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Archive for August, 2011

Aug

2011

The Baby Boomer stock shock and what you can do to avoid it

by Fred Mason

Two researchers buried amid reams of data at the Federal Reserve Bank of San Francisco emerged recently with a disquieting prediction: the first great wave of Baby Boomer retirements is going to push down stock prices for the next 10 years. According to researchers Mark Spiegel and Zheng Liu, stocks in 2021 could be worth 13 percent less than were in 2010.

Worse than that, Spiegel and Liu don’t expect stock prices to fully recover to their 2010 levels until 2027. I’ve dubbed it the Baby Boomer stock shock, and its had me exploring ways to protect my capital over the next 16 years.

Born between 1946 and 1964, Baby Boomers are the single largest demographic in America, and they make up fully 25 percent of the population. The youngest Boomer is now 44 years old, and the oldest Boomers should start qualifying for retirement benefits this year. According to Speigel and Liu, those Boomers are going to start selling shares they’ve spent decades accumulating, and that’s going to drive down the overall stock market.

How to avoid the Baby Boomer stock shock

While the overall stock market might suffer from prolonged selling as Boomers cash in their equities, stocks that specifically cater to an older population could be poised to outperform. JPMorgan Chase & Co. (NYSE:JPM) has actually put together a list of just such stocks. Dubbed the Aging Population Index, this group of 21 stocks has outperformed the S&P 500 six out of the eight past years (per the Financial Post).

The index is heavily weighted toward healthcare (at 48 percent), consumer discretionary items (at 33 percent) and financial stocks (at 14 percent). Among the companies?

Royal Caribbean Cruises Ltd. (NYSE:RCL). Stress-free trips on clear blue Caribbean waters. Just what the doctor ordered. There are even a handful of retirees who have opted to live out the rest of their days on cruise ships (per Snopes). The industry’s been working hard at appealing to younger travelers, but their bread and butter for the next 20 years will be Boomers.

Chico’s FAS, Inc. (NYSE:CHS). With a clothing line that’s specifically targeted at high-income women over 35, the company’s stock is up more than 123 percent over the past 10 years (not counting three stock splits earlier in the decade). Chico’s designs its clothes with a toned-down color palette and fills its racks with sizes aimed at “plumper” figures.

Sun Healthcare Group Inc. (NASDAQ:SUNH). One of Sun Healthcare’s largest businesses is SunBridge, which operates more than 200 nursing homes and post-acute care centers. All told, SunBridge houses 22,000 beds in 25 states, and that number should start accelerating rapidly 10 years from now. The average age upon admission to a nursing home is 79 (per PBS.org). As Boomers start aging, long-term care will be inevitable for many.

The Scotts Miracle-Gro Company (NYSE:SMG). The National Gardening Association pegs the average age for gardeners at 55 (per Mlive.com). Companies like Miracle-Gro that cater to that niche are in the fat part of the growth curve. The oldest Boomers are still gardening and the youngest Boomers could just be getting started.

In general, Boomers won’t be fully liquidating their portfolios, but they probably will be moving from high-risk sectors like tech into stable, dividend-paying stocks. Keep the macro-trend in mind, and you should fare better than the S&P in the years to come.

FALSE GODS Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks	GOLD PRICE COLLAPSE Gold prices take biggest plunge in 30 years; CME hikes gold margin requirements
THINK AND GROW RICH Top 10 new investing books for 2011	ONE IDEA TO RULE THEM ALL How to file a patent
BETTER THAN CRUDE? How to invest in natural gas	THE WHITE METAL Why invest in silver?

Tags: Baby Boomer stocks, CHS, RCL, SMG, SUNH
Posted in financial stocks, healthcare stocks, NYSE, senior stocks, stock tips | No Comments »

Aug

2011

Gold prices take biggest plunge in 30 years; CME hikes gold margin requirements

by Fred Mason

Gold bullion prices collapsed more than $100 an ounce yesterday. According to Reuters, that’s the largest single-day drop in nominal dollars since 1980, and the largest one-day percentage drop (at more than 4 percent) since 2008.

Markets are jumpy right now. Investors are positioning themselves for an announcement from Fed Chairman Ben Bernanke on Friday morning. Bernanke will speak from his annual pow-wow with several others central bankers in Jackson Hole, Wyoming. While many were anticipating Bernanke would announce more economic stimulus (just as he did last year after the Jackson Hole meeting), that notion seems to have gained a lot less traction in recent days. That’s lent some strength to an otherwise ailing dollar and pushed investors into riskier trades – particularly equities.

One trader told Bloomberg that he started getting really nervous about gold prices when he heard that the total value of the SPDR Gold Trust (NYSE:GLD) had surpassed the value of the SPDR S&P 500 ETF (NYSE:SPY). SPY’s been the world’s largest ETF since 1993. Seeing it kicked to the No. 2 slot in favor of gold was a sign that perhaps stocks were underbought.

When it rains, it pours

The CME Group doused even more water on the price of gold after it announced late last night that it was raising gold margin requirements 27 percent after trading on Aug. 24. The move follows a 22 percent margin requirements hike on Aug. 11. If gold prices bounce back after today’s collapse, I wouldn’t rule out even higher margin requirements.

