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Outlook for interest rates

2009-11-22T12:32:00.003+02:00

Zero interest rates currently works as a relatively strong attraction for investors who are borrowing cheap dollars and turning into purchases of shares and commodities.

What happens on the next FED meeting nobody knows but general expectation is unchanged interest rates until summer 2010. The Federal Reserve may start raising interest rates on June. This comes from the results of the Fed Funds futures. Currently traders give 54% chance to increase the minimum rates by 0.50 basis points. The increase is estimated could take place at the regular meeting, scheduled for 23 June 2010.

The increase in interest rate markets are generally perceived as a strongly negative element, but this time it could be consider differently. That would mean that the Fed feels confident about the economy, as well as the financial system is strong enough to withstand higher interest rates. It would be a positive for equity markets. Australia has recently experienced something similar. Local central bank after a long pause decided to increase the lowest interest rate for the past 49 years from 3% to 3.25%. Australian S & P / ASX 200 responded by the increase of 1.8%.

Energy stocks for bull market

2009-11-16T18:27:00.001+02:00

One thing is for economic recovery the same as ever. Demand for energy during growth simply must grow. And for those who believe in recovery here are some of energy stocks.

Chesapeake Energy (CHK) mines natural gas. While the price of gas is pushed down by the economic downturn and new technologies which allow to isolate the material from clay. But the recovery will come only with the end of the recession, but at the expense of coal, which generates more pollution. Estimated profit for 2010 is over U.S. $ 2.4 per share. So it is possible to buy those shares for about 12 multiples of expected profits.

Devon Energy (OK) is one of the producers of natural gas and oil (which constitute 86 percent of its sales). At estimated profit of USD 6.2 shares are very attractive to buy that provides 11 multiples of expected profits.

Oil giant ConocoPhillips (COP), among other things, owns 20 percent of Russia's Lukoil. From their lows around 35 USD has bounced up to $52, but still have long way to highs (just slightly below $100). ConocoPhillips is at around 9 multiples earnings per share which is currently one of the cheapest stocks in energy sector.

American Electric Power (AEP) generates electricity. 73 percent of production is from coal-fired power plants, which is not in vogue, but the shares are still nearly 40 percent cheaper than that at its peak in 2007.

The best investments for year 2010

2009-11-15T18:50:00.002+02:00

Today I publish similar poll which I usually do before the year-end. What is the best investments for the next year. Which investments do you consider as the best for the year 2010. Please participate in our survey. You can choose among US stocks, international stocks, bonds, soft commodities, energy commodities and precious metals.

The poll will be active until the last day of this year. And you can find it in the left sidebar at StockWeb site.

I also try to post opinions for the best investments of the top investment gurus. For example you can see already in March 2009 Warren Buffett was increasing share in Burlington Northern (BNI).

Warren Buffett investment strategy

2009-11-15T17:55:00.003+02:00

Warrenn Buffett is a real investment guru who earned his enormous assets by investing in capital markets and with strict adherence to certain rules which every investor knows but few respects. In fact Warren Buffett investing strategy may have for ordinary investors more negatives than positives and ultimately may lead to the desired profit.

One of the reasons is the size of transactions and volume of funds which most investors have only dreamed of. Buffett can afford to invest billions of dollars, which his company Berkshire Hathaway has which allows him to buy his interest for shares in companies. At the same time it provides a better bargaining position when entering into the company for an interesting price.

Another related significant difference compared with the ordinary investor is that Buffett often buy shares to own that company (or at least significant part). As an example can be Coca Cola (KO), Wells Fargo (WFC), Procter and Gamble (PG), and last but not least mentioned Burlington Northern Santa Fe Corp. (BNI), which make up the majority of its entire portfolio. He often buy preferred stocks selected companies that give quite an interesting advantage over ordinary investors.

It also reflects the basic principles of long-term investment horizon (and its strict compliance), buying stocks of well-established companies whose functioning well understood by the investor at a low price and limited diversification (with Berkshire Hathaway Buffett owns more than 40 titles from various sectors such as consumer goods, finance, energy, industry, health, etc.).

In recent years, the Buffett and his investment company quite significantly deviates from the established rules which brought him his fortune. The first problem is the purchase of shares of companies in terms of fundamental analysis do not meet his criteria of values and eventually some of them had to quickly get rid of. Examples can be expensive buying shares in recent years, like Anheuser Busch (BUD), Wrigley (WWY.BA), Conoco Philips COP) or two Irish banks, which recorded big losses.

