Archive for November, 2007

by Bryan Benson
2. Getting into the rental business before your cash-flow needs are met. Boy, did I ever get tangled up in this one. When I first got started with real estate, I decided to buy all the rental property I could. I figured with a lot of tenants in a lot of houses, the cash would just fall into my lap every month, right?

Wrong. It was the biggest single mistake I made for a very simple reason - I just wasn’t ready. Like yours truly, many beginning real estate investors get into the rental business because they think it’s some kind of quick path to wealth. But it’s not. It’s slow and long-term. Soon after I built my “rental empire” back in 1982, I discovered that my daily cash flow needs were not being met. I had a huge amount of capital tied up in equity and a thin stream of income. And I had a family to feed!

Don’t get me wrong, I’ve got nothing against rental property as an investment. I’ll probably have them until the day I die. However, if you don’t have a cash cushion built up, you’d better get really good at buying properties dirt cheap. But even when you do, you’ll discover a million ways to spend down your cash flow.

Busted toilets, leaky roofs, paint, carpet, yada-yada-yada, it all eats great big holes in your income stream. Even if you do have enough ready cash to get into the rental game, you need to know what you’re doing. For instance, do you know about “professional tenants” who make a living “getting over” on landlords? These creeps know the landlord tenant code and eviction laws inside out and they can make your life a living hell before you finally get them out of your house. If you want to become a professional landlord, you’d better understand how the game is played and get the education necessary to deal with all the potential problems.

Bottom line, my advice is this: Make some fast cash by quick-turning a few houses before you get yourself mired down with rentals. Get into some low risk, high-return deals before you start piling up equity and dealing with tenants. Then, when you do become a “Super Landlord,” your chances of retiring on your rental income will be much better.

3. Listening to poor advice. This is something you probably already know. As you go through life, there will never be a shortage of people who want to give you advice. Your parents, your spouse, friends, in-laws, kids, they all have opinions about what you’re doing and what they think you should be doing. Very often, the value of their advice is worth exactly what you paid for it . . . nothing!

I’m not saying these do-gooders aren’t honest, intelligent and well-intentioned. However, you must ask yourself, are these folks qualified to give you advice? Have they had any experience in what you’re doing? It seems to be human nature for people to offer advice on subjects they know nothing about. What baffles me is how often the recipients of this so-called wisdom will listen to it and even act upon it without ever questioning the credentials of those giving it.

Through many painful experiences, I’ve learned that when you take advice from people who don’t know any more about the subject matter than you do, the quality of that advice is, at best, suspect. Plus, very often, listening to unqualified advice can have a negative impact on your focus.

So, who should you be listening to? I believe in taking advice only from people who are:
1. Qualified experts in their field and
2. Making a whole lot more money than I am.

And those people are out there. Don’t be afraid to seek help - just be careful where you go to get it - even if you have to pay for it. I think you’ll find that if you pay for the opinion of a bona fide expert, the advice you receive will be more than worth the price.

- Contintued in Part 3

For additional information on real estate investing and the hot foreclosure market, I recommend joining Ron LeGrand’s Millionaire Maker Newsletter The newsletter itself is loaded with great tips and resources, and he’s usually giving away something free like a CD or something that generally has a lot of great information on it.

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by Alexandria Anderson
When you are deciding what parameters your desired investment property should have, you don’t need to rely entirely on what someone else says is important. Use your own financial goals and needs for determining what to look for. However, it may help to consider the things that are also important to other people.

For example, Ken McElroy, author of “The ABCs of Real Estate Investing,” prefers to buy properties of “substantial size,” so that they will pay for the hiring of a property manager. He simply does not wish to play that role. It would probably be a waste of his time to do so anyway. By hiring a property manager, he is able to scout for even more properties, to make even more money.

Another thing that should be part of the litmus-test for everyone is whether or not the property is going to require extensive renovation. McElroy refuses to consider properties past a certain age. Even if such a property were in good shape, which is doubtful, it will probably be missing some amenities. In this case, you couldn’t charge as much rent as with other properties. You will have to spend more money and time getting these properties up to code. Why bother with investments like that when, with just a little more effort, you can find a property that needs less repairs and will bring in more rent?

Remember how vital the location is when buying an investment property. When deciding upon your market, always remember that the majority of people would prefer to buy rather than rent. So, unless it is a lot more expensive to buy in a particular area, you might have a difficult time finding and keeping tenants.

