal proceedings against BP under the Migratory Bird Act in case there are more lawyers than dead birds at the base of their turbines. This disaster is Hurricane Katrina all over again for the government's slow response. While Obama cries foul about the evil oil companies, what has the government done about the potentially devastating ecological and economic disaster? The polluted shorelines are the same shorelines they are supposed to protect. Meanwhile, shareholders in BP suffer from actual and perceived consequences. Has BP failed to disclose the extent of the very material clean up and litigation costs? Have they avoided their fiduciary duty and legal obligations to shareholders because the press and government are hanging over them like vultures looking for evidence of alleged wrong doing? What is remarkable to some Canadians is the internal trashing Americans pile up on each other. For whatever reason the media seems to have taken a very left wing Democrat position on just about everything.Predictably, the U.S. media will do nothing but trash BP and the rest of the oil industry rather than pursue a different angle. The newspaper journalists who drove to work could suggest that producing more oil domestically would lower the trade deficit, but they won’t. American T.V. programming could point out that the oil industry is a big employer of Americans, but they won’t. They might even suggest that eliminating American dependency on foreign oil may allow for a change in foreign policy and the American involvement in fighting terrorism. But apparently, they don’t think that sells advertising to American companies who employ Americans targeting American customers to buy their products and services.Politics and the extreme nature of the stock market are creating a potentially huge investment opportunity in certain U.S. traded oil stocks. It might even be BP. When the well is finally plugged and the spill achieves some kind of containment, a huge rally may drive some of these stocks to massive short term gains. Tue, 25 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Revisiting_Diversification.html http://www.investorbootcamponline.com/blog/Revisiting_Diversification.html Every investor understands diversification and can easily provide examples of how to accomplish diversification. It’s an investment principle that doesn’t seem to need teaching. Unfortunately, it’s so implicit in every investor’s approach that no one ever questions the application of diversification strategies. Some investors are hurting the performance of their portfolio because they are failing to make adjustments that are the purpose of diversification - to reduce risk. Take the standard diversification practice of spreading money out over three asset classes; equities, bonds and cash. Investors who follow this will leave the allocations as they originally established them. But this approach ignores the impact of bad markets. If, for example, the stock market is in a correction or bear market, that portion of the portfolio is losing money, guaranteed. That’s not reducing risk. If an asset or market is doing poorly, removing capital from that area is the only risk managed approach that makes sense. Growth investors with stock portfolios may hurt performance by acquiring too many stocks particularly in certain market conditions. May 2010 has been a case study illustrating the importance of protecting capital by either, being entirely in cash or, concentrating capital in one or two of the absolute best performing securities. An increasingly apparent characteristic of poor markets is that virtually all stocks trade the same way; down! Investors who sell a loser then buy another stock because they think "this one's different" have been proven wrong. The issue with building a position in a single increasingly larger, and profitable, position is psychological. But mathematically, the portfolio is relatively lower risk and the math is how risk is measured. Rather than buy extremely high risk stocks, investors who want to “hit home runs” may consider the strategic use of transaction sizes and the number of securities in their portfolio. By doing so, they may generate significant profit in higher quality stocks. Most individual investors are randomly deciding what they believe is an appropriate number of securities. Studies show twenty two stocks are required for effective diversification in the U.S. market and thirty three in the Canadian market. That’s too many for an individual to hold in a self managed portfolio. Furthermore, individuals are not, and should not, be employing portfolio theory the way mutual funds do. Building a position in one or two of the best performing securities by strategically adding to the position as profits are achieved can produce big returns for the entire portfolio. During the recent correction restricting capital to an inverse or bear E.T.F., such as the volatility index (VXX or VXZ), would have been quite profitable. Every other stock regardless of country, sector or underlying fundamentals was a losing venture. By deploying capital into strength, investors stay focused on what is actually working and, by default, keeping capital out of weaker markets and securities based on flawed investment practices. Fri, 21 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Credit_Crisis_Market_Again.html http://www.investorbootcamponline.com/blog/Credit_Crisis_Market_Again.html It looks like the credit crisis market all over again. After a little more than a month in the current correction there are similarities that are eerily like the market from October 2008-March 2009. For investors they may want to be prepared. After all, trends and patterns repeat themselves and it’s only a little more than a year later. The ComparisonsMarket Phase Credit Crisis Bear Market Correction: 2010 The initial decline The stock market suffered the worst week in history in October 2008. The “Flash Crash” shaved nearly 1000 pts. off the Dow in less than an hour. Second decline The stock market undercuts the October lows undergoing a three day shake out before undertaking a bullish reversal (higher) November 21st. The stock market undercuts the low of the “flash crash” in a huge volume two day sell off before reversing higher in a classic bullish reversal, May 21st. Following the November 21, 2009 climax sell off, or shake out, the market went through several large rallies (+30%) and declines of 30-35% before another new low and bullish reversal in March 2009. The market effectively traded in a range with progressively lower rally peaks. It remains to be seen how the current correction will play out. But it is already showing a pattern of lower peaks in rallies. More importantly, two characteristics are nearly identical to the credit crisis; sharp, severe sell offs and massive volume shake outs. We’re also seeing other markets, i.e. commodities; fall with the stock market as the U.S. dollar and bond markets undertake rallies. The credit crisis bottoming out phase following the October blast was a trader’s market. Retail investors were conspicuously absent except to sell near the lows as fear mounted. Retail investors have struggled with the market for several months now, perhaps since September 2009, and may find the current market too much to handle. That’s another match to the credit crisis market. Wed, 19 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Message_From_The_Flash_Crash.html http://www.investorbootcamponline.com/blog/The_Message_From_The_Flash_Crash.html The “Flash Crash” was a message. It was intended for retail investors everywhere from the uninformed and disinterested investor to the active trader. The message is simple, you have to actively look after your money! Far too many investors have used the “I’m in it for the long term” line when their hard earned money takes a pounding. Following the credit crisis, many older investors cried that they were going to have to work longer than anticipated because their retirement money had been crushed. Unfortunately, another routine exercise is a migration to televisions and the internet to find out what caused a big decline. But the “flash crash” has made something clear. The reason is irrelevant. The “flash crash’ is a message of supernatural proportions. The huge one hour decline that dropped the Dow by nearly one thousand points serves as a wake up call to manage money with timely defensive tactics. Investors who were aware of them had reduced their exposure before the “flash crash” through selling, and fund switches. The same timely response could have easily kept investors out of the wipe out that unfolded in the fall of 2008.There are too many clichés about investing that simply don’t work. Diversifying by spreading capital over numerous sectors, stocks, or other markets like commodities is one of them. Investors would be better served by putting on “blinders” to filter out the noise and focus on the real world trading action in markets and individual securities. Try it! The next time the investment world goes into a state of turmoil, you’ll like the view from the sidelines.Tue, 18 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Why_Corrections_Happen.html http://www.investorbootcamponline.com/blog/Why_Corrections_Happen.html The Goldman Sachs (GS-ny) scandal broke on April 16th sending the stock into a dizzying decline of $23.57 to $160.70 by the close. It sent the market lower and many stocks broke their distinctive bullish behaviours on that very day. Shortly afterwards, on the 26th, the stock market peaked and began a correction that has also featured the “flash crash”. Did Goldman Sachs trigger a correction that has crushed many stocks in a short period of time?It’s unlikely the issues of a single company, as significant as they are, would bring the global markets to its knees. The same thinking would suggest Enron caused the gruesome bear market from March 2000-October 2002. The contributing factors to the current correction include credit tightening in China, debt issues with Greece and the P.I.I.G.S. and U.S. financial market reform. Goldman Sachs played the role of fanning the fire on the financial market reform issues. But these issues were all known to the markets, some of them for quite a while before the market hit a wall in mid April. So why would the market crack when it did and what made it so violent?Clearly, issues in Greece reached the point where the markets hit the panic button. Traders in the debt markets were whipping Greek bonds up to 25% yields and the failure to reach a bailout agreement was getting to the “make or break” point. But something else was developing that quietly punctuates turning points in market trends; the desire for something new.Investment industry participants may have a sense of this. The market’s fourteen month up trend was becoming stale. There was very little news that wasn’t old news regurgitated. The economy had been gradually improving for some time and interest in the bears crying about the “false rally” had fallen off.Investment markets are often driven by the investment industry itself. Think about the cycles among industry participants. Most mutual funds and hedge funds, who were participating, were fully invested. Investment advisors had plenty of time to work their client books over numerous times. Even those with the biggest books would have worn out their opportunities with client portfolios. That means their monthly commissions were starting to drop. The solution to this is simple – change your mind and start selling.As markets fall viewpoints start to shift providing fresh energy. The stock markets characteristic of vigour and power is restored. Unfortunately, for the bulls the price direction is the wrong way. But, the non volatile boring up trend had exhausted itself allowing for the perfect storm to whip up new action. When the current cycle of increasing pessimism and the related selling, exhausts itself the correction will end and a new rally will kick in.Mon, 10 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Nice_Timing.html http://www.investorbootcamponline.com/blog/Nice_Timing.html Interesting! The stock market gets hammered over a few days and then, to finish off the pounding, inexplicably plunges. It recovers most of the wipe out on the same day, the day that was just in time for the German government to vote on bailing out Greece. But on that day, Friday May 7th, we don’t hear anything and the market gets rocked again with many stocks getting hammered. Mercifully, the weekend shows up. Over the weekend the European Union, (emphasize union), decides to collectively bail Greece out. The market rips higher on Monday and the sky is no longer falling. Let’s party! But this doesn’t add up. First of all the “fat finger” story that was immediately addressed as “we’ll be cancelling some trades” has turned into a mystery. Then, to add salt to the wounds of investors who are trying to make some money back after getting crushed in the credit crisis thanks to the shortcomings of various investment industry operators, they lose more money on Friday as the German vote becomes a non event. That sounds like more bad news putting everybody on edge as they pile up the cash they have left from selling. But instead, a deal is made over the weekend. It’s not a deal decided by one country, it’s numerous countries that couldn’t decide on a deal over many week days over many months. But they can make the deal on a weekend that was perfectly timed to follow the week of trillions of dollars of losses. If we add up the losses, particularly those from Thursday afternoon when the Dow fell 9% in an hour right through to the close of trading on Friday, somebody made a lot of money buying during that time. Somebody was on the other side of those losing trades. Funny how the money lost is more than enough to bailout Greece.Don’t forget that governments and central banks, U.S. and otherwise, have put a lot of money into the economy in order to revitalize the banking system. Don’t expect them to announce they’re pulling their money out so they can take their profits. We’ll all be left speculating on it after another financial market beating with no explanation. Sat, 08 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Theres_Market_Risk_and_Market_Risk.html http://www.investorbootcamponline.com/blog/Theres_Market_Risk_and_Market_Risk.html The risk investors face in the stock market is more than factors related to economies, governments and corporate earnings. There’s the risk of a failure in the functionality of the market itself. Think about it this way; you want to go shopping so you go to a mall but you don’t like the stores or they don’t offer something that interests you. It happens. But another risk is the mall, not the stores in it, doesn’t have the lights on, there’s no heating or cooling or perhaps it’s closed when it's supposed to be open. That’s a risk you don’t expect. The credit crisis that crushed the stock market in 2008-2009 was a problem related to market function. We've also said on a number of occasions the solution lies in better relationship management. On May 6th, Boot Camp Banter addressed the market’s one hour collapse ("Not Again!") that can be summarized as poor linkage between separate market related activities and firms (relationships again). But a comment in that blog was "cancelling trades is the right thing to do". This idea needs to be revisited. The issue with cancelling some trades in the stock market is that other securities are connected to those trades. That may include options, futures markets and E.T.F.’s. Cancelling the impact in all areas is too complicated and effectively unenforceable. All markets, including derivative products, need a central mechanism for pricing.That would have limited the domino effect from the “fat finger” swoon. But don’t count on the investment industry, or the government, to solve investor’s problems related to market functionality. Despite the carnage in the bear market, the short sell rule in U.S. markets has still not been restored to the up tick rule. The up tick rule was eliminated in 2007 in the same week mortgage stocks began to crater. Feel Like A Victim?The individual investor may feel victimized again. But retail investors, versus institutional accounts, may be the ones that can best deal with market risks of any kind. They can easily enter orders, perhaps well ahead of time, and have them executed without affecting the market. Investor’s Business Daily reported in their Monday May 10 edition, “After Stocks Blow Fuse, Circuit Breakers?” that big institutions complain tiny bid ask spreads make it easier for small investors to jump ahead of big block trades.The reality is timely trading can be managed far more effectively by individuals than institutional accounts. Take advantage of it. It is highly unlikely the public will get any satisfaction from the government or the investment industry after cutting its own throat once again. Thu, 06 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Not_Again.html http://www.investorbootcamponline.com/blog/Not_Again.html The credit crisis can be attributed to people working in the investment industry who essentially failed to do the right thing. But now we’re finding out that the incredible and unexplainable plunge in stock prices in the afternoon of Thursday May 6th is attributable to a reaction by investment industry professionals that is essentially ridiculous. The emerging story of the latest market meltdown is being attributed to a trade error in a sell of one million Procter and Gamble shares (PG-ny). Apparently, the order entered was for one billion shares but one million shares was the intended order size. Since the order size effectively swamped all the open buy orders, the bid plunged to .01. Then, a domino affect kicked in; with traders selling everything they could as though “the sky was falling” and they didn’t even know why. This is absurd! Why would anyone believe that Proctor and Gamble, which closed at $60.75 on May 5th, would trade at .01? Second, the organization that initiated the sell order should have some kind of a safeguard in place to at least investigate if not cancel orders that exceed limit protocols. No one except possibly the most naive inexperienced investor in history is going to enter a market order to sell one billion shares. This trade doesn’t even involve a retail investor, naive or otherwise. This trade was being executed by an employee, otherwise known as a professional, of an investment industry firm.Where was the fiduciary duty response? The New York Stock Exchange apparently didn’t seem to notice anything unusual such as a sale of one billion shares in just one minute. Never in the history of any exchange has this ever happened. The average volume on the N.Y.S.E. is just over one billion shares per day. Once again, millions of investors with hundreds of millions of dollars have been victimized by investment industry professionals who dropped the ball. The story, as it appears, goes beyond failing to exercise fiduciary duty. It’s just dumb! The NASDAQ has quickly undertaken a plan to cancel certain trades (although there's no notice of their intended acton on their website). That’s the right thing to do. But once again, the investment industry has egg on its face. Law schools are surely overflowing with graduates intending to make a career of Investors vs. The Investment Industry. Tue, 04 May 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Signs_Of_A_Correction.html http://www.investorbootcamponline.com/blog/Signs_Of_A_Correction.html Here are some indications that the stock market has entered a correction effectively ending the fourteen month up trend. The Market AveragesMarket averages are suffering numerous large losses and the losses are becoming larger. The volume is very high on down days indicating “big money” is leaving the market.The volume on the Nasdaq for the week ended April 30th is the heaviest in nearly a year. Average volume has increased significantly in the last month with little price progess in the market averages.Sector Action The worst performing sectors, since the market peaked, were the rallies biggest winners. Stock Action The behaviour of stocks has changed in a number of ways including; large short term losses, undercutting a key support level that has held during the fourteen month rally, heavy volume on the downside, lengthy losing streaks. Failed break outs. A break out defines the beginning or renewal of an up trend. It is a very sensitive pivotal change in action in the price path of a stock or market. When a failed break out occurs, it is a significant “red flag” for a stock and with numerous failed break outs, it is a reliable signal for indicating the investment climate has changed from bullish to bearish. Stocks that recently undertook powerful break outs from long term bases have become equally powerful on the downside despite their early stage up trends. That's not normal!Sentiment, on some measures, indicates there are very few bears and the spread between bulls and bears is too wide historically. Extreme sentiment readings tend to coincide with trend changes.These characteristics have been increasing and intensifying through April and into May. Other contributing signs include a break down in a number of commodity markets including the predictive price action of copper. Tue, 27 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Picking_Great_Stocks.html http://www.investorbootcamponline.com/blog/Picking_Great_Stocks.html Active traders could sit around in a bull market, like this one, and pick new buys every day. Some day traders operate this way moving from the flavour of the day to another. But this doesn’t work very well for inexperienced investors or people who don’t have time to allocate to the wild and whacky world of stock trading. But the bigger question is, “what actually works better”? Comparing day trading to other trading systems isn’t effective. Success in day trading is entirely dependent on the decision making and trade execution of the trader. It’s more informative to compare an approach such as buy and hold to another system that is more active.The issue with a more active approach is the same as day trading. The ability to buy near the low and sell near the high is dependent on who, or what, is executing trades. Here is what our study of decades of stock market action and investor behaviour indicates. Buying the early winners in a new up trend and holding them until the cycle ends is more profitable than attempting to trade out of them and into other stocks. Strength becomes stronger and weakness remains weak. Adding to the best performers is more profitable as an up trend becomes more powerful, and advanced. The implication for portfolio management is investors will deploy remaining cash and/or sell weaker performers reducing the number of securities in the portfolio. The issues with diversification, and what is generally believed about it, are clearly challenged. Redeploying capital from stocks, and sectors, that have broken down to renewed strength in other sectors is more profitable than waiting through a significant correction. The current rally, which started March 2009, is a classic case study in moving with sector and country rotation. Stocks from China which were the clear big winners early in the rally have not traded well since the fall of 2009. Invest Like A Pro! Tue, 20 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Uh_I_Wonder_Why.html http://www.investorbootcamponline.com/blog/Uh_I_Wonder_Why.html Many people think the economy is going to go back into a recession. Why? People are hung up on the plight of the unemployed. Why? If you are truly concerned about it do some networking with them in mind. You know an electrician who is out of work, send an email to your contacts. You know somebody who is punctual, organized and loyal tell somebody. The Fraser Institute reports that taxes in Canada have risen by over 1,600% since 1961. It is the number one expense for the highest growth rate. Why is it that nobody really seems to mind? Don’t voters have an interest in having their money spent more efficiently? Why hasn’t the solution for securitized investments been dealt with? Bigger still, why isn’t the press all over this? The solution is simple, more disclosure. If you want to know what’s in a mortgage pool surely somebody could reveal the geographical location, the average (percentage) remaining on the mortgages and the percentage in default. Wouldn’t that have provided a basis for sellers and buyers to establish a price? The investment industry could have made billions diving into the details that would provide more transparency to securitized and derivative products The current cycles’ witch hunt continues with Goldman Sachs the target. The last time the market went into the tank it was Martha Stewart. Laying blame is not a solution. If investors really want to minimize the ugly issues with their investment portfolios, get the facts. The reality is people, and organizations, are looking out for themselves and nowhere is this more obvious than in the investment industry. That’s why the founder of Investor Boot Camp Online left the regulated investment industry to manage an independent and unbiased investment information and investor education service. Investing for the average person is like an iceberg. You wouldn’t believe what’s under the surface. Fri, 16 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Stock_Markets_Fuel.html http://www.investorbootcamponline.com/blog/The_Stock_Markets_Fuel.html The stock market has been chugging higher for more than thirteen months. Bad economic news, fear, high unemployment and, at times, poor technicals haven’t derailed this speeding train. So what’s driving it? Trillions of dollars in stimulus spending and central bank action is the fuel in the engine of not only the stock market but commodities. An economy that is gradually recovering is the other and billions of dollars that have been sitting on the sideline are changing their mind and buying into rising price trends before it’s too late. The Bond Market and StocksNow we have increasing interest rates. That is driving money out of the bond market and into the stock market as it looks for higher returns. Investors in bonds and bond funds should consider taking a hard look at their holdings, check the maturities and be prepared to reduce exposure if losses are developing. When the credit markets effectively went back to work the catalyst for a full recovery from the declines in the fall of 2008-spring 2009 was underway. Many stocks are getting close to their bear market peaks from either 2007 or 2008. The best stocks are hitting new highs. Gold stocks have been a struggle. It’s not surprising given the extreme bullishness that is, or at least was, rampant on internet sites. Despite the five month range bound action gold and gold stocks remain poised to resume their up trends at some point. The stock market rally has numerous sectors in the driver’s seat. Technology (semiconductors in particular), clothing retailers, restaurants, oil and base metals have been dominant. So have companies with stellar earnings and sales growth. Contrary to popular opinion, there are lots of companies in many areas of the economy, U.S. and otherwise, that are in great shape. Projecting the Market's PeakThe market will likely continue to chug higher as long as the economy is growing. That’s the basic mindset of mutual funds and pension funds. A round of interest rate increases by the Fed., may spark a significant correction similar to the bull market interruption in 1993-94. The market is now moving into a mergers and acquisition phase which indicates management believes their share prices are getting close to a peak. They’re taking advantage of their share currency to acquire other businesses. But this lengthy and huge rally may end with fireworks. Investor psychologically is still relatively pessimistic. Even the bulls are waiting for a big correction. Most rallies end when everybody is bullish and we are nowhere near that point. Throughout history, there have been market up trends that come to end with what is known as climax runs. This is when stocks undertake huge one day to one week gains on the heaviest volume in the entire up trend. It’s the culmination of bullishness meeting little selling. You can see this occurrence fitting in with the way psychology is slowly shifting from the “sky is falling” mentality. Sentiment was extreme on the downside (early 2009) so it may be extreme at the top. When everyone concedes the economy is finally in good shape the stock market may reach its peak. Thu, 08 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Bring_On_The_Bubbles.html http://www.investorbootcamponline.com/blog/Bring_On_The_Bubbles.html Speculators have been taking a lot of criticism for creating bubbles in investment markets. Of course, the issue isn’t the upside in a massive up trend it’s the collapse on the other side. The most recent example is sugar where sugar E.T.F. (SGG) has plunged 46% in just two months. The critics are assuming the speculators are making money and the innocent upstanding citizen is losing. There is probably some merit to that viewpoint but the critics may not be considering the benefits that bubbles create. The obvious upside to bubbles is investors can make a lot of money. But there are real and useful economic benefits as well. The explosive gains create an unusually favourable business environment. As new operators flock into the sector or industry and existing firms expand operations supply increases. Unlike a more normal scenario, the increase in supply occurs much faster.Given the dynamics of massive growth in emerging markets where 40% of the world’s population live, getting raw materials, energy and food to a growth hungry global economy is achieved sooner rather than later. The rapid increase in supply serves to alleviate inflationary pressures that may otherwise characterize markets over long periods of time. The fact that prices (i.e. the market) increased rapidly for a year or two has little consequence when considered over a longer time frame such as ten, fifteen or even twenty years. Perhaps the issue is that people don’t know how to trade. Hasn’t that always been a problem? Technology, i.e. online trading, has brought more retail investors with little guidance into the shark pit. The truth is there’s nothing wrong with making money. In an era where unemployment is high and now we’re likely facing inflationary pressures making money in the investment markets is the one and only way to generate a significant increase in wealth. Instead of curtailing investment activity, let’s encourage it. Bring on the bubbles! Wed, 07 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Bond_Funds_Bust.html http://www.investorbootcamponline.com/blog/Bond_Funds_Bust.html Investors and debt holders can no longer ignore the ongoing chatter about interest rates rising. The U.S. bond market has clearly indicated that the trend to rising interest rates has been confirmed. Why Should Investors Care?Many investors will think rising rates is good for their income portfolios. After all, rising rates means higher yields on reinvested capital. But the issue is invested capital may decline and the losses in capital is typically much higher than the offset provided by higher cash flows from rising rates. 