When the CME started raising margin requirements on silver this spring, they didn’t stop until the market had given up a month’s worth of gains. During one nine-day period late in April, the CME raised silver margin requirements by 84 percent.

One of the big drivers for equities yesterday, and a downward force on gold prices were better than expected numbers on durable goods orders. Orders for things like airplanes, automobiles and business equipment rose 4 percent last month. That was more than twice as much as expected. And that bit of good news overshadowed the bad: namely, that business spending fell 1.5 percent last month. That’s the biggest decline in corporate outflows since January, and it’s an indication that businesses started tightening the reins on their pocketbooks over fears of a double-dip recession.

The arguments for investing in gold (reference my post “Why invest in gold“) have gotten an added boost thanks to inflation not just in the U.S. but around the world. The Swiss Central Bank has even considered pegging its currency to the Euro so its export market can remain competitive. That leaves few safe havens for investors and it’s even pushed up the value of U.S. treasuries in the wake of a downgrade for U.S. debt. Investors invest not just to make money, but to protect the capital they’ve already accumulated. With the dollar expected to remain weak through at least 2013 (when the Fed may begin raising interest rates from historic lows), I don’t think we’ve seen the last of the gold story. This is just a temporary bump in the road.

How to short gold with ETFs

ETFs make it easy to bet against the yellow metal. Investors can short the flagship SPDR Gold Trust (NYSE:GLD) (which would have been good for a 3.3 percent gain yesterday), or go long on the PowerShares DB Gold Double Short ETN (NYSE:DZZ), which spiked 10.3 percent yesterday. GLD holds physical gold deposits in a London bank, while DZZ attempts to return twice the inverse of the Deutsche Bank Liquid Commodity Index. If the index goes down, DZZ should go up twice as much as the index’s decline.

FALSE GODS Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks	WHAT’S THE POINT? Why invest in gold?
THINK AND GROW RICH Top 10 new investing books for 2011	MORE THAN A CORPORATION How to start a B Corporation
BETTER THAN CRUDE? How to invest in natural gas	THE WHITE METAL Why invest in silver?

Tags: CME Group, DZZ, GLD, gold margin requirements, gold price, silver price
Posted in commodities, gold, gold stocks, precious metals | No Comments »

Aug

2011

Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks

by Fred Mason

When I first started writing this blog post, I was going to call it “How to Invest Safely in Stocks.” My second recommendation was that beginners should start with a handful of the 30 stocks that make up the Dow Jones Industrial Average. Once I started digging through the numbers, though, I was a startled at what I found. Apparently, the blue-chip stocks aren’t the no-brainers most investors like to think they are.

Need proof? Check out this chart I put together of the 10-year returns for each of the 30 Dow Jones stocks:

Company	10-Year Stock Return	10-Year Dividend Return on $1,000 investment	$1,000 is now worth
3M Company	+46.6%	$590.94	$3,458 (aided by a stock split)
Alcoa Inc.	-68.1%	$134.46	$449.82
American Express Company	+41.47%	$122.40	$1,514
AT&T Inc.	-31.8%	$357.12	$1,024
Bank of America Corp.	-51.8%	$718.58	$1,109
The Boeing Company	+12.54%	$218.16	$1,311
Caterpillar Inc.	+208.7%	$787.17	$7,093 (aided by a stock split)
Chevron Corporation	+113.9%	$794.85	$4,791
Cisco Systems, Inc.	-7%	$7.20	$933
The Coca-Cola Company	+45.2%	$284.76	$1,734
du Pont	+11.1%	$372.72	$1,462
Exxon Mobil Corporation	+82%	$319.44	$2,086
General Electric Company	-61.9%	$200.4	$572
Hewlett-Packard Company	+2%	$123	$1,129
The Home Depot, Inc.	-32.7%	$117.58	$780
Intel Corporation	-29.7%	$136.54	$825
International Business Machines Corp.	+57.1%	$127.26	$1,605
Johnson & Johnson	+20.8%	$257.22	$1,426
JPMorgan Chase & Co.	-16.1%	$273.12	$1,107
Kraft Foods Inc.	+8.7%	$283.34	$1,339
McDonald’s Corporation	+198.4%	$387.25	$3,351
Merck & Co., Inc.	-51.2%	$218.70	$698
Microsoft Corporation	-20.1%	$416.64	$1,998
Pfizer Inc.	-56.3%	$196.56	$634
The Procter & Gamble Company	+68.6%	$607.79	$3,884 (aided by a stock split)
The Travelers Companies, Inc.	+11.8%	$120.34	$1,206
United Technologies Corporation	+94.9%	$529.54	$4,305
Verizon Communications Inc.	-31.5%	$305.33	$988
Wal-Mart Stores, Inc.	+4.7%	$130.29	$1,141
The Walt Disney Company	+25.1%	$110.20	$1,330

What’s startling is this: of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!). That’s remarkable considering I didn’t factor in inflation, which have averaged 2.4 percent over the past decade (per FinTrend.com).

That means your odds of throwing a dart at a list of the Dow stocks and hitting a winner are only around 63 percent. That’s not much better than going to the casino and counting a few cards at the blackjack table.

