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Jared Levy
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Jared Levy is Editor of WaveStrength Options Weekly, our options trading research service and Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to... More
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Taipan Publishing Group
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  • The Best Way to Invest In Currency
    Last weekend after attending our annual financial summit in Las Vegas I realized a couple of things.
    1.      Just about everyone wants to invest in currencies as a hedge and to add real diversification to their portfolios.
    2.      A very small percentage of the investing community really knows how to do it.
    Precious metals and the currency are flying around the news just as much as the presidential election that is beginning to heat up. But unlike pulling a lever at election time, investing in the currency markets can be much more difficult and even dangerous if you don't know what you are doing.
    If you do know your way around the currency markets, you can tap into markets that have returned an average of over 75% during the past nine years.
    In this article, I'll show you a simple, cheap and stable technique to invest in currency. But let's look at the mechanics first.
    Pairs
    The FX market is a "pairs" market. That means two currencies are paired up and their values are compared against each other. Generally when you want to "trade" a currency or speculate on its rise or fall, you will buy or sell a "pair."
    By using pairs, traders can get an exact value down to the thousandth of a penny! They can quickly profit or lose by very small changes in these values.
    In fact, the word "pip" is a term used by many FX traders use. It is equal to 1/100th of a penny. Some traders consider a successful day making 50 pips. That's one-half of a penny in profits!
    The pair value itself trades like a stock; it can go up or down. It even has a bid and an asking price.
    Here is an example of pair values

    View larger chart
    The first currency in the pair is the divisor. The second is the dividend and the last price is the quotient. The value you see on your screen is how many U.S. dollars (NYSEARCA:USD) it would take to buy the paired currency.
    So if you look at the USD/Canadian dollar (NYSEARCA:CAD), it takes $1.03 USD to buy a CAD. The first currency is one that you are buying or selling, so if you thought the USD was going to rise against the CAD, you would buy this pair. Vice versa if you thought it was going to fall.
    Currency prices can move extremely fast and leverage is extreme, which can be overwhelming for many folks who try their hand at this fast trading method.
    It's certainly not for someone who can't be at their computer frequently.
    The advantage here is that is doesn't take much money to get started. Account minimums are usually around $1,000.
    Hopefully you drink caffeine, because these markets are open 24 hours a day, seven days a week...
    Until recently, the FX market was primarily used by large companies and banks to protect themselves from currency fluctuations.
    For example...
    If "ABC" beverage company sells most of its goods in Europe, but is U.S. based and reports earnings in U.S. dollars, its revenues will be strong when the U.S. dollar is weak and the euro is strong.
    It's kind of like being able to sell your $1.00 U.S. Coke for $1.50 in Europe. But what if the tables were turned and you were selling most of your $1.00 U.S. Cokes for $0.75 in Europe? Do you think ABC company would be making as much money? No.
    So to protect themselves, they would buy U.S. dollars/euro pairs to protect against such a shift.
    Individual investors can buy or sell currency pairs to speculate on small price movements, but this takes skill and patience, and there is a steep learning curve involved.
    Paper Currency
    For those of you who don't want to count pips or buy cases of Red Bull to stay up late, you can simply accumulate dollars in the currencies that you want to own. This is the most efficient and straightforward means of investing in an actual currency.
    Just like opening up a bank account in America, some investors will physically open accounts denominated in foreign currency.
    This was easier said than done for a long time. For many countries, you will need to travel there and physically open the account. There were also restrictions and reporting requirements that made this a daunting task.
    EverBank, which has been in business since 1961, has torn down many of the barriers to entry that once faced investors wanting to simply open accounts in foreign currency. Now, you simply open an account with EverBank in just about any currency you want.
    A couple of years ago, we decided to take paper currency investments a step further. Being that there are dozens of currencies out there to invest in, it could cost you a bundle not to mention a ton of energy to research the best ones. To help make the currency markets more accessible to the average investor, Taipan (now Insiders Strategy Group) partnered with EverBank to create the "Ultra Resource CD."
    Basically, this CD allows you to earn interest on dollars that are divided among several foreign currencies including the Australian, Canadian, Hong Kong, New Zealand and Singapore dollar and the Norwegian krone. The best part is that your money is FDIC insured.
    You will earn interest and have the potential to profit from movements in these currencies. It is a way for the average investor to diversify with currency without having to fiddle with all of the nuances of the currency markets. It is also OK in an IRA and has averaged almost 7% returns for the past 10 years.
    It wouldn't hurt for you to read a bit more about it; you can find more details here. If you are interested in opening an account, click here.
    There are many ways you can take advantage of the FX markets; a hedged, prepackaged CD that is already diversified may make the most sense for many investors. With the recent dollar rally, it may be good time to look at buying a product like this.
     
