US treasury secretary urges IMF reform

ISTANBUL – U.S. Treasury Secretary Timothy Geithner on Sunday urged the IMF to implement reforms that would give emerging market and developing countries more say in the financial institution.

"A more representative, responsive and accountable governance structure is essential to strengthening the IMF's legitimacy," Geithner said in a statement.

He noted that G-20 countries had committed to shift some control in the International Monetary Fund from countries with strong representation to those with little input. The Group of 20 includes developing economic powerhouses such as China, India and Brazil.

Geithner said the IMF should outline how the proposed transfer of at least 5 percent of voting power within the institution can occur.

"We call on the IMF to facilitate this process by providing scenarios of how the quota shift could be implemented in the very near-term," he said.

The remarks came at the IMF's annual meeting, held this year in Istanbul. They followed a decision at a Pittsburgh forum that the Group of 20 nations would become the world's main economic decision-making forum, effectively taking over the role of the G-7 group of rich countries.

Geithner said reform of the IMF's executive board was vital to modernizing the Washington-based institution, which represents 186 countries. The U.S. recommends reducing the board size while preserving the current number of emerging market and developing country chairs.

The IMF is usually headed by a European and the World Bank by an American. It has received pledges of more money to help poor countries struggling to emerge from the global economic crisis, and a broader range of nations wants to have more say in how the funds are handled.

Aid agency OXFAM says current voting formulas at the IMF give Luxembourg more weight than the Philippines, which has almost 200 times the population. It said the 5 percent shift in voting power was insufficient.

"They need to give more voice to the poorest countries, have fewer European seats on the Board, and get rid of the U.S. veto," said Caroline Pearce, OXFAM policy adviser. She said the IMF can only be relevant if it gives "countries hardest hit by the financial crisis a say in their own destiny."

The U.S. has a 17 percent voting stake in the IMF, effectively giving it veto power because major decisions require an 85-percent majority to pass.

In the past, the IMF has been criticized for allegedly imposing austerity measures on countries in exchange for loans and without sufficient regard for the impact on the poor.

IMF officials say they have shown more flexibility in recent years. John Lipsky, the IMF's No 2. official, has said the IMF is undertaking "substantial efforts" toward internal reform that will provide "a fair shake for all our members."

At the Istanbul conference, a group of 35 heavily indebted countries welcomed the G-20's new role as a leader in global economic decisions, but said poor nations also needed representation to express their financing needs.

"We need at least one seat so that almost 1 billion Africans can express their views," said Lazare Essimi Menye, Cameroon's finance minister.

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Associated Press Writer Suzan Fraser contributed to this report.

Dividends: Smart Plays for Tight Times

Investing in companies that have a proven history of raising their dividends has been a popular strategy among stock-market players over the years. But lately, finding firms that continue to boost their payouts has been getting harder.

Standard & Poor's said on Oct. 1 that only 191 out of 7,000 companies that report dividend information to S&P boosted their dividends during the third quarter, down nearly 45% from a year earlier. That makes the just-completed quarter the worst ever for rising dividends. It was also the worst third quarter for dividend cuts since 1982, with 113 companies reducing their cash payouts, S&P said.

The worst may be over in terms of dividend cuts or eliminations, according to S&P. But even if the economy responds to the Obama Administration's stimulus programs, companies may still not feel comfortable enough to raise or re-initiate payments until they have seen several quarters of improving financial results, S&P added.

Don Taylor, portfolio manager of Franklin Templeton's Rising Dividends Fund (FRDTX), agrees with S&P that dividend cuts "are largely behind us," and expects some companies that have trimmed their dividends in the past year, such as some banks, to start raising them again within the next six months. Nor would he be surprised, he says, if Pfizer (PFE), which slashed its dividend when it announced it was buying Wyeth earlier this year, starts to increase it by the end of this year or the early part of 2010.

Disappointing Funds

He notes that the vast majority of banks no longer qualify to be included in his fund because most have either cut their dividends or, if they have accepted money from the Treasury's Troubled Asset Relief Program, are prohibited from raising their dividends until they have paid it back.

The returns of most dividend-focused funds so far this year generally have been disappointing. These funds have underperformed because they don't invest in the lesser-quality, higher-risk stocks that don't pay dividends, which have been favored by the market since the rally began nearly seven months ago.

Taylor's fund was up 10.97% year-to-date as of Sept. 30, lagging the large-cap blend category by more than 10 percentage points and the S&P 500 index by 8.3 percentage points. The Franklin fund has been hurt by not including shares of big non-dividend-paying gainers such as Apple (AAPL).

Taylor prefers stocks he thinks are more likely to increase their dividends over the long term over ones currently paying high yields. Two that fit the bill are among the more defensive consumer staples names—Family Dollar Stores (FDO) and Wal-Mart (WMT). When it comes to retailers, the market lately has been focused on companies with greater potential for a big snap-back from several quarters of depressed sales, while companies that were able to consistently increase same-store sales during the downturn—such as Wal-Mart and Family Dollar—have been ignored in the rally.

"Longer-Term Phenomenon"

"We value that consistency and predictability and the appeal that they have to the consumer," says Taylor. "People have gotten more frugal, more careful. They're looking for discounts. It's not just cyclical, it's a longer-term phenomenon, and companies that appeal to that mindset will continue to benefit."

Wall Street to Comcast: Are You Serious?

Reports that the cable giant might want to buy NBC Universal sent its stock reeling. Media investors have seen this horror film before

Brian Roberts, President and CEO of Comcast, speaks to the press after it was announced that his company made a proposal to the Walt Disney Company to merge the two companies in a tax free transaction. Timothy A. Clary/AFP/Getty Images

By Ronald Grover

As Yogi Berra once said, it's déjà vu all over again. Comcast (CMCSA) is rumored to be interested in buying NBC Universal from General Electric (GE). And just like back in 2004, when Comcast bid $54 billion for the Walt Disney Co. (DIS), investors are horrified. The Sept. 30 reports sent the cable giant's stock price plunging the next trading day, down more than 6% as of 2:30 p.m. ET, even after the Philadelphia company hustled out denials as fast as its spokeswomen could e-mail reporters.