Before you toss your hands up and cash in your IRA for guns and ammo, though, I’d be remiss if I didn’t point out that the average return on $1,000 for the 30 Dow component stocks was $1,842 over the past 10 years. Indeed, a $1,000 investment in Caterpillar Inc. (NYSE:CAT) would be worth $7,093 today. That’s not bad, but seeing the returns from a company like GE, which has crumpled more than 60 percent over the past 10 years is scary. And this year hasn’t been kind to the Dow, either. Take a peek at the YTD returns on each of the component stocks:

Company	Ticker	YTD Return	Dividend Yield
3M Company	NYSE:MMM	-10.8%	2.86%
Alcoa Inc.	NYSE:AA	-27%	1.07%
American Express Company	NYSE:AXP	+3.9%	1.61%
AT&T Inc.	NYSE:T	-3.17%	6.05%
Bank of America Corp.	NYSE:BAC	-51.8%	0.62%
The Boeing Company	NYSE:BA	-10.5%	2.88%
Caterpillar Inc.	NYSE:CAT	-14.7%	2.3%
Chevron Corporation	NYSE:CVX	+2.25%	3.34%
Cisco Systems, Inc.	NYSE:CSCO	-25.8%	1.6%
The Coca-Cola Company	NYSE:KO	+2.28%	2.79%
du Pont	NYSE:DD	-12.1%	3.74%
Exxon Mobil Corporation	NYSE:XOM	-4.02%	2.68%
General Electric Company	NYSE:GE	-17.3%	3.97%
Hewlett-Packard Company	NYSE:HPQ	-41.9%	1.96%
The Home Depot, Inc.	NYSE:HD	-7.9%	3.1%
Intel Corporation	NYSE:INTC	-7.85%	4.33%
International Business Machines Corp.	NYSE:IBM	+8.33%	1.89%
Johnson & Johnson	NYSE:JNJ	-1.51%	3.6%
JPMorgan Chase & Co.	NYSE:JPM	-21.2%	2.99%
Kraft Foods Inc.	NYSE:KFT	+6.47%	3.46%
McDonald’s Corporation	NYSE:MCD	+14.3%	2.78%
Merck & Co., Inc.	NYSE:MRK	-13.1%	4.85%
Microsoft Corporation	NYSE:MSFT	-14%	2.67%
Pfizer Inc.	NYSE:PFE	+0.9%	4.52%
The Procter & Gamble Company	NYSE:PG	-4.07%	3.40%
The Travelers Companies, Inc.	NYSE:TRV	-11.8%	3.34%
United Technologies Corporation	NYSE:UTX	-14.02%	2.84%
Verizon Communications Inc.	NYSE:VZ	-2.6%	5.6%
Wal-Mart Stores, Inc.	NYSE:WMT	-3.23%	2.80%
The Walt Disney Company	NYSE:DIS	-14.6%	1.25%

Just seven out of the 30 Dow component stocks have actually appreciated in value this year. That should give you pause before you invest in a high-profile company solely on the strength of its name and brand.

The Takeaway

Here are three key things I take away from the charts above:

1) Energy is the name of the game. One sector in the Dow has strongly out-performed others in recent years. Namely, oil (ala Chevron and Exxon). And I wouldn’t expect that to change – particularly as fears over inflation mount.

2) Banking stocks have a lot of ground to make up. The fact that JPMorgan Chase is down 16.1 percent over the past 10 years, and Bank of America’s down a whopping 51.8 percent could get you thinking banking stocks have to turn the corner soon. I’d argue there’s a lot of pain for them on the horizon, particularly with the imminent threat of inflation. Banks thrive and dive on interest rates, and all those fixed mortgages BAC’s underwriting at 3 percent could come back to bite them in a high-inflation environment. That’s a big part of why banking stocks have fallen in recent months, and it’s a trend I expect to continue.

3) Follow the macro-trends. If you would have invested $1,000 in gold at the start of 2001, you’d now be holding onto $6,797 in bullion. Energy and inflation are the stories du jour, and your portfolio should reflect that reality. No one can say the next 10 years will play out the same as the past 10, but we can say the demand for oil isn’t going away anytime soon, and neither is our government’s debt problem. You can’t afford to ignore the macro picture anymore, unless, of course, you’re happy rolling the dice in your IRA.

JUST THE BEGINNING FOR GOLD Insane gold and silver price predictions for 2011	WHAT’S THE POINT? Why invest in gold?
THINK AND GROW RICH Top 10 new investing books for 2011	DON’T CALL IT A BUBBLE YET Rally in gold prices could still have legs
TECH BOOM Top five best social media stocks	THE WHITE METAL Why invest in silver?

Tags: AA, AXP, BA, BAC, CAT, CSCO, CVX, DD, DIS, Dow Jones Industrial Average, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, KO, MCD, MMM, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM
Posted in Bank stocks, commodities, economy, energy stocks, NYSE, stock tips | No Comments »

Aug

2011

Rally in gold prices could still have legs

by Fred Mason

In case you haven’t noticed, the gold market is starting to feel frothy. Over the past month, the SPDR Gold Trust ETF (NYSE:GLD) has risen more than 18 percent while the Dow Jones Industrial Average has tumbled 14 percent.

