Month: June 2011

The typically-muted impact report by the Conference Board (CB) today revealed what many have considered a surprise revelation about future economic direction. The monthly Leading Index report revealed a sudden uptick by 0.8% this month, well above forecasts for a 0.3% growth in several economic sectors.

The report is a combination of 10 economic indicators out of the US economy. It tends to have little effect, however, as the data which comprises the index is released earlier in the month. It is designed to forecast the direction of the US economy which makes this sudden jump contrary to much of the analyses which are expecting a sluggish second quarter. Should traders anticipate growth, as referenced by the CB?

Unity between leaders in France and Germany was seen today as both French President Nicholas Sarkozy and German Chancellor Angela Merkel made statements about a new plan, dubbed the “Vienna Initiative,” that may lead to approval for an aid package to Greece. The EUR was seen trading moderately stronger following the news as it has taken pressure off investors who were concerned about an impending default.

Many analysts claim that the initiative wasn’t a new one and many were in fact expecting such an 11th-hour agreement to be struck. The rise in regional risk appetite and the positive impact on European shares and bond spreads has so far provided a glimpse of hope for an economic turnaround following the expected sluggish second quarter.

Back to back publications of trade balance figures from Italy and the broader euro zone today highlighted a downturn in regional exports, likely connected with the upsurge in EUR values and downturns in demand for manufactured goods. The added buying power of the EUR, moreover, has helped hike import levels and the result has been a widening trade deficit this past month.

The data comes as little surprise as many investors expected the region’s deficits to worsen. Growing strength of the EUR, as previously mentioned, coupled with sluggish manufacturing and industrial output no doubt will generate widening trade deficits in most of the developed world this summer. The EUR was seen trading mildly bearish as a result of the news, however, as investors anticipate an economic slowdown in the region.

Forget OPEC… Invest in America’s Top Oil Supplier

by David Fessler, Senior Analyst, Investment U
Friday, June 17, 2011: Issue #1357

Ask 10 people the name of America’s top oil supplier.

Chances are half of them will get the answer wrong.

A surprising number still believe our top source of foreign oil is Saudi Arabia. They’re now number three, supplying the United States with a little more than one million barrels per day (bpd).

Mexico is second, at 1.14 million bpd. As you can see from the Energy Information Administration’s (EIA) chart below, the leading crude oil supplier to the United States is…

Canada.

Investing in Canada… America’s Northern Neighbor

It sends us just under two million bpd. And there’s money to be made in the Great White North.

In 2010, Canada was the source of 22 percent of all of America’s oil imports. Crude oil from Alberta’s vast oil sands deposits accounts for more than 50 percent of Canada’s 2.9 million bpd.

As you can guess, Canada has enormous energy resources. With a population of more than 33 million – one-tenth that of the United States – Canada is the world’s fifth-largest producer of energy. It cranked out 19.11 quadrillion Btus of energy in 2008.

Its unconventional bitumen deposits also represent nearly 97 percent of the country’s proven reserves. Canada’s total reserves are estimated to be about 175 billion barrels.

Number Three in Proven Oil Reserves and NOT a Member of OPEC

Canada is number three in the world in terms of proven oil reserves. It’s the only country in the top five reserve holders who’s not a member of OPEC.

That’s important to the United States for several reasons…

• The first is that we’re Canada’s immediate neighbor, and its most strategic trading partner.

• Second, Mexico is the second-largest supplier of foreign crude to the United States. But its crude production continues to decline, and we need to locate new sources. That means Canada will become even more important as a source of oil to the United States in the future.

Canada’s Oil Consumption to Remain Flat

The EIA estimates Canada’s oil consumption will remain relatively flat over the next several decades (see graph below), leaving any increase in production available for export. Canada itself uses about 2.3 million bpd.

By 2035, our neighbors to the north are expected to produce nearly seven million bpd, primarily from the oil sands. Those two facts combine to make Canada one of the top sources for non-OPEC oil production growth in the next several decades.

