Korean Investment Blog

There are a huge amount of insurance policies obtainable to protect people and their families should anything unpleasant occur, but not many people are procuring them. This article reviews what is available.

Life, critical illness insurance and income protection policies are in abundance but not many people are purchasing them as indicated by Reinsurance Solutions LLC– their approximated funding shortfall is a mind-blowing 2.3 trillion. Although people want only the best for their families hundreds of them risk financial damage because they haven’t taken precautions to safeguard them if anything sadly occurs to the main breadwinner.

Before you set out to seek the best bargins you have to comprehend what you are talking about and specifically what it is you require for your personal situation. As soon as you have found the cover that is right for you, you ought to then keep it in line with your situations and the alterations that could take place that will alter your requirements.

Income Protection Cover

Income Protection Insurance pays out if a client is unable to work for a length of time owing to illness or accident. Generally, the longer you agree to wait for the payments to start the cheaper your insurance will be so payments might be late in the beginning but assoon as they begin they will continue until either the policy holder goes back to work or dies or the policy expires, usually on retirement. additional benefits can consist of retraining to assist clients returning to work. Income Protection Cover will also pay for conditions not grouped as critical such as stress.

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It almost seems like peak oil all over again. The word on Wall Street is that gold supplies are thin, and after a 10 percent decrease in gold mined in the past decade, it looks like the yellow metal may be more rare than we think.

That Dirt Has No Gold

Since 1950, gold mines in the United States, Canada and Australia have experienced a grave shift in the amount of gold that could be produced per ounce of ore, from 12 grams per tonne to an average of 3 grams today. Though capital investment and machinery have made the process more efficient, gold mining certainly isn’t very profitable at low prices, indicating that the bottom may be closer to today’s top.

Market Leaders Moving

Harmony Gold has said it may close as many as two large-scale mining operations because they have been forced to mine deeper at an expense that does not warrant the operation at today’s prices. Barrick Gold, another gold mining leader, is busying paying off its hefty futures bets in gold delivery having accepted prices in the 1990s that are well below today’s market prices. This winding down in operations and in futures holdings suggest that supply is going to be further limited and that gold has plenty of room left to run.

The Gold Paradigm

Unfortunately for gold miners, each increase in the depth of a mine exponentially increases the price they pay per ounce to remove it from the earth. Barrick Gold, for example, has seen its average production price per ounce of gold fall to $456 per ounce in recent years, but only due to a change in energy prices. Should energy prices rebound (energy is one of the biggest overhead expenses) gold miners will be pinched and ultimately forced to cut out high-priced mines, again limiting supply.

Laying it all out there

Gold production is decreasing at a rate of 1 million ounces annually, despite prices that are four times higher than a decade ago. It is certain that the cheap gold is long gone, new production is coming on the line at extremely high prices, leaving miners with the choice of mining at what would be thin profit margins or avoiding the risk in search of easier to access gold. At any rate, the supply line should not be sinking with a price that is 300% higher unless it is true that we are, in fact, running out of gold.

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So far this year the IPO market has been in a stalemate as companies fear they won’t be able to attract enough attention from investors to warrant an IPO. Most new issues on the stock exchanges have been exchange-traded funds of different varieties but two recent IPO successes point to a healthy capital market and the ability to raise money, even in a recession.

Hyatt Hotels and Ancestry.com

Hyatt Hotels and Ancestry.com both IPO’ed on November 5th, 2009 with both selling all of their shares and still managing to climb 12% and 5.2% respectively in the first day of trading. Ancestry.com Inc. (ACOM) launched with a share price of $13.50 per share and seeking to raise $100 million to expand is online business of helping people find families and family information.

Hyatt Hotels IPO’ed at a price of $25 per share with 38 million shares to sell, all of the shares were sold and analysts were quick to note that Hyatt may have been one of the best IPO bargains of the year. The company, which owns hotel chains across the United States, sold at a price analysts thought was under its bookvalue. Hyatt closed at $28 per share.