In a sign of the times, the SPDR Gold Trust actually surpassed the SPDR S&P 500 ETF (NYSE:SPY) to become the world’s largest ETF yesterday (per USAToday). GLD’s now holding some $78 billion in gold in a London vault, while SPY’s holding $77 billion in paper assets.

Gold bugs have to be getting jittery, even as they watch the value of their favorite commodity scream higher. Why? Gold just might be going parabolic, and anything that goes parabolic is doomed for a collapse (no matter how short-lived).

The same thing happened six months ago in the silver market when silver prices rocketed up more than 30 percent from roughly the end of April to the end of May. A series of new silver margin requirements from the CME was widely blamed as causing silver prices to crash.

Now, investors are starting to look at their watches and guess when the same thing’s going to happen to gold. I’m not ready to be a bear yet, though, and here are three reasons why:

1) Seduced by silver prices. I was thinking gold prices were getting over-heated until I look at the chart for the iShares Silver Trust ETF (NYSE:SLV). In April, the run-up in silver prices made gold’s current spike look paltry. In the span of 30 days, silver shot up 30 percent.

By contrast, gold has risen a mere 18 percent over the past month. If bullion is indeed going parabolic, we could be right in the middle of the most powerful part of the upward thrust. We’ve got to be careful, though. Silver more than made up for its rise by giving up all its gains in five short days. That’s a plunge of 6 percent per day!

2) Margin calls anyone? The CME took the brunt of the blame for cooling the silver market after issuing a series of vicious margin hikes when the market got overheated. During a nine-day span at the end of April, CME raised silver margins by 84 percent (per the Wall Street Journal). Two weeks ago, they started in on the margin requirements for gold raising them 22 percent on Aug. 11. CME also hinted more hikes could be imminent for gold, but still, we’re a long way from the 84 percent hike we saw for gold’s white cousin.

3) Timing is everything. Gold prices will likely remain strong through the end of the week as investors await an announcement from Federal Reserve Chairman Ben Bernanke. He’s hashing over ideas with some of the world’s most powerful bankers at the annual symposium in Jackson Hole, Wyoming, right now, and he’ll make some sort of announcement on Friday morning.

Last year’s gathering brought us QEII, of course, and some are betting there’s going to be even more quantitative easing on the horizon as the banking elite look for ways to keep the ship afloat. If that happens, expect lots of fireworks in the financial markets. I’m just not sure if it’s going to be good for gold, but I know better than to argue with a trend until its broken. Friday might be the breaking point, but I’m at least bullish until then. And if gold prices do indeed fall, I’ll look for ways to add more to my portfolio in the rocky months to come.

JUST THE BEGINNING FOR GOLD Insane gold and silver price predictions for 2011	WHAT’S THE POINT? Why invest in gold?
THINK AND GROW RICH Top 10 new investing books for 2011	CLEANING OUT YOUR DRAWERS How to sell your silver jewelry and silver coins
BETTER THAN CRUDE? How to invest in natural gas	THE WHITE METAL Why invest in silver?

Tags: CME Group, GLD, gold price forecast, gold price predictions, silver price forecast, silver price predictions, SLV, SPY
Posted in ETFs, gold, gold stocks, precious metals, private companies, ProShares, silver coins, silver stocks | No Comments »

Aug

2011

How to start a B Corporation

by Fred Mason

While you don’t get any special tax benefits (unless you happen to be based in Philadelphia), certifying your business as a B Corporation demonstrates to the world that you company is committed to solving social and environmental problems. I also suspect that in the future, consumers as well as local, state and the federal government will start showing B Corporations preferential treatment (and that means earning the designation could be good for your bottom line AND for the wider world).

Before you run out and sign up, though, realize that becoming a B Corporation isn’t as simple as filling out a registration form and paying an annual due. If you meet B Lab’s requirements for earning the designation, you’ll probably have to modify your company’s legal structure to limit management’s ability to bypass B Corporation values. That means giving a lot more power to your shareholders AND your stakeholders. You’ll also have to agree to random audits designed to verify your adherence to B Corporation standards.

If you’re committed to running a company that doesn’t just make you money but makes the world a better place in the process, here are the steps to earning a B Corporation designation:

1) Register for a B Impact Assessment. Since every industry has different social and environmental impacts, you’ve first got to submit information regarding your industry, business size, revenues, employee hours and more to B Lab (the certifying body for B Corporations). After you’ve submitted this information, your company will receive a specific B Impact Assessment form to complete. You can register to receive the appropriate B Impact Assessment form here.

2) Complete your B Impact Assessment. After completing your registration, you’ll be sent a custom username and password that you can use to complete your industry and business size’s specific B Impact Assessment. Before beginning, you may want to assess how transparent you’d like to be with your business practices. B Impact Assessment’s are freely available to the public.

3) Review your survey with a B Lab staff member. You’ll need to walk through all of your Impact Assessment answers with a representative from B Lab so he or she can be sure you correctly answered all the questions on the form.