McElroy also likes to target out-of-state owners who own only 1 or 2 properties in a particular area. Many times these owners do not keep their properties up to the level at which they could operate, because they originally underestimated the cost and time it would take to nurture out-of-town properties. Sometimes these owners are anxious to let someone take their properties off their hands.

No matter what kind of deal it looks as though you will be arranging on a given property, be cautious not to buy something at a “good” price if it is in a bad location. Remember that the only reason you are purchasing investment property is to make money. If it is not going to generate income, then NO price is a good price. It won’t going to make money if it is in a poor neighborhood. It is not going to make money if it is in a community who don’t have jobs. It won’t be making money if it is in an area that is suffering an exodus. If there are no people, there are no prospective tenants.

These are some of the qualities that an investor should consider when researching potential properties, and they will help you on the road to discovering what you really need in an investment property. Your focus is finding good opportunities that will make you money. Look for properties that are in good shape and good locations. Make sure they are where the people are and where they want to be. If you keep those ideas in mind, everything else will fall into place.

Are You Looking For A Real Property Investment? Alex Anderson Specializes In Investment Property Sales and Services For People Who Want To Make Money With Real Estate. Get A Free Copy Of "The Investor’s Rental Guide" By Visiting: http://www.GreatInvestmentProperty.com.

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by Bryan Benson
Over the last 23 years, I’ve known many investors and entrepreneurs. I’ve seen every possible scenario, from overnight success to plodding, sit-on-your-butt-and-do-nothing failure. I’ve known people who would get off to a great start, and then fade away, and some who would piddle around and never seem to get anywhere. I’ve known those who made a very successful living and even a few who became super wealthy.

Is there a magic formula for success? I wish I could tell you there was. It could have saved me a whole lot of headaches over the years. And having the copyright on that formula would have made me an awful lot of money. Unfortunately, there’s no more magic in being successful than there is in anything else worthwhile in life.

However, from years of experiencing my own successes and failures, as well as witnessing those of others, I have identified a few mistakes that can short-circuit an entrepreneur’s rise to fortune. I’ve compiled a list of the most common roadblocks you’ll face on the road to becoming a successful real estate entrepreneur.

Now, you may be one of the fortunate few, and never find yourself faced with any of these problems, and that’s great. More likely, you’ll recognize parallels in your own situation in what I’m about to discuss.My goal here is to put you in a position where you can identify these pitfalls. Then, when you encounter them (and you will), you’ll be armed with the ability to direct yourself around them and get back on track . . . immediately. You won’t have to worry about these things hindering you from achieving your goals. So, let’s dive in and go down the list.

1. Lack of focus. I define focus as concentrating only on the work you must do to succeed in your business, avoiding all distractions and not getting side-tracked by every “great idea” that pops up. It’s not easy. The world we live in today is filled with things that beg for our attention. We live in what’s being called the “Information Age”, and that’s great except all this bombardment of information makes it hard for most of us to sift through the junk and come up with the good stuff. That’s why most of us have a problem staying focused - even when we’re trying to concentrate on something we know will make us wealthy. There are a million ways to make a million bucks and every day a new avenue for riches is presented to us. But I’ve learned through trial and error (lots of error) that the only way to make something work is to filter out everything else and stick with what I know works.

I get frustrated when I see people with tremendous potential for this business get off track with a so-called “get-rich quick” scheme (and there are a lot of them - just watch a little late-night television). If you dabble in one business, jump to another then try something else completely different, you’re not likely to be successful at any of it. Focus takes work, determination and discipline. Sometimes it hurts. Like when you have to say no to your family so you can go out and make them five or ten thousand dollars when you could be watching Seinfeld re-runs at home. Believe me, when your increased income starts showing up in trips to Disney World, new clothes, cars, etc., your spouse and kids won’t have a problem with it.

- Continued in Part 2

For additional information on real estate investing and the hot foreclosure market, I recommend joining Ron LeGrand’s Millionaire Maker Newsletter The newsletter itself is loaded with great tips and resources, and he’s usually giving away something free like a CD or something that generally has a lot of great information on it.

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by Paul Wallis
Tribune Uranium Corp. (TSX.V: TCB) has been quick to start planning its 2008 exploration and drilling of its recent acquisitions of Quartz Claims in Manitoba’s Reed Lake Mining District, which it acquired as a 100% owned interest from W.S. Ferreira Ltd. in October this year. The company is currently planning a comprehensive program, including verification of historical drilling, and exploration of previously un-drilled EM conductor bodies.

