Aran Olein

Lobster Trapping for Investment Ideas

2011-11-09T19:46:00.000-08:00

Recently, my family and I took a trip to Maine to visit relatives. During our stay, we toured the rocky shore lines and took in the beautiful architecture of the old towns.

One sunny morning, three generations of Wardlaws boarded a lobster boat and set out on a guided lobster trapping excursion.

We quickly learned lobstermen lead a life of hard work and regulations.

Over the course of many years, Maine's lobstermen and state officials have established certain criteria to protect lobsters and allow for greater development. With the rules, lobstermen look for "keepers."

A "keeper" is a lobster that measures between 3.25 and 5 inches from its eye socket to the end of its back shell. In addition to the precise measurements, the lobster cannot carry eggs nor can it have a notch in its tail (indicating it is a breeding female). The notch is carved from prior lobstermen who observed the lobster's breeding.

If the lobster does not fit the criteria set forth, it is discarded and placed back in the waters.

As an investor, you constantly look for "keepers." At your disposal is a wealth of information to determine the quality of a position.

Depending on your predetermined goals (including risk tolerances and time horizons), you may use a number of measurement tools. If the position does not fit such benchmarks, you may consider moving on to a more appropriate position.

For example, among the many rules of measurement, an investor may look toward a mutual fund's beta. Of course the fund's management, its fees, asset allocations and historical performance should play a role as well.

For bonds, an investor may consider its maturity, the coupon, its yield to maturity (or call), price, and rating. An investor must also determine the type of bond. Do you prefer a municipal, treasury, or corporate bond?

And with regards to stocks, if you have been an investor for any number of years, you know the drill. Between fundamental and technical analysis, you have several traps to pull from the waters.

It is important to know the criteria that is appropriate for your portfolio. Remember, some positions may be keepers while others may be discarded.

5 Ways To Protect Your Bond Portfolio From Rising Interest Rates

2011-11-05T19:45:00.000-07:00

The Federal Reserve recently raised its target federal funds rate for the first time since March 2000. This could be just the tip of the iceberg, though, as many experts believe rising inflation and a strengthening economy will spur continued rate hikes for the foreseeable future.

This is bad news for bond investors, since bonds lose value as interest rates rise. The reason stems from the fact coupon rates for most bonds are fixed when the bonds are issued. So, as rates rise and new bonds with higher coupon rates become available, investors are willing to pay less for existing bonds with lower coupon rates.

So what can you do to protect your fixed-income investments as rates rise? Well, here are five ideas to help you, and your portfolio, weather the storm.

1. Treasury Inflation Protected Securities (TIPS)

First issued by the U.S. Treasury in 1997, TIPS are bonds with a portion of their value pegged to the inflation rate. As a result, if inflation rises, so will the value of your TIPS. Since interest rates rarely move higher unless accompanied by rising inflation, TIPS can be a good hedge against higher rates. Because the Federal government issues TIPS, they carry no default risk and are easy to purchase, either through a broker or directly from the government at www.treasurydirect.gov.

TIPS are not for everyone, though. First, while inflation and interest rates often move in tandem, their correlation is not perfect. As a result, it is possible rates could rise even without inflation moving higher. Second, TIPS generally yield less than traditional Treasuries. For example, the 10-year Treasury note recently yielded 4.75 percent, while the corresponding 10-year TIPS yielded just 2.0 percent. And finally, because the principal of TIPS increases with inflation, not the coupon payments, you do not get any benefit from the inflation component of these bonds until they mature.

If you decide TIPS makes sense for you, try to hold them in a tax-sheltered account like a 401(k) or IRA. While TIPS are not subject to state or local taxes, you are required to pay annual federal taxes not only on the interest payments you receive, but also on the inflation-based principal gain, even though you receive no benefit from this gain until your bonds mature.

2. Floating rate loan funds

Floating rate loan funds are mutual funds that invest in adjustable-rate commercial loans. These are a bit like adjustable-rate mortgages, but the loans are issued to large corporations in need of short-term financing. They are unique in that the yields on these loans, also called "senior secured" or "bank" loans, adjust periodically to mirror changes in market interest rates. As rates rise, so do the coupon payments on these loans. This helps bond investors in two ways: (1) it provides them more income as rates rise, and (2) it keeps the principal value of these loans stable, so they don't suffer the same deterioration that afflicts most bond investments when rates increase.

Investors need to be careful, though. Most floating rate loans are made to below-investment-grade companies. While there are provisions in these loans to help ease the pain in case of a default, investors should still look for funds that have a broadly diversified portfolio and a good track record for avoiding troubled companies.

3. Short-term bond funds

Another option for bond investors is to shift their holdings from intermediate and long-term bond funds into short-term bond funds (those with average maturities between 1 and 3 years). While prices of short-term bond funds do fall when interest rates rise, they do not fall as fast or as far as their longer-term cousins. And historically, the decline in value of these short-term bond funds is more than offset by their yields, which gradually increase as rates climb.