20 Year Interest Rate Down Trend is OverRetail investors have a habit of “looking in the rear view mirror” when it comes to investment trends. But here’s why the current interest rate outlook is serious. Interest rate trends are typically twenty years long. In June 1989, if you remember, the G7 central banks all declared war on inflation. From that moment, the trend in interest rates shifted to down. Twenty years have passed and 2010 marked a clear shift in rates to higher particularly in the leading U.S. market. Investors in other countries may say “I don’t live there”, but that doesn’t matter.What happens in the U.S. eventually develops elsewhere and no where is that more apparent than in Canada.The floating and perpetual preferred share market in Canada has suffered a sharp decline over the last week. This is an alarming development reminiscent of the beginning of the credit crisis. This market was a tip off for its bearish action in February 2007. But this time it’s for different reasons and it is potentially very negative for income investors. Do It NowIncome oriented investors need to look at their portfolios and determine exactly what they are holding. Detailed analysis of the break down between longer term maturities and short term is at the core of managing risk.But keep it simple. If your holdings have been in any kind of decline over the last year, and last month in particular, your capital is at risk. If it goes any lower, consider reducing exposure. This includes bond funds that may be referred to as income funds. Don’t expect the mutual fund companies to protect your capital. They didn’t do it in 2008 (equity and commodity funds) and they haven’t changed their tune. Being proactive is one of the keys to success in the art of investing. Waiting to lose more capital in an investment climate of very low rates does not add up. There are other alternatives that may be safer and offer higher expected returns. Mon, 05 Apr 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/It_Pays_To_Use_Debt.html http://www.investorbootcamponline.com/blog/It_Pays_To_Use_Debt.html Unserviceable mortgages continue to plague the U.S. housing market and foreclosures remain a significant portion of re-sales. Many consumers, and not just in the U.S., are under the heavy weight of a growing mountain of debt. The banks along with Wall St. have been undergoing relentless attack as though they’re responsible for the borrower’s problems. But inherent in our economic system is an incentive to use debt rather than equity. Why would anyone pay for a house purchase in full with cash when they can borrow most of the money at record low interest rates? Why would a company go out and pay exorbitant investment banking fees to raise equity when they can borrow? The incentives for choosing debt vs. equity are unbalanced. Debt WinsThe biggest incentive for using debt is the deductibility, in taxes, of interest expense. This is clearly more significant for businesses than consumers but U.S. homeowners are eligible to deduct mortgage interest from income. It’s easy to avoid dealing with our own financial weaknesses, and perhaps lack of creativity, by using someone else’s money. It also appears to be far too easy to escape financial obligations by filing for bankruptcy especially in, again, the U.S. Our economic system has effectively encouraged the use of debt to “get ahead” especially when it comes to home ownership. If central banks were truly serious about keeping prices down housing would have never been a market to consider as an investment. If the economic environment of the last two years is undesirable, it’s time to make structural changes that affect the decisions related to the use of debt versus equity. Eliminate interest expense as an eligible deduction on tax returns. Unfortunately, the timing is “tough love” for U.S. mortgage holders and changing it now would surely have an unbearable consequence. Provide a tax incentive for using equity. This is essentially flipping the relative advantage to equity from debt. How many hard working entrepreneurs are cashing in their savings and investments, including retirement funds, to finance their businesses? This is the driving force of the capitalist system and yet they are penalized for financing this way rather than encouraged. Some readers, especially big business managers, will think these ideas are nonsense. But consider this; in a global economy where most of the world is finally emerging economically, how long can the western economies remain in economic power based on flawed principles?Wed, 31 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Greatest_Bubble_Ever.html http://www.investorbootcamponline.com/blog/The_Greatest_Bubble_Ever.html Market trends since around 2002 have progressed in straight lines meaning once the up trend or down trend starts it essentially just keeps going. The sugar market is a recent example of a market that was one of the strongest but after its late January peak fell nearly 45% in less than two months with no bounce at all. The price of sugar can be traded with the U.S. traded I-path Sugar ETN (symbol - SGG). Speculators have been taking their share of the blame for creating what critics believe are bubbles on the upside and excessive wipe outs to the downside. However, speculation has been present in nearly every market for hundreds of years. Furthermore, nobody seems to mind it when they’re making money in a nice up trend either. Why is it that nobody blew the whistle on Enron when the market was in a powerful up trend? It’s the crowd that loses money who thinks there’s something wrong with it. Global Market ForcesThe more likely driving force in “straight line” market trends is the global nature of markets. The internet is the catalyst for the rapid spreading of information, true or false including opinions. From a big picture perspective, the global economy is taking on a character of countries that are becoming much more linked rather than a collection of separate economies that have some impact on each other. It’s the same idea as “it’s not a stock market, but a market of stocks”. The propensity for the “snowball” effect is far greater now in global economics than ever. It’s not just investment markets. Now we have numerous governments, including the U.S., who seem to be undertaking the same massive borrowing and spending programs with huge increases in deficits at the same time. It doesn’t take an economics major to know this isn’t typically the road to great wealth. What analysts, investors, and taxpayers are contemplating, and worrying about, is what the solution to the apparent building economic jeopardy is?Bring On InflationThe obvious solution is to create inflation. With an inflationary trend the principal and interest paid over the years on a mountain of debt is worth less than the original borrowing (adjusted for time). It’s a brilliant solution when you think about it. But what happens if governments around the world (more accurately central banks) start acting the way markets do? What if they jump on the bandwagon and accelerate inflationary forces to not only improve their balance sheets but try and get an upper hand on other governments and debt issuers? It’s the same behaviour as one investor trying to get an advantage over other investors and the market overall. The Greatest Bubble EverIt might seem like a frightening scenario. But it would be interesting from an economic and academic perspective. It may be extraordinarily profitable as investors position themselves on the market trends that emanate from the massive power of government induced forces. It could be the greatest bubble ever created in history. Fri, 26 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Full_Circle.html http://www.investorbootcamponline.com/blog/Full_Circle.html The credit crisis was one of the most dramatic and significant economic and investment market events in history. The severity of the issues still has the “bears” believing the stock market’s miraculous recovery isn’t real and is doomed to, eventually, go all the way back down again. But here’s why the economy, and the outlook, is better now than it has been for many years even prior to the 2008 meltdown. The economy’s original problem was rooted, entirely, in the issues that crushed the financial services sector. The fall out that rolled through the economy occurred because the banking system and the stock market put up a “closed for business sign”. This was the nature of the credit crisis from the fall of 2008 until the spring of 2009. But once the attempts to resurrect the core of the economic system were underway the financial services business effectively took the closed for business sign down. When that happened, the problem was over. Open For BusinessThe interpretation that there are all still all kinds of issues in the banking system and its cousins are incorrect. The garbage was thrown out and everybody who’s still standing is back at work. The dynamic of persistent unemployment is actually unrelated to the original problem. The biggest issue that remains in force is psychological. Individuals, governments and many businesses remain spooked. If you run a business and you laid off ten people last year why would you turn around and hire twelve people now? You wouldn’t if for no other reason that negative sentiment. In fact, you’ll take advantage of the lower cost which includes avoiding what will undoubtedly be higher health care costs born by employers. When confidence returns to the financial markets, raising money will become easier.That’s why the stock market needs to keep chugging higher. When investor’s decide to stop being so fearful and put a few bucks into a decent company the economic wheel will return to normal. Since the credit crisis is over, the issues have been dealt with and the economy is recovering, stocks will return to their bear market highs. Many of them are getting close. Thu, 25 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Government_Spending_Misses_The_Target.html http://www.investorbootcamponline.com/blog/Government_Spending_Misses_The_Target.html A recent Fraser Institute study concluded the Canadian governments $47.2 billion Economic Action Plan contributed little to the country’s economic turnaround in 2009. They also said it will do more harm than good in 2010. The public policy think-tank said the growth that lifted Canada out of recession was driven almost entirely by private sector investment and exports and had little to do with debt spending. The finance minister, Jim Flaherty, says the study was poorly done and wrong. Shocking! One of Flaherty’s counter attacks was to suggest the Home Renovation Tax Credit has been a huge boost to consumer confidence and spending. But of all places in the world why do Canadians need financial assistance with their homes? After all Canada has the hottest residential real estate market anywhere. Not so long ago in this column it was suggested that Obama’s plan was poorly targeted and stimulus efforts should go to areas of the economy where it truly makes a positive difference. Now we have supporting evidence, once again, that government spending is inefficient and largely ineffective. If anybody thinks differently then they will surely be happy to pay more taxes for a long time and personally help to pay down the gigantic deficit. Time For A Separate Fiscal Policy AgencyThere are numerous case studies from most countries around the world and many governments that they essentially have no idea how to run an economy. The proof of this is so overwhelming that the case for a non government controlled fiscal policy agency is hard to argue against. We do it with monetary policy through central banks. So why not appoint professionals with proper academic credentials and real world high level experience to run an agency that engineers good, or better, economic policies regardless of which political party is in power? If investors have forgotten, the income trust tax structure will be gone by the end of 2010 thanks to Flaherty’s surprise attack on the principle of building wealth. For months following the decision Dennis Gartman said it best; “It was the worst finance decision ever made by a person in political power in the civilized world in history”! It comes down to this; If voters don’t start demanding, and receiving, accountability in economic policy then we are all going to pay a cost far beyond what is necessary. Don’t kid yourselves. Many policies, some of them new, implemented by the Canadian and U.S. governments are a disaster in progress. Mon, 22 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Investor_Education_Breakout.html http://www.investorbootcamponline.com/blog/Investor_Education_Breakout.html Yahoo finance ran an article from Investopedia.com titled “3 Reasons Not To Trade Range Breakouts”. The good news about that article is it introduces some investors to the idea of executing buys based on breakouts from a range. The bad news is the premise of the article contains many statements that are either misleading or wrong.In fairness to the article, what actually appears to be a theme is that investors are executing poorly because of psychology. But that doesn’t mean the strategy of buying a breakout is a bad idea. In fact, the evidence compiled over many decades is that buying breakouts is legitimate, effective and profitable. But here’s where the article is inaccurate; Explosions (from a break out) are rare. This doesn’t even make sense. An explosion and a break out are usually the same thing regardless of where it occurs from (above or within a range). The evidence shows that powerful break outs from ranges are, in fact, the beginning of an explosive up trend. The alternatives: The strategy of buying a break out that has returned to the original break out price might make a weak trader feel better but it will reduce the chances of landing a big winner. Buying a powerful break out later, when it's obvious, is higher risk because it's late.Breakouts may be the most insightful tool investors can use to interpret conditions and trade profitably. False break outs, or failed breakouts as we call them, are an indication that market conditions are bearish.When conditions are bullish, a failed breakout may occur in any stock but most of the time they occur in poor quality stocks particularly lower priced ones in very small companies. The investopedia article is overly simplistic to the point where the author either doesn’t know what he’s writing about, is suffering from the same resistance as many in terms of buying at any price but the low, or is simply trying to get people’s attention. We’re not picking on him, but rather, it is our mission to educate investors with the facts and train them to undertake effective analysis, decision making and trade execution practices. Shifting the premise of the article to poor trade execution strategies can be corrected by following a reliable evidence based methodology would have been supremely more beneficial to stock investors of all kinds. Investor EducationThis is another example of why legitimate investor education is needed. It’s remarkable that so many people are involved in an activity that has no related formal education and the proliferation of any old bad idea is commonplace. It’s why Investor Boot Camp Online was created. Investors don’t need to suffer anymore thanks to false or weak theories and practices. Wed, 17 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Unemployment_As_A_Weapon.html http://www.investorbootcamponline.com/blog/Unemployment_As_A_Weapon.html Unemployment remains stubbornly high keeping it the over employed headline as the U.S. government maintains this is their number one project. It’s also keeping the bears calling for another major decline in the markets. Many continue to wonder when companies are going to hire their workers back. But the untold story is why would they? U.S. corporations are dealing with a number of issues not the least of which has been a weak economy.But there’s another issue. President Obama and the Democrats seem determined to force new health care legislation on the American people. Like the Canadian system, guess who carries a major cost in health care? That’s right, business!Left wing driven health care reform will undoubtedly raise the total cost of benefits paid for by employers.It’s cheaper to pay existing staff overtime rather than hire a new worker, train and manage them and pay into another benefits plan package. U.S. corporations are also facing the expiration of the tax cuts President Bush put in place nearly ten years ago. While Wall St. and the banking sector are being relentlessly kicked around, U.S. corporations have some power they can use in a hostile environment. Their new weapon is to not hire new workers! Imagine yourself working in management of a big corporation or, better still, running a small and struggling business as many people do. Unless you’re in dire need of manpower, what incentive do you have to bring someone on board? You don’t have one and until something significant changes, business will silently fight costly government policy changes by leaving the unemployed looking for work. Thu, 11 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Emails...Hello.html http://www.investorbootcamponline.com/blog/Emails...Hello.html It seems that communication by email has fallen off the edge of the earth. There used to be a time when consultants were making money teaching people how to handle it effectively and be a winner! But these days if you email them they won’t answer it. What’s going on out there? You might be thinking that it’s just my problem and maybe I should be taking it personally that nobody is returning my emails. But an unscientific survey says otherwise. One theory is that the under 30 crowd has abandoned email and they are resorting to Twitter, Facebook and live chat. There’s certainly something to be said for that but it doesn’t explain the rest of the working force.Perhaps people have decided the way to handle the heavy volume of ingoing and outgoing emails is to attend to it for an hour or so once a day or even less frequently. But that doesn’t add up. When a customer, who is paying your income, contacts you, there should be a reply. If the reply isn’t almost immediate, it should be close to it. It’s bad enough that a communication is left dangling because many people don’t send an acknowledgement of some kind. The impact on lowered productivity has to be getting to a significant level. Permanency and SecurityThe issue, for some, with email is that it leaves a permanent record. Investment industry compliance and enforcement regulators routinely look at emails. The other matter is many employers forbid the use of emails and the internet for personal purposes. Email isn’t really cool anymore! It has become the communication method of choice for dealing with issues related to poor service. How many people are spending excessive amounts of time dealing with companies like Rogers over their billing practices, breakdown in service(s), etc.? Email makes it more efficient. Let’s be clear about email policy. When it comes to business or workplace relationship management, email is a very efficient method of communication. Use it, don’t abuse it! If you want to end a relationship, a good way of doing it is to not answer emails. Tue, 09 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Happy_Anniversary.html http://www.investorbootcamponline.com/blog/Happy_Anniversary.html March 9 2009, was the bottom of one of the worst and most dramatic bear markets in history. One year later the stock market has put in a recovery that is nothing short of miraculous. The Nasdaq has ramped up 84% and the TSX 59%. What an anniversary it is!The amazing thing about the stock market is that no matter how bad it gets it always bottoms out and puts in some kind of a recovery. It’s as though it has a built in optimism driver. Too bad the masses don’t have the same trait. The belief that a double dip is going to occur seems to be rebuilding. But that’s the nature of the stock market. The more extreme the cycle was the longer it takes for people to shake off their conditioning.When you understand market psychology and the nature of its cycles, you’ll realize that the current rally may have considerable gains left in it before it finally peaks. A considerable amount of pessimism still needs to be converted into optimism, and buying. As gains continue, an increasing number of investors are going to change their mind and jump into the market “before it’s too late”. When everybody believes the market can only go higher the cycle will be complete and the market will peak. The last two bear markets have been abysmal. The market (Nasdaq) fell 77% between March 2000 – October 2002 and over 55 % from October 2007 – March 2009. These are deep declines and, in the case of the collapse of internets starting March 2000, it was long. But there are some very valuable and profitable lessons from these two bears. As long as the market is falling there is no profit in staying invested or guessing where the bottom may be. The deeper the decline is the greater the profit potential is on recovery. Fund Investors Took A HitFor the first time in history, mutual fund investors may be the group that has the most to learn. It’s obvious mutual funds aren’t going to take money out of falling markets, at least, not to the degree necessary to look after their clients. Fund investors need to be more active in the timing of long term cycles. Investors in bond funds might want to keep that in mind if interest rates undertake a convincing up trend. When that happens, long dated bonds and bond funds will be the last place to invest hard earned money. Sat, 06 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/In_All_Thy_Moms_Command.html http://www.investorbootcamponline.com/blog/In_All_Thy_Moms_Command.html The Canadian government apparently feels compelled to address a Canadian woman’s concerns about the gender orientation of the Canadian national anthem. The line from O Canada’s, “in all they son’s command”, is, to at least one person, offensive. In typical Canadian government fashion, they are going to set up a parliamentary committee to address the matter. It will be interesting to see how much money that costs, although we may never know. But politics aside, the proposed change is to use what was apparently the original line “in all thy dost” command”. Dost, by the way, is an old english word for do. It is also a line that is a little tough for people who speak english to sing. But maybe it’s time to take this seriously and, through one nation’s national anthem, recognize the true stalwart’s of our culture and drivers of the economy – mothers! Let’s change the lyric to “in all thy Mom’s command”. After all, who doesn’t listen to their mom? They are the backbone of families, the ones who start it all by going through a gruelling process of carrying the baby and finally delivering. Then they do all kinds of work without taking a breath for decades. Some of them work full time or run businesses and hobbies on the side. Really, how do they do it? If Obama and his buddies were looking for a solution to resurrect the economy, why don’t they throw some money at mothers? They’re the most important sector of the workforce and they don’t get paid a nickel. Well, ok, in Canada they get $100/month in child benefits. Big deal! What would happen to the economy if they were paid a more meaningful, and normal, salary? What if, say $35,000/year, in tax money was redirected from the numerous idiotic programs currently being funded to each and every mother? This may the best solution for Japan’s biggest economic issue – a declining population. Just in time for International Women’s Day too. Canada can lead the world by singing to our Mom’s with the national anthem. Wed, 03 Mar 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Working_Get_No_Respect.html http://www.investorbootcamponline.com/blog/The_Working_Get_No_Respect.html The dark days of the credit crisis and a weak economy have been front and centre for nearly two years. The Obama administration has been quite clear that getting the unemployed back to work is their primary objective. Meanwhile 90% of the work force carries on. The constant attention on the unemployment issue might be getting tiresome. But what’s interesting is what never gets any attention. Certain segments of the workforce continue to run into the same issues over and over again. Perhaps it’s time to address these issues?Think about the daily regimen of an artist or musician. Consider all those people who freelance in television and film. Many people work in these well established industries but they never know if there’s going to be work following their current contract. It’s a grind and for many of them it’s not particularly profitable. Artists and musicians are essentially small business operators. They have to manage the operations (paint a picture), market themselves and do the necessary administration. Realistically, how are they supposed to do that without paying a pile of money to consultants or professionals who have expertise in those areas?The premise of free markets is value is paid to those who generate it. It would be easy to justify that many artists aren’t worth the cost of the canvas and their brushes. In the long run, that will surely be taken care of. But even the most capitalist oriented viewpoint has to recognize that our economic system doesn’t work very well for certain segments of the