Blog already been transfered

This blog is already been transfered to INVESTORS MONEY JOURNAL .com Pls. visit the new site to read newly update articles and videos. Thanks

Friday, December 12, 2008

TIPs to Protect Yourself from Future Inflation

Visit the new Investor's Money Journal extension website and feel the difference... just click Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.


This article is another in my series of articles about common mistakes that the average individual investor makes in their overall portfolio allocation. For these articles, I drew from the 20 years of experience I had at Charles Schwab in dealing with clients face-to-face and helping them meet their financial goals.

In previous articles, I wrote about two areas which were dramatically under-represented in most clients portfolios – commodities and international securities. There is a third area which I found to also be under-represented and that is fixed income investments. Many clients had little or no exposure to fixed income investments.

The most difficult task I believe for allocating funds to fixed income investments is to choose what type of bonds an investor should buy from the myriad of choices available. Obviously, an investor’s specific financial circumstances will dictate the final choices. In this article, I will choose an area of the fixed income world that I believe most investors should currently allocate funds toward.

TREASURY MARKET FANTASY

Right now the Treasury market is enjoying its own titillating little fantasy. It is the ultimate dream of everyone in the bond world. It is nirvana for bond market junkies. It is the D-word – deflation.

The media and financial authorities have fallen in love with the word deflation. The dim bulbs that appear on CNBC air are constantly talking about deflation. This fact alone sets off alarm bells in my head. When is the last time that the conventional wisdom as presented on CNBC ever came true? In fact, when is the first time?

I believe that all of this deflation talk is simply a way for the financial authorities to prepare the public for incredibly massive government spending over the next several years. It simply helps to justify even more massive government bailouts and spending programs. Look at the amount already spent on the “bailout” - nearly $8 trillion. I fully expect that figure to rise by tenfold or more.

I notice that CNBC conveniently seems to have forgotten about how the Treasury market crazies got it wrong in 2003. There was a huge deflation scare at that time too, although on a smaller scale than the current nuttiness. What followed that deflation scare? One of the most massive upward moves in history of the price of many commodities.

Right now, the Treasury market crazies have priced in massive deflation that will occur in the United States for the next decade or longer. They have also priced in corporate default rates of 21%! And this is in the face of massive printing of money and multi-trillion dollar annual deficits.

There is a major headwind that the Treasury market crazies will soon be facing. Over the next four years, 66% of America’s current $5.2 trillion of debt has to be rolled over. Who is going to buy all of this Monopoly paper?

Wall Street is expecting the suckers (foreigners) to buy it all. They seem to have forgotten that, thanks to Wall Street, these foreigners have major financial problems of their own. I strongly believe that most foreign investors’ funds will be spent in their home markets, buying their own bonds, and funding their own governments’ fiscal needs.


When this happens, the Federal Reserve will have to resort to cranking up the printing press to warp speed so that there is enough Monopoly money available to purchase the massive amount of Treasuries which will be issued. Can you say inflation?

MIS-PRICED ASSET - TIPS

In all of the Treasury market nuttiness, there are Treasury securities which have been completely mis-priced. These securities are Treasury Inflation Protected Securities or TIPS. The interest and principal on these securities are indexed to the U.S. Consumer Price Index or CPI.

TIPS have become mis-priced because liquidity has fled the TIPS market, just as liquidity has fled from the equity markets. After all, why would anyone want to own TIPS when everyone “knows” that deflation is here to stay and inflation is dead forever, right?

Wrong! For reasons stated earlier, I believe we will see a mass conflagration of the funds that are currently rushing into Treasury securities at zero or one per cent because of liquidity concerns. And once again, we will see that the conventional Wall Street wisdom will be proven incorrect.

I don’t believe we will ever see massive deflation in this country. I believe that the only possibility of deflation in the US would be if we truly see 1930s conditions – where the US GDP collapsed by 50% in nominal terms and unemployment rates were at 25% and corporate defaults were in the 15% range. Sorry, that scenario is not in the cards. What is much more likely is a return of inflation.