    Sep 27 11:44 AM | Link | Comment!
  • Special Delivery: A Job Killer Is at the Door
    Over the weekend, we held our annual investors survival summit in Las Vegas. Aside from the libations and excitement surrounding us, we focused on the world's economies.
    But more specifically we looked at what's ahead here at home.
    Employment and consumer confidence are the main drivers of economic growth. Without them, America's small-business growth -- the core of our stability -- would stagnate.
    While some unemployment is actually tolerated and generally acceptable, a continued increase in unemployment when the stock market is recovering is bad.
    Excessive unemployment (over 8%) hammers the equity markets.
    Below is a chart of the unemployment rate going back to 1970 (in blue) compared to the S&P 500 (green and red).
    Generally speaking, when unemployment is dropping sharply, the market rallies. You will also see that sometimes markets surge even when unemployment is rising (1990-1992, for example).
    This is because the employment rate is a lagging indicator, while the stock market is the ultimate leading indicator.
    Think about it as a rubber band. As the market rallies, it stretches the rubber band between the two, creating more tension. If unemployment begins to drop after this rally, the tension on the stock market is released. If unemployment continues to rise, tension also rises. Eventually, it will snap the stock market back down.
    With every reason to expect higher unemployment, that's the case today. The rubber band is stretched to record tension levels. It's starting to feel a lot like the late '70s, sans bell-bottoms, of course...
    Job Killer in Your Mail
    Have you noticed delays in your mail? Letters and packages taking longer and getting misrouted? Recently, I have seen major changes in my postal service. It started a couple months ago. I wasn't getting mail in a timely fashion, sometimes not at all.
    My renters were complaining to me that they haven't been getting their mail... including their paychecks. Just yesterday my neighbor came back from vacation and called me to tell me that he has been getting bits of my mail for weeks.
    I asked a few attendees at our conference over the weekend, and they had been noticing the same. Obviously this is anecdotal, but these signs should not be ignored and I suspect my small sample is not alone.
    It could be due to the fact that the 235-year-old U.S. Postal Service -- which happens to be America's second largest employer next to Wal-Mart -- is in deep trouble.
    The USPS is a nearly bankrupt, antiquated albatross that is wrapped tightly around the neck of our highly indebted nation.
    As it stands now, the poorly run entity is running a $9 billion annual deficit and there is the potential for it to miss a $5.5 billion payment on retiree benefits at month's end.
    Saving the agency will come at a huge cost of jobs, taxes and service.
    Right now about 3,700 offices are targeted for possible closure, which would eliminate over 100,000 jobs (they shed 105,000 jobs last year).
    In 2010 the USPS carried 6 billion fewer pieces of mail compared to 2009. Fifty-nine percent of the average mailbox was filled with junk mail. First-class mail, like personal letters, bills and payments, has traditionally generated more than half the postal service's total revenue, but that is on the way down as our culture continues to move into the electronic age.
    Invitations, cards, bills and checks are all going digital.
    Companies like Rpost (who joined us at our recent conference) provide electronic, registered email that could eliminate the need for registered snail mail, which we all know is expensive and takes days.
    What's worse is that job cuts, postage rate increases and the elimination of Saturday delivery will make the USPS even less of an attractive option when it comes to mail. This will further provide ammunition for private competitors like Rpost and others to doom the USPS to the same fate as the Yellow Pages and TV Guide.
    It is a vicious cycle that will bring the postal service to its knees.
    The Verdict
    In a time when faith in America and our government is being tested and scrutinized, this is just another example of too little, too late. Even if the USPS were to be given more autonomy to operate like a private sector company, I don't see the way out.
    Companies like UPS and FedEx could benefit from the demise of the USPS. Unlike most regular mail, parcels of goods cannot be digitized or sent over the Internet. Both companies have extremely efficient logistic systems that can be scaled.
    Consumer frustration with the postal system will result in a diversion in business to both companies.
    While I don't believe the USPS will be allowed to die, the part that it plays in our daily lives, especially for the younger generations, is no doubt going to become less and less. The inevitable consequences of post office closures, delays and increased costs will unfortunately mean more job losses and another kick in the head for the small-business owner.
    Publisher's Note: We had a slew of top-notch speakers at our conference over the weekend. But Jared was the best of the best. Maybe it's from his time on TV. Or it could be the confidence that comes with earning a lucrative career in the trading pits. No matter what the cause, Jared's 45-minute "how to" session on options trading was a flat-out hit.
    If you missed him in Vegas, all is not lost. Jared recently wrote a report that details how to use other people's money to wrap up double-digit gains no matter which way the markets head.
    In today's ultra-volatile market... it's the perfect strategy.
     


