Futures Techniques Crucial For Results by T Dawkins

The stock market or perhaps the commodity market has different instruments for trading with respect to the preference and technique of trading sought by the trader. There are several who always have confidence in trading inside the cash market, while you can find others who make speculation course by trading in futures being an instrument of trade.

The concept of futures is directed towards price discovery of the underlying understanding that can be stocks, bonds, foreign currency or commodities. The concept is to predict the price tag on the underlying over a period of time and which is referred to as being the contract period. Futures trading can be done by both of these individuals as well as by companies. People mainly make use of this as a speculative tool to make quick profits available in the market by taking good thing about volatile price movements while businesses generally use this as a hedging mechanism.

As mentioned futures contracