Month: June 2011

Source: ForexYard

Yesterday’s bullish retail sales and PPI figures out of the American economy, alongside solid growth figures in British CPI and RPI data, have so far helped to lift the value of riskier assets as investors seek higher growth in their portfolios. The EUR, GBP, and AUD were each appreciating against the US dollar throughout Tuesday’s session, with mild downturns coming towards the day’s closing. Continuation of this trend is being wagered ahead of today’s heavy news day.

Economic News

USD – USD Bearish as Traders Seek Risk

The US dollar was seen in decline in trading yesterday for the second consecutive day as traders began to seek risk following several bullish economic data releases. The EUR/USD was seen moving towards 1.45 yesterday before settling mildly below this mark. The GBP/USD was also in a bullish channel, but witnessed a stronger downtick later in the session than its euro zone counterpart.

Yesterday’s bullish retail sales and PPI figures out of the American economy have so far helped to lift the value of riskier assets as investors seek higher growth in their portfolios. The EUR, GBP, and AUD were each appreciating against the US dollar throughout Tuesday’s session, with mild downturns coming towards the day’s closing.

With another heavy news day expected, traders are sure to see heightened volatility. Most significantly, the US economy will be publishing its CPI reading as well as its TIC Long-Term Purchases report. Expectations are for a near-doubling of the investment differential, with global investment flows favoring the US economy. Should the long-term purchases report disappoint, traders may see some upward movement in the USD as investors shift back to safety.

GBP – British Employment Sector under Review Today

The British pound (GBP) was seen trading higher yesterday following news of stable growth in the island economy’s CPI and RPI inflationary reports. The UK Office for National Statistics is also due to release several more significant data reports today; most impactful will be the 9:30 GMT publication of the UK’s Claimant Count Change report alongside its quarterly reading of the Average Earnings Index.

While the pound was seen flattening out against the EUR yesterday, it appears to have moved mildly higher against the greenback and continues to see sideways price action versus the Japanese yen.

Today’s employment sector data will help many forex investors get a feel for how well the structural challenges in the UK labor market have been addressed. The report published earlier this week by the Confederation of British Industry (CBI) highlighted expectations for a continued rise in unemployment through 2011, but today’s Claimant Count Change report is scheduled to reveal a slowdown in claims for unemployment benefits. The conflicting data may help the GBP in the short-term, but the overall trend appears to be for an eventual turnaround in sterling values.

JPY – Japanese Yen Bearish as Investors Seek Higher Yields

The Japanese yen was seen trading lower against most of its currency rivals yesterday as investors moved towards higher yielding assets in Europe and the Pacific. Japan’s economy has published several positive figures over the last week, much of which has helped establish the yen’s recent bullishness. With yesterday’s rate statement affecting JPY values, traders are likely to see heightened volatility as the day moves ahead.

While the yen suffers from its own economic concerns, shifts in consumer sentiment have helped lift yen values against a number of its rivals. This trend was cut short yesterday, however, as investors took cues from bullish inflationary reports out of the US and UK to mean that riskier assets may see an uptick. The yen, which traditionally acts as a store of value during times of uncertainty, was seen taking a hit yesterday as investors largely moved away from the island currency and into higher yielding assets like the EUR and AUD.

Oil – Crude Oil Prices Halt Decline as USD Falters

Crude Oil prices dropped sharply towards $97 a barrel Monday as sentiment appeared to favor a downturn in global industry and expectations for unilateral action among members of OPEC. The sudden halt to this downward movement came as a result of several forces Tuesday.

Data releases out of China, Britain and the US yesterday were driving many investors back into higher yielding assets as most reports suggested steady growth in global inflation and consumer spending. As investors sought higher yields, the value of crude oil, which was seen plummeting Monday, held steady just above $97 a barrel.

Faltering dollar values have helped many investors pause on their short-taking positions on physical assets. Crude Oil witnessed a mild uptick in yesterday’s late sessions while Gold and Silver began to largely see sideways movement. Should sentiment hold steady this week, oil prices may continue to find weak support near its current price.

