Investment Tips(4)

Few things need to be highlighted once you willing to get in or already inside the investment program in regards to rules changing (terms and conditions) of each investment.

a)Adding minimum deposit

b)Going private

c)Profit rate or principal withdrawal takes a longer time than it should be.


If you aware, these might be a red flag or a true sign that the investment program you are referring to is experienced problems.

Get out quickly because you do not know on the next day they will gone with your monies.


Several excuses will be provided by them such as:

a)Trading loss

b)Site and payment processor being hacked

c)fraudulently deceived by a single individual who has full control of assetsAt my last Investment Tips, I would like to emphasize NEVER ever double you money in one investment program.


Takes your monies once their reach 20 - 30% in profit.

Put the maximum 50% in profit if you confidence enough with your investment program and move to another venture.

Its better to play safe though and hope stay on the right track making money to fully possible extent.



By Yuliarko Sukardi

Investment Tips(3)

Now the question is, if you successfully find an Online Investment Programs that fulfilled all criteria above, are you assured that your monies will be working for you as a clock work without any delay?

I would like to point out the difference between an ordinary investor.

Here some Investment Tips I would like to share with you in order not to become an ordinary investor but a smart investor.


Some good investment programs indicated by:

a)They give you ID of traders + fund manager, office location and respective phone number.

b)They give you proof of their trading.

c)Due Diligence by third party will be an added value.

d)Usually they become hot topics on many investment blogs and forums.




By Yuliarko Sukardi

Investment Tips(2)

If you willing to play your monies with fun, HYIP can be a money game you are looking for.

You should know when to get in and when to get out of the game, since HYIP adopt a ponzi/pyramid scheme which means the new comers pay the old members.

It just a matter of time when this program will collapse (short period in fact, when the number of new comers is less than or even the same as the old members).

Hence the chance to get win as an old members is higher than the new comers.

But if you really are a genuine investor you should be wise enough not to have a look at that one.


Here are several indications of real investment:

a)Reasonable monthly rate (less than 5%), more than that can be categorized as a high risk investments

b) No compounding

c)High minimum initial deposit (minimum principal is 50, 100, 1000 or sometimes 5000 usd)

d)Short holding periods of your principal (usually takes 1 month to 6 months)

e)No referral commission

Investment Tips(1)

As many investors may know, Online Investment Programs offered via the internet are mostly end up with losses or scam.

Extensive due diligence in credible and worthwhile offshore investment programs is substantially needed prior to invest your monies in.

It should be noted that there are major difference between real investment programs and HYIP or High Yield Investment Programs.


The main characteristics of HYIP are define as follow:

a) High daily rates

b) Compounding system is allowed

c) Low minimum initial deposit (principal as minimum as 1 usd)

d) Long holding periods of principal (usually takes 6 months or 1 year)

e) Referral commission is available



By Yuliarko Sukardi

What Skills Do You Need To Be Rich?(4)

We can look at this four samples {0,0,10,10}, {9,9,1,1}, {6,4,4,6} and {5,5,5,5}.

The average for all of them is 5.

Standard deviations are5.77, 4.62, 1.15 and 0.

We can see that in the first sample value can change a lot and that it carries the highest risk.

The fourth sample doesn't carry any risk (value is always 5).

Therefore the smaller Standard deviation the better.

There is a theory that helps us to create the most efficient portfolio (meaning the best return rate and minimal risk).

For now we can say that if we have have to choose between two investment opportunities with the same return rate, we will select the one with smaller risk (ie. Standard deviation)

It is mentioned above that using a spreadsheet program can help a lot.


That means that some kind of Computer skills are necessary.

It is not necessary to be a programmer in NASA.


Basic level of computer knowledge is enough with some knowledge about spreadsheet programs (MS Excel, Open office Calc, or some something else).

Also you will need and access to the Internet, and have some Internet skills.

Expert knowledge is not required, just surfing and searching the net.

An that would be all for the beginning.



By Zoran Maksimovic

What Skills Do You Need To Be Rich?(3)

The next step is to compare two investment opportunities (or more of them).

There are basically several parameters involved.

The main parameter is Return rate and it means how much return will I get after certain period of time (usually after one year).

It is usually calculated as a percentage of the invested amount.

The greater percentage means better results.

For example, Return rate of 10% means that if you invest 1000$, after one year you will have 1000$+1000$*10%=1100$.


It is also important to know how risky is a certain investment.

This parameter can be also calculated an is usually called the risk (quite obvious, isn't it).

Risk or volatility is calculated as a Standard deviation of Price history.

Standard deviation is a measure of how far are the members of the sample from the average of the sample.

More about Standard deviation you can find on http://en.wikipedia.org/wiki/Standard_deviation.

It might look horrible, but you can calculate it quickly using some spreadsheet program.



By Zoran Maksimovic

What Skills Do You Need To Be Rich?(2)

What does it have in common with being rich?

First of all, in order to be rich you must live frugally, therefore you should buy only products with the best price available.

To do this you should deal with the process of comparison on the fly.


Do you go to shopping with paper, pen and calculator?

Probably not.


Although it might not looks like that, the same process and skill are used in the process of investing.

You should invest only in the best opportunities,

or to say it the terms of price you should buy only the best investment opportunities.




By Zoran Maksimovic

What Skills Do You Need To Be Rich?(1)

It might be obvious, but you should have some math skills.

First of all you should know the for basic operations and how to deal with the percentages.

Of course, you need to know to read and write. "Hey, I am not a moron!" you probably think, but having this skills is a must.

Why?

Look at this situation: you want to buy XY-Cola and you find that you can get

A) one pack with six cans for 10$ or

B) one pack with 8 cans for 12$. Which one should you buy?

The point here is to determine how much a single can costs.

For A) that is 10$/6 and for

B) it is 12$/8. And what now?

You should compare the numbers 10/6 and 12/8 with some help of calculator you can find that in the first case the cost of a single can is 1.66$ and in the second case it is 1.5$.

That means that the second offer is better.

By Zoran Maksimovic

3 Important Things That Every Investor Must Remember

One should never believe in rumors or tips about a certain stock or a particular company.

Almost 50 percent of companies have promoters and brokers assigned with the responsibility of promoting stocks.

They tend to attract shareholders with this strategy and eventually sell off their stocks at a higher price.

These stocks are bound to crash in the future resulting in heavy losses.

These promoters will have their money and will then try to sell some other stock.

They end up making a profit using this method every time and it is the individual investor who ends up suffering a loss.


It is very important to do a thorough research about a particular company before putting investment in its stocks.

You must always use your brain rather than relying on the advice from others.

You should always ignore newsletters, bulletins and press releases while trying to dig out facts about companies.


It is better to start small while trading stocks in the stock market.

You should only invest money that you can honestly afford to lose.



By Kum Martin

3 Important Things That Every Investor Must Remember

A stock can be simply defined as a share in the ownership of a company.

A stock represents an investor's claim on the company's assets and earnings.

More the number of stocks an investor holds, more will be the ownership stake in that company.

Hence, it is important to understand the nuances of stock market.

Knowing the basics of stock market is even more important for newbies so as to avoid risks and losses.


Listed below are three most important aspects that investors should always remember under any situation while trading in a stock market.




By Kum Martin

The 5 Year Bull Market Myth!(5)

So while the 5 year bull market did happen for a lucky few, chances are if you have been a long term investor over the last seven years you have barely broke even.


How much better off could you have been if you had invested in safer, less volatile, or even risk free alternatives.

Before you get ready to listen to the market makers or mutual fund marketers make sure you know the facts.


Don't get sucked into the hype of the mythical 5 year bull market.


If you are not sure exactly how well your investments are doing you may want to seek out the assistance of a qualified advisor

A)who can tell you not just what your fund has averaged over the last 5 or 10 years but

B)who can help you analyze what your true return has been and if you are as far ahead as you think or if it may be time to reevaluate your holdings.


While blinders may work well for horses they can be devastating to investors.




By Antonio Filippone

The 5 Year Bull Market Myth!(4)

If you would have invested your money directly in the S&P 500 on January 3, 2000 to October 8, 2007 for a little over 7 years your compounded annual growth rate would have been .96% during the entire period.


Not even one percentage point.


Now that is a market that suddenly does not look so bullish does it?

And all we did was look back an additional two years.

What if we looked ahead?


What would the S&P 500 Index have to do over the next two to three years so that by 2010 this investor would actually be able to justify all of the risk that he/she just took over this 10 year period?


