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MARKET BUZZ – Unemployment Rate Flat in Canada - Europe Screwed


Posted by Ryan Irvine: Keystocks

on Saturday, 09 June 2012 09:40

Unemployment Rate in Canada Stays Flat in May; Europe Continues to Add to Global Uncertainty

The S&P TSX Composite closed at 11,500.63, up 1.23% for the week, but down 3.8% since the start of the year and uncomfortably close to 2012 lows.

Canadian employment numbers came in on Friday slightly above expectation with 7,700 new jobs being created during the month of May. Consensus estimates for the month were for 5,000 new jobs. The numbers, while a little higher than expected, essentially put an end to the strong month-over-month momentum we have seen March. Collectively, March and April brought with them 140,000 new jobs; a 30 year record for Canada’s economy. Although the prudent minded knew to look at the numbers with caution, there were, not surprisingly, many optimists that hoped the performance was the start of a new trend. Clearly they were disappointed by the May numbers. Overall the Canadian unemployment rate remained flat at 7.3%.

While we continue to see mixed data in North America, the situation in Europe is nothing less than clear. The continent continues to struggle with an unyielding debt problem which many fear is spilling over into the global marketplace. After rallying at the start of the year, nearly all major global stock markets are now either down or flat. Although Greece remains firmly in the spotlight, Spain has moved a few steps up the ladder to release its financial woes upon the world. Spanish banks have come under serious pressure which has caused economists and analysts to predict that the country will formerly request an EU bailout on Saturday, making it the fourth nation in Europe to do so. The International Monetary Fund is currently in the process of conducting an audit on how much money Spain would require (due out Monday) with preliminary estimates at €50 to €60 billion and potentially higher. Not surprisingly, ratings agency Fitch announced on Thursday that it was reducing Spain's credit rating by three notches on from A to BBB. This rating is now only one notch above junk status.

The situation with the PIGS (Portugal, Italy, Greece, and Spain) is analogous to what happens to an individual person that takes on too much debt. As an individual’s debt continues to grow, and their ability to pay that debt declines, naturally creditors will require a higher interest rate to compensate them for the additional risk. But at some point, creditors will just stop lending the money regardless of the rate that the debtor is willing to pay. This is true unless of course someone with a better credit rating and balance sheet agrees to co-sign the loans. In the case of Europe, this reluctantly generous co-signer is of course Germany. But Germany’s graciousness is not without a self-serving purpose as they stand to benefit more than anyone by the preservation of the Euro.

In the pre-Euro area, each of the debtor nations would simply allow their currency to de-value which would have the natural effect of lowering their respective debt burdens in real purchasing power terms. Although this is quite painful in the short term, it has historically been the only way to sort these issues out, as was the case with Argentina’s debt crisis in 1999 – 2002. The short-term pain was intense, but Argentina did recover and now enjoys one of the highest economic growth rates in Latin America.

100217-unemployment-line




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Lifestyle

Retirement Means Poverty for Many


Posted by Peter Grandich - Grandich.com

on Saturday, 09 June 2012 01:52

retirement-transitionplanning

Regular readers know where I stand on retirement: it’s a man-made myth. See the below chapter from my book “Confessions of a Wall Street Whiz Kid” for my views on the subject.

I have also been pounding the drum that health care costs will bankrupt older Americans. In this article from US News & World Report (which you can also read on Yahoo Finance) says, “One of the biggest drivers of poverty in old age is failing health and the associated medical costs.”

I urge all readers to read both the US News article and my chapter.

6-1-12-grandich-usnews

Poverty Increasing Among Retirees 

By Emily Brandon | U.S.News & World Report LP 

Growing numbers of older Americans are spending their retirement years in poverty, according to a recent Employee Benefit Research Institute study. The proportion of older people living below the poverty line has been growing steadily since 2005, and many of those people are falling into poverty as they age and spend down their savings.

Click here to read the article in its entirety.

Growing numbers of older Americans are spending their retirement years in poverty, according to a recent Employee Benefit Research Institute study. The proportion of older people living below the poverty line has been growing steadily since 2005, and many of those people are falling into poverty as they age and spend down their savings.