Technical News

EUR/USD

A three week rally was met with a failure of the pair to breach 1.4700, a level not far from the previous trend line which opened the door for a significant pullback that retraced 50% of the late May to early June gains. The week’s declines ended at the 20-day moving average at 1.4330 and will serve as initial support. Falling daily stochastics suggest the move lower may have scope to continue where the pair may find resistance at 1.4250, a level that coincides with the 61% retracement and the rising trend line from the May low. A breach here and the pair will test the 100-day moving average followed by the May low at 1.3970. To the upside, resistance will likely come in 1.4570 followed by 1.4700.

GBP/USD

The weekly candlestick suggests further declines may be in store as last week’s candlestick ended on a shaven bottom, indicating momentum is moving to the downside. A confirmation will be needed from this week’s trade to confirm the bearish pattern. In the meanwhile the move lower finished at the 38% retracement level of the December to April move and is quickly approaching the trend line off the May 2010 low at 1.6180. The pair could receive a bounce from this level, as was the case in late May. Resistance is located at 1.6400 and 1.6460, and 1.6550. Should the pair not receive a bounce at the trend line declines could mount to 1.6060 and the April low at 1.5935.

USD/JPY

The yen was relatively unchanged from the previous week after an attempt to breach below the 80 yen level was only briefly successful before the pair was bid higher. While most oscillators remain in neutral territory, the pair continues to trade lower with resistance at the falling trend line from April high which comes in near the 20-day moving average at 81.00. This level may offer traders a better price to enter short. Further resistance is located at 81.75 from the May 31st high followed by 82.25 of the May 19th high. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.

USD/CHF

The pair is testing a short term resistance level at 0.8450 and a breach here would expose the resistance at 0.8855 which lies just below the 20-day moving average. A rise to this price may offer traders better levels at which to enter short. Above these levels rests the falling trend line from the mid-February high which comes in at 0.8720. Support is found at the all-time low at 0.8325.

The Wild Card

EUR/SEK

After a surprising breakout higher from a triangle chart pattern on the daily chart the EUR/SEK has retraced 61.8% of its late November to early March downtrend at 9.1500. A move above this level would indicate a reversal of the long term downtrend and a test of the early December resistance at 9.1700. Forex traders may want to be long as from this point a lack of resistance is found on the daily chart and thus the euro could continue to gain on the Swedish krona to the November high of 9.4275 in the mid-term.

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.

Cloud Computing: An Unstoppable Yet Vulnerable Force

by Tony D’Altorio, Investment U Research
Wednesday, June 15, 2011

The words “cloud computing” are among the latest technology buzzwords these days.

But what does it mean?

People may be asking, “What the heck is the ‘cloud?’” Technically, it simply means storing digital files on someone else’s computer servers and then accessing those files via the internet.

Many people don’t realize that cloud computing isn’t really new. It’s actually been with us for a while now, through email services like Gmail from Google (Nasdaq: GOOG), photo services like Flickr and Picasa, and storing documents with a firms such as Dropbox.

It’s just that now with the introduction of more consumer resources like music services – Google Music, Cloud Player from Amazon (Nasdaq: AMZN) and the iCloud from Apple (Nasdaq: AAPL) – the general public is becoming more aware of cloud computing.

Apple recently announced the biggest push to date by a technology company to bring cloud computing to consumers. Its new, free iCloud service, to be launched this fall, will allow users to spread their documents, programs, photos, music, etc. among all their Apple devices seamlessly.

It’s all part of a generational trend away from owning physical media content and towards renting media content from the computing universal cloud.

And it’s happening rather quickly. Just look at how quickly people moved away from owning CDs and DVDs and became accustomed to streaming movies from companies like Netflix (Nasdaq: NFLX).

Cloudy Skies for Cloud Computing Industry

Of course, all is not blue skies for cloud computing… there are major concerns about the shift to the cloud.

One such concern is security. Large internet companies that hold vast quantities of personal data come under constant attack from hackers.

Sony (NYSE: SNE) was recently forced to admit that cyber thieves might have taken 100 million of its customers’ records. Google also revealed recently that several Gmail accounts, including some belonging to prominent U.S. politicians, were hacked.