Perhaps the biggest disappointment for many investors seeking to invest on the basis Buffett's rules is a relatively large amount of funds that are kept in derivative instruments. Buffett has always been known for his very negative attitude to derivatives. Even though he sold options with a value of 4 billion U.S. dollars. It is also a fairly risky naked put options.

Investing in gold or platinum

2009-11-10T15:30:00.001+02:00

Gold is a special and fascinating commodity - a store of value, which is no debt. It cannot be printed and does not have any objective value. As a safeguard against deflationary downturn and inflationary spiral is the ideal protection against the financial meltdown.

Many people think that the recent rally in the price of gold is different than the previous. Escape to the safe harbor sent already several times the gold over 1 000 dollars per ounce. Traders highlight the unwillingness of the price fall below $1000 and large volumes of speculative options to purchase gold at a price of 1100 - 1200 dollars per ounce.

Price of gold continues to rise even in a situation where it should fall according to history. Price of gold usually increases with inflation. But inflationary pressures and inflation expectations has been eased nowadays. Economic recovery eliminating also second assumption that investors use gold to ensure the growing insolvency or deflation.

Let's have a look to Fed Fund rate - Fed's basic interest rate. Despite the growing economic activity, the interest rate are unchanged because FED does not want to risk of economic recovery. Rates will remain low long enough and excess bank reserves are key fuel for the inflation, which will gradually emerge.

Fed chairman, Ben Bernanke, spent a life studying the causes of the Great Depression. He will not want to do the same mistake. Historically, the Fed began to raise rates nearly 19 months after the unemployment rate reached a peak. At the current growth in unemployment appears to increase rates as a very distant future. Cheap money again stoking the economy.

Government debt

Governments have no other viable alternative. Next debt could trigger bankruptcy. The only honest system are tax increases and expenditure cuts - which is neither fiscally nor politically acceptable. Required expenditure restraint is even more unlikely. So long printing money appears to be the only viable solution.

By the way central banks have very little gold - China and Japan hold only a fraction of its reserves in gold. If the change only 10% of their reserves into gold, it would represent almost four times the quantity of gold reserves currently held by all the ETFs (exchange traded funds).

Shares of gold mines are traded at the same multiples of profits as in 2003, while the gold price is three times higher. Although gold is now at historic highs in nominal terms, after adjusting for inflation, is still 40% below its historical peak, reached twenty years ago.

Alternative to gold may be also platinum. A rare metal, has many similar characteristics and also may be supported by global demand for catalysts, which have been drastically reduced by the problems with the crisis. For easy investment in gold here is the list of gold ETFs and similar list of platinum ETNs.

Consider platinum ETFs (ETNs) and producers

2009-11-09T17:33:00.003+02:00

Platinum is a good alternative for investing in precious metals. However it is not so popular like in investment in gold or silver.

Platinum is used as a consumer and industrial products. It is well known jewelry but more important is usage in industrial production. Most of the platinum is used in automotive industry in production of catalytic converters. Therefore, compared to investing in gold, it can be bet on the rebound in auto industry. Platinum is more volatile than gold is. Generally speaking platinum and silver are better investments during economic strength than gold. And on the other hand gold is safer play in turmoils and uncertainties.

Here is the list of platinum funds. Because of the small size of the platinum market there is no possibility to create physically backed ETF. And because of this all 3 funds are actually exchange traded notes. Major difference is than ETNs are debts issues.

iPath Dow Jones-UBS Platinum Subindex Total Return ETN (PGM)
UBS E-TRACS CMCI Long Platinum Total Return ETN (PTM)
E-TRACS CMCI Short Platinum Excess Return ETN (PTD)

Another possible way how to get exposure from this precious metal is investment in platinum producers. Two biggest producers are Anglo Platinum (AGPPY) and Impala (IMPUY).

Short-term outlook for crude oil prices

2009-11-07T14:50:00.005+02:00

In last week crude oil prices has been traded more or less sideways and finished the week on unchanged mark. But short-term picture shows interesting development because on Friday price closed below $77,7. This level has been formed since summer this year and was support for technical pattern flag formation. The breakout didn't support bullish trend anymore and short-term outlook is more bearish now.