Click here to read the article in its entirety.

~~~~~~~~~~

Chapter 13:

Retirement: A Man-Made Myth

“Retirement at 65 is ridiculous. When I was 65, I still had pimples.” ~ George Burns

There are a lot of things I can point to as being wrong with our society today, but one glaringly obvious shortfall is our entitlement mentality. In general, we feel we “deserve” a whole lot of stuff that we really have no right to claim. First and foremost, in my opinion, is the concept of retirement.

Make no mistake about it: this whole notion of retirement is a man-made creation. There’s nothing Biblical about us supposedly killing ourselves for 75% of our years to store up enough assets to live off for the last 25%, yet that’s the system our society has built. The system is hopelessly broken and our government can do little more than try once again to kick the can down to the next generation. Somebody is going to pay an awful price.

Let me give you a little background on the phenomenon we call “retirement.”

In her New York Times article entitled “The History of Retirement, From Early Man to A.A.R.P.”, author Mary-Lou Weisman briefly and humorously outlines the history of retirement from Cave Man to modern day, and gives supporting facts about why retirement is not just man-made, but a 20th-century creation.

During the Stone Age, says Weisman, we worked until age 20 then died, usually from unnatural causes. During Biblical times, when people lived to be really old – the Bible says Methuselah died at the ripe old age of 969, thus the adage “older than Methuselah” – people worked until they dropped.

This working-until-your-last-breath mentality prevailed through the centuries even after Chancellor Otto Von Bismarck, nicknamed The Iron Chancellor, introduced the concept of retirement. In 1889, Germany’s Old Age Disability Insurance Bill was enacted to provide a pension for all workers at age 65. Sounds generous? Not really. It was proposed by Bismarck as a way of gaining favor among his countrymen, but it wasn’t as sweet a deal as you might think. The average life expectancy at the time was 45, so there weren’t many around at 65 to collect, and those who did usually didn’t live a whole lot longer.

What Bismarck’s bill did, however, was put in motion the idea that at some point in life we deserve to plop down in our rocking chair and grow mold. Did I say mold? I meant old. As Weisman describes, that single move “set the arbitrary world standard for the exact year at which old age begins and established the precedent that government should pay people for growing old.”

Fast forward to 1905 when world-renowned physician William Osler, in his valedictory address at the Johns Hopkins Hospital, where he had been physician-in-chief, said that workers aged 40 to 60 were less productive than their younger counterparts and those over age 60 were “’useless” on average. That must have been popular. At the time, around 60% of men aged 65 and older were still in the workforce.

But it wasn’t until President Franklin D. Roosevelt signed the Social Security Act of 1935, also known as the federal old-age program, that retirement and entitlements, which were mostly available only to white men, became a part of American culture. The average life expectancy in America was just under 62 years. Roosevelt’s old-age program was funded by a 1% tax on employers and employees on the first $3,000 of a worker’s earnings. Today, the Social Security tax rate is more than 6%.

....read page 2 & 3 HERE



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Stocks & Equities

8 Strategies to Avoid Stock Trading Failure


Posted by Tyler Bollhorn StockScores

on Saturday, 09 June 2012 00:00

perspectives commentary

Here is a video link to an interview that I did at the World Resource Investment Conference last week, click here to watch on YouTube.

Trading is simple, but not easy. Despite its simplicity, most people who try to trade have a hard time finding consistent profitability. Trading well is as much about doing certain things right as it is about avoiding the common mistakes. Here is a list of the common causes of trader failure.

1. Lack of Knowledge
Trading does not have to be complex or involve a sophisticated understanding of capital markets. In one day, I can teach a person the skills that I use as a trader. However, like riding a bicycle, being good at applying those skills takes practice and usually involves some painful mistakes through the learning process. You probably were pretty wobbly the first time you pedaled a bicycle but, with time, you found your balance and got good at it. Trading is no different.

However, unlike riding a bike, there are thousands of ways to trade. You have a choice in what you trade, the hold period for your trades and the strategies you apply.

There are many options for people looking to learn trading. You can take classes, study online, read books or try to figure it out on your own. Each approach to learning has a cost; don't underestimate the price for how you intend to learn.

With so many approaches to acquiring the knowledge you need to trade, there is not necessarily just right and wrong ways to learn. It becomes a question of what is right for you, what best fits your learning style. What is most important is that you get educated before you risk a penny of your money in the market. Most people can't beat the market because they don't know what they are doing. Don't let a lack of knowledge ensure your failure.

2. Poor Risk Management
The focuses for most aspiring traders are the decisions to enter and exit the trade. They spend a lot of time trying to find the right stock to buy and then try to make a good decision on when to enter. They miss out on the most important component of the trading process.

Risk management is that often forgotten piece of the trading puzzle. Without capital to trade with, you have nothing to do. Protect your capital first and never try to get rich overnight. Some might get lucky in the short term but those who fail to manage risk over the longer term will go broke. That is guaranteed.