Why does Wall Street give so little love to Comcast CEO Brian Roberts whenever he's seen to be straying outside his mainstay business of wiring homes with cable and delivering crisp pictures and Internet service? For starters, it's hard to find a more notoriously fickle business than entertainment, where TV ratings and hit movies often disappear overnight. Just ask Comcast executives, who five years back paid an estimated $300 million for a 20% stake in movie studio MGM. The cable company has since written down that investment as the debt-laden MGM struggles to avoid bankruptcy. Or ask GE, which has spent a decade in the ratings desert with NBC.

So how might this deal be different? Savvy folks like Roberts and lieutenant Steve Burke, a onetime ABC executive, see value in NBC. Comcast already owns cable channels E!, Style, and others, and plainly is aching to add NBC's brace of cable channels, which include Bravo, the USA network, MSNBC, and SyFy. In fact, cable channels are the hottest properties in the fragmented media world. By collecting fees from cable and satellite operators in addition to selling advertising, cable channels are a hedge against the fast-changing (and not for the better) advertising market.

(According to a report on CNBC, Comcast officials are now talking about merging their content assets with those of NBC Universal to create a new company. Comcast would have 51% control and would put in $7 billion, but wouldn't endanger its credit rating or issue any stock.)

Cable Operators Aren't Growing

But you get the idea that Comcast is mostly worried about the rapidly shifting media landscape and where that will leave the company. Increasing numbers of folks are getting video from online sites and some (though not yet a lot) are killing their cable or satellite service to log onto TV shows via the Internet instead.

Satellite continues to add subscriptions, as do telephone operators such as AT&T (T) and Verizon (VZ) that offer TV service. Cable operators, meanwhile, largely haven't been growing. In the last six months, for instance, Comcast lost about 1% of its 24 million subscribers to "increased competition," it said in its most recent financial filing. It's done a great job so far of making up for the loss by selling its customers on higher-priced digital service and phones, but clearly it can't do so forever.

"Owning a major content stake would give Comcast a tremendous amount of control over the future evolution of distribution venues," says Bernstein Research analyst Craig Moffett. He figures Comcast could help control the destiny of Hulu, the online content site started by NBC and Fox (NWS) and whose online TV shows are seen by cable operators as a looming threat. Moffett also postulates that Comcast would be able to control the timing of when NBC shows or Universal movies show up on its video-on-demand services, perhaps making them earlier than current offerings to enhance their popularity. And that may be true: Even as its investment in MGM tanked, Comcast gained access at cut-rate prices to the studio's large library of older films.

Settling for a Only a Piece?

The payouts from those synergies—a frightening word when it comes to media M&A—are mostly theoretical, though. Most analysts believe the staggering price tag for all of NBC Universal—possibly $35 billion—likely would force Comcast to take a smaller piece. For one thing, federal regulators might not allow Comcast to own NBC TV stations in the same markets in which it owns cable systems.

A truncated acquisition might be just as well for Roberts. He would seem to get his prize, while possibly dodging the storm of criticism that an outright deal would almost certainly set off.

Grover is Los Angeles bureau chief for BusinessWeek.

Trimming Health-Care Costs Without Reforming the System

In the heated debate over health-care reform, one inconvenient fact is often ignored. There's little evidence to support the use of many of today's routine treatments and procedures. By some estimates, the portion of medicine that has been proven truly effective is still in the range of 25%. That means billions of dollars are being spent on care that may not be effective. And there's even a raging debate over whether the country should do "comparative effectiveness" research to try to figure out what does really work.

That's the bad news. The good news is that these woes mean there is enormous room for improvement, if doctors can understand how to care for people more effectively. The latest proof of the gains that are possible comes from a study published Oct. 1 in The American Journal of Managed Care by researchers from Kaiser Permanente.

In the study, patients with diabetes or heart disease were given a simple, low-cost regimen of aspirin, a generic cholesterol-lowering drug, and a blood-pressure drug. Compared with similar patients not taking the combination, these patients had 60%-80% fewer heart attacks and strokes in a two-year period. Plus, the approach saved hundreds of dollars per patient. "This is an example of an opportunity that has been sitting there for more than a decade," says Dr. David Eddy, founder and chief medical officer emeritus of Archimedes Inc., a private health-care research firm whose work paved the way for the study. "It shows how we can be smarter at determining the right treatments and find clever, simple ways of delivering those treatments."

At the same time, the study also offers a cautionary tale of how hard it is—and how long it can take—to prove that changes in treatment really are effective. This particular story starts way back in the early 1990s, when Eddy began developing a computer simulation he dubbed Archimedes. The idea was to create a SimCity-like world in silicon, where virtual doctors conduct virtual clinical trials on virtual patients.

Modeling a Cholesterol Drug's Benefits

Eddy showed that the predictions of the model almost exactly matched the results from clinical trials. Then it was time to tackle a real-world problem.

At the time, Kaiser was prescribing to its patients what was then a relatively new cholesterol-lowering drug, Mevacor, from Merck (MRK). "We were treating everyone who walked in the door," recalls Dr. James Dudl, diabetes expert at the Kaiser Permanente Care Management Institute. "We thought the drug would do spectacular things."

But maybe not. When Kaiser plugged the data into the Archimedes model, the computer simulation predicted that the net benefit was tiny. "We were treating the wrong population with an expensive drug," says Dudl.

Was there a better approach? Dudl began to think of ways to target high-risk patients, such as those with diabetes and other conditions like hypertension and heart disease. The conventional wisdom was that the best treatment for diabetes was keeping blood-sugar levels consistently low, which would help ward off complications like heart disease. But Dudl wondered what would happen if he flipped that around, aiming treatment at the downstream problems instead of blood sugar. His idea: give patients a trio of generic medicines—aspirin, a cholesterol-lowering statin, and a blood-pressure-lowering ACE inhibitor.

Using Archimedes and thousands of virtual patients, Eddy compared the drug combination to the traditional approach. The model took about a half-hour to simulate a 30-year trial, and the results were startling. Controlling blood sugar accomplished little, but the simple three-drug combination would cut heart attacks and strokes by 71%.