If by the year 2010 the market increases by 50% this lucky investor will have an effective 10-year rate of return of a whopping 4.20%!



The truth of the matter is that the next 3 years have to be incredible just to provide long term investors with somewhat competitive results.


Returns that they could have otherwise achieved with much less risk and much more certainty.




By Antonio Filippone

The 5 Year Bull Market Myth!(3)

What if we were to go back just 24 months to the year 2000.

In fact let's go back to January 3, 2000 when the S&P 500 index closed at 1,441.47.

Let's assume that this just so happened to be the date that you decided to invest your hard earned money into the market.

Would you still be up 14.19% per year on average?

Hardly.


In fact you would have spent two years with a stomach ache watching your money decline as the market dropped to the bottom on September 30, 2002.

In fact you would have lost 42.6% of your investment.


Could you afford to lose that much money in so short a time?


But some may argue that this was only a paper loss and if they would just hang in there until the market rebounded they would be fine.


The truth is the market did rebound but with what effect?




By Antonio Filippone

The 5 Year Bull Market Myth!(2)

First let's look at this so called bull market and why it has been deemed as such.


Going back about 5 years ago to September 30, 2002 the S&P 500 closed at 827.37.

Flashing forward just a little over 5 years to October 8, 2007 the S&P closed at 1,554.41.

When you ad that all up it equals an attractive annual growth rate of 14.19% per year.

Wow you might say, what's wrong with 14%, sign me up!


The problem is no one is telling you the entire truth.

In fact this is a dangerous story if market makers and mutual fund promoters use this information to influence countless investors to invest in the market without considering the true risks and the effects these risks will most likely have on their returns.

Let's take our blinders off for a moment and consider the long term implications of this mythical market.




By Antonio Filippone

The 5 Year Bull Market Myth!(1)

If you like to read about the stock market you may have seen some recent articles about the so-called bull market we have experienced over the last 5 years.

One of the problems with looking at the market with such a short term view is we fail to see the whole picture.


I liken it to the horse wearing blinders effect.

Not that I get out to the horse races much but if you have ever been to one you will notice that they put these things called blinders on the horse's eyes so they will not get distracted during the race.

Sometime our gut reactions as humans make us act just like those horses wearing blinders and we tend to see only what has happened lately.

This is exactly the case of the mythical 5 year bull market and this phenomenon can be very dangerous to the novice as well as the experienced investor. .




By Antonio Filippone

Are We in a Recession?(3)

Just ask Mr. Want to be Homeowner, who wants to purchase a house over $417,000.

He needs to be an acrobat to jump over all the hoops his bank or mortgage companies present him.

Another obvious sign is the Falling stock prices.

We are below the 200 day moving average.

This is a line of demarcation.

If we are above one could say the market is healthy and conversely if we are below, the market is sick.

Another example is the ISM Purchasing Managers Index.

Your guess?

It is in the low 50's.Are purchasing managers going on a buying spree? Nope!

Not to bore you, when you last filled up your car with gas; did you have shock once you finished filling up?

How about our favorite grocery store, Prices are also going up.

The additional price of gas has and will affect everything.

There is just so much money in our wallets and so much we can press onto our credit cards.

So how do splurge on ourselves and buy all kinds of cool new things. Do we need to take a step back?

The biggest catalyst of the US economy is the consumer.

So if we tighten up our spending what is the catalyst for the US economy.

This seems to be happening as Consumer confidence is waning.

can listen to the economists who have a very poor track record or we can simply look at the facts.

We are either in a Recession now or the throes of the oncoming onslaught of one.


Andrew Abraham

Are We in a Recession?(2)

Ask homeowners in Ft Myers Florida who can not even get people to look at their home after they have been lower the price time after time. Speak to the car salesman. It is not just Florida;

We could be in a RECESSION RIGHT NOW!

There exist tenable indicators present in every Recession.

They are logical and historically related to economic weakness.

Any one of them is not conclusive but when there is a confluence, the risk of Recession rises dramatically.

Every aspiring economist has learned about the Inverted yield curve.

Guess what ...

We have an inverted yield curves.

The 10-year Treasury yields no more than 2.5% above 3-month Treasury yields.

What about widening credit spreads?

There has been an increase over the past 6 months in the spread between commercial paper and 3-month Treasury yields, as well as between the Dow Corporate Bond Index yield and 10-year Treasury yields.

Do I need to ask if commercial loans to mortgages have been become more stringent?

Andrew Abraham

Are We in a Recession?

Recession Risk?

All one has to do is read any newspaper or listen to the TV and hear all the wonderful economic news.

Do I really need to mention all the issues ranging Sub prime, Housing crisis, or my favorite all the SIVs( Special Investment Vehicles or toxic paper that needs to be written off) that banks all over the world are holding.

When I even ponder the thought that the worlds largest banks and financial companies have a special pouch in which they place all their bad loans which they do not want to value, it is reminiscent of Enron and WorldCom.

An analyst from Royal Bank of Scotland estimated the potential write off of bad loans... sub prime or even commercial paper is from around 250 billion to 500 billion dollars.

Everyday seems to bring a surprise. Yesterday was E*TRADE...Who will be tomorrow?

The real funny thing( at least to me) recently a Blue Chip Economic Indicator report based on a group of economists came out and the consensus indicated expectations that growth will be sluggish into next year and NO RECESSION!

Never has this report been accurate to anticipate a Recession.



Andrew Abraham

CAN SLIM(13)

Institutional Sponsorship


Mutual funds and other professional investors represent the vast majority of trading activity in the market.

As such, they wield tremendous influence over stock prices, capable of sending their favored stocks up significantly.

Here, you'll learn how to spot stocks benefiting from "institutional sponsorship."


Winning Characteristics


A stock should show an increasing number of institutional sponsors in recent quarters (accelerating sponsorship).


A stock should have at least several institutional owners.

If there is no institutional sponsorship, it is likely the performance will be more run of the mill.


You want stocks owned by the most successful money managers, the ones who have a proven record for consistently selecting top-performing stocks at the right time.


Consider giving greater weight to those stocks being bought by top-performing mutual funds, either as new positions or add-on purchases.

CAN SLIM(12)

Leader or Laggard

Winning Characteristics


Look closely at the top 20% of industry groups (Investor's Business Daily tracks 197).

Our study of the greatest stock market winners show the best stocks generally come from the top 22% of industry groups.

Also, you want to avoid the bottom 20% of groups.

Historical analysis also shows stocks within the top half of all industry groups greatly outperform those in the bottom.


The best-performing stocks are generally No. 1 in their industry based on key fundamentals, including return on equity, annual earnings growth, pretax and after-tax profit margins and its relative price strength.

Look for confirmation of strength from at least one other company in the same industry group.


Look for leading stocks:

Our study of the greatest stock market winners found that all-star stocks had, on average, outperformed 87% of the market before they began their most dramatic price advances.

In a manner of speaking, if you want to find next year's winning stocks, look at the better-performing stocks today.


Once a general-market decline is definitely over, the first stocks to bounce back to new price highs are almost always your authentic leaders.

CAN SLIM(11)

Leader or Laggard


Our studies show that, on average, 37% of a stock's move is directly tied to the performance of the industry the stock is in,

and another 12% is due to strength in its overall sector.


That's why it's so important to track the performance of both industry and sector groups.


Leadership also refers to an individual stock's performance in the market.


Once you've identified the most powerful industry groups, the next step is to identify the strongest stocks in those industries.

CAN SLIM(10)

Supply and Demand(2)

Winning Characteristics

Watch the demand for shares by looking at the Volume % Change for each of your stocks.

It will show you immediately how much a stock traded vs. its average daily volume over the last 50 trading days.


For example, a stock that trades 100,000 shares on average will have a 50% Volume % Change if it trades 150,000 shares on the day.


Stocks closing at their highs for the day or gapping up in price can indicate strong demand.

Companies buying back their stock in the open market and companies showing stock ownership by management can be positive indications.

When a stock breaks out of a price consolidation area, trading volume should be at least 50% above its average daily volume, indicating strong demand.

In many cases, a strong stock breakout will see volume up 100% or more for the day, indicating solid buying and the possibility for further price increases.


Investing Tip:

A stock moving up in price on lower than normal volume could be a sign of weakness. Look for strong demand supporting price increases.