TIPS ETFs

An investor can buy an individual TIPS bond, but with the current lack of liquidity the spread between the bid and asked of such securities is unusually large. A better choice may be an ETF which invests in TIPS securities.

Currently, investors have two choices for TIPS ETFs. They are SPDR Barclays Capital TIPS ETF with the symbol IPE and the iShares Lehman TIPS Bond Fund with the symbol TIP.

Both ETFs have many similarities – both ETFs have very low expense fees, both ETFs are down between 7% and 8% for the year, and both ETFs also have a similar average duration of the TIPS bonds that they hold of approximately 7 ½ years.

The only difference seems to be that TIP trades with a higher daily average volume than does IPE and is therefore a bit more of a liquid security.

Due to the current mis-pricing I believe is occurring in the US Treasury market, both TIP and IPE are currently yielding in the 8% range. Keep in mind – this is an 8% yield that investors are receiving on a US Treasury security!

Investors are urged to jump on the bargains occurring currently with regard to the TIPS market. I believe that an immediate purchase of either IPE or TIP will be a wise choice.

by:

Tony D’Altorio
Analyst, Oxbury Research

The DOW Crashes?

Visit the new Investor's Money Journal extension website and feel the difference... just click Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.


The DOW Proves It's Over Unitil It's Over - Watch the Video here. You may enter your e-mail address to receive an alert for a new post or video

How did a dead mathematician pinpoint the downturn in the market?
In my new video, I will show you how a mathematician who has been dead for
several hundred years, pinpointed today's downturn in the market (12/1/08).
I think that you'll find this short video informative, educational and above
all practical.

With the 2008 trading year rapidly coming to an end, we think it's diligent
to look forward at what and how you're going to approach the markets in
2009.

As I've said before in our blog, there is going to be some fabulous
opportunities to make money in the New Year. However, it's going to take
discipline and a structured approach to take advantage of those
opportunities.

Using Option Spread to Reduce Risk

Visit the new Investor's Money Journal extension website and feel the difference... just click Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.


Many market participants are conditioned to think of options as instruments of gambling and undue risk. In my opinion options should be regarded as what they really are: instruments of market participation. Like any other tool, it is the way we use them that can make them help, or harm us.

I sometimes use options instead of buying or shorting the underlying securities. As we know, options come with an expiry date, and a time premium that shrinks ever so faster as we get closer to expiration. So, timing is important. Also, it is important that one chooses an expiry date that would give enough time for the trade to play out.

Following is a trade I did a while back using put spreads to short the Biotech Holders ETF (BBH). I will use a hypothetical position size of 10 contract for simplicity of calculations but that is not the size of the actual position that I had.

On August 14, 2008, a TV commentator’s remark on the biotech sector being hot and attracting funds caught my attention. I am a strong believer that when I hear something on TV, the story has already run its course. Not that financial pundits mean to deceive us, just that they, or at least most of them, pay attention to things like most of the rest of us - well past the half way mark if they are half good at what they do, right at the end if they are not.

A look at the BBH chart got me interested on the short side.


I noticed a few things
1. Price had a huge gap up in mid July
2. It followed through by another, smaller gap up, which was quickly reversed by a gap down, forming an Island Reversal.
3. The island reversal was ignored by bulls and price rose, but in a very tight slanted channel
4. The latest rise on the chart was accompanied by diminishing momentum, and volume
I liked what I saw for a short and decided to keep an eye on it.

My first thought was to see if I could find a leveraged short ETF on the Biotech sector. I could not find any. I am a member of a very active community of traders. I posted a question to see if anyone would aware of a Biotech short ETF. Instead of a simple Yes/No answer, I received detailed dissertations why it would be a bad idea to short Biotechs. This was my second contrary confirmation that I had a good shot on the short side. Not having been able to find an ETF to do the short, I decided to use put options.