$8 Billion in Potential Cost Savings

At a pivotal meeting of the board of the Care Management Institute in 2003, Eddy presented the results and made an impassioned plea to implement the findings. "I told them, 'This is as good as it gets to improve care and lower costs, which doesn't happen often in medicine,' " Eddy recalls. "'If you don't implement this,' I said, 'you might as well close up shop.' "

Kaiser listened. As reported in the new study, the company prescribed the drug combination to 68,560 Kaiser Permanente members in California with diabetes or heart disease. Researchers followed the fates of those patients for two years and compared them to 101,464 similar patients who didn't take the combination.

The results mirrored Archimedes' prediction almost exactly. Patients who took the drugs some of the time had a 60% reduction in heart attacks and strokes. For those who adhered more closely to the drug regimen, the benefit was an 80% reduction. "We're extremely happy with the results," says Dudl.

Dudl and his fellow researchers didn't do a cost analysis of the program. "Kaiser's motivation was to improve the quality of care and let the cost chips fall where they may," says Eddy. But Eddy wasn't so reticent. By reducing heart attacks and strokes, he calculated, the program saved about $350 per person treated. Multiply that by the number of diabetics in the country (23 million) and the potential for cost savings is huge: $8 billion.

"The general point here is that quantitative thinking is just beginning to enter health care," says Eddy. Imagine, he says, trying to optimize the operations of an airline without having any data on the numbers of passengers, the cost of fuel, and other basic information. The new study shows it's possible to get that key information in health care, and put it to use to both improve quality and cut costs. "This is equivalent to the Wright brothers flight at Kitty Hawk," says Eddy. "It's saying that something can be done."

A Nasty October Surprise for Stocks

The Dow and S&P 500 fell over 2% Thursday, while the Nasdaq lost over 3%, after unexpectedly weak reports on jobless claims and manufacturing

U.S. stocks managed to skate through the normally tricky month of September in good shape, with the S&P 500 index rising 3.5%. But the first day of October brought fresh reminders of of the fragility of the U.S. economic recovery, causing major indexes to plunge Thursday. The worst damage was sustained by the Nasdaq composite index, which lost more than 3% on the session.

In particular, an unexpected rise in jobless claims created some jitters ahead of Friday's release of the U.S. employment report for September, while a decline in the Institute for Supply Management's manufacturing index in September raised worries about the strength of the rebound in the factory sector.

On Thursday, the 30-stock Dow Jones industrial average finished lower by 203.00 points, or 2.09%, at 9,509.28. The broad Standard & Poor's 500-stock index was down 27.23 points, or 2.58%, at 1,029.85. The tech-heavy Nasdaq composite index lost 64.94 points, or 3.06%, to 2,057.48.

On the New York Stock Exchange, 25 stocks were lower in price for every five that advanced. Breadth on the Nasdaq was 22-5 negative. The basic materials, technology, and financial sectors were among the worst performers on the session.

Treasuries soared amid the equity sell-off, with yields moving sharply lower. The dollar index was higher, putting pressure on gold and crude oil futures.

What could Friday's session bring? "After a wash-out such as this in which few stocks are left unscathed, it is common to see a reversal to the upside, even if just for a day or two," says Standard & Poor's technical analyst Chris Burba. "This is certainly a possibility [on Friday]". However, notes Burba, much will depend on the reaction to the September employment report at 8:30 a.m. ET.

The weekly jobless claims report released Thursday appeared to have sparked fears of a downside surprise in Friday's jobs data. U.S. jobless claims rose 17,000 to 551,000 in the week ended September 26, vs. a revised 534,000 previously (was 530,000). Continuing claims fell 123,000 to 6,090,000 in the week ended Sept. 19, after a revised 6,160,000 (was 6,138,000).

"The headline print is higher than expected, and may make some nervous ahead of Friday's September employment report," says Action Economics.

Worries also surfaced about the recovery in the factory sector after the U.S. Institute for Supply Management's manufacturing index slipped to 52.6 in September, after rising 4 points to 52.9 in August.

The two reports countered some positive data on the real estate sector. U.S. construction spending rose 0.8% in August from a revised 1.1% drop in July (was -0.2%). Residential spending climbed 4.2% following a 0.7% increase (revised from 2.3%). Spending on nonresidential projects declined 0.4% after a 1.8% July drop (revised from 1.2%). Private spending rebounded 1.8% and public spending fell 1.1%.

The U.S. pending home sales index climbed 6.4% to 103.8 in August from 97.6 in July. That is the highest since March 2007. On a year-over-year basis the index is up 12.1%, but that is a little slower than the 12.9% pace in July. Gains were posted in all four regions.

U.S. personal income rose 0.2% in August, while spending climbed 1.3%. July's flat reading on income was revised up to 0.2%. Personal spending in July was revised to 0.3% (from 0.2%). Disposable income inched up 0.1% in August. The savings rate fell to 3.0% in August from 4.0% previously (revised from 4.2%). The chain price index rose 0.3% from flat in July, while the core rate was up 0.1%, the same as in July.

LA Times, Washington Post breaking up news service

The Los Angeles Times and The Washington Post are breaking up their news service after 47 years, making it the latest casualty of the media upheaval driven by the array of alternative information and entertainment sources on the Internet.

The divorce announced Wednesday takes effect Jan. 1. Beginning then, the Los Angeles Times will distribute some of its best work through a news service jointly owned by newspaper publishers McClatchy Co. and the Tribune Co., the Times' owner.

The Tribune Co. has been operating under Chapter 11 bankruptcy protection since December. The financial duress before and after the bankruptcy filing led to staff cutbacks at the Times and the Tribune's other newspapers, including The Baltimore Sun and Hartford Courant, whose stories also were distributed through the Times-Post venture.

It's unclear whether the Tribune Co.'s troubles factored into the demise of the Times-Post service -- a partnership forged in 1962 by two renowned publishers, Otis Chandler on the Los Angeles side and Philip Graham on the Washington end.

When the service started, newspapers were still highly profitable and the dominant news sources in their markets. But the number of people reading newspapers has been shrinking as more people turn to the Internet, leading more advertisers to shift their spending online.