By far the biggest contributor to the growth of Canada’s oil production will continue to come from the Athabasca oil sands in Alberta.

How to Invest in Canada’s Energy Bounty

Holding one of the largest positions in the deposit is Suncor Energy Inc. (NYSE: SU).

Suncor was the first company to develop the oil sands, and holds one of the largest land positions in the play.

It currently uses conventional surface mining techniques to extract the oil-rich bitumen. Suncor also holds a stake in the Syncrude Canada Project, a joint oil sands venture between seven partners.

Shell Canada (private) operates the Athabasca Oil Sands Project, currently producing 155,000 bpd.

Another major producer is Canadian Natural Resources Ltd. (NYSE: CNQ). Its Horizon Oil Sands Project began producing in September 2010, upping the output from the sands by 110,000 bpd.

No less than 17 new projects and/or project expansions are planned between now and 2022. In total, they will result in an incremental capacity expansion of nearly three million bpd, nearly all of which will be available for export.

Much of that will likely be coming to the United States, as transportation through existing and planned pipelines directly to refining facilities in the Midwest is the cheapest and most direct market for the oil.

Investors who want to get in on the Canadian oil sands boom should view the current market pullback as a golden opportunity to pick up oil sands companies at bargain basement prices.

Oil will eventually resume its upward climb, and you’ll want to be onboard for the ride.

Good investing,

David Fessler

Yesterday on CNBC, Mark Spitznagel, chief investment officer for fund manager Universa Investments L.P., made a scary prediction. He warned that the S&P 500 could lose 40% of its value in the next couple of years.

He went on to point out several facts and figures that led to this prediction. He specifically said, “there is a 20% chance of a well-over 40% correction in the S&P 500 within the next few years.”

CNBC even had viewers voting on this black swan event.

So will the S&P 500 drop down to 760?

The Black Swan Theory

The Black Swan theory was developed (popularized) by Nassim Nicholas Taleb in his 2007 book of the same name, The Black Swan. The term is now used throughout the investment community to describe unexpected events (outliers) of large magnitude and consequence.

Coincidentally, Taleb is a “scientific adviser” at Universa Investments, the firm that is making this prediction. Universa’s specialty is providing protection against these cataclysmic events for clients.

Basically, you can think of a black swan event in this case as an event that doesn’t make statistical sense at the moment, but has a small probability of occurrence. Not only can these “outliers” or extreme unpredictable events be catastrophic for our wallets, but they may change the way we look at the safety of our investments forever.

If more of these black swan events occur and are burned into our memory, we may begin to believe that these abnormal events are more common than they are and those subsequent fears may actually exacerbate the repetition of these occurrences. It’s like having five tornadoes hit the city of Philadelphia in a summer — something that seemed impossible is occurring in front of your eyes and becomes reality, and it triggers massive changes in the minds of the people that live there.

That’s a good thing for a firm like Universa Investments, so it’s convenient for them to stir up a bit of fear in investors’ minds. But perhaps it’s a good thing that we are aware of these possibilities and protect ourselves.

But will it really happen?

What Are the Chances of a Black Swan Event?

As an option trader, I am looking at the potential for these sorts of occurrences all the time. Believe it or not, mini catastrophes and outliers happen every week. We option traders usually know what to look for when it comes to signs of impending doom.

But sometimes there are no abnormalities or warnings of these types of events, and that’s when funds like Universa make big profits.

Take Research in Motion (RIMM:NASDAQ), for example. It went from $70 per share down to $29 per share in less than 120 days. The options did NOT predict this early on. Statistically, there was less than a 0.05% chance of this happening.

The prices of the options that I trade actually can help us find where there is fear of uncertainty. They also indicate how volatile investors think a stock will be. This is similar to how the high yields of Greek sovereign debt tell us that there is a high risk of default.

I did some basic calculations using my own techniques and found some interesting statistics:

• Looking at the options prices in the SPX and how the index has moved over the past year, I actually came up with the same probability as Mark Spitznagel.
• I see a 19.89% chance that the S&P 500 (SPX) could get down to 762 by June 18, 2014 — which would be a 40% drop.
• I also figured that there is about a 10.5% chance that it could go back to the low of 666 by June 16, 2014.