4. Money-market funds

If capital preservation is your concern, money market funds are for you. A money-market fund is a special type of mutual fund that invests only in very short-term money market instruments. Since these instruments usually mature within 60 days, they are not affected by changes in market interest rates. As a result, funds that invest in them are able to maintain a stable net asset value, usually $1.00 per share, even when interest rates climb.

While money-market funds are safe, their yields are so low they hardly qualify as investments. In fact, the average seven-day yield on money-market funds is just 0.70 percent. Since the average management fee for these funds is 0.60 percent, it does not take a genius to see that putting your capital in a money-market fund is only slightly better than stashing it under your mattress. But, because the yields on money-market funds track changes in market rates with only a short lag, these funds could be yielding substantially more than 0.70 percent by the end of the year if the Federal Reserve continues to hike rates as expected.

5. Bond ladders

"Laddering" your bond portfolio simply means buying individual bonds with staggered maturities and holding them until they mature. Since you are holding these bonds for their full duration, you will be able to redeem them for face value regardless of their current market value. This strategy allows you to not only avoid the ravages of higher rates, it also allows you to use these higher rates to your advantage by reinvesting the proceeds from your maturing bonds in newly-issued bonds with higher coupon rates. Diversifying your bond portfolio among 2-year, 3-year, and 5-year Treasuries is a good start to a laddering strategy. As rates rise, you can then broaden the ladder to include longer maturity bonds.

Investors: Avoid These 5 Common Tax Mistakes

2011-11-02T19:44:00.000-07:00

For many investors, and even some tax professionals, sorting through the complex IRS rules on investment taxes can be a nightmare. Pitfalls abound, and the penalties for even simple mistakes can be severe. As April 15 rolls around, keep the following five common tax mistakes in mind ? and help keep a little more money in your own pocket.

1. Failing To Offset Gains

Normally, when you sell an investment for a profit, you owe a tax on the gain. One way to lower that tax burden is to also sell some of your losing investments. You can then use those losses to offset your gains.

Say you own two stocks. You have a gain of $1,000 on the first stock, and a loss of $1,000 on the second. If you sell your winning stock, you will owe tax on the $1,000 gain. But if you sell both stocks, your $1,000 gain will be offset by your $1,000 loss. That's good news from a tax standpoint, since it means you don't have to pay any taxes on either position.

Sounds like a good plan, right? Well, it is, but be aware it can get a bit complicated. Under what is commonly called the "wash sale rule," if you repurchase the losing stock within 30 days of selling it, you can't deduct your loss. In fact, not only are you precluded from repurchasing the same stock, you are precluded from purchasing stock that is "substantially identical" to it ? a vague phrase that is a constant source of confusion to investors and tax professionals alike. Finally, the IRS mandates that you must match long-term and short-term gains and losses against each other first.

2. Miscalculating The Basis Of Mutual Funds

Calculating gains or losses from the sale of an individual stock is fairly straightforward. Your basis is simply the price you paid for the shares (including commissions), and the gain or loss is the difference between your basis and the net proceeds from the sale. However, it gets much more complicated when dealing with mutual funds.

When calculating your basis after selling a mutual fund, it's easy to forget to factor in the dividends and capital gains distributions you reinvested in the fund. The IRS considers these distributions as taxable earnings in the year they are made. As a result, you have already paid taxes on them. By failing to add these distributions to your basis, you will end up reporting a larger gain than you received from the sale, and ultimately paying more in taxes than necessary.

There is no easy solution to this problem, other than keeping good records and being diligent in organizing your dividend and distribution information. The extra paperwork may be a headache, but it could mean extra cash in your wallet at tax time.

3. Failing To Use Tax-managed Funds

Most investors hold their mutual funds for the long term. That's why they're often surprised when they get hit with a tax bill for short term gains realized by their funds. These gains result from sales of stock held by a fund for less than a year, and are passed on to shareholders to report on their own returns -- even if they never sold their mutual fund shares.

Recently, more mutual funds have been focusing on effective tax-management. These funds try to not only buy shares in good companies, but also minimize the tax burden on shareholders by holding those shares for extended periods of time. By investing in funds geared towards "tax-managed" returns, you can increase your net gains and save yourself some tax-related headaches. To be worthwhile, though, a tax-efficient fund must have both ingredients: good investment performance and low taxable distributions to shareholders.

4. Missing Deadlines

Keogh plans, traditional IRAs, and Roth IRAs are great ways to stretch your investing dollars and provide for your future retirement. Sadly, millions of investors let these gems slip through their fingers by failing to make contributions before the applicable IRS deadlines. For Keogh plans, the deadline is December 31. For traditional and Roth IRA's, you have until April 15 to make contributions. Mark these dates in your calendar and make those deposits on time.

5. Putting Investments In The Wrong Accounts

Most investors have two types of investment accounts: tax-advantaged, such as an IRA or 401(k), and traditional. What many people don't realize is that holding the right type of assets in each account can save them thousands of dollars each year in unnecessary taxes.