The Reed Lake region is an area currently under intense exploration, even by Manitoba’s demanding standards for that description. There are no fewer than 28 other mining ventures, operational and exploratory, in the region and surrounds, according to maps from the Manitoba Mineral Resources Division. The region is currently delivering results for explorers. Tribune’s Quartz Claims are near VMS Ventures Inc. (TSX.V: VMS) discovery hole grading 11.19% Cu over 10.50 meters.

Tribune’s exploration program is scheduled to begin in January 2008. The company’s exploration team has identified multiple high priority drilling targets, and drill equipment has been reserved for the duration of the exploration program.

The Quartz Claims, northeast of Snow Lake Manitoba, cover a 4,800 foot long electromagnetic conductor which is interpreted to lie in a fold axis. The historical exploration data which is very pertinent to Tribune’s operations, and identify gold mineralization ranging from 18.14 g/t Au over 4.2 feet to 12.19 g/t Au over 4.5 feet. There are two EM conductor bodies which have not been previously drilled. Tribune management believes that these two conductor bodies have the potential to host significant gold mineralization.

Tribune has additionally announced the start of its joint venture exploration of the North Shore property of the Athabasca Basin in northeastern Alberta with partner Fission Energy (TSX V: FIS). The program will include additional geological mapping, geochemical sampling and geophysical surveys, with planned airborne radiometric survey and drill sampling of priority targets. Also in the Athabasca Basin, exploration of the Botham Lake prospect, involving an aggregate drill of four anomalies over 4,000 metres, is expected to be completed by the end of the year at a cost of $1.3 million, being part of Tribune’s $3 million expenditure obligations for 2007-2008 under the Option Agreement.

Tribune’s high level of exploration activity and October acquisition of the Quartz Claims are part of an interesting series of events relating to the company. The Quartz Claims holding was acquired at a relatively low outlay, totaling $270,000 cash and 500,000 common shares to be issued over five years.

Also worthy of study are Tribune’s capital management moves. The company completed a private placement of units for $3.4 million in May, 2007, and doesn’t currently intend to raise capital. A previous private placement of $1 million was noted on the TSX in June this year.

These placements indicate that Tribune is keeping its bottom line well covered. The nemesis of mineral exploration is expenditure, and cost control is extremely important. Tribune’s operations are quite extensive for a relatively small cap company, and it’s clear that the management is seeking dollar value for its expenditures, and targeting yield results from its exploration.

The new phase of exploration comes soon after Tribune Uranium’s announcement that it will spin off non-core assets (including the Quartz Claims) into a new company, in which it will not hold a stake. The estimated time frame for setting up the new company is six months.

Tribune was originally formed as a uranium company, and there’s a significant operational, as well as logistic, divergence between uranium and Tribune’s rapidly diversifying inventory of other assets. Structurally, therefore, there’s some glaringly obvious common sense in the spin-off. Uranium is quite unlike other minerals in almost every respect. The exploration, science, regulatory framework, extraction, processing and handling are entirely different, and so is the market.

The uranium side of Tribune’s business couldn’t be subordinated to other interests on an ad hoc basis without some significant dislocation of resources, time, and money. The other commodities also have their own individual requirements, so at almost every level, a separation of functions is required.

In this case, those other assets are also being translated into capital value for Tribune shareholders, at the expected benchmark ratio of 1:5 of their Tribune holdings, as described in a recent statement by Chief Executive Graham Harris. That’s an equitable, and notably very cost effective, method of delineating both operational and equity considerations.

Tribune’s successful exploration of its assets indicates expertise in its science and industrial savvy. The company’s approach to dealing with cashflow and the added value of non-core assets give grounds for belief that its asset management is both realistic and properly weighted. Strategic direction has also been maintained.