(This isn’t the first time Smart Investing Daily has discussed Black Swan events. Sign up for Smart Investing Daily and stay up-up-date with my and fellow editor Sara Nunnally’s easy-to-understand articles.)

So What Could Really Happen to the S&P 500?

For the market to drop so dramatically, there has to be a catalyst, something out of the ordinary — a black swan needs to create a black swan event, if you will. Back in 2008-09 it was a complete meltdown of the banking system and housing market that sent securities 57% lower…

Looking at the charts and some basic fundamental estimates, it’s more realistic that a correction would bring us down to the 1,100 level in the next year.

But I wouldn’t look toward the charts in the S&P. I would instead focus on the potential catalysts for catastrophe: a bubble bursting in China’s housing and growth boom, a major terrorist attack, earthquake or other natural disaster, a double-dip recession here in the U.S., eurozone stability crumbling under sovereign debt contagion, etc.

Any of these situations could occur; the questions you have to ask yourself are:

• What’s the probability of an occurrence?
• How will my portfolio be affected?
• What am I doing to hedge (protect) myself?

How Do You Profit or Protect Yourself From This Potential S&P 500 Drop?

You can protect yourself without paying a company like Universa to make sure you are hedged. Learn to use options, and option spreads specifically! They can dramatically reduce your risk and exposure to events like this. They can also increase your probability of success in your trades!

You can also buy put options against your long stock positions. These are called “married puts”; basically they are like insurance policies for your stocks. In my book, I discuss all of this in detail. If you want to learn more, you can pick up a copy here.

I actually used an option strategy on RIMM because I believed that the company would get smart and turn around. They failed miserably, but instead of losing $40 on the trade, I lost about $8. This was much more tolerable, and I can now deal with my mistake and move on as opposed to having my account decimated.

We will all have losing trades and make mistakes, and every so often when that black swan appears, you will want to be prepared. Instead of losing it all to the swan, use the right strategy to dramatically reduce your risk and live to play with the black swan another day.

P.S. I mentioned earlier in the week that we have a huge conference coming up in Vegas on surviving the markets. Details for that will be coming shortly, so stay tuned. We are also offering a free money crisis webinar on June 20 that I urge you to check out. You can sign up here.

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In this edition of The Woodward Report, journalist Lasse Engelbrecht Jensen explores the future of solar energy from The Mohave Desert in California, to MIT in Boston to the production lines in China.

Solar energy has the capacity to fully meet the world’s energy needs within the next 20 years, says futurist Ray Kurzweil, and his predictions on technology have been right before. At the same time, ambitious goals in California, the increased use of nanotechnology and unique research at the World’s leading universities also suggest that solar could dominate the energy market before 2030.

Click on and hear what people from the Massachusetts Institute of Technology, George Washington University Solar Institute, Solar Millenium LLC, Nanosolar and Yingli Solar have to say.

And (for Danish-speaking viewers) check out our follow-up discussion with the experts here.
Reporting: Lasse Engelbrecht
Camera: Thomas Idorn Hass / Jan Rørkær
Edit: Thomas Idorn Hass / Jan Rørkær

Musik: Thomas Gulyás, TG Mediasound.

Host: Brian Woodward, [email protected]

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Video courtesy of en.jyskebank.tv

Investment options in India are plenty. Investing money ultimately depends on the risk appetite of the person who is investing. There are so many options and it is difficult to choose the best one because most of them are giving good returns. Some good investment options are given below.

Bank Fixed Deposits (FD):
Fixed Deposit or FD is a good investment option today. It gives up to 8.5% annual return and depends on the bank and period of investment. Minimum period is 15 days and maximum 5 years and above. Senior citizens get special interest rates for Fixed Deposits. This is considered to be a safe investment because all banks operate under the guidelines of the Reserve Bank of India.