I agree with Adam Hewison's long term-term outlook for crude oil which stays bullish. Adam also mentions flag formation which brings "bullish breakout" but this has been reversed on Friday as a false signal.

Jim Rogers about commodities, China and others.

2009-10-25T15:26:00.000+02:00

Why is China booming? Are these prices for commodities still safe to buy and what about U.S. dollar? All these questions and outlook for the rest of 2009 and 2010 from Jim Rogers.
21st century for China

We must not forget the rest of Asia which is growing as fast as China. The reasons are many, but according to Jim Rogers is particularly important to note the following:

1.) The Chinese want to live as a people living in the west
2.) They are eager to work
3.) They have better morale, in terms of savings
4.) There are about one and a half billion people in China (all Asia population reaches three billion). Western countries are mostly in the role of borrowers.

"Of course, that in emerging Asian economies will be some slowdown, but there are many investment opportunities. And if you already see on a slowdown in Asian markets, pick up the phone and get involved in trading. I think that our children should learn Chinese, "says Rogers.

The road to global economic domination of China was started in 1978 with Deng Xiaping capitalist program. Jim Rogers sees China's dominant position in markets like an unstoppable wave of growth, except for one small flaw - problems with water. In China there are many places without drinking water. And where there is no water, they can not be even people. That is why China has come up with aggressive and maybe a bit drastic solution to the problem and therefore can no longer see the future water shortages, as obstacle to sustainable development.

US dollar outlook

Depreciation of the dollar may result in U.S. currency collapse as a reserve currency. It is seen in the market, where many people sell the dollar, because of its steep decline.

"just sitting on a chair and waiting for rally development in stock markets. I want to be ready to leave the market at any time, and I think that it may soon become. Development of the dollar just confirms. I confess that if that happens, I will sell like everybody else, "adds Rogers.

Jim Rogers is frightened by all the steps that the U.S. government took a particularly Ben Bernanke himself. Strategy of the United States will have a detrimental effect by Rogers on the dollar. The devaluation of U.S. currency is called terrible policy. Rogers believes that this policy helps the U.S. economy in the short term, but medium and long term outlook is dire.

Jim Rogers about commodities

As already noted, Asia is around 3 billion people and it seems everyone is ready to live out his "Asian - American Dream". It is clear that it is all about consumption. We like things - buy them, wear them, eat them, etc. It is therefore a lot of power, and it seems (as economic indicators suggests), consumption is growing. However, if you look at commodities, according to Rogers over the last decade, are far from being exhausted of their growth capacities.

Regarding oil, Rogers highlights the fact that, for example Saudi Arabia has made no new discovery of oil fields. Last 20 years only claims that its reserves are 260 billion barrels.

Rogers adds "The ideal time to invest in commodities, which are still in a bull phase, is 18 to 20 years. I think that now we are in the eleventh year. "Yes, this development may end soon, but it seems that the increased demand retain commodities still at the top for some years.

How to invest in gold now.

2009-10-18T21:47:00.011+02:00

After gold prices crossed above psychological level of $1000, target price for gold became very popular topic on the markets. Jim Rogers predicts gold prices to go even to $2000. In today's article I sum up some of latest analysis from Adam Hewison about gold.

In the first video Adam provides some mid and long term analysis for US dollar, S&P 500 and gold.

In next analysis you can check his outlook for gold alternative investments like ETF. If you want to avoid big volatility in gold market but still benefit from great upside potential than you should start thinking to add some gold funds positions into your holdings.

You can have a look also to other analysis for selected stocks or commodities here.

ETF correlation

2009-10-07T11:19:00.001+02:00

I already posted some articles focused on assets classes correlation like the one about correlation between commodities and equities. It shows correlation coefficient for precious metals commodities (gold, silver,platinum), crude oil and major US equity indices (S&P 500, DJIA).

Correlation analysis is key factor for successful portfolio diversification. Positive correlation means that the prices of shares or ETFs move up or down together. They will probably be impacted in similar way.

If the prices of shares or ETFs move in different directions we call it negative correlation. In this case we achieve high degree of diversification.

There is one useful website where you can do analysis asset correlations by using ETF. It has matrix for countries, sectors or bonds. Another interesting function is correlation over time where you can check the development of correlation coefficient for two tickers.

