Market Review 3.8.12

Source: ForexYard

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After falling more than 150 pips against the US dollar yesterday, the euro staged a mild upward correction during the overnight session. The common currency fell across the board yesterday, after the ECB refrained from announcing any new initiatives to lower borrowing costs in Spain and Italy. The EUR/USD is currently trading at the 1.2200 level, up from 1.2165 last night. Crude oil also advanced close to $1 a barrel during the Asian session and is currently trading just above the $88 level.

Main News for Today

US Non-Farm Payrolls- 12:30 GMT
• The employment indicator is considered the most important news even on the forex calendar
• Analysts are forecasting that the US added 101K jobs last month, above July’s figure of 80K
• Should the news come in above 101K, the USD could extend its upward movement from yesterday

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Will The Non-Farm Payrolls Signal a Further Decline in the US Economy?

Source: ForexYard

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At FOREXYARD, we believe in keeping our clients prepared for potentially significant news events. As such, traders will want to pay careful attention to the US Non-Farm Payrolls figure, set to be released today, August 3rd at 12:30 GMT. As can be seen in the chart below, the safe-haven US dollar received a boost following last month’s disappointing Non-Farm Payrolls figure.
EURUSD 2.8

Don’t miss out on another opportunity to capitalize on market volatility!

The Non-Farm Payrolls figure is widely considered the most important event on the forex calendar, and consistently leads to significant activity in the marketplace. If the indicator comes in below the forecasted 101K, investor worries regarding the slow pace of the global economic recovery may go up, which could lead to gains for safe-haven currencies like the USD. This is an excellent opportunity for forex traders to take advantage of potentially significant news, so don’t miss out!

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Revealed: Government to Get Hands on More Retirement Savings

By MoneyMorning.com.au

For over three years we’ve warned you that the government is coming for your retirement savings.

Of course, they won’t just grab it. They’re smart. They’ll do it by stealth. Even claiming it’s in your best interests…or the interests of society in general (that’s how governments always justify a wealth grab).

First they took the retirement savings of foreign workers who have left Australia. Then they took the retirement savings of Aussies’ lost super. And according to the latest Treasury draft paper, next on the list is the lost super of public sector employees.

But that’s just for starters; what’s next?

Well now it seems the government has its sights set on Self-Managed Superannuation Funds (SMSF). SMSFs account for about one-third of all super savings. And the government wants it. So they’ve got the big guns lined up to do their dirty work…

Yesterday The Australian headlined:


‘Investors are courting disaster on SMSFs, say fund managers’

Selections from the news story include:


‘Leading fund managers have expressed concerns with the speed at which ordinary Australians are eschewing professional advice and taking responsibility for the investment strategy that will ultimately fund their retirement…

‘”The next problem area might be collapses because people don’t know what they are doing. There is some truly wacky stuff going on out there”…

‘The comments about the vulnerability of the sector comes hard on the heels of a report from the Australian Crime Commission that SMSFs would be increasingly targeted by sophisticated overseas crime gangs in the year ahead.’

But Aussie investors needn’t worry about a bunch of swarthy foreigners stealing their savings. The gangs to fear are those in the Federal Government and the Australian Taxation Office…

Shoplifting is Bigger Than Investment Fraud

The report by the Australian Crime Commission referred to by The Australian is called, Serious and Organised Investment Fraud in Australia.

The report says that between January 2007 and April 2012, ‘more than 2,600 Australians were victims of Serious and Organised Investment Fraud.’

According to the report, losses due to investment fraud between January 2007 and April 2012 were $113 million…or $22.6 million per year.

That’s a lot of money. But it’s nothing compared to the estimated $5.5 billion lost by Aussie retailers in 2008 due to shoplifting.

Now, we’re certainly not underplaying the scale of this fraud, or the disastrous impact on some retirement savings.

But let’s put this in perspective. This report is nothing more than propaganda to convince people that it’s too dangerous for you to save for your own retirement…so you should let the government help.