Pulling out the Powder

Investors have been “keeping their powder dry” by investing in debt instruments and fixed income as a means to protect their money from risk. But the success of these two IPOs does suggest that the markets may be willing to accept risk, but only at the right price. Certainly, Hyatts business is well off its pre-recession highs and Ancestry.com isn’t exactly a “must-have” product. However, investors were willing to invest in two fledging businesses, even if it did require some risk acceptance.

Healthy IPOs Indicate a Healthy Market

Though both issues were already established in their market, investors should welcome new issues that aren’t ETFs. Its certain that exchange-traded funds will find it easy to raise capital, as they are funds of stocks already trading on the NYSE, the ability of individual businesses to raise capital gives hope that the stock market may be turning around—even if the economy isn’t.

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Whether you’re looking to smooth out dips in the market, or have just a few short years to retire, a sound investment strategy may include what is known as a “collar.” This simple strategy has been deployed by hedge funds, pensions, and other institutions with great success. In fact, a recent study found it to be more successful than buy-and-hold investing over the past 10 years.

Stock Option Collars

A collar is created by buying shares in a company, as well as protective puts, and selling covered calls. The name comes from the differing prices at which you buy and sell, ultimately creating a sort of price collar around the chart.

Why it Works

The stock option collar is particularly effective over the long term because you’re holding 3 different positions, one short, one long and one practically sideways. (puts, pure stock, covered calls) The idea is that if a stock rises, the puts will lose value, the way out of the money covered calls will generate an income, and the pure stock will rise in value.

The Beauty of Stock Options

Stock options complete the system. Due to the fact that a stock option cannot drop more than its value, and the fact they can run for several hundred percentage points, they make an excellent player for any hedging strategy. Should your stock dip like crazy, your put options will only allow you to lose the difference between the strike price and the current value of the stock. As such, all you really have to lose is the premium, which is often 2-3% of the stock’s price depending on the expiration, not too shabby if I do say so myself. What you have to gain is the appreciation of the plain old stock, and the income from the covered calls.

The Numbers Behind the Practice

A recent study found that in a 10 year period, the PowerShares QQQ ETF lost 3.5% per year while the options strategy generated a 9.26% return. The difference there is staggering, however we must also consider that during bull markets, the collar would underperform, but only by the difference of the value of the stock option. Which, of course, would be larger in short term trades and smaller over the long term.

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Remember the Old Dell?

Dell stormed onto the market back when custom computers were for gaming nerds. Their TV advertisements offered slick deals on a PC that was built just for you, with all the components you could individually choose. The idea was popular, as it was the first company to do custom computers in volume. They were also well known for their top-notch customer support, offering service packages to customers still new to the whole idea of personal computers.

Where Dell Messed Up

Early on, Dell made the decision to outsource their own customer support from a call center in the US to India. Prior to then, Dell customer support was of the very best and most experienced IT professionals. This quickly changed (in order to cut costs) to a call center which did nothing but provide scripted responses. Dell could no longer charge a premium for its service packages but that didn’t stop it from trying.

From Offshore to In-House

Even today, Dell generates nearly 50% of its business from other businesses. Most of its revenue is undoubtably from computers but its profits come from the support and warranty service. When Dell burst onto the scene in 1988 there was no such thing as an IT department, very few businesses even had a computer for every employee. Dell was the IT department, and it made a lot of money doing it. When they dropped that, every nerd and their brother opened their own IT solutions company locally, stealing what were once Dell customers.

The Modern Computer Market

When Dell entered the scene many years ago there were only a few computing companies and the choices were limited. That gave Dell a difference, and a niche. Today, there are literally hundreds of computer-makers as well as many thousands if not millions of small businesses that will make custom computers for individuals. Profit margins in computers are their thinnest ever, with many top-level companies bringing 3-4% of the product price on each sale. That’s nothing compared to servicing, where IT specialists are hired for $30-50 an hour and sent to work on networks and business computers for $90-120 an hour.

Simply Put

Dell focused far too much on building computers and not enough on fixing them. Its analogous to auto makers that make $500-$1,000 on a car but the autoshops make $2-3,000 fixing cars. Personal computers were a rock solid business with huge profit margins, but there is more competition than there was in the 1990s. Dell has proven itself to lag behind the market, and for this reason, I’m afraid their stock price will lag too.