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Sep 21 12:09 PM | Link | Comment!
  • World Debut: The Microsoft of the New Millennium

    Yesterday was an epic, game-changing day for Google (GOOG:NASDAQ). It alters the landscape in the smartphone industry. In one expensive move, Google made its first foray into proprietary hardware territory. The move was another kick in the head for top competitor Research In Motion (RIMM:NASDAQ).

    Google is now a hardware manufacturer. Never in the history of the company has it produced a product that consumers can actually hold in their hand.

    At $12.5 billion, the purchase of Motorola Mobility (MMI:NYSE) is a drop in Google's big cash bucket. Motorola produces high-quality phones and has a clean reputation with most consumers in the smartphone industry (not like RIMM). This will be a major leap for Google and a catalyst to propel it higher in the coming years.

    MMI lacked a marketing catalyst and its brand was lost in the shuffle. That made it a prime candidate for Google to snap it up.

    That, and this: Motorola Mobility's 17,000 patents.

    They are a sort of immunity to the lawsuits that happen so frequently in the smartphone industry. With the patents in its pocket, Google can focus on creating a "super phone" that integrates all the best features of its Android system with a sleek, functional, high-quality piece of hardware.

    Apple is the only other company that does this. But unlike Apple, Google will still license its operating system to other phone manufacturers. That means increased partnerships with demand for new apps and functions. This could hurt Apple.

    Apple doesn't share well. It must have missed that lesson in kindergarten. The company lost a similar battle to Microsoft in the '80s. Apple only offered its operating system on its own computers, while Bill Gates let anyone buy a copy. This sent Apple into a 12-year hole and made Microsoft one of the most profitable companies in history.

    It may not be that bad this time around, but Apple has a serious, more powerful contender in Google (Android). It's now both the top-selling mobile platform in the world and the largest aggregator of all types of information in the world. This gives Google an extreme edge.

    Frankly, the other phone manufacturers don't have anywhere to go, unless of course they want to run Windows Mobile, which is currently only 9% of the U.S. market. That wouldn't be smart.

    Google is the Microsoft of the new millennium, only smarter, more nimble and with a much larger potential reach. When Bill Gates was at the top of his game, he could only dream of the things that Google is now capable of.

    I would be buying Google here.


    View larger chart

    RIMM's Smartphone Future

    Everyone loves the underdog, but I doubt that this fight is going to end for RIMM like it does in the Rocky movies. Sadly, the Canadian phone manufacturers still has some beatings to take and won't win this one. Some investors think that a company like Microsoft, Dell or Hewlett-Packard will come in and buy the company for their large subscriber base.

    Of course, adding 77 million RIMM subscribers to your platform is a great way to achieve a critical mass of customers right away and RIMM does have unique security features that set it apart from Android or iPhone.

    But a purchase of a company like RIMM has a downside. The company is losing serious market share to Apple and Android. Its phone and tablet design is dull and its operating system drab and outdated, which would mean some serious research and development time and costs for the acquirer. The worst part about RIMM is its application selection (app store) pales in comparison to Apple and Android.

    Buying a RIMM phone is like buying a computer that no one makes software for.

    To put it bluntly, RIMM needs to be bought by a company that is willing to bet it all and has little left to lose. Dell, HP and Microsoft all fit the bill. Yes, RIMM stock is relatively cheap, but many said Nokia was cheap when its shares were at $16. They fell below $5 recently.

    If you are a risk taker, you can buy RIMM below $27, but I would keep it small and stick to the stock.

    The one thing you don't want to do is make the mistake that many investors did with MMI.

    Who Bought MMI and Lost Yesterday?

    You would think that just about everyone was a winner in MMI yesterday. Google is paying $40 in cash per share, more than MMI has ever traded for since coming public in late 2010. But there were losers...

    Investors who bought out-of-the-money call options with a strike price of 40 or more lost ALL their money. Even options that expire all the way out till January 2013 are now practically worthless.

    A good friend of mine used to say, "If you don't know what you are doing, you're gonna hurt yourself." Unfortunately, for many this was a tough lesson to learn.

    Most likely these call buyers were speculating on a takeover. The worst part is that they were right, but they picked the wrong option! Options can increase your chance of success in a trade and they can multiply your returns exponentially, but when used incorrectly, they can hurt you.

    Written by Jared Levy for Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content orwww.taipanpublishinggroup.com.

    Aug 17 1:58 PM | Link | Comment!
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