workforce. Perhaps artists, musicians, business start ups and certain other “jobs” are the ones who should be getting a break from the government. What would the economy be like if it was easier to make a living being an artist, musician or any other kind of small business operator? A higher personal exemption in their taxes or an adjusted expenses and/or tax rate would reduce the risk of this work by leaving more after tax income in their hands. It just might enrich our culture at the same time. Tue, 23 Feb 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Less_To_Banks_More_Growth.html http://www.investorbootcamponline.com/blog/Less_To_Banks_More_Growth.html In times of economic weakness, the economy contracts due to a reduction in marginal spending and investment. We all understand this basic process including the ripple affect of changes in behaviour by consumers and businesses. A homeowner decides not to replace their old blinds, the window covering business owner lays somebody off and the owner stops going out to restaurants every weekend. It’s standard for individuals and families to look for expenses they can reduce or cut entirely. Suppose you have cut your expenses because of the economic slowdown by 15%. A trip was eliminated and those cool shoes you saw the other day stay in the store window. But there is one expense people never seriously consider cutting back - debt payments. Why not? Weren’t the credit crisis and the related rescue efforts by governments and central banks the ultimate proof the banking system, and leverage, are the building blocks of the economy? If that’s true then why would reduced debt payments be an issue? In fact, wouldn’t it be better for the banks? Their interest income would go higher boosting the bottom line and reinforcing their capital base. Temporarily reducing, or eliminating, mortgage payments, and other regular debt payments, might actually trigger an economic recovery. The extra cash could go a long way to pay for a vacation, invest in the kid’s R.E.S.P.s and a donation to the Olympic team. But of course the banks would be all over you wondering where your payment is. Do they think you're broke? Do they think you're committing a fraud? No, it's because they actually don't know anything about you. You're a set of financial data on a document. The banking system actually konws very little about their clients. What business gets away with knowing little about their clients? It's no wonder, they need bailing out.It appears they don’t know what they’re doing on many levels. Maybe the government (i.e. taxpayers) should let them fail. What arises from the ashes will undoubtedly be a customer driven organization establishing a permanent solution to the real issues from the credit market meltdown – better relationships. Thu, 18 Feb 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Back_To_Work.html http://www.investorbootcamponline.com/blog/Back_To_Work.html Unemployment continues to remain high around the world. The Obama administration claims getting people back to work is their primary agenda and the media has been beating the unemployment issue to death for more than a year. Some believe that unemployment will remain abnormally high for an extended period in this cycle. So what are the unemployed supposed to do about it? The obvious is to turn looking for a job into a full time activity with overtime. But be smart about it. Cover letters remain too long and unfocused. There is no need to repeat what is in the resume. The cover letter should address one thing, the real reason why the employer should hire the applicant. For example, a construction company doesn’t hire someone because they have five years experience. They want to hire the person who solves their problem. Think about what that is. The cover letter might say “I’m hard working, never late, strong and take instruction.” Get Creative, Work For FreeThe unemployed might have to become more creative. Try these out; Offer to work for no benefits. Offer to work for lower pay for a brief period followed by a guaranteed normal market payout.Offer to work for free for a specified period. If it’s unlikely a job will show up in the short run there’s no pay anyway. If the employer likes your work, they might keep you. If they don’t, the next employer won’t know you weren’t paid for the job. So get a job that adds something to your resume particularly a higher level function or position that you wouldn't otherwise get. Start A BusinessAnother option is to start a business. If you’re out of work for an extended time it costs money. Spend that money on a start up generating some income in the near term that will compensate for it. It doesn’t have to be innovative or involve significant capital. Keep it simple. Focus on marketing and execution. Do a good job for one customer at a time. Another solution lies with those who are still working. Productivity is the key to keeping inflation down and reducing expenses. For some businesses, labour is their biggest cost and productive employees provide an employer with some wiggle room to hire someone else. As it turns out, employers and employees both have an incentive to be productive anyway. If the Obama administration is serious about getting people to work, give employers incentives.That’s a more targeted approach and doesn’t cost the government any cash outflow. Mon, 15 Feb 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Leverage_From_The_Naive.html http://www.investorbootcamponline.com/blog/Leverage_From_The_Naive.html Recessions, and bear markets, carry their own unique headline the most recent being a credit crisis. Of course, it wasn’t the first, or last, credit crisis but this one brought central bank operations to the forefront. Over the last year and half, many people started taking an interest in central bank operations and its relationship to a basic underlying premise of capitalism. There’s nothing wrong with a little knowledge even though it doesn’t impact daily life or decision making. But thanks to technology a mainstream attack has been launched on the financial system and the very premise of our economic existence. The internet is rife with videos made by people suggesting the system is not only collapsing but that it is inherently flawed.The arguments they put together are not only weak they are frankly naive. These people should be embarrassed.However, they’re not because they don’t attach their name, or livelihood, to their idea of the world’s greatest documentary. At the centre of their attack is the banking system. They think it’s “wrong” that banks can lend more money than they have in their capital base. If that is wrong then they should return their mortgage immediately. The implication of not allowing leverage is you cannot buy a home unless you have 100% of the purchase price. If somebody thinks the system is flawed and doomed to failure then this is what they, personally, would have done already. Sold their house. Disposed of their investments including retirement savings. Converted all cash to useful assets, i.e., things you need for daily living. What kind of economy would we live in if we eliminated leverage? Think about the unwinding process. How long would that take and how ugly would it be? What is their solution to that? What would happen to housing prices? How many people would become unemployed as a direct result of a contraction not just at the margin but at the very core of individual and economic wide wealth accumulation? Very few of the recently emerged brainiacs have proposed any solutions. If going to a gold standard is their answer they wouldn't even get their thesis graded. Politicians are attacking the banking and investment industry because it is a politically easy left wing position.What the naive don’t realize is the left wing politicians in the U.S. are actually fuelling an economic revitalization plan through the principle of leverage. That’s a right wing capitalist approach and they’re doing it because that’s what works. If it didn’t work you wouldn’t drive a car with a stereo that plays c.d.’s, you wouldn’t live in a comfy house or condo, you wouldn’t be able to take vacations anywhere in the world and you most certainly wouldn’t have a 100” television in your living room. Ironically, the attack on the economic system, by those who don’t have a clue about how it works, is actually proving that it works fine. Wed, 10 Feb 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Two_Edged_Sword_Of_Earnings.html http://www.investorbootcamponline.com/blog/The_Two_Edged_Sword_Of_Earnings.html If ever there was a time that earnings drove stock prices this is it. Report bad earnings the stock price keeps going lower, report surprisingly good earnings and massive buying rips the stock higher. This might not seem like a surprise since earnings is the number one fundamental variable to the success of a stock in the long run. But the big money that dominates the stock market is making it clear expectations of earnings growth is the key to their position. Toy manufacturer Hasbro Inc. (HAS-n.y.) recently exploded higher by over 12% to a new high on the announcement of fourth quarter earnings. The earnings increase of 7% and revenue growth of 12% was enough to convince many mutual funds Hasbro’s business was improving. So was the dividend increase. But other companies have reported strong earnings growth and yet their share prices are suffering a deep correction. The online video game sector in China is an example. Numerous companies from this sector were stock market darlings through the first half of the powerful rally in 2009. But now they are amongst the worst stocks in the market. Why? The answer lies in the expectation that Chinese search engine Baidu.com (BIDU) will eat into their market share with the recent announcement they are entering the online video game business.This will undoubtedly affect some of these companies quite badly. But one of them may hold their market share making that stock a very attractive buy. Eventually heavy buying will be the tip off as earnings announcements are released. In the meantime it’s wait and see. It may have been a pure guess to buy into the stocks of companies like Hasbro before the earnings report. Knowledgeable investors could have anticipated strong earnings but it would have been difficult to predict the reaction of the market. With the market mired in a correction, the risk is even higher. Big gains in companies with strong earnings growth may be a tip off to the next rally’s best performers. We’re keeping a list of them to monitor their condition and be ready to buy at the beginning of a new up trend. You should too. Fri, 05 Feb 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Correction_Is_Getting_Ugly.html http://www.investorbootcamponline.com/blog/The_Correction_Is_Getting_Ugly.html The correction in the stock market is getting ugly. In just three weeks, many stocks have lost 25-40%. Some of the best performers in the rally are down a monstrous 50% already (weight loss products company Medifast –MED for example). The rapid declines and heavy losses are eerily reminiscent of not so distant market downturns. The gains in the rally that erupted from the smouldering remains of the credit crisis meltdown have been huge. The unexpected recovery, and its strength, has been the financial cavalry for investors around the world.But if investors don’t take their gains and clear out how much of those gains are going to be given back? The connection to the bear market is too close for comfort. Like 2007, the banking sector started to drift lower in relative performance to the market long before the market topped out (August 2009 for the Canadian banks). Now, the last three weeks has been much like the three week period of January 2008 when stocks of the best companies lost 35%. Bear markets give investors opportunity to learn a new lesson in money management. The most recent lessons were directed to mutual fund investors. 2008 was one of the worst in history for mutual fund performance. Mutual funds will not go entirely to cash nor will they advise their clients to switch to an alternative in a safer asset or market. The implication is investors have to initiate action when the markets give the signal to do so. Investors remain far too complacent accepting the investment industry to take care of them. Investing is not about hope. It’s about reacting to conditions when conditions change. But retail investors tend to react when it’s too late. Consider the following possibility. The effort to stimulate the market and the economy was a well known government and central bank engineered effort. You have to know that certain “big money” investors were also part of the orchestrated effort planting their funds before the market lift off started. They are going to take their profits at some point. Perhaps the very heavy volume that punctuated the market top for several weeks before it rolled over was their money coming out. The question is, will retail investors be left “holding the bag”? Wed, 27 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Its_Time_For_A_New_Fiscal_Policy_Agency.html http://www.investorbootcamponline.com/blog/Its_Time_For_A_New_Fiscal_Policy_Agency.html While fanatics looking for attention continue to run with the idea that the Fed. should be dismantled we would suggest that attention be focused on establishing a new agency; one that would oversee fiscal policy. Central banks, such as the U.S. Federal Reserve Board or “Fed”, oversee monetary policy which includes various tools intended to fuel economic expansion or contraction through monetary measures. But fiscal policy is run by the ideological and self serving interests of whatever political party is in power. Americans and Canadians might not think this is an issue but examination of other countries, current and through out history, shows this can be a serious problem. The economic issues that prevail in the U.S. and Canada can be attributed to a lack of consistency in fiscal management. This is related to the predictable change in governments thanks to a four year system that gives the electorate the opportunity to vote for the hairstyle and charming speeches they like. But this is no way to run a country. If you ran a business would you hire a teacher to run it? Would you allow the head of shipping to demand some perk or he would block the implementation of a significant company policy or plan? It’s time to establish a separate agency with professional, knowledgeable and experienced individuals who understand the peculiarities of the country and every relevant economic and financial variable. Like central banks, it would be separate from the government and would not change because a new party was in power. If capitalist free market activities and lower taxes is the answer to an issue then a left wing party should not be able to change that. Mon, 25 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stock_Market_Enters_A_Correction.html http://www.investorbootcamponline.com/blog/Stock_Market_Enters_A_Correction.html The signs of a major correction in the stock market are too obvious to overlook. The implication is a market top will remain for some time and many of the market’s biggest winners face the possibility of significant declines. The average correction in a bull market trims 25-35% of most stocks including the market’s best performers. Stocks that fall more than this are unlikely to be good choices when the market picks up again. The other characteristic of corrections is that they get worse as time goes by and they don’t end until everybody believes they can only get worse. We are nowhere near that sentiment yet. The signs of a correctionSignificant losses on heavy volume in market averages. Market averages have also undercut a key support level during the rally, the 50 day moving average.Many of the market's best stocks are in a decline that has been punctuated by heavy volume, undercutting the 50 day moving average with an increasing number of small cap. stocks facing large percentage declines. These stocks are the crystal ball into the market's true underlying condition. Until mid January they continued to trade well. Other markets, such as most commodities, are undergoing declines that have broken their uptrends. Since most markets have been correlated this is confirmation of the stock market's budding correction. Several significant factors developed within just a few days of each other sparking the heavy selling. The most significant of these is tightening action by the Bank of China and a related increase in T-bill rates. The importance of this should not be underestimated for its economic and financial market impact. Many investors claim to want to be able to act early in a correction so they can avoid the most severe selling. Now appears to be one of those times. Corrections, and the associated selling, is psychologically challenging. But it can be viewed as a process, not a one shot deal. It can also be seen as an opportunity. Take advantage of the decline to buy back in at lower prices later. Unfortunately, most mutual fund investors and their investment advisors believe they are supposed to be passive in the management of equity funds. The lesson from 2008 may be lost if investors don't switch, for free, from their equity funds to a money market fund or some other alternative. While it is purely speculation to predict the depth of a correction or how long it will take, investors may want to consider the following factors; stocks put in very large gains since last March, the economic rebound may falter and the big money that was part of engineering an economic and financial market recovery might take their profits and leave everyone else "holding the bag". Mon, 18 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Dont_Waste_A_Perfectly_Good_Crisis.html http://www.investorbootcamponline.com/blog/Dont_Waste_A_Perfectly_Good_Crisis.html The earthquake in Haiti is a terrible devastation of lives, the magnitude of which, many people around the world may not be aware of. The irony of one of the most severe earthquakes the planet ever gets is that it hit a country which is the most impoverished in the Western Hemisphere.Haiti has neither the infrastructure of solid buildings nor the ability to deal with such a natural disaster. They are completely at the mercy of aftershocks and the efficiency of rescue efforts from outside the country. But there is opportunity in this crisis. With help coming from numerous countries and organizations around the world Haiti may soon undergo some kind of resurgence that brings their people a healthier and more productive lifestyle than they had before the earthquake. In 2008, the credit markets brought the global economy to a standstill. It was an earthquake in the financial system not seen since the ‘30’s. The stock and commodity markets were crushed in the “fall out” as overleveraged mortgages and securitized products were suddenly without a bid. Rating agencies had, apparently disappeared, a clearing facility that would have handled the securitized products didn’t exist, the Regulators, of course, were not the problem, and to top it off the rich had been scammed in their choice of Ponzi schemes. But where are the new ideas and processes that solve some of these issues? What changes have been made, by the regulators or otherwise, that shifts the relationship of firms and the individuals who work in them so accountability is restored? Here we are in early 2010 and U.S. politicians think the solution lies in taxing bonuses paid to employees of financial service firms. Meanwhile, there isn’t a person out there who doesn’t recognize that the issues of too much debt are being dealt with by throwing more money around. That’s great for investors who have milked a recovery in the stock market that has taken the market averages above the pre meltdown levels of September 2008. But it looks like an opportunity to put a perfectly good crisis to work has been missed. Thu, 07 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/No_Website_No_Email_No_Stock_Buy.html http://www.investorbootcamponline.com/blog/No_Website_No_Email_No_Stock_Buy.html You’d think that with the worst economic decline since the Depression, a major meltdown in the banking sector and global markets that more businesses would be working on their relationships. But publicly traded companies (stocks), continue to leave their investors in cyberspace. Two areas that continue to baffle us here at Investor Boot Camp Online are; Publicly traded companies with no websites. Investor Relations departments that don’t answer emails. The U.S. is supposed to have the highest level of transparency of all stock markets. Canada isn’t as transparent as the U.S. but you’d think in these two countries a website is an obvious and necessary cost of running a publicly traded vehicle. If the politicians and the regulators want something to do, why don’t they make a website with certain basic content a mandatory condition of a listing?If a company doesn’t have a website, how are potential clients, partners, and suppliers, supposed to obtain basic information? If a listing doesn’t have a basic website, why should you invest your hard earned money in their stock?The purpose of the contact information under Investor in a website menu, for those that have one, is to provide information, and comfort, to existing and potential shareholders. Why aren’t more emails being answered? How many people might have bought into the stock if they had received a prompt and acceptable answer to their inquiry? Perhaps if management prepared an investor presentation and posted it on their website some useful information would be accessible and fewer inquiries would be directed to investor relations. Correction, that should be “poor investor relations”.Looking at a company’s website is the first step in researching a stock. If they don’t have one, take the stock off your buy list. If you send them an email with a reasonable inquiry and they don’t answer it, take them off your buy list. Mon, 04 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Self_Centred_Headlines.html http://www.investorbootcamponline.com/blog/Self_Centred_Headlines.html The current economic and market related headlines are a perfect example of self interests at work. Here are the headlines taken directly from Bloomberg on the morning of Monday January 4th. Geithner Finds No Good Deed Unpunished as Banks Seek Profits From Bailouts Bernanke Says Low Rates Didn't Cause House Bubble, Regulation Best Answer This is not intended to be a criticism of the individuals or organizations involved. The problem is, once again, that information being jammed into people’s heads is uninformed to the point of being misleading. Starting with the first issue of profiting from bailouts, let’s go beyond Economics 101. Would it be a better idea if the bail out funds produced losses? How does it help if the businesses who lost money creating the credit market meltdown continued to lose money regardless of what their source of capital is? The second issue is Bernanke claiming that regulation is the answer to the housing bubble issue. The issue was related to human behaviour. You can change the rules related to mortgage lending, and enforce them, but regulation is not the core issue or the solution. Low interest rates have had a major impact in this cycle’s house buying spree as millions of home buyers around the world will acknowledge.So have rules implemented in 1997, in the U.S., which are not getting any media attention. Common to the stories behind these headlines are people who are “killing time” until the issues are finally resolved. They’re making their daily lives easier while millions around them are blaming others for their hardship. Politicians are taking the easy and predictable political road of slamming Wall Street, the banks and anybody else who attempts to earn a profit. They are appealing to “Mainstreet” who carry a negative attitude toward big corporations even though they hand a pay cheque over to them every week and pay their health benefits. Unfortunately, for Geithner and Bernanke they have to deal with these politicians who are grandstanding.Bloomberg quoted Joshua Rosner, a managing director at Graham Fisher & Co., who said “Prices of these securities may slump again, leaving the banks exposed to potential losses that the Treasury Department’s rescue plan was designed to mitigate.” That’s a possibility, but once again we have to look at the self interests of the source of the quote. Graham Fisher & Co. is an organization that advises regulators. Naturally, Rosner says this because this is what the Regulators want to hear. Does anybody truly think it's a good idea to lend bail out funds to those who can't repay it?Successful investors know that the media and the “mainstream” are lost in headlines and poor information. If markets didn’t tell the truth who would? Fri, 01 Jan 2010 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Not_Looking_Ahead_To_2010.html http://www.investorbootcamponline.com/blog/Not_Looking_Ahead_To_2010.html Investors love to make, or at least listen, to projections for the upcoming year. But the most successful traders don’t operate that way. Success comes from timely trades. Projecting, or speculating of any kind, adds little to executing timely trades. In fact, for many people, projections are a distraction that leads to blowing potentially big returns. It’s irrelevant if someone is “right’ with their projection. What matters is the timing of the trade. In order to make timely trades the investor needs to be organized and observant. That implies objectivity.What is particularly interesting about the stock market is how accepted thinking, or projections, rarely turns out. If a particular belief was widespread, investors would have already taken a position (buy or sell) and the projection would have already occurred. If it hasn’t occurred, it isn’t likely going to simply because there isn’t enough action associated with it where it matters. That’s in the market. Here are some of the more common projections for 2010; Central bank rates are going to start moving higher. Inflation is going to accelerate. The price of gold is going to $2,000-$2,500/oz. The U.S. dollar is going lower. It takes time, of course, for a trend or cycle to complete itself. But rather than spend too much time on either side of the beliefs associated with a trend know what the current trends are and watch for new ones to develop. There will be plenty of opportunities for investors in 2010. The average investor, particularly those who are somewhat passive in their investment approach, may want to be prepared for a correction in the equity markets. Given that the market is into the tenth month of a powerful advance, it is historically precedent that a correction of some kind is highly probable in 2010. You'll notice that isn't in the list.Tue, 29 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Have_No_Fear_In_Opportunity.html http://www.investorbootcamponline.com/blog/Have_No_Fear_In_Opportunity.html In a previous article, “No Money, No Environmental Progress” (December 17, 2009), the issue of a realistic and serious effort for energy conservation was addressed. Specifically, there’s a lack of it! But there are some individuals, and organizations, that are doing their part. It was also previously mentioned that one of the bigger issues facing small hard working companies is the challenge to raise capital. Since the 2008 credit crisis, raising capital is affecting everyone including big business and governments. Investors are, again, acting on emotion and dour headlines instead of rolling up their sleeves, doing some research and investing the “old school” way. Some companies are working on meaningful solutions. Canadian company Outlook Resources Inc. (OLR-tsxv), recently acquired U.S. based low carbon fertilizer firm ERTH Solutions Inc. The bio-fertilizer operation is an efficient method of converting organic waste with appeal to companies seeking to reduce their carbon footprint. Outlook’s challenge, like other emerging organizations, is they require capital.Outlook (OLR) is a turnaround situation where a small group of opportunistic business men took over a mismanaged fish farm operation. The fish farm is still a part of the operation, for now, but the bio-fertilizer operation is the primary focus. It’s a business solution that has considerable potential in the U.S. where the government