As former US President, Ronald Reagan, said, ‘The nine most dangerous words in the English language are, “I’m from the government and I’m here to help.”‘

Besides, as crimes go, 2,600 is only a handful of people compared to the millions of tax theft victims each year. Where the government takes money from your pocket and your retirement account, money that you could use to save for your retirement.

Be in no doubt, Welfare States worldwide are fast running out of cash. They’re reaching the maximum they can tax people without causing civil unrest. And most Western nations have reached their maximum borrowing limit too.

Of course, compared to other nations the Aussie government has low debt. But there’s still a limit to the amount the government can borrow from foreign investors.

That puts them in a tough spot. How and where can it raise the cash to fill the hole in the budget deficit, and pay for the Welfare State?

The answer is clear – a retirement savings grab.

It’s a trend we’ve seen worldwide. Argentina, Ireland and Hungary are just three examples of countries nationalising private wealth.

Australia has done the same, but in a more shrewd way. It demands that superannuation funds pay any unclaimed funds to the tax office…so the government can spend it.

But it will be harder for the government to get hold of the rest of the $1.3 trillion super industry. They won’t be able to get away with boldly taking it. It will need a coordinated and fear-driven effort…

Watch Your Retirement Savings

The kind seen in the Australian article. So, what does this scary Australian Crime Commission report say?

We’ve read the report and really, it doesn’t say all that much. Sure, investors need to keep a close eye on their savings. And they need to be careful whom they trust.

But it doesn’t justify forcing individuals to hand their savings over to so-called investment pros or the government.

Because the last time we checked, governments haven’t done such a good job of looking after taxpayer money anyway.

And some of the biggest ever frauds have been committed not by the ‘sophisticated overseas crime gangs’, but by local firms, and often firms that are licenced and regulated.

Or by big banks punting with savers’ money: Barings, JPMorgan, Societe Generale, and UBS are recent examples.

The biggest fraudster of them all, Bernie Madoff, was an investment professional regulated by the US Securities and Exchange Commission. He ripped his clients off for billions of dollars over many years. Fortunately he was caught (or rather, gave himself up) and will die in jail.

So yes, there are crooks, but that’s why it’s important that investors have more, not less, control over their

The last thing Aussies need as they prepare to retire is for the government to take private retirement savings and spend it. While at the same time claiming the money will be there when they retire. The experience of the Aged Pension proves otherwise.

In short, keep your eye on the news. The article in The Australian has all the hallmarks of planted government propaganda.

And it’s likely you’ll see many more articles like the one in The Australian in the coming months.

The government attack on your retirement savings has only just begun.

Cheers,
Kris

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Revealed: Government to Get Hands on More Retirement Savings

Deflation – Inflation: The Big Risk We Face in the Future

By MoneyMorning.com.au

Bill Gross – founder of bond manager PIMCO, and one of the most respected bond investors around – is usually worth listening to.

He doesn’t get everything right – who does? – but his monthly overviews always provide plenty of food for thought.

Gross is a realist, which probably explains why he became a bond rather than an equity fund manager. He tries to look at things as they are, rather than being a mindless cheerleader for the long-term prospects of the stock market.

In his latest piece he claims that the “cult of equity” is dying. Predictably, it’s drawn a lot of attention.

But there’s a much more crucial point in his piece. It’s about the one thing that could have a more devastating impact on your savings in the future than anything else – inflation

Inflation Means Bad News For Savers

Bill Gross has been arguing for a while that economic growth in the future will be much weaker than we’re used to, mainly due to debts the global economy has racked up.

Under this ‘new normal’ scenario, you can’t expect stocks to perform as well as they did in the 20th century. Indeed, their performance since 2000 has been very poor – hence his view that the ‘cult of equity’ is dead or dying.

The trouble is, bond yields are so tiny that you can’t realistically expect them to perform well in the future either. This is all terrible news for savers and pension funds. You can’t build a decent retirement pot on the back of near-zero bond yields and miserly dividend yields.

That means people will probably have to save a lot more and work a lot longer than they currently think they will. For some, retirement may just be a pipedream.