Generally, investments that produce lots of taxable income or short-term capital gains should be held in tax advantaged accounts, while investments that pay dividends or produce long-term capital gains should be held in traditional accounts. For example, let's say you own 200 shares of Duke Power, and intend to hold the shares for several years. This investment will generate a quarterly stream of dividend payments, which will be taxed at 15% or less, and a long-term capital gain or loss once it is finally sold, which will also be taxed at 15% or less. Consequently, since these shares already have a favorable tax treatment, there is no need to shelter them in a tax-advantaged account.

In contrast, most treasury and corporate bond funds produce a steady stream of interest income. Since, this income does not qualify for special tax treatment like dividends, you will have to pay taxes on it at your marginal rate. Unless you are in a very low tax bracket, holding these funds in a tax-advantaged account makes sense because it allows you to defer these tax payments far into the future, or possibly avoid them altogether.

Why the Rich Keep Getting Richer

2011-10-20T19:43:00.000-07:00

Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated, caring, brilliant individuals? Becoming rich isn't hard, but it does require a bit of time and knowledge. Having time to get rich, educating oneself, and buying assets are the three key factors in attaining untold wealth.

Rich people usually either have or make time to get rich. Most people that now own huge mansions, have wonderful riches, and drive the nicest cars usually begin taking the road to riches in their spare time. One plan, the most common, is to work at a low-risk, steady job until one has enough money to invest in something that will feed one for the rest of their life. But before one can invest in anything, one first has to educate oneself.

Although the best way to educate oneself in a particular investment is to have a mentor, and thereby gaining valuable hands-on experience, another excellent way to do this is to listen to tapes and CDs and to read books on the subject. I have done both, mainly pertaining to real estate, but also I have read a wonderful book about making money on the Internet, called Multiple Streams of Internet Income, by Robert Allen.

Lastly, after creating time to get rich, and educating oneself, one simply MUST buy assets that will create money for one, and not liabilities and toys such as a new car every other year, and boats. These come only after one can prove that he is capable of handling and keeping money. Simply put, according to multi-millionaire Robert Kiyosaki: "Assets will feed you, and liabilities will eat you." An example of an asset is a rent-house, or stocks and bonds in a certain company. Only, that is, if the company is good and the stocks are ultimately going up in value.

In conclusion, we see that the three most important ways the rich keep getting richer are: having or making time, subject education, and buying assets. These are the key factors influencing wealth. I personally plan on educating myself in real estate, as it seems the simplest and safest way of getting rich.**

**Note: If you'd like to use this article, feel free to do so, but please remember to include this message, and my resource box in every copy. Thank you!

Value Investing

2011-10-19T19:42:00.000-07:00

By definition, value investing is the process of selecting stocks that trade for less than their intrinsic value. A value investor typically selects stocks with lower than average price-to-book or price-to-earning ratios. Of course, it is not nearly this simple. Value investing is the corner stone of long-term growth. Those who practice it survive the ups and downs of the market and are more likely to emerge wealthy than those who ride the market, in principle, due to the higher quality of the companies falling under the prerequisites of the value investor. Value investing is essentially concerned with getting the most profit at the lowest cost. The basis of value is profit. Value investing is an investment style which favors good stocks at great prices over great stocks at good prices. Value investor extraordinaire Warren Buffett has used this style to become a billionaire.

It's important to keep in mind that value investing is not concerned with how much the price of a stock has risen or fallen necessarily, but rather what is the "intrinsic" or inherent value of the stock, and is it currently trading below that price, i.e. at a discount to it's intrinsic value. The important point here is that when looking at stocks that are trading at or above their intrinsic value, the only hope for gaining value is based on future events, since the stock price already represents what the company is worth. However, when dealing with stocks that are undervalued, or available at a discount, unforeseen events are unimportant in that without any new earnings or additional profits, the shares are already "poised" to return to that inherent value which they have.

The question now, of course, is "why would stock prices not always reflect the true value of the company and the intrinsic value of its shares?" In short, value investors believe that share prices are frequently wrong as indicators of the underlying value of the company and its shares. The efficient market theory suggests that share prices always reflect all available information about a company, and value investors refute this with the idea that investment opportunities are created by disagreements between the actual stock prices, and the calculated intrinsic value of those stocks.

Finding Value Stocks

Value investing is based on the answers to two simple questions:

1. What is the actual value of this company?

2. Can its shares be purchased for less than the actual (intrinsic) value?

Clearly, the important point here is, "how is the intrinsic value accurately determined?" An important point is that companies may be undervalued and overvalued regardless of what the overall markets are doing. Every investor should be aware of and prepared for the inherent market volatility, and the simple fact that stock prices will fluctuate, sometimes quite significantly. Benjamin Graham has often said that if investors cannot be prepared to accept a 50% decline in value without becoming riddled with panic, then investing may not be for them...or rather, successful investing, as it often takes significant losses in a particular security before gains are made, due to the idea that value investors do not try to time the market, and are focused on the underlying fundamentals of the companies. Furthermore, the quality of the companies targeted by the value investors' screening methods should be, over the long term, less volatile and susceptible to market "panic" than the average stock.

