by Mark Cliffe, The IndependentPosted: October 1, 2006
Gold prices have been on a roller-coaster ride in the past few months. Having shot up to over $720 per ounce in May, they dived to less than $560 in June, bounced to over $660 in July, and then slumped back to around $570 in September. This is clearly not a market for the faint-hearted. However, with the commodity clawing its way back to almost $600 over the past two weeks, there are seven reasons why gold could regain its May highs.
1. Seasonal demand. There is a tendency for gold prices to rise at this time of year, which they are now starting to do. One reason for this is the Indian wedding season.
2. Weakness in the dollar. The inverse relationship between gold and the greenback has resurfaced this year, after breaking down late last year… However, we expect the dollar, under the influence of a shrinking interest rate advantage, to fall over the next few months, heading off towards 1.40 to the euro and 2 to sterling.
3. Geopolitical tension. Gold has appealed to some investors as a safe-haven asset in the midst of heightened geopolitical worries…
4. High oil prices. The sharp decline in crude from its August highs, which has been a depressing factor for gold, is also unlikely to persist. The recent absence of supply disruptions cannot be relied upon to continue, and demand is likely to remain firm despite the signs of moderation in US economic growth. In any case, oil producers are hinting that they may cut output to shore up prices if they fall much further from here…
5. Central bank selling is abating. After many years of off- loading their gold reserves, central banks have recently been taking a less negative view. Indeed, there have been reports that some are buying, citing the diversification benefits of holding gold.
6. Institutional demand. Gold is also benefiting from an increase in demand among institutional investors, which are seeking to diversify into commodities as an asset class…
7. Producer "dehedging". Another factor supporting the gold price is that producers themselves are taking a more positive view and reducing the hedging of their future receipts by scaling back forward sales.
All this said, the suddenness of the retreat from the highs recorded in May highlights the risks attached to this bullish view. A sudden loss of investor appetite for risk - perhaps because of resurgent fears of higher US rates (after all, gold does not pay interest) or a steeper-than-expected plunge in US economic activity - is certainly possible.However, while I expect US activity to slow, this is unlikely to turn into recession. With the slowdown will come an easing in inflation fears, and while this won't help investor demand for gold - it has traditionally been seen as an inflation hedge - it should give the Federal Reserve the leeway to bolster both economic activity and investor appetite for risk by cutting rates. If so, gold may shine again.
Mark Cliffe is group chief economist at ING
The above information has been redacted from the article as it originally appeared on Independent.co.uk on October 2, 2006.
Success Starts Today
Sunday, February 25, 2007
Friday, February 23, 2007
The Cost of More Troops
An article written by Joseph Quinlan of Bank of America.
While a surge in extra U.S. troops in Iraq is hardly a done deal, such an option, if adopted, could cast a long shadow over the U.S. financial markets. The decision...could prove to be an early tipping point for the markets. Such a move could trigger the following:
An unexpected jump in oil prices...
An increase in the cost of waging war...
An exodus out of U.S. dollars...
An even deeper divide between Republicans and Democrats...
A slip in U.S. consumer confidence...
In our opinion, a troop surge could very well lead to an unexpected market swoon.
The above information has been redacted from the article as it originally appeared on Barron’s
Online on January 8, 2007.
While a surge in extra U.S. troops in Iraq is hardly a done deal, such an option, if adopted, could cast a long shadow over the U.S. financial markets. The decision...could prove to be an early tipping point for the markets. Such a move could trigger the following:
An unexpected jump in oil prices...
An increase in the cost of waging war...
An exodus out of U.S. dollars...
An even deeper divide between Republicans and Democrats...
A slip in U.S. consumer confidence...
In our opinion, a troop surge could very well lead to an unexpected market swoon.
The above information has been redacted from the article as it originally appeared on Barron’s
Online on January 8, 2007.
Thursday, February 22, 2007
Rule of 72
Do you know the Rule of 72?
This rule is an easy way to calculate the years it will take for your money to double. Just divide 72 by the percentage of interest you have on your investment.
72 / 2% interest = 36 years.
72 / 4% interest = 18 years.
72 / 6% interest = 12 years.
72 / 8% interest = 9 years.
72 / 10% interest = 7.2 years.
72 / 12% interest = 6 years.
Use this rule to choose if your investment will fulfill your financial needs.
This rule is an easy way to calculate the years it will take for your money to double. Just divide 72 by the percentage of interest you have on your investment.