The worst U.S. recession since World War II has drained even more ad revenue from newspapers, prompting both the Post and the Times to reduce the number of reporters and photographers feeding content to their news service.

Although they are smaller than they once were, the Times and Post still have large audiences. The Times is the fourth largest U.S. newspaper with a weekday circulation of 723,000 while the Post is the fifth largest with a weekday circulation of 665,000, according to the most recent figures from the Audit Bureau of Circulations.

Executives from the Times and the Post said they mutually agreed it was time to dissolve their marriage, although they didn't elaborate on the reasons for the decision.

But Washington Post Co. Chairman Bo Jones hinted the Internet played a role in the break up.

"As the news business and our newsrooms have evolved, the ways in which the organizations cover and distribute the news have changed," Jones said in a statement sent to the news service's subscribers. "We felt at this time it made sense for us to proceed separately."

Times Publisher Eddy Hartenstein said it was a "privilege" for the Los Angeles newspaper to package its stories with the Post.

The Times-Post venture distributed its stories to about 600 subscribers including newspapers and other media. The McClatchy-Tribune service that the Times is joining next year has more than 1,200 subscribers worldwide.

Survey: China manufacturing expanded in September

China's manufacturing expanded at a faster pace in September, supporting an economic recovery spurred by massive stimulus spending, a survey showed Thursday.

The state-sanctioned China Federation of Logistics and Purchasing said its purchasing managers index rose to 54.3 from August's 54 on a 100-point scale where numbers above 50 show activity expanding. It marked the seventh straight month of expansion.

Economic growth accelerated to 7.9 percent over a year earlier in the second quarter, up from 6.1 percent the previous quarter, driven by Beijing's 4 trillion yuan ($586 billion) stimulus. The plan is helping to boost industrial demand through heavy spending on building new highways and other public works.

Economists see the PMI as a better measure of China's economic outlook than gross domestic product because it includes forward-looking elements such as new orders.

The Chinese federation's survey is based on responses from managers who oversee purchasing for some 700 Chinese companies.

The government has warned that some industries suffer from overcapacity, suggesting the risk of an unsustainable boom that might lead to a bust.

On Wednesday, Beijing announced sweeping curbs on surging investment in steelmaking, cement, aluminum, wind turbine manufacturing and other industries.

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On the Net:

China Federation of Logistics and Purchasing (in Chinese): http://www.chinawuliu.com.cn

An Industry Blueprint To Stocks And Shares

In this day and age, a lot of things have changed from how they used to be, which can be new and exciting for most.

Because of the large size of the stock market, beginner investors appear to feel overwhelmed as to where to even activate investing their money. To most people, the stock market presents a messy web of options but does not reveal the highway map of clarity to guide their way along way in their investment adventure. The key to investing in the stock market is to become as educated as it is possible so that you know exactly what is taking place at all times. This helps people to make plausible and sound decisions about their money, thus, dropping the stress involved with investing.

The usual person, when beginning to entertain the idea of investing in the stock market, falls into one of two categories. Class one is the gambler who feels that investing is definitely a form of betting and no question what they do, they are certain that they will drop money slightly than make money. It seems that this opinion of investing in stocks is either formed from friends and family that have been baffled by the stock market or private experience and lost money. If someone has personally made losses in the stock market, it is pretty evident that they were not educated enough at the time of their investment in the stock market. Therefore, they must become educated as to what exactly the stock market is as well as how its system works in order to become a successful investor. Class two, on the other hand, represents the “go-getter” investor, which is an individual who knows that they should invest into the stock market for the safety of their monetary future, but they have absolutely no idea where to begin. The “go-getters” lean towards avoiding their monetary decisions and leave it up to professionals; therefore, they are powerless to justify why they own a certain stock. A usual “go-getter” operates in blind faith, as one stock goes up in value, they more than likely will hold it. The “go-getter” is in poorer shape than the gambler in that they will invest like everyone else and then wonder why they receive an unsatisfactory or devastating outcome. This just proves that the typical person should become thoroughly educated about the stock market as well as stocks before investment takes place.

Essential to every economy is business...businesses that started out as small operations that have grown to become money making giants, raising capital by promoting stock in them to people who want to invest to make their futures financially secure. As small businesses start to grow, one of the supreme obstacles is generating enough money in order to develop into a superior operation. Businesses either scrounge the money in the form of a offer from a bank or venture capitalist, or someone that will invest money into a business in which they feel they will receive a high rate of return, or a reap from their investment into a business, in order to create the currency to expand. The most common choice for a business to gain money for the view of expansion is to take out a loan; however, there is no agreement that a bank will offer money to any given business.

What we have explored up to now is the most important information you need to know. Now, let’s dig a little deeper.

In this case, business owners roam to the stock market for help in the form of issuing stocks. Firm owners relinquish a tiny fraction of control over their business and in reciprocation; the stock market provides that business money that does not have to be salaried back, in order to guarantee expansion. As an added bonus, the business is permitted to “go public,” a saying that means a brand is selling stocks for itself for the first time, so that business owners no longer are required to borrow money from banks because they can merely use their own stocks for getting monies to use for expansion. Thus, as the business grows and sells their stocks to people, the better chance a sponsor has on gaining a return on their investment as opposed to a loss.

As an investor, it is to your advantage to efficiently study each and every business in which you propose to hold stocks. The more facts you know about any certain business, the easier it is to make a plausible decision as to whether you should hold stocks or want a different business in which to work with.

Try searching for a particular keyword from the title of this article on your search engine and you are sure to find a wealth of knowledge.

An Analysis Of Overstock.com (OSTK)

Why is a value investor writing about an unprofitable internet company? Because value investing is about finding dollars that trade for fifty cents; with a market cap of less than 75% of sales, Overstock.com (OSTK) looks like it may be exactly that.

But isn’t it too risky?

The greatest risk in any investment is the risk of overpaying. So, the real question is: what is Overstock worth? I think it’s worth at least $1.5 billion. With Overstock’s market cap currently sitting around $500 million, my valuation certainly looks far fetched. But, there’s only one way to know for sure. Let’s take apart my argument piece by piece, and see if any of my assumptions are unreasonable.