Internet security experts say, however, that home computers are even more vulnerable. They believe it’s arguably safer to keep files in a data center run by technology professionals.

Another major concern centers on the ownership of data.

• Photo-sharing service Twitpic upset its users earlier this year when it changed its terms and conditions to allow it to sell photos uploaded by its users!

• There have been similar concerns at Facebook as to who owns the data. Facebook angered privacy groups by using personal data to target advertising to users of their service.

• And then there’s the question of “stickiness.” Providers of cloud services like Apple, Google and Facebook will have strong profit incentives to hold on to their users to maximize revenue. They’ll do their best to limit consumers’ freedom to roam freely from cloud to cloud.

So consumers may get stuck in Apple’s iCloud and not be able to get out without a hassle. Mark Little, an analyst at Ovum, remarked, “Switching costs [from cloud to cloud] is likely to be one of the biggest parts of the cloud story.”

Finally, there are infrastructure problems connecting to the cloud. Many wireless networks today have difficulties with reliably handling constant uploading and downloading of media and other types of content.

The Cloud Computing: An Unstoppable Force

However, despite the currently cloudy outlook, the trend towards cloud computing looks unstoppable.

That means investors need to know who the winners will be in this new technology era…

Among the larger companies, the winners will consist of the usual suspects – Apple, Google, Amazon and Facebook.

The announcement by Apple of its iCloud service has leapfrogged it ahead of Google and others for now.

The back and forth will continue though between these companies. Google, for instance, is about to launch a low-cost “dumb” computer equipped only with a browser because its users will keep all their software and content in the cloud.

Among the major companies, cloud computing looks to only add to the gap between the technology leaders and the laggards.

However, that’s not to say that new leaders will not emerge among the smaller companies…

Good investing,

Tony D’Altorio

Fundamentals appear in favor of the Swedish krona according to interest rates and bond yields.

One of the major driving factors in the valuation of a currency is interest rates and Sweden enjoys higher yields versus both its European and US counterparts. The Riksbank is forecasted to continue to raise interest rates over the mid-term which should be supportive of the Swedish krona. Currently the repo rate maintained by the Riksbank is 1.75%. The EU interest rate currently stands at 1.25% and is expected to rise 25 bps in the next ECB meeting in July. The US maintains an interest rate below 0.25% and is forecasted to continue its ultra-loose monetary policy.

Strong yield differentials between the Swedish 2-year bond and the 2-year German bund are in Sweden’s favor by 81 bps while Sweden enjoys a 197 bps spread between the equivalent US 2-year Treasury. Currently the Swedish 2-year yields 2.41%.

However, traders should be aware that the 2-year US Treasury note has plummeted since April (bond prices and yields have an inverse relationship) as the yield has risen to 0.44%. As such, traders may look to play the euro versus the Swedish krona rather than the USD.

Read more forex trading news on our forex blog.

The euro fell in early European trading following a Bloomberg report that yesterday’s meeting of Europe’s finance ministers in Brussels failed to resolve the differences between the ECB and Germany. After two days of euro gains this puts the pressure on the 17-nation currency once again and may be the driving factor in today’s trading. Yesterday’s high at 1.4500 stands as short term resistance for the EUR/USD while a clear breach below 1.4320 could open the door to test the 1.4000 level for the second time in as many months.

Today’s Economic Data Releases:

GBP – Claimant Count Change – 08:30 GMT
Expectations: 7.1K. Previous: 12.4K.
Cable looks weak based on yesterday’s doji candlestick and the pair’s failure to rise above the recent falling resistance line from the May 31st high. Resistance is located at 1.6425 while the trend line off of the May 2010 low comes in today at 1.6200. A break here and the pair could test the neckline of a potential head and shoulders pattern at 1.6110.

USD – Core CPI m/m – 12:30 GMT
Expectations: 0.2%. Previous: 0.2%.
There are those calling for QE3 to support the tepid economic recovery and struggling US equities, many market pundits and those in the blogosphere forget that QE I and II were implemented to drive down interest rates and avoid a potentially damaging deflationary environment. Yesterday’s PPI reading showed an increase of 0.2% on consensus expectations for only 0.1%. With rising inflation data the Fed would be hesitant to further loosen US monetary policy, a potential dollar catalyst in the medium term.