Tribune has meanwhile added some expertise in the appointment of industry veteran Andrew W. Bowering to the Board of Directors, announced on 13 November. Mr. Bowering is no stranger to Tribune’s line of work, with 17 years experience in the field, including work in Canada, the United States, Mexico and China. Mr. Bowering brings with him additional capabilities in the areas of securities markets, regulatory affairs and investor/public relations. He’s also CFO of ATW Venture Corp (TSX V: ATW), and a director of Pinnacle Mines (TSX V: PNL)

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

Resourcex Investor is an internationally distributed newsletter about emerging junior resource companies. Sign up for a free 1-month trial to our newsletter and get instant access to news and investing tips that have helped many of our readers make more money. http://www.resourcex.com

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by Bryan Benson
4. Listening to negative thinkers and “Dead Heads.” Nothing kills the entrepreneurial spirit like negativity. With all the challenges you face in business, you need to keep a positive, upbeat, enthusiastic attitude about what you’re doing. It’s the only way you’ll be able to perform at your best. Negative thinkers and “Dead Heads” will only suck the energy out of you and bring you down to their own miserable level (usually, these are people who have failed in their own lives and get off trying to make failures out of those around them). They’ll make you question yourself, doubt what you’re doing and, if you listen to them, eventually give up entirely.

I’m sure when you first told friends and family you were going to be a real estate entrepreneur, you heard things like, “You really believe that stuff they sell on TV?” or “You can’t make money in real estate, the market’s too slow.” Or maybe “There’s not enough appreciation to make a profit and didn’t they change the tax laws or something?”

Yes, the “Larry Losers” of this world have all the answers, don’t they? Meanwhile, they’re working three jobs and won’t answer the phone at night for fear it will be a bill collector. I don’t think your true friends or your family would intentionally hurt you or bring you down. Usually they think they have your best interests at heart. However, in the process of “trying to make you see all sides” or “just giving you a few facts about the real world”, they’re pouring buckets of ice water on the fire you need to keep burning in order to keep on succeeding.

It may be nearly impossible to completely cut yourself off from these people. I suggest you simply tell them in firm, no-nonsense terms that you appreciate their interest, but have no use for their negative, sarcastic or skeptical comments. Sure, it can be a rough thing to do and some of them may be offended, but if they really care about you, they’ll get the message.

One of the best ways to avoid negativity is to seek out positive and supportive people. Find successful people or a group with common interests where you can share ideas and discuss successes and failures with people who are genuinely in tune with what you’re doing. This is where clubs and associations can play a big role. If you’re not a member of a real estate association, I strongly suggest you consider joining one. Having said that, let me caution you, not all club members are doers. There are people in every group who are going nowhere and are never going to achieve anything in their lives. Pick out the winners and connect with them. When you become a successful real estate entrepreneur (and you will), one of your greatest rewards will be to share your blueprint for success with others, “What goes around, comes around.” Before you know it, that sharing will attract people to you like a magnet. I can’t tell you the many profitable deals that have come my way through people who wanted to hang around me because I was willing to share my knowledge.

Continued in Part 4

For additional information on real estate investing and the hot foreclosure market, I recommend joining Ron LeGrand’s Millionaire Maker Newsletter The newsletter itself is loaded with great tips and resources, and he’s usually giving away something free like a CD or something that generally has a lot of great information on it.

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by Alex Ola-16736
What is financial spread betting?

Consider this scenario: You have been trading the financial markets for a while and you have developed a good knack for it. You make decent returns on your trades but you have been acutely aware of the fact that for every pound or dollar of profit that you earn on your trading, you are liable for capital gains tax that, in the UK, could be as high as forty per cent (40%) depending on whether or not you are a higher-rate tax payer. My experience suggests that most successful traders are indeed higher-rate tax payers so that means writing a cheque for 40% of your trading profits to the Treasury every year!

Now, it is worth noting that what you actually trade (be it individual equities or derivatives) is irrelevant to this scenario. So long as you book trading profits, you are eligible for capital gains tax.

Enter financial spread betting.

Now, consider this alternative scenario: you conduct your pre-trade analysis as usual and place your traders in virtually the same way as you would typically do. But this time, you change your trading instrument and rather than trade options or futures on a particular stock or stock market index, you simply trade another derivative of the stock or index. This is essentially what financial spread betting is.

Basically, a financial spread bet is a derivative instrument that mimics the price action of the underlying financial instrument, such as individual stocks and shares, commodities, various currency pairs, stock market indices, and government bond benchmarks. The unique attraction of spread betting is the fact that profits are free of capital gains tax. Of course, this is irrelevant if you have no trading profits to protect. But for those who earn substantial returns on their investments, the ability to keep a further 40% of those returns is certainly attractive.

This tax-free feature has led to the rapid rate of growth that spread betting has enjoyed in the United Kingdom over the last five years. Financial spread betting is now the number one derivative instrument used by private traders in the UK and the popularity is also widespread in places like Australia where spread betting is also legal.