A few days later, I got what I wanted



1. The rising channel broke
2. Stochastics gave a sell signal
3. Negative momentum divergences in place
4. Longer term momentum, at the top of the chart, showed signs of rolling over
Things are seldom perfect
1. Volume was lacking
2. price was on a first run out of a long term base indicating possibility of a mere pullback and not a total breakdown
3. Longer term MAs were pointing up
I decided to go on with the trade and buy some puts on BBH. But what puts? To decide on a strike, I first tried to come up with some target areas if the short would actually work.
1. There was the huge gap in 183-190 area
2. There was the top of rectangular base at 180 (that base had been 2+ years in the making)
3. 50% retracement of the up move sat right on the resistance line at 180
4. 32% retracement of the up move was somewhere in the 183-190 gap
I thought if I could get lucky, 180-185 area might define a drop target.

What option duration? Trying to give the trade a bit of time, I decided to buy Oct 185 puts. Before placing an order I defined on my exit rules:
1. Buy, sell, stop decisions were to be primarily taken based on price action of the underlying security and not the option price
2. If options were more than 1/3 in loss, the position would be closed.
For 10 Oct 185 puts at 1.25, I would have to pay 125 dollars a contract or 1250 dollars total. That would be all I could ever lose; if I could get to exercise my rules, I would actually lose 1/3 of that.

It so happened that the channel break signal that I took was a good one, and BBH started on its merry way down, all the way to this chart of Sep 4, 2008



The puts that I had could now be sold for 2.20 for a net profit of 220 - 125 = 95 dollars a contract or 95 / 125 = 76%.

But, conservative and risk averse as I am, I still am a greedy trader. This chart looked like it was rolling over on a weekly basis. So I decided to do something different.
1. I would sell 30% of the position and take some profit
2. I would lay a spread against the remaining 70%
I could sell 3 of my puts for 3 * 2.20 = 660 dollars, bringing my cost down to 1250 - 660 = 590 dollars for remaining 7 contracts = 90.7 dollars per contract.

I could now sell 7 Oct 180 puts for 1.25 or 125 dollars a contract = 7 * 1.25 = 875 dollars.
So I would be out 1250 - 660 = 590 dollars on 7 Oct 185 puts

I would get 7 * 125 = 875 dollars from the sell of the Oct 180 puts.

That would give me a net profit of 875 - 590 = 285 dollars, or 285 / 1250 (original investment) = 22%

Not as good as 70% but still decent, and I was still in the game, free of cost.

So what could happen from then till Oct expiration day if I did nothing?
1. BBH could stay above 185, and all puts would expire useless. Then I would make 22%
2. BBH could drop below 180, then I would be put BBH shares at 180, which I would sell at 185 using my higher puts and would make 500 dollars a contract on top of what I had already made (best possible outcome)
3. BBH could stay between 180 and 185 at price x, then 180 puts would expire, and my 185 puts would be worth (185 – x) * 100 dollars per contract + what I had already made
4. A disaster could happen and all contracts could be declared void, I would still make 22%, that is, if the disaster did not adversely affect my bank.
This is a recent chart of BBH showing what would happen if I had, against all technical signs, followed the pundit on TV, or the traders on the board I mentioned above.



A combination of basic chart reading techniques, decent timing, and risk management using options can produce good returns against well-defined, limited risk.

Tuesday, December 9, 2008

Traders Toolbox: Candlestick Formations

Visit the new Investor's Money Journal extension website and feel the difference... just click Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.



Japanese candlesticks, which have been enjoying the spotlight in recent years, are difficult to explain in one broad brush. Candlesticks draw on the same open-high-low-close data as do bars. Here the length of the bar, or “candle,” is determined by the high and low, but the area between the open and close is considered the most important.

This area, the “body” of the candle, is filled with blue (or white for most charting programs) for closes higher than open, and is filled with red (or black from most charting programs) for down days. The wicks above and below constitute the “shadow” of the candle, or high or low.

No pattern is 100% correct, but these formations are often time incorporated into many mechanical systems and can provide as great information source for the naked eye.

Doji - When the open and close price is almost the exact same value and the tails are not excessively long. This formation can alert investors of a possible indecision and during oversold or overbought conditions can possibly signal for reversal. The bulls and bears are equally pushing the price.