This is also a two way road of sorts. On one hand, there is no sense in worrying about depressions, upturns, and recoveries due to the underlying quality of the value investments. On the other hand, investments should only be made in companies which can flourish and do well in any market environment. Doing solid investment research and making equally solid investment decisions will take investors much further than trying to forecast the markets.

How Many Different Stocks?

In terms of diversification, there are many discrepancies over exactly how many different stocks a solid portfolio should be made up of. My personal view is that there should not be as many stock as normally make up a mutual fund. Many will disagree with this, but what it's worth, I think that owning a portfolio of 100, 200, or even more companies not only serves to limit risk, but it really limits the possibility for reward as well. Also, as Warren Buffett has said many times, the more companies you own, the less you know about each one.

As I write this, there are 42 stocks in our recommended portfolio. This number may very well grow in the coming months, as it may decrease in number, but one thing to keep in mind is, out of the thousands of companies available for purchase, only a very small percentage meet the stringent requirements of the diligent value investor. This is both a blessing and a curse. Very often, there is simply nothing to buy, and this is fine. The trap to avoid falling into is to lower your requirements for a stock when there simply isn't anything meeting the normal requirements. This is how many an investor has fallen into making poor investment decisions, putting money into companies not really adequate for their respective portfolio, and it will certainly have a long term effect on gains.

10 Ways to Use Facebook for Increasing Web Traffic to Your Site

2011-10-15T19:30:00.000-07:00

More than 115 million people login to Facebook every month. It is the largest social networking tool and a great place in the web for building your brand and driving traffic to your site. However, if you are not familiar with the viral techniques that work in the Facebook platform, soon you will find your brand tarnished. You can gain quick exposure to your businesses using the techniques discussed in this article.

1. Build a Facebook network. Before you start implementing any of the techniques discussed here, you need to develop a network of Facebook friends. To do that, join a few groups that are related to your business and a few groups that you are passionate about.

Ask people in the groups to add you as their friend. Facebook also has nifty tool that suggest people you would like to know. Send request to these people to add you as their friend. Send a short note explaining why you want to be their friend. If send 20 requests a day, you will have a network of more than 1,000 friends in two months.

2. Update your status every day. Login every day and update your status. Don’t use status messages like “I am sleeping now”, “Just came from work”. These types of status messages are not interesting. Use quotes from famous people about a specific niche, for example love, dedication, work ethics, peace, war, etc. You can also use jokes. Your aim is to draw people’s attention to your messages so that they would click on your profile to know more about you.

3. Wish birthday wishes everyday. Facebook also shows upcoming birthdays of all friends in your network. Every day send birthday wishes to friends whose birthdays are due. Read their profiles to know more about them and write a nice personal message on their walls. Don’t use canned birthday messages for everybody.

When you write on a friend’s wall in Facebook, everybody in the network gets updated news feed. You need to write something that get attention. You may craft a 10 to 20 attention grabbing birthday messages and than personalize them slightly for each friend.

4. Create a business page. Besides your personal page, you should also create a business page. Creating a business page is similar to creating a personal page in Facebook. Design a nice logo and use it for your business page picture.

Next, become a fan of your business page. You can use your business page to launch targeted Facebook ad campaign. Promote your Facebook business page using blogs, blog comments, etc. and ask people to become a fan of your business. Use some promotional materials, like free t-shirts, free eBooks etc as incentives for becoming a fan.

5. Tag promotional photos using friends’ names. Upload all promotional photos to your business page. Some people tag these photos with the names of their most influential friends in the network. Your promotional photos will show up in your friends’ news feeds. Once you setup a network of friends, make a list of friends with high number of friends, preferably more than 1000. Setup your mini network to tag each others names in promotional photos.

6. Change your relationship status regularly if it is possible. One of the least frequent activity in Facebook is changing the relationship. Because people don’t change their relationship frequently, Facebook places a great deal of importance to relationship change and send the news feeds to everybody in your network whenever there is a change in your relationship status.

People have explored this loop hole to attract attention to their profiles. They change their relationship almost weekly and try to attract visitors to their profiles. It is up to you to adopt this technique because it may not reflect your true relationship status. If you do adopt this technique, don’t forget to publish some promotional materials in your personal feed.

7. Attend Multiple Events. True to its college root, Facebook is all about friends gathering at some place for an event. Facebook gives high priority to events in the news feed. Your goal is to RSVP all the events in your network even if you miss a few of them.

When your friends see you as a frequent event attendee, they consider you as an event resource. The trick is to show your name in all the places you can. As your friends see your name multiple times, some will be curious to check your profile.

8. Import your blog post. If you have a blog, import your blog’s RSS feed into Facebook. Facebook will publish the articles in the feed as Facebook notes automatically. Encourage your friends to comments on your articles in Facebook notes. You can also tag friends in the articles but don’t overdo it.

9. Post comments on popular groups. Visit popular Facebook groups that you have joined regularly and post comments. Just like blog comments or forum posting, Facebook comments on popular groups will attract attention to your name and profile. Add something valuable or post a link that adds value to the topic under discussions.