has mandated carbon footprint reductions. Outlook’s ERTH operations are still early stage with minimal revenues in a business with a longer term sales cycle. But the company is in advanced talks with various organizations. Should just one of these companies move ahead with the installation of ERTH’s “plants” the impact to OLR’s financials would be significant. Ironically, for companies like Outlook Resources, obtaining customers appears more likely than raising money does. Perhaps 2010 will bring renewed success to the beleaguered sales people in the investment industry. They could use a little help in convincing investors to “take a shot” and place money in long term investments. Some of the possibilities may not only save the environment but many investment portfolios. Mon, 21 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Is_Another_Banking_Collapse_Developing.html http://www.investorbootcamponline.com/blog/Is_Another_Banking_Collapse_Developing.html Share prices in the banking sector have been breaking down with substantial declines in certain countries and recent trend changes in others. The decline is so significant in some U.S. and U.K. based banks that the stock market may be tipping investors of the possibility of a serious issue in the banking sector. Again! Investors surely don’t need to be reminded of the credit crisis and the market meltdown of one year ago. But the trading action in the banking sector looks eerily similar to the trading action that preceded the recent bear market in stocks.Relative strength indicator, or R.S. line, turns down before the stock market goes lower. The relative strength in banks turned down in May 2007. Mortgage financing services, subsequently started their massive downturn on July 26, 2007, followed by a peak in U.S. and China stock market averages October 31, 2007.Canadian banks, which remain amongst the strongest performers internationally, were one of the first to have their relative strength lines turn down (early August). Relative strength is an often overlooked but extremely important indicator. In early December, bank stocks around the world sold off sharply on the Dubai World debt repayment issue. Canadian bank stocks recovered from this but many Asian and European bank stocks did not. Since then, a number of Canadian bank stocks and finally most South American bank stocks have broken their up trends. On Friday Chilean bank, Banco Santander Cl Ads (SAN-ny) and Columbian bank, Bancolombia Sa Ads (CIB-ny) suffered a heavy volume decline. They are the last of the best banks (i.e. fundamentals and superior stock performance), to maintain up trends. The greatest concern lies with U.K. banks. The U.K. housing market and economy have been amongst the largest casualties in the credit crisis. Irish banks, in particular, have been hammered after a rally from the March 2009 bear market lows. These are not normal correction type declines. They are the sign of a potentially serious problem.BankSymbolPercentage Decline Allied Irish BankAIB67% Bank of Ireland IRE65% Royal Bank of ScotlandRBS48% Lloyd's Banking GroupLYG37%It is possible that the recent declines, as large as they are, are a normal revisiting of the low after a very deep bear market. After all, Allied Irish Bank (AIB), did run up by a factor of ten times from March - September 2009. Returning to the low, or near it, is relatively common throughout history. But investors have the unpleasant and financially devastating experience of 2008 to know enough to be prepared for a repeat of a serious underlying problem. Many analysts, such as Niall Ferguson, believe the problems in the banking sector are still severe. The difference for investors, this time, is there are attractive investment alternatives. Given the recent trading action in banks and the viable alternatives in resources and technology, is there any reason to hold bank stocks? Thu, 17 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/No_Money_No_Environmental_Progress.html http://www.investorbootcamponline.com/blog/No_Money_No_Environmental_Progress.html Let’s face it, reducing wasteful energy consumption isn’t happening. Governments can set emissions reduction targets all they want but their efforts are targeting manufacturing and are therefore limited. The reality is there are 350 million people crawling around in the U.S. and Canada but there are few signs of meaningful changes in environmentally conscious behaviour.If people were serious about pollution and global warming and reducing wasteful energy consumption they’d be doing some of the following; Shutting the oven off ten minutes before baking time is completed. Opening the oven door after baking and releasing the warm air into the room (winter time). Turning the thermostat down, or off, when leaving the house. The reverse process in the summer. Turning off excessive exterior lighting on homes. Using a composter. Other obvious changes that could have already been accomplished but haven’t include; More appropriate sizes for many household and business products. Less packaging. The reality is, most people don’t appear to be the least bit interested in taking control in their own realm. The implication is a solution lies with governments forcing manufacturers to implement measures on consumer products. Things like timers on stove tops and pre programmed thermostats for furnaces and air conditioners. Speaking of which, it’s time for a design overhaul on H.V.A.C. systems. They are archaic and lack any sense of engineering efficiencies. The solution to change in modern society has always been through the mechanism of “free enterprise”. If there is money in it, business will find a way to make something happen and make it happen faster. The problem is, there’s no profit for the changes that are needed. The changes are also against the human nature desire of "more". If change can only be achieved through government intercedence, it thrusts the government into an unprecedented role of responsibility. That has never paid off. Investment markets aren’t doing their part either. Fear from the credit market crisis and market meltdown in 2008 has rendered financings a major challenge for many smaller companies. There are some decent companies out there with viable solutions and hard working people behind them. Too bad they can‘t raise money to move ahead. More on this next time. Wed, 16 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/There_Are_No_Role_Models.html http://www.investorbootcamponline.com/blog/There_Are_No_Role_Models.html The issue of risk in using celebrities as marketing tools has taken a twist. Consultant Laura Ries was quoted by the press saying, “there doesn’t seem to be any good role models out there”. That’s quite a statement! Out of all the people in the U.S. and Canada there are no “good” role models. That’s a good one! This is not intended to be a criticism of Laura Ries. Her comment was intended, presumably, to be a statement about the quality, specifically, of celebrities and athletes that corporations might use to market their products and services. But let’s take a minute to work through this one. When you go through your day today, look at your neighbour in a different light. Look at your colleagues or the person working in the coffee shop you stop in every day. What are these people like at the core? Are they ethical, honest people who don’t cheat on their spouses, drink too much or put themselves above everyone and everything else? Could any one of these people be a legitimate role model?Better still, who might we find through a church? There are millions of the faithful, who strive to live as Christ did. These are the true role models in our society. But western culture, and culture is used loosely here, does not exemplify morals and a higher calling. Our culture glorifies the rich, men who are “players”, celebrities because they’re bigger than life and professional athletes because they’re supposed to be something that the rest of us can only dream about. The world’s greatest professional golfer, who millions think of as “The Man” has been revealed for what he truly is at the core - empty and bankrupt. The timing of Eldrick Woods problems couldn’t have been scripted better. The “Tiger” has been brought down to the lowest level just before Christmas. The baby Christ, and only role model, is mightier than the “Tiger”! That’s the truth, and perspective, about the golfer, formerly known as “Tiger”, and everyone else that this society puts on a pedestal. How poetic is that? How just is that? This dissertation might not seem to be an investment or economic matter. But didn’t the world “come to an end” just one year ago when the credit markets put up a “closed for business sign”? Didn’t the truth come out about many people, and organizations, who were not operating on moral high ground?For one day, starting today, operate the way we really ought to. Give yourself a second chance and step up. Tue, 15 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/U.S._Dollar_Trend_Shift_Creates_Opportunity.html http://www.investorbootcamponline.com/blog/U.S._Dollar_Trend_Shift_Creates_Opportunity.html There is a widespread belief that the primary driver behind all investment market trends is a falling U.S. dollar. After all, the U.S. dollar has been in a major downtrend for years so conditioning is well entrenched. But the relationship the U.S. dollar has with markets may be changing and it will surely “shake up” the beliefs of investors and traders around the world. What has caught the eye of traders, and analysts, is the apparent breakdown in the Euro’s up trend against the U.S. dollar. The implication is a rising U.S. dollar is bearish for the stock market and commodity prices. But other currencies are not breaking down against the U.S. dollar. The Canadian dollar (FXC) is holding its ground, while the Yen (FXY) and Australian dollar (FXA) remain in up trends. These trends can be seen on a chart of U.S. traded E.T.F.’s whose symbols are noted here. We’ve already seen one currency trend change this year and that was with the Yen. The U.S. dollar is now the currency for the "carry trade". The impetus for this change is the fuel for further U.S. dollar gains. There is plenty of credit available at multi decade low interest rates in the U.S and the U.S. government bond market is the most secure in the World.Those are powerful influences.But a decoupling of the U.S. dollar’s ingrained relationship with currencies goes beyond the currency markets. If other currencies go lower against the U.S. dollar, such as the Euro, but commodity prices go higher, or remain stable, the implication is commodity prices are rising on a currency adjusted basis for Europe and falling for the U.S. Think about the economic implications. That’s a tornado blowing through just about every market and industry around the world. Perhaps it’s too early to jump to any conclusions. But an examination of key commodity markets reveals a bullish implication. Gold is a modest 9% off its high while copper is less than 5% from its high. Oil has fallen further, by 14%, but the decline has been gradual, orderly and increasingly non volatile. These are all indications of a constructive pullback in an up trend. The implication is these commodity markets, and presumably others, will eventually resume their up trends. It was previously suggested, in this column, that the stock markets powerful up trend might end with a “climax run”. That’s when numerous stocks undergo a very powerful short term advance with the largest gains on the heaviest volume since the rally began in March. If you think through the process of shifting sentiment and add in a U.S. market that becomes more valuable due to a surprising rising currency this event is imaginable. Should the U.S. dollars apparent new trend continue, extraordinary opportunities may be seized by those who move with the times. Now is the time! Thu, 10 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Truth_About_Paying_Back_Government_Bail_Outs.html http://www.investorbootcamponline.com/blog/The_Truth_About_Paying_Back_Government_Bail_Outs.html An increasing number of governments around the world are considering, or implementing, controls on the compensation that executives in the banking sector may earn. It’s a political ‘hot potato” that left winged governments can’t help but take a bite from.Meanwhile, a growing number of financial service firms are paying back “bail out” funds. Financial service firms are increasingly raising capital to pay back government bail out funds and buy out the government’s share ownership. The corporate world is attempting to remove government intervention while ensuring executive compensation is in the control of the company, not the government.The actions of the government and the corporate banking sector are understandable. Each has their own agenda and, depending on your viewpoint, you side with one or the other. But this is not to support or criticise either of them. This is intended to focus investor attention to the implications that may have a direct impact on their portfolio. Investors need to be aware of the effect these equity financings may have on the stock market’s overall trend. Investment banking activity typically ramps up when the market has gone through a relatively large gain. With many market averages up well over 50%, this is one of those times. It’s much easier to raise money when conditions have been bullish because investors feel good about it. But unfortunately, many investors don’t recognize that the timing of “feeling good” and deploying new cash doesn’t work very well.Billions of dollars are being raised in financings thereby sucking money away from buying into stocks through the secondary market (i.e. the stock market). What cash is going to be left over to come into the market and continue to drive stock prices higher?On one hand, investors might like the idea of getting the government’s hooks out of the financial services sector. But they might not be happy about it when a correction is underway and their banking stocks, along with everything else, are sinking into the abyss. Remember, that governments and their “big money pals” want to take their profits from the capital they planted early in 2009. This is how they profit and the rest of us are left “holding the bag”. Fri, 04 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Canadian_Home_Buyers_.html http://www.investorbootcamponline.com/blog/Canadian_Home_Buyers_.html Canadian real estate is hot! You might have thought hot stocks and commodities were the big play but it is hard to deny the power in the housing market in the “Great White North”. Good for home owners there. You’ve made some money again this year. But when does this fun come to an end? Does anybody out there sense that homebuyers in Toronto, Vancouver and many other centres are reckless with little concern to the price they’re paying? Bidding wars prevail, still, with the “sold” sign landing on the lawn within two days of open houses. Drive around any neighbourhood on a weekend and then go back on Tuesday. The houses are sold.Sure, it’s cheap to carry a mortgage now. Mortgage rates are about as close to “free” as they’ll ever get. Rates were as low as 2.5% in September. But how many homebuyers are putting only 5-10% down and carrying the rest in a mortgage? What happens if rates run up to 5-7%? How many homeowners will be facing a cash crunch and what will that do to the housing market?The Cost of a Mortgage IncreaseA $500,000 property price, with $50,000 down, and a mortgage at 3.0% amortized over 25 years is a $2,700 monthly payment. If the $450,000 mortgage cost jumps to 6%, the monthly payment becomes $3,460. That’s a 28% higher carrying cost of more than $9,000/year. The homeowner would need $25,000 additional income per year to service the higher mortgage cost. Fix the House Now, Your Finances LaterIt used to be that fixing up your house, and reselling, didn’t pay. You could spend money on key rooms, kitchens and bathrooms, but only part of the renovation funds would be recoverable? But for the first time, ever, that trend has shifted. Houses have been redone with a bold, clean colour, used in a crisp decorating scheme throughout the house. Houses for sale look great now and they’re turnkey. Buy it, move in, and your friends will crow about your big score! But every market has its cycles and this one will end. The current cycle in Canadian residential real estate is about to move into its seventeenth year. This is historically one of the longest, if not the longest, in history. What’s going to happen to the price of these exorbitantly priced houses, with high property taxes and maintenance costs, when the sellers market “rolls over”? Does anybody care or is the obvious rescue of American homeowners what Canadian homeowners will be banking on?Tue, 01 Dec 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Deals_Are_Developing_Behind_Closed_Doors.html http://www.investorbootcamponline.com/blog/Deals_Are_Developing_Behind_Closed_Doors.html There are some issues facing the economy that have the doomsayers crowing about a repeat of a financial meltdown. The major ones include;The huge amount of refinancing in the U.S. commercial/industrial sector in 2010. The capital shortfall in U.S. banks, and others, around the world due to previous and pending write downs of assets. But here’s why these may not be the issues people think they are. The primary reason is that they are known and when issues are known, there are people, and organizations, working on them. When they’re working on an issue some kind of a solution is forthcoming.Not all companies will get the money they need. But the ones that fail are the weak, and likely poorly run, organizations that are destined to wither away. The rest will negotiate deals that may not be ideal, to some, but the parties involved will arrive at terms that are workable. There is also, apparently, a lot of cash on the sidelines. Some have used that as a bullish argument for a sustained up trend in stock and commodity markets. But perhaps this cash is waiting for the apparent demise of some organizations so they can swoop in and make a deal at a bargain basement price. It’s called business and that’s how profitable deals are made even if it appears to be at someone else’s expense. The strongest survive! The ability to raise money and run a business during a slowdown will be tested.The boardroom negotiations will be hot and heavy in 2010. The solutions to widespread financial woes will be resolved there without any press. Then the average investor has a golden opportunity to watch and see which companies are the big beneficiaries of boardroom negotiation successes. The stocks of these companies will suddenly shoot higher and continue to romp as the word gets around they’re poised for significant growth. Watch for them and profit. 2010 may be the year of “special situations”. Sat, 28 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/How_You_Knew_Gold_Stocks_Were_In_For_A_Big_Gain.html http://www.investorbootcamponline.com/blog/How_You_Knew_Gold_Stocks_Were_In_For_A_Big_Gain.html In early September, gold stocks blasted off! The entire sector underwent massive volume buying shooting prices sharply higher over four consecutive sessions. The gains were nearly 20% as numerous gold stocks cleared ranges, or bases, that stretched for nearly five months. This is power and when you see a massive rocket leave the launch pad with this characteristic, you can bank on it going a long way.One of the keys to making reliable trades is to know what the action is in other stocks in a sector, particularly amongst the best companies. When stocks move as a group, with power, the odds of a successful and profitable buy go much higher. The gold sector’s powerful September action stood out as the most impressive sector wide action in any sector during the rally that started in early March 2009. Since then, gold has risen 20% hitting new highs on nearly a daily basis. Many gold stocks have tacked on 50% gains. So what do investors do now, especially those that missed the opportunity to buy in?Avoid the tendency to buy because you missed the ride. This sector is volatile and sometimes difficult to trade.Wait for a period of consolidation (basing) to develop. This sets up another chance to buy in.Gold stocks have not yet had a significant correction since the early September break outs. Powerful up trends don’t typically end on the first correction (historical evidence). The implication is the first big correction in gold stocks may present an opportunity for all "gold bugs" to buy into. For some, they may want to “bottom fish” trying to buy near the lows of the consolidations. For others, waiting for the break out from the first completed base, formed during the correction, represents the confirmation of the resumption of the up trend. It is a more reliable trade to buy on this event from a timing perspective.We're going to track the progress of gold stocks for the purpose of providing members with timely informaton as it relates to buying, and selling, in one of the most powerful up trends investors will ever see.Thu, 26 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/How_You_Knew_It_Was_A_Bull_Market.html http://www.investorbootcamponline.com/blog/How_You_Knew_It_Was_A_Bull_Market.html The Bear was finishedThe bear market was long enough (18 months), and deep enough (50%) to achieve normal bear market cycle characteristics. The bottoming process was long (5 months; October 2008-March 2009) and one of the most severe in history effectively washing out all sellers and preparing the ground work for a sustainable up trend. The Bull had clearly startedThe rally was powerful and sufficiently long to break the down trend providing observers with key recognizable signs that a meaningful rally was underway (by April 2nd, 2009). The rally was displaying power that was a distinct change in behaviour from the bear market. If your child, who had been failing, started getting “A’s” would you not declare they had changed? Leadership was evident, high quality and met historical precedenceSome analysts think the early rally lacked the right kind of trading action from companies, and stocks, of significance. Their observation missed the mark. These high growth companies were the first, and most powerful, stocks to barge ahead. That’s the evidence of a building and sustainable rally. They’re also a long way from being household names which is typical of early bull markets. Perfect World (PWRD) Intuitive Surgical (ISRG) Mercadolibre (MELI) Gafisa Inc. (GFA) Shanda Entertainment (SNDA) Green Mountain Coffee (GMCR) Netflix (NFLX) SentimentMany investors still think the market’s rally is a fake out or a rally in the context of a bear market.A) How is a 60% gain in the market averages a fake out?B)Bear or bull rally; doesn’t matter. What happens after the current rally is irrelevant. Trade what you get and decide on what happens next when what happens next develops.The economyWhen, in any previous economic cycle, has the stock market waited for the economy to chug higher before starting a rally? Tomorrow: We’ll show you how you could have known that gold stocks were going to be big winners. Wed, 18 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Can_You_Lend_Me_A_Dollar_For_Nothing.html http://www.investorbootcamponline.com/blog/Can_You_Lend_Me_A_Dollar_For_Nothing.html Can you lend me a dollar ...at .25%? Many analysts and investors seem to think that nothing fundamentally positive is happening in the economy. Their argument is that another recession is imminent. Everybody’s “stock market girlfriend”, Meredith Whitney, says she’s more bearish now than she was a year ago and a big decline in the stock market is imminent.But what about the trillions of dollars injected into the financial and economic system from central banks in the U.S., Canada, Britain, China, etc.? What about the impact of central bank interest rates near zero? Do the experts out there truly believe these manoeuvres are artificial? Monetary stimulus has been used in many cycles to stimulate the economy. Why wouldn’t a massive injection work this time? Criticizing the kings of commerce: Why? Goldman Sachs has been under so much attack, for making money, that they have resorted to public relations tactics to improve their image. Meanwhile, the U.S. government continues to threaten the financial sector with controls on executive compensation. What is this going to accomplish? Goldman Sachs, in particular, had nothing to do with the issues in the economy. But they can fix it. If the financial services sector becomes compromised, the economic recovery will be delayed. The time for trash talk is over; start cheering for them. The real issue: The credit market meltdown was related to the inability of the financial market system to price securitized assets and debt. Nothing appears to be done about it and the issue isn’t even getting any press. Why not? The “trading system” is at the root of the problem. How are we supposed to know the status of each mortgage in a mortgage pool? When are we going to get some useful indicators such as the region(s) the mortgages are in, the average time remaining on the mortgages, and, perhaps, the average house price the mortgages are on? When we have this type of information, markets will provide more accurate pricing. Stock market technicals: Declining volume is a red flag in an up trend and it is rampant in the U.S. stock market in particular. But occasionally volume is relatively unreliable. This may be one of those times for the following reasons: If the U.S. dollar falls, and commodity prices rise, stock prices will also rise to remain in valuation equilibrium. The other factor is money continues to flow into high growth emerging markets. That sustains economic and equity market up trends globally and in North America. There may be decreasing funds active in North American markets but money is active and the U.S. market’s price gains reflect that. Tue, 10 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/What_The_End_Of_The_Rally_Might_Look_Like.html http://www.investorbootcamponline.com/blog/What_The_End_Of_The_Rally_Might_Look_Like.html Some market observers think there has been too much complacency amongst investors. Sentiment statistics have confirmed this perspective for several months now. Typically, when there is a high level of optimism or bullishness the market peaks and a correction develops. But the trading action hasn’t confirmed investor behaviours that are excessively bullish. The market’s recent gyrations have kept investors on edge scaring the bulls and messing up the bears who have been waiting for a big decline. Since September 23rd, there have been four changes in the trend rendering the investment environment confusing and challenging. That’s not the making of extreme bullishness or even modest complacency. In fact, one of the characteristics of a significant market top is that it happens when almost nobody anticipates it. Many investors have been anxiously waiting for a market top and subsequent massive sell off for months.So what might the market’s ultimate top look like? Investor Boot Camp Online’s research on prior cycles, and expectation for this one, is a “climax run”. A climax run is an extraordinarily large short term gain followed by a collapse in the share price. The gain would be the largest one day or one week gain in the rally and it will be accompanied by the heaviest volume in the entire rally. In other words, the stock turns into a rocket following the already large advance since the inception of the rally. This trading behaviour has punctuated market tops of powerful rallies throughout history. Many will wonder why a climax run has any chance of developing on the heels of one of the worst bear market declines in history. Well that’s a major contributor right there. The fact that the market was so bad has convinced most investors there's little chance of a strong recovery. But, before the rally is finished, the psychological or sentiment cycle will go from one extreme to another as it always has. In the current environment, pessimism is harder to convert but it will ultimately be converted. When the last of the bears finally decide to get on board the rally, investors will have become so accustomed to making money that they’ll believe it will never end. When you feel that way, and you see the climax runs, start putting in some sell orders. Mon, 09 