72 / 2% interest = 36 years.
72 / 4% interest = 18 years.
72 / 6% interest = 12 years.
72 / 8% interest = 9 years.
72 / 10% interest = 7.2 years.
72 / 12% interest = 6 years.
Use this rule to choose if your investment will fulfill your financial needs.
Wednesday, February 21, 2007
Quality Stocks
Investing in individual stocks is the most rewarding way to increase your wealth. There is however, a greater risk when choosing this type of investment. As with any investment, the greater the risk, the higher the return. The following are easy ways to determine which companies to invest into.
Preparation
Before you can begin this rewarding path, you need to start an account with an online broker. I suggest you invest a minimum of $2,000 and to choose TDAmeritrade as your brokerage because I have had good success with their site. Other online brokers you can choose are E-Trade, fidelity, and scottrade.
What to look for
The name of the game is buy low, sell high. What this means is that you do not want to invest in a company that is already doing good. This is where many people lose money; they feel the price of the stock will continue to rise, but in all actuality the price will begin to drop. What you need to look for are undervalued companies which have potential to become hot stocks. Your emphasis on the evaluation needs in chart and financials because nothing else really matters.
Charts
The first thing you need to do is examine 10-20 year charts. History is a great guide for showing potential in companies. Take for example a company which I really like, EDGW. From 1996 to 1999 the price grew from $14 to $40, and since 1999 the price has been around $4. This shows that the company has great potential to become hot in the next years to come. I purchased 600 shares when the price was around $5, today it is at $7.50 which has given me a 40% return in two years. I feel strongly that April of 2008 the price will skyrocket and I will more than double my money, which would mean that I have averaged 25% AYP.
You also need to look for seasonal patterns. Look to for what season the price is the highest and lowest. Some companies are cyclical, so if you hold off investing until the low season, you can assume that in the near future the price will begin to rise. I have done this a few times, owning a company for 3-6 months and then selling it to make a 20-30% profit.
Financials
This is the real predictor of under valued companies. What you want is a company with a low Price to Earning ratio or P/E. You want a company that has a high rate of income compared to the price of the stock. In other words a company could be doing real well, but investors have not notice the company yet once they do, the price will rise significantly. Also this is a company which has potential to be purchased by a large corporation. If a merger like this happens you will know it because in a matter of weeks or even days, the price will rise more than 50%.
A company which I have purchased, and a great example is ABAT. This company has one of the lowest P/E of any company in its sector. It also has a pattern of having enormous spikes about ever 5 years. I bought this company in back in Dec. and the price has risen almost 30%. I feel the price will slowly drop this year, but there is great potential for it to skyrocket to 400% to 600% in the next two years.
Volume
The volume is the rate at which the stock is being bought and sold. When volume is high the price is either rising or falling, but if the volume is low, this shows that investors what to hold onto their stock. Low trading shows that investors see value in the company and potential for price to continue to rise. A low volume also is the best time to buy because the price is inflated my emotions.
Summary
Purchase under valued companies before they become hot.
Evaluate charts to see to ensure the company is at a low.
Check the financials to ensure P/E is low.
Buy when the volume is low.
Preparation
Before you can begin this rewarding path, you need to start an account with an online broker. I suggest you invest a minimum of $2,000 and to choose TDAmeritrade as your brokerage because I have had good success with their site. Other online brokers you can choose are E-Trade, fidelity, and scottrade.
What to look for
The name of the game is buy low, sell high. What this means is that you do not want to invest in a company that is already doing good. This is where many people lose money; they feel the price of the stock will continue to rise, but in all actuality the price will begin to drop. What you need to look for are undervalued companies which have potential to become hot stocks. Your emphasis on the evaluation needs in chart and financials because nothing else really matters.
Charts
The first thing you need to do is examine 10-20 year charts. History is a great guide for showing potential in companies. Take for example a company which I really like, EDGW. From 1996 to 1999 the price grew from $14 to $40, and since 1999 the price has been around $4. This shows that the company has great potential to become hot in the next years to come. I purchased 600 shares when the price was around $5, today it is at $7.50 which has given me a 40% return in two years. I feel strongly that April of 2008 the price will skyrocket and I will more than double my money, which would mean that I have averaged 25% AYP.
You also need to look for seasonal patterns. Look to for what season the price is the highest and lowest. Some companies are cyclical, so if you hold off investing until the low season, you can assume that in the near future the price will begin to rise. I have done this a few times, owning a company for 3-6 months and then selling it to make a 20-30% profit.