Treasury inflation protected securities ETF

2009-10-04T12:28:00.001+02:00

Right now we are globally in period of low interest rates and low inflation rate. In some economies even with deflation. What should we do when inflation will start to rise again? How to invest money when inflation is inching up?

The best investments against inflation are investing in gold, index linked bonds, national savings index linked certificates, shares and property.

I will focus more on less risky inflation protected securities like TIPS (Treasury inflation protected securities) or "linkers" (inflation indexed bonds/gilts). Coupon payments reflect rising inflation and/or interest rates. TIPS are generally one of the safest investments. It should be a part of retirement or standard portfolio for better diversification.

There are already some ETFs following TIPS indexes like iShares Barclays TIPS Bond (TIP) or SPDR Barclays Capital TIPS (IPE). Recently PIMCO launched their exchange traded funds for inflation hedging PIMCO BROAD U.S. TIP (TIPZ) and PIMCO 15+ Yr. US TIPS Index Fund (LTPZ) and PIMCO 1-5 Year US TIPS Index Fund (STPZ).

These funds protect against US inflation. International exposure provides fund SPDR DB Intl Govt Infl-Protected Bond (WIP) which access inflation protected securities in 18 countries. Around 70 % of its portfolio come from foreign developed countries and 30 % from emerging markets. Regionally holdings include securities from France, UK, Canada, Japan, Brazil, Turkey or South Africa. Contrary to US TIPS this fund offers another diversification against weakening US dollar as international bonds are in 15 different currencies.

Hedge funds portfolios

2009-09-28T14:39:00.000+02:00

Hedge funds raised their bets on further strengthening of stock markets to the level before last year's collapse of Lehman Brothers. Analysts Goldman Sachs have reviewed portfolios of 687 large hedge funds and discovered that there is 498 billion for growth and 346 billion for decline.

A large part of the short positions (speculation on the fall) had been closed at the end of the second quarter and have turned their bets in favor of speculation on growth. The current net long exposure is at 31 percent, the highest since June 2008. Note: most of short-covering was made at the end of July and August.

Speculations on the growth of have been opened after the stock market stabilized and improved macroeconomic data. Hedge funds also pulled out the majority of speculation on the decline in financial institutions.

For hedge funds are becoming more important so-called "bottom-up" analysis. Therefore they give priority to selecting individual stocks.

The biggest hedge funds holdings:

source: Goldman Sachs

The most favorite sectors are information technology, consumer goods producers and banks.

Gold and silver prices

2009-09-21T21:05:00.008+02:00

In order to determine relative value of gold and silver we can put both commodities in ratio . It was the lowest in the last century at 14, compared to current levels around 70. This would suggest that gold is currently overvalued.

Since 1980, the ratio of the price of gold silver ranged between 30 and 100 and average was 65. Last time it reached 100 in 1991 after Iraq's invasion in Kuwait which raised concerns about rising oil prices that could lead to rising inflation. Gold will serve as financial security.

The current massive pumping of money into the economy by central banks and government spending could lead to similar concerns about the price level. In next few years this could support the prices of both precious metals.

In the short term both gold and silver prices may drop slightly, as investors move to riskier assets such as shares, due to expected economic growth and industrial production.

If indeed there is a revival of the economy, the price of silver will not be so much affected because it is used in industries such as electrical engineering, aerospace and defense industries. . The value of gold will suffer more than silver.

It is expected that industrial demand for silver will constitute about 65 percent of the total world supply, estimated at 895 tons. While industrial and medical uses of gold is estimated at 11 percent of total supply (3880 tons).

* * *

For easy investment into both precious metal commodities there are already several exchange traded funds.

Gold ETF
streetTRACKS Gold Shares (GLD)
PowerShares DB Gold (DGL)
Market Vectors Gold Miners ETF (GDX)
iShares COMEX Gold Trust (IAU)

Silver ETF
PowerShares DB Silver (DBS)
iShares Silver Trust (SLV)

For all above mentioned ETF you can get free analysis here. You simply type ticker and that's it. Or you can follow video trading analysis for gold.

Insider trading is more bearish.

2009-09-13T19:36:00.003+02:00

Directors, owners and top managers, in other words, insiders, have turned to be more bearish. In recent months there is a growing volume of sold shares from insiders. In August, U.S. sales by insiders more than 30 times exceeded the volume of insider purchases (historical average is around 7:1). This ratio is the highest since 2004 and many investors may signal that if their companies do not believe their majority owners and management is probably something wrong.