CAN SLIM(9)

Supply and Demand(1)


Our study of the greatest stock market winners validates what most investors understand.when demand for a stock outpaces supply, the price usually heads north.

The best way to measure a stock's supply and demand is by watching its daily trading volume.

When a stock rallies up in price, you want to see volume rise at the same time, which may represent institutional buying that can really power a stock's move.

When a stock pulls back in price, you want to see volume dry up indicating no significant selling pressure.

CAN SLIM(8)

New Products, New Services, New Management, New Price Highs(2)

Winning Characteristics


A stock that makes big gains often results from new products or services.

But be wary of unproven products, especially if the company management doesn't have a solid track record.

Superior management is essential to a company's success.

That's why often a shakeup at the top pushes a stock's price higher.

Quality stocks making new price highs just as they emerge from sound chart bases on higher volume are often likely to continue climbing, while stocks making new lows are probably headed even lower.

Therefore, focus on the new price highs list for the best potential opportunities.

You can think of a stock's price as a measure of its quality and, consequently, its potential.

Typically, stocks higher in price reflect higher quality.

Always be on the lookout for new products, new services, new management, or major improvements in industry condition.

CAN SLIM(7)

New Products, New Services, New Management, New Price Highs(1)

Explosive stock growth doesn't happen in a vacuum.

Usually, new products, new services, new management or new industry conditions propel stocks to new heights.

In its study of the greatest stock market winners, IBD discovered that more than 95% of the successes in American industry met at least one of the above criteria.

And, contrary to the beliefs of many investors, stocks that make the biggest price advances start their moves when they are already at or near new price highs.

By following the old adage, "buy low, sell high" investors would have missed out on most of the biggest stock successes in market history.

CAN SLIM(6)

Annual Earnings Growth(3)


How to Identify Companies with Superior Annual Earnings Growth and Other Strong Fundamentals

An SMR Rating™ (Sales + Profit Margins+ Return on Equity) is provided for every stock listed in Investor's Business Daily.

This rating combines four fundamental factors that research shows can influence a stock's price: sales growth rate over the last three quarters, pre-and after-tax margins,and return on equity (ROE).

The SMR Rating™ uses a simple A to E scale:

A = Top 20% (Outperforming 80% of all other stocks in these key fundamentals)

B = Next 20%

C = Next 20%

D = Next 20%

E = Bottom 20% (Under performing 80% of all other stocks in these key fundamentals).

CAN SLIM(5)

Annual Earnings Growth(2)

How to Identify Companies with Superior Annual Earnings Growth and Other Strong Fundamentals

An Earnings Per Share (EPS) Rating is provided for all stocks.

This proprietary rating measures a company's earnings performance by looking at its:

1) latest two quarters' earnings per share growth,

2) 3-year annual earnings growth rate, and

3) stability of annual earnings growth.

These factors are then weighted and compared to the same measures for all other public companies.

EPS Ratings are on a 1-99 scale, with 99 being highest.

An 80 EPS Rating, for example, indicates that a stock is outperforming 80% of all other companies based on earnings performance.

Seen another way, a stock with an EPS Rating of 80 is in the top 20% of all companies in terms of recent quarterly and annual earnings growth.

Research shows that the stocks that make the most powerful gains usually have an EPS Rating of 80 to 85 or higher.

CAN SLIM(4)

Annual Earnings Growth(1)

As we've seen, strong current quarterly earnings are critical to picking the market's biggest winners.

However, three out of four of the biggest winners in our research also showed at least some positive annual growth rate over the five years preceding the stock's big run-up.

We'll also look at other key fundamentals you'll want to consider.

Winning Characteristics

The annual earnings per share should show consistent growth over the past three to five years.

Look for average annual EPS growth of at least 20% to 25%.

Between 1980 and 2000, the median annual growth rate of all outstanding stocks in IBD's study of the greatest stock market winners, prior to big price moves, was 36%.

Look for stocks where each of the last three years shows an increase in annual earnings, with no one single-year being down.

It is also helpful to see either the annual pre-tax profit margin and/or the annual return on equity expanding.

Return on Equity (ROE) should be 17% or higher.

The last three quarters' sales should either show acceleration in the rate of increase and/or the latest quarter should be up at least 25%.

Investing Tip:

In a few cases you may accept one down year in the last five as long as the following year's earnings quickly recover and move back to new high ground.

CAN SLIM(3)

Current Earnings Growth(2)

How to Identify Companies with Superior Earnings Growth

Investor's Business Daily and investors.com make it easy to identify companies with superior earnings growth:

An Earnings Per Share (EPS) Rating is provided for all stocks in our database.

This proprietary rating measures a company's earnings performance by looking at its:

1) latest two quarters' earnings per share growth,

2) 3-year annual earnings growth rate, and

3) stability of annual earnings growth.

These factors are then weighted and compared to the same measures for all other public companies.


EPS Ratings are on a 1-99 scale, with 99 being highest.

An 80 EPS Rating, for example, indicates that a stock is outperforming 80% of all other companies based on earnings performance.

In other words, a stock with an EPS Rating of 80 is in the top 20% of all companies in terms of recent quarterly and annual earnings growth.

Research shows that the stocks that make the most powerful gains usually have an EPS Rating of 80 to 85 or higher.

CAN SLIM(2)

Current Earnings Growth(1)

Research shows that earnings growth is the single most important indicator of a stock's potential to make a big price move.

The stocks you select should show a major percentage increase in current quarterly earnings per share (the most recently reported quarter) when compared to the prior year's same quarter.


Winning Characteristics

Large increases in current quarterly earnings per share.

Look for these increases to be at least 25%. (Three out of four of the best-performing stocks in our research showed earnings increases of 70% or more in the quarter right before they started to make their huge price moves!)

Preferably, look for accelerating earnings in at least the three most recent quarters.

Check earnings consensus estimates to make sure the company is projected to be on a positive track.


Investing Tip:

The best stocks often have high - some would say ridiculous - P/E ratios when they start their big climbs.

If you weren't willing to pay the higher P/Es, you eliminated most of the best stocks of all time.

CANSLIM(1)

What is CAN SLIM?

CAN SLIM is IBD's checklist for the seven common characteristics all great performing stocks have before they make their biggest gains.

You can significantly reduce your risk and increase returns by using the CAN SLIM Investment Research Tool as a fact-based performance checklist to evaluate a stock before you buy.

C= Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters.

Quarterly sales should also be up 25% or more or accelerating over prior quarters.

A= Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.

N= A company should have a new product or service that's fueling earnings growth. The stock should be emerging from a proper chart pattern and about to make a new high in price.

S= Supply and demand. Shares outstanding can be large or small, but trading volume should be big as the stock price increases.

L= Leader or laggard? Buy the leading stock in a leading industry. A stock's Relative Price Strength Rating should be 80 or higher.

I= Institutional sponsorship should be increasing. Invest in stocks showing increasing ownership by mutual funds in recent quarters. IBD's Accumulation/Distribution Rating gauges mutual fund activity in a stock.

M= The market indexes, the Dow, S&P 500 and Nasdaq, should be in a confirmed up trend since three out of four stocks follow the market's overall trend.

Key Fundamentals: Sales, Margins, Return On Equity(8)

Profit Margins: Another Way To Assess Earnings Performance(3)

The rule of thumb for all companies except retailers: seek companies with annual pretax profit margins of at least 18%.

After-tax margins should be at all-time highs for the company or within 10% of the high.

Of course, increasing profit margins alone don't make for a good investment.

You need to keep an eye on all the key fundamentals, such as earnings growth.

Rising profit margins mean little if sales are dropping, unless there's a change in strategy and the company drops inefficient product lines, for example.

Also, if margins start trending lower, it could indicate the company is losing ground to competition.

One other note:

increasing profit margins aren't the same thing as increasing earnings, as we've shown with the above examples.

Suppose a company earns $10 million from $100 million in sales, resulting in a 10% profit margin.

The next quarter it earns $10 million from just $80 million in sales, for a 13% margin.

You see how a higher margin doesn't automatically mean bigger profits?

Key Fundamentals: Sales, Margins, Return On Equity(7)

Profit Margins: Another Way To Assess Earnings Performance(2)

Let's take profit margins one step further.

There are two types of profit margins.

One is called the after-tax margin, and it calculates the percentage of earnings that come from sales after taxes have been paid.

Let's take one company that earned $10 million from $100 million in sales.

This gives it a profit margin of 10%.