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Silver_Platter_Is_Gold.html http://www.investorbootcamponline.com/blog/The_Silver_Platter_Is_Gold.html Four times, since September 23rd, the equity market appeared to have shifted its underlying trend. But no one seemed to notice. Was it complacency or a case of the “deer caught in the headlights?”But as it turns out, for those that didn’t sell they got lucky. After a horrible 2008 followed by a miraculous recovery the up trend lives on! The silver platter has arrived for investors everywhere! After a scary moment, gold stocks, like the rest of the market, have re-emerged. In fact, gold stocks are starting to look like the “sure bet” that prognosticators everywhere have been trumpeting. You can hear them riding through the town on horse back bellowing “gold $1,500, gold $2,000, gold $2,500”!The problem with feeling good about gold is that everybody appears to feel good about it. Historically, markets tend to change their trend when “everybody is on the same side of the fence”. But despite the rampant bullishness, gold stocks have been a struggle. That trading action is keeping the bulls in check which serves to sustain the up trend.Adding more to the irony of the gold story is that most of the arguments for why gold will be a big winner are not even close to reality. But, since when has mainstream thinking, and the press, dealt with reality when it comes to any investment market especially gold and the stock market? Dear Investors: Enjoy the moment. It is a rare time when the cavalry rides in with a massive rally in stocks saving the herd just as they’re ready to jump off the cliff. Perhaps it’s more than investors who have been saved. The rally in stock and commodity markets may have saved the economy from certain gloom and doom. Gold’s ascent to the top of the investment food chain is the silver platter landing at the investor’s doorstep. Or is it now the gold platter? Tue, 03 Nov 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Is_The_Economy_Stuck_In_Neutral.html http://www.investorbootcamponline.com/blog/Is_The_Economy_Stuck_In_Neutral.html The state of the economy may become increasingly significant for investors. If the economy is unable to build momentum based on productivity and “real economic growth” the outlook for stocks and commodities may become bleak. The stock and commodity markets rally that finally took hold in March was liquidity driven. Trillions of dollars injected into the system by central banks around the world had to “find a home” and the investment markets are the fastest to respond. But now the stock market appears to have entered its first significant correction. The third quarter earnings season is coming to a close and markets will start to focus not on the bottom line, but the top line. Are companies actually experiencing an increase in revenues?But there’s a bigger issue out there.Hedge funds and banks have taken Fed. money at .25% and invested in short term (2 year), government guaranteed 2 year Treasury Notes. At less than 1% (.913%) that might not seem so attractive, at first glance, but it is in fact a return of nearly four times on the cost of capital. It’s also guaranteed. Why would the banks rush out with the taxpayer’s money and lend it to businesses and consumers who represent much higher risk? The fact that politicians and the press have lenders on the radar screen for their “reckless” lending activities they don’t have a lot of incentive to undertake “real business activity”.But here’s another potential issue; the leverage problems that landed the global economy in the tank in the first place may be looming large again. With plenty of Fed. and government cash around why not take as much as you can and leverage up the 2 year note trade? If 20% equity is used with 80% dirt cheap Fed. money, the return is approaching higher risk loan arrangements as well as the historical rate on other growth asset returns. There’s nothing wrong with guaranteed high returns. But how is the economy going to ramp up when there’s no incentive to put capital to work? The stock market has been a blessing with its miraculous recovery, but the catalyst for a continuation of the up trend appears elusive. Protecting capital with rates of return near zero may appear very attractive by the time the calendar rolls over to 2010. Sat, 31 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Revisiting_Past_Horrors.html http://www.investorbootcamponline.com/blog/Revisiting_Past_Horrors.html Do not have a happy Halloween! This message isn’t about having a good time. It is about the suggestion that investor’s not be distracted by the normal tendency to “relax and let loose” on the weekend. Instead, sit down in a quiet place and focus on your portfolio.Both the stock market and the bond market are indicating a correction is underway. If investors have already forgotten about the enormous and frightening decline in stocks and commodities through the fall of 2008, remember it now. Bring that pit in your stomach back. When you open the door on Halloween night to a crew of ghoulish kids let each one of those scary masks remind you of the stocks and mutual funds in your retirement account. I am not speculating on how bad the declines may or may not be in stocks and bonds. That is a game which can only lead to being wrong. But corrections have, throughout history, been brutal affairs financially and emotionally. Why should this one be different? If one wants to speculate, consider that the economic rebound might be faltering, trillions of dollars may be removed from the system and that those trillions were directly responsible for the most powerful first year rally following a bear market since before World War II. This is not the time to sit around with your fingers crossed and justify that you’re a long term investor, or my advisor is taking care of it, or I’m a positive person. None of those are going to work. They haven’t before and they won’t now. They are about as misguided as the Halloween celebration of the devil. The stock market is not about being positive. It is about being vigilant on trade execution to the point of being “hard nosed”! Investing requires reaction near the beginning of changes in the trend. This appears to be one of those times. Avoiding this is an expression of assuming that the financial markets have no risk. Don’t wait for everybody on t.v. to tell you that selling now or switching your mutual funds to a money market fund is the right thing to do. There are no cheerleading teams with investing.The evidence has been accumulated (that’s what Investor Boot Camp Online does) and the evidence is as clear as it has been at any other time throughout history.The financial markets are to be avoided. Act now so you can feel good about it later! Wed, 28 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Are_Investors_Responding_To_The_Market.html http://www.investorbootcamponline.com/blog/Are_Investors_Responding_To_The_Market.html Corrections in the stock market always seem to start with a “different look” to them. Historically, what is similar is investor reaction which ranges between complacent or indifferent to denial. Some look at it as an opportunity and buy in as prices decline. The current time appears to be following the same path. The bullish viewpoint is dominant as the key characteristic of current market conditions, as evidenced in the churning in market averages.Since September 23rd, the markets have had nine sessions where the market average declined on heavier volume than the day before. Through out history, three or four of these sessions, known as distribution, has been the end of the rally and a full blown correction took hold. But, technically the up trend of market averages and many stocks are still intact. But how long will this last? So far, heavy buying has been “soaking up” the selling holding market averages near the highs. What is the market going to look like when selling overwhelms buying?Earlier this week a number of the market’s best performing stocks suffered sudden and deep declines on heavy volume. Historically, these stocks have been the crystal ball into market conditions. They’re telling us that the huge, and unexpected, recovery in the stock market has ended. Investors who rode the bear market down from September 2008 to March 2009 may want to reconsider if they care to do that again. The lesson back then was it doesn’t pay to hold through downtrends. Investment advisors and mutual funds who say investors should hold because they’re "in it for the long haul" are doing their clients a disservice.Investors may want to revisit two themes of stock market investing: Taking early action, as a new trend develops, is the appropriate mathematically evidence supported response. Mindset is contrary to taking action as a new trend develops. That’s the conditioning effect from powerful markets over time. Good trade execution strategies is the way to deal with it. Perhaps investors need a little incentive. Consider that some very powerful people, businesses and the government were part of an overt plan to refuel a recovery in the stock market. They planted their millions earlier this year. Eventually, they will want to get paid. If they're selling now "who's going to be left holding the bag"?Thu, 22 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Theres_No_Advantage_To_Stock_Market_Disclosure_Rules.html http://www.investorbootcamponline.com/blog/Theres_No_Advantage_To_Stock_Market_Disclosure_Rules.html Publicly traded markets are intended to provide a higher level of disclosure and transparency. The principle of fairness is applied through policies such as halting a stock pending material announcements and issuing earnings reports when markets are closed. The idea is everyone is on the same footing and no one has an unfair advantage. But does this truly serve investors?As many investors know, stocks frequently stage large gains or losses at the opening of trading following an earnings release. Every investor is effectively receiving the same price change. But as it turns out the implication, and unintended consequence, is there is no advantage investing in publicly traded equities. In fact, there are numerous disadvantages. Investors routinely rely on analysts and advisors to provide information on a company and its stock so they may have an advantage. But if the analyst is talking to the company’s management, management isn’t supposed to tell the analyst anything that hasn’t been publicly disclosed. In other words, the analyst’s specific inquiries that are intended to provide investors with useful information are not being answered. All investors must wait for either a press release related to corporate developments or the earnings release.There are too many issues compromising the investor’s ability to invest successfully because of the underlying rules that are supposed to support them. Why do we have to wait three months to get information on earnings?If the analysts we rely on can’t get information when they make an inquiry, why should we use them?If you watch the way your stock trades when the market is open why can’t you act on news that is materially relevant? Why not release earnings when the stock is trading and allow for a more orderly progression of price changes as information is acted on by investors over time? What’s wrong with that? Why should you suffer because someone else isn’t paying attention?If you call management of a private company they can talk freely because they don’t have disclosure rules hanging over them. They may not be held accountable to any rules, but in the long run, it’s in their interest to give the investor what they want to know. If you made the effort to call management and talk to them, you should be able to act on what you learned. If others don’t make the same effort, that’s their choice and their potential misfortune. What is about the stock market that has rules that take away an advantage? What other business does that? It’s another obstacle that the average investor has no chance of getting through. Wed, 21 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Penny_Stock_Are_Lottery_Tickets_In_Disguise.html http://www.investorbootcamponline.com/blog/Penny_Stock_Are_Lottery_Tickets_In_Disguise.html The attraction of penny stocks is the huge one day gains that can be found routinely. But instead of becoming giddy with the idea of striking it rich picture the thousands of investor portfolios full of penny stocks with a market value of zero.A Merrill Lynch study reported that 90% of all stocks under $10 ended up at zero. That’s a staggering statistic! But the issue with penny stocks is how it highlights an individual’s subconscious need to “hit the big one”! For those that suffer from this, mindset is effectively overriding the realities of investing. There is plenty of evidence that investing in stocks over $10/share that are well entrenched in up trends, with growing earnings and sales are a much better bet.What many investors don’t realize is stocks that have been big winners for a sustained period tend to continue to log big gains. But fear keeps some investors out of these stocks. This emotional reaction is the flipside of the “hit the big one” condition.A good trade execution system is the solution for dealing with this. You don’t have to feel good about how you’re trading to be successful. In fact, investing has an element of doing what is counter intuitive to feeling. Who makes money at casinos and racetracks? Answer: casinos and racetracks.Who makes money in publicly traded companies that are “penny stock status”? Answer: management, stock exchanges (fees), investment dealers and investment advisors. Where’s the investor in this list?Penny stocks are like lottery tickets. It’s big potential but, ultimately, money out of your pocket. Don’t fall for the trap by routinely spotting big winners. Other people, and organizations, are profiting from misguided greed. If it really worked, we’d all be rich. Tue, 20 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Its_Now_Or_Never.html http://www.investorbootcamponline.com/blog/Its_Now_Or_Never.html The stock market has just resumed the up trend after another brief, but scary, pull back. After seven months and the biggest first year post bear market rally since before World War II the market is sending a very clear message. Get your cash in or you're going to miss it. Bulls and bears alike have been waiting for the up trend to crack. But sentiment is not extreme yet and until it is, markets typically march higher. The evidence is apparent in the relatively low volatility and tight orderly trading action. The stock market almost seems to be in a vacuum right now. Isn’t this up trend the most unexpected, unlikely development that is “a dream come true”?The media could be running wild with stories on the market’s powerful advance following one of the worst declines in history. This is actually a bigger story than people realize with some interesting twists. It was just over a year ago that the worst weekly decline in history occurred. Remember? Since then reports of high unemployment, rampant economic woes and central bank rates stuck near zero have been beaten to death. But the stories that are most repeated are rooted in false interpretation and economics. The stock market is notorious for intertwining a cycle of changing viewpoints with the underlying price trend. Until these weak positions have been erased, the market will work continue to “work over” those who counter the real trends. The media could run with the idea that big government is engineering a huge resurgence in the banking sector and the stock market. After all, isn’t that what the stimulus program and central bank action is all about?One could conjure price targets for the stock market from this idea. The governments objective is to “get conditions back to the way they were before the big meltdown” in 2008. That implies many stock prices will recover to their bull market highs of 2007-2008. Some stocks, like Apple (AAPL) are getting close. That’s when nervousness, and selling, may be appropriate. But until then the green light is on. It’s now or never!Thu, 15 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Best_Stocks_Tell_Us_The_Stock_Market_Is_Going_Higher.html http://www.investorbootcamponline.com/blog/Best_Stocks_Tell_Us_The_Stock_Market_Is_Going_Higher.html On Wednesday, October 14th U.S. market averages gave a “buy signal” that has occurred at the beginning of every rally throughout history. The gain, of greater than 1.5%, was the seventh gain in the last eight sessions and pushed the S&P 500 and Nasdaq to new highs clearing a short but troublesome period in the market. More importantly, the action of top performing stocks, defined here as “leaders” is increasingly bullish. As subscribers to Investor Boot Camp Online know, bullish action in the “leaders” is the window to the stocks market’s underlying condition. We identified a specific bullish trading pattern in the current up trend that has been the ultimate “tool” for tracking the performance of stocks. This unique pattern of investor behaviour suggests that shareholders have not been selling the market’s best quality companies. The behaviour is essentially a “holding pattern” or trading range which, with renewed buying, shoots the price above the range enabling investors to make new buys. It is also the tip off that stocks overall will continue their up trend.Even the bulls have been anxious about a pending correction. But several periods of pullbacks over the last five months have had the appearance of a developing correction. That has served its purpose with keeping sentiment from becoming excessively bullish and the up trend alive. But eventually this powerful up trend will end and a correction of significance will develop. Here are the possible, and probable, events or targets that may mark the end of a stock, and the market's, up trend. A full recovery in a stock's price to the bull market peak, and all time high; this occurred in 2007 for most stocks, and 2008 for many Canadian stocks. Historically, stocks consolidate near the high after logging a nearly complete recovery. That’s the nature of investor behaviour. Apple (AAPL) is now just 6% from its 2007 high of just over $200/share. Watch how it trades over the next month.The broader averages return to the “credit market meltdown level” which occurred August – September 2008. The S&P 500 was in the 1200-1300 range at that time. It is now less than 10%, at 1100, away from that target.It is speculative to decide where, and when, a market or individual security will peak. But history has always been the best predictor of near term investor behaviour and these targets are probably "locations" for a change in the trend. When it comes to the stock market, it pays to be prepared. Invest like a Pro!Tue, 13 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Stock_Market_Has_Been_Forgiving.html http://www.investorbootcamponline.com/blog/The_Stock_Market_Has_Been_Forgiving.html I'll be appearing on CBC Business News Tuesday evening. The program starts at 6:30 p.m. e.s.t. This is the last week for this program. The stock market has been up six straight sessions after a brief decline from the September 23rd high. The decline displayed characteristics that are common at the beginning of corrections. But once again, the market’s recovery exemplifies not only its strength but the way it has fooled bears and bulls alike.So it’s back to the up trend, or is it? The market has increasingly shown sign of tiring. The six session winning streak for the S&P 500 and the Dow has been on declining volume from one session to the next, below average volume and lower volume than the decline that preceded it. That’s not the fuel of a hot market index. Most stocks have risen over the last seven months but many have logged big gains on falling volume. Declining volume, in market averages and individual stocks, has been a precursor to declines. Now the averages are at the September 23rd high, placing the market in a pivotal "make or break" situation.The market, or equity investment environment, has been forgiving to investors during its powerful resurgence. Those who hung in, holding their stocks, from the severe declines of last fall and earlier this year have been “let off the hook” for doing so. For others, who have been actively buying since March when the up trend began, their trading mistakes have not been exposed. But that may be about to change.The dynamic of the lessons the stock market teaches is perhaps the market’s most salient characteristic. The “trend is your friend” might be the most appropriate cliché for the current up trend. But the pending correction, whenever it occurs, will expose the trading flaws that investors make. The lesson may be most vicious, not for stock traders, but for mutual fund investors who already suffered in the fall of 2008. Mutual funds will not sell all positions when the next correction develops. The “but I’m in it or the long term” is going to be true for those investors who believe this. That’s because their losses will force them to hang around a long time to recover. Thu, 08 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Contrived_Earnings_In_Financials.html http://www.investorbootcamponline.com/blog/Contrived_Earnings_In_Financials.html Become a MemberSee what members receive. It's all about market timing and smart money management.Television Interview re: Investment markets: I'll be appearing on CBC's Business News Program Tuesday October 13th. The show starts at 6:30 p.m. e.s.t.Earnings reporting season begins today with Alcoa the first to announce recent results. The expectation is this quarter will be the first earnings increase for S&P 500 companies in nine quarters. Leading the resurgence will be the financials with an anticipated 63% increase in their bottom line. But earnings reports won’t be the fuel for stock buying. Earnings in the financials have been engineered to look good. Ben Bernanke and Tim Geithner will surely have a smile on their face over the next few weeks. Their mission has been simple; save the financials! Near zero interest rates and a historically wide spread between short and long term interest rates have provided banks with an abnormal profit margin in loan business. That’s just the way they want it. Fat profits minimize the need for more write downs on bad loans and assets. But more ammunition has been used to rejuvenate credit markets.Accounting policy changes allow banks, hedge funds and other financials to use mark-to-model accounting with certain assets. What it comes down to is they can put whatever asset value they want on their balance sheets. The horrors of a system based on singular profit motive and a lack of accountability can be put to rest. Short memories work well now especially with the stock market up 66%.The next step in the economic recovery plan engineered by government and big business, is to redeploy capital so they can increase leverage. The Goldman Sachs, Warren Buffets and Ben Bernankes of the world want to take profits on the seeds that they planted earlier this year. They earned it. All they need are naive investors to start loading up on bank stocks based on big increases in reported earnings. That will give the “big boys” their opportunity to get out. The “pump and dump” will shift from the pump to the dump.Wed, 07 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/When_Will_American_Investors_Figure_It_Out.html http://www.investorbootcamponline.com/blog/When_Will_American_Investors_Figure_It_Out.html T.V. Interview: I'll be appearing on CityPulse 24 (CP 24) today just after 3:15 p.m. e.s.t.The powerful commodity cycle began October 2002. In the last equity bull market, the Canadian stock market outperformed the U.S. market and peaked eight months after the U.S. market peak. On September 8th, the TSX was the first North American stock market to trigger a buy signal which has punctuated the beginning of new rallies throughout history. On October 6th, strength in commodities breathed new life into the stock market perhaps saving it from a correction. But the Americans continue to appear to be avoiding Canadian markets.It’s not that the Americans aren’t interested in acquiring Canadian resource assets. But they’re not pulling the trigger on deals. The Chinese are. The Obama administration continues to take the stance that the oil industry is evil and should be taxed on their excessive profits. Environmentalists are strangling U.S. consumers and businesses by blocking the development of new refineries and U.S. airlines continue to operate in the red primarily because of the high cost of jet fuel. The Obama and Bush administrations have both failed to implement domestic oil and gas exploration and production policies that would make the U.S. far less dependent on Middle Eastern oil.On one level it makes you wonder about the strength of the decades long U.S.