4) Supply documentation verifying your assessment answers. To get certified, your company will have to supply B Lab with documentation verifying roughly 20 percent of your answers to the survey questions. If you can’t verify key questions on the survey, your certification will be denied.

5) Modify your company’s legal structure. If the results of your survey are approved, you’ll have to modify your company’s legal structure to institutionalize stakeholder interests in your business. B Lab provides a legal roadmap to help you do just that. Visit the page linked above to select the type of corporation you run and the state where you’re incorporated. B Lab will provide you with reference language to help you update your company’s legal structure.

6) Sign your new B Corporation documents. If your company is approved as a B Corporation, you’ll have to sign a term sheet specific to the state where you’re incorporated.

7) Set aside funds to cover your company’s B Corporation certification. Fees for B Certifications vary based on the annual revenue at your company. The cost ranges from $500 a year for a company with less than $2 million a year in sales to $25,000 a year for companies with more than $100 million in sales.

8) Be prepared for random audits. One in five B Corporations (20 percent) are randomly selected for audits every two years. Should your company be audited, you’ll be expected to verify all of the information you submitted while filling out your B Impact Assessment survey. If you fail the audit, your company runs the risk of being publicly de-certified (and no one wants that!).

How much does it cost to become a B Corporation?

At the time of this writing, fees for B Corporation certification are based on your annual sales as follows:

Annual Net Sales	Annual Fee
$0 – $1,999,999	$500
$2 M – $4,999,999	$1,000
$5 M – $9,999,999	$2,500
$10 M – $19,999,999	$5,000
$20 M – $99,999,999	$10,000
$100 M +	$25,000

ONE IDEA TO RULE THEM ALL How to file a patent	WHAT’S THE POINT? Why invest in gold?
BUILD YOUR OWN BUSINESS Top 10 most expensive franchises to start	THE BIGGEST BULL MARKET IN HISTORY? Insane gold and silver price predictions for 2011
BETTER THAN CRUDE? How to invest in natural gas	FREEDOM FROM THE CUBICAL Five cheap franchises to start with less than $10,000

Tags: B Corporations, entrepreneurs, green companies, How To
Posted in business ideas, private companies | No Comments »

Aug

2011

Top 10 new investing books for 2011

by Fred Mason

If you’ve been reading my blog for any length of time, you should have a sense that I’m worried about the direction of our economy, as well as the world economy. I’m not a complete pessimist, though. If you’re willing and able to put work into protecting the capital you’ve accumulated, you should be able to whether the coming economic storm.

To do that, though, you’re going to need a lot more than a stock brokerage account. You’re going to need to get educated about what’s going on behind the scenes in the business world and at the Fed. Here are 10 new investment books that should help you do that:

***

1) Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.
The new and updated second edition to Aftershock, the authors have expanded the book with forecasts for 2012 as well as an in-depth break-down of the current economy. They focus heavily on inflation, which they predict will rise to 10 percent in two to three years.

***

2) (**Preorder Only**) The Great Crash Ahead: Strategies for a World Turned Upside Down.
Famed financial newsletter writer Harry S. Dent, Jr. argues that we’re due for another major economic meltdown sometime between 2012 and 2014. Dent has a contrarian view arguing that deflation, not inflation, will capsize us next. His reasoning? Aging baby boomers are going to start cashing in their chips. That fact coupled with staggering public and private debt will cause the economy to cave in on itself.

***

3) George Lindsay and the Art of Technical Analysis: Trading Systems of a Market Master.
Perhaps one of the most gifted financial prognosticators ever born, George Lindsay’s techniques live on through the newsletters he left behind. Ed Carlson takes Linday’s ideas and translates them into visual charts and easy-to-understand language so you can start using technical analysis on your own before you buy and sell stocks.

***

4) The Era of Uncertainty: Global Investment Strategies for Inflation, Deflation, and the Middle Ground.
For the first time in years, the macro-economic picture is going to out-weigh picking individual stocks. It’s not just a question of a where a particular company’s headed, it’s a question of how the global financial system is re-shaping itself. The authors delve into several different scenarios for how the economic mess will play out in the years to come.

***

5) Understanding China’s Economic Indicators: Translating the Data into Investment Opportunities.
We all know about CPI, jobless claims, inflation rates and unemployment in the U.S., but increasingly, it’s China’s economy that’s setting the tone for the rest of the world. This book looks at 35 key economic indicators that can give us clues about where the economy in the People’s Republic is heading. And it comes from a reputable source: Tom Orlik, a China correspondent for The Wall Street Journal.

***

6) Trading Tools and Tactics.
Fundamental analysis is a great way to destroy your portfolio, according to technical trader Greg Capra. Here, he lays out the insights behind all those mystifying terms you’ve never really understood: candlesticks, shooting the gap, retracements and more. It’s a book designed for daytraders, not the buy-and-hold crowd.

***

7) The End of Growth: Adapting to Our New Economic Reality.
You can give up on the idea that our economy is going to recover. According to Richard Heinberg, this period of high unemployment, falling home prices and stagnant or negative growth is the new normal. We could only forestall the energy, economic, environmental and social problems plaguing us for so long. It’s time now for us to start looking at ways to fix them.