Worse still, Gross reckons that Western governments are set on a course of action that will make things even more painful for today’s investors.

Having run out of money, our politicians seem to believe that cost cutting is a surefire vote loser. Few want to raise taxes either. So for Britain, the USA and now even the eurozone, all hopes rest with the printing presses, and attempts to inflate our debts away.

If inflation takes off, then bond yields would have to go higher, and bond prices would fall sharply. Surging inflation would be bad news for most equities too.

The Big Question: When?

We should embrace deflation – but we won’t.

I think Gross is right to be worried about inflation. But for now the forces of deflation are so big that it’s going to take money printing on a huge scale to create the sort of inflation that can get rid of the debts in Western economies.

The UK is in recession with high levels of debt and cash-strapped consumers. America is in a similar boat, as is the eurozone. And now China looks to be in trouble with falling company profits and over-investment.

Asset prices are falling, debts are going bad, and people are trying to cut back. This is not a recipe for a major inflation problem.

One way to heal our economies would be to accept this process of bankruptcy and deflation. If you believe in capitalism, you have to accept both the good and the bad parts of it.

Recessions are sometimes a necessary process. They push bad businesses into bankruptcy, and inflict losses on those who made bad investment decisions.

However, they also provide opportunities. The resources that were being used inefficiently by bad businesses can be bought up cheaply by people who can make better use of them. Lower costs make businesses more competitive. The falling prices that come with this type of correction mean that you can buy more goods with the money in your pocket.

Meanwhile, keeping interest rates above the rate of inflation encourages people to save. These savings supply firms with the funds to invest in more wealth-creating projects.

Getting to this point is usually quite painful, but once an economy has reached this point it can begin to prosper again.

The trouble is, this won’t happen. Our central bankers and politicians would rather protect the interests of an insolvent financial system by creating money out of thin air.

They would rather make goods and services more expensive for the general public, and destroy the value of people’s savings, than accept that some asset prices are too high, and some debts shouldn’t be repaid.

So I think that Gross and others who fear inflation will be proved right – eventually.

For inflation to take off, money printing needs to reach a point where people become afraid of rising prices or a collapsing currency, and so start to spend money as quickly as they can.

But the world may have to experience a deflationary shock, and falling prices, before central bankers get desperate enough to act. If this scenario plays out then holding a good chunk of cash in your portfolio would be a good strategy.

This will allow you to wait for investment opportunities (not to mention also buying you more goods and services, if prices fall).

So how do you hedge against inflation erupting? Well, you won’t be surprised to hear us recommending gold. With increasing talk of more money printing in America and European Central Bank president Mario Draghi promising to do ‘whatever it takes’ to save the eurozone, gold – at just over $1,600 an ounce – looks interesting right now.

Phil Oakley
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

From the Archives…

Get Ready to Pin Back Your Ears With Gold Stocks
27-07-2012 – Dr. Alex Cowie

The Upcoming Interest Rates Shock You Should Prepare For
26-07-2012 – Kris Sayce

Don’t Believe ‘the Bull’ on Australian House Prices
25-07-2012 – Kris Sayce

Why the Melbourne Property Market Could Be Set For Two Years of Pain
24-07-2012 – Dr. Alex Cowie

The End of Growth Through Currency Wars
23-07-2012 – Dan Denning


Deflation – Inflation: The Big Risk We Face in the Future

The Eurozone Crisis Will Have to Get Worse Before it Gets Better

By MoneyMorning.com.au

Last week, European Central Bank (ECB) head Mario Draghi promised to do ‘whatever it takes’ to save the eurozone.

Yet, given the opportunity, he did nothing at all.

Don’t get us wrong Draghi isn’t at all relaxed about the state of the eurozone. Indeed, ‘the risks surrounding the economic outlook for the euro area continue to be on the downside’.

Draghi’s latest press conference following the ECB’s decision to keep interest rates at 0.75%, he noted that the growth of broad money was very weak. In other words, there’s not much lending going on in the eurozone.