That brings me to the primary downside of financial spread betting at this point in time: legality.

Your ability to spread bet legally depends on the country in which you reside. Financial spread betting is not legal everywhere so it is worth checking out the rules in your own country before going ahead and opening a trading account. Indeed, most reputable spreadbetting brokers would not open accounts for residents of countries where the activity is not permitted.

For more extensive insights and additional information on financial spread betting as well as free research on spread betting opportunities, please visit http://www.spreadbettrader.co.uk

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by Suzanne Parkey
Inspiris is an expert care and care management company focused on improving the quality of life for the frail elderly, the chronically ill and those with disabilities, while reducing the cost to Medicare Advantage, Medicaid and commercial health plans. Beginning Nov. 1, Inspiris will bring its nurse-practitioner led teams to serve some 17,000 Humana Medicare Advantage members in the Daytona/Ormond Beach metropolitan area.

Inspiris will provide its nursing home-based services, led by a registered nurse practitioner in coordination with a physician, to Humana enrollees in custodial care. Under the long-term care program, signs and symptoms of declining health status in frail, elderly patients are recognized early and appropriate adjustments to therapy are made on a timely basis. The model has proven to effectively reduce costs, decrease hospital admissions and utilization of skilled nursing care, improve outcomes, and to improve patient and family satisfaction.

“Our nurse practitioners visit patients several times a month, so they can see small changes in a member’s condition and adjust care before they become major health issues,” said Mike Tudeen, Inspiris’ president and chief executive officer. “This greatly improves the quality of life for patients who can receive enhanced care where they live.”

Under the contract with Humana, Inspiris will also coordinate care for enrollees in the post-acute care setting for short-term rehabilitation. Through the program, an Inspiris nurse practitioner visits the patient and makes a clinical assessment, reviews the therapy plan and coordinates care. The Inspiris team also communicates with the patient’s primary care physician, and works with the patient’s family to ensure a smooth transition from the short-term facility.

“Primary care physicians typically visit their patients in custodial care once every 60 days, and often coordinate care for their patients in custodial and skilled nursing care telephonically,” said Steve Lee, MD, chief medical officer, senior products, for Humana North Central Florida. “The Inspiris nurse practitioner-led model can help detect a patient’s declining health status and coordinate care with the primary care physician before symptoms become severe. We are pleased to offer our Daytona-area Humana enrollees this enhanced care model through our partnership with Inspiris.”

The need for coordinated, quality care for the frail elderly is expanding as the first baby boomers reach retirement age. Between 2005 and 2015, the U.S. Census Bureau projects the over-65 population to increase by almost 28 percent, while the total U.S. population increases by just 9 percent. The number of those over age 85 is expected to increase 16.8 percent over the same period. About 20 percent of this population is in a long-term care facility, and about one third report fair or poor health.

Studies published in the Journal of the American Geriatrics Society and Gerontologist show that a combination of intense management by nurse practitioners in the nursing-home setting can reduce hospitalizations for nursing home residents by 45 percent and emergency room visits by 50 percent. Analysis of Medicare claims data for an Inspiris client population indicated the Inspiris long-term care program reduced hospitalizations by 74 percent and emergency room admissions were reduced by 46 percent.

“The Inspiris model emphasizes coordinated, consistent care focused on prevention, as well as chronic and acute condition management, delivered in the appropriate setting,” Tudeen said. “We are delighted that our partnership with Humana will extend these services to thousands of members in the Daytona/Ormond Beach market.”

This article was prepared by Suzanne Porkey of River Cities Capital Funds.

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by Andrew Stratton
How do you know if your real estate venture will make money? You’re dealing with a considerable amount of money, and you don’t want to waste a single penny. A real estate investment is not something you want to dive into blindly, which is why the modified internal rate of return is so useful.

The modified internal rate of return, or MIRR, is a calculation that gives you an idea of how much your real estate venture will make you. In the end, the modified formula tells you whether the deal is worth it or not.

Before you can understand the modified internal rate of return, you need to be familiar with the internal rate of return.

Internal Rate of Return

The internal rate of return, or IRR, is basically the expected profit on a real estate venture. There is a difference between the two figures. Knowing which is which can help you master these somewhat complex formulas. The results of this type of calculation have been used by big companies for years to predict if a project is worth financing.