High proportion of sales by insiders is not itself a clear signal to investors to start selling shares. There are several reasons, such as corporate programs in which the owners could sell large blocks of shares of its securities only in defined time intervals. Another reason may be grounds for a private investors which simply need more money in cash. This year may be the reason also profit taking after many insiders noticed a significant loss in last year.

For this reason, many investors do not take the increasing volumes of insider sales as a relevant reason to start reducing their positions in the markets. Among the experts is much more popular the opposite situation, where shopping is dominated by insiders over the sale, which is generally considered as a very strong signal for buying. This happens very rarely, because insiders receive a majority of the shares as a form of remuneration or the incentive programs.

Natural Gas price

2009-08-31T14:01:00.004+02:00

Natural gas is a cyclical commodity. Unlike the oil market the adaptation of natural gas prices is much longer. There is no organization that would maintain the quota extraction or had an interest in the price level. Adaptation takes place through the market and it takes longer.

Natural gas futures price is subject of many discussion right now. Henry hub contracts went all the way down from $13,5 to $3. September contract finished even below the level $3 at 2,84.

The main reason why natural gas is traded at lows is high level of storage. We are 18% above the 5 years average and also 18% above the level year ago (based on EIA statistics in weekly report).

Another reason is weather. Cold summer in US which has impacted lower consumption of natural gas.

* * *

Reference indicator, which tells how the market works on the production, the number of active wells in the U.S. Currently there are 675, the lowest number in past seven years. While the oil market has released the taps, the gas is still waiting.

There are some other arguments for price growth. If economic conditions will not worsen, it will not cause long-term decline in demand for energy commodities. Another aspect that has or may play a role in the demand for natural gas is that natural gas is a substitute for oil and it has higher reserves.

Natural gas prices follow with some delay crude oil prices. The gap between these two commodities is increasing. On average crude oil is 10 times more expensive than natural gas but right now the ratio is 24.

Last but not least is natural gas seasonality. Usually second half of the year is stronger for natural gas prices.

Economic forecasts for 2010

2009-08-29T12:33:00.003+02:00

As a member of Forbes Blogger Network I have been asked to provide my opinion about economic outlook for 2010. Here is the the question and answer.

Question:

September 15, 2009 marks the first anniversary of the fall of Lehman Brothers and the global financial meltdown.

What is your economic forecast for 2010? Are there specific economic markers that you find particularly useful and upon which you rely on in making your prediction?

Answer:

There are evident signs that global recession is easing. We can see green shoots broadly. Better than expected data from housing, labor market in US. Positive GDP reading in biggest European economies for Q2. But on the other hand still negative numbers in consumer spendings or latest industrial output in Europe and sharp GDP decline in Japan. In my view this will be also the picture for the rest of 2009 in developed economies.

This time source of global growth is outside developed world and particularly in Asia. Emerging countries like China or India avoided the recession and grow by 7,5% or 5,4% based on IMF forecast for 2009. Chinese stimulus plan shows positive impacts on rising bank lending, fixed assets investments a industrial output, commodity imports are also higher.

Unlike NIE (Newly Industrialized Economies) in Asia dependent on export (share more than 100% of GDP) and banking centers, China started recovery even with still weak export. Even though it is the biggest exporter in total amount, in % to GDP China is in low end of the ranking (33%).

Next example is India. Indian economy is even less dependent on export than China. Another key feature is that economy is highly service oriented. Consumption of services is typically less affected by volatility in income and wealth. This has proved to save Indian economy from sharp decline.

Picture above shows GDP grows for advanced economies and emerging markets. The common rule about more volatile emerging markets hasn't been fulfilled, meaning higher flying in economic boom and sharper declining in recession compared to advanced economies. This recession has showed potential and power of emerging countries like China or India.

Generally outlook for 2010 is following. Some countries are able to growth from domestic sources like India or China. The trend of recovery in Asia is going to be dependent in large on household behaviour in the United States and Europe. Generally foreign demand in advanced economies will set the shape of recovery.

Outlook for stock markets

Since March 2009 we could see one of the strongest rebound rally ever. There are increasing voices about correction and overbought markets. I suppose there will be correction this autumn. Even with good news coming to the street markets will be sent lower by profit taking after huge rally. The correction could be around 15% but definitely we will not test March lows.