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Corporate insiders have been selling off loads of stock in their own companies among others. Insider selling has hit a pace last unseen since Summer 2007, right before stocks began their freefall.

Stacking Up The Numbers

In August, insiders were selling 31 times more stock than they were buying, a huge shift from the post-crash recovery period that started in March. Through the first 5 months of the year, insiders were mostly buyers, with most of the volume coming in March when 1023 more insiders purchased stock than those that sold it. The tide is shifting however, with 348 more insiders selling in August than those buying.

Why Watch Insiders?

Insiders are extremely important to get a view about what people think about their own businesses but also the underlying economic conditions. Publicly traded companies in the United States do a significant amount of business, so much that one should expect that corporate leaders typically have a very good idea about the status of the economy and the opportunities for growth. You must also look at the data with a level head. Many believe that insiders are long term investors, when often this isn’t the case. As we see here, insiders were buying up shares like crazy in March but are selling off today. Many insiders, having a good understanding of their own business, can make huge amounts of money playing the short term ebbs and flows of a business and the economy.

Insiders Believe We’re Priced Too High

I’m never much to take what everyone says and accept it as the truth, however, with the insiders being so right in March, I wonder if again they’ll prove their investing prowess. The S&P500 and many other indices are up nearly 50% from March, a spectacular rally, but the fundamentals aren’t lining up just yet.

We won’t know for many weeks or even months if the insiders get this one right, or if these recent statistics even play any importance. This could just be some normal profit taking, or it could be a large-scale exodus hoping to get out of the markets with what they’ve got.

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As we all know, precious metals have been on a roll. With gold and silver moving like nobodies business, I’m going to take a few moments to discuss reasons why they’re moving so quickly.

Interestingly in the recent rally, the miner stocks have been the big winners. Recently, we saw that miners were hurting from a lack of capital, the credit crunch had limited the ability of miners to fund the day to day operations. As such, miners were lagging well behind the metals, mostly due to the fact that with lower metal prices, the risk to lenders was greater.

Inflation trade is persistent

The rise in prices also show the inflation trade is still abound. Investors, who have become increasingly concerned with inflation, especially as monetary inflation continues as the economy shows signs of “green shoots.”

5% on Gold, 10% on Silver

The changes in gold and silver are incredible, especially for metals that are better known as inflation plays and not super speculative investments. I think the best quote I heard on this subject was from CNBC, in which they alleged “Generally a movement like this means someone knows something!” Now, the timing is interesting, because the employment report is poised to come out tomorrow. But we also must consider that the move follows a large jump in equities with little move from metals. Following the multiplier effect, it should only be normal that you might see something like this.

Levels to Break

Ultimately silver must break $16.30 and gold $1000 before the metals can move further. Unfortunately for the bulls, these levels will be extremely tough to break. Metals, unlike equities, typically touch many many times before a break out. This is usually due to the fact that many companies are hedging their bets, and trying to find both the highest and most consistent price they can for their metals. Though there is plenty of speculative interest, there is also lots of commercial interest which further adds to the strength of the lines.

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The Federal Reserve began its quantitative easing scheme just a few months ago, but today nearly all of its allocated reserves have been spent. The goal is to weigh down interest rates to get the economy moving, and while interest rates have fallen, the economy continues to grind to a standstill.

New Numbers Released

The Fed’s balance sheet has expanded past $2 trillion again after rising to $2.057 trillion on July 15 from $1.977 trillion on July 8. The expansion was mostly due to its quantitative easing (inflation) program meant to jump-start the economy.

Where the Money Went

The $80 billion infusion between July 8 and 15 didn’t go unnoticed. The Fed bought an additional $60 billion in mortgage-backed securities as well as $11 billion in Treasuries and loaned another $6 billion to various financial institutions. Money that was used to buy mortgage backed securities likely flowed to Fannie Mae and Freddie Mac while treasury purchases were made directly from the treasury and primary dealers.