What if this company had to pay $2 million in taxes?

What would that do to the margin?

Well, deduct the $2 million tax payment from the $10 million in earnings and you've got $8 million in earnings.

Divide that by the $100 million in sales, and the margin is now only 8%.

The other type of margin is the pretax profit margin, and -- you guessed it -- it ignores the taxes a company pays.

Analysts and investors scrutinize both numbers.

Some prefer pretax margins because they show realistic profitability without the distortion of varying tax rates.

Key Fundamentals: Sales, Margins, Return On Equity(6)

Profit Margins: Another Way To Assess Earnings Performance(1)

Profit margins are the portion of a company's sales that end up as earnings.

As an investor, look for companies that generate an increasing percentage of profit out of every dollar of sales.

The larger the margin, the better a company is at managing and leveraging its business.


Studies of the greatest winning stocks revealed that most showed strong and even expanding profit margins before they made huge price moves.

The best small and midcap stocks of the 1996-97 period had after-tax profit margins, on average, of 10% in the two quarters right before they made their main price gains.

For big-capitalization stocks, the margins were 13%.

Profit margins can be a major clue in finding the best stocks to buy, although the numbers vary widely among industries.

For example, retailers tend to have smaller profit margins.

Whatever the exact numbers, a company's margins should be among the best in its industry.

Key Fundamentals: Sales, Margins, Return On Equity(5)

Watch For Pitfalls In Sales Figures

Sometimes sales numbers mask problems at companies.

Companies may rely on just a handful of customers, and losing any of them may mean big trouble.

Other companies are overly reliant on overseas markets, putting them at risk of bad economies or political strife abroad.

Also, fluctuations in foreign-exchange rates can seriously dilute sales figures.

Some companies, such as pharmaceuticals, get the bulk of their sales from a few flagship products.

If sales in these items falter, it could mean more trouble than if the overall sales drop.

With retailers, additions of new stores increase the sales figures, even if sales at existing stores slow down.

That's why retailers report total sales as well as same-store sales, to provide an apples-to-apples comparison.

Another pitfall happens when companies include sales that haven't actually taken place.

Orders that won't be shipped or paid until weeks or months later sometimes are added to the sales total to inflate results.

Key Fundamentals: Sales, Margins, Return On Equity(4)

It All Starts With Sales(3)


Take a look at some companies that have done just that:

Nokia

Nokia began a 630% jump from March 1998 through December 1999 and continued rising into 2000 after the wireless-phone maker reported sales gains of 9%, 12% and 19% in the three quarters leading up to the big move.

Earnings were rising sharply during this period, too.



Home Depot

Home Depot made a 698% move from June 1982 to June 1983.

Its sales grew 104%, 158%, 191% and 220% respectively over the four quarters leading up to this major stock-price jump.


EMC Corp
EMC, the maker of memory chips, rose 512% from September 1992 to October 1993 as sales in the four quarters before this huge move rose 30%, 46%, 54% and a hefty 267%.



How high should sales growth be?

The three most recent quarters should each have strong sales growth of at least 25% compared to their year earlier quarters.

Otherwise, sales growth should be accelerating in the last three consecutive quarters.

Key Fundamentals: Sales, Margins, Return On Equity (3)

It All Starts With Sales(2)

Demand is driven by a number of factors,

a)including larger numbers of customers,

b)customers increasing their purchase volume,

c)introduction of new products,

d)expansion into new markets and

e)the improvement of existing products.

The top-performing companies show consistent double- or triple-digit sales growth.

It's even better when the percentage growth rate increases quarter after quarter.

Such acceleration is the hallmark of quality growth companies.

They reflect a well-managed organization.

Key Fundamentals: Sales, Margins, Return On Equity (2)

Sales growth, profit margins and return on equity are vitally important in evaluating a company's health.

It All Starts With Sales


Sales figures are a key measure of a company's strength -- or

lack of it. Perhaps no other piece of financial information reflects growth better than sales:

the money that comes into a company from products sold or services rendered.

If a company is run efficiently, sales growth essentially drives earnings growth.

Companies basically have two ways to increase earnings.

They either increase sales, reduce expenses or ideally do both.

Although a well-managed company controls expenses, healthy sales are the main engine for growth.


When you search for the best stocks, you want a company to have strong sales growth to support its earnings growth.

Think of sales growth as the foundation under your house: if it is loose, it's not as stable as one with all the structural elements in place.

When you see a company increasing its sales,

it's telling you its business is drawing larger demand and is structurally sound and prepared to expand and generate the earnings capable of boosting its stock price.

Key Fundamentals: Sales, Margins, Return On Equity(1)

Assess Your Knowledge
1.If a company's earnings per share growth has been accelerating for several quarters, then sales growth is not a critical factor to consider.

True
False


2.A company showing increasing profit margins is, by definition, also increasing its earnings growth.

True
False


3.Even if a company's most recent sales growth is less than 25%, at least three to four quarters of accelerating sales growth also indicates a solid trend.

True
False


4.Profit margins and ROE are often misleading performance indicators since they vary from industry to industry.

True
False


Answer

1. False
2. False
3. True
4. False

How To Select The Right Stocks At The Right Time(14)

Test Your Knowledge

1.You want to focus on stocks with a minimum Earnings Per Share Rating of _____.

A) 60
B) 70
C) 85
D) 90

2.What is the minimum annual EPS growth rate you should look for each of the past three years?

A) 15%
B) 25%
C) 50%
D) 70%


3.Which of the following indicators generally has the least impact on a stock's price?

A) Quarterly earnings growth
B) P-E ratio
C) Annual earnings growth
D) Quarterly earnings growth acceleration


4.What is the minimum EPS growth rate you should look for in the most recently reported quarter?

A) 25%
B) 40%
C) 70%
D) 99%

5.A study of the biggest market leaders showed these stocks had a current quarter EPS growth rate of ______% prior to their major advances?

A) 25%
B) 40%
C) 70%
D) 99%


Answer

1. C) 852.
2.B) 25%3.
3.B) P-E Ratio4.
4.A) 25%5.
5.C) 70%

How To Select The Right Stocks At The Right Time(13)

Key Points To Remember

Insist on the best earnings performance, not just a promise of earnings. This way, you will pick stocks with the best probability of making Yahoo-like gains.

Look for companies reporting earnings growth of at least 25% in the most recent quarter.

Find companies with earnings that have accelerated in the three or four most recent quarters.

Identify stocks with annual earnings growth of at least 25% over each of the previous three years.

Focus on EPS Rating for a quick way to evaluate a company's earnings. EPS Ratings of 85 or higher are best.

Don't overemphasize the price/earnings ratio as a way to compare a company's stock relative to its earnings.

How To Select The Right Stocks At The Right Time(12)

Corporate Earnings Reports(2)

When it comes to analysts' estimates, you want to see forecasts that represent positive indications of growth.

But remember, these are only estimates, and they are no substitute for a track record of past performance.

Daily Graphs includes earnings estimates.


One other point:

Investors should also be wary any time a company announces "record earnings."

If you think about it, a company could be growing at just 2% or 3% and still have its best-ever quarter.

You don't just want earnings to be better than the year before;

you want to see remarkable gains.

How To Select The Right Stocks At The Right Time(11)

Corporate Earnings Reports(1)

Companies report their earnings every three months, and are widely disseminated soon after their release.

Investor's Business Daily publishes a comprehensive list of the prior day's earnings reports, separating those posting earnings gains from those reporting lower results.

The number of companies in each of these categories helps you get an overall idea of the profitability of U.S. corporations.

The earnings table shows the percentage above or below analysts' consensus estimates,

and arrows indicate whether there's been acceleration (up) or deceleration (down) in earnings or sales growth compared to the prior quarter.

Any increase of 25% or better is boldfaced in the "EPS % Chg" column.

The company's entire line is boldfaced when the EPS growth is more than 25%, the EPS Rating is more than 85 and the earnings were better than expected.

How To Select The Right Stocks At The Right Time(10)

Watching For Pitfalls(2)

Would you have purchased these "high" P/E stocks?


Stock P/E Ratio before advance

Amgen 300 (Up 650% in 22 months starting March 1990)

America Online 205(Up 557% in six months starting October 1998)

Mindspring 157(Up 237% in five months starting November 1998)

Ascend Communications
49 (Up 1,380% in 15 months starting August 1994)

MCI Communications
42(Up 266% in 17 months starting April 1988)

If you weren't willing to pay the higher P-Es, you eliminated some of the best stocks of all time.