10. Start your own events. Events are very popular in Facebook and if you can promote it properly, it will have viral effects and thousands will register for the event. Send invitation to your network friends who have thousands of friends in their networks and also to attractive female friends in your network who may not have a large number of friends.

Economic Survival in the 21st Century - the Three Key Questions to Ask

2011-10-05T19:37:00.000-07:00

In this "special report", I want to pose a few important "philosophical questions" to my readers. Firstly -- our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a speech that he made last Friday. Readers may remember that I also briefly mentioned this issue in my June 24th commentary. I urge you to keep this worldwide phenomenon of the aging population firmly on the back of your minds. If you are like most people, then you earn you living by producing a certain thing ? such as a consumer good, or a service that the masses want. Let's face it ? how many people really "struck it rich" by being pure traders or investment managers? The stock market and other financial markets are definitely very important to us investors/traders but this "super secular trend" of the aging of the worldwide population will impact every aspect of our lives, whether it is losing our relative competitiveness on the world arena, increasing pension and healthcare costs, or even a potential fundamental change of our political system.

The second question that I want my readers to think about is the potential end to the era of cheap energy prices ? an era which we have basically enjoyed for the last two decades without thinking of the long-term repercussions. The United States, with less than five percent of the world's population, currently consume approximately 25% of the world's energy each year. Supply is maturing while demand continues to surge ? as exemplified by the surging in demand from China and India. In the meantime, spare energy-producing capacity and inventory levels have been at all-time lows ? potential for a perfect storm?

Finally, I want to ask my readers the following question: What kind of investor are you? What investing style do you adopt and what investing style are you most comfortable with? Can you be a contrarian and buy when the crowd is selling or are you merely a follower who is only comfortable if you fit in? These are straightforward questions ? but these are questions that you really need to ask yourselves in order to truly make money in investing over the long run. If my readers take the time out to thinking about these three questions or issues ? and ultimately have a firm grasp of even just one of the issues ? then you will be in a much better economic situation than most Americans five to ten years from now.

To begin, what are the potential implications of the "aging population" phenomenon? Readers my recall that in my June 24th commentary, I stated: "Assuming that the current level of benefits remain into the future and assuming the level of taxes is not raised, then public benefits to retirees would dramatically increase going forward. On the extreme end, Japan and Spain will see a more than 100% increase in their outlays to retirees. Clearly, this is not sustainable. Either things such as defense or education spending will need to be cut, or the above countries will need to raise their taxes. Neither of the two scenarios is optimal. Borrowing more of their funds is not a long-term solution. Cutting funding in defense and education will comprise a country's future, and raising taxes will place a huge social and financial burden on the population of the developed world ? where taxes are already at a historically high level. Think about this: If you were a bright, young, French industrialist and you were forced to pay 60% of your income as taxes to support the elderly, what would you do? Why, you would vote with your feet and relocate to another country that is more tax-friendly and business-friendly ? and so will other great talent that may have been a great contribution to the French economy. The governments of the developed world recognize this ? but there are no easy solutions.

"This picture gets grimmer when one takes note of a study that was done by the Bank Credit Analyst. In that study, the BCA predicts that by the year 2050, the percentage share of the developed countries of the global population will drop from over 30% in 1950 to less than 14% -- or about equal to the population of the Islamic nations of the world. Similarly, Yemen will be more populous than Germany in 2050; while Iraq will be 30% more populous than Italy (Iraq is less than 40% the size of Italy today). Russia's population is projected to continue to decrease ? at a rate such that the population of Iran will be even higher to that of Russia's in 2050. India will be the most populous nation in the world, and Pakistan will only lag the U.S. by approximately 50 million people. If the developed countries of today do not choose to work harder or become more efficient, then they will ultimately lose their comparative advantage, as the younger population of the world is inherently more hard-working, energetic, innovative, and creative. In today's globalized world, this will be a killer for the average worker in the developed countries ? the more so once the language barrier is eliminated (the successful commercialization of universal language translators is projected to happen in ten to fifteen years). I am generally more optimistic, as the elimination of the language barrier will greatly enhance business opportunities and efficiencies, but a person such as the average American worker will loss his or her comparative advantage in the global workforce. The availability of a huge supply of labor should also drive down wages in the global marketplace ? and most probably increase the maldistribution of wealth in today's developed countries."

Like I have mentioned before, there are no easy solutions. If the average American sees an increase of 10 years in his or her life expectancy, can he or she reasonably or logically retire at the current normal retirement age of 65 (which was determined during the Roosevelt administration during the 1930s) without placing an undue burden on the system? The answer is most probably "no." Applying the same working-years-to-retirement-years ratio to his or her new life expectancy, then the average American should probably work around five to six years more ? thus giving a revised normal retirement age of 70 or so. Moreover, all this analysis is based on the outdated population distribution in the form of a pyramid ? where the younger and more able workers represent a majority of the population (and where the elderly represents only a small minority of the general population). The pyramid distribution has historically facilitated government support of the elderly ? as the monetary and social burdens have been shouldered by a relatively large younger population. The current experience of Europe and Japan suggests a more uniform distribution in the population of those countries going forward ? as the birthrate in those countries are now dismally below the replacement rate of the population. The situation in the United States is not currently as drastic (given our relatively lax immigration policy) but we are heading towards the same direction. Thus to maintain the current standard of living at retirement, my guess is that the general population will not only have to work longer, but work longer hours in the present (and save more) as well.