Read more forex trading news on our forex blog.

EURUSD’s bounce from 1.4321 extended to as high as 1.4497, suggesting that a cycle bottom had been formed at 1.4321 on 4-hour chart. Lengthier consolidation of downtrend from 1.4696 is possible in a couple of days, and range trading between 1.4321 and 1.4497 is expected. Support is at 1.4321, a breakdown below this level will indicate that the downtrend from 1.4696 has resumed, then another fall towards 1.3969 could be seen.

Forex Signals

Before blaming falling stocks on the most recent weak economic reports, let’s check some dates

By Elliott Wave International

As of June 10, the Dow has suffered the “longest losing streak since the fall of 2002. The market’s last seven-week stretch of losses began in May 2001, as the dot-com bubble deflated,” reports The Associated Press.

As for why stocks are falling, most observers agree: Blame “weaker hiring, industrial output, and a moribund housing market.” The economic reports from the past two weeks made that clear.

But wait a minute. The DJIA didn’t top in the past two weeks — it topped on April 29. At the time:

• U.S. unemployment benefit applications had been trending down/flattening. In fact, “The unemployment rate fell last month in more than 80% of the nation’s largest metro areas,” said an April 27 AP report.
• U.S. industrial output was up. In fact, “both the Philly and N.Y. Fed reports show[ed] improving manufacturing and business conditions.” (Reuters, April 15)
• As for the U.S. housing market, it officially entered the “double-dip recession” zone only on May 31, a month after the Dow’s April 29 peak.

This is not to say that unemployment, manufacturing and real estate were peachy in April. But the worst of the reports from those areas of the economy only came after the stock market had already entered the decline. The most recent weak economic reports hardly explain why stocks topped when they did.

If you’re looking for a better explanation, consider an Elliott wave perspective: The economy doesn’t lead the stock market — it’s the stock market that leads the economy.

Skeptical? Then think back to 2007. “Goldilocks economy,” strong corporate earnings, unemployment at 4.4% — nothing but blue skies ahead. The Dow rallies to an all-time high above 14,000 in October 2007 — and over the next 18 months goes on its biggest losing streak in 70+ years, falling 54% and ushering in “the Great Recession.”

Now fast forward to March 2009. The Dow has crashed below 6,500; unemployment has more than doubled; the desperate Fed has dropped interest rates to 0%; foreclosures; bailouts; consumer confidence at an all-time low; general state of near-panic. The Dow bottoms on March 6, 2009, and stages a powerful two-year rally above 12,000.

By conventional logic, you’d have to agree that, paradoxically, “the good economy” of 2007 prompted the deflationary crash, while “the bad economy” of 2009 sent stocks flying.

But here’s an explanation that actually makes sense: Broad market trends are not created by the economic conditions — social mood is what creates them. Social mood doesn’t depend on what Ben Bernanke had for breakfast — it changes for endogenous reasons, and those changes follow the Elliott wave model. Stocks lead the economy because they are quicker to register changes in social mood.

Before you make investment decisions based on the latest economic report, be sure to read the 2011 edition of The Independent Investor eBook by Elliott Wave International. You will see example after example of the fallacy to the belief that economic conditions direct the moves in the stock market.  Download your free 50-page Independent Investor eBook now.

You know, gasoline prices are supposed to climb as we head into summer, but things are getting a bit ridiculous!

Gasoline prices are up nearly $1.06 a gallon from last year, and it’s not even summer yet.

Why is this happening? Well, the Arab nations of OPEC are fighting…

OPEC decided not to produce more crude oil. Or rather, Iran and its cohorts blocked Saudi Arabia’s efforts to try to boost production.

Aside from the crummy effect this had on crude oil prices just after the meeting last Wednesday, there are some bigger issues coming to the surface.

The Wall Street Journal reported:

An acrimonious OPEC meeting failed to produce an agreement to increase oil production despite tight supplies and rising prices, bringing to the fore long-simmering divisions between key cartel players Saudi Arabia and Iran and calling into question the group’s ability to influence oil prices.