Long-Legged Doji - You can recognize this formation by one or two long tails (shadows). This formation will sometimes alert that we have reached the top of the market or warn that the trend has lost sense of direction.


Gravestone Doji - This formation occurs when the open and close price is the same or near the low of the bar (period). Although this can be found at the bottom of a trend, this formation can be used to pick out market tops.


Hanging Man - This formation looks like a body with feet dangling… or a hanging man. This is a short body with a tail that is twice the body’s length. This formation can alert of a reversal and is typically found at the top of an up-trend. The longer the shadow, the greater the change is for a reversal.



Hammer - This formation is a short body with a tail that is twice the body’s length. This formation can alert of a reversal and is typically found at the bottom of a downtrend. The longer the shadow, the greater the changes are of reversal.

Spinning Top - This short body has sizable tables both on the top and bottom of the bar. This formation often times represents indecision and a standoff among the bears and bulls. There is little movement between the open and close, but both the bears and the bulls were active that trading day. After a long blue candlestick, a spinning top suggests weakness among the bulls. After a long red candlestick, a spinning top suggests weakness among the bears.


Bearish Engulfing Pattern - This formation is a major reversal pattern after the completion of an uptrend. After a blue candlestick, the next day will open above the previous day’s positive close, throughout the trading day it will blow past the previous days open completely engulfing the previous day’s movement.

Bullish Engulfing Pattern - This formation is a major reversal pattern after the completion of a downtrend. After a red candlestick, the next day will open below the previous day’s negative close, throughout the trading day it will blow past the previous days open completely engulfing the previous day’s movement.

Evening Star - This is a top reversal signal suggesting that prices will go lower. It is formed after an obvious uptrend. The 1st candlestick is a long blue box (usually when the confidence had peaked). This stick is followed by a small blue body, when the trading range for the day has remained small. The third bar (red) plows down at least 50% past the 1st day’s bar signifying that the bears have taken control.

Morning Star - This is a bottom reversal signal suggesting that prices will go higher. It is formed after an obvious downtrend. The 1st candlestick is a long red box followed by a small blue box, when the trading range for the day has remained small. The third bar (blue) shoots up at least 50% over the 1st day’s bar signifying that the bulls have taken control.

Dark Cloud Cover - This is a two bar formation that is found at the end of an upturn or at a congested trading area. The first bar is a blue (positive movement) bar followed by a red bar which reaches over the open of the previous days close and closes at least 50% down the previous days bar.

Piercing Pattern - This is a two bar formation that is found at the end of a declining market. The first bar is a red (declining movement) bar followed by a blue bar which opens (often gaps) below the previous days close and reaches at least 50% of the previous days bar.

Sunday, December 7, 2008

The MLM puzzle (2)

Visit the new Investor's Money Journal extension website and feel the difference... just click Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.


This is the continued part of The MLM puzzle. MLM is just like a puzzle and there are different parts of it. The more you know, the more parts you get and you can develop your business using it. Now lets see what are these parts and how to get these,

Follow ups
It is essential in MLM to do follow ups. Without this, your prospects will become negative and will never buy your products. Follow up is needed to keep in touch with him and to provide him informations. You can read more about this topic here, Prospect follow up

Team meeting
To have a great successful and active team, you must organize team meeting. This way you can provide informations to your team mates and can motivate them. If you manage to keep up team meetings, your distributors will become leader. Read more about this topic here, 20 reasons why you must have team meetings , 20 ways to make your team mates attend team meetings

Presentation skill
Present and describe your business concept by your self to the prospects. This is also called the official meeting with prospects. A sales or a joining depends on this skill. Practise it ith your team mates and with uplines. There are was to improve this skill, read these articles for more info, A good presentation , Presentation Book

Have big dream
Dream is the biggest part of MLM success. See more dreams to achieve more. Think big and want more from life. Tell your team mates to dream too. Whenever you see a dream, believe it and your mind will set you to work more and to achieve it. Click to read Part 1

To all readers of Investor's Money Journal (IMJ) Networking Page, visit the The Marketeers site for MLM motivational articles and videos.