The situation is more alarming when one considers that the combined population of China and India makes up over 1/3 of the world's population. The number of unemployed workers in China is greater than the entire labor force of the United States. The competition for relatively unskilled jobs will continue, and it promises to accelerate going forward. The average American who does not stay ahead of the curve or does not keep pace of the trend will find his or her job being outsourced ? not to mention the average wage being driven down by global competition. I, for one, believe that this continuing trend of globalization will make the world a better place, as hundreds of thousands of people will finally be empowered as they climb out of absolute poverty (again, over half of the world's population currently live on less than two dollars a day) ? and as the prices of consumer goods are driven down still further. The average American will probably disagree, but the trend of globalization and "offshoring" will not stop. The last time the United States adopted economic and military isolationism we had a Great Depression and subsequently, World War II. I sincerely do not think that this was a coincidence.

The trend of the general aging population and globalization will have a profound impact on all Americans. Ultimately, I think all Americans will benefit ? although it may not be clear to people who are losing their jobs today. For the initiated and nimble, you will not only survive but thrive in these "interesting new times." Imagine a market for your product that is over ten times the size of the population in the United States. China and India has historically disappointed ? as the citizens of those countries have historically been too poor to consume much U.S. goods and services. Globalization and offshoring will change all these. A world more equalized economically will also mean a much more secure and less conflictive world.

Now, I want to address a similar concern of all Americans ? as the era of cheap energy (basically the cheap energy prices as experienced by Americans for the last twenty years) comes to a close. While I think oil prices will decline in the short-term (i.e. for the next few months), I am longer-term bullish on both oil and natural gas prices (I will only discuss oil in this commentary). Consider the following:

* The world supply of oil is flattening out. Readers may not know this, but the United States today still produce enough oil to satisfy approximately 40% of total domestic demand. The United States also had 22.7 billion barrels of proved oil reserves as of January 1, 2004, eleventh highest in the world. According to the Energy Information Administration (EIA), the United States produced around 7.9 million barrels per day during 2003. This is down sharply from the 10.6 million barrels averaged in 1985. The peak of domestic oil supply occurred sometime during the 1970s. Today, total domestic production is at 50-year lows ? and still falling.
* While Saudi Arabia (the world's top exporter and contains 25% of the world's reported reserves) has claimed that there are and will be no supply problems for the next few decades, they have not been transparent with their reserves data. According to Simmons & Company International, five to seven key fields in Saudi Arabia produce 90% to 95% of its total oil output ? all but two fields are extremely old ? with the last major find reported in 1968. The last publicized reserves data was in 1975 ? when Saudi Aramco was still managed by Exxon, Mobil, Chevron and Texaco. In that report, the world's best experts determined that all the key fields at that time contained 108 billion barrels of oil in recoverable reserves. If this holds true, then the peak of supply in Saudi Arabia will come soon. Moreover, if the report is correct, then there is really no "plan B" (unlike during the 1970s when the center of power shifted from the Texas Railroad Commission to OPEC due to the peaking of supply in the United States) ? crude oil prices will soar.
* The "last frontier" for the production of oil (namely the North Sea, Siberia, and Alaska) is now aging. Most companies are now struggling in order to even maintain their current production levels.
* World oil demand continues to grow. Oil demand in the early 1990s stayed relatively flat (at around 66 to 68 million barrels per day) but over the next ten years to today, world oil demand increased 14 million barrels per day. Today, total world oil demand is greater than 82 million barrels per day. The energy "experts" who in the early 1990s predicted a flattening of oil demand growth and who wrote off demand growth in developing countries were dead wrong.
* No new refineries have been built in the United States for the past two decades, even as refineries have been closing every year during that same time period. Refining capacity from 1981 to the mid 1990s also dropped drastically (this author estimates a drop of approximately 6 million barrels per day in refining capacity during that time period). Since 1994, however, an expansion in refining capacity at existing refineries has contributed to an increase in refining capacity from 15.0 million barrels per day to 16.7 million barrels per day (as of today). Despite this expansion, however, domestic refining capacity is still stretched to the limit, as utilization at U.S. refineries is now averaging nearly 90% -- leaving no cushion room if something unforeseen happens.