And the Boston Herald said:

OPEC’s stunning admission of major dissent within its ranks has left it reeling and its status as the world’s oil power-broker weakened — perhaps beyond repair.

OPEC has already lost a lot of clout as crude oil production outside of its group has grown in the past decade or so. Places like Russia and Brazil have brought a lot of crude oil to the table. These countries aren’t under the thumb of OPEC’s production rules.

That said, OPEC’s influence with global powers, however, shouldn’t be forgotten.

I’m talking about the crude oil embargo in the mid-1970s that nearly brought the U.S. to its economic knees, and quadrupled the price of crude oil in less than half a year.

Saudi Arabia and other Arab OPEC members turned off the tap by 15% back in 1973, and markets went bananas… The “oil weapon” will always be a threat. But ill will between major OPEC producers has even bigger consequences.

That they are fighting now should be a warning to everyone. Saudi Arabia and Iran — who are ranked as the top two Arab countries in terms of oil reserves — are vying for power… and they have very different global views. Mainly, they deal differently with the West. Saudi Arabia works closely with the U.S., while the U.S. still has strict sanctions against Iran.

Now, these two countries are dealing with more than one crisis. Even though Saudi Arabia and its OPEC allies are calling for increased demand in the second half of this year, the world is using less crude oil because of the global financial crisis. Crude oil inventories in the U.S. are 7.5 million barrels higher than they were last year.

You could say the call to increase production would solely be a bid to lower prices. This rubbed some OPEC members the wrong way because some of them can’t produce more crude oil quickly or cheaply. Iran is one of those countries.

Indeed, only Saudi Arabia and three other Gulf countries that are more allied with the West than other Arab OPEC members favored an increase in production.

Most of these countries don’t want lower crude oil prices. This is because of the second crisis. The Middle East and North Africa are under siege from their angry citizens. When Tunisia and Egypt were successful in overthrowing their governments, other countries jumped on the uprising bandwagon. Yemen, Bahrain and Libya have all seen huge protests.

Of course, Libya is still in the midst of a global military intervention. Its oil production is still offline.

These countries need high crude oil prices if only to throw money at the masses, hoping they’ll stop their protests.

Because of these two crises, OPEC is on the edge of a cliff. Some analysts are even saying that OPEC is dead.

But what — if anything — will this do to crude oil markets?

Immediately after the announcement, crude oil prices climbed nearly 3%. This pressure means higher gasoline prices heading into summer. As I told you, gasoline prices are nearly $1.06 per gallon higher than last year… And unlike oil inventories, gasoline inventories are down 4.5 million barrels from last year.

Translate this pain at the gas pump to other market investments, and you’ve got possible bearish outlooks for retail companies.

On the other hand, domestic energy could get a lot of attention. Even companies doing business in friendlier countries like Canada could benefit.

Check out Apache Corp. (APA:NYSE) and Suncor Energy Inc. (SU:NYSE), up about 26% and 19% in the past year. These guys are heavy hitters without being 800-pound gorillas. They are outperforming their competitors and are a much better value than their industries as a whole.

Of course, these aren’t the only opportunities to pop up in the wake of the nasty OPEC meeting. In fact, this first OPEC fracture could be the start of an even bigger crisis. Justice Litle, editor of Macro Trader just sent me a letter about the coming crisis saying:

I can tell you right now, we have never… EVER… seen this level of chaos on U.S. shores. This will put the financial crisis of 2008 to shame…

I don’t have room to tell you what the rest of his letter said, but we’re quickly working on a way to let you read it in its entirety. One thing I can tell you, though, is that Justice believes that the bigger the crisis, the bigger the opportunity.

As soon as this letter is available, I’ll be sending you a link to it, so keep an eye out in your inbox.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

Backdoor IPOs and Reverse Mergers: A Chinese Recipe for Scandal

by Tony D’Altorio, Investment U Research
Tuesday, June 14, 2011

Since 2007, more than 150 Chinese companies have been listed in the United States through reverse mergers or backdoor IPO listings.