Basically, this calculation tells you the expected yield of a venture or project. This yield should add to the company’s (or investor’s) wealth, and is measured against other possible projects. It is also sometimes measured against existing projects. For example, when a corporation is considering several different investments, it may use this calculation to decide which is most profitable.

The IRR Gets Modified

What makes the “modified” rate of return different? This second formula takes into account not only the expected yield, but accounts for the yield after reinvesting in the initial project. This is the goal with commercial real estate ventures; to reinvest some of that profit into the business so that it continues to increase in profits.

The MIRR is a great way to predict how much your possible project will make, but with real estate ventures, it is not always so easy. The first step for any real estate investor is to pay back the property loans that funded the project in the first place. Very few people can start a career in real estate investment without first taking out a hefty loan, and you won’t see the profits until afterward.

Advantages of the MIRR

The MIRR is a better predictor of how much profit a project will make, because it assumes that the money will be reinvested at the same initial cost. If you work out the same problem using both methods, you will sometimes find that the profit balance comes out positive with the IRR and negative with the MIRR. This is dangerous, because the IRR may be misleading profit-wise.

Basically, the modified internal rate of return is the better of the two because it allows you some flexibility. You can enter whatever amount you deem appropriate. The IRR has a tendency to overstate the amount of money you will make, so the modified internal rate of return is safer to use for long term projects.

Once you know how to use the modified internal rate of return, you will be able to safely predict whether a particular real estate investment is worth doing or not.

Real estate investment can be a tricky business if you enter blindly. Using the modified internal rate of return lets you calculate profits after you’ve reinvested in your project. The formula helps you decide which deal is most profitable. KISCL offers help getting started. http://www.kiscl.com

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by Monty Guild / Anthony Danaher
This is a season of reflection with the harvests in the northern hemisphere and the planting season in the southern hemisphere. We are thus reflecting and wanted to take this opportunity to thank you for your confidence, friendship, and readership.

HOW WE GOT HERE AND WHERE WE ARE HEADED

Every so often it is our policy to review the history of what brought us here to this place in world economic history and thus to see what the economic and stock market future holds.

1. In 1989, The Berlin wall fell and the Soviet Union collapsed. It turned out that the Soviet Union was a much bigger economic failure than western economists had realized and all of the left wing discussion of instituting Soviet-style planned economies stopped in the Western universities, and stopped being practiced by many third world countries.

2. Instead, third world countries took their cue from the newly developed Asian Tigers which grew so nicely in the 1980 and 1990’s. At the time, the Asian Tigers were: Hong Kong, Korea, Singapore, and Taiwan. Countries that wanted to develop and to grow began to emulate these countries economic policies which were based upon market capitalism.

3. When China created property rights for foreigners, China received a wave of outside capital investment which continues to this day. Due to this wave of investment, China has developed into the most successful economic story of the new century. India has been more reticent to accept foreign capital and clings to some of the old socialist policies but they too have grown stunningly fast. Simultaneously, the developed countries’ economic growth is slowing.

4. Because the social safety net is limited, residents of these developing and newly-developed countries tend to save more than people in developed countries. So a huge wave of savings has accumulated in the developing world. This is a key thing to remember.

5. At the end of 2006 the world found itself with a group of debtor nations with free spending populations…the developed world, and another group of creditor nations with saving populations…the developing world.

6. In 2007 a world financial crisis has developed around sub-prime debt and many of the world’s banking institutions and investment banks are shaky. We believe that this crisis will be solved by a four pronged attack.

New capital investments in the shaky banks by developing country companies (in other words; Chinese, Russian, United Arab Emirates and Saudi Arabian companies among others) may redeploy their savings to invest in western financial institutions to strengthen them.
The World’s central banks will unleash a wave of liquidity to create confidence in the global banking system.
An organization will be funded to purchase illiquid debt and make a market in it so that transactions can be carried out. This may be funded by private or government sources in the U.S., and maybe in Europe.
The U.S. Treasury and other governments will buy up low quality debt to guarantee financial institutions against excessive losses. Taxpayers will bear the brunt of the folly of banks.
THIS BRINGS US TO TODAY

Two major trends dominate:

Trend 1
Some countries are growing much faster (and will be for the next few years) than others.

Clearly, the fast growing parts of the world: China, India, developing Asia, Latin America, and Eastern Europe will have the majority of the corporate profits and growth in coming years . As a result, most wise investors will focus on these regions. We have been investing in these regions for decades and will continue to focus our investments where the growth is to be found.