***

8) Extreme Money: Masters of the Universe and the Cult of Risk.
A cutting look at how the global financial system really works. Satyajit Das draws on 30 years of experience in high finance giving us a look at the housing crisis came about, how hedge funds make money and how a handful of banks and insiders control the bulk of the cash in the largest economy in the world.

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9) (**Kindle Book**) Rupert Murdoch, The Master Mogul of Fleet Street: 20 Tales from the Pages of Vanity Fair.
Let’s just forget that he bought MySpace. It’s hard to argue that Rupert Murdoch isn’t a financial genius (just take a look at this gigantic Wikipeda page that lists all of News Corporation’s holdings). Still, there’s always been the sense that Murdoch’s a wolf in sheep’s clothing (and the current phone hacking scandal just drives the last nail in the coffin). This Kindle book takes a fine-toothed comb over Murdoch’s career through a series of Vanity Fair articles.

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10) Endgame: The End of the Debt Supercycle and How It Changes Everything.According to Endgame’s authors, we’re at the end of a six-decade debt binge, and now we’re due to pay the piper. That means debt restructuring and austerity measures are probably on their way in the U.S. and throughout Europe. Our entire economy, tax structure, benefits system and personal habits are due to change – whether we want them to or not.

***

Upcoming Release

1) Steve Jobs: A Biography.
OK. This isn’t actually a book on investing, but I’m stoked to read it anyway. No matter how often we complain about Apple products, it’s hard to deny Steve Jobs is a genius. He turned Apple into a household word in the 1990s, left to reinvigorate Pixar, then returned to the crumbled corporate husk that was Apple and repositioned it as a money-minting machine with the iPod, iPhone and iPad. Brilliant.

JUST THE BEGINNING FOR GOLD The latest gold price forecast for 2011? $2,500 an ounce, says JPMorgan	WHAT’S THE POINT? Why invest in gold?
BUILD YOUR OWN BUSINESS Top 10 most expensive franchises to start	BYE-BYE DEBT How to improve your credit score in six months
THE DOLLAR’S ON ITS DEATHBED Gold standard in the U.S. by 2016?	FREEDOM FROM THE CUBICAL Five cheap franchises to start with less than $10,000

Tags: finance books
Posted in investment books, stock tips, trading stock | 1 Comment »

Aug

2011

Insane gold and silver price predictions for 2011

by Fred Mason

The arguments for investing in gold and silver grow louder every day. While the official Consumer Price Index pegs the inflation rate at 3.56 percent, there’s evidence it’s actually more than three times as high. John Williams at ShadowStats.com calculates the inflation rate using the methodology in place in 1980. According to his numbers, the CPI is actually around 11 percent.

That’s a harrowing figure considering that the average money market account currently pays 0.27 percent in interest (per Money-Rates.com). That situation has produced an environment where no one’s quite sure how high silver and gold prices can go (not that a lot of market analysts, writers and bloggers aren’t trying to puzzle out the answer).

Insane silver price predictions

Jason Hommel at SilverStockReport.com has a long-term price target of $500 an ounce on silver.

“Silver has gone up, now, from $4.15/oz. in 2003 to $40.87/oz. this week in the fall of 2011. Silver is going up by 31%, on average, per year, over the last 8.5 years,” Hommel writes. “Silver will likely continue to go up by 30% per year, or more, for at least the next decade, until silver hits about $500/oz.”

His logic? Currency creation is growing at 13 percent a year, and that leaves investors with few alternatives for protecting their capital. On top of that, the silver market is so small, Hommel argues, that even if 1 percent of U.S. money flowed into silver, the white metal could quickly spike to $600 an ounce.

Insane gold price predictions

Mike Maloney, the founder of GoldSilver.com, has made one of the most aggressive gold price predictions I’ve seen: $15,000 to $20,000 an ounce.

After getting approached by Rich Dad, Poor Dad author Robert Kiyosaki, Maloney spent two-and-a-half years writing his Guide to Investing in Gold and Silver. The research process brought him to a startling realization, he says: the current bull market in precious metals is actually the death knell of fiat currencies. And it’s not just the U.S. dollar that’s doomed, he says. It’s a global breakdown of the monetary system, and there’s nowhere else investors will be able to turn that gold and silver.

“I really couldn’t care less about gold and silver,” he says. “I don’t want gold and silver. It’s just in its cycle right now. It’s a stupid lump of metal that doesn’t have cash flow or spin off dividend yields. So I don’t want gold and silver. It’s just that right now, I don’t want anything else.”

And that’s the same conclusion he’s convinced more and more Americans will make in the years to come.

JUST THE BEGINNING FOR GOLD The latest gold price forecast for 2011? $2,500 an ounce, says JPMorgan	WHAT’S THE POINT? Why invest in gold?
GLITCH IN THE MATRIX Gold prices could dip in near-term as profit-takers move in	CLEANING OUT YOUR DRAWERS How to sell your silver jewelry and silver coins
BETTER THAN CRUDE? How to invest in natural gas	THE SIX-YEAR SAGA How to file a patent

Tags: gold price forecast, gold price predictions, Gold Prices, silver price, silver price forecast, silver price predictions
Posted in gold, precious metals, silver coins | No Comments »

Aug

2011

How to file a patent

by Fred Mason

Got a great idea you want to patent? Chances are, you’re thinking about the rewards that it will reap you. In an ideal world, your discovery is so revolutionary that a Fortune 500 company’s willing to license it, then sign and deliver checks to your mailbox every month. A patented idea can be as good as money in the bank if it’s something the marketplace genuinely needs.