These types of listings happen when Chinese firms merge with a U.S. publicly traded shell company. Many of these listings are found on less regulated stock exchanges such as the Pink Sheets, the OTC Bulletin Board and NYSE AMEX.

These reverse mergers and backdoor procedures allow Chinese companies to become public without the regulatory rigors involved in a traditional initial public offering (IPO).

In recent months, short sellers have attacked a large number of these types of Chinese companies – accusing them of fraud or other wrongdoings. This has caused shares of these companies to tumble and have inflicted huge losses on unlucky investors…

Investing in China Becomes Unsettling…

With so many of these reverse merger and backdoor Chinese companies now under a cloud of scandal, investors in China are getting increasingly unsettled.

Especially since the United States is at the center of this storm. In the past six months alone, more than 25 New York-listed Chinese companies disclosed accounting discrepancies or saw their auditors resign.

Most of these firms are small and slipped onto the exchanges in the past few years through the reverse merger process described above.

Regulators are now reversing that process.

• Nasdaq and NYSE Euronext halted trading in the shares of at least 21 small- and micro-cap Chinese companies in the past year. Five such companies were altogether kicked off of the exchanges.

• Facing investors’ ire, the SEC is investigating many of these companies as well as the network of U.S. auditors and public relations firms who marketed such companies to the U.S. investing public.

Some U.S. investors are worried whether they can take the financial statements of any Chinese company at face value.

For instance, look at software firm Longtop Financial Technologies (NYSE: LFT). It listed in New York in 2007 via an IPO, not through a reverse merger. Last month the company’s auditor, Deloitte, accused Longtop of “very serious defects,” including faking its bank statements. Longtop said it is conducting its own internal investigation.

As the scandals mount, many investors are dumping U.S.-listed Chinese stocks. They’re fearful of further price declines or perhaps not being able to sell their shares due to trading halts.

Protecting Against Fraudulent Chinese Stock Listings

So what should investors do? How can they protect themselves against fraudulent Chinese companies?

One way recommended by my colleague, Carl Delfeld, is to avoid the smaller companies. He pointed to a study showing that 60 percent of China backdoor listings reported less than $50 million in annual revenue or assets.

There’s another logical way investors can avoid most of these fraudulent companies…

• Do a little bit of homework and look to see if these companies are listed either on mainland Chinese stock exchanges or in Hong Kong.

• Not surprisingly, you’ll find that the vast majority of these companies aren’t listed in their home market.

• The fraudsters running these companies know they can’t dupe local investors, who would be well aware if they are or are not legitimate companies in China.

One former executive at one of these firms was even quoted as saying that American investors will buy anything “as long as it has ‘technology’ in its name.”

He may be on to something. Many of the recent “hot” Chinese IPOs listed in the United States are technology companies that are not listed in China.

Investors need to keep in mind that investing in Chinese companies should be no different than investing in other companies. Do your homework and your due diligence. Caveat emptor.

Good investing,

Tony D’Altorio

I guess you could call me a “grassroots” investor when it comes to my longer-term ideas. I look out my window, talk to friends and read the back pages of just about every local publication I can get my hands on. I want to find out what’s really happening out there, to find trends that could explode onto the national scene.

Most of the headlines of tomorrow are being hidden by the big headlines of today. They are often talked about in local papers, but can be hard to spot if you don’t look beyond Page 1.

I want to share with you an idea that’s a little unconventional… at least when it comes to inflation. Let me give you a little background.

America’s Struggle Against Inflation

The average American has little or no defense against inflation. For most of us, our home is the ONLY asset we have that keeps up with inflation and thus gives us some protection. You need to own hard assets like real estate and/or precious metals if you want to keep up!

For most Americans, the dream of owning a home is NOT getting any closer.

Impossible loan requirements make mortgages hard to come by. This is exacerbated by the fact that many have had their credit bruised in the recession. Many were perhaps even forced to change jobs or go to work for themselves, which also makes it harder to obtain financing.

If you couple that with the fact that most Americans are still scared to buy anyway, you have a housing market that is ripe for the savvy investor to step in and find deals.

Five to seven years from now, when the economy has stabilized and these issues disappear off of people’s credit reports, you will have a much healthier housing market out there. 