Friday, December 5, 2008

Traders Toolbox: Money Management Part 3 of 4

Visit the new Investor's Money Journal extension website and feel the difference... just click here Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.




Crucial but often overlooked, money management practices can mean the difference between winning and losing in the market.

-Placing Stop Order- It’s helpful to think of these by their more formal name, stop-loss orders, because that is what they are designed to do – stop the loss of money. Stop orders are offsetting orders placed away from the market to liquidate losing positions before they become unsustainable.

Placing stop orders is more of an art than a science, but adhering to money management rules can optimize their effectiveness. Stops can be placed using a number of different approaches; by determining the exact dollar amount a trader wishes to risk on a single trade; as a percentage of total equity; or by applying technical indicators.

Realistically, methods may overlap, and you’ll have a certain amount of leeway in deciding where to put a stop, but always be wary of straying too far from the basic asset allocation parameters established earlier. For example, if a trader is long one S&P 500 future at 450.00, a based on his total equity he has a $2,500 to risk on the position, he might place a sell stop at 445.00, which would take him out of the market with a $2,500 loss ($500 per full index point, per contract). Buss after consulting his charts, he discovers strong support at the 444.55, a level he believes if broken will trigger a major break. If this level is not broken, the trader believes, that rally will continue. So he might consider putting a stop at 444.55 to avoid being stopped out prematurely. Although he’s risking an extra $225, he’s staying close to his money allocation percentages and modifying his system to take advantage of additional market information.



Of course, the size of a position will affect the placement of stops. The larger the position, the loser the stop has to be to keep the loss within the established risk level. Also consider market volatility. You run a greater risk of getting stopped out in choppy, “noisy” markets, depending on how far away stops are placed. This can cause unwanted liquidation when the market is actually moving your direction.

Now suppose our hypothetical trader, who started with $50,000, is now looking at a $10,000 gain (which happened to be his goal for this trade) on a long position. What should he do? That depends entirely on his trading goals. He can take the $10,000 profit and, assuming he leaves the money in his trading account, turn to other trading opportunities. If he desires, he can increase the size of his trades proportionally to his increase in trading equity. This would give him the potential to earn greater profits, with the accompanying risk of greater losses.

He also could choose to keep the size of his trades identical to what they were before he made his initial profit, thus minimizing his risk (as he would be committing a smaller percentage of his total equity to his trades) but at the same time bypassing the chance for larger profits. If his winning positions had consisted of more than one contract and he believed the market was still in an uptrend, he could opt to take his profits immediately on some of the trades, while leaving the other positions open to gain even more. He then could limit his risk on these remaining trades by entering a stop order at a level that would keep him within his determined level of risk, as well as protect his profits. He does run the risk of giving back some of his money if he is stopped out, but counters that with the potential for even larger gains if the market continues in his direction.

Good money management practices dictate stop orders be placed at levels that minimize loss; they should never be moved farther away form the original position. You should accept small losses, understanding that preservation of capital will in the long run keep you in the market long enough to profit from the wining trades that make up for the losers.

Trading in the real world almost never seems to go as smoothly as it does on paper, mainly because paper trading typically never figures in such real world factors as commission, fees and slippage. “Slippage” refers to unanticipated loss of equity does to poor fills (especially on stops) that can result from extreme market conditions or human error. Factoring these elements into your overall money management program can help create a more realistic trading scenario, and reduce stress and disappointment when gains do not seem to be as large as they should be.

-One Final Note- Do your money management homework before you start trading. This helps you decide what to trade and how to trade it. On paper, money management sounds so obvious and based on common sense that its significantly overlooked. The challenge is to apply its principles in practice. Without money management, even the most astute market prognosticator may find himself caught in a downward trading spiral, right on the trend, but wrong on the money. Read part 1 and 2 here


To all readers of Investor's Money Journal (IMJ), I want to ask your opinion about this blog if you want an articles purely about stock market or mix of articles about investment vehicles like real estate, networking, etc. Pls. comment.

