RRSP season an excellent time to bone up on investor skills
Feb 17, 2009     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

The 2009 RRSP season could be a tough sell for investors who got scorched last year during the global meltdown on financial markets.

However, a contribution to a registered retirement savings plan – whether it’s in equities, mutual funds, guaranteed investment certificates or whatever – will still yield a welcome tax refund.

And while you’re at it, ask yourself if you could have done anything different last year while the losses were deepening, simply by being a better investor.
Not only would you benefit, but your financial adviser would likely appreciate sitting across from somebody who doesn’t just shovel over cash without a murmur.
“I prefer having someone who knows and understands and has an appreciation for what is going on – that client is a better client,” says Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.

“That client is going to be trying to get the best performance, and doesn’t want to jump on the bandwagon. And he or she knows that this is a long-term affair.”
Mastracci added that he’s noticed investors are certainly better educated in one key area than they were a year ago – understanding that the market is risky.
“Everybody is aware of taking a haircut.”

An excellent resource for the novice investor is the Ontario Securities Commission where you will find investor information and the Investor Education Fund .
“Just giving up is not an option,” says Tom Hamza, president of the Investor Education Fund.

Investing, Hamza says, “isn’t that intimidating; you just have to understand some basic things and have a framework to advance with, and you will be OK.”
The Investor Education Fund website offers explanations in simple language about all types of investments and how to shelter them from tax through RRSPs and the new tax-free savings accounts.

For example, the section on mutual funds describes what a mutual fund is, what it will cost, how to buy one and whether they might be a good choice.
OSC resources offer a wealth of information for the novice – and also for investors who regard themselves as experienced.

A segment on questions to ask when choosing a financial adviser is particularly helpful because many people don’t know much about shopping for one.
“Working with your financial adviser is actually something that has come to the forefront in the financial crisis, just because there is more of a focus on maximizing the value of that investor relationship,” said Perry Quinton, manager of investor communications at the OSC.

“When markets are going up, it’s pretty easy to sit back and let someone else do it.”
Questions to ask include whether the adviser is registered with securities regulators, which provides an assurance of basic qualifications.

Asking how an adviser is paid is also apt – and it’s not like asking your neighbor at a dinner party how much she earns.

“You’re the one paying it so you need to know how you’re paying it,” said Quinton.
Some are paid by salary so the cost of their advice is built into their products. Some receive commissions on what they sell, while others charge a fee based on your portfolio.

For investors who want to get serious, there is the Canadian Securities Course.
Investment professionals, including those seeking a brokerage or mutual funds licence, have to pass this course.

The CSC, which costs about $900, delves into how to analyze corporate financial statements and gives the lowdown on all financial instruments, including structured products and derivatives.

Whichever route you take, you should feel a lot more in control by not leaving everything up to the adviser.

“I really believe investing is a lifestyle choice, and that means there is work involved,” said John Stephenson, portfolio manager at First Asset Funds.
“And for many people that is offputting, and perhaps life is complicated and for that reason people would rather just forget about it,” Stephenson said.
“While you may rely on your investment adviser, you still have an obligation to understand what is in your statement, what he’s doing at least in the broadest terms … and you’d better be pretty comfortable that this guy knows what he’s doing.”

Have your say!

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How can you profit with the stock market in 2009.
Jan 09, 2009     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

If, after 2008, you’re still looking at the stock market as a way to fund your retirement, most people probably consider you a few congressmen short of a bailout. (Zing!) It’s probably progressed far beyond the point of people refusing to make eye contact with you. In all likelihood, your dog is, too.

Yes, it’s tough proclaiming yourself a bull after a year in which every bull became a steer.

But there are a few perks. Like getting the profits that come from buying stocks at what could be some of the best prices you’ll ever see.

A brief history of 2008
Last year was a fantastic demonstration of what happens when, in a highly leveraged world, everyone needs liquidity at the same time.

Anyone who borrowed to buy mortgage-backed securities needed cash as mortgage values plummeted. Ambac (NYSE: ABK) and the other bond insurers needed cash as the mortgage-backed securities they were guaranteeing fell. Banks needed cash to maintain their capital ratios as defaults escalated. AIG (NYSE: AIG) needed cash to balance its losses in credit default swaps. Hedge funds needed cash to fund redemptions and reduce leverage as assets declined.

The problem is, when everyone needs cash, the only way to get it is to sell off assets. And that’s what investors did, dumping almost every asset class with the exception of ultra-safe Treasuries. The stock market took it on the chin.

An overreaction
That’s not to say that the market collapsed simply because everyone cashed out. The problems in our economy are real. We’ve seen huge bankruptcies, the unemployment rate has spiked to almost 7%, and consumer confidence is low. Companies that need cash are finding it tough raising money at reasonable costs.