If you have the means, you can profit in these tough times!

U.S. Real Estate: Housing, Housing Everywhere, but Not That Much for Rent

There is no doubt that the regular housing market is still suffering and banks are keeping their hands in their pockets when it comes to offering mortgages to prospective homebuyers.

Fannie Mae is the only agency that is helping buyers with less-than-stellar credit and less than 20% to put down on a home. You can expect lending to remain tight and housing to continue to struggle.

But rents are a different story altogether…

Rent rates are up and have been for some time now. In fact, according to the Bureau of Labor Statistics, primary residence rent rates are up over 1.3% over the past year. In this same period the average home value dropped about 5%.

I have been noticing this trend for some time now and finally the mass media seems to be catching on.

After looking at investments in Dallas, I wrote about rental property a year ago. I also warned of a housing market double dip back in December 2010. I wanted to revisit this topic and offer a few more tactics if you want to allocate some funds to rental properties.

Why Own Real Estate Property?

If you do a little homework and take your time you can find some great long-term real estate investments. The drop in home values has shaved off almost 10 years of appreciation. That’s good for the long-term investor.

As new homebuilders scale back on construction (as they have been for some time) and older homes are demolished for other uses or natural decay takes the old inventory off the market, supply goes down.

That means there could be some pent-up demand for homes when the economy improves.

This simple equation should lead to home price appreciation. But in the meantime, an investment can still make you money. In fact, there is a plethora of homes out there that are generating positive rental cash flow.

To Landlord or Not to Landlord

Being a landlord is not always a picnic. But not every tenant is going to be the next Michael Keaton in Pacific Heights. (Don’t watch the movie if you plan on buying an investment property.)

There are some tips that you should know before even considering it:

Location — You will want to buy a home in a stable, dense neighborhood preferably close to a military base, college or large commercial/industrial office park where there will be a huge pool of possible tenants to draw from.

Inman News recently wrote a piece about the 10 best markets for real estate investors; here are their top 10 picks:

1. Indianapolis — Carmel, Ind.
2. Winchester, Va.
3. Gainesville, Fla.
4. Tucson, Ariz.
5. Tallahassee, Fla.
6. Hagerstown, Md.– Martinsburg, W.Va.
7. Salt Lake City, Utah
8. Richmond, Va.
9. Gainesville, Ga.
10. Winston-Salem, N.C.

Price — Everything is relative when it comes to price and value. Do your homework and look at average rent rates in the area and average sale prices, and check out sites like Craigslist.com to see what people are offering and how it compares to your perspective property in terms of cost, condition, amenities, etc.

Management Company? — There are management companies that can help you, but they will cost money and it might be better to do it yourself, as they don’t have your investment as their No. 1 priority. Take your time finding the right tenant and make sure you do proper checks on credit history and criminal background.

I have always looked to friends to find tenants and have never used a management company, but if your property is far from home, it might be your best bet.

If you are on Facebook, sometimes just posting that you have a place for rent might bring a friend (or friend of a friend) to your door!

Of course, renting out a property isn’t your only investment choice…

Don’t Want to Be a Landlord?

There are several public rental property companies to invest in. They won’t give you the same inflation hedge or real equity that a home would, but investing in a company might save you a couple headaches. Here are two that I think are worth looking at:

Essex Property Trust (ESS:NYSE) This real estate investment trust (REIT) manages properties along the West Coast. As an REIT, they must distribute a large amount of their earnings through a dividend. The current yield is about 3%.

Camden Property Trust (CPT:NYSE) is also an REIT with 187 properties all across the U.S. They offer a well-diversified portfolio of communities in terms of geography and also are currently yielding a dividend of about 3%.

There is no such thing as a free lunch, my friends. The wealthiest people in the world usually had to work for what they have. Diversification of your investments and taking action when others are too scared or too slow can lead you to wealth if done with tact.

And that means being open to alternative investment ideas like the inflation hedge we’ve talked about today. It’s a perspective that we at Smart Investing Daily are always willing to share.