Many analysts talk about high P/E valuation. S&P500 is somewhere around 16 compared to 100 years average which is 15. We are above but it is just because we subtract quarter with "low" earnings (nevertheless they were far better than expected). Have a look to latest recession when P/E ratio for S&P500 peaked 35. With improving earnings P/E will dramatically plunge. Current P/E valuation of 16 explain that markets are not valued "close to perfection" and there is still potential for long term consistent growth.

The best investments for 2009

2009-08-23T20:44:00.000+02:00

In the beginning of the last week it looked like this rally is losing steam. But we finish the whole week again higher. I guess reality check will come after summer time when most of the traders come back from holiday and we will see again standard trading volume.

Today I would like to use this post for comparison of different assets classes as an investments. The chart below shows performance since the beginning of the year.

Generally stocks were the place to be in for the first half of 2009. Emerging markets equities are leading the ranking with 60% return, followed by developed markets equities 34% and REIT 22%.

For the rest of 2009 I prefer still emerging markets as a best investments. But I'd be more selective with focus on Asian markets ex. Japan and China. Countries like Thailand, South Korea or Singapore. These markets don't seem so overheated like Chinese and local currencies are traded at several years lows. This makes Asian equities even more interesting investment for international investors.

I made the comparision based on ETF which represents different assets.

High Yield Bonds	iShares iBOXX High Yield	(HYG)
TIPS	iShares Barclays TIPS	(TIP)
Emerging markets bonds	iShares EM bonds	(EMB)
Cash	SPDR 3 month T-Bill ETF	(BIL)
US bonds	Barclays agg. Bond fund	(AGG)
Foreign Dev Market bonds	iShares Intl. bond fund	(IGOV)
Commodities	iShares GSCI commodity	(GSG)
Emerging markets stocks	iShares MSCI EM Index	(EEM)
US stocks	iShares Russell 3000	(IWV)
Foreign Dev Market stocks	iShares MSCI EAFE Index	(EFA)
REITs	Wilshire REIT Index	(RWR)

For all ETFs you can receive free trend analysis. It is enough if you type ticker here.

GDP growth 2009-2010 for global markets

2009-08-19T16:17:00.004+02:00

IMF world economic outlook shows forecast for GDP growth in 2009 and 2010. This is mid year forecast released on July 2009. I picked major developed and emerging countries. There is similar picture for most of them with forecast for 2009 with negative GDP growth. Only China and India are expected to post decent growth. But for the year 2010 IMF prediction is positive for all of them except Germany where outlook is still slightly negative with GDP contraction of -0,6.

I made quick fundamental analysis for international markets by using PEG indicator . Basically it explains markets / stocks value taking into consideration P/E valuation and estimated growth. In case of world economies it is forecast for GDP growth 2010. As small as PEG is, the country / stocks has better value.

From the analysis BRIC emerging markets are with better value vs. developed economies. Last time I made similar analysis with P/E and GDP growth by using regional ETF the results were similar. But there was not such a big difference between expected growth in developed and emerging countries. Now IMF favors more emerging economies. We can make grouping where emerging markets are with the best value, North America & Japan somewhere in the middle and major European economies this time at the end of the ranking.

Short interest

2009-08-16T20:59:00.001+02:00

Stock markets are still in big rally since March 09. Some broad indices like S&P500 or Dow Jones are around 40% up. Many traders and analyst are calling current market condition as a overbought and short interest indicator is closely watched.

Short interest tells us total number of shares which are being sold short and are not yet covered.

Statistics about short interest are published twice a month. In mid of each month and also at the end. You can follow short interest for selected stocks. It presents monthly records for past year. Or summarized statistics at Wall Street Journal. It provides summarized report with short interest ratio at NYSE and Nasdaq with largest increases and decreases.

Another useful investing tool is to have short interest in chart and to see relation with stock price. For me the best source for short interest in chart is at AOL money&finance. For scanning stocks based on short interest and monthly change. I also recommend Short interest filter screener provided by Schaeffer's investment research.

How to invest in gold and oil.

2009-08-10T21:36:00.001+02:00

Today I have two video analysis from Adam Hewison. This time he is analyzing commodities and predicts future movements for crude oil and gold prices.