But the carnage in the market isn’t limited to the shaky companies that are likely to suffer the most. The S&P 500 contains the biggest, most successful, and most stable businesses in America. Yet more than 94% of the companies in the S&P 500 fell during 2008. Over 30% lost more than half their value! Certainly, deteriorating business prospects are responsible for some of that drop. But based on valuations, it seems likely that stock investors are selling because they must. Like everyone else, they need the cash.

And that’s a really great thing if you’re not one of Wall Street’s forced sellers.

The sweet spot
Large-cap value stocks could be the best way to exploit this opportunity. I’m not just talking about slow-growing companies trading at low single-digit earnings multiples, but also compellingly cheap growth stocks.

For instance, these days, the universe of large-cap value stocks includes Google (Nasdaq: GOOG). Google has huge barriers to competition, $14 billion of cash on its balance sheet, an innovative culture, a 21% estimated annual growth rate going forward, and is trading for about 19 times earnings. At these prices, Google is a large-cap value stock.

So why are large-cap value stocks a great investment these days? Not because these stocks are certain to outperform the other categories under all circumstances, but because they present the ideal trade-off between risk and reward in these troubling times.

While there’s a good chance that the economy will start showing signs of life sometime in 2009, there’s a possibility that things will get even worse. When you’re betting your retirement, you should own businesses that can survive the worst-case scenario.

Low risk, high reward
Generally, large-cap stocks fit that criterion. They have the most stable cash flows, the most well known brands, the greatest economies of scale, and the best chance of recovering from mistakes.

Would you put your money on McDonald’s (NYSE: MCD) to withstand a depression, or Krispy Kreme (NYSE: KKD)? Would you bet on Wal-Mart (NYSE: WMT), or Dillard’s (NYSE: DDS)? These two examples may be somewhat hyperbolic, but it’s absolutely true that powerhouses like McDonald’s and Wal-Mart are far more likely to survive than companies with smaller moats because they have the financial clout, the economies of scale, and the proven, winning business models.

In normal times, you’d really have to pay up for these sorts of dominant companies. But thanks to forced selling from investors struggling to raise cash, right now you can buy some excellent businesses extremely cheaply. The S&P 500 is trading at just over 12 times 2009 earnings estimates, its lowest earnings multiple since the 1980s. What’s more, due to the poor economy, the earnings of these powerhouse companies will be depressed in 2009, which means that the normalized earnings multiple is even more compelling. Large-cap stocks are extremely cheap, and I believe will offer superior returns over the next few years.

The bottom line
Of course, you still have to be careful — as 2008 has shown us, you can’t just throw a dart at the S&P 500 and expect to avoid a blow-up. You still need to pay attention to balance sheets and how much cash companies are bringing in during these troubling times.

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JPMorgan Chase in Talks to Buy Wamu
Sep 12, 2008     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

JPMorgan Chase in Advanced Talks to Buy Wamu: Sources

American Banker | Friday, September 12, 2008
By Cheyenne Hopkins and Joe Adler

WASHINGTONJPMorgan Chase & Co. is in advanced discussions to buy
Washington Mutual, sources said Friday.

While a deal has not been struck, and could fall apart, sources said
negotiations are ongoing at the highest levels of both companies,
including James Dimon, the chairman and chief executive of JPMorgan,
and Alan Fishman, the newly-installed CEO of Wamu.

A spokesman for JPMorgan Chase declined to comment. A spokesman for
Wamu was not immediately available for comment.

If a deal is struck, it would remove a potentially huge problem facing
the government. Regulators have already intervened to save Fannie Mae,
Freddie Mac, and Bear Stearns Cos., and are reportedly aiding the sale
of Lehman Brothers Holdings Inc.

The talks between JPMorgan Chase and Wamu do not involve the
government, sources said. Observers had said earlier this week that a
government-assisted transaction may be necessary if Wamu did not
recover or find a buyer soon.

Sources cautioned the situation remains in flux and other bidders for
the Seattle-based thrift company could emerge. But knowledgeable
sources were optimistic the deal would come together.

“It’s quite plausible,” said one source. “It’s a possibility this
weekend.”

JPMorgan Chase pursued a deal with Wamu in March, but talks fell apart
after the thrift received a $7 billion capital infusion from TPG Inc.
in April. Sources said JPMorgan Chase has remained interested in
buying Wamu since that time.

Wamu holds $309 billion in assets, and roughly $190 billion in
deposits. A collapse of the thrift company would have a severe impact
on the Deposit Insurance Fund.

Wamu has had a long week. On Monday, the company announced that Kerry
Killinger, its CEO since 1990, was leaving the company. It also
revealed that it had entered into a memorandum of understanding with
the Office of Thrift Supervision and “committed to provide the OTS an
updated, multi-year business plan and forecast its earnings, asset
quality, capital and business segment performance.”

In an effort to show that its capital levels are solid and that its
credit problems are stabilizing, Wamu released a mid-quarter update
late Thursday and said its third-quarter provision for loan losses
will fall by $1.4 billion from the second quarter, to $4.5 billion. It
also said its liquidity is stable, at $50 billion, and that it is
“well-capitalized.”