- Canadian partnership. Is there a serious, but unspoken problem, on the business front with these major trade partners who have a geographical advantage? The U.S. published Gartman Letter has been pounding the table on the strength of Canadian resources, the Canadian dollar, the strength of the Canadian banking sector and the integrity of Canadian contracts. But he seems to be alone. It's true that the Canadian stock market has numerous shortcomings. But that aside, the Canadian resource treasures remains an orphan market to foreigners. Mon, 05 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Somebodys_Going_To_Get_It_Wrong.html http://www.investorbootcamponline.com/blog/Somebodys_Going_To_Get_It_Wrong.html Use evidence when making investment decisions.See it for yourself. Invest like a Pro!Some very well known deep pocketed and powerful investors have “put it on the line” with recent predictions. In some cases, the predictions are at opposite ends of the spectrum. What is most significant about their position is that one of them is going to get it wrong! Bill Gross of Pimco Funds is the manager of the largest bond fund in the U.S. He thinks the risk of deflation is increasing and the U.S. economy will have only sluggish growth. That would make his bond fund more profitable and a better performer on a relative bases to equity alternatives. On the other hand, numerous equity fund managers think economic growth will be much stronger. They have laid their bets with big buys in the stock market. There are so many equity managers on record with their bullish forecasts that it has become easy to find a new one on a daily basis. Both parties have put the money they control where their mouth is! That’s not surprising. The divergence in the strength of their convictions might be but when it comes to sound investing practices there is a different issue at stake. The issue is that far too many investors are going to side with one of those viewpoints.The fact that a bullish viewpoint is on record versus a bearish viewpoint is irrelevant. There are always differing viewpoints. If there wasn’t, the markets wouldn’t function properly (there’d be no trade activity). Some people make predictions for the sole purpose of profiting from it. Many forecasts are based on trends that have already developed. They are looking backwards, not forwards. For the average investor following others is academic and potentially a costly distraction. What I go on record for is the following; never mind what others are forecasting. Follow the trend. Use a sound investment methodology based on facts and be prepared for what comes next, whatever that may be, when it occurs. Fri, 02 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stocks_May_Be_Entering_Correction.html http://www.investorbootcamponline.com/blog/Stocks_May_Be_Entering_Correction.html Investor Education: Do you have a trade execution system? Do you have a coach to help you "keep your head on straight" with the challenges of investing? Are you committed to succeeding?The stock market has been building a case that a correction is underway. After seven months and the largest first year rally following a bear market (since before World War II), it doesn't seem out of character that a correction of significance may be developing. Here is the evidence on a day by day analysis: Market average declines on higher volume are a sign of net selling.Day 1: (Sept.23rd): Market closes lower on higher volume than the day before. Day 2: Market closes lower, with a modest loss and above the intraday low. Volume is higher on the N.Y.S.E. but lower on the Nasdaq and TSX (compared to Sept. 23rd). Day 3: Market lower for third day. Volume lower. First weekly loss in three weeks. Day 4: (Monday Sept. 28th): Markets close higher on a reasonably strong gain (1.90% on the Nasdaq), but on lower and below average volume. Nasdaq closes at the 10 day moving average which has been a reliable short term support level (trendline) throughout the bull market. Advances trounced decliners 4:1 but the low volume level is a "curious" divergence. Day 5: TSX rises on higher volume but the gain is insignificant. U.S. markets reverse from being higher to closing lower. Volume is higher than Monday's. 3 distribution days have now occurred on U.S. averages in the last week, since September 23rd. Day 6: Markets recover from intraday losses closing nearly flat but volume is higher indicating continuing selling. Day 7: (Thursday October 1st): Market decline is large with the Nasdaq down 2.72% and the TSX 2.8%. Market averages closed at their lows of the day indicating selling continued right into the close. Volume is higher for the fourth time since September 23rd. Losing streak is six of the last seven sessions. Leading stocks participate in decline today. Markets remain above the 50 day moving average. Day 8:Markets sell off near the close and close lower for the seventh time in the last eight sessions. Volume is lower but still above average (on the Nasdaq). The bond market continues to rise (yields decline) implying big money is moving out of stocks and into the bond market.Today is Friday and investors may spend the weekend developing anxiety about their stocks. Consider what might happen on Monday. Thu, 01 Oct 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Bull_Or_Bear_Rally_It_Doesnt_Matter.html http://www.investorbootcamponline.com/blog/Bull_Or_Bear_Rally_It_Doesnt_Matter.html Markets & Investing:Get the information you need to time the market through daily market updates. Televsion Appearance:I'll be appearing on CityPulse 24 (CP24) at approximately 10:45-10:50 a.m. e.s.t. Friday. I'll address the market's condition in this live interview. Next CBC Business News appearance is October 13th (show starts at 6:30 p.m. e.s.t.).Some investors say we are in a bull market, others say we're in a rally in the context of a longer term bear market. Which is it? The answer is it doesn’t matter.Bull and bear rallies eventually end and a correction follows. The appropriate action is the same in both cases; protect your capital. When the evidence of a correction in progress appears conclusive, sell and go to cash. Don’t speculate on the depth or duration of the correction. Selling is your insurance against unpredictable outcomes.If you’re a bull, and proven right, then you may buy back in again when a subsequent rally develops. History has shown there are valid entry points for executing buys. If you’re a bear and the correction is deep and long, you’re still faced with waiting for the evidence of a new bull market to take positions.The bears who missed the huge rally, since March 9th, failed to recognize a change in investor behaviours. They also didn’t recognize the importance of understanding cycles. The series of deep declines starting September 2008 should have told them that eventually the market would undertake a significant rally even if a bearish condition persisted longer term.Bulls are surely becoming increasingly anxious about a pending correction. After seven months and significant gains it is not hard to recognize that a correction of some significance will develop. But initial rallies following bear markets have, historically, been powerful and nine to twelve months in duration. This rally may still have several months to go. The key now is to stay invested in the top performing stocks and sell when the evidence of a break down is clear.Less speculation amongst bulls and bears would go a long way to producing better results in their portfolios. Wed, 30 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/And_You_Thought_Nobody_Cared_About_The_U.S._Dollar.html http://www.investorbootcamponline.com/blog/And_You_Thought_Nobody_Cared_About_The_U.S._Dollar.html Markets & Investing:Get the information you need to time the market through daily market updates. Investor Education: The Hedge Funds are "booking profits".Televsion Appearance: I'll be appearing on CityPulse 24 (CP24) at approximately 9:15-9:20 a.m. e.s.t. Thursday and 10:45 a.m. e.s.t. Friday. Next CBC Business News appearance is October 13th (show starts at 6:30 p.m. e.s.t.)The U.S. dollar has not only been under attack in the currency markets but economic and financial circles as well. But now the beleaguered U.S. currency is taking on a different character. The U.S. dollar has replaced the Japanese Yen in the carry trade. The widespread and entrenched view that the U.S. dollar is going lower is sparking U.S. dollar denominated debt financings.Over the last decade a “carry trade” had developed where borrowers obtained the world’s lowest financing rates from Japan and invested in assets and markets around the world. This was the fuel of the last economic expansion and bull market especially in commodities. In 2009, with the Fed’s key rate near zero, short term borrowing rates in the U.S. are as close to free as it gets. The U.S. dollar has become the lender of choice replacing Japan. If the U.S. dollar emulates the same trend the Yen undertook, it will go lower. Note, the FXY (U.S. traded Yen-U.S. dollar E.T.F.) is in an uptrend with a recent break out. Italy and the Ontario government recently announced borrowings denominated in U.S. dollars. Why would they do this? Future repayments, of interest and capital, will be repaid in dollars that are worth less than they were at the time the debt was issued. The currency gain reduces the cost of borrowing even lower than the already historically low cost of financing. For those that think the U.S. dollar is going to be replaced as the world’s benchmark currency these developments may counter that viewpoint. The dollar may not be the secure strong dollar of previous decades but, rather, it has become the currency for the carry trade.With low cost debt ramping up, what are the implications for equity financing and the long term health of the stock market? Tue, 29 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Are_The_Doomsayers_Serious.html http://www.investorbootcamponline.com/blog/Are_The_Doomsayers_Serious.html I'll be appearing on CBC Business News tonight. Program starts at 6:30 p.m. e.s.t.Market Update: Get the information you need to time the market. Investor Education:Merger and Acqusition activity could mean stocks are near their peak.Since the credit markets put up a “closed for business” sign in the fall of 2008, a growing number of people predicted a severe economic downturn. Some have predicted sustained high unemployment, a depression like the ‘30’s or a “W” shaped economic recovery with a secondary and equally serious contraction. But are these doomsayers taking action on their forecasts?If someone really believes the economy is doomed, they might be more believable if they spoke with their actions. At the core of their forecast would be a dismal housing market in the U.S. Did they sell their house and are now renting? If they think the stock market is going to revisit the March 2009 lows, or worse, did they sell all their stocks including those in retirement accounts? Did they sell virtually every other growth asset, including their business, and put the cash in their mattress? These are the appropriate responses for a forecast of prolonged economic contraction and, as some say, the demise of the American financial empire.At this point, the recovery in the stock market is so large that sticking to a forecast of a decline is foolish. Of course, it’s going to go down again. It always corrects after a rally especially a big one. The possibility of a major follow up decline in the economy remains to be seen. But as the economic picture gradually improves the outlook also improves. The long and powerful upswing in bullish sentiment is precisely what is driving stock prices higher.Investors need only know that the trend has been, and is, higher. When the market peaks and a correction develops, those who are “on the ball” will take action. The doomsayers are only playing into their hands, or is it their gains? Best Investment Research available on the Web. Subscribe now. Membership rates will be rising soon.Mon, 28 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Lets_See_How_They_Regulate_These.html http://www.investorbootcamponline.com/blog/Lets_See_How_They_Regulate_These.html The capitalist nature of western society has been under scrutiny, and outright attack, since the credit market meltdown in 2008. Some believe the fiat currency system based on leverage is doomed to failure and now the system is showing its weaknesses. But perhaps the bigger issues are on a different and deeper level related to relationships and lifestyle. The breakdown in credit markets and the financial markets can be attributed to a combination of poor relationship management and a lack of accountability.The structure of the financial services industry is too fragmented and that has led to a separation that supports a lack of accountability. An employee, and/or management team, working at a rating agency, for example, may have felt the burden was too heavy for them to declare that securitized pooled assets, like mortgages, were an accident waiting to happen.It was also too easy for them, and others, to "pass the buck"!The other issue is rooted in lifestyle. Why is it that in a global economy of the internet, cell phones, land lines, videoconferencing, email, satellite communication and emails people are compelled to move to the outskirts of a big city to buy an affordable home and, subsequently, spend several hours a day commuting to and from work? What’s the point of that? Does anyone else see something “wrong with this picture”? It certainly doesn’t work for raising a family and building other close personal relationships. At the end of the day, people who are “dropping the ball” in the workplace have no excuse. They’ll “face the music”. The system may support organizations, and individuals, to hide for a while but it will catch up to them. Perhaps some good will come out of the meltdown in 2008. But the Obama government wants us to believe that more regulation will fix the problems. Let’s see how they regulate people to start working closer to home so they can spend more time on what matters. That would be families and friends for anyone who needs reminding. Let’s see how they regulate accountability and effective communication. Watch for section 311, subsection 4a and b, to provide regulation for regular attendance at Church. Fri, 25 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Whos_Going_To_Bailout_Canada.html http://www.investorbootcamponline.com/blog/Whos_Going_To_Bailout_Canada.html Canada’s economy has grown over the years despite socialist and anti business government policies thanks to its geographical position with the U.S. How fortunate! But now that luck may be running out! Two new trends have developed, both of them potentially a crushing blow to Canada’s economic underpinnings. The Obama government’s “buy U.S.” policy combined with a desperate economic state. The rise of the Canadian “loonie” against the American dollar. The Canadian government’s bail out of the auto sector is failing. More production is about to be moved to the U.S. The same has been happening in the steel industry despite deals stipulating that Canadian jobs were to be kept and plants were to remain open. Canadian operations, especially with a rising loonie, are too expensive on a relative basis. Perhaps it’s time Canada undertook a major policy shift before it’s too late? Maybe it’s time the government, and Canadian business, took a creative and dynamic initiative? If the Americans aren’t going to buy Canadian built cars and parts, why not design and build an entire line of cars in Canada using the auto and steel production facilities and labour force that’s already here? Design the vehicles for Canada, market them as Canadian made and if the business fails, the cost structure may undergo the shift it needs to be competitive internationally? Take it one step further and create a Canadian auto manufacturer. But don’t stop there, list it on the TSX giving the boring Canadian stock market something that may attract new capital. How long can an economic model that taxes its own citizens and businesses to death, with inefficient programs, like healthcare, and now bailouts that, in reality, are for American businesses last? It can’t. Fix it now before it’s too late. When is the electorate going to finally figure it out? Thu, 24 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Predictable_Unpredictability.html http://www.investorbootcamponline.com/blog/Predictable_Unpredictability.html When it comes to the economy and the stock market there are, for some of us, some developments that are interesting and often ironic. Many of them might be categorized as “non developments”. Here are some current ones:Throughout history, a bull market’s biggest winners tend not to repeat their out performance despite the wide belief that they’re still the greatest. These winners, prior to 2008, have become virtually invisible. Solar power sector Fertilizer/potash sector Tanker ships sector Research in Motion (RIM-tsx , RIMM-nasdaq)What you least expect, is often what happens in the stock market; How many thought the market would put in a near full recovery from the 2008 meltdown? How the stock market overshoots on the downside and the upside. The losses that panicked stock investors have suffered from switching to bonds earlier in the year as stock prices bottomed out.The fake out on those who have remained bearish: The June consolidation was short and very mild and the August correction was, apparently, the correction that didn’t happen. The fake out on stock investors who use technicals; Pullbacks to under the 50 day moving average that stop, just under, spend some time there, and make a full recovery. The September-October effect in stocks hasn't happened this year despite the big gains in stocks and apparent economic sluggishness (so far).Regulation: The talk of sweeping regulatory changes (U.S.) hasn’t happened amidst a big recovery in stocks and the banking sector. The kindergarten level of knowledge and one sided perspective in the media and mainstream thinking; This time it's;The extensive kicking around of C.E.O.’s and business in general as if they’re all incompetent and greedy. You might have expected that in France but not the U.S. High unemployment means the economy isn’t recovering. Central banks, like the Fed., keeping rates low means the economy is in poor shape still. (The Fed. is pumping up bank profits so they can recapitalize. When the bank’s balance sheets are “ready to rumble again”, the Fed. will raise rates). If there’s a lesson for investors it’s, Be Prepared to Change Your Mind. Wed, 23 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Where_Are_American_Investors.html http://www.investorbootcamponline.com/blog/Where_Are_American_Investors.html The Canadian stock market, the TSX, leads North American stock markets. On September 8th, the TSX triggered a “buy signal” a day before the Nasdaq displayed the same historical event. But if you turn on CNBC or any other U.S. investment news coverage, they haven’t noticed.The bull market in the U.S. ended October 2007 but the TSX didn’t peak until the summer of 2008. The price of oil was big news everywhere as it raced higher in the first half of 2008. But once again, there was no mention of Canada as a major producer of oil, gas and other resources. Why would a well developed country be shunned in a global economy and market system?The answer lies in the poor quality of the Canadian equity market. Very few stocks trade more than 250,000 shares per day. Even fewer trade more than 1,000,000 shares per day. How many world class companies are there in Canada? You’d be hard pressed to use all your fingers to count them. A consumer shopping at a store expects full shelves with variety. But Canada has little, or in some cases nothing, to offer in hospitals, H.M.O.’s, medical products, insurance, internet, semiconductors, steel, auto, different levels of banks, pollution control, electrical equipment and fiber optics. So why would Americans or any other foreigners consider Canada as an alternative? Why are so many Canadians stuck on investing in Canada only? Perhaps the world will take notice this time. The Canadian dollar may charge higher as money pours into resources and the Canadian stock market. When it does, it will be harvest time for Canadian investors who, naively, choose to keep their funds local. But don’t hold your breath. Canada has been an orphan market for a long time. That isn’t about to change any time soon. Tue, 22 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Dow_36000_and_Beyond.html http://www.investorbootcamponline.com/blog/Dow_36000_and_Beyond.html Market UpdatesInvestor Education: Don't Be Fooled By Big Gains“Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market” suggests the stock market is cheap and is undertaking a gigantic long term uptrend. Anything is possible, especially when it comes to the stock market, but a lofty feel good stock market target isn’t why this book is being mentioned. The issue is that what seems unbelievable to many investors is the cash strapped American consumer is in no shape to invest in the stock market. But further analysis suggests otherwise.For decades, savings has been virtually non-existent in the U.S. Now that trend has shifted as evidenced by the savings rate which has ramped up sharply in 2009. There is the argument that savings have gone up as a reflection of the attempt to pay down high debt levels. Undoubtedly, this is part of it. But a higher savings rate contributes to increased investment in the financial markets. This is not without historical precedence. The demographic shift to higher savings could have a profound impact on the stock market as capital flows shift on a long term basis.Cycle analysis suggests investors should now be gravitating towards stocks rather than tangibles, such as housing. In the early phase of a new long term cycle, “paper” (stocks) outperforms and late in the cycle, assets, such as housing, become stronger. Housing may be the most affordable ever in the U.S. but that doesn’t mean it’s going to be unusually profitable. Even the Canadian market, which remains hot due to a lack of supply (sellers), can’t stay this strong indefinitely.In the process of managing savings and investing, ask yourself this question, “Do I really know the stock market won’t, in fact, be enormously profitable in the next five years”? If this turns out to be the case now is the time to add capital to the portfolio. Mon, 21 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Is_Capital_Going_Underground.html http://www.investorbootcamponline.com/blog/Is_Capital_Going_Underground.html Television Interview ScheduleMarket Updates: Know What's Really Going OnInvestor Education SeriesDespite a strong recovery in stock prices and an economic recovery underway IPO activity continues to be at multi year lows. This seems to be a curious “non development”!It could be a reflection of bearish or pessimistic sentiment but that seems odd too. Some sentiment indicators, which are contrarian, have been at extremes of bullishness not bearishness. Even if they weren’t, or aren’t, stocks have put in such a stunning recovery that surely the crowd is feeling more than a little better. There is a herd of investment bankers and investment advisors who are itching to make some serious money, and this is typically how they do it. Have they lost their swagger? Investors may have decided that they are going to be selective to the point of ignoring deals that are being presented to them. That would have been understandable in the spring but not so much now. We know that the U.S. government is sapping investment dollars through the bond market but that’s debt not equity. What happened to the entrepreneurial spirit of growth investors looking at leverage, through warrants, or a big emerging company pay off? Do investors really think the economy and the stock market are going to plummet again? Financings are far more prevalent in China and other emerging markets. But that shouldn’t scare off North American investors from placing a few dollars locally. Perhaps capital is being placed in hedge funds, mutual funds and other managed pools. That would be consistent with trends since the turn of the decade. However, this would seem to be questionable decision making given the nature of markets meltdown in 2008. But then again, who said investors would suddenly start getting smarter?The absence of even a whiff of increasing I.P.O. activity is not only curious it is a “red flag” for the condition of the stock market longer term. Investors in the stock market have always feasted on a fresh flow of choices. Where are they? Or is this another symptom of the secular bear market in stocks? Fri, 18 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Economic_Function_Of_High_Prices.html http://www.investorbootcamponline.com/blog/The_Economic_Function_Of_High_Prices.html I will be appearing on CP24 at 1:20 p.m. e.s.t. Friday. The Weekend Investor will be updated today with investment market information and what to do about it. Investing in Junior Resource stocks is always interesting. Investor Education gets stock investors ready for what's coming next in the markets. Rising prices at the grocery store, the gas station, etc. have been a common complaint for decades. Since June 1989, inflation has been the enemy of central banks and critics are giving the Fed. a hard time on their massive economic stimulus activities. But prices that seem too high can serve a useful purpose. Earlier this week, dairy farmers in China dumped thousands of gallons of milk in the street to protest the price of milk being too low. They’ve undertaken a dramatic demonstration of the basics of business. If you can’t get a good price for your product, reduce the supply until you can make a profit. You may recall the tainted milk scandal in China where a milk producer was putting a protein substitute in milk. Putting the insanity of that particular story aside, businesses routinely take this type of action if the bottom line demands it.In North America we are accustomed to the relatively well organized free market system. We can rely on it with almost any product or service and implicty know a higher price is typically better quality. If we don’t want to pay it we can find cheaper alternatives. But there are other situations where the price seems to be ridiculously high and yet the market continues to maintain, or increase, that price. Residential property in Canada is a perfect example.Many people continue to wonder who can afford the high prices and when will the market finally “fall off the cliff”? But those lofty prices have contributed to a trend to buying houses, tearing them down and building a new home. If prices had been flat over the last ten years there may not have been an incentive to finance such a costly expenditure. Neighbourhoods across affordability levels are undergoing a transition where a new, and larger, building can be constructed.This phenomenon doesn’t happen very often. But the long and powerful market in housing, which has many critics in the U.S., has served a purpose. The homes many people live in are getting old and now they can be rebuilt. Thu, 17 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Interest_Rates_Are_Too_High.html http://www.investorbootcamponline.com/blog/Interest_Rates_Are_Too_High.html I will be appearing in CP24 in the Toronto area, Friday at 1:15 p.m. e.s.t.There has been plenty of talk about the issues related to interest rates being too low, the falling U.S. dollar and, up until a year ago, the U.S. trade deficit. But the critics are missing some key points on all of these. In fact, prior to the market’s melt down, when these matters were all supposed to be issues we were, in fact, in “good times”! As we know, the Fed. Fund rate and the Bank of Canada rate are, at nearly zero, a historic low. But long term interest rates have been moving higher through 2009 creating a spread in yields that is also a historic development. Long term interest rates are, primarily, the rates that matter not short term rates. Many investment and borrowing decisions are predicated on the long rate. The 4.25% yield on the 30 year U.S. bond isn’t high but it isn’t exactly a bargain when you consider it was 2.5% earlier in the year. Corporate borrowing rates are, in many cases, double digits. General Electric, one of the world’s largest and most diversified companies, had to pay Warren Buffet 10% earlier in the year when they needed the capital. This, on all historic measures, is very expensive and a major impediment to funding investment and business activity through debt. Keep that in mind as employment growth remains sluggish. The near zero central bank rates serve the purpose of boosting the returns Banks earn on their loan portfolios. The banking sector (credit markets), in case we forgot, was the heart and soul of the economy's deterioration. So phase one of the economic recovery is being managed by central banks handing the banks capital “for free”. But, when the Fed. raises their rate, are mid and long term rates going to come down? The falling U.S. dollar is not an issue. Currency markets are the great equalizer and a falling U.S. dollar makes it cheaper for the rest of the world to buy products and services from the world’s biggest and most creative economy. If the dollar goes up, how are regions like Europe going to grow?The trade deficit isn’t an issue either since it is being funded by foreign capital. Why are people here worried about the Chinese government’s U.S. bond portfolio? For homeowners who profited over the last ten years, your gains came from falling interest rates which was a direct result of heavy foreign buying in the bond market.For those who think these three matters are a problem and should be fixed, be careful what you ask for? Wed, 16 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Stock_Markets_Character.html http://www.investorbootcamponline.com/blog/The_Stock_Markets_Character.html Near the turn of the decade, equity markets underwent a shift from globalization and the growth of hedge funds. Those influences have shaped trends which can be defined, simply, as “straight lines”.To clarify, if the stock market undertook a new uptrend, that uptrend effectively kept going higher without meaningful pullbacks. For investors who were waiting for a pullback to buy in they were left behind. Conversely, when markets peaked and began a new downtrend those who were looking for a “bounce” to sell at a better price were stuck with either selling lower or deciding to hold and hang in. The rally in global equities that started March 9th, 2009 has the same “straight line” character. The consolidation, starting mid June, lasted just one month and the apparent correction that was developing at the end of August lasted barely two weeks. The pullbacks, when they occurred, have hardly left their imprint nor would the casual observer even be aware of them.The current rally is the largest since before World War II for a first year rally following a bear market. A handful of the best stocks are indicating that a near full recovery will be “put in” taking stocks back to their 2007 highs. This is perhaps a shocking rally, for its strength, given the dire headlines of market meltdowns, big bank collapse, massive central bank intervention and sluggish economic recovery with high unemployment. So what’s next? The market, with its power and “straight line to the top” character, may complete a full bull market cycle in a relatively short period of time. That implies extreme bullish behaviours as the market approaches the top and ultimately rolls over. In technical parlay, you get “climax runs” where stocks log huge one day to one week gains.This is the type of action that would be unexpected which fits right into the stock market’s predictable unpredictability. Give that the market just signalled a renewed uptrend now may be the best chance, and