First Assumption: Over the next five years, Overstock will neither generate truly free cash flow nor consume cash. In other words, its free cash flow margin will average 0%. Cash generation in some years will exactly offset cash consumption in other years. Obviously, this assumption is unreasonable, because there is almost no chance the cash flows will exactly offset.

That’s not a problem if it turns out Overstock does generate some free cash flow over the next five years. In that case, my assumption simply errs on the side of caution. If, however, it turns out Overstock actually consumes cash over the next five years, there is a problem – possibly a very big problem. So, which scenario is more likely?

Overstock’s revenues are growing quickly. Gross margins look solid at 13.3% in 2004 and 14.9% over the last twelve months. Overstock’s unprofitability is the result of its selling, general, and administrative expenses (SG&A) which have been growing exponentially. Will these expenses continue to grow? Yes, but not as fast as revenues. Over the last twelve months, Overstock’s spending on cap ex has been 5.6% of sales. That number is an aberration. In the long run, spending on cap ex should not exceed 3% of sales. Considering the business Overstock is in and the expected sales growth, the company will, more likely than not, generate some free cash flow over the next five years. Therefore, the assumption that Overstock will be cash flow neutral over the next five years is not overly optimistic.

Second Assumption: Over the next five years, Overstock’s sales will grow by 15% annually. Is this an unreasonable assumption? Again, I don’t think it is. Very few industries are expected to grow as fast as eCommerce. Overstock’s revenue growth in 2003 and 2004 was over 100%. In the past year, that growth has slowed. However, it is still closer to 50% than it is to 15%. Overstock isn’t in a cyclical business. So, there is no reason to believe current sales are abnormally high.

Also, all that spending on advertising is increasing consumers’ awareness of Overstock. A review of Overstock’s traffic data shows it has not only been gaining more visitors; it has also been climbing the ranks of the most popular web sites. While it is a long, long way from the Amazons, Yahoos, and eBays of the world (and will never reach those heights) Overstock is becoming a well known internet destination. This fact was most clearly evident in the weeks leading up to Christmas. Shoppers who visited Overstock during the holiday season obviously know it exists, and may very well return at some other point in the year. Analysts are predicting very high growth rates for Overstock; however, they are also recommending you sell the stock. I don’t put any weight in their estimates. But, for the other reasons given, I believe the assumption that Overstock will grow sales at 15% a year for the next five years is not unreasonable.

Third Assumption: Six to ten years from today, Overstock will have a free cash flow margin of 3%. Ten years from today, Overstock’s free cash flow margin will rise to 4% and remain at that level. Now, of all the assumptions I’ve made, this one is the most questionable. Sure, Amazon has that kind of free cash flow margin, but Overstock isn’t Amazon, and it never will be Amazon. Overstock’s gross margins are less than Amazon’s. In fact, Overstock’s gross margins are less than Wal – Mart’s. However, Overstock’s fixed costs will eat up a much smaller portion of its sales than is the case over at Wal - Mart.

If you compare Overstock to other online retailers, you will see that if Overstock does experience strong sales growth, a 3% free cash flow margin six years from now is not unreasonable. I assumed Overstock’s sustainable free cash flow margin will be 4%. There’s a case to be made that 4% is too high. I won’t make that case, because I don’t believe in it. Remember, that 4% number comes ten years out. That gives Overstock plenty of time to grow sales and thus reduce SG&A as a percentage of sales.

Fourth Assumption: Six to ten years from today, Overstock will be growing sales by 12% a year; eleven to fifteen years from today, Overstock will be growing sales by 8% a year; thereafter, Overstock will grow sales by 4% a year. Let’s see what this really means. According to these assumptions, Overstock’s sales will be as follows:

Today: $707 million

2011: $1.59 billion

2016: $2.71 billion

2021: $3.83 billion

2026: $4.66 billion

2031: $5.67 billion

2036: $6.90 billion

Seven billion dollars is not an unreasonable target – if you have thirty years to achieve it. To put that figure in perspective, Amazon.com currently has sales of about $8 billion. So, even after thirty years, these assumptions don’t lead to Overstock reaching the same size as today’s Amazon. Don’t forget these numbers assume some inflation. For instance, if inflation averages 3% a year over the next thirty years, Overstock’s projected $6.90 billion in sales only translates to $2.84 billion in today’s dollars. So, these assumptions only lead to a fourfold increase in Overstock’s real sales over a period of thirty years. I think that’s pretty reasonable.

If you take these four assumptions together, you get a value of $1.5 billion for Overstock. Today, Mr. Market is offering it for $500 million – that’s why I’m writing about an unprofitable internet company.

Against The Top Down Approach To Picking Stocks

If you have heard fund managers talk about the way they invest, you know a great many employ a top down approach. First, they decide how much of their portfolio to allocate to stocks and how much to allocate to bonds. At this point, they may also decide upon the relative mix of foreign and domestic securities. Next, they decide upon the industries to invest in. It is not until all these decisions have been made that they actually get down to analyzing any particular securities. If you think logically about this approach for but a moment, you will recognize how truly foolish it is.

A stock’s earnings yield is the inverse of its P/E ratio. So, a stock with a P/E ratio of 25 has an earnings yield of 4%, while a stock with a P/E ratio of 8 has an earnings yield of 12.5%. In this way, a low P/E stock is comparable to a high – yield bond.

Now, if these low P/E stocks had very unstable earnings or carried a great deal of debt, the spread between the long bond yield and the earnings yield of these stocks might be justified. However, many low P/E stocks actually have more stable earnings than their high multiple kin. Some do employ a great deal of debt. Still, within recent memory, one could find a stock with an earnings yield of 8 – 12%, a dividend yield of 3- 5%, and literally no debt, despite some of the lowest bond yields in half a century. This situation could only come about if investors shopped for their bonds without also considering stocks. This makes about as much sense as shopping for a van without also considering a car or truck.