Stock Market:
Investing in share market is another investment option to get more returns. But share market investment depends on market conditions. Higher risk will get you higher returns. Before investing you should have a good knowledge about its operation.

Mutual Funds:
Mutual Fund is a type of collective investment method by which many people deposit their money in a fund and invest in various securities like stock, bonds or cash investments to get good returns. For individual investors it is very easy type of investment because someone else manages their funds, takes care of accounts and invests money over many different available securities.

National Saving Certificate (NSC):
NSC is a safe investment related with the Government. Lock in period is 6 years. Minimum amount is Rs100 and there is no upper limit. You get 8% interest calculated twice a year. NSC comes under Section 80C, so you will get an income tax deduction up to Rs 1, 00,000.

Gold:
Gold has been the perfect tool to beat inflation. Real estate and shares beat gold on capital appreciation. Real estate and shares have given returns of about 11% over inflation since 1979 (the year the index called Sensex was formed). But as a short term investment option, however, gold is a very strong investment tool, compared to shares which are highly volatile. Gold does not carry much risk at least in India, as we hardly see deflation in the gold price. Liquidity option in gold is always 100%, compared to all other investments. At any period of time gold can be converted into cash.

Real estate:
Real Estate in India is one of most successful investments in the last few years of Indian history. Indian real estate has huge potential demand in almost every sector like commercial, educational, housing, hospitality hotels, retail, manufacturing, healthcare etc. Real Estate industry in India has reached a highest point at this period. It has been opened to foreign investors also. This is the reason why many foreign investors are investing huge amounts of money in this sector and making sizeable profit.

Equity:
Those who have the appetite to take risk they always can invest in equity market. Equity market is also a good way to beat inflation. It is very difficult to neglect the enormous profits, which have been earned by the investors in the equity investment market of India over past few years. There are several interesting and new areas, where venture capital and private equity firms are looking aggressively to enjoy the advantages.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics . He writes columns and articles for various websites and internet journals in the domain of Investing in India and Investment Services.

Weekend risk is back on the table as all eyes will be focused on the differences between the Germany and the ECB/France at this weekend’s ECOFIN meeting in Luxembourg. Ben Bernanke’s 2nd press conference and the FOMC statement will also highlight the week.

As the Greek debt crisis continues to garner market attention the coming week is highlighted by the ECOFIN meeting on Sunday and Monday. European heads are confident that a compromise will be reached by Monday and the next round of funding for Greece will be released by the EU and the IMF. This only became relevant yesterday after the IMF retreated from a previous position that would deny Greece funding should the EU not secure Greece’s financial needs for the next 12 months. The decision to release the funding prior to the EU’s guarantee comes at a time when the major political parties at stake look to be at an impasse.

Today’s meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy helped to achieve a breakthrough between the parties but the key player who has not weighed in today was the ECB. The central bank has made its position clear it is against any involuntary restructuring that would cause a credit event. Nevertheless the markets took this as a positive sign and the euro has temporarily halted its sharp decline.

A roadblock may also have been put up in Greece given the drama that is being played out via internal Greek politics. Greek prime minster George Papandreou’s head fake resignation and subsequent reshuffling of his cabinet led to the termination of Greek finance minister George Papaconstantinou. On Tuesday a vote of confidence will be taken and at this time it is unclear if the current administration will survive the vote which may lead to a general election. Greece must still muster enough votes to win approval to qualify for the EU/IMF loan which would require additional austerity measures. One must only look to the public demonstrations/confrontations in the streets of Athens from last week to get an idea of the country’s sentiment.

On the other side of the pond come Wednesday the Fed will likely leave Fed Funds rate at its current ultra-low level and perhaps adjust the accompanying FOMC statement with a downgrade of the Fed’s economic assessment. However, the main event for the day will be the FOMC press conference to follow. All eyes will turn to the Fed chief as Bernanke will give prepared remarks followed by a subsequent Q&A session with the members of the press. Looking back at the first press conference in April Bernanke gave the green light for dollar selling after signaling the Fed’s intention to complete the full $600Bn QE2 program. We shall presume that Bernanke will be questioned regarding the downturn in US economic data and the longshot possibility of QE3.