For every trade, you need to know your downside. Being wrong is part of trading so you must have a plan for what to do when you are wrong.

3. Insufficient Capital
Since being wrong is part of a profitable trading strategy, you need to allow for drawdowns of your capital base. There will be times when market conditions will not be great for the strategies you are applying. 
When planning your trading business, you must allow for this potential deterioration of capital. You may make five steps backward before you start to go forward, make sure you have the capital to ride out these losing periods.

4. Trading Without Proven Strategies
I have seen a lot of people trade without a strategy that they have tested. They think that they can beat the market by doing things that make sense. This is often the biggest problem with people who are successful in other areas of life.

It is a bad idea to think that you can beat the market by being smart. The markets rarely do what makes sense, at least in the context of the information that we have. This is because the market often moves on information that most of us just don't have.

For that reason, it is smart to have a set of trading rules that you first test exhaustively before you trade. Your testing must determine whether the rules yield a positive expected value. Over a large number of trades, your rules should make a profit. What happens on any individual trade really does not matter.

5. Failure to Follow Rules
The rules you define and test are only effective if you follow them. While this is easy for all of us to understand, it is a very hard thing to actually do. We break rules because we are afraid of losing money. Emotion is a hard thing to overcome.

To minimize the impact of emotion requires a comfort with the risk you are taking. Most traders find that paper trading, simulated trading without using real money, is not too hard. It is only when they have their capital at risk that they start to make mistakes.

The solution to this problem is to not take more risk than you are comfortable with. The best traders are those who don't care about the money. The more you can do to take out emotion, the better your chances will be to follow the trading rules.

6. Lack of Determination
Doing anything well requires the determination to learn and gain expertise. This is very much the case for trading because it is such an emotional pursuit. There will be times when the novice trader will feel overwhelmed with emotion and ready to give up. 

I don't think trading is something that can be done well by someone who does not like it. Having a passion for trading is what will get you through the hard times and ensure that you stick with it when your heart may tell you otherwise.

7. Poor Focus
The shorter the time frame you trade, the more focused you need to be. Position trading (hold period measured in weeks or months) is not that demanding mentally because you have a lot of time to make your trading decisions. Swing trading (hold period measured in days) requires you make quicker decisions but is not as demanding as day trading. The day trader (hold periods measured in hours or minutes) has to make decisions in only seconds and work hard to not miss out on good trading opportunities.

It is hard to trade if you have a lot of distractions while you are trading. You have to do what is necessary to avoid letting outside factors have an effect on your trading decisions.

8. Inability to Adapt
The market is constantly changing and you need to be able to adapt with it. That means applying trading strategies that are appropriate for the present conditions; you may not want to apply a buying strategy in a market with strong downward momentum.

Avoiding chasing the market with your rules is a challenge that many traders have trouble with. You should have a set of trading principles that do not change over time, these based on source of opportunity that you are pursuing. Do not constantly change the rules of your tested and proven strategies.

However, how and when you apply your strategies will change as the market evolves. I keep a stable of trading strategies that I apply as conditions warrant.

perspectives strategy

Markets took a step in the right direction this week with the bounce back that I was expecting. The indexes have not overcome the pessimism yet but could do so soon, watch for a break of the downward trend line on the major stock market indexes. In the mean time, there are a few stocks able to do well despite the market weakness. This week, I ran the Stockscores Simple strategy Market Scan and found a few stocks with decent charts. Here they are with my comments:

perspectives stocksthatmeet

1. DRAD
DRAD made an abnormal up break with abnormal volume on Friday, taking it through resistance from a rising bottom. Good potential provided it does not pull back to close below support at $2.16.

Picture 1

2. UNIS
A good ascending triangle break on UNIS Friday with abnormal volume supporting the break. The reward for risk will improve with a pull back. The stock is breaking its long term downward trend, a good sign for a turnaround. Support at $3.95.

Picture 2

3. TCAP
A nice weekly chart breakout from a cup and handle pattern on TCAP as the stock moves to five year highs after sitting under $20 resistance for over a year. Support at $19.75.

Picture 3

References

 

  • Get the Stockscore on any of over 20,000 North American stocks.
  • Background on the theories used by Stockscores.
  • Strategies that can help you find new opportunities.
  • Scan the market using extensive filter criteria.
  • Build a portfolio of stocks and view a slide show of their charts.
  • See which sectors are leading the market, and their components.

    Disclaimer
    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.

 



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Currency

Signs of the Time - Currency Stocks Bonds Gold & Commodities


Posted by Bob Hoye - Institutional Advisors

on Friday, 08 June 2012 12:35

"The European Central Bank has reached the limit of its mandate, especially in the use of non-conventional measures... In the end, these [efforts] are risks for the taxpayers.