Financials
This is the real predictor of under valued companies. What you want is a company with a low Price to Earning ratio or P/E. You want a company that has a high rate of income compared to the price of the stock. In other words a company could be doing real well, but investors have not notice the company yet once they do, the price will rise significantly. Also this is a company which has potential to be purchased by a large corporation. If a merger like this happens you will know it because in a matter of weeks or even days, the price will rise more than 50%.
A company which I have purchased, and a great example is ABAT. This company has one of the lowest P/E of any company in its sector. It also has a pattern of having enormous spikes about ever 5 years. I bought this company in back in Dec. and the price has risen almost 30%. I feel the price will slowly drop this year, but there is great potential for it to skyrocket to 400% to 600% in the next two years.
Volume
The volume is the rate at which the stock is being bought and sold. When volume is high the price is either rising or falling, but if the volume is low, this shows that investors what to hold onto their stock. Low trading shows that investors see value in the company and potential for price to continue to rise. A low volume also is the best time to buy because the price is inflated my emotions.
Summary
Purchase under valued companies before they become hot.
Evaluate charts to see to ensure the company is at a low.
Check the financials to ensure P/E is low.
Buy when the volume is low.
Tuesday, February 20, 2007
Monday, February 19, 2007
GOLD, A GREAT INVESTMENT
Since September 11th the price of gold has more then doubled. Over the past five years, Gold has had an average of 30% APY. Gold which is priced around $660 today, is predicted to reach over 1600 in the next 5 years.
Not many individual investors consider gold as an investment possibility. Through this post I hope to help investors- like myself -understand that gold is a great investment for 2007. Fueled by the increase of national debt and a growing global demand, gold has and will continue to rise for years to come. I will not lie, understanding the factors which control the price of gold is very difficult. I have spent the last three months doing my own research in an attempt to understand the price of gold. The following are simplified reasons which I have gathered through my research.
Reason One
The price of gold will continue to rise until the war on terrorism is resolved. This war which we are in is still only in the early stages. I say this because there is a growing violence in the Middle East and countries like Iran and North Korea are becoming larger threats.
Reason Two
Over the past decade there has not been a large discovery of gold. Instead, mining companies are mining gold at an average of 1% a year. This is very important because the global consumption of gold is 4%. This tells me that the supply of gold does not satisfy the demand, and therefore the price of gold will continue to rise.
Reason Three
In 2004, the Chinese government legalized the selling of gold bullion of its citizens. This is enormous because a new 1.3 billion people are now able to purchase gold. Over the next few years as the gold trade in china grow the demand for gold will rise significantly.
Reason Four
Banks are starting to invest more in gold to preserve their assets as the value of the dollar continues to drop. Take for example the Royal Bank of Canadian, which is considered the largest bank in North America. Chairman, Anthony S. Fell recently gave a speech to investors urging the Bank to purchase large sums of Bullion. Other banks are considering similar options as gold price continues to rise.
Summary
The price of gold will continue to rise because supply can not satisfy the growing demand. Also, the value of the dollar will continue to drop as the war on terrorism continues. This means that with every passing month, the purchasing power of the dollar drops, and the value of gold rises.
Not many individual investors consider gold as an investment possibility. Through this post I hope to help investors- like myself -understand that gold is a great investment for 2007. Fueled by the increase of national debt and a growing global demand, gold has and will continue to rise for years to come. I will not lie, understanding the factors which control the price of gold is very difficult. I have spent the last three months doing my own research in an attempt to understand the price of gold. The following are simplified reasons which I have gathered through my research.
Reason One
The price of gold will continue to rise until the war on terrorism is resolved. This war which we are in is still only in the early stages. I say this because there is a growing violence in the Middle East and countries like Iran and North Korea are becoming larger threats.
Reason Two
Over the past decade there has not been a large discovery of gold. Instead, mining companies are mining gold at an average of 1% a year. This is very important because the global consumption of gold is 4%. This tells me that the supply of gold does not satisfy the demand, and therefore the price of gold will continue to rise.
Reason Three
In 2004, the Chinese government legalized the selling of gold bullion of its citizens. This is enormous because a new 1.3 billion people are now able to purchase gold. Over the next few years as the gold trade in china grow the demand for gold will rise significantly.