He also noted the ‘exceptionally high risk premia… in government bond prices’. Of course, he wasn’t able to admit that this is because Spain’s economy is bust. Instead it was the fault of ‘the price formation process in the bond markets of euro area countries’ – ie evil speculators rather than incompetent leaders.

And he did signal that the ECB is about to take some action. He stated that, ‘governments must stand ready to activate the EFSF/ESM [the European Financial Stability Facility/ European Stability Mechanism – Europe’s big bail-out funds] in the bond market’.

He also stated that the ECB ‘may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission’.

These are two big hints that the printing presses will be turned on in the near future.

A Little Less Conversation About the Eurozone,
A Little More Action

So why has the market reacted so badly, with Italian and Spanish bond yields veering higher?

It’s because both measures came with some big caveats.

Firstly, it will be up to national governments to spend EFSF/ESM money on buying other nations’ bonds – something that countries such as Finland (part of the Germanic ‘northern’ eurozone contingent) oppose.

Draghi also stated that debtor nations had to keep to their part of the ‘bargain’. This means yet more unpopular spending cuts. He also ruled out giving the ESM a banking licence, which would allow it to use leverage to increase the amount of money at its disposal (effectively making it a tool for funnelling eurozone quantitative easing if necessary).

And as several analysts have pointed out, he only talked about drawing up guidelines about bond buying. He did not formally commit the ECB to doing it. Approval of this action may be just a formality, especially since all but one member of the council supported his efforts.

However, as Draghi admitted, the one dissenter was the German representative. While Bundesbank opposition is not great enough to stop the programme, it is enough to delay it by weeks, or even longer.

Will Action Come in Time to Save the Eurozone?

Given that the bond market had priced in immediate, extravagant action, following Draghi’s rash promise last week, you can see why the markets were unhappy. It also raises the question of whether the intervention will come quickly enough to prevent a crisis.

As Dario Perkins of Lombard Street Research notes: ‘this is certainly not the “big bazooka” that had littered recent market commentary. In fact, the scheme he is now suggesting sounds even less impressive than the failed Securities Market Programme (SMP) – which involved the ECB buying peripheral country bonds.

We still believe that the ECB will simply have to print more money, since it is the only way to get monetary growth up to rates consistent with any kind of recovery. However, it looks like Brussels wants Spain to formally seek a bail-out before there can be any action. This would give the ECB a lot more leverage in any negotiations with the Germans.

The problem is that in the meantime the Spanish (and Italians) will keep betting that they are ‘too big to fail’ – and continue their game of chicken with the ECB. Even if a deal is struck it will be bad for growth.

The best solution to this sorry mess would be for the euro to split up and for national central banks to deliver their own monetary stimuli.

However, with the probable exception of Greece, this doesn’t seem to be on the cards.

Instead, things might have to get even worse before the ECB finally acts – and with most European leaders looking to get off on their summer holidays, there may well be a gap of several months before anything happens.

We suspect, though, that the printing presses will be turned on eventually.

Matthew Partridge
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

From the Archives…

Get Ready to Pin Back Your Ears With Gold Stocks
27-07-2012 – Dr. Alex Cowie

The Upcoming Interest Rates Shock You Should Prepare For
26-07-2012 – Kris Sayce

Don’t Believe ‘the Bull’ on Australian House Prices
25-07-2012 – Kris Sayce

Why the Melbourne Property Market Could Be Set For Two Years of Pain
24-07-2012 – Dr. Alex Cowie

The End of Growth Through Currency Wars
23-07-2012 – Dan Denning


The Eurozone Crisis Will Have to Get Worse Before it Gets Better

Charles Sizemore on Straight Talk Radio

By The Sizemore Letter

Listen to Charles Sizemore discuss European Central Bank President Mario Draghi’s market-moving comments, the impact on America of the aging of the Baby Boomers, and the best areas for investment for the remainder of 2012 on Mike Robertson’s Straight Talk About Money.