last chance, for investors to get on board. Rather than looking in the rear view mirror at the big gains from the bottom, perhaps investors might want to consider the type of gains that are coming. It would be right in character for what the stock market has done numerous times throughout history.Tue, 15 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/What_You_Least_Expect_To_Happen_Does.html http://www.investorbootcamponline.com/blog/What_You_Least_Expect_To_Happen_Does.html I’ll be appearing on CBC’s Business News program this evening. New:Sector analysis on bio-techs; very heavy buying and big gains in many bio-techs. One of the interesting, and challenging, aspects of the stock market is the element of “what you least expect to happen, does”! Perhaps somebody should run a regular survey with different scenarios and see what is most expected and least expected. Then we invest based on the least expected scenario since that’s what seems to develop.The rally in world wide equity markets, which started March 9th, is a perfect case study in progress. Who would have thought back in January and February when the stock market was undergoing another 35% decline that it would be followed by a huge rally? A rally so powerful that an apparently obvious correction lasted just two weeks and now, since September 8th, has signalled the resumption in the up-trend. The ability of the market to continue a strong up-trend is obvious now. That implies proactive investors will, at some point, need to consider the next unlikely scenario. The obvious one is the market’s peak. The peak, when it comes, will surely play out as peaks have throughout history. It will develop when investors are so entrenched in bullishness that they see it as “good for the market” and an opportunity to buy more on the pullback. It may also occur with a story wrapped around it that shrouds the reality of a correction in progress and fools millions of investors. What comes to mind about the peak are the financial trends and markets that are external to the stock market. Securitized products and the options markets in particular. These are part of the system now (see “The Stock Market Isn’t Just Stocks Anymore”, Sept. 4, 2009). The other is the pump the Fed. and U.S. government have primed the economy with. There are some very powerful players with a lot of money at stake in the current cycle. They aren’t going to allow themselves to be victimized by the herd, if they can help it.The good news is that these complexities have rendered decision making easier for the average investor. Have a system, be prepared and don’t think about it too much. Just react when the time comes. Mon, 14 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Which_Country_Is_The_Problem_Again.html http://www.investorbootcamponline.com/blog/Which_Country_Is_The_Problem_Again.html Several years ago, I had this notion that the trigger for a major bear market and long lasting economic downturn would be a “bad business decision” by the Chinese government.Since October 2001 when China was admitted to the World Trade Organization billions of foreign capital has been taking a stake in the world’s most promising emerging market. But the Chinese government is known for their unique form of control and “Chinese capitalism”. Foreign investors knew, or should have known, that the risk of the government making a decision which rendered foreign capital captive was not only high but probable. The day that happens foreign investment into China, and other emerging markets, would stop and the global economy would go into a freeze. But that hasn’t happened. In fact, the Chinese government has been creative, pro-active and progressively more capitalistic in policy. On the other hand, the economic freeze came from the U.S. where credit markets put up a “closed for business” sign thanks to no audit trail of securitized markets, accountability or method to clean it up. Apparently, I had it backwards.Now the Obama administration thinks the way to go is a “Buy America” policy. The fear of the past was that the Chinese government was going to implement such a policy to the detriment of foreign investment. The Chinese have now started to retaliate in response to a U.S. move against Chinese tire exports. Canada is apparently doing little about a potentially disastrous scenario where their business as the U.S.’s largest trading partner takes a major hit. The only public response from Canada has been a statement from the Finance Minister that the “loonie” is too high and threatens Canadian economic recovery. He’s right. Rising exchange rates makes Canadian products and services more expensive in the U.S. But that isn't the major threat.The U.S. policy is akin to a small company refusing to do business with a giant shopping mall that just opened across the street. A global economy demands a policy of free trade not trade restriction. The adjustments will undoubtedly be painful for certain sectors but the leverage for flexible market oriented businesses and countries are obvious. Remember the demise of communism in Europe? Apparently, the U.S. government hasn’t! Fri, 11 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Financial_Legacy_Of_Michael_Jackson.html http://www.investorbootcamponline.com/blog/The_Financial_Legacy_Of_Michael_Jackson.html Markets Overview at Markets & InvestingThe Weekend Investor and Investing in Junior Resource stocks seriesEnough already about Michael Jackson! Get a life people! Many people, me included, are worn out from the overexposure of his life and recent tragic death. Even his financial problems have garnered attention. But the business of Michael Jackson has become more interesting in his death.For a number of years we’ve seen stories of his excessive spending habits fuelled by a massive amount of borrowing that was so extreme it overwhelmed a lucrative business empire. Now creditors are waiting to get their money back. Will they force Michael Jackson’s executor to liquidate his assets to pay them off? But, hedge fund managers with the capital might want to consider making a bid for M.J.’s business. Here’s why his legacy is worth more now than it was before his death.New revenue streams can be developed that are limited only by the imagination, energy, and business acumen of someone who can manage it. This might include; A magazine called, simply, Michael Jackson. The magazine can be published once/month with pictures, stories and memorabilia of Michael Jackson. Other entertainment stories could be included.The Michael Jackson video game: Why not? Guitar Hero has been huge and now the Beatles have a video game.The Neverland Ranch, which of course isn’t new, could be developed beyond its current capacity to exploit what will, surely, be decades of visitors and cash flow.I can picture a line of Michael Jackson figurines, an animated show with, guess who, as the main character, and a NASCAR Michael Jackson racing team. Quick, can somebody put $1 billion together for me? Or should the investment industry, in its creativity, raise the capital in an I.P.O., hire a manager to execute the business plan, and, of course, pay itself a healthy fee for doing so? Thu, 10 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/This_Might_Be_It.html http://www.investorbootcamponline.com/blog/This_Might_Be_It.html This may be one of those rare times when conditions in the financial markets are as good as they get! To the casual observer, this may seem unbelievable to the point of being bizarre, but that only emphasizes the nature of markets, especially equities. Consider the following; Stocks are up over 38% on most market averages. Some stocks have recovered to levels of one year ago, just before the meltdown in equity and commodity markets. The TSX and the Nasdaq have both, this week, given a “buy signal” on a historic measure. An increasing number of the market’s best stocks are resuming their up-trends. The action in leading stocks and the market averages are, historically, a strong indicator of future performance. Credit Suisse reports that earnings momentum is being revised up and once it turns positive it usually stays positive for eleven months. G.D.P. growth continues to be revised higher. Capital continues to be redeployed into riskier markets such as corporate debt. A massive amount of stimulus from governments and central banks around the world has been injected into the economic system. The banking system appears to be stabilizing and undergoing recovery. Interest rates are still near historically low levels and capital markets are gradually ramping up financing activity.Predictably, individual investors don’t believe any of it and think there is more trouble to come! But that is a common viewpoint at the beginning of new economic and financial market up-trends. Pessimistic mindset conditioning takes a considerable period of time to wring out. But that may cost investors who wait to feel good about the future. This is a rare time in the world of economics and finance. If someone told you five years ago that, someday soon, trillions of dollars would be pumped into the economy and central bank rates would be less than .25% you would have laughed believing that to be a fantasy. The TSX and Nasdaq have triggered a “buy signal” this week. Top stocks are beginning to ramp up again. If this action carries through investors who don’t ‘get on board’ soon will miss one of the best stock market rallies in this lifetime. Wed, 09 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Sport_In_Investing.html http://www.investorbootcamponline.com/blog/The_Sport_In_Investing.html Many retail (individual) investors understand sports and may be avid followers of one or more professional leagues. They routinely look at the stats. the standings, last night’s games, who the key players were and so on. They’ll also look at stats. and conduct research in the investment markets in a number of ways. But that’s where the similarities end. When decision time comes, buys and sells of stocks are fundamentally flawed. Even an uninterested sports fan knows that a bet on a team or player is best made on one of the top performers. But why do so many investors think that a stock that is an inferior performer, or laggard, is a better deal? In fact, many investors target a stock that has just undergone a massive one day price decline.This, and other practices, is flawed. The stock market is a huge pool of investors including many experienced, well researched and deep pocketed “players” buying and selling. Think about what they would do. If buying a penny stock were the way to get rich no stock would ever trade over $1.Suppose you decided to become an investor in paintings. You could buy a portrait I painted for $10, or you can buy a $50 million Van Gogh. Which is a better investment? The answer is obvious and that explains why the Van Gogh, which used to be a lot less money, is now valued at $50 million. The probability of the Van Gogh appreciating in price is much higher than my painting. My painting might appear to be good value, but nobody wants it because I’m a terrible painter. In fact, I can’t even read my own handwriting.Here is how investing and sports should be similar.Sports Investing Top of the standings Best performing stocks relative to the rest Bottom of the standings Stocks that fall in bull markets A great pickup by the G.M. A company with big earnings growth and the stock is moving higher John Madden The opposite of CNBC Sports fans love to talk it up, criticizing players and coaches, and imagine the great trades and signings they would make. But the reality is most of us aren’t good enough to pull it off. So we’re fans! However, in the investment arena anybody can open up a trading account and be a player. That’s naive. It’s also financially dangerous which is precisely why so many investors get eaten alive. Where’s the sport in that? Tue, 08 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Trend_You_Dont_Know_Is_Your_Friend.html http://www.investorbootcamponline.com/blog/The_Trend_You_Dont_Know_Is_Your_Friend.html There’s a saying from the investment community “the trend is your friend”. While many commonly used terms and concepts about investing are misnomers, this one is useful. It also has a different perspective to it in these days of global markets and securitization. Bear markets serve as a strong reminder of past investment “mishaps”. The most recent bear market that started in October 2007 and accelerated on the downside in September 2008 is a case in point. The first signs of trouble were a breakdown in the trading of the banking sector in the spring of 2007 (declining relative strength). This, surely, was a development that was hard to believe and easily rationalized. But taking the appropriate defensive trading posture would have saved many individual investors from losses that buried banks and hedge funds. The issues that contributed to the greatest credit crisis and economic decline since the Depression were rooted in the securitization of mortgages and other assets and debt. The finance and business behind the process is simple, and brilliant, but the complexities in resolving the fallout still plague Regulators and investment market participants.The issues for stocks and bond investors are as follows; Trends in motion outside the financial markets may have an impact in equity and bond markets. The trade trend in the equity and bond markets, impacted by the exogenous trend, may not appear obvious or even logical. The challenges to investors on this matter are not going away any time soon. Take the current trend in a significant increase in U.S. interest rates. The mainstream thinking is that rates are going higher because the U.S. government is borrowing so heavily it’s a natural market reaction. To a large degree, this is a valid conclusion. But rates are also going higher because capital is flowing into riskier debt, like the corporate bond market, and the government bond market has been heavily shorted.Bloomberg quoted Donald Galante, the chief investment officer and senior vice president of fixed income at New York- based MF Global Ltd. “Panic has receded and you are in a more normal world, with dealers starting to take on a little bit more leverage. They are taking on some inventory in the corporate world and hedging with Treasuries again.” The average investor, predictably, wouldn’t be aware of a trend like this. They are reading headlines about how terrible the economy is, unemployment is going higher, and, lately, the stock market is beginning to question the extent of economic recovery. But these processes have stages and they take time to develop. Financial markets undertake a trend based on an expectation of the outcome of trends that may not have even started but would typically do so in the near future. Investors don’t need to research all the possible influences in the investment markets. It’s far too big a job for one thing. A theme that members of Investor Boot Camp, and the Investor Boot Camp seminar series, are well aware of is that investors are better served ignoring headlines and gossip when it comes to effective portfolio management. The trend in the investment market your capital is subject to is the only trend that matters. It might seem to be an odd or illogical trend but, “the trend you don’t know is your friend” is one of the very few clichés on investing that we like. Trade accordingly.Fri, 04 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Stock_Market_Isnt_Just_Stocks_Anymore.html http://www.investorbootcamponline.com/blog/The_Stock_Market_Isnt_Just_Stocks_Anymore.html It used to be that the stock market truly was a market unto itself. Capital flowed in and capital flowed out. But now, there are other influences that are invisible to investors if they are focused solely on the stock market.These “other” markets are relatively new but have become significant on their own; E.T.F.’s. Options. Securitized assets and debt. Exchange Traded Funds (E.T.F.’s) trade on a stock exchange of course but they are creating a pocket in the stock market that other stocks “fall into”. This was explained in some detail in "Why Exchange Traded Funds are bad for the market", August 14, 2009. The options market has grown substantially this decade as big investors place their bets with options rather than trading individual stocks. The takeover of Volkswagen in October 2008 is a case in point. The buyer had taken a large position in calls rather than buying the stock. When they announced the takeover, they were able to take a huge gain, as it turns out, before the tender process on the stock became formalized. The huge run up in the stock was due to a heavy short position, in the common share, by at least one investor who was forced to cover their position, driving the price higher. Investors can make minimal changes to their stock portfolios now by hedging their positions through the stock market. That’s not new; it’s just more extensive and sophisticated now.The impact of the securitization phenomenon became obvious when the 2008 meltdown in the credit markets crushed every stock and commodity market around the world. The correction of its impact may not be headlines anymore but the issues have yet to be resolved.Acquiring the inside knowledge of these other markets is surely an impossible endeavour. For this reason, research in the stock market looks different now since the old school approach is obsolete. But in some ways, it’s easier. Investing is more about reacting to the trend as it develops rather than attempting to figure it out. Thu, 03 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Hedge_Funds_Are_A_Viable_Alternative.html http://www.investorbootcamponline.com/blog/Hedge_Funds_Are_A_Viable_Alternative.html I'll be appearing on CityPulse 24 (CP24) Friday at 1:15 p.m. e.s.t.It seems that hedge funds are some kind of a “dirty word” in the investment markets. Perhaps it’s that they are unregulated but, more likely, it’s the mystery behind them. In fact, a common marketing tactic by hedge funds is that they don’t reveal their methodology or their holdings. They claim that by keeping it secret they maintain a trading advantage.For investors who don’t know, hedge funds used to refer to a specific investment style. Whatever the fund invested in they offset, partially or entirely, the risk in the holding. Now, hedge fund implies a managed fund that is not under mutual fund or pension fund regulation. The proclivity to criticize an organization or investment professional individual who is unregulated and suggest that investors should avoid them is a misnomer. Some elements of the regulated investment industry are incompetent and a thorn in the side of those who are doing a good job. In fact, the oppressive regulations have been a significant driver for good traders to set up hedge funds.Most importantly, hedge funds offer investors, including the average person, flexibility. The mutual fund industry wants to charge their clients for switching capital around within the same fund company as investors attempt to protect their money from falling markets. How does that enhance good money management? The challenge for mutual funds is that they are not allowed to take short positions. Hedge funds can go entirely short if they choose, go entirely long (own securities), or some combination. The strategies hedge funds may take can adapt to market conditions.There may be issues with the transparency of some hedge funds but their money management flexibility makes them a viable option for all investors. Some of the best money managers available to the average investor can be found in a hedge fund. Tue, 01 Sep 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/What_Mutual_Funds_Dont_Want_You_To_Know.html http://www.investorbootcamponline.com/blog/What_Mutual_Funds_Dont_Want_You_To_Know.html I'll be on BNN Wednesday morning at 8:35 e.s.t. and CBC Business News Wednesday night (at 6:30 e.s.t., I believe). The BNN interview can be accessed through their website. My usual Wednesday CP24 interview is around 3:20-3:25 p.m. e.s.t. CP24 appearance on Thursday is 10:45 a.m. e.s.t.Most investors in the stock and bond markets have their capital with one or more mutual fund companies. The fund companies are regulated, provide certain mandated information and have service representatives ready to assist Investment Advisors and investors. But the real story is they run their business to work for them, not the investor.Sure they want the portfolios to rise in price so investors are happy. After all that’s the portfolio manager’s objective and a large part of how he or she gets paid. But they run a “captive capital” program that revolves around getting your money. Once they have it, they effectively have it forever! The mutual fund business is a marketing business, not a money management business. Their portfolio management approach has one objective: Don’t blow up! Good idea of course but that explains why you rarely see a mutual fund, especially a large one, outperform the market index benchmark. They’re more concerned about poor performance sparking a large redemption outflow. Fund companies get paid a fee, based on a percentage of assets under administration (M.E.R.). The longer your money is in the fund the more the fund company makes. When was the last time a mutual fund company said “the market is bad”, you should move your money to one of our other funds in a different market? They could because most funds have a diverse offering. But there’s no money in it for them. It would be a massive administration project, and cost, if capital flew from one market, and fund, to one of their “sister” funds in a different market. Investment Advisors, who are the only way investors may acquire most funds, don’t want to do it because they don’t get paid for it.Capital inflows and outflows (net redemptions) play as big a role in the performance of a fund as the market does. In February to March 2009, mutual fund companies faced huge redemptions as investors, and Advisors, caved into the pressure of declines and dire headlines. The selling the funds undertook to meet redemptions added to the markets downturn.Most mutual funds have a legal requirement to place some of the capital into the underlying market the fund operates in. The fund manager might think it’s the worst time ever but they invest your money anyway. Why? It doesn’t work for investors. It’s time to change it. It’s also time for the investment industry to stop telling investors their money is in the fund “for the long term”. That advice is forcing investors to stay in for the long term in an attempt to recover losses.Fund companies typically charge a 1% fee if you switch out and then back into a fund within 90 days. Pay it. It’s better to pay a small fee than lose half your capital.Mon, 31 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Get_Back_in_the_Game.html http://www.investorbootcamponline.com/blog/Get_Back_in_the_Game.html Investors have been severely “roughed up” in the last year. In fact, some of the quieter, non-volatile income oriented investments have been amongst the hardest hit; Preferred shares, Asset Backed Commercial Paper (A.B.C.P.), Canadian income trusts and in 2009 the bond market. But bear markets and a crisis such as the one experienced recently create new opportunities.Investors need to put the past where it belongs, behind them. The damage that has been done cannot be changed. But throughout history one of the unspoken facets of the stock market are “the fallen”. The investors who say “I will never invest in the stock market again” and they don’t. This happens in every bear market throughout history. But you don’t have to be one of those investors. As they say in sports, “pick yourself up, brush yourself off and get back in the game”! After nearly six months, most markets have made substantial “come-backs”. The NASDAQ is up 60% from the March 9 low and the TSX Preferred share index in Canada is up 34%. Look at the bright side. Who would have thought we’d have had such a big recovery in stocks since the spring? Take it, it’s a gift. Now reposition for one of two developments that will present itself in September; The stock market is going to undergo a significant correction. The market will resume its up-trend.Whatever happens, you don't have to be on the wrong side. As the evidence builds this fall, it will become clear what trend is developing. Don’t question it but, rather, reposition capital accordingly. Fri, 28 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Two_Jobs_In_One.html http://www.investorbootcamponline.com/blog/Two_Jobs_In_One.html Two Jobs In One Part 3 in a series on investing in juniour resource exploration companies through financings and trading in the market. Part 4 will appear next weekend with subsequent entries each weekend. Investors typically look at a company, contextualize their research by the industry or sector the business operates in and analyze the operations of that industry. But running a publicly traded company actually involves two businesses; Managing the operations of the business. Managing the publicly traded vehicle (the stock). The way the “stock” is handled is actually a much bigger factor than many people think. In fact, it may be the number one variable to the performance of share price.With smaller start ups or emerging companies, investment by shareholders is based on expectation or speculation. The company isn’t profitable yet, has negative cash flow and, in the case of exploration companies is unproven. As a result, the following factors have a direct and profound impact in the price trend of the stock; The number of warrants outstanding, the exercise price and the expiry dates.Number of shares outstanding and the breakdown between stock that is “tightly held” (management for example) and the float (retail or individual investors primarily). The trend in the pricing of financings. Since the second half of 2008, the ability to raise capital has become seriously impaired creating a capital market and economic environment similar to the ‘30’s. Junior resource companies have been particularly hard hit since they typically raise money on an annual basis to fund drilling operations. The situation has been so bad that the rare companies with cash cancelled drilling plans so they could keep their cash. A new world has been dropped on "juniors" and how the capital structure is managed in the near future will have a long term impact on share price performance. Fri, 28 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Is_The_Loonie_at_a_Peak.html http://www.investorbootcamponline.com/blog/Is_The_Loonie_at_a_Peak.html The Canadian Central Bank, The Bank of Canada, is talking tough about halting the renewed ascent of the Canadian dollar. They say the "loonies" rise is putting a dent in the economic recovery. If the Bank of Canada carries through a flat to lower “loonie” has several implications for Canadian consumers, investors and businesses. Travellers should consider exchanging their Canadian currency soon to lock in what may prove to be the best rate.Investors looking at cheap U.S. housing and other foreign investments may want to either exchange their money now and sit on it or make the investment in the short run. Imported products will become more expensive as the loonie falls in value. If the Bank keeps rates lower than the U.S. for the purpose of driving the loonie lower, the housing market would continue to be a beneficiary. The wealth effect from rising housing values has a spill over effect as the consumer/home owner spends some of the gains they’ve made. However, this won’t kick in until 2010 at the earliest when the Fed. starts raising their key overnight rate.But why would the Bank be so concerned about a higher currency when there are other issues they could be dealing with? The answer lies in not only the weakness of the U.S. economy but the leaning of the new Obama government to run a “buy U.S.” policy. A rising currency makes the net cost of Canadian exports more expensive to Americans. Keep in mind that Canada is the U.S.’s largest trading partner and the rising loonie is having its biggest impact in Alberta where the export is oil and natural gas. Alberta has been the “swing” province having gone from rolling in cash a few years ago to a crushing economic contraction.Pushing the loonie lower might not seem like the smartest economic strategy but the U.S. is a sick patient in need of some economic care. The medicine can be removed once the