Wednesday, September 9, 2009
Two suburban Chicago banks failed in Illinois, the Federal Deposit Insurance Corp. said:
InBank, the 14th bank to fail in Illinois this year, had $199 million in deposits as of Aug. 3, the agency said. Chicago-based MB Financial Bank has agreed to assume its deposits. InBank's failure will cost the deposit insurance fund $66 million.
Platinum Bank of Rolling Meadows was closed by the Office of Thrift Supervision, which appointed the FDIC as receiver. As of Aug. 29, the bank had total assets of $345.6 million and deposits of $305 million, the FDIC said. The FDIC authorized payout of insured deposits and estimated the cost to its Deposit Insurance Fund will be $114.3 million. MB Financial Bank will accept the failed bank's direct deposits from the federal government.
Kansas City, Mo.-based First Bank of Kansas City also was closed by regulators. The FDIC said. De Soto, Kan.-based Great American Bank has agreed to assume the failed bank's deposits. First Bank of Kansas City had $16 million in assets and $15 million in deposits as of June 30, the regulator said. Its failure is expected to cost the federal deposit-insurance fund $6 million. First Bank of Kansas City is the second Missouri-based bank to fail this year, the FDIC added.
Sioux City, Iowa-based Vantus Bank and Oak Forest, Ill.-based InBank also were closed. Vantus Bank had roughly $368 million in deposits as of Aug. 28, the FDIC said, and Springfield, Mo.-based Great Southern Bank has agreed to assume the failed bank's deposits. The failure of Vantus Bank will cost the deposit insurance fund $168 million. It's the first bank to fail in Iowa this year, according to the FDIC.
In Arizona, First State Bank in Flagstaff was closed and Sunwest Bank of Tustin, Calif., will assume all of its deposits, the FDIC said. As of July 24, First State had total assets of $105 million and total deposits of about $95 million, the FDIC said. The failure will cost the deposit insurance fund an estimated $47 million, the FDIC said.
Phillip Moeller for Smart Money reports that there are six major lessons to be learned from this recession:
* The experts are not the end all, be all. The trust in financial institutions and leaders will not be restored for some time. All of the kind words from banks, brokerages and real estate companies didn’t amount to much when crunch time arrived. Make sure to protect yourself with an entry and exit strategy, instead of relying on the predictions of others.
* Learn how to budget, and live within it. Make a household budget and watch where your money is going. This is a good way to get a handle on spending and to help downsize if need be.
* Learn how to negotiate. Make sure that you do not have to pay full price. For most products and services, including home improvement, the consumer is in the drivers seat.
* Actively manage your own investments. As you may have learned from the past market meltdown, buy-and-hold isn’t foolproof. Passive investing is the way of the past. To brush up on your trend following skills, educate yourself. The ETF Trend Following Playbook is a simple and effective place to begin.
* Forget about housing wealth. Even a few years of solid increases in home values could bring on mass amnesia. Do not depend upon housing wealth for a retirement or even appreciation. Housing gains are only a cushion, nothing more.
* Stay healthy, both mentally and physically. People who exercise feel better and think better. Remember that exercise is free and bad health can cost you a small fortune.
* To this we’d add: Brush Up. Brush up on what you need to know to be successful in the markets. If you’ve taken a beating, dust yourself off, pull yourself up by the bootstraps and examine where you are now, your strategy, how you’re feeling and what you can do to improve. Looking inward can only benefit you.
Disclosure I am long many ETF's
Nevertheless, when it comes to the future’s most dominant economic force, “green shoots” can bloom in any season. During the precarious pullback in June, the iShares China 25 Index (FXI) found support at the 50-day moving average before rocketing higher yet again.
Still, we’re about to see the first breakdown of technical support since March… when the 6-month, world stock rally began. With FXI falling roughly 1.2% on Monday, August 31, 2009, the popular benchmark breached the short-term, 50-day moving average.
Ditto for SPDR S&P China (GXC) and PowerShares Golden Dragon China (PGJ). Again, we haven’t seen the China ETFs below 50-day trendlines since March… when they were moving the other direction!
Should we even be concerned that the Shanghai Composite over on the mainland is down 20%… or that it has fallen below a longer-term 125-day support line? I think we may need to perk up!
Consider the following reality: The 6-month cyclical bull for worldwide stock assets began in China. Its stimulus package focused 75% of its $550 billion directly on infrastructure, which required a host of natural resources from iron ore to nickel. China went on to purchase resources and companies in countries from Brazil to Australia, and the re-inflation of the global industrial cycle seemed to begin anew.
It follows that we must consider the impact of falling equity prices in China. Would the rest of the world really have investor confidence were it not for China, Southeast Asia and expectations for emerging market growth?
It’s fine to celebrate the 6 consecutive months of gains for the S&P 500 and the Nasdaq. What’s more, we may decide that a 1% Monday selloff from recent highs is “no big deal.”