First is analysis of crude oil and gold based on Fibonacci retracement. Adam chart heading to $1000 for gold as a target level. And for crude oil there is a target $74.

Second short video analysis is focused on outlook for gold prices. Is it new bull trend for gold market? Adam shows long term and short term pictures with some key technical analysis indicators.

High dividend stocks / ETF

2009-08-10T11:03:00.000+02:00

Many investors don't want to worry about the indicators of investment value, and therefore prefer a simpler strategy which is based on high dividend yield and is called dividend strategy. It depends only on high dividend yield if shares will become part of the index portfolio.

For the purpose of dividend investing there are plenty of dividend indexes. The basis is usually taken from the past payment of dividends, and not from the future (or expected). Broadly used in US is Dogs of Dow or DivDax in Germany.

One of the problem of this strategy is that it can not accurately predict with certainty whether the amount of dividends in the future will be the same as last payments. Another significant important point missing in dividend strategy is stock value. Are shares prices undervalued or overvalued? You will not get answer based on dividend yield.

On the market there are now many ETFs which are in the category of High dividend yield ETF. Here are some high dividend paying funds in US.

Claymore/Zacks Yield Hog ETF (CVY)
ELEMENTS Dogs of the Dow ETN (DOD)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
iShares Dow Jones Select Dividend Index Fund (DVY)
SPDR S&P Dividend ETF (SDY)
Vanguard High Dividend Yield ETF (VYM)

And the list of international high dividend yielding funds traded on US markets.

Middle East Dividend Fund (GULF)
SPDR S&P International Dividend ETF (DWX)
WisdomTree Europe High-Yielding Equity Fund (DEW)
WisdomTree International Dividend Top 100 Fund (DOO)
WisdomTree Japan High-Yielding Equity Fund (DNL)
WisdomTree Pacific ex-Japan High-Yielding Equity Fund (DNH)

As I have mentioned in the beginning of the article, dividend strategy itself has some imperfections. During past two years I have compared US high dividend yielding ETFs with broad equity index ETF iShares S&P 500 Index (IVV). And you see the result at the chart above. For almost the whole period IVV has outperformed all high dividend yield ETFs.

Commodity equity correlation.

2009-08-09T10:40:00.003+02:00

Equity and commodity markets interact. But share prices affect commodities or vice versa? Or there is no dependency? For which commodities there are the highest dependency? Is it gold, oil, or any other commodity?

As you can see from the picture below there is a long term dependency in crude oil prices and equity indexes. In this relation mostly we can call equities as a trigger. Good performance of stock markets predict good future for economy and higher demand for energy like crude oil.

With gold we can see inverse correlation with equity indexes. Usually this commodity is seen as a safe heaven when there is uncertainty on the stock market.

And how the commodities are linked between each other. This table shows correlation between crude oil, gold, silver and platinum.

Correlation (91-09)	Crude Oil	Gold	Silver	Platinum
Crude Oil	1,00	0,81	0,90	0,82
Gold	0,81	1,00	0,95	0,95
Silver	0,90	0,95	1,00	0,93
Platinum	0,82	0,95	0,93	1,00

Second table with correlation between commodities and broad stock markets indexes.

Correlation (07-09)	Crude oil	DJIA	S&P 500	Silver	Gold
Crude oil	1,00	0,50	0,48	0,75	0,37
DJIA	0,50	1,00	0,99	0,37	-0,48
S&P 500	0,48	0,99	1,00	0,36	-0,51
Silver	0,75	0,37	0,36	1,00	0,50
Gold	0,37	-0,48	-0,51	0,50	1,00

S&P 500 with P/E 13. Still 26% below 50 years average.

2009-07-28T14:11:00.000+02:00

For the first time during last 2 years U.S. analysts raise earnings estimates of companies in the index, Standard and Poor's 500. Last time when analysts were so bullish was on April 2007 - before the outbreaks of largest global recession since the end of the 2nd World War II, and total writedowns due to subprime losses reached 1.5 bil. USD.

There have been some positive surprises. Particularly profits in Q2 of firm Goldman Sachs (GS) or tripling sales of raw materials at Freeport-McMoRan Copper and Gold (FCX), which has led to the higher projections for 2010. The estimates of Wall Street firms show earnings for next year at $ 74.55 per share, compared to $ 72.54 in May this year. Shares are now trading at 13.13 times estimated ratio of earnings, which is about 26% below five decades average of 16.54.