Related posts:

Basic Elliott Video Lesson — How the Zigzag Measures Up

Quickly learn how to differentiate a zigzag from two common Elliott Wave patterns

By Elliott Wave International

You’re not supposed to compare apples to oranges, but I do compare apples to apples: I prefer the classically mellow taste of Red Delicious to the grassy and tart Granny Smith.

It can be a challenge to describe the differences between two similar objects. For example, I’d struggle to tell the difference between Pinot Grigio and Sauvignon Blanc in a taste test (and why I don’t try to earn a living as a sommelier).

When it comes to Elliott Wave analysis, it can be difficult to distinguish among technical patterns on a price chart, especially when you’re new to trading.

That said, now it’s your turn: can you explain how a zigzag compares to other corrective patterns?

Watch this brief clip to learn what the zigzag shape looks like in contrast to the other sideways structures. (Note: If you are interested in getting a strong foundation in the Wave Principle, check out our free Elliott Wave Tutorial — find out how below.)

To understand corrective Elliott patterns (which move against the larger market trend) is to equip yourself to find opportunities in the direction of the trend. To be a consistently successful Elliott trader, the reality is that you need to be able to identify these forms as easily as a sommelier can distinguish a Malbec from a Chianti. How do you like them apples?  

If you are ready to improve your analysis, take the first step in educating yourself about the basics of the Wave Principle — access the FREE Online Tutorial from Elliott Wave International.The Elliott Wave Basic Tutorial is a 10-lesson comprehensive online course with the same content you’d receive in a formal training class — but you can learn at your own pace and review the material as many times as you like!

Get 10 FREE Lessons on The Elliott Wave Principle that Will Change the Way You Invest Forever >>

This article was syndicated by Elliott Wave International and was originally published under the headline Basic Elliott Video Lesson — How the Zigzag Measures Up. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

How to Profit From USD/EUR Currency Manipulation

Article by Investment U

Yesterday, I wrote about a first-time-ever loophole the European Central Bank (ECB) uncovered last week that enables it to begin buying bonds directly from debt-plagued nations such as Spain, Italy and even Greece.

Better known as quantitative easing (QE), this is exactly what the U.S. Federal Reserve has done in America to prop up its economy since December 2008.

Now, regardless of whether or not you agree with QE programs don’t really matter.

What does matter is how the ECB and the Federal Reserve are going to manipulate their currencies to keep their economies alive and kicking over the coming months.

In a nutshell, the central banks want to see the euro appreciate against the U.S. dollar. They have as much as $1 trillion ready and waiting to flood the markets at any moment to set this trend in motion.

And that’s why today I’m following up yesterday’s broadcast with a few unique ways to play the central banks’ currency manipulating policies.

Weighing the Options

Of course, despite what’s likely to occur, three things can happen this week.

  1. The central banks completely leave the markets empty handed and no one gets any money.
  2. Only one of the central banks actually cranks up its printing press and buys up sovereign debt.
  3. Both of them engage in more QE.

Regarding the ECB president’s aggressive remarks last Thursday, option one would probably be a blow to his credibility and career.

That leaves options two or three. And both are likely going to create unique opportunities to profit, as the euro regains some strength against the dollar for the remainder of the year.

Looking Out for the Rest of 2012

Before we go any further, first things first… don’t even think about selling your stocks, as share prices going higher can easily outstrip the effects of a struggling economy.

Also, unless you already have a forex account and know how to trade currencies, I say steer clear. Instead, there is a much easier way to capture gains from the next round of QE that’s coming.

And that’s by putting your money into commodities like gold.

Granted, since last September the price of gold has fallen 20% from its all-time high. But now that central banks are talking behind closed doors about bringing new rounds of QE to the markets, gold is looking once again like a safe haven against their spending.

If you own gold bullion such as South African Krugerrands, American Eagles, or Canadian Maple Leafs, my hat is off to you.

Since dollars are set to drop in value, gold is your best bet to preserve value. Of course, not everybody has the means to buy gold bullion, though.

The next best thing?

Try gold ETFs.