There are currently three factors at work which should contribute to a continued increase in the world oil price ? the maturing of supply, growing demand, and the lack of a cushion in refining capacity and low inventories. The "culprit" has usually been labeled as China, but it is interesting to note that the United States has had virtually no domestic energy policy (in terms of conservation and encouraging the development of alternative fuels) for the last twenty-something years. China demand, however, has soared over the last few years. It is now the second biggest oil consumer, having just surpassed Japan for the title. Demand for oil in China has more than doubled over the last 10 years (to today's 6 million barrels per day), and this amazing increase is projected to continue, especially given the fact that oil demand in China is still a lowly 2 barrels per person per year (compared to 25 barrels per person here in the United States). Furthermore, it is interesting to note that the number of cars in China only totaled 700,000 as late as 1993 and 1.8 million as late as 2001. Today, the number of cars in China totaled more than 7 million ? and this number could potentially have been much higher if not for the Chinese government intervention in limiting the number of cars that could be sold and driven each year. Now the most scary part: Current oil demand in India is only 0.7 barrels per person per year ? given this fact, oil demand in India could potentially explode over the next decade ? barring a huge worldwide economic recession or depression.

I believe my readers should be made aware of the current energy supply/demand situation. Given the above, what is the best course of action for the average American? How about the best course of action if you were the head of a motor company like GM or an airline pilot employed by a legacy airline like Delta? How about the best course of action for a mutual fund manager or a commodity fund manager? Since there are no easy solutions, there should be no easy answers either. In the short-run (three to five years), Americans will have to pay up if we want to drive gas-guzzling SUVs, and legacy airlines like Delta will have to continue to cut costs by probably further slashing labor costs as their first priority. A further improvement in extraction technology should help, but the serious development of alternative fuels will have to start now. I also believe that the next serious decline will be induced by a combination of an "oil shock" and a rise in interest rates. Readers may recall the relative strength chart that I developed in my August 15th commentary showing the AMEX Oil Index vs. the S&P 500 and the huge potential inverse heads and shoulders pattern in that chart. For now, the relative strength line should bounce around the neckline (the line drawn on that chart) ? possibly even for a few years ? but once the relative strength line convincingly breaks above the neckline, crude oil prices could rise to $80 or even $100 a barrel. I sure hope that my readers would not be taken by surprise if gas prices at the pump soars to $4.00 a gallon five to six years from now.

Finally, I want to pose to my readers the following question: Have you taken the time out to learn more about your psychological makeup and how it has affected your investment or trading decisions? What type of person are you when it comes to the market? Are you a so-called buy-and-holder, a swing trader, or a day trader? An independent thinker, a contrarian, a momentum investor or merely a follower? I am asking you these questions because of my following considerations:

* This author believes that we are currently in a secular bear market in domestic common stocks. While I believe that this current rally still have more room to go, I believe that a cyclical bear market will emerge in due time ? this upcoming cyclical bear market may even take us back or below the lows that we hit during October 2002. If this is true, then a buy-and-hold portfolio would definitely not work ? unless you were in natural resources or precious metals mining stocks.
* When this cyclical bull market tops out, all your friends, relatives, and the popular media will be telling you to buy more or to hold your common stocks. The bears and all bearish thoughts will be ostracized and frowned upon. This has happened in every bull market in everything in all human history. If you are in cash now, would you be able to remain in cash when the top finally comes or will you be unable to resist and buy in because you are afraid of "the train leaving the station without you," so to speak?
* Most people are inherently not good day traders or even swing traders. To be good in even the latter, you need a huge amount of dedication and discipline.

Investing or trading has always been dominated by emotions and always will be. My thinking in starting www.marketthoughts.com has always been that that if I can get my readers to buy in now, it will be a much easier decision for them to sell and hold cash once the DJIA reaches 11,000 or 12,000 or so ? as opposed to being in cash and staying out for the rest of this secular bear market. 99% of Americans are just not disciplined or dedicated enough to stay in cash during a secular bear market ? not to mention staying in cash during the entirety of a secular bear market and buying and holding common stocks during the entirety of a subsequent secular bull market. The average human psyche is just not capable of doing this. Because of this, I sincerely believe that success in the stock market (for most people) during the next five to ten years would involve catching the swings at the right or near-right times. For readers who just cannot resist, I am also going to continue to recommend some common stocks at opportune times, but in no way should my readers take my recommendations as gospel and in no way should my readers put all their eggs in one basket. If you are a person who can stay in cash for the next ten years and wait until the Dow Industrials has a P/E below 10 and a dividend yield of over 5%, then more power to you ? you are either already rich who have no need to make money in the market anyway or you are a very disciplined and independent-thinking person. Most Americans just cannot do that ? but I am here to help.

Internet Marketing Tips - Earth is Running Some Kind of Special

2011-09-09T19:35:00.000-07:00

Everybody loves a sale. Ever get a load of the stores the day after Thanksgiving? It’s like a mob scene. Every establishment on God’s green Earth is running some kind of special and we flock to these places like geese. Yes, running specials is a great way to increase income.

However, when you do this, there are certain things you need to keep in mind so that your special has the most impact. I’m going to cover these in this article. Leave them out at your own risk. In the world of Internet marketing, the special isn’t a special until you’ve covered certain areas. The first one is scarcity. You can’t let everybody and their grandmother get a crack at whatever it is that you’re practically giving away. For more details www.achieving-liftoffs.com.You have to limit the number of items being sold. It can be 100 or 500 or whatever, but make it a firm number and let your list know that after they are gone, they’re gone. No begging, no pleading. Nothing is going to get you to sell even one more item at the price you’re selling it at. If you make this clear in your copy, you’ll see the sales start to pour in. The second thing is time. You don’t want to run these sales forever.