Determine the Trend in Any Market by Connecting the Dots

Visit the new Investor's Money Journal extension website and feel the difference... just click here Investors Money Journal . See, watch, and listen to the market strategies, tips, and advices of different investment and financial experts.


Connecting The Dots.
One of the easiest ways to determine the trend in any market is simply to connect the dot's. In this five minute video, I explain how you can connect the dots in any market to determine its trend. I will show you three examples of connecting the dots...

1. How to determine a downtrend.
2. How to determine an uptrend.
3. How to determine when a market is making a change of direction.

One of the key components I look for is how a market closes on a Friday or the last trading day of the week. This is when traders have to decide what they want to do with their positions. It also tells you with a high degree of probability which way the market is headed for the upcoming week. I learned this trading secret on the floor of the exchange in Chicago and it is one I would like to share with you today. I feel that this technique has a lot of validity, particularly in light of today's volatile markets.

Enjoy the video.

To all readers of Investor's Money Journal (IMJ), pls. leave a comment if we should stick on the articles that are related to the stock markets or you still want to read about other investment vehicle like real estate, networking, etc.

Tuesday, December 2, 2008

Traders Toolbox: Money Management - Part 1 of 4

Investors Money Journal




Crucial but often overlooked, money management practices can mean the difference between winning and losing in the markets.

Plenty of books, manuals, and software packages will help you form and opinion of a market, but not many will tell you how to trade once you have decided to get long or short. The goal of money management is to increase the odds of high quality trades. And as we’ll see, leaving the money management variable out of your trading equation can lead to ruin, even if you’re correct about the market direction.

In a broad sense, money management can encompass those elements of trading outside the initial decision to get long or short in a given market or markets – that is, how many positions to put on, when to get out, where to place protective stops. More specifically, it refers to the strategic allocation of capital to limit risk and optimize trading performance in the long run. Allocation of capital can refer to how much money to put into any one market or how much money to risk on any one trade. These decision directly affect how many positions to put on and where to place stop orders.


Given the negative odds inherent in trading (a successful trader can expect to lose money on 60% of his trades), how do you go about maximizing the profit potential of the few winning trades you can expect to have? The answers vary with the disposition and trading style of the individual trader. There exist, however, basic concepts that can be successfully adapted and modified to individual needs, and when the followed in spirit, can boost the promise of long-term trading profits and take some of the stress and uncertainty out of trading.

-Establish A Goal- Having a clear idea of what you want to accomplish by trading, whether it is a short-term profit on a single trade or the desire for a long-term trading career, can go a long way toward building successful trading habits. Regardless of whether or not the goals are set on a per trade, daily or long-term basis, establishing from the outset basic levels of acceptable risk and financial reward will help curtail avoidable risk and extreme losses. Also, determine a specific time frame in which to trade: Will a position have to be liquidated by a certain time for tax purposes or for same other reason?

-Diversification- Just as in the stock market, a portfolio of different instruments can be one of the best hedges against several and unsustainable losses; a loss in one market will hopefully be offset by gains in others. Traders must take caution, though, to truly diversify their portfolios with contracts that are price independent. Spreading your trading among three or four different interest rate contracts that move in a similar fashion is not a good example of diversification, because a loss in one contract is likely to be mirrored by losses in the others. But over-diversification is dangerous, too. A trader can spread his money over too many markets, and not have enough capital in any one of them to weather even small adverse price swings.

A good rule of thumb is to stick with what you are comfortable; do not venture blindly into unknown markets just for the sake of diversification. A balance must be stuck between available resources and a manageable trading scenario. Capital constraints will, of course limit the choices traders can make, forcing those with smaller trading accounts to bypass or minimize diversification. click to Part 2


To all readers of Investor's Money Journal (IMJ), I want to ask your opinion about this blog if you want an articles purely about stock market or mix of articles about investment vehicles like real estate, networking, etc. Pls. leave a comment.