Myth: It's better to get into an unprofitable company's stock before the company turns around and other investors discover it.

Again, studies tell you established companies that can't make much money for themselves can't make much money for investors.

Even in late 1990s, when it seemed any stock with a dot-com name could surge without the slightest hint of profitability,

a track record of good earnings growth still won the day.

Research has shown most Internet stocks with earnings growth outperformed their counterparts posting losses.

How To Select The Right Stocks At The Right Time(9)

Watching For Pitfalls(1)

Investors can easily be misled by popular myths about earnings.

Myth: You should buy stocks with low price-to-earnings (P-E) ratios.

The P-E ratio is a comparison of the stock's price to its annual earnings per share.

For example, a stock quoted at $50 a share with annual earnings of $5 per share has a P-E ratio of 10.

In other words, the stock is selling at 10 times its annual earnings.

Conventional wisdom says stocks with higher P-E ratios are overpriced and should be avoided.

But the truth is that the best stocks often have high — some would say ridiculous — P-E ratios when they start their big climbs.

And they continue having high P-Es throughout their advances.

How To Select The Right Stocks At The Right Time(8)

Evaluating Earnings(1)

Unless you have time to sift through endless earnings reports, odds are you'll miss out on those companies announcing superior earnings.

And how do you know the difference between a one-hit wonder

and a potential stock market winner when you are looking at raw earnings numbers on thousands of companies?

Investor's Business Daily compares the earnings performance of all domestically traded stocks each day using its proprietary Earnings Per Share Rating.

The EPS Rating measures each stock on a scale of 1 to 99 (99 being best) for a quick assessment.

An 80 EPS Rating means that stock is outperforming 80% of all other stocks based on earnings growth.

Seen another way, a stock with an EPS Rating of 80 is in the top 20% of all stocks in terms of recent quarterly and annual earnings growth.

Our research shows that the stocks that make powerful gains usually have an EPS Rating of 80 to 85 or higher.

How To Select The Right Stocks At The Right Time(7)

So, Here's What You Want To Look For When Researching Your Stocks:


Quarterly earnings-per-share growth of at least 25% over the same quarter the year before.


Preferably, accelerating earnings in the three most recent quarters.

Annual earnings-per-share gains of at least 25% over the past three years.


Strong companies with good management teams, innovative products and leadership in their industries boast the best earnings and reflect the best investing potential.


Remember, in a good market, the opportunity of a lifetime stock can come along every two or three weeks.

How To Select The Right Stocks At The Right Time(6)

Acceleration Is Also Important


Many stocks that make major advances have another trait.

Their earnings accelerate over the previous three or four quarters.

Acceleration represents an increase in the earnings growth rate quarter over quarter.


Shares of Cree Inc., the maker of semiconductor devices, were at $20 in May 1999 when it began an ascent that took it past $100 by early 2000.

Before this jump began, its quarterly earnings grew 67%, 71% and 86%.

Improving bottom-line growth, such as Cree's, nearly always precedes a burst in stock price.

What's important to realize about this is that it's not just rising earnings that make a good stock.

The key is to focus on companies whose earnings may be drawing professional investors' attention --

the phase when a stock prepares to spring higher.

How To Select The Right Stocks At The Right Time(5)

What Are Earnings?


Earnings, also called profits or net income, are what a company makes after paying all its obligations, including taxes.

Companies often conclude their quarters at the end of March, June, September and December, though some companies end their quarters in different months.


Companies report their earnings in two ways:

i) a bottom-line total and

ii) a per-share amount.

The per-share figure is calculated by dividing the total earnings by the number of shares outstanding.

Example: XYZ Corp., with 45 million shares, reports earnings of $35.8 million, or 80 cents a share.

The per-share amount is most relevant for investors.

How To Select The Right Stocks At The Right Time(4)

Earnings: The Indispensable Element Of Great Stocks(4)


Three out of four companies averaged earnings increases of 70% or more in the quarter right before they started to make a huge price move.

Three-quarters of these top stocks showed at least some positive annual growth rate over the five years before their major price move.


This research continues today, and consistently confirms the original findings about the significance of strong earnings growth.

The study also reinforces that under countless market conditions over the years, the selection criteria still work today when searching for winning stocks.

When it comes to investing, start with a look at a company's quarterly and annual earnings record.

How To Select The Right Stocks At The Right Time(3)

Earnings: The Indispensable Element Of Great Stocks(3)

See a pattern here?

A study of the greatest stock market winners dating back to 1953 looked at all the biggest stock winners - stocks that doubled, tripled, and even went up even more.

This was a comprehensive study that analyzed every fundamental and technical variable.

What emerged were seven common characteristics among the big winners with earnings growth being the most significant factor.

(The other winning factors from the study are discussed in subsequent course lessons.)

How To Select The Right Stocks At The Right Time(2)

Earnings: The Indispensable Element Of Great Stocks (2)

Yahoo surged 458% in seven months starting September 1998.

Right before this phenomenal move, Yahoo reported three quarters of earnings growth of 400%, 500% and 800% -

clear indications that this stock was building a strong track record and poised for further growth.


Mindspring surged 237% in five months starting November 1998.

In the three quarters prior to this, it reported earnings growth of 140%, 233% and 800%, respectively.


Brooktrout Technology Inc., a maker of software and hardware for networks and telecommunications systems, catapulted 230% over 23 weeks starting in December 1995.

The three quarters before this great move saw earnings growth of 31%, 47% and 100%.

How To Select The Right Stocks At The Right Time(1)

Earnings: The Indispensable Element Of Great Stocks

Research shows that earnings growth is the single most important indicator of a stock's potential to make a big price move.

You'll learn how to find the companies with the best earnings growth and avoid some pitfalls that trick many investors.

Why Earnings Growth Is So CrucialHow many times have you kicked yourself for passing up a great stock like Microsoft or Home Depot?

There were tell-tale signs that these winners were about to make major moves before they became household names.

First Rule Of Investing:Cutting Losses(7)

Q: Why did you pick 8% as the rule?

O’Neil:

If you cut your losses at 8%, it will always allow you to survive to invest another day.

I’ve seen people go bankrupt or ruin their health because they’d fallen in love with a stock, couldn’t face up to and admit mistakes, and couldn’t make the hard sell decisions.

Vacillating when it comes time to sell is how you will sooner or later experience big losses.

And big losses will cause you to lose your confidence, which you absolutely cannot let happen if you expect to continue investing.

If you’re worried, the old adage, “Sell down to the sleeping point,” is the best way to relieve some pressure.

You don’t have to sell it all, just sell something so you can sleep.

If you cut all your losses at 7% or 8% below your purchase price, and then sell just a few of your stocks when you’re up 25% to 30%, you can be right once and wrong twice and still not get into trouble.

Your best-performing stocks should be held longer for a larger possible profit.

Always sell your worst-performing stock first, not your best-performing stock.


Investor's Business Daily

First Rule Of Investing:Cutting Losses(6)

Q: How persistent have you had to be at times?


O’Neil:

I once had a string of 10 stocks that I cut losses on.

But the very next one emerged just as the market came out of a correction (downtrend) and more than tripled in price.

I’ve often thought: “What would have happened if I had gotten discouraged and quit because the previous 10 stocks didn’t work?”

The tricky part is getting rid of the emotion attached to making decisions, like cutting losses.

It doesn’t feel comfortable to sell something you may have purchased only a few weeks ago because it’s now down 8% below your cost. Emotions take over.

We try to defend our original decision to buy and justify holding the stock.

But you can’t go through life looking in the rear-view mirror.

You can get yourself in a lot of trouble with the “could’ves,” “would’ves” and “should’ves.”

When you bought the stock, that was last week or last month — not today.

Today is a whole different situation, and you’ve got to protect yourself from serious losses — which could happen to anyone — so you can still invest tomorrow.



Investor's Business Daily

First Rule Of Investing:Cutting Losses(5)

Q: How long did it take you to become successful at investing?

O’Neil:

It took me two to three years to figure out how to put the whole system together.

It doesn’t happen overnight.

For most people the learning curve is about the same.

As the years go by, you should get better and better at stock selection, and the number of individual 7% or 8% losses should drop.

Plus, these small losses will be offset by much larger profits from your winners.

Think of a number of controlled losses as your tuition to Wall Street.