Estimates indicate that corporate profits SP 500 index companies will grow by 25% from $59.80 per share, which would be the biggest growth since 1995. Revisions are indeed real and quick view of the fact that people are becoming more or less optimistic. The earnings for Q2 indicate that there may be even faster change. 204 companies of SP 500 have issued its balance and 75% of them were able to overcome the market consensus. So far, the highest number was 72.3% in 1993.

For example estimates for the company Goldman Sachs have evolved significant changes. Profit for the year 2010 may be raised to $16.19 per share, almost three times the minimum $ 5.90 per share in March this year. The bank is trading at 10.17 times the projection of next year. This is approximately 63% discount against the times 37.73 times used in the past 12 months, and even after the shares rose about 95% this year.

Another suitable example is the world's largest semiconductor manufacturer Intel Corp. Company doubled profit for Q2, than was designed, in particular as a result of improved computer demand in Asia. Analysts and increase their profit estimates for 2010 to the level of $1.08 per share, a 21% increase. Shares of Intel, however, reached a 10-month maximum, and increased by 32% this year. Intel traded as a multiple of 17.93 times earnings next year, it is about 36% less than the average of the last decade with number 28.13.

Best way to invest money

2009-07-27T19:55:00.004+02:00

How to invest your money... best way for your investment... how to invest in the stock markets... invest in gold... invest in oil... invest in real estate...

I think those are the questions which most of us currently asking ourself. I would stay with equity markets and their latest development. I was waiting for confirmation of technical pattern Head and Shoulders for Dow Jones Industrial Average and it has been crossed above. Also level of 9000 could be called as a magic resistance/support level as shown at the chart below. We saw several retest especially as a resistance.

Another broad US indexes (S&P 500, Nasdaq Composite) are also very close to support and I don't have doubts that we will see crossover in coming days. This should technically support the rally. But from the economic point of view there are still only few "green shots " of recovery. And therefore in mid-term horizon I expect more choppy development rather than stable uptrend.

Another area of equity markets are emerging stock markets. Here I see big potential in China and especially India which is still traded with 40% discount compared the valuation 2 years ago.

For commodity investing I would put my money into Natural Gas futures or any kind of fund underlying Henry Hub contracts. Someone can say energy goes in line with equity trends and therefore there is no diversification. But that is not the case of Natural Gas nowadays. It is more or less valid for crude oil price. Historically ratio crude oil / natural gas makes value of ten. Right now we are somewhere around 17.

How to invest in gold.

2009-07-11T14:16:00.007+02:00

Gold is of these assets which are mostly used for hedging against falling equities but also used as a safe heaven for political, economic or other kind of crisis. This has been seen during current financial crisis and global economic recession. The gold prices topped all time high $1000 this March when stocks found their bottom. The bottom at least for now.

There are several ways how to invest to gold. One of the possible investment is in physical gold ownership. The gold can be purchase as bullion bars, coins or as a numismatic coins.

Investment without interest in physical ownership are based and on exchange traded products. Here is the list of the most liquid Gold ETFs (exchange traded funds):

SPDR Equity Gold (GLD) - Fund tracking performance of gold bullion prices.
Market Vectors Gold Miners (GDX) - Fund follows performance of AMEX Gold Miners index. ADRs with biggest share included in this index are Barrick Gold (ABX), Goldcorp Inc (GG) and Newmont Mining (NEM).
iShares COMEX Gold (IAU) - In fact the same structure like GLD. Also with the same performance.
PowerShares DB Gold Double Long ETN (DGP) - This ETN reflects double performance of Deutsche Bank Liquid Commodity index. Keep in mind difference between ETF and ETF.
ProShares Ultra Gold (UGL) - Double performance of gold bullion prices.

Except of ETFs you can use gold futures or other derivatives for your investing to gold. It is the riskiest asset you can use. With ETF you can get usually up to 3 times leverage investment where with futures there is no limitation. On the other side there is bigger potential return on your investment.

For safer play with mutual funds I list here the biggest funds underlying gold assets.
List of precious metal (gold) mutual funds
The best ways to buy gold from MSN - precious metal mutual funds

On top of that there are other possibility how to invest in gold like buying jewelery, gold certificates, shares of gold miners or other gold trading companies and so on.

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