The iShares Gold Trust (NYSE: IAU) and New York’s SPDR Gold Shares (NYSE: GLD) are two ETFs that trade in the United States and hold gold as their one and only asset.

Like it or not, the central banks are going to crank up the printing presses again very soon. It may not happen this Thursday. But it will happen again. And with gold prices significantly off its highs, there’s no better time than right now to prepare your portfolio accordingly for the short term.

Good Investing,

Mike

Article by Investment U

The Investor’s Guide to Cloud Computing

Article by Investment U

When I started in IT in the mid 1980s, all computer applications ran on the mainframe – a large computer that was efficient and well-managed.

I recall watching “in horror” in the late 1980s and early 1990s as individual departments began to embrace “client-server” computing, where a “server,” which was equivalent to a large PC, began to run critical applications.

There were some benefits – better graphical user interfaces and greater control – but distributing the computing power to hundreds of locations was destined to be a maintenance nightmare.

As individual devices became more powerful, the computing power got pushed further down to the end-user – PCs, laptops, and now smartphones and tablets.

But put everyone on the same network and it seems destined that the pendulum would have swung back to the centralized environment.

From the perspective of a former IT guy with plenty of gray hair, cloud computing is a natural progression…

What Cloud Computing Really Means

Cloud computing is simply any technology service, such as an application, infrastructure, or platform that’s offered to customers over the internet.

With the proliferation of devices connected to the internet, why not keep key resources in a centralized location? This centralization allows everyone to use the “public utility” called the internet to access these resources. There are certain benefits to centralized resources – such as cost efficiencies and a better customer experience.

But what does that mean to me?

The typical internet-savvy consumer has been using services in the cloud for years. If you’ve ever bought anything from Amazon.com, you used your browser and the internet to get on that site and order your goods. That was a transaction occurring in the cloud.

So, it’s easy to see how consumer-facing businesses have already adopted cloud computing for their own purposes.

But what’s now changing is a migration of business-to-business (B2B) transactions also occurring in the cloud. Also, greater trust in the cloud leads to more activity.

The question is – if a company sells products over the cloud, are they a cloud company? The answer is, in this writer’s opinion, no.

When a mining company loaded coal onto a railroad car, were they a railroad company? No! When Pets.com – now part of PetSmart (Nasdaq: PETM) – began selling pet supplies over the internet, were they an internet company? No! They were a pet supply company.

Finding the “Arms Suppliers”

Investors typically want to find the winner in “the war.” Will Amazon (Nasdaq: AMZN) sell more books over the internet than Barnes & Noble (NYSE: BKS)? If yes, then Amazon is the winner, right?

The smarter investor will look to the “arms suppliers” in “the war.” Don’t pick a side in the war, pick companies that sell services to all of the war’s participants.

And this is what makes cloud computing so interesting. There are many different levels of “arms suppliers” in these wars.

What are some of the weapons required?

  • Centralized Data Centers – The cloud is perfect for the re-centralization of IT resources. Companies like Rackspace (NYSE: RAX), Amazon Web Services, Equinix (Nasdaq: EQIX), OpSource and SunGard. Others include Dell (Nasdaq: DELL), Hewlett-Packard (NYSE: HPQ), Cisco (Nasdaq: CSCO), Verizon (NYSE: VZ) and AT&T (NYSE: T).
  • Storage – The files you have on your computer are moving to the cloud. Storage, once unthinkable to be moved to the cloud (people want their data near them) is now significantly being used in the cloud. Vendors like Apple (Nasdaq: AAPL), Dropbox, Mozy – owned by EMC (NYSE: EMC) – and Riverbed Technologies (Nasdaq: RVBD) facilitate cloud-based storage solutions.
  • Security – Security remains a concern when accessing resources through the internet. Many companies boast of cloud security solutions. Among them are Qualys, Trend Micro (OTC: TMIC.PK), Webroot and Websense (Nasdaq: WBSN).
  • Applications – Perhaps the best-known services delivered via the cloud are applications, or Software as a service (SaaS). Among the best known in this category are Salesforce.com (NYSE: CRM), Taleo (Nasdaq: TLEO) and Keynote Systems (Nasdaq: KEYN).
  • Virtualization Technology – Cloud-based solutions typically deploy some kind of application or desktop virtualization technology. Vendors leading this charge include VMware (NYSE: VMW) and Citrix (Nasdaq: CTXS).