Reason Four
Banks are starting to invest more in gold to preserve their assets as the value of the dollar continues to drop. Take for example the Royal Bank of Canadian, which is considered the largest bank in North America. Chairman, Anthony S. Fell recently gave a speech to investors urging the Bank to purchase large sums of Bullion. Other banks are considering similar options as gold price continues to rise.
Summary
The price of gold will continue to rise because supply can not satisfy the growing demand. Also, the value of the dollar will continue to drop as the war on terrorism continues. This means that with every passing month, the purchasing power of the dollar drops, and the value of gold rises.
How to Start Building Wealth
The most important aspect of building wealth is to get started today. It does not matter how much your income is, or the amount you are able save right now. The idea is to get in the habit of paying yourself before you pay others. You work too hard for your money just to let it disappear. Saving money is how you reward yourself for all the hard work. You deserve to have wealth and to be financially secure; and you will if you start saving today. Today needs to be the beginning of your new life. As I have explained in a previous post, through the power of compound interest, the small sums of money you save today will become enormous sums in the future.
How to begin:
The easiest way to begin investing is to start a monthly automatic transfer from you checking account to your savings. I myself struggle with saving money. What I do to overcome this is to lock that money away before I can spend it. This is why I don't carry cash on me.( I tend to give it all away to vending machines.) Over time, your savings account will become large enough to begin your portfolio. I highly suggest you put your first $1,000 in a Certificate of Deposit or CD. CD's can be obtained by banks and other investment organizations. I prefer to invest in CD's with CIEF (church investors extension fund) they have good rates and help a good cause.
The reason CD's are great to begin with is that you are unable to spend your saved money, and more importantly your first investment needs to be easy, safe, and rewarding. Most CD's run percentage rates at 5%. So a $1,000 in two years will become $1,130, which is that much, but $1,130 is much larger than ZERO if you never saved at all.
How to begin:
The easiest way to begin investing is to start a monthly automatic transfer from you checking account to your savings. I myself struggle with saving money. What I do to overcome this is to lock that money away before I can spend it. This is why I don't carry cash on me.( I tend to give it all away to vending machines.) Over time, your savings account will become large enough to begin your portfolio. I highly suggest you put your first $1,000 in a Certificate of Deposit or CD. CD's can be obtained by banks and other investment organizations. I prefer to invest in CD's with CIEF (church investors extension fund) they have good rates and help a good cause.
The reason CD's are great to begin with is that you are unable to spend your saved money, and more importantly your first investment needs to be easy, safe, and rewarding. Most CD's run percentage rates at 5%. So a $1,000 in two years will become $1,130, which is that much, but $1,130 is much larger than ZERO if you never saved at all.
The Power of Compound Interest
The power of compound interest is the reason why you should start saving money now. Small amounts of money today will become large sums in the future. This is a chart of what a $1,000 can do in 20-40 years at different interest rates.
5% for 20 years = $2,712 for 40 years = $7,040
7% for 20 years = $4,038 for 40 years = $14,974
8% for 20 years = $4,926 for 40 years = $21,725
10% for 20 years = $7,328 for 40 years = $45,259
The average rate of return on the stock market is 10%. In otherwords $1,000 paid into a mutual fund today, will have a value of over $45,000 when you are ready to retire.
This is the reason you need to start investing today.
5% for 20 years = $2,712 for 40 years = $7,040
7% for 20 years = $4,038 for 40 years = $14,974
8% for 20 years = $4,926 for 40 years = $21,725
10% for 20 years = $7,328 for 40 years = $45,259
The average rate of return on the stock market is 10%. In otherwords $1,000 paid into a mutual fund today, will have a value of over $45,000 when you are ready to retire.
This is the reason you need to start investing today.
Introduction to OnedayMillionaire
I have choosen to start a blog so that I can build a network of young investors like myself. I am only 22 but have been investings since I was 15. The beauty of starting young is that I am able to enjoy the power of compound interest. Take for example a $1,000 investment into a mutual fund that has an annual percentage yeild of 10%. In 40 years that $1,000 will become $45,259. This is what drives me to save every dollar I am able to because one dollar today is 45 dollars in the future.
In the future I will be posting my stock picks and companies which have given me great returns. If you have any advice or comments feel free to email me. I will enjoy hearing from you
In the future I will be posting my stock picks and companies which have given me great returns. If you have any advice or comments feel free to email me. I will enjoy hearing from you
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