The thrift company posted a $3.3 billion second-quarter loss, the
largest of three straight quarterly losses, and built up its reserve
for loan losses by nearly 80% during, to $8.5 billion.

Comment

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MasterCard and Visa continue to Soar
Apr 30, 2008     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

By Tom Hutchinson April 30, 2008

After years of adoration, investors seemingly forgot about MasterCard (NYSE: MA) and threw themselves all over Visa (NYSE: V). It seemed as though MasterCard didn’t even exist anymore.

Then on Tuesday, with a brazen pre-market earnings announcement, MasterCard reminded investors that there are two hot credit card mamas in this market.

How hot are these stocks?

Visa was initially offered in mid-March in the largest IPO ever in the U.S. Since then, the stock is up more than 80%. The MasterCard IPO was two years ago. Since then, the stock is up more than 600%. You read that right — 600%!

Va va voom

MasterCard, like Visa, reported an absolute blowout quarter in the midst of a miserable economy. Profits more than doubled and the stock rocketed more than 12% in trading Tuesday.

Profits increased primarily on foreign customers’ ever-increasing penchant for plastic over cash. Also, like Visa, American Express (NYSE: AXP), and Discover Financial (NYSE: DFS), MasterCard reported increased cardholder spending in the U.S.

MasterCard’s profits for the first quarter increased to $446.9 million from $214.9 million and earnings per share soared to $3.38 from $1.57 in last year’s quarter. Actually, after excluding one-time gains, earnings per share came in at $2.59. This number blew away the Thomson Financial average analyst estimate of $2 per share and, at $1.2 billion, revenue beat analysts’ estimates of $1.07 billion.

How good is this business?

MasterCard and Visa have business models that are superior to that of American Express, Bank of America (NYSE: BAC), Discover, and Capital One (NYSE: COF) because they don’t lend out their own money. Thus, they aren’t struggling with consumer delinquencies. They just collect transaction tolls on the exponentially growing global money highway.

Although MasterCard is nicely positioned to benefit from the global trend from cash to plastic and U.S. revenues are still growing in this economy, a souring U.S. economy would ultimately hurt its bottom line. In fact, a cautious Visa issued conservative three-year growth projections based on anticipated slowness in the economy.

Quite simply, MasterCard has one of the best businesses in the world, both in terms of current earnings and future prospects. The only drawback is price. MasterCard stock sells for about 35 times earnings. Can MasterCard hiccup in a deteriorating economy and maintain this price? Can it really go to 40 or 50 times earnings in this market?

Should I buy it?

As good as MasterCard is, it seems to be selling at a fair price (to be kind). Logic dictates that you wait for a dip to buy. But, since when does logic matter? The price of both MasterCard and Visa just keeps going higher despite valuation concerns. I’m sick of being rational and wrong. I’d rather be irrational and rich.

Have your say!

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When to Buy, When to Sell
Mar 24, 2008     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

I firmly believe that when it comes to buying and selling stocks, you must trust yourself more than you trust others. If you think that something isn’t right in your portfolio, don’t ignore those feelings. That doesn’t necessarily mean sell; I’m simply saying you might reconsider your positions. Likewise, when your neighbor insists a stock is a loser, but you’ve done your research and your instincts tell you otherwise, make a small investment in that company. If you don’t want to let your fear of loss keep you from ultimate gain, consider the following pointers:

  1. Keep a close watch over your stock, paying attention to the daily volume of shares traded. When the volume increases dramatically and the price of the stock falls, that’s a danger sign. Similarly, if the past several quarterly reports show the earnings per share is decreasing significantly or future earnings are projected to decline, those are other bad signs.
  2. Watch for a split: When a company distributes more stock to its shareholders, that’s called a stock split. For example, a two-for-one stock split means that for every share you held before the split, you now hold two shares at half the presplit value. If a stock splits twice in less than a year, the stock may be volatile—and that might spell trouble.
  3. Look at the overall market. If it’s plummeting and you’ve investigated the tax consequences of selling some or all of your stock, you might prefer to take the loss on next year’s tax return. If you’re in the market for the long term, ask yourself if you still think you have a great stock.You might prefer to wait out the downturn.
  4. Follow a stock’s moving average—the average closing price of the stock over a period of time. When a stock falls below its own 20-month moving average, that’s a signal to sell at least some of the stock. Charting services on the Internet can help you stay on top of your portfolio.
  5. If a stock falls 10 percent or more below the price you paid—without an obvious reason—and the market or other stocks in that sector are going up, sell at least some of the stock. If, however, the stock has been affected by circumstances you think will change, consider buying more as the price falls. I’m not recommending throwing everything you have into a stock that’s bombing, but by investing small amounts of money each month in a company you believe in, you’ll actually benefit from the lower price and be able to buy more shares than you otherwise could have.

Have your say!

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