All investments are ultimately cash to cash operations. As such, they should be judged by a single measure: the discounted value of their future cash flows. For this reason, a top down approach to investing is nonsensical. Starting your search by first deciding upon the form of security or the industry is like a general manager deciding upon a left handed or right handed pitcher before evaluating each individual player. In both cases, the choice is not merely hasty; it’s false. Even if pitching left handed is inherently more effective, the general manager is not comparing apples and oranges; he’s comparing pitchers. Whatever inherent advantage or disadvantage exists in a pitcher’s handedness can be reduced to an ultimate value (e.g., run value). For this reason, a pitcher’s handedness is merely one factor (among many) to be considered, not a binding choice to be made. The same is true of the form of security. It is neither more necessary nor more logical for an investor to prefer all bonds over all stocks (or all retailers over all banks) than it is for a general manager to prefer all lefties over all righties. You needn’t determine whether stocks or bonds are attractive; you need only determine whether a particular stock or bond is attractive. Likewise, you needn’t determine whether “the market” is undervalued or overvalued; you need only determine that a particular stock is undervalued. If you’re convinced it is, buy it – the market be damned!

Clearly, the most prudent approach to investing is to evaluate each individual security in relation to all others, and only to consider the form of security insofar as it affects each individual evaluation. A top down approach to investing is an unnecessary hindrance. Some very smart investors have imposed it upon themselves and overcome it; but, there is no need for you to do the same.

A Trading Strategy That Consistently Beats All Major Indexes

Are you looking to outperform the market and optimize your profits but are not sure how to pick the right stocks? Has investing become a chore? Do you find yourself investing in hot stocks after they have made their big move? Would you like to learn how I increased my portfolio by over 400% in under 7 years? Do you want to discover how I have outperformed the market over the past 3 years by a margin of 5 to 1?

Do You Hate Research? . . . I do!

I have always wanted to find an investment strategy that made sense. An investment strategy in which I do not need to know the intricacies of the market, predict market trends or follow specific stocks. How can I get the inside information of what is hot before the rest of the market knows? I can't. Nor do I need to.

Plus, I don't have that kind of time to commit to in-depth research. Like you, I have a regular job that I need to devote my time to. I am not a day trader; nor do I want to spend all of my free time on the computer doing research. Always following the stock market and getting stock quotes is not how I want to spend my free time.

I Avoid Individual Stocks . . . they are too unreliable!

Everybody wants to buy low and sell high. While millions of people do make money this way (and many millions loose money), I have found an easier and more effective way to use the market to my advantage. I do not trade in stocks. I do what I can to avoid individual stocks. And I consistently beat the market . . . month after month after month.

If not stocks, what's the alternative?

Like many people, I got heavily involved in the stock market in the mid to late Nineties. Tech stocks were going through the roof and I, like everybody else, wanted a part of the action. It seemed an easy way to make money. Everybody was getting rich. You did not need a special investment strategy to beat the market.

During this time, I engrossed myself in the financial markets. I wanted to learn as much as I could without giving up my day job. I was trying to find the next best tech stock, IPOs and the occasional pre-IPO offering. But it was not until I discovered options trading that I discovered an investment strategy (The Yager Trading Strategy) that can work in any kind of market . . . Bull, Bear or stagnant.

That's right...OPTION trading!

And I am not talking about stock options or writing covered calls. Options trading...I started selling options on S&P futures, using different methods and trading strategies. And I did well. VERY well.

Between July 1998 and January 2000 (a span of 18 months), from my option trading system, I turned an initial $25,000 investment into $167,615. That's over 670% increase. And this was not paper money where you buy a stock and it has a certain listed value. This was real, taxed income. Profits collected on a monthly basis.

Market fluctuations and volatility have diminished greatly since then...reducing the premiums. Those types of returns are no longer available, but the option trading strategy is still very sound. I still consistently beat the market. Even the years the DJIA, Nasdaq and S&P were all down, I posted more than a 22% gain.

Learn the option trading strategy or see how to make money with this strategy. I describe the strategy and show actual recent trades on YagerInvesting. The information is FREE. No subscription required. This is a method for risk capital only.

For the preceding 12 months (May '06 through April '07) this is how my strategy, The Yager Trading Strategy, performed:

DJIA-----20.3%
NASDAQ-----14.7%
S & P 500-----17.3%
Yager Trading Strategy-----32.2%

A Spiraling Market and Rising Penny Stock Opportunities

It's been a wild and wooly couple of weeks on the international stock markets. But is the recent slide grinding to a halt...or just taking a breather before tumbling some more? And more importantly, what does it mean to astute penny stock investors?

Wall Street recently stumbled to its worst week of the year, and global stock markets fell dramatically on concerns about rising interest rates and slowing growth. After rising almost 9% in the first four months of the year, the Dow Jones industrial average has fallen about 6.5% from a six-year high, reached May 10, 2006.

Stocks have been ailing because penny stock investors fear the Fed could be so focused on inflation that it ignores signs of an economic slowdown, raises interest rates too high and sends the economy into a recession.

Global stock markets were sent reeling last week after golden-tongued U.S. Federal Reserve Chairman, Ben Bernanke shocked penny stock investors in saying the Fed will continue raising interest rates to keep inflation in check.

And that decision will have a direct impact on the penny stock market. Higher interest rates hurt penny stock prices because investors believe it will curb economic growth and corporate profits.

But why is inflation heating up? Higher energy costs. Traders and penny stock investors are also worried that with the hurricane season officially under way, Gulf Coast refineries and oil production sites could be damaged again this summer and fall.

And higher interest rates have the ability to affect the entire economy. Finance charges on credit cards will rise. So too will rates on mortgages and home equity loans, putting additional pressure on homebuyers and a softening housing market. Ultimately, it will cost more to borrow for expansion.

But does this signal doom-and-gloom for the penny stock market? Au contraire. While the temptation to sell everything can be overwhelming, some see this as a great opportunity. "I would not be selling. I would tend to be buying," said one New York analyst.

So how exactly is this an opportunity? It just so happens that many companies caught in the market's downward spiral are cheaper than they were a few weeks ago. And as any seasoned penny stock investor will tell you, buying a great penny stock when it's been beaten down isn't a bad way to make money over the long haul.

If you can stomach some of the volatility that is. While many blue chip investors have difficulty handling the market's unpredictability...it's par for the course.