You want to put a time limit on them. This can be 24 hours or 48 hours or whatever you want. But make it very clear to your list that this sale is for a limited time and once that time period has elapsed, the sale is over and no more items will be sold at that price. Again, no matter who writes to you and asks you to extend it, your answer is firm. The sale will be over when the time is up…no exceptions. If people see that you are a man of your word, you’ll see the money come pouring in quickly. The third thing is the bonus. Let the people know that if you take advantage of this sale, you’ll throw in a very exclusive bonus besides. Sometimes people will buy whatever it is that you are selling just because of the bonuses.

For more details www.website-conversion-mastery.com. Now, don’t just throw in any piece of junk. Make sure the bonus has real value and ties in with the item that you are selling so that it compliments it. If you do this, you’ll see your sales skyrocket. It’s not rocket science. If you follow these three little tips when running your sales special, you’ll find that it will go a lot smoother and you’ll make a lot more money in the process.

Internet Marketing Tips - How Do We Do This?

2011-09-07T19:34:00.000-07:00

This one has stumped some of the greatest minds in Internet marketing circles. Is contained viral testing possible? That is the question we’re going to try to answer in this article. Trust me, the answer isn’t as simple as you might think. If you understand the concept of viral marketing, then you know that the very nature of it makes this a tricky proposition.

Okay, for those who don’t know what viral marketing is, a brief little overview is probably in order. For more details www.achieving-liftoffs.com.Viral marketing is when you put something out there on the Internet, whether it be a script or video or something and the very nature of what it is makes it so that one person will tell another person about it and it will spread like wildfire. That is the basic premise of viral marketing.

Okay, let’s suppose you want to test a viral script where the script, when seen by one person, gives them the option of putting in the names of a few of their friends. By doing this, their friends get this script sent to them and they in turn do the same thing, put in the names of their friends. This continues until thousands of people find out about this script. That is what you want to happen with a viral marketing campaign. You want as many people to find out about your product as possible.

Now, let’s say we want to test our script but we don’t want it to get too far around the Internet. How do we do this? Again, the very nature of it means that it is going to get around. Now, you could tell the first few people who you send it to NOT to send it to more than a few people and to instruct those people not to send it to anybody. For more details www.website-conversion-mastery.com.But is there any guarantee that these people are going to listen? Once something is out there, theoretically, it’s out of your control. You can give people all the instructions that you want, but you can’t force people to obey them.

It is an interesting little problem wouldn’t you say? No, I haven’t thought of a solution. Sure, you could disable the script, maybe. But at what point? And then how do you get your test results back? If anybody reading this has the answer to this puzzle, you might want to write your own article about it.

Internet Marketing a Mine Field

2011-09-05T19:33:00.000-07:00

I’m telling you…they should give Internet marketers battle pay. If this was a war, I’d be a five star general by now. Okay, maybe four stars. If you think I’m being a little dramatic, I’m not. Internet marketing is one of the most difficult things a person can do if he’s not properly trained and doesn’t have the right mindset. This article is going to discuss some of what I consider to be the most important things needed to become a successful Internet marketer. You might want to make note of these.

Let’s start with mindset. www.tube-pros-espects.com One of the most difficult obstacles that many Internet marketers face is disapproval from friends and family. I remember when I first started trying to make a living online. I heard so much negativity, I almost drowned in it. It took me a long time to tune out all the negative vibes. Once I was able to do that, I was able to concentrate fully on my business and proceed to make it the success that it now is.
Then there’s knowledge. Most marketers have no idea what’s involved when it comes to earning a living online. That’s the reason that 95% of them never make a dime. I won’t go through everything but right off the top of my head, a comprehensive marketing education requires excellent skills in writing, advertising, organization and planning. Each of these can be broken down into a number of sub categories, all of which can get quite complex. This knowledge doesn’t come cheap. You’ll either pay for it in dollar bills, getting the best educational resources money can buy, or in your time…combing the Internet for the information.

Finally, there’s money. As much as I hate to say it, the more money you put into your business, the more successful you’re going to be. See, even if you didn’t have the mindset or the knowledge, if you just had an idea of what you wanted to do, al you’d have to do is simply hire people to create and run your business for you. Naturally, that would take a lot of money, but it can be done. www.outsource-beginners.com Point is, if you can’t afford to have your business run in its entirety, with what funds you do have, you could get some things done for you.

Any one of these things I’ve mentioned can blow up in your face. The wrong mindset, insufficient knowledge, or inadequate funds, can sink your business in a heart beat. That’s why I call Internet marketing a mine field. One wrong step and you’re blown to bits. And let me tell you, I’ve seen plenty of casualties.

So make sure you have these three bases covered. If they are, you’ll have a very good chance of getting through this war with all your body parts intact.