Do you like the unique investment tactics I talk about? As a trader, I truly enjoy discussing strategy, trading ideas and market events with fellow traders. My guess is that you’re the same way. It’s amazing what you can learn from sharing trading experiences with colleagues and friends.

In September, you’re going to have just this kind of opportunity. Mark your calendar for Sept. 17-19 when we will hold our annual conference in Las Vegas. This is your chance to hear trading ideas from all of our editors, ask questions during our panel presentations, and chat about trading over breakfast, lunch or dinner.

I am looking forward to the event. We uncovered some great opportunities last year and had a blast doing it.

To kick things off this year, we are hosting a FREE online event next week — the “Money Crisis Survival Webinar.” Not only will you hear about the trouble we see brewing, but you will get solutions… including a free report that details how to take advantage of Washington’s unending greed.

Technically, registration is closed. But we’ve had such demand for this one-of-a-kind event, we found a way to increase our bandwidth and let more viewers in. Don’t miss this last chance. Reserve your spot now… All we need is your email address.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

{jtagstpg} {authorstpg}

Other Related Sources:

Article by DividendOpportunities.com

The 8 Rules I Use to Earn $112.77 in Dividends Per Day

Note: The following is a guest article from Dividend Opportunities co-founder Paul Tracy.

I counted twice, just to be sure…

$41,161.63.

That’s the amount in “daily paychecks” — more commonly known as dividends — I received from my investment portfolio in 2010. That total comes to $112.77 for each day of the year. Cash.

Why am I telling you this?

It’s not to brag. I was born and raised in Wisconsin. The typical Midwestern mentality is so ingrained in me, I very rarely talk about money. And I’m not one to show off, either. I drive a Nissan I bought six years ago. I get my hair cut at Supercuts.

No, I’m telling you this because I honestly think what I’ve discovered is the single best way to invest, hands down.

I’m talking, of course, about the “Daily Paycheck” strategy. If you’ve read Dividend Opportunities for even a couple of weeks, you’re likely familiar with Amy Calistri and this strategy.

Amy is the Chief Strategist behind our premium Daily Paycheck newsletter. Her goal is to build a portfolio that pays at least one dividend every day of the year. The idea for her advisory came from my personal “Daily Paycheck” experiment.

I’ve been following the strategy personally for a few years now. In that time, I’ve not only been able to build an investment portfolio that pays me more than 30 times a month, but the checks are getting bigger and bigger as time passes.

What I like best is that it’s the easiest way to invest you can imagine. Once you get started, it runs on autopilot. Of course, you’ll make a few portfolio adjustments now and then, but you won’t have to anxiously watch your holdings every day.

Now it’s time to come clean. If you start this strategy tomorrow, it’s unlikely you’ll be earning $112 a day by the weekend.

I’ve been fortunate to start with a healthy-sized portfolio. And as I said, I’ve enjoyed the benefits of implementing the “Daily Paycheck” strategy for a few years now, so my payments have grown much larger than when I started.

But here’s the good news… it doesn’t matter. Whether you have $20,000 or $2 million, you can start your own “Daily Paycheck“ portfolio today. The results are fully scaleable, and anyone can have success, as long as you follow eight simple rules Amy and I created to not only build our portfolios, but also manage risks…

It’s these eight rules I’ve followed to build a portfolio that not only paid me $112 a day in 2010, but that is also seeing rising payments. In December, I earned 59 checks, at an average daily amount of $214.18. (December’s payouts were higher than normal thanks to year-end dividends, but there’s no doubt the payments are increasing.)

I’ve been investing for the better part of two decades. During that time, I’ve tried just about every strategy and style you can imagine. And don’t get me wrong — you can make money any number of ways in the market.

But earning thousands of dollars each month consistently? I never experienced that until I implemented the “Daily Paycheck“ strategy.

Good Investing!

Paul Tracy
Co-Founder — StreetAuthority, Dividend Opportunities

P.S. — My ultimate goal is to build a portfolio that pays me $10,000 a month. In December I pocketed $6,639, so I’m well on my way. To learn how easy it is to set up your own “Daily Paycheck” portfolio, be sure to read this memo. It has all the details on how to get started yourself.