So, "snap out of it," said another watcher. A month of dizzying selling has brought the markets into an attractive range. Is it possible the markets will fall more? Absolutely. After all, no penny stock is a sure thing. But one thing is certain: "Stocks are much cheaper now than they were two months ago."

A Review Of The Stock Market Crash Of 1929

The great Wall Street Crash just previous to the Great Depression of the 1930s has become a part of North American legend. People speak of the crash, its causes and its consequences, with great authority, although few people actually understand the fundamentals that led to the crash, and fewer still the intricacies involved in it. This article will detail a short review of the crash, analyze some of the myths evolving out of this period in American history, and also answer some questions such as why the crash happened, and if something like it could happen again.

The crash began on October 24, 1929 and the slide continued for three business days, ending on October 29 1929 (as we can see, the crash did not occur in the ‘30s, as many people believe). The first day of the crash is known as Black Thursday, and the last day is called Black Tuesday. The crash began when a rush of nervous spenders panicked and rushed to sell their shares- over 13 million stocks were sold on that first Thursday. In an attempt to halt the slide, several bankers and businessmen gathered and tried to rally the numbers by buying up blue-chip stocks, a tactic that had worked in 1909. This was to prove only a temporary fix, however. Over the weekend, while the stock markets were closed, the media added to the fear of investors as the published the wrap ups to the week. By Monday, a fearful populace, nerves on edge due to the reports, were waiting to liquidate. Again, industrial giants and other businesses tried to halt the panic by demonstrating their faith in the system by buying more stock, but the slide would not stop. The market did not recover its value until almost a quarter of a decade later.

As with any legend, the Wall Street Crash of 1929 carries with it several mythical misconceptions. To start with, the Crash did not lead to the Great Depression. In fact, many financial analysts and historians are still not sure to what degree the Crash even contributed. The economic forecasts were poor before Wall Street fell, and it was poor people who could not even afford to think about stocks that were the most affected by the Depression. For these people, poverty was mostly caused by very poor farming conditions. There was also not the onslaught of suicides that is commonly referred to- a few investors did succumb to depression, but their numbers are generally agreed to have been very small indeed- enough to count on one hand.

What was it that caused this Crash? Because the market had been doing so well, many Americans were investing- many more, in fact, than could afford it. These people were investing on speculation. This means that they were buying stocks with an eye to selling them in the future for a higher profit, and to achieve the capital to invest they borrowed from banks. When prices began to drop, people realized they would not be able to pay their debt, let alone make any money,. They rushed to get out as soon as possible. To prevent panics such as this in the future, buying on speculation is now illegal.

9 Survival Tips for the Market Shakeout Blues

Investors who bought during the top of the frothy commodities rally are now panicking or kicking themselves. Neither activity helps an investor or trader think straight. Below are a few tips in dealing with the current market shakeout.

1.If you believe you invested in the right stock(s), then turn off your computer and do something enjoyable. Exercise is a great stress reliever. The market has already begun its shakeout. If you didn’t get stopped out, or failed to place earlier stops, your best opportunity lays ahead in picking up additional shares at a much lower price. Most of the experts we’ve interviewed tell us the next rally should start sometime between late July and Labor Day. In an attempt to interview the uranium guru James Dines in late May, we were told, “Call back in a couple of months.” That was a helpful clue that the markets were less than exciting. Mr. Dines is often eager to be interviewed, but recently he was not.

2.Do you believe the fundamentals which engendered the commodities boom have changed? If they haven’t, then the bullishness is only taking a breather. We don’t see any fundamental change in the markets. Russia still wants nuclear power, and its oil production may be peaking. China hasn’t announced the end of its nuclear expansion program. India wants to spend $40 billion on new nuclear reactors. If you are invested in uranium stocks, spot uranium jumped another dollar to $45/pound this past week. Hardly the end of the bull market.

3.If you worry about your investment in one stock or another, then stop watching the ticker and focus on the company fundamentals. Is the story still true or has it changed? See #7 A, B and C below.

4.There’s an old clich้ that the time to buy is when you feel like dumping everything you own in the category. At the exact moment you want to sell your entire portfolio of uranium stocks, it may be wiser to add to your holdings. This applies mainly to the retail investor. Most of the professionals did dump at the top and are now slowly accumulating the shares of the na๏ve who waited until the washout to start selling off.

5.Has a major, earth-shattering event occurred? The last bull cycle in uranium ended with Three Mile Island (TMI). The last decent rally in the precious metals markets fell off a cliff after it was discovered Bre-X Minerals had perpetrated a fraud about its gold ‘discovery’ in Indonesia. Something significant and newsworthy always transpires, and it is also far-reaching. That is the trigger. As with TMI and Bre-X, those were the first shots which launched a later chain reaction to end those bull markets.

6.Before pulling the sell trigger, ask yourself: Do I really want to give up these shares to a bargain basement hunter, who will make a killing on my losses?

7.Since most of you will still panic, please review the following basics for any of the uranium companies you’ve read about:

A)How much cash does the company have in the bank? During shakeouts, cash is king. Prescient companies, which completed their financings during the recent and robust rally, are sitting pretty. They can weather the short-term storm and are well-oiled to move forward when this correction bottoms and reverses. Those companies are the strongest ones to check out when this correction looks gloomiest.

B)Has the management remained the same? Unless the top financial and/or technical people blew out the door, in recent weeks, the story probably hasn’t changed much. Companies which built a strong technical team are resilient and powerful. They will move forward.

C)Have the properties come up dry? One of the reasons you invested in a uranium company was because it announced it had “pounds in the ground.” Some companies have more than others. Some went to the expense and trouble of completing a National Instrument 43-101, which independently confirmed the quantity and quality of the uranium resource. If that changed – and the company announced, “Sorry, nothing there after all,” or announced, “Hey, we were kidding,” that’s one thing. If you haven’t heard that, or read a news release announcing that, then the uranium didn’t walk away or move onto a competitor’s property. It’s still there.

Next time, when the markets are racing higher, and you feel like you won the lottery, consider this bit of biblical advice. The old joke goes, “When did Noah build his ark?” The answer of course is: Before it began to rain.