patient gets out of I.C.U. and the Canadian economy may return to buoyancy. Fri, 28 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Money_In_Dragons_Den.html http://www.investorbootcamponline.com/blog/The_Money_In_Dragons_Den.html This appeared in The Weekend InvestorThe Dragon’s Den is a popular C.B.C. program featuring inventors who are displaying their product to a panel of experienced investors to obtain financing. The show is quite entertaining on different levels and gives the aspiring business person a glimmer of hope to make it rich! Assuming that the show is more than entertainment, there may be an actual investment in a business with potential. But, what we’re not getting in the show is an explanation of the finance behind the Dragon’s decisions.The Dragon’s aren’t interested in a great idea. They are interested in an undertaking with the following characteristics; The business of the product can be managed by a competent person. An investment in the company, by them, will produce a return of the capital plus an acceptable level of profit.Here is what is going through the minds of the Dragon’s as they evaluate the business prospects; Is it proven? I.e. are there sales? What is the margin on the product? For example, if it costs $20 to make, what can the product be sold for? A selling price of $100/unit is a far more attractive proposition than $25.What is the valuation?The valuation is where many of the inventors lose their chance for success. They clearly don’t understand it which is not only a deal breaker but it shows they lack adequate knowledge. Too many people are making “financial fools” of themselves by walking in with a new product that has no sales, and asking for an amount of money that values the company at an excessive valuation. Suppose the business needs $250,000 in additional financing to adequately operate. Using two scenarios as an illustration of valuation; If the $250,000 financing is done for 50% of the company that makes the company worth $500,000. This may be still be a risky investment but let’s assume it is a reasonable valuation.The Inventor asks for $250,000 but offers just 10% of the company. That values the company at $2.5 million.This is an absurd valuation. If an investor were buying into a profitable company that, given its line of business, is normally valued at 20 times earnings then the company’s profit would be $125,000/year. That’s just a dream for an inventor in the early stages.If, in scenario B, the inventor had spent $50,000 of their own money developing the product and they were successful at receiving a $250,000 financing for 10% of the company they have managed to make their R&D expenditure worth $2.25 million. Not a bad return on $50,000! In some cases, the Dragon’s are very interested in the business but they opt out because they didn’t get the deal they wanted. It’s not that the inventor blew it either. In fact, the Dragon’s frequently appear to be trying to make deals that should be turned down by the inventor because the agreement the Dragon’s are after is too cheap. We’d see more deals if the inventors had better valuations not inventions. In the upcoming season, some of the inventors are coming back. Let’s see if they’ve learned anything.Thu, 27 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Perfect_Exit_Plan_In_The_Making.html http://www.investorbootcamponline.com/blog/Perfect_Exit_Plan_In_The_Making.html Studies, conducted by William J. O’Neil and Co., imply a sell signal on a stock is triggered when the price is 70-100% above the long term trend line (i.e. the 200 day moving average for chart readers). At the current time, many stocks are up by more than 100% from their long term trend line. Some of them are more than three times higher. Arguably, there are legitimate reasons for the stock market to have been as strong as it has and for some “real companies” with earnings, sales and significant market share in their industry to have logged big gains in this rally. Now, many of the big winners are consolidating (trading sideways) in a very bullish, and rare, condition. Analysis, suggests that it appears to be a "golden opportunity" to buy a big winner if you hadn’t already. But what looks like it might be too good to be true might be just that! To run higher from these levels would be one of the most unusual up-trends ever seen. That raises the question: “Why aren’t investors selling these stocks and locking in profits”? Well, consider that maybe they are and we don’t realize it, yet! Here are some distinct possibilities that are in development; The large “bear” population (investors not the ones in the forest), are late to the party. They are buying now after watching gigantic gains pass them by for five months. They also finally believe that the economy is recovering.Big investors with large positions in the stock market’s extended winners are hedging their profits through the options market. They’re also getting ready to profit in the inevitable correction. But here’s the bigger picture to consider: There is an orchestrated movement by the U.S. government, and the Fed., to refinance the banking sector. It’s to their advantage to keep prices elevated until the big money “on the inside” can lock in their profits from this liquidity driven rally. Those profits will ultimately reposition, triggering phase two of the economic expansion.When money managers come back from their summer holidays, they might be in a selling mood. But by then the smart money has locked in their gains.Wed, 26 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Insider_Selling_Another_Slap_in_the_Portfolio.html http://www.investorbootcamponline.com/blog/Insider_Selling_Another_Slap_in_the_Portfolio.html Individuals on the “inside” of a publicly traded company, such as management and members of the Board, are required to file personal trades in their company with the appropriate stock exchange. This information is released on a regular basis by the exchange. Unfortunately, far too many investors draw erroneous conclusions about future stock performance from that insider trade activity. The evidence shows that insider trade activity is a poor timing mechanism especially selling.Insiders are not experts in the stock market. They are experts in managing their company. There’s a big difference. More importantly, the sells they make are rarely related to a conclusion they, themselves, have drawn about the merits of their company. They’re selling because that’s how they get paid.Management is granted options in the company as a future reward for producing the corporate results that typically drive the share price higher. Since the options have an expiry date they either have to pay for the stock in full, on exercise of the options, or sell the stock. Through selling there’s no cash involved. So they take the money and run! Alternatively, some stock is optioned to management but they have to hold the stock for a fixed period. Even though there’s little or no cash involved, when the hold period expires they’re inclined to sell it. Wouldn’t you? Most people cash their pay cheques when they get them. Managements big pay off is frequently in the form of stock options. Throughout 2009, there has been an unusually high level of insider selling. Some have interpreted that as a sign that the economy is doomed and the stock market along with it. But there are other explanations; Insiders are spooked like everybody else but their anxiety is compounded by the responsibility of guiding their business through dark economic times. More likely, they’ve managed to get the Board to approve new options based on the huge declines in their share price. That left virtually no potential for realizing gains on options granted prior to September 2008. March 2009 rolls around, the stock market catches on fire, shooting prices much higher than expected and they “bag a big gain”. But this raises another issue for stock investors: Did those insiders do anything to deserve such a reward? No! They got lucky! Did the shareholders they work for receive any kind of a similar “deal” from the company? Of course not! In fact, the insiders exercising their recently granted stock options diluted the number of shares outstanding leaving the rest of us with an even smaller piece of the pie. Tue, 25 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Markets_a_Pump_and_Dump.html http://www.investorbootcamponline.com/blog/The_Markets_a_Pump_and_Dump.html Mon, 24 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Danger_In_Bonds.html http://www.investorbootcamponline.com/blog/The_Danger_In_Bonds.html From late 2008 through to March 2009, stock investors were about as mortified as you’ll ever see them. The natural reaction is to sell stocks, redeem equity funds, and “run for cover”. Individual investors, known as retail, typically do the same thing en masse at the end of bear markets through out history. Equity mutual fund redemptions in late 2002 were very heavy just as they were in the spring of 2009.Panic stricken investors and their Investment Advisors team up to assess investment objectives and decide to move those beaten down equity funds into the bond market. The thinking is that bonds are predictable, non volatile and, most importantly, they’re not stocks. So how have the proceeds of those redemptions done since then? In a word, terrible!U.S. bond yields have exploded higher since December on the huge borrowings by the U.S. government.But, it was also a normal market reaction since bond yields had, just months earlier, collapsed from the meltdown in the credit markets. The issue for stock investors was their timing. If they had moved from stocks to bonds in September when the stock market resumed its downtrend they would have profited. But that was before anyone thought they should hit the panic button. There are several lessons that investors can take from this: Making investment decisions based on emotion is a poor timing mechanism. Financial markets of any kind, including bonds, can never be presumed as “safe”.Too many Investment Advisors are operating with an insufficient knowledge of market cycles, are driven by emotion, like their clients, and they are motivated by a commission.To this, we say that investors holding bonds or bond funds need to be prepared for things to get worse! If the more than 20 year decline in interest rates comes to an end bond investors may suffer a long and painful erosion of their portfolios. Fri, 21 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Losing_The_Big_One.html http://www.investorbootcamponline.com/blog/Losing_The_Big_One.html Tens of millions of people buy lottery tickets every week. Why? The odds of winning are terrible. You have a better chance of being hit by lightning, twice! Of course, we all know why. It’s fantasy being empowered through believing someone is winning a big lottery somewhere. If only it was me! Maybe I’ll win the next one and if I don’t, it’s only a couple of bucks. Let’s look at the numbers for the popular Canadian lottery, the "649": There is a one in thirteen million chance of getting all six numbers. The odds, or probability, are calculated by multiplying the following numbers together; 49, 48, 47, 46, 45, 44. The easiest way to understand the odds calculation is this way; the first number in the draw has a one in forty nine chance of being selected. With that number out of the draw, there is now a one in forty eight chance of the next number being drawn and so on until all six numbers are selected. The ticket cost $2. If "Mr. or Mrs. Gambler" plays the lottery all the time that’s $4/week and $208/year. That’s a guaranteed loss of $208/year, $2,080 in 10 years, and $5,200 in 25 years. If the $208/year was invested in a boring equity mutual fund that returned 10%/year the investment would double every 7 years. In 25 years, the capital would grow to just under $25,000.So what do you like better now? The stock market which seems to be miserable too often or the “oh I’m going to be so happy when I win the lottery fantasy”? Maybe someone should set up a mutual fund for buying lottery tickets. Why not? It’s better than sitting on a bunch of penny stocks run by management who blame the stock market or the credit markets for the share price falling from $1.25 to .02. We need something fresh anyway since most bull markets have a new “spin” to them. Hire a manager to survey lottery jackpot sizes and then load up on tickets when the jackpot becomes unusually large. Of course, the Regulators would require that investors meet the accredited investor rules (i.e. sophisticated investors), due to their determination of what’s risky and what isn’t. If you’re still not convinced that you should stop buying lottery tickets, then go to Church. Thu, 20 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Its_a_Boring_Time.html http://www.investorbootcamponline.com/blog/Its_a_Boring_Time.html The world of finance and business seems to be lacking news lately. In July, I was filling in at CBC Newsworld and it surprised me to see the writers scrambling around trying to put a spin on some kind of a story.It seems that many of the years’ stories have become “old news”:The stock market has, until recently, been ploughing higher for five months. It has become monotonous to hear the “bears” saying it won’t last. The Obama Administration isn’t interesting anymore. The bail outs, the Fed., the stimulus programs, Ponzi schemes, new regulations and some signs of economic recovery are all old news.Some will say it’s the time of year but it’s much more profound than that. The truth is big stories are being born at this very moment.So what’s going on “behind the scenes”? The trillions of dollars that were pumped into the financial system have driven stock and commodity markets higher but it’s not transient capital. Investors everywhere are looking for new opportunities in a world that has seen sharp increases in bankruptcies, unemployment, tight credit markets, extraordinarily volatile markets and a shifting economic power to Asia. But like farmers in the spring who work around the clock to prepare their fields to plant their crops it’s just not a story, yet. The story comes later at harvest time. Just like farming in the early phase of the crop cycle, business and finance, are planting seeds to produce economic rewards later.As the economy recovers, and it will, stock markets will be higher and investment industry professionals will be looking to see where the “big shots” have been making money. The industries or businesses they are planting their seeds in now, will become known later. As word gets around investors will follow suit and proudly invest where the “smart guys” are.In tough economic times, innovation kicks into high gear. In Canada, more people have become self employed in May-June, than the total number of new jobless claims. People are “rolling up their sleeves”, getting to work and being creative. We will hear about some of these success stories in the making, later.Wed, 19 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Stock_Market_Enters_Correction.html http://www.investorbootcamponline.com/blog/Stock_Market_Enters_Correction.html The deep decline on Monday (August 17th) effectively placed the stock market in correction status. The single session loss of 5.8% in China, 3% in Canada and nearly 2.75% on the NASDAQ doesn’t necessarily imply correction. After all, many stocks had doubled from their March lows. But history has shown that a number of significant changes in “investor behaviour” are enough to provide a tip off of what’s to come. And, as the cliché goes, “timing is everything”! So if investors are to be given the “heads up” to take action this is it. Here are the signs that a correction may now be underway; Mondays’ decline undercut the markets’ consolidation which, to that point, had been quite constructive on the market averages. Market averages in North America gapped lower. A gap in a major average or index, where no trading occurs in that price range, is a relatively rare event and indicates power. Such power tends to continue in the direction of the gap. Market averages were undergoing distribution; Distribution is a price decline in higher volume than the day before and indicates selling by big money managers. The S&P 500 has had 5 distribution days since July 28th. Through out history 4 or 5 distribution days effectively terminates a rally. The decline started in China and was a very large loss. China has been the leading market world wide. When “leaders” change trend the herd follows. This is one of the best "crystal balls" into the markets' future direction. A number of Chinese A.D.R.’s on U.S. exchanges have suffered badly. Many of the markets’ best stocks were historically extended. Their gains had gone about as far as any stock rises without undergoing some kind of a short term correction. We identified two stocks as the most telling leaders when they first emerged in February and March. Those two went into corrections some time ago. After the one month consolidation in mid July ended, the market underwent a shift in leadership with laggard non growth or value sectors and stocks picking up. Historically, this can keep the markets’ up-trend intact but it is typically a challenging investment climate. Extreme levels of optimism in contrarian sentiment indicators developed recently. Such readings usually coincide with market tops. However, not all signs point to a “rush to the exits”! The markets best performing high quality stocks are mixed with many showing signs of strength on Monday. A number of recent price break outs, above ranges or bases, are holding up indicating a healthy condition for those stocks.The current market rally looks similar to 1932, 1938 and 2003. In 2003, the market rose steadily from March to December before logging its first monthly loss. The first up-leg in many bull markets has recorded larger percentage gains over a longer period than the current bull. Advances as powerful as this one, at 52.6% for the NASDAQ, do not fade into history. There has usually been a recovery and continuation of the advance after the first correction.Tue, 18 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/The_Downside_of_the_Economiic_Recovery.html http://www.investorbootcamponline.com/blog/The_Downside_of_the_Economiic_Recovery.html Stock and commodity markets have been signalling an economic recovery since a powerful rally began in early March. Economic statistics are showing improvements in some areas, and U.S. jobless claims are starting to drop. These are all typical signs of the progression in an economic recovery. But what comes next?On Monday August 17th, the Chinese stock market fell sharply and markets around the world followed. Doubt is arising now as some question the validity of economic data from China, the strength of the economic recovery in the U.S. and whether the stock market has gone too high too fast. But what issues could there be if stock markets went up for 5 straight months and many stocks doubled in price from their lows? The answer might lie in the nature of the rescue plan for the credit markets. Mid and long term interest rates in the U.S. rose sharply this year as the U.S. government continues to borrow heavily to finance their stimulus programs. The upside is the widest yield spread in history has given the banking sector an enormous margin to operate with serving to refuel earnings. Phase 1 of the recovery, “save the banks”, is completed. But the economic benefit may be short lived.While the yield spread is good for the banks it doesn’t work very well for borrowers. Why would anyone or any company choose to finance at a significantly higher longer term rate when they can borrow at the much lower short term rate indefinitely? This is an unsustainable condition.Compounding the issues in the debt markets are the double digit borrowing rates that even some of the most creditworthy big corporations face. Some will argue that the government is squeezing out other borrowers. This may be true but 10% corporate bond yields are still well above the 30 year bond yield at 4.35%. Financing activity remains tight for the businesses that are normally the drivers of economic growth.These factors are the forces that shape an economic recovery that may look like a “W”. 2008 was the deep decline, left hand side of the “W”, and the recovery since the spring of 2009 brings the economy to the midpoint of the “W”. Now those structural issues will start to show up causing a breakdown which may spark another big sell off in stock and commodity markets.The actions taken by governments and central banks were intended to revive the credit markets and banking system. The liquidity driven rally in markets, like equities, may be phase 2 of a plan to generate capital to serve those in higher positions of power. If that’s the case, the average investor needs to be prepared to protect their capital and their job. Mon, 17 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Corporate_America_gets_lean.html http://www.investorbootcamponline.com/blog/Corporate_America_gets_lean.html August 17, 2009Jobless claims may be improving but unemployment remains very high and the economy is a long way from producing net gains in employment. This is keeping the “bears” growling supporting their argument that the stock markets’ 5 month advance is doomed. However corporate America is not only getting leaner and meaner they may take advantage of the sluggish economy.Mainstream opinion believes the global economy is unlikely to see a rebound of significance until well into 2010 and the output gap will remain wide until 2012. Considering sentiment, high unemployment and the scare from the credit markets last fall it’s no surprise that companies will be reluctant to hire staff. That gives business several options to help rebuild the bottom line; 1) Keep total payroll costs down and spread the work load out amongst fewer employees. 2) Reduce hourly rates and/or annual salaries by tapping into a larger pool of potential employees. 3) Increase flexibility by using part time employees. The current economic climate might be the opportunity for business to fight back against the high cost of benefits. It couldn’t come at a better time with the Obama administration targeting the rich to carry more of the income tax burden and companies with health care benefits costs. Using part timers is a powerful weapon against government policy and the tendency amongst workers to look for jobs that pay benefits. Anyone looking for work might have a convincing pitch to an employer by telling them they’ll work without a company sponsored benefits plan. Cost control in the current economic environment doesn’t stop with staffing. The environment for raw materials, supplies and other inputs is even more competitive. Great deals can be made from shopping around and bargaining at a time when some suppliers may be desperate.Lower payroll costs may be vital for North American businesses as they struggle with left wing government policy, tight financing markets, and a global economic landscape that is shifting towards Asia. Fri, 14 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Why_Exchange_Traded_Funds_are_bad_for_the_market.html http://www.investorbootcamponline.com/blog/Why_Exchange_Traded_Funds_are_bad_for_the_market.html Exchange traded funds were one of the hallmarks of the last bull market. In 2002 there were about 100 exchange traded funds or E.T.F.’s. Now there are at least 1000 in the U.S. and well over 100 in Canada. So they must be a good thing right? Wrong. They’re good for the company that issued them but some E.T.F.’s, in particular, are downright bad for the market and their presence, in general, detracts from alternatives.The benefit of E.T.F.’s include exposure to countries and commodities that stock investors in North American wouldn’t otherwise have. They also offer both bull and bear possibilities. There are, however, E.T.F.’s that provide two times, and in the case of the Direxion funds, three times performance to the underlying “market”. The issue with the leveraged E.T.F.’s is that they are essentially providing free margin or leverage without the owner having to put up additional capital. That can be seen as a bonus to some but they are adding volatility to a market and economy that was apparently compromised by that very issue.The diversified offerings of equity E.T.F.’s are also attracting investor capital for trading, especially from hedge funds, when that same capital could be going into individual stocks. Many hedge funds will buy, for example, a sector or country E.T.F. and short an individual stock from the same sector or country. Have you ever wondered why some stocks of companies that seem to be perfectly valid investment candidates, do poorly while its sector or country is doing well? How is that good for the investor who wants to pick their own stocks? Here are some other reasons to have E.T.F.’s banned; There’s apparently a lack of regulation of what the issuers of the leveraged E.T.F.’s are telling investors about pricing. Some issuers claim a 99.9% tracking between the leveraged E.T.F.’s pricing and the underlying market. However, the reality is leveraged E.T.F.’s are like options. If you don’t get the underlying market moving powerfully in your favour, day after day, you will lose ground in the price correlation. You might even lose money on your leveraged E.T.F. holding even though the underlying market has moved favourably. Where’s the regulation of the content or holdings within the E.T.F. How do we know that the silver bullion E.T.F. actually holds 100% of its capital in silver? How do we know what manipulations are occurring within an E.T.F. that holds a basket of stocks? Don’t let a bulky prospectus give you any assurance about what goes on after the issuer has your money. They make a management fee on the bull and bear E.T.F. regardless of which way the market goes. The exchange gets their fee for the E.T.F. listing and the shareholder protection fund gets their cut from another issuer.The Regulators probably have a cozy feeling about E.T.F.’s based on theory. We will say this: They are a great idea, in theory! But the reality is they are bad for the market and they are hurting the average investors’ chances for success. Thu, 13 Aug 2009 09:00:00 ESThttp://www.investorbootcamponline.com/blog/Why_the_Bears_missed_the_ride.html http://www.investorbootcamponline.com/blog/Why_the_Bears_missed_the_ride.html See the Markets and Investing page for todays action and market overviewMany investors have missed one of the best rallies you’ll ever see in the stock market. History has shown up, again, in the form of a new bull market and economic cycle when people say it can’t. Right on cue the mainstream media, investment newsletters and numerous institutional and retail investors have been caught looking in the rear view mirror instead of looking ahead, as the stock market always does. Here is why stock and commodity markets have been chugging higher for 5 months; Declines were so large that they had little room for further decline. The sell off was as extreme as it gets. By spring 2009 if somebody hadn’t sold based on the terrible decline and news they weren’t going to. Selling had exhausted itself on a short term, mid term and long term basis. A normal market reaction after an extended period of heavy volume action and huge price declines is to stop and start going the other way. Enormous economic stimulus was established with the process underway by the spring. Believing that trillions of dollars and near zero interest rates weren’t going to revitalize the economy is pessimistic to the point of being unrealistic. For all the doomsday believers out there, did you sell your house? Did you sell all of your investments? For anybody that thinks the huge fiscal stimulus, especially out of China, and the actions by the U.S. central bank weren’t going to work that’s the only appropriate response. The huge and rapid decline in the fall of 2008 occurred because the credit markets had, effectively, put up a `closed for business`sign. Since the credit markets are back to work, why can’t the market recover the entire decline from last fall? The stock market is a discounting mechanism meaning it accounts for, or prices in, an expectation, which by nature, is in a future time. So, the most appropriate response for an investor is to deal with the trend in the market as it occurs. It is not necessary to attempt to justify it based on the news.