"It's like morphine, the LTROs provide relief from the pain, but are not a cure for the illness."

--ECB Governing Council member Jens Weidman, May 25.

We have often thought that interventionism is the opiate of the intellectuals.

"Investors pulled $3.05 billion from junk-bond funds globally in the week ended May 23, the most since August."

--Bloomberg, May 25.

"Home prices drop 2% to post-crisis lows."

--Case Shiller, May 29.

“Consumer Confidence Plunges in May"

--Yahoo! News, May 29.

The Conference Board number for May is 64.9, down from 68.7 in April, which is the biggest hit since October.  The consensus was for 70.  February's 71.6 was the highest in a year.

Note that junk-bond withdrawals and consumer confidence have quickly moved to numbers seen at the culmination of the last crisis--away back last fall.

Does this suggest that current distress is culminating?

Not likely, but it is poised for some relief.

Last year's problems began to be revealed last May and culminated in late September.

CURRENCIES

The dollar has progressed to new highs for the move, as the sovereign debt crisis resumes.  The short squeeze on the DX, which is one of the features of a post-bubble contraction, continues. We had thought that the action would briefly pause at the 81 level reached in January. It only spent a few days there and with some drama has popped to almost 83.

And this is the story--drama as the world discovers that last year's "stimulus" is not working. Well, the global economy has been rolling over.

And yet, the establishment continues in its fanaticism that intervention will make a normal post-bubble contraction go away. Unfortunately, the rise in the dollar as well as yields in Euroland insist that it is not going away. Chart on Spanish bond yields follows.

However, last week we noted that the daily RSI had reached 77.7, which was a level that could limit the move. This is now at RSI 80 and that ended the last big rally, which was to 88.7 (for the index) in 2010.

This fits with the Euro now registering a daily Downside Capitulation.

Stability in the Euro would make most everyone think that the pressures are over and Ross's model has been reliable in signaling a rally.

This would fit with our outlook for choppy financial markets through the summer.

As instructive as it is, let's call it a mini-crisis that is close to ending with the dollar at a daily RSI of 80. A major crisis, as in 2008, could culminate with a weekly RSI out at the 80 level. Possibly later in the year.

COMMODITIES

Last week we noted that the CRB was getting as oversold, with an RSI at 22, as at the double bottom last fall. That was at the 281 level and it has dropped to 275 with an RSI at 21. Mainly, this seems to be due to this week's extension of weakness in crude oil and the fresh hit to natural gas. Cotton and sugar have seriously extended their 52-week lows. Cotton has plunged from 115 a year ago to 71 now. Sugar has dropped from 27 to 19.5.

This really confirms that a cyclical bear started from our "Forecaster" signal in 1Q2011.

However, base metal prices (GYX) at 363 have yet to take out last fall's low of 356. At an RSI of just under 30 it is getting oversold enough to limit the move.

The grain’s index (GKX) has dropped to 397 and is testing last December's low of 397. Who cares if it takes out the low, but where are the inflation bulls when you really need them?

It seems that most commodities are beat down enough to expect choppy action through the summer.

Stock Markets

Last week, the S&P got down to an RSI of 23 which could be the momentum low for the move. With this week's pressures the index has slumped to 1311, which we take as testing last week's low of 1292.

This will likely hold and general stock markets could be choppy through the summer. Perhaps another new paradigm is developing - - the "All-One-Chop" model?

Other than that, we are looking for a "Typical" summer. Pundits will describe each rise as a "Typical Summer Rally" and each set back will be a "Typical Summer Doldrum".

GOLD STOCKS RELATIVE TO BULLION

Picture 1

 

  • Gold’s have generally underperformed since the economy and orthodox investments arose out of the crash in mid 2009.
  • Base metal mining stocks outperformed the rise in base metal prices. That ended in 1Q2011.
  • The gold sector is preparing to outperform most every sector—on the planet.

Gold’s relative to S&P

Picture 3

SPANISH BONDS

Picture 4

BOB HOYE, INSTITUTIONAL ADVISORS

E-MAIL bobhoye@institutionaladvisors.com

WEBSITE: www.institutionaladvisors.com



 



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Stocks & Equities

The Most Successful Dividend Investors of all time. Mark Leibovit Comment


Posted by Dividend Growth Investor - Comment by Mark Leibovit

on Friday, 08 June 2012 10:20

The first investor is Anne Scheiber, who turned a $5,000 investment in 1944 into $22 million by the time of her death at the age of 101 in 1995. The second investor is Grace Groner, who turned a small $180 investment in 1935 into $7 million by the time of her death in 2010. The third dividend investor is Warren Buffett, the Oracle of Omaha himself.

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

....read how these investors did it HERE

Mark Leibovit: My reaction to Bernanke's testimony in Congress yesterday is simply that the sooner this corrupt house of cards collapses, the better off we'll all be!

Bernanke only knows one thing: How to print more money! If you think that is going to change whether you call it QE3 or secret actions masked under the protected cloak of the Federal Reserve, guess again.

A sixty point rally in the S&P 500, a 500 point rally in the Dow Industrials and a 420 point rally in the TSX is apparently 'all she wrote' for this upleg. Whether we've seen THE low for my predicted May to July cyclical trough, only time will tell. (Ed Note: Mark recently went Bullish on Stocks based on Cyclical and seasonal patterns)

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 A common question I am asked is, “When do you sell the stock you own?” There are several circumstances that need to be considered...

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