5 Tips for Investing in Penny Stocks

Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles.

1. Penny Stocks are a penny for a reason.
While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker's money for an IPO. This doesn't make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.

2. Trading Volumes
Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn't trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding "dead money", where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.

3. Does the company know how to make a profit?
While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.

4. Have an entry and exit plan - and stick to it.
Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you're out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.

If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.

5. How did you find out about the stock?
Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You'll start to notice quickly if you have subscribed to a good newsletter or not.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you'll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?

5 Steps To Researching a Stock Trade Before Investing

Once you determine which business cycle the economy is currently in you can start researching for a trade. It is best to have some sort of a system in place that will be used before EACH trade. Here is a simple 5 Step formula to help get you started.

5 Steps to Investing Online:

1. Find a stock
This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks to trade a good rule of thumb to consider is time of the year. For example, as I write this, it is the beginning of spring. It would make sense to consider stocks that traditionally make runs, or slide if you are bearish, during this time of year.

2. Fundamental Analysis
Many short term traders may disagree with the need to do ANY Fundamental Analysis, however knowing the chart patterns from the past and the news regarding the stock is relevant. An example would be earnings season. If you are planning
on playing a stock to the upside that has missed its earnings target the last 3 quarters, caution could be in order.

3. Technical Analysis
This is the part where indicators come in. Stochastics, the MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all the rest. The batch of indicators you choose, whether lagging or leading, may depend on where you get your education.

Keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses. Get very comfortable using one or two indicators first. Learn their intricacies and you'll be sure to make better trades.

4. Follow your picks
Once you have placed a few stock trades you should be managing them properly. If the trade is meant to be a short term trade watch it closely for your exit signal. If it's a swing trade, watch for the indicators that tell you the trend is shifting. If it's a long term trade remember to set weekly or monthly checkups on the stock.

Use this time to keep abreast of the news, determine your price targets, set stop losses, and keep an eye on other stocks that you may want to own as well.

5. The big picture
As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor.
For example, if you are long (expecting price to go up) on an oil stock and most of the oil sector is rising then more likely than not you are on the right side of the trade. Several trading platforms will give you access to sector-wide information so that you can get the education you need.

3 Steps To Profitable Stock Picking

Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.

Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.

Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.

If you decide to be a short term investor, you would like to adhere to one of the following strategies:

a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.

b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock's fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business's brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.

Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.

Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.

These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.

3 Steps To Profitable Stock Picking

Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.

Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.

Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.

If you decide to be a short term investor, you would like to adhere to one of the following strategies:

a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.

b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock's fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business's brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.

Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.

Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.

These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.

3 Steps To Profitable Stock Picking

Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.

Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.

Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.

If you decide to be a short term investor, you would like to adhere to one of the following strategies:

a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.

b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock's fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business's brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.

Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.

Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.

These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.

Broker-dealer

When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a "dealer." Securities bought from clients or other firms in the capacity of dealer may be sold to clients or other firms acting again in the capacity of dealer, or they may become a part of the firm's holdings.
A broker-dealer is a company or other organization that trades securities for its own account or on behalf of its customers.
Although lots of broker-dealers are "independent" firms solely involved in broker-dealer services, lots of others are business units or subsidiaries of commercial banks, investment banks or investment companies.

Regulation

United States
The 1934 Act defines "broker" as "any person engaged in the business of effecting transactions in securities for the account of others," & defines "dealer" as "any person engaged in the business of buying & selling securities for his own account, through a broker or otherwise." Under either definition, the person must be performing these functions as a business; if conducting similar transactions on a private basis, they're considered a trader & subject to different requirements
In the United States, broker-dealers are regulated under the Securities Exchange Act of 1934 by the Securities & Exchange Commission (SEC), a unit of the US government. Some regulatory authority is further delegated to the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization. lots of states also regulate broker-dealers under separate state securities laws (called "Blue sky laws").

United Kingdom
The Financial Services Authority authorises & regulates companies engaging in such activity as "regulated activities" under the Financial Services & Markets Act 2000.
UK securities law uses the term intermediary to refer to businesses involved in the purchase & sale of securities for the account of others.

Japan
The common Japanese term for a broker-dealer is "securities company" (証券会社, shōken-gaisha?). Securities companies are regulated by the Financial Services Agency under the Financial Instruments & Exchange Law. The "big three" are Nomura Holdings, Daiwa Securities Group & Nikko Cordial (a subsidiary of Citigroup). Most major commercial banks in Japan also maintain broker-dealer subsidiaries, as do plenty of foreign commercial banks & investment banks.
Securities companies must be organized as kabushiki kaisha with a statutory auditor or auditing committee, & must maintain minimum shareholder equity of ¥50 million.

Aircraft broker

Aircraft broking is an activity which forms part of the international aircraft manufacturing industry. Aircraftbrokers are specialist intermediaries between aircraftowners and manufacturers and the buying public.

Much as in real estate brokering they connect buyers with sellers through either a buyer searching for a catalog, or a sales representation agreement created by an aircraft manufacturer. For example Cessna, Dassault, Gulfstream, Bell Helicopter etc.

Who is Broker??? You should know! ! !

A broker is a party that mediates between a buyer as well as a seller. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Distinguish agent: one who acts on behalf of a principal. A "brokerage" or a "brokerage firm" is a business that acts as a broker. A brokerage firm is a business that specializes in trading stocks.[1] A salesperson working for a securities or commodity brokerage firm is popularly (but incorrectly) called a "broker." A broker in that context is, strictly speaking, an exchange member who's actually executing the purchase or sales order in the 'pit', on the exchange, as a service to the client of the firm for which that salesman works.

See Some Types of brokers
Aircraft broker
Broker-dealer
Business broker
Commodity broker
Contract Hire Broker (see Business Contract Hire)
Deep discount broker
Forex Broker
Insurance broker
Investment broker
IT broker
Joint venture broker
List broker
Low cost broker
Marriage broker
Mortgage broker
Options broker
Power broker (term)
Prime broker
Real estate broker
Retail broker
Ship broker
Sponsorship broker
Stock broker
Yacht charter brokers