Most people think that investing in a college degree is a sound decision.

They don’t think of it as a waste of money because they have hopes of having that degree pay off in future success.

Why should success in the stock market be any different?

Anything worth succeeding at takes time to learn. Professional ballplayers aren’t made in three months, and neither are successful investors.

The only difference between the successful person and everyone else is determination and persistence.


Investor's Business Daily

First Rule Of Investing:Cutting Losses(4)

Q: How do you define short?

O’Neil:

For Loeb, it was 10%, which is probably a good rule for most beginning investors.

But when you use charts to time your purchases more accurately,

I recommend cutting all losses at 7% or 8% below your purchase price.

By doing this, you’re taking out little insurance policies to protect yourself from possible substantial losses.


If you let a stock go down 50% from where you bought it, you must make 100% on the next stock just to break even.

Now, how often do you buy stocks that double in price?



Investor's Business Daily

First Rule Of Investing:Cutting Losses(3)

To make matters worse, when you do cut losses, half the time the stock will turn around and go back up.

Then you’re really upset.

You conclude you were wrong for selling and that the loss-cutting is a bad policy.


How you think about losses is critical.

Historically, this is where most investors go wrong and get confused.


Ask yourself the following:

Did you buy fire insurance on your house last year?

Did your house burn down?

If it didn’t, were you upset because you wasted your money on the insurance?

Will you refuse to buy fire insurance next year?

Why do you buy fire insurance in the first place, because you know your home is going to burn down?

No! You buy insurance to protect yourself against the remote possibility you could suffer a major loss.

That’s all you do when you cut short your losses.


Part 2


Investor's Business Daily

First Rule Of Investing:Cutting Losses(2)

Q: What is the single most important thing an investor should know?


O’Neil:

Loeb was a highly successful investor and preached cutting all your losses short.

And for me, this is Rule No. 1.

You must always protect your investment account.

Particularly if you invest on margin (use borrowed money), cutting losses is absolutely essential.

Whether you’re a new or experienced investor, the hardest lesson to learn is that you’re simply not going to be right all the time.

And if you don’t cut every loss quickly, sooner or later you’ll suffer some very large losses.

I’ve known seven highly intelligent, educated men in their 40s who were wiped out because they invested on margin and had no sell discipline.

Brains, education, ego, stubbornness and pride are deadly substitutes for having and following sound selling rules.

The problem is, you always hope to make money when you buy a stock.

And when you have to sell and take a loss, you find it gut-wrenching and hard to admit you were wrong.

You’d rather wait and hope the price will come back.

Part 1

Investor's Business Daily

First Rule Of Investing:Cutting Losse(1)

Before founding Investor’s Business Daily in 1984, Bill O’Neil already had 25 years of experience in the market as an individual investor, stockbroker, investment adviser and owner of a securities brokerage and research firm.

His career started at age 22, just after he graduated from college, got married, joined the Air Force and became interested in his financial future.

He bought his first stock with $500 — all he had at the time.

He also started reading books on the market. According to O’Neil, the best was Gerald Loeb’s “Battle For Investment Survival.” It’s there we pick up our conversation.

Investor's Business Daily

Stock Market Fear And Volatility Factor(4)

If nothing has changed in variables that determine future outlook and demand from the past during a market uptrend, your stock may be on sale.

You must look at the technicals as well.

At this point they most likely are broken down. A new down trend is most likely developing.

At this point you should look at past support areas and if the downtrend is broken at these areas of support this may be a good entry point.

We are not suggesting to pick bottoms, but to deploy capital on the way down in the extreme oversold conditions.

If you are a more advance trader options work well in these setups to reduce risk.


Bottom line, in the end supply & demand determines a stock's price, not fear.

It takes time to develop the skill to control your fear and in time you will improve this skill.

This important factor of fear will play a part in the determination in one success in the markets.



By Justin Blasi

Stock Market Fear And Volatility Factor(3)

Fear is a great variable in which you can use to your advantage.

Not your fear of course, but the fear of others.

When the market or a stock is selling off and they become undervalued this gives us great entry points and trading set ups.

Fear must be controlled to master the market.

I say controlled, because you will never eliminate this human factor that is a part of all of us,

and anyone who claims they can eliminate fear or just does not feel it is ignorant and will fail in the greatest game on earth.

Remember to look at a stocks fundamentals, and ask yourself is there any new factors in the stock or its sector that will affect the future demand of its services or products.


By Justin Blasi

Stock Market Fear And Volatility Factor(2)

Fear, this is a huge variable in the markets along with recent volatility levels.

Also a lack of knowledge in the financial sector is a great reason we have been experiencing big swings in the market.

Traders and investors are missing a piece of the puzzle that would show the current state of the markets.

With this situation we have a great amount of speculation, which is not a bad thing for some, but increases fear in some traders and investors.

In turn we believe there is a lot of cash sitting on the side line now and this can be a good thing for the future.

All of these variables cause these recent huge swings in the markets.

There was indication of this yesterday near the end of the trading session.

When the financials did a huge reversal, the markets intraday fear and speculation turned as well so this caused the market to turn in parallel with the financials.


By Justin Blasi

Stock Market Fear And Volatility Factor(1)

What an exciting day yesterday was in the markets.

How can I say exciting?

Well an extremely volatile day like yesterday is an intraday trader's haven.

However this may be the market place for the proactive intraday trader, but what are thoughts, strategies, and feelings for the average retail swing trader?


Elite Trading & Speculations outlook has not changed, and if you have read our previous essay our strategy is playing out.

Tech has had a great run up and we took money off the table;

our outlook for tech is the same so we will redeploy capital back into this sector once a correction has been set.

Consumer staples had a great day and this was due to reports and analysis suggesting a domestic slowdown,

however this is nothing to fear causing you to pull money out of perfectly good stocks.




By Justin Blasi

What Are Oil Futures And How Do They Work(4)

Futures trading in oil is a way of planning future trades with the goal of making a profitable trade.

In the present time, the investor simply has to look at the price he paid for an oil commodity purchase, and compare it to the current market price.

If the market price is higher than the sales price, he can make a profit by selling.

If the market price is lower than the original purchase price, he can hold on to the shares, or sell them for a loss.

If oil trading prices are unfavorable now, oil futures trading is a way of setting up a trade to occur at a later date,

in the hope that the market will be more profitable on that future date.



By BIG Mike

What Are Oil Futures And How Do They Work(3)

Assume an investor buys an oil future contract.

This means that the investor has committed to buying a fixed amount of oil at a fixed price at a defined future date.

If the price of oil rises between the time of the initial futures contract and the date of the sale, then the investor will make a profit.

Conversely, if the oil's future price is lower than on the date the futures contract was created, the investor will lose money.


By BIG Mike

What Are Oil Futures And How Do They Work(2)

Futures can also refer to the markets on which oil futures and other commodity futures are sold.

It is estimated that there are more than seventy five worldwide futures trading markets.

Some of these oil future trading markets include the


a)Chicago Board of Trade (CBOT),

b) the International Petroleum Exchange (ICE),

c)the London Commodity Exchange,

d)Tokyo Commodity Exchange or TOCOM, and

e)the New York Mercantile Exchange or NYMEX.


Oil future trading can be found on all these markets.


By BIG Mike

What Are Oil Futures And How Do They Work(1)

Oil futures, and the futures market in general, can be difficult concepts to understand for the non investor.

A future is a contract to buy or sell a specified amount of a commodity or similar product at a predefined price.

This sale is set to take place at a specified future date.

In the case of an oil future, this arrangement effectively sets the price at which the oil will be bought or sold on the future expiration date.

It is a way for investors to guess at the future prices of commodities, in the hope of making a profit.

It is also a way for businesses and consumers to purchase bulk commodities at a fixed price for planning purposes.



By BIG Mike

Crude Oil Future Prices.(3)

In the UK, crude oil futures are regulated by the Financial Services Authority.

India has the Securities and Exchange Board of India.

The Australian Securities and Investments Commission regulates the Sydney prices of crude oil prices.

In the U.S., regulation is performed by the Commodity Futures Trading Commission.

All these futures exchange agencies ensure that contracts for crude oil future prices are executed exactly as stated in the contract's terms.



By BIG Mike

Crude Oil Future Prices.(2)

There are several dozen futures trading markets around the world.

They exist in different countries and are governed by that country's rules.