The truth is quite a bit more sobering, though. Estimates range from one in every 500 to one in every 5,000 patents that actually end up becoming commercially successful (per InventionStatistics.com). Those aren’t good odds, and that makes it all the more important that you think through you decision to file a patent and fully commit to your idea before moving forward.

A recent article in Entrepreneur magazine estimates that the most basic patents cost anywhere from $7,000 to $15,000 in attorney fees, take hundreds of hours in paperwork and can take up to six years to get approved.

If you’re still committed to forging ahead, though, here are eight tips on how to file a patent:

1) Decide whether or not you really need a patent. In theory, you’d think filing a patent on your brand new idea is a no-brainer. In practice, though, there are plenty of reasons why you might not need or want to file a patent. Think about the following factors before deciding whether filing is really going to pay off:

Will your design still be relevant in three to six years? If your design applies to a fast-changing field like technology, odds are, it’ll be out-dated before the patent office even looks at your application.
Are you certain you can turn your idea into cash? If at all possible, prove that your idea has legs before taking on a second mortgage. Hire a web designer to build a site advertising a product that’s similar to your idea, then track the number of visits and social buzz it builds.
In my experience, plenty of great ideas fail, and plenty of terrible ideas succeed. It all has to do with the commitment and passion of the inventor. Assess whether you realistically have the time, energy and focus to devote to marketing, filling out forms and meticulously documenting your invention. On top of that, will you be able to market your idea, even if it’s rejected by the marketplace for months or years?

2) Choose your approach. Filing a patent is a difficult process – particularly for the uninitiated. If you’ve got the commitment and gumption to go it alone, the DIY route is doable. Entrepreneur says to budget at least 150 hours to file your patent over several months (and anticipate lots of additional work in the years to come). Based on some digging I’ve done online, it looks like you should be able to file your own patent for somewhere around $3,000, payable throughout different stages in the patent process.

3) Find a patent attorney. The United States Patent and Trademark Office maintains a list of registered patent attorneys by geographic region. Search the list by state to find several attorneys in your area. Call around to find one that specializes or at least has experience in your specific industry.

4) Determine the type of patent you’re going to file. Currently, they fall into three categories: 1) Utility applications for a “new and useful process, machine, article of manufacture, or compositions of matters, or any new useful improvement thereof”; 2) Design applications for a “new, original, and ornamental design for an article of manufacture”; and 3) Plant applications for “anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.”

5) Research the process for your specific type of patent. The U.S. Patent Office’s web site is a treasure trove of information. Depending on the type of patent you plan to file, you can click on the links below to start reading through background information, download forms and get guidance on the next steps to patent your idea:

6) Electronically file your patent. Once you’ve put together all the drawings, written descriptions (aka “claims”) and filled out all the relevant forms, you can submit your patent application online at on the Patent Office’s EFS-Web site.

7) Wait for a response. You should hear back from the patent office somewhere between 18 and 36 months after you’ve submitted your patent application. In most cases, they will have rejected your patent (according to Douglas Baldwin) because of competing patents that have already been accepted. Don’t get discouraged. The Patent Office should give you specific reasons why your patent is too similar to those existing patents, though, and you’ll have three months to organize and file a detailed appeal.

8) Wait for the results of the appeal. In one to two years, you should get a final response to your appeal. If your patent was rejected, you can appeal yet again, but we’ve got our fingers crossed for you. Hopefully, you’ll be the proud owner of a patent. And then the real work truly begins.

THE STEVE JOBS OF COUPONS Groupon CEO is a weird guy with good advice	WHAT’S THE POINT? Why invest in gold?
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BETTER THAN CRUDE? How to invest in natural gas	FREEDOM FROM THE CUBICAL Five cheap franchises to start with less than $10,000

Tags: entrepreneurs, How To, Inventions, Patents, small businesses
Posted in business ideas, private companies | No Comments »

Aug

2011

Gold prices could dip in near-term as profit-takers move in

by Fred Mason

The price of gold bullion has been in a powerful uptrend rising from $1,600 to $1,800 an ounce in the course of a month. That was good for more than a 10 percent gain in 30 days, and that led to what I expect will continue to be short-term selling as investors lock in profits.

FastMarkets research analyst James Moore told TheStreet that gold prices could fall as low as $1,680 before consolidating and resuming the uptrend.

Gold hit an all-time record high of $1,817 an ounce last week as investors digested bad news. The U.S. lost its AAA credit rating, unemployment numbers got revised upward and consumer spending dipped.

The market did get some good news on Thursday, though, that helped alleviate smoldering fears of a double dip recession: jobless claims fell to a four-month low (per Reuters).

Fred’s best guess: The dip in demand for gold looks like an excellent buying opportunity, particularly if prices fall near $1,700 an ounce. I’m just not convinced that we’re out of the water yet.