Fed Creates Best Treasury Auction

The week of July 8-15 brought one of the best Treasury auctions in recent history. Large purchases from the Fed distorted the markets, making it appear as if an extreme amount of bids were entered for treasuries. Regardless of a $11 billion infusion from the Fed, treasury rates trudged higher, mostly because investors realized the near obvious manipulation of the market.

Running out of Ammo

The Federal Reserve can buy up to $750 billion of Mortgage-backed securities, however its already purchased $526.42 billion of the notes. It has even less breathing room with treasuries, having already purchased $684.03 billion with authorization to buy up to $700 billion. With so little ammunition left, the Federal Reserve will have to make landmark announcements to further impact the free markets.

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For all it’s highlighted benefits, daytrading as a whole is often detrimental to most trader’s account balances. Over the years, day trading has been exploited as a way to make money quick, but for most, it’s a way to lose even faster. We’ll breakdown daytrading, and the math, to discover why day trading simply doesn’t make sense.

Trading Costs

The cost of a trade is relative to the number of shares, or dollar value for each trade. Commission on 100 shares of Ford is entirely different than 100 shares of Berkshire Hathaway. The commission on Ford is worth about 2 shares of stock while its worth about .0001% of the Berkshire shares.

Spreads are a fixed cost

So the cost of commission is relative, but one cost that plays so dearly into the cost of a trade is the spread between bid and ask price. The spread isn’t relative, its lower on high volume stocks and higher on low volume stocks but the spread stays the same no matter how many shares you purchase.

Profit/Loss And Movement Calculations

Often, traders fail to figure costs into their trading regimen. Whether buying for one hour, one minute, or holding for the century, the costs of trading remain the same. If you buy into a stock with a spread of $.10, the shares must move $.10 before you even break even.

Day trading, chump change, high volume trades

Day trading is all about making many, high volume trades for low amounts of profit. Let’s consider a case in which you’re shooting for a $.50 profit. If the spread is $.20, roughly 28% of the total movement in the stock price is made up by your own expenses. If instead you shoot for $5 of profit, the cost of the spread is only 2.8%. You only have to be better than the market by 2.8% to make money in the long run, but 28% better to make money in the short run.

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This year has been undeniably slow for any investor looking for IPO activity. Just over a dozen companies have gone through a 2009 IPO, compared to 35 last year. The trend to inactivity hasn’t been stopped, despite rising stock prices. Oddly enough, IPOs are booming in private markets, where businesses aren’t burdened with costly regulations and accounting rules.

Behind the scenes, whole and pieces of startup companies are bought an sold just like their larger counterparts on Wall Street. Two new exchanges bring together high net worth individuals and institutions alike to create a market small enough to evade the gloom on Wall Street and the regulations that send so many IPOs to bankruptcy.

Private Exchanges Are Nothing New

Private stock exchanges are a new thing. Typically, low wages at start-up businesses are offset with stock options, which may or may not pay off. Many times, employees have to wait it out for years, hoping that when the company IPOs they’ll be able to liquidate some, if not all, of their shares.

But private exchanges help bridge that gap. Two exchanges, SharesPost and SecondMarket, are leading the way in the private stock exchange boom. The companies help sell stock within private firms to investors who have the financial lee-way to wait out an IPO. Many startup employees and operators are finding the exchanges an excellent opportunity to raise cash without going through the procedures of listing on the big board. SecondMarket is emerging as the leader in start-up financing, with 40 deals and $150 million in transactions having taken place in the past year.

Staying Small is Crucial

Keeping the company, and the number of shareholders, in thin supply helps keep these companies under the radar. SEC rules require that firms worth more than $10 million must file annual reports if there are more than 500 shareholders. For many companies, this works out perfectly, as small companies can be easily financed by less than 500 shareholders. For many firms, the value of the company is far higher than $10 million but its financiers can be counted on one hand.

Got Cash?

Unfortunately most investors will never see the light of day with these private exchanges. Most deal with institutional investors which manage $100,000,000 or more, or individuals that have at least $1 million in assets or make over $200,000 per year. As each company can have a maximum of 500 shareholders, private exchanges can be selective in who gets to buy and sell on their exchanges.

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