However, the international markets are all interconnected, so the rules for trading and setting crude oil futures prices are expected to be similar between countries.

The International Petroleum Exchange trades crude oil and other energy commodities.

The TOCOM or Tokyo Commodity Exchange is located in Japan.

There is the Sydney Futures Exchange in Australia and the Chicago Board of Trade in the U.S.

All these markets have rules in place to prevent exploitation of crude oil future pricing.



By BIG Mike

Crude Oil Future Prices.(1)

Investing in crude oil future prices is a way of guessing whether the price of crude oil will rise or fall in the future.

Many commodities are traded this way.

A crude oil futures investor signs a contract to buy a given number of oil shares for a given price at a future date.

On that date, the crude oil future contract is executed, and the investor determines whether the investment is a profit or a loss.

This is far different from regular stock market trading, in which shares are bought and sold for the current price only.

The whole crude oil future investing process appears to be a free for all. Investors guess at crude oil's future pricing, and make promises to buy oil shares at those prices.

What happens if the investor changes her mind?

What are the consequences if the investor refuses to buy the shares because the crude oil future price is unfavorable?

There are agencies in several countries with the responsibility to regulate future prices of crude oil and other commodities.



By BIG Mike

Current crude oil prices(4)

Crude oil is a worldwide resource, so blame for the current crude oil price must be placed globally as well.

Some oil producing countries will lower production for no reason.

Others have manipulated crude oil prices apparently out of spite.

Still others use more crude oil than they produce, simply because they don't have the oil resources of other nations.

Oil is a limited, non-renewable energy source.

It must be used and managed responsibly by all nations so that current crude oil prices become more reasonable for everyone in every nation.




By Big Mike

Current crude oil prices(3)

Many circumstances have united to cause the current crude oil high prices.

One was Hurricane Katrina, which disabled much of the offshore oil drilling capacity in the Gulf of Mexico.

Another is the continuing political unrest in the Middle East, a major oil producing region.

There were radical attacks in the U.S., with the subsequent American retaliation.

Major political upheavals, war, and even rumors can spark stock market activity which can drive the current oil prices even higher.

Many events, real or imagined, can negatively affect crude oil's current price.



By Big Mike

Current crude oil prices(2)

Consumers are also bearing the burden of the current high crude oil prices.

Citizens of many countries became accustomed to extremely cheap gasoline to fuel their trucks and sport utility vehicles.

Naturally the current near-record crude oil prices lead to equally high gasoline prices.

Fuel used to be a negligible expense.

Now it is a large budget item for cash-strapped consumers.

Although small car and hybrid car sales are climbing, both types of vehicles are dependent on high-priced fossil fuels.



By Big Mike

Current crude oil prices(1)

Current crude oil prices have hit record highs in the past several years.

Oil prices remain high, placing a financial burden on businesses and consumers alike.

Manufacturing, transportation, service industries, and even farms depend on low crude oil prices to make a profit.

The currently higher crude oil prices cut into those profits, forcing companies to cut costs elsewhere.

These cost cuts might be in production levels, personnel layoffs, or seeking cheaper crude oil based raw materials.

Unfortunately, most businesses are suffering from the current high crude oil prices.

These extra costs are often passed on to the consumers.


By Big Mike

Have Current Oil Prices Stabilized?(3)

So in conclusion, it is obvious that current oil prices will fluctuate between stable and high prices,

it is expected due to such a high demand for oil around the world.

Oil prices are unpredictable, they will rise and then stop and then rise again.

It's hard to determine when they will change or when they will stabilize, but one thing is for sure, oil prices are not going to drop, at least not by a significant amount.

This is obvious because oil is becoming such a valuable asset to the worlds population,

oil is what helps us survive and prices will not stay the same, and even if they do it will not last.



By Bryan Evans

Have Current Oil Prices Stabilized?(2)

So will prices continue to stabilize in the future?

Well it is difficult to say, but depending on how each factor contributes each and every day will determine whether or not the prices will stabilize of grow.

So far we can only gather that the current oil prices are set to rise and rise due to the high demand.

There is not much we can do, the whole world needs oil and fuel,

we have to be fair and as long as other people around the world exist we will never see the end of high oil prices until it become either too expensive to afford.

There is not much we can do, there is a limit supply of oil on this planet and we can only get more by waiting millions of years,

without another source of energy and providing the demand is high, oil prices are going to stay high.



By Bryan Evans

Have Current Oil Prices Stabilized?(1)

Current oil prices are unpredictable, they are hard to track, one week it will be stable, the next week it will be sky high.

It truly is hard to track oil prices, the current oil prices are bound to change, whether it be tomorrow or next week.

There will be a select few periods in which oil prizes stabilize, but it never lasts, the prices will always increase.

That is one thing we can be sure of, prices will continue to rise providing that the demand for it remains high.


The current oil prices do stabilize at points, it may last a day, it may last two weeks. But the fact is that it probably will not last.

Current oil prices have fluctuated, they have been good some days and bad on other days.

It is hard to even give an opinion on something that is constantly changing, but we can determine an opinion from judging its overall gradual increase.

I think that oil prices will continue to grow but considering the current demand.

Sometimes there is less need for oil in some parts of the world, this could in equal allow more oil to be shipped to the US thus allowing cheaper prices.

There are a variety of factors which affect current oil prices and future oil prices and since these factors are unpredictable, oil prices will remain unpredictable.

It's hard to determine, but if you examine the factors a little closer you may find that you will see patterns in the rise and fall of oil prices.



By Bryan Evans

Oil Prices & Ramifications(4)

f) USA May React:


USA being USA will be facing untold problems if oil prices stay at US$100 for a prolonged period (say a few years).

Politicians will work feverishly to control the consequences of living with US$100 oil.

Push comes to shove, USA may fight certain wars for the oil - if you know what I mean.


g) Petrodollars Balance Sheet:


Used to be 100% in US Treasuries - this way the US can continue to consume as the petrodollars were recycled back to lend to the US via Treasuries.

Over the last 2 years,many countries with hefty trade surpluses have started huge sovereign funds to invests in foreign companies.

These companies are a mask to move funds away from buying Treasuries.

I don't see this trend reversing, hence I see further downside for USD.




By Salvatore_Dali

Oil Prices & Ramifications(3)

d) Money Supply Growth:


What we are seeing is not just oil prices but almost every single commodity.

The growth machinery cited above coupled with aggressive money supply growth policies undertaken by most developed nations over the last 5 - 7 years have resulted in a load of liquidity swishing in the system.


e) Shift In Balance of Power:


Due to the dependence on oil and their record prices, the producers have minted a lot of surplus cash.

Russia has used its proceeds wisely, effectively bankrupt in 1998, now Russia has more than US$450bn in reserves.

Russia is also using petro money to "control" the surrounding small countries via joint ventures and questionable deals.

China, realising its vulnerability has deliberately courted African countries with proven oil and gas reserves.


By Salvatore_Dali

Oil Prices & Ramifications(2)

b) Correcting U.S. Dollar:


The dollar is at 15 year lows versus a basket of currencies.

The Fed is engineering a cheaper US stocks scenario amidst credit problems in the US.

The correction in USD is reflecting itself in oil prices.


c) Under Invested:


We are reaping the consequences as many big oil companies and state controlled firms have under invested to replenish natural production declines.



By Salvatore_Dali

Oil Prices & Ramifications(1)

Even though we saw US$96.65 (9Nove2007)for oil, in real terms, the price is not an all time high as its still below its all-time inflation-adjusted high of US$101.70 back in April 1980.

However, Crude has climbed 47.3% over the past 52 weeks, and since 2001, it is up 511%, from US$18 to US$96.

We have examined the reasons why & potential ramifications, here's a repeat:


a) Increasing Global Demand:


Booming growth in China and most of Asia-Pacific. Add India, Korea, Russia, Brazil, and Australia to the equation as well.

Even old E.U. is moving in the right direction.




By Salvatore_Dali

12 Basic Stock Investing Rules Every Successful Investor Should Follow(6)

11. The worst thing an investor can do is take a large loss on their position or portfolio.

Market timing can help avert this much too common experience.

You can avoid making that huge mistake by avoiding buying things when they are high.

It should be obvious that you should only buy when stocks are low and only sell when stocks are high.

Since your starting point is critical in determining your total return, if you buy low, your long term investment results are irrefutably better than someone that bought high.


12. The most successful investing methods should take most individuals no more than four or five hours per week and, for the majority of us, only one or two hours per week with little to no stress involved.



