Archive for June, 2005

Learn about Forex, Currency Trading, & Currency Exchange Markets

Wednesday, June 29th, 2005

Forex is the single largest financial market. Each day over a trillion dollars worth of currency changes hands. With that sum of money exchanging hands there is significant opportunity in currency markets, especially considering that you can leverage your Forex purchase power by a factor of 20.

With the ever increasing US debt, trade imbalances, the possible fall of the Euro, the pending Chinese Yuan revaluation, US Dollar fluctuations related to Greenspan and company changing interest rates, and global oil shortages there are large swings in global currency values.

Read Forex 101 if you want to learn more about how you can take advantage of the opportunities in FX markets.

Higher oil prices

Sunday, June 26th, 2005

Very few economists were predicting oil prices around 60.00/barrel 12 months ago. Now that they have arrived, stocks are suffering:

“People need a good reason to buy stocks, but they always have reasons to sell,” John Waterman, chief investment officer at Rittenhouse Asset Management, told The Associated Press. “We’re seeing mixed economic data, high oil prices, so where do you put your money? Investors chase momentum, and there’s none here.”

Considering the energy situation, here’s a nice look at some energy stocks and the related economic issues in India.

It’s interesting to me that with the higher oil prices we see some people calling for a switch from value to growth investing. It seems that some investors think that earings growth will slow overall so that the focus needs to be on the companies with solid growth:

Large growth stocks have been especially weak during the past five years, Conrad Herrmann, manager of the California-based Franklin Flex Cap Growth Fund said during a recent stop in Phoenix.

“That’s where we’re finding good opportunities,” he added.

Herrmann cites firms such as Pfizer, Johnson & Johnson and Amgen, traditional growth companies that now resemble value plays. Other growth bellwethers with modest p/e ratios include Microsoft, General Electric, Citigroup, Home Depot and Wal-Mart Stores.

Millen cites Johnson & Johnson as an example. The company’s per-share profits rose 18 percent in 2004 – the 20th straight year of double-digit increases – and that paved the way for dividend increases.

Although value stocks have enjoyed an edge during the past five years, some observers see the scales tipping back in favor of growth. Herrmann says a slowing economy could be the catalyst.

“I think we’ve seen the peak in the (overall) growth of earnings,” he said. “Investors now will need to focus on companies still able to generate good growth.”

TD Ameritrade

Thursday, June 23rd, 2005

This email interested me because I used to be a TD Waterhouse customer. I switched to Ameritrade and have found over the years that their customer service is far superior to that of TD Waterhouse. Anyway, they will soon be one company:

This is an exciting time to be an Ameritrade client. As you may have heard, Ameritrade has signed a definitive agreement to acquire the U.S. brokerage business of TD Waterhouse. This means you will soon have more tools, more choices and more of the edge you need to be a power player in the financial markets.

You’ll get the best of everything in one company named TD Ameritrade. We’ll be taking the powerful robust online trading tools, advanced technology, and 24/7 service you expect from Ameritrade, and adding the extensive branch network, personalized investment services and financial advice that TD Waterhouse offers.

The future of trading and investing is on its way.

The proposed acquisition of TD Waterhouse will require regulatory and shareholder approval and this will take some time – probably six months. We’ll then spend several months bringing the strengths of both companies together. During this time, you can continue to use all of Ameritrade’s services and features just as you do today. There’s nothing you need to do differently. You can keep informed of our progress at www.ameritrade.com and we’ll contact you, in writing, well in advance of any changes.

A hint of good things to come.

You can expect many of the same benefits for which you chose Ameritrade, including:
An advanced trading platform
Quality execution, speed and pricing*
S&P

What are the markets doing?

Thursday, June 16th, 2005

Despite rising oil prices, stocks seem to be in reasonably OK shape. I wrote about Boeing a few days ago, and sure enough Boeing stock is on the rise following a few deals at the Paris Air Show. A stock I’m invested in is also making news; Phizer is ready to buy Vicuron Pharmaceuticals Inc. for $1.9 billion in cash.

Boeing not done yet

Monday, June 13th, 2005

Boeing has not walked away from the battle with Airbus and seems to be winning back some customers with its new fuell efficient plane:

First, he said Boeing was in talks with another 27 airlines over potentially 427 more orders for its new 787 Dreamliner – raising the prospect of nearly 700 orders for the fuel-efficient, long-range 250-seater jet.
Airbus has so far secured 10 orders for its A350 twin-engined jet compared with 266 for Boeing’s 787. It is due to announce 100 more orders this week, although there are now serious doubts about whether the Emirates and Qatar Airlines will go ahead.

I saw a segment on BBC World News that this represents a different view on what airlines want: Smaller, more efficient planes vs. the huge plane like the Arirbus A380 with 555 seats. My money’s on the smaller, more efficient planes. You never know when a natural disaster or geopolitical uncertainty will reduce flight passengers, making the 555 seat jets somewhat risky. Also, with the smaller jets an airline can operate more flights, providing customers with a more convenient schedule. And we all know how important fuel efficiency is today.

A step in the right direction

Monday, June 13th, 2005

In a move that will cost rich countries only 1.2 billion dollars a year, the G8 has agreed to cancel the debt of 18 well-governed but impoverished nations. Critics of the deal are saying more needs to be done and they are absolutely correct. However when trying something new, it’s important to move somewhat cautiously.

For example, Germany and Japan share real concerns about how to make sure that the money is being used well. Might debt cancellation encourage reckless spending? Time will tell and that is why this low-risk move is the right one. Certainly, resources should be collected to expand the program quickly as people are suffering and we need to help them soon. I’d just rather see numerous, quick, small steps than one big one.

Investing in Precious Metals

Saturday, June 4th, 2005

Looking at precious and not so precious metals is an important step in diversifying your holdings.

Commodity prices are driving higher and higher as more funds add raw materials to their portfolios. Based on the outlook for raw materials and the need for diversification of portfolios after equities and bonds returns decreased, the investment in metals and other raw materials is part of a strategy. Should you attempt the same thing or is it too late?

Unlike equities and bonds, higher interest rates negatively affect the returns from commodity futures. Equities and bonds give income payments through dividend payments or coupons which are better than returns on cash. Commodity futures contracts, on the other hand, provide a negative yield because they provide no income payments.

The influx of money has pushed prices higher than they usually would be, creating a speculative bubble that could burst at any time. This price volatility and risk is especially hard on smaller future contracts which trigger large price falls when funds are withdrawn. Higher prices for basic commodities like gold and silver correspond to higher interest rates which increase the cost of holding commodities.

Base metal prices have risen. The price of copper on the London Metal Exchange was $1,550 per metric ton at the beginning of 2003. In 2004, it rose to $2,350 per metric ton and the beginning of 2005, saw the price at $3,400 per metric ton. Aluminum rose from $1,600 per metric ton in 2004 to $2,000 per metric ton in 2005.

Short term speculative gains for the main metals (especially copper, lead, tin, and nickel) are good because the exchange stocks have declined. The declined stock price suggest that future spikes are imminent which is why short term investments as opposed to long term look good.

This is not a worldwide condition. For example, aluminum stocks are low in the US and north Europe, but supply has outgrown the demand in Asia thanks to Chinese expansion and development. In Asia, exchange stocks of aluminum are going up and physical premiums have gone down. Copper inventories, on the other hand, are not at risk of supply disruption. This means that the price has risen which has decreased the demand in Europe, US, and China.

What does this mean? Some think that a short term investment in a precious metal will be profitable, a medium term investment may or may not be, and long term probably won