Trend 2
We have predicted it for a few months, and it has arrived. The U.S. is in a recession. Europe may also end up in a recession. This will cause a slow down in growth in the emerging world, but their growth will remain positive and will re-accelerate as the U.S. recession winds down.

The banking crisis and recession have left the U.S. dollar in shambles. The U.S. dollar is still sick. Gold and some foreign currencies have been a good alternative to a depreciating dollar.

BEN BERNANKE MAKES HIS MARK

You would not expect the Fed to be so direct, but the Federal Reserve of Ben Bernanke is proving to be a far cry from the Federal Reserve of Alan Greenspan in terms of transparency and candor. This is especially noticeable in the minutes of the last Fed meeting. Let me explain.

A disturbing note, The Federal Reserve governors in the minutes stated that the Fed did not believe that the U.S. economy could grow more that 2.5% per year without engendering inflation. Even while they held that the high food and fuel prices that had been plaguing the economy would end after 2008 causing inflation to decline. This is not good news.

IF I MAY TRANSLATE

1. After the current recession ends, if the U.S. economy grows at about 2.5% a year this compares very unfavorably to China growing 11% and India 9%per year. May I pose a question? Why would anybody own U.S. stocks with a declining currency and a 2.5% GDP growth when they can get stocks abroad at comparable PE ratios and with GDP growth of 3 or 4 times as much?

Let me further elaborate, GDP growth of 2.5% long term probably means corporate profit growth of about 8%. While GDP growth of 9% or 11% probably means corporate profit growth of 30% plus.

We believe that stock prices are a function of corporate profits. There is in our opinion ample historical proof of this and it also makes excellent logical sense. Thus, faster growth in profits means a faster rise in stock market valuations. In other words you make more money in stocks when profits are growing faster…and profits grow faster when economic growth is faster.

All of the above is very bullish for the long-term growth of the stock markets of China, India, and other fast growing countries. We discuss the short term outlook below.

2. If the U.S. economy gets up a head of steam and grows faster than 2.5% the Federal Reserve believes that inflation will rise. Another word for rising inflation and slowing or flat growth is Stagflation.

Clearly stagflation is to be avoided…no growth combined with rising inflation means a lower standard of living for all who experience it…This is a very unattractive outlook and although we don’t see that right away we do not rule it out in the long term, especially if the U.S. government keeps making such unwise economic decisions as they have over the last few years.

SUMMARY-WE STILL LIKE THE SAME LONG-TERM THEMES

India and China are getting a correction and we plan to buy them after a decline. Currently, we are very light in these two countries.

Gold and precious metals also getting a small correction and we will continue our commitment here. They benefit from a lower dollar, and the fact that inflation is rising in the emerging world.

Due to a recession in the U.S. which we believe has already begun, and a possible recession in Western Europe, base metals will be under pressure for a few months as some of the developed world goes through a recession. The developing world will slow down but continue to grow. We will avoid base metals while much of the world is in recession.

Foreign currencies continue to outperform the U.S. dollar, and we believe that this trend will continue long term.

Energy continues to hit new highs. After oil peaks and pulls back we will add to our commitments here.

Altogether for the long term; India, China, non Japan Asia, precious metals, energy, non U.S. currencies, and base metals will continue to outperform, although a correction is currently under way in many of these areas.

We plan to hold much of our cash in foreign currencies or short term foreign government bonds, as has been part of our strategy for several years.

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Monty Guild founded Guild Investment Management in 1971. Mr. Guild is a recognized expert in the areas of international investing and economics. He has been a writer and speaker on economic issues for 30 plus years and has been widely quoted in the world media. Mr. Guild supervises the investment and research functions at Guild Investment Management. He holds a BA in economics and an MBA with highest honors. Anthony Danaher joined Guild in 1990. Mr. Danaher assists in the management of inc

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by Steve Selengut
Sweet November… well, not really: The war lingers on for purposes unknown to most and oil prices continue to rise. Credit woes dominate the financial headlines, and value stocks seem intent on extending their correction into a seventh month. Investors want a stronger dollar while lower interest rates (and lower taxes) are clearly more beneficial. Neither political party has a candidate that supports real tax reform for both investors and corporate job creators, nor has the counter productive United States Regulation Industry stopped growing faster than most world economies. In terms of issue breadth alone, November is becoming the worst month (or the best buying opportunity) since July of 2002, and possibly since October of 1987. Just who makes this good/bad determination anyway, the Wall Street institutions, the media, investment letter writers? Why are rallies considered good and corrections bad? Will we remember 2007 as the year of the Grinch or will the leaves and the market stop falling in favor of a Santa Clause rally? Only the phantom knows for sure.