The debate over the debt ceiling gave us a glimpse of just how bad the nation’s debt problem has become, and I’m convinced that we’re overly-optimistic on the job market.

Earlier today, The Atlantic posted an excellent chart showing that the unemployment rate is actually closer to 12.5 percent – not the 9.1 percent the government’s touting. Too many people have given up looking for a job altogether.

Consider this: over the past 60 years, the official U.S. unemployment rate has only hit 9 percent or higher for 43 months. Twenty-four of those 43 months have occurred since Obama took office. The economy’s in a dark place, and the debt crisis has taken a lot of ammo out of the government’s gun.

That’s not to say the U.S. is the only economy around the world that’s hurting. It’s a global problem, and it’s one that’s hitting currencies the hardest. The best way I’ve heard it described so far is this: We’re in a bear market for currencies.

Don’t buy that? Consider the recent news that the Swiss government’s considering pegging the value of its currency to the Euro! When the unflappable Swiss are considering inflation, the global economic train has jumped the rails.

And what’s bad for currencies is good for precious metals. Count me in the bullish camp for gold. Not because I love precious metals, but rather because I’m scared of the future for the dollar.

TECH BOOM Top five best social media stocks	WHAT’S THE POINT? Why invest in gold?
JUST THE BEGINNING FOR GOLD The latest gold price forecast for 2011? $2,500 an ounce, says JPMorgan	CLEANING OUT YOUR DRAWERS How to sell your silver jewelry and silver coins
BETTER THAN CRUDE? How to invest in natural gas	$30 MILLION A YEAR? THAT’S JUST THE COST OF DOING BUSINESS Why do companies go public?

Tags: gold price, gold price forecast, gold price predictions
Posted in gold, precious metals | 1 Comment »

Aug

2011

Why Bank of America stock (NYSE:BAC) got crushed

by Fred Mason

It’s not often that one of the 30 largest stocks in the country drops 20 percent in a day. That’s what happened to Bank of America Corporation (NYSE:BAC) yesterday, though. The Dow component stock crumpled from $8.17 a share to $6.51 and it shed another 1.5 percent in after-hours trading.

Year-to-date, Bank of America stock is down 51 percent. But the bad news just doesn’t seem to be going away for America’s largest bank holding company. Here are five reasons the stock got crushed yesterday:

1) The mother of all lawsuits. American International Group, Inc. (NYSE:AIG) filed suit against BAC yesterday seeking at least $10 billion in damages for alleged fraud at the bank and at Countrywide Financial, a mortgage origination company that Bank of America acquired in 2007.

2) Did we mention the other lawsuits? AIG is just the latest in a string of high-profile lawsuits against BAC. Freddie Mac, Fannie Mae, BlackRock, Inc. (NYSE:BLK), PIMCO and Goldman Sachs Group, Inc. (NYSE:GS) have also filed suits against the bank. And no one’s sure just how much it’s going to cost BAC to defend itself (not to mention how much it will cost if the bank does have to pay for damages one day).

3) Stock dilution, anyone? Bank of America maintains its stance that the company won’t have to issue more shares in order to cover costs associated with ongoing litigation. If the lawsuits keep coming, though, BAC might not have a choice. Win or lose, lawyers need paid.

4) Jumping ship. Regulatory filings released yesterday showed that hedge fund manager David Tepper of Appaloosa Management LP took a carving knife to his stake in BAC last quarter. Tepper pared off 42 percent of his holdings in the bank, narrowly escaping the guillotine that dropped yesterday. The news of Tepper’s move added fuel to an already fiery sell-off.

5) Downgrade central. In just two trading days, Bank of America shares were downgraded three times. On the heels of downgrades from Standard & Poor’s and Wells Fargo, the most recent thumbs-down comes from CLSA analyst Mike Mayo (per TheStreet). Mayo cut the stock from “buy” to “outperform” (which almost seems meaningless considering the stock’s loses year-to-date). Still, it’s yet another vote of no-confidence for BAC.

All told, yesterday’s 20 percent plunge in Bank of America’s share price wiped out $16 billion. Other banks didn’t fare much better, but it’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. For the year, BAC is down 51 percent. Citigroup Inc. (NYSE:C) is down 41 percent YTD, Wells Fargo & Company (NYSE:WFC) is down 26 percent, and JPMorgan Chase & Co. (NYSE:JPM) seems heroic having lost just 20 percent since the start of the year.

SAY NO TO COFFEE Top four reasons to invest in Teavana Holdings, Inc. (NYSE:TEA)	WHAT’S THE POINT? Why invest in gold?
JUST THE BEGINNING FOR GOLD The latest gold price forecast for 2011? $2,500 an ounce, says JPMorgan	CLEANING OUT YOUR DRAWERS How to sell your silver jewelry and silver coins
BETTER THAN CRUDE? How to invest in natural gas	$30 MILLION A YEAR? THAT’S JUST THE COST OF DOING BUSINESS Why do companies go public?

Tags: stock price collapse
Posted in BAC, Bank stocks, C, financial stocks, GS, investment banks, JPM, NYSE | No Comments »

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