Beware of companies that claim, “We are a cloud company.” Look at what they offer and see if it takes advantage of this secular shift and isn’t just using the latest jargon to inflate its market capitalization.

Good Investing,

Gary

Editor’s Note: Of all the cloud computing companies Gary lists above, he thinks one in particular is best positioned to take advantage of several of the trends he mentioned above. Plus, a recent sell-off in the stock could be providing an ideal entry point for long-term investors.

To find out which company Gary likes the best, along with how to receive our experts’ top picks with each daily issue, click here.

Article by Investment U

The Wealth of Nations: How Capitalism Makes Us All Richer

Article by Investment U

The founding principle of Investment U is that if you want to be a better investor, you need to better understand the time-tested principles of investing and how they apply to today’s markets.

That starts, however, with comprehending the nature of business in a capitalistic society.

That is something that eludes many Americans, however, including perhaps the nation’s chief executive.

President Obama opened a can of worms recently with his remark, “If you’ve got a business – you didn’t build that. Somebody else made that happen.” He prefaced his remarks with references to how public education and government-created infrastructure allow businesses to thrive.

There’s no argument here. We all know the term “self-made man” isn’t a literal one.

But you have to wonder whether the President – a man with no experience in the private sector – truly understands how wealth is created in our capitalistic society or how an overweening federal government diminishes it.

A Culture That Rewards Individual Initiative

For example, every society depends on public education and the roads and bridges that the government builds. But if these were the primary determinants of economic success, why have so many countries with world-class infrastructure not been hotbeds of innovation and wealth creation? Clearly, a culture that fosters and rewards individual initiative and risk-taking plays a major role.

Also, if business owners themselves are not primarily responsible for their successes, who is responsible for their failures? In a letter to The Wall Street Journal last week, Dick Raddatz of Mequon, Wisconsin wrote, “My last business lost $1.5 million of which $750,000 was personally guaranteed by me. Please give me a call, Mr. President, and I will tell you where to send the check for your fair share.”

Perhaps the biggest fallacy in Obama’s remarks was the contention that the government pays for the nation’s infrastructure. The reality, of course, is the federal government has no money except what it collects in taxes. And since the vast majority of taxes are paid by businesses and high-earning individuals, we can thank them for the infrastructure we all enjoy.

My goal here is not to bash President Obama or influence the way you vote – I’m sure you’ve got your own ideas on that – but rather to point out that personal economic success is primarily about individual striving not government policies.

A Win-Win Proposition

Capitalism is a beautiful thing. It promises that you can have anything you want if you just provide enough other people with what they want. It’s about voluntary exchange for mutual benefit. That is why whenever you make a purchase you hear two thank-you’s.

You say thanks because you want the merchandise more than the money. The retailer says thanks because he wants the money more than the merchandise. Capitalism is not a zero-sum game where one side wins and the other side loses. It’s a win-win.

Remember, big business can’t make you do anything you don’t want to do. If you don’t like a company, you don’t have to patronize them, work for them or sell to them.

Big government, on the other hand, is all about force, not choice. Every year Congress generates thousands of pages of new legislation, with virtually every page requiring business owners to do something they don’t want to do or prohibiting them from doing something they would like to do.

Educated people realize there is a role for government to play. But it is a minimal role. Mandates, regulations, tax complexity and compliance bog down businesses, stifle innovation and, not incidentally, diminish confidence about the future, leading businesses to hire, spend and invest less.

In short, we shouldn’t discount or demean entrepreneurship. We should celebrate it. Hard work and risk-taking – not roads and bridges – is what creates fortunes. Understanding and appreciating this is the first step down the right path.

Good Investing,

Alex

Article by Investment U