By C.C. Collins

12 Basic Stock Investing Rules Every Successful Investor Should Follow(5)

9. Traditional technical and fundamental analysis alone may not enable you to consistently make money in the markets.

Successful market timing is possible but not with the tools of analysis that most people employ.

If you eliminate optimization, data mining, subjectivism, and other such statistical tricks and data manipulation, most trading ideas are losers.


10. Never trust the advice and/or ideas of trading software vendors, stock trading system sellers, market commentators, financial analysts, brokers, newsletter publishers, trading authors, etc., unless they trade their own money and have traded successfully for years.

Note those that have traded successfully over very long periods of time are very few in number.

Keep in mind that Wall Street and other financial firms make money by selling you something - not instilling wisdom in you.

You should make your own trading decisions based on a rational analysis of all the facts.



By C.C. Collins

12 Basic Stock Investing Rules Every Successful Investor Should Follow(4)

There are many important things you need to know to trade and invest successfully in the stock market or any other market.

12 of the most important things that I can share with you based on many years of trading experience are enumerated below.


7. You must let your profits run and cut your losses quickly if you are to have any chance of being successful.

Trading discipline is not a sufficient condition to make money in the markets, but it is a necessary condition.


If you do not practice highly disciplined trading, you will not make money over the long term. This is a stock trading “system” in itself.


8. The Efficient Market Hypothesis is fallacious and is actually a derivative of the perfect competition model of capitalism.

The Efficient Market Hypothesis at root shares many of the same false premises as the perfect competition paradigm as described by a well known economist.

The perfect competition model is not based on anything that exists on this earth.

Consistently profitable professional traders simply have better information - and they act on it. Most non-professionals trade strictly on emotion, and lose much more money than they earn.

The combination of superior information for some investors and the usual panic as losses mount caused by buying high and selling low for others, creates inefficient markets.



By C.C. Collins

12 Basic Stock Investing Rules Every Successful Investor Should Follow(3)

There are many important things you need to know to trade and invest successfully in the stock market or any other market.

12 of the most important things that I can share with you based on many years of trading experience are enumerated below.


5. Stock markets generally move in advance of news or supportive fundamentals - sometimes months in advance.

If you wait to invest until it is totally clear to you why a stock or a market is moving, you have to assume that others have done the same thing and you may be too late.

You need to get positioned before the largest directional trend move takes place.

The market reaction to good or bad news in a bull market will be positive more often than not.

The market reaction to good or bad news in a bear market will be negative more often than not.


6. The trend is your friend.

Since the trend is the basis of all profit, we need long term trends to make sizeable money.

The key is to know when to get aboard a trend and stick with it for a long period of time to maximize profits.

Contrary to the short term perspective of most investors today, all the big money is made by catching large market moves - not by day trading or short term stock investing.





By C.C. Collins

12 Basic Stock Investing Rules Every Successful Investor Should Follow(2)

There are many important things you need to know to trade and invest successfully in the stock market or any other market.

12 of the most important things that I can share with you based on many years of trading experience are enumerated below.


3. Every market or stock that goes up will go down and most markets or stocks that have gone down, will go up.

The more extreme the move up or down, the more extreme the movement in the opposite direction once the trend changes.

This is also known as "the trend always changes rule."


4. If you are looking for "reasons" that stocks or markets make large directional moves, you will probably never know for certain.

Since we are dealing with perception of markets-not necessarily reality, you are wasting your time looking for the many reasons markets move.


A huge mistake most investors make is assuming that stock markets are rational or that they are capable of ascertaining why markets do anything.

To make a profit trading, it is only necessary to know that markets are moving - not why they are moving.

Stock market winners only care about direction and duration, while market losers are obsessed with the whys.




By C.C. Collins

12 Basic Stock Investing Rules Every Successful Investor Should Follow(1)

There are many important things you need to know to trade and invest successfully in the stock market or any other market.

12 of the most important things that I can share with you based on many years of trading experience are enumerated below.


1. Buy low-sell high.

As simple as this concept appears to be, the vast majority of investors do the exact opposite.

Your ability to consistently buy low and sell high, will determine the success, or failure, of your investments.

Your rate of return is determined 100% by when you enter the stock market.


2. The stock market is always right and price is the only reality in trading.


If you want to make money in any market, you need to mirror what the market is doing.

If the market is going down and you are long, the market is right and you are wrong.

If the stock market is going up and you are short, the market is right and you are wrong.


Other things being equal, the longer you stay right with the stock market, the more money you will make.

The longer you stay wrong with the stock market, the more money you will lose.




By C.C. Collins

Normal investors might scoff at the notion of shorting



Beyond the educational, emotional, and mental programming required to get our heads in gear,

a big part of our job as active investors is to find the dominant market trend and profit from it - even when it's down.


Normal investors might scoff at the notion of shorting, but highly successful investors and stock traders aren't normal.

While accepting the fact that the stock market will go in whatever direction it pleases,

the latest generation of market players knows how to take advantage of the opportunities offered by the down-side of repetitive market cycles.

Maybe it's time for you to consider short selling too.


By Thomas Sutton

Short Selling - How To Make Money Investing In Bad Stocks(4)

Never even heard of selling short


After more than four decades studying the markets, Bill believes there are two main reasons why most investors "can't sell."

First is the obvious lack of knowledge about the subject.

Most folks have never even heard of selling short.

The second reason is the psychological resistance most investors have against selling short.


After all, investors aren't supposed to make money when stocks go down ... right?



By Thomas Sutton

Short Selling - How To Make Money Investing In Bad Stocks(3)

O'Neil was a young stockbroker


In the early sixties O'Neil was a young stockbroker for a major New York Stock Exchange member firm.

Based on his research he decided to close out all of his stock positions in the market by the spring of 1962.

Then he started selling short.

By the end of the year he had made a sizable profit while almost everyone else was getting crushed in one of the worst bear markets of that era.

A year later he bought a seat on the NYSE and started his own firm.



By Thomas Sutton

Short Selling - How To Make Money Investing In Bad Stocks(2)

Selling stocks short


Selling stocks short is a simple way to make money when stocks drop.

To "sell short" you simply borrow the stock from your broker, sell it, and then buy it back when the price drops.

You then return it to the broker you borrowed it from and keep the profit. Yes, it's perfectly legal!

Imagine that.

A conservative well heeled senior investor such as Mr. O'Neil advocating that investors learn how to sell short.

As surprising as it may seem, you only have to look back to when Bill began his investing career to see why he is willing to take this "odd" position.


By Thomas Sutton

Short Selling - How To Make Money Investing In Bad Stocks(1)

Falling markets


Falling markets always cause investors grief.

The media reports any selling in a mortally serious tone, while bullish cheerleaders comfort the masses with promises of better days ahead.

Negative sentiment usually intensifies right along with the selling,

and desperate prayers are offered to the heavens as everyone nervously holds their breath.


Well, not everyone.

In fact, more folks are starting to take advantage of the normal rising and falling of the market tides by learning to sell stocks short.

For example, Investor's Business Daily newspaper founder William J. O'Neil's latest book is titled "How To Make Money Selling Stocks Short."



By Thomas Sutton

Are You An Investor Or Trader(4)

TIPS TO THE TRADER


Unlike investor, the stock broker by a trader cannot always be the best one, for the best ones charge the highest commissions.

A stock trader must consider the possible profit he can earn from a deal and thereupon decide on how much commission he can give to the broker.


As a trader, you have to be aware of a wide number of facts and figures, which may directly or indirectly affect the prices in the stock exchange.


A good choice for a trader would be to go for online trading.

The online brokers are very cheap in terms of the commission rate charged.

Also online trading will save you a lot of time you would otherwise need to waste for traveling to and coming back from the stock market.


Always make educated and well thought decisions.

Haste and carelessness are the enemies of stock trading.



By Amit Malhotra

Are You An Investor Or Trader(3)

THE TRADER


The stock trader is the one who invests in stocks that have a probability to increase, in demand and in price.

He invests just to sell them later at an increased price and gain some profit.

This is a different type of earning profit from the stock exchange.

You do not incur profit from the company.


You make profits due to changing demands and prices of stocks.

If you want to go for this, you will need to be constantly in touch with the stock market.

You will have to have an eye on the prices in there.

However, successful trading is the result of subtler observations, something described in the tips that follow.



By Amit Malhotra