Every fall, good year in the market or not, I remind my clients that the final calendar quarter is a very special time. November is particularly exciting because it hosts the convergence of four Katrina-level forces, all of which are part of Wall Street’s conventional wisdom while none of them lead to intelligent investment decision making. And this year we have a special treat in the form of a Category Three market correction in the Value Stock sector. (October ‘87 was a Short Five; June ‘98 through January ‘00 was a long Four.) A five-force November Syndrome can be particularly destructive; no wonder the media is giving it so much attention… carnage at last!

Force One is the mad rush of the lemmings to realize losses on equity and/or income securities for absolutely no investment reason at all… just because they have fallen in price from the time that they were purchased. Assuming (as I always do) that we are dealing with “Investment Grade Securities”, lower prices should more logically be seen as an opportunity to add to positions cheaply than as an opportunity to reduce the 2007 tax liability on our other investment earnings. Losing (your) money is only a good idea in the eyes of accountants, particularly if the reasoning for buying the security was sound in the first place, and assuming that the issuing company is still profitable. This “tax-loss” lunacy is comparable to barging into your boss’ office and demanding a cut in pay, and it could be eliminated entirely by some intelligent tax reform. Have hope investors, I’ve heard a rumor that candidate Romney is talking about eliminating taxes on investment earnings.

Similarly, letting your profits run, as instructed by Force Two, in order to push the awful things into 2008 is just foolishness. Talk to those geniuses who didn’t take profits in 1999 (or in August, ‘87) and who are still waiting for their stocks or Mutual Funds to bounce back! The objective of the equity investment exercise is to take profits… the more quickly and more frequently, the better. There are no guarantees that the profits will wait for you to pull the trigger at your personal tax convenience. And patting yourself on the back when you have unrealized gains within your income portfolio is equally absurd. What’s better, a 10% profit in your hand today, or 6% over the course of the next twelve months? Profits need to be taken when they appear… the investment gods are watching.

Force Three takes the form of a trade, and is innocently called a Bond Swap… one of two reasons why your broker sold you those short-duration, odd lot positions in the first place. Now he has the opportunity to pick your pocket by exchanging them at a “nice tax loss” for another bond with “about the same yield”. He gets a double dip commission (yeah, I know it’s not on the confirmation notice, but a mark-up is applied to each side of the trade), and you get a bond either of longer duration or lower quality. Somehow it’s OK now to buy the longer duration bond. Really, this is how they finance their Christmas Shopping! If you don’t fall for the swap con, he won’t be too upset… the rapid turnover of your portfolio nets him a cool 3% on each maturing issue anyway.

As if all of this isn’t enough, Wall Street gangs up on you some more with a self-serving strategy that is blithely referred to by the Media as Institutional Year End Window Dressing…a euphemism for consumer fraud. In this annual Shell Game, Mutual Fund and other Institutional Money Managers unload stocks that have been weak and load up on those that are at their highest prices of the year. Always keep in mind: (a) that Wall Street has no respect for your intelligence and (b) that the media talking heads are entertainers, not investors. Institutions must show how smart they are by having quarterly and annual reports that reflect their unfailing brilliance, so they boldly sell low and buy high with your retirement nest egg.

It would be an understatement to say that the sum of these year-end strategies typically adds to the weakness of the weak and “proves” the intelligence of buying the strong. The November Syndrome is a short-lived annual investment opportunity that most people are too confused to notice, much less appreciate. Simply put, get out there and buy the November lows and wait for the periodic and mysterious January Effect to happen. The media will talk about this phenomenon with wide-eyed amazement as they watch many of the horrid become torrid for, seemingly, no reason at all. What’s happening, you might ask? Well, those professional window dressers are now selling their high priced honeys and replacing them with the solid companies they just sold for losses. Interesting place, Wall Street… tough but manageable. Take the profits and pay the dreaded taxes. Buy the November lows, even add to existing holdings. More often than not, this proves to be a winning strategy if you stick with investment grade securities.

Note: The 2nd Edition of “Brainwashing” has arrived.

Steve Selengut800-245-0494http://www.sancoservices.comhttp://www.investmentmanagementbooks.comProfessional Portfolio Management since 1979Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

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