Read more forex trading news on our forex blog.

By DividendOpportunities.com

If you’re an income investor, you’ll want to see this one. This investment…

Pays no corporate taxes  Is required by law to pass through the bulk of earnings to investors Acts as a “toll operator” for the transport of America’s most-needed commodities Earns money from how much volume it ships — NOT the price of the commodities Rarely sees any competition in most regions Pays yields of 6% on average — twice a 10-year Treasury

 

That’s a pretty impressive list.

And over the past 15 years this asset class has earned a whopping 17% compound average annualized total return, according to Morningstar.

I’m talking about master limited partnerships (MLPs). You might have heard of them. But I know from experience there are a number of income investors who haven’t.

These partnerships — including the one I’ll tell you about in a moment — trade just like a common stock. Their businesses are highly stable. Most MLPs operate in the energy sector, but they don’t buy or sell commodities. They transport them.

In other words, the income of an MLP is largely based on the volume of oil and gas flowing through the system — like a tollway — much more so than on the volatile prices of the underlying products.

And since MLPs are required to pay out most of what they earn as distributions, their yields are typically higher than normal. As I noted above, on average MLPs are trading at about a 6% yield, double that of a 10-year Treasury.

Even a recent article on Forbes.com said, “Any fan of big dividend stocks should take a look at master limited partnerships.”

I own a number of MLPs in my Daily Paycheck portfolio. In fact, I added units of Enterprise Product Partners (NYSE: EPD) just about three weeks ago. (MLP shares are technically called “units.”)

This MLP has raised its dividend for 27 consecutive quarters — which is an income investor’s dream come true.

I’m glad I found it, as MLPs can be good investments in challenging economic times — especially for investors who depend on a steady income stream. During the last recession, many “regular” companies cut or suspended their dividends to preserve capital. But almost every MLP increased their distributions during the downturn.

Now, MLPs aren’t immune to market risk. So if we get a market correction, the unit price of MLPs will trend with the market. But that income stream is likely to keep on flowing and growing.

And that’s why I hold several in my real-money Daily Paycheck portfolio.

I always reinvest my dividends. The compound growth of dividend reinvestment is pretty powerful on its own. But use the technique with securities also raising payments, and your dividends can rise even faster.

For instance, I was able to boost my income by 9.9% from one MLP in just one year. Of course the icing on the cake was that the MLP gained 38.9%.

Now imagine that over an entire portfolio.

Take a look at the chart below. It shows the monthly dividends I’ve received each month. At first glance, it looks lumpy. But remember that many stocks pay quarterly — you can expect larger checks in January, April, July, and October, which are the most common months for dividends to be paid.

But there’s little doubt the payments are rising, and that simply makes the future payments larger, without me having to add another dime.

Keep in mind that all this is done with a portfolio of $200,000 in actual cash (StreetAuthority actually buys the stocks held in my Daily Paycheck portfolio). But the results are fully scaleable.

If you have half that amount to invest, simply cut the monthly dividends above in half. If you have $400,000 to invest, you can double the numbers.

For example, my boss Paul Tracy is actually the one who created the “Daily Paycheck” strategy. In December, he topped $6,000 in monthly dividends, after reinvesting for just a few years. You can read his first-hand account here.

And if you want to get started on a “Daily Paycheck” portfolio of your own, MLPs like Enterprise Product Partners aren’t a bad place to look — especially given the possibility of a downturn in the overall market.

Always searching for your next paycheck,

Amy Calistri
Chief Investment Strategist — The Daily Paycheck

P.S. — I’d be remiss if I didn’t mention the tax complexities of MLPs. Since they are technically a partnership, taxes are a little trickier than with regular stocks. They also aren’t ideal for holding in tax-deferred accounts. For more information, click here to read more from our sister site, InvestingAnswers.com.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.