However, I myself am particularly wary of developed market ETFs after an unprecedented winning streak. Not only should we expect a correction, but we may need to see conviction on the part of emerging market investors (a la “buying the dips”). Meanwhile, keep a firm handle on your stop-loss protection.
Hey… it’s a different world out there. It used to be whatever happens in the U.S. markets, the rest of the world had to take notice. Today, whatever happens in China… the U.S./Europe need to take notice.
Disclosure I am long FXI shares.
Disclosure I am long BP shares.
Tuesday, September 8, 2009
Billions of dollars are being poured into cancer-fighting drugs. But it’s not just to find a cure – it’s also to gain market share in one of the most untapped markets, from a pharmaceutical standpoint. The related ETFs could benefit no matter which company discovers a drug first.
After largely ignoring the disease, virtually every large pharmaceutical company seems to have discovered cancer now that more about the disease is known. A substantial portion of the smaller biotechnology companies are focused on it, as well. Combined, the two industries are pumping billions of dollars into the development of drugs to fight off the disease, reports Andrew Pollack for The New York Times.
Two industry trends are pushing the move:
- Recent scientific discoveries have suggested new targets for cancer drug researchers to attack
- Drug companies are experiencing declining profits from staple drugs such as Lipitor; the high prices that cancer drugs can command are proving to be alluring
- Cancer patients are often desperate for drugs while insurers could face outrage if they denied payments, so drug makers can charge hefty sums for medicines – even those that don’t work very well
Gardener Harris for The New York Times reports that a settlement has been reached regarding the pharmaceutical giant Pfizer (PFE) over the company’s illegal promotion of its now-withdrawn painkiller, Bextra. The $2.3 billion fine is the largest-ever levied for Medicare and Medicaid fraud, and the agreement also includes some promotional practices involving other Pfizer drugs — Zyvox, Geodon and Lyrica.
European shares rose for a fourth straight session, with miners getting a lift from stronger gold prices. Australian shares were among the winners in Asia, buoyed by a jump in business confidence to its highest level since October 2003.
Morgan Stanley changed its tech-sector view, upgrading systems and PC hardware to attractive from in-line, while downgrading software to in-line from attractive. Among several rating changes, the broker cut Dell (DELL 15.72, +0.03, +0.19%) , IBM(IBM 118.17, +0.71, +0.60%) and Texas Instruments(TXN 24.86, 0.00, 0.00%) to equal-weight from overweight.
Credit Suisse downgraded American International Group (AIG 38.36, -1.69, -4.22%) to underperform from neutral and slashed its price target to $15 from $30, saying there could be little value left for common equity holders after AIG has sold off its core businesses.
Costco Wholesale Corp. (COST 56.95, +1.48, +2.67%) was upgraded to overweight from equal weight by Morgan Stanley, which said food deflation and other headwinds that had been pressuring the company are dissipating.
Kraft Foods Inc.(KFT 26.41, -1.69, -6.01%) said on Monday that it's pursuing a takeover of Cadbury (CBY 52.59, +15.13, +40.39%) after the U.K. chocolate maker rejected a $16.7 billion bid. Kraft said a combination of the two companies would create a "global powerhouse" in snacks and confectionery with annual sales of more than $50 billion. Analysts, however, said the U.S. giant may need to significantly raise its offer. A counter-bid from Nestle and Hershey (HSY 39.45, +0.82, +2.12%) is also considered a possibility.
Gold futures surged above $1,000 an ounce on Tuesday, propelled by weakness in the U.S. dollar. The December contract hit an intraday high of $1,009.40. Analysts said it's unclear how sustainable the rise above $1,000 will be, as the last two times it occurred it was followed by a sharp correction back below $900.
Chartered Semiconductor Manufacturing (CHRT 17.25, -1.53, -8.15%) said over the weekend that it has struck a deal to sell itself to Abu Dhabi's Advanced Technology Investment Co. for approximately $1.8 billion in cash.
Atheros Communications Inc. (ATHR 28.82, +0.84, +3.00%) said it will acquire Intellon Corp. (ITLN 7.15, +2.15, +43.00%) in a stock-and-cash deal valued at about $244 million, or $181 million net of Intellon's cash and short-term investments.
Disclosure I am long KFT shares.
Bullion for December delivery surged to $1,009.40 on the Comex division of the New York Mercantile Exchange, taking this year’s gain to 14 percent. Gold futures, which reached a record $1,033.90 in March 2008, are set for a ninth yearly gain. Crude- oil futures and all six industrial metals on the London Metal Exchange rallied as the Dollar Index lost as much as 1.1 percent to more than an 11-month low. Raw materials typically move inversely to the U.S. currency.
Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies. Gold, silver and palladium holdings in exchange-traded funds have advanced to records.
“We don’t see any immediate recovery in the dollar and gold is one of the better alternatives,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “From here, the next technical level is $1,040, and at the rate it’s going it might not be difficult. There’s a lot of new money coming into gold.”
Gold last traded at more than $1,000 on Feb. 20, the first time the metal had reached that price since March 2008. Futures then retreated as low as $865 on April 6. The metal added 0.9 percent to $1,005.70 at 8:35 a.m. in New York. Bullion for immediate delivery surged as high as $1,007.70 in London and was last at $1,005.45.
“There’s not many good options for investors to hedge against a declining dollar and rising inflation,” Hwang Il Doo, head of trading with KEB Futures Co., said today from Seoul. He expects gold will rise to $1,100 an ounce by year’s end.
The metal’s advance boosted producers. Newcrest Mining Ltd., Australia’s largest gold-mining company, gained as much as 5 percent to A$34.18. Zijin Mining Group Co., China’s largest producer, rose as much as 10 percent in Hong Kong.
Lead, which has paced this year’s gains in metals, rose as much as 5.7 percent to $2,484 a metric ton, the highest level since May 2008. The metal’s 149 percent rally this year came after China, the world’s largest supplier of the metal, closed smelters and investigated lead-poisoning cases. Copper has more than doubled and traded at $6,505.75 a ton, the highest in more than a week. Goldman Sachs Group Inc. today raised its forecasts for industrial metals as a recovery in the world economy reduces spare capacity.
Gold may be cementing its status as a haven investment as governments seek to flood the financial system with cash in an effort to haul the global economy out of a recession.
“The reasons to own gold as an investment make sense,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said in advance of the metal’s gain to $1,000 today. “It is a hedge against policy makers losing control of fiscal and quantitative monetary policies.”
The Dollar Index, a six-currency gauge of the dollar’s value, declined for a third day today. The measure has slipped 5 percent this year.
Other precious metals have outperformed gold this year. Silver for December delivery in New York gained as much as 3.5 percent to $16.86 an ounce today, the highest since August 2008, and was last at $16.725. It has climbed 48 percent this year.
An ounce of gold now buys about 60 ounces of silver in London, the least since August 2008, according to Bloomberg data. That’s down from a high of 84.4 on Oct. 10, which was the most since March 1995.
Palladium for December delivery in New York rose 1 percent to $299 an ounce, the highest price in a year. The best performing precious metal this year has gained 58 percent in 2009. Platinum for October delivery added 2 percent to $1,284.80 an ounce, increasing its gain this year to 37 percent.
U.S. President Barack Obama has increased U.S. marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.
Crude-oil futures, used by some investors as an inflation- outlook guide, have soared 57 percent this year. Consumer prices will rise 0.9 percent in advanced economies next year compared with 0.1 percent in 2009, the International Monetary Fund forecast in July.
Gold at more than $1,000 may attract more investors seeking to take advantage of the longest advance in the metal’s price in 60 years. Assets in some of the industry’s largest exchange- traded funds have reached all-time highs the past few months.
The SPDR Gold Trust, the biggest ETF backed by the metal, reached a record 1,134.03 metric tons on June 1. The fund, which held 1,077.63 tons as of Sept. 4, has overtaken Switzerland as the world’s sixth-largest gold holding. Bullion held in ETF Securities Ltd.’s exchange-traded products added 6.640 ounces to a record 8 million ounces (248.8 tons) yesterday, its Web site showed.
The company’s silver holdings increased 0.9 percent to an all-time high 20.516 million ounces, while palladium assets rose 1 percent to a record 456,953 ounces.
Investors should avoid buying gold at $1,000 an ounce because investment demand is less compared with earlier this year, UBS AG analyst John Reade wrote in a note today. UBS maintained its one-month and three-month forecasts for the metal at $950 and $1,000 an ounce respectively.
“We are unconvinced that all the ingredients are in place for a sustained surge higher,” Reade said. “Only if we see much stronger and more broad-based buying in gold will we change our view that this is a profit-taking opportunity rather than a signal to buy gold.”
Disclosure I am long GLD Shares.
Silver Wheaton shares were up 2% at $11.82 premarket, while Barrick Gold rose 3% to $41.33.
The Canadian mining company will pay Barrick $625 million in cash over three years. It will also pay the lesser amount of $3.90 per ounce of silver delivered or the prevailing price.
The stake in the Pascua-Lima mine, which is still being built by the world's largest gold-mining company, will give Silver Wheaton an estimated 9 million ounces a year for the first five years it operates. The deal requires Barrick to have 75% of design capacity completed by the end of 2015.
Retroactive to Sept. 1, Silver Wheaton will get all the silver output from the Lagunas Norte, Pierina and Veladero mines through at least 2013, estimated about 2.4 million ounces a year. If Barrick hasn't completed 75% of design capacity at the Pascua-Lima mine by 2013, Silver Wheaton will continue to get silver from the other operation minds for the next two years until Pascua-Lima is up and running.
President and Chief Executive Officer Peter Barnes said the deal "propels Silver Wheaton to the next level in terms of size and growth profile."
Silver Wheaton is paying for the deal with $70 million in cash on hand and part of its $250 million in shares sold to Genuity Capital Markets and GMP Securities LP, announced Tuesday. The remaining payments will be made from operating cash flow. The company doesn't expect a debt drawdown.
Stocks can be as tricky a business for novice investors as they are for seasoned players. However, as Warren Buffet has always propagated, 'Right stocks at the right price' is the way to laugh your way to the bank. This means, avoiding all those 'junk' stocks and setting your sights only on the 'right ones'.
So how do we really separate the wheat from the chaff? In an age where Satyam [ Get Quote ] and Infosys [ Get Quote ] both ruled the roost at one point of time, how do we know which ones are the black sheep and which ones are not?
In this issue of women's weekly, we bring to you the fundamentals of choosing a stock from a long-term perspective:
A sound management is like a captain of a ship. The onus of charting out the right direction in still waters and steering the company safely in troubled times lies on the management.
We would even go to the extent of saying that the way in which a management behaves, determines to a great extent, the long term success of the business. You don't want to be an investor in a company where the management takes money from the shareholders to fill its own pockets.
A case in point here would be Satyam. It promised its investors the moon. However, they soon had to settle for sleepless nights as the ugly truth of Satyam reared its head.
Traders routinely buy and sell the same stocks within a time frame of a few hours. 'Investors', on the other hand, put money in stocks and hold on for a longer period of time, generally at least 2 to 3 years.
Develop an investor mentality. Adopt a long-term investment strategy. While looking at the quarterly results of the company, don't lose sight of the bigger picture. Invest for a longer duration which promises more returns and is not affected by daily market fluctuations.
Research shows that the shorter the duration of investment, the more are the chances of losing money. While, with long term investing, the chances of losing money are lesser.
Remember, the longer the investment period, the greater are the chances of making money.
Emotions need to be kept aside while dealing with stocks. Don't get emotionally attached to your investments. Your aim is to get maximum profits out of your stocks. It's immaterial if this is achieved through selling them, buying them or holding them.
Just because you are emotionally attached to the stock or just because the little voice inside your heart says, "Give it some time and things will work out just fine", does not mean that you have to hold on to a stock when it is destined to hit its nadir.
At the end of the day, it's all about numbers. Numbers can tell a story - you should just have an ear attuned to understanding their language. It makes sense to thoroughly investigate the company and its track record.
Consistency is the key. If the company is good, it will have a consistent performance. Its income statement will show consistent profits. Its annual reports will talk about the consistent dividends doled out. Ideally, the company should have a dividend history over the past 5 years and a dividend payout comparable with its peers.
In the case of 'growth stocks', the game changes a little. The company may not distribute its' profits as dividends; rather, it would invest the profits back into the venture for future growth. However, all said and done, it should not invest so much that it has to resort to frequent financing from outside. In other words, it should not undertake frequent dilution of equity or raise so much debt that its debt to equity ratio spirals out of control.
Looking at prior records helps one understand the company's capabilities. It gives an idea, shows a direction, and helps to understand the company's vision and the path ahead.
The golden rule to investing is considering the future growth prospects of the company you are investing in. During the dot-com boom, many investors displayed a herd mentality, investing in companies without any research. The result was the dot-com bust that followed.
It is important to not only know the company like the back of your hand but also be aware of the external factors influencing the growth of the stock. The overall state of the economy, the factors influencing political and social environment should also be considered while investing.
Sector growth, the demand supply trend and the competition in the sector also need attention before you decide to invest in a particular stock.
If you are a serious investor, you cannot go by intuition alone. You will need to do a lot of homework before zeroing on a particular stock. This should not be difficult. We may be considered impulsive buyers, but we do have our own ways of background research before we make the ultimate buying decision.
Homework before investing would include reading up about the company you are about to invest in. Reading its annual reports, studying the balance sheet, analyzing its profits, assets and liabilities; reading interviews of the top management, keeping yourself updated about the latest economic policies.
In short, being the sponge and soaking every piece of news and information related to your investment.
Keep a constant track of your investments. Regardless of the market condition, whether it is a bear market or a bull market, it is your money that is at the stake. Your hard earned money! You owe it to yourself to ensure that the savings that you have invested are showing a promise and growing.
It's the last mile that makes the difference in the race. It's not just about the right formula but about the grit to see it through. The grit to emerge as a winner.
Don't lose steam once you invest. Serious follow up is what will differentiate you from other investors. It will be your secret weapon, your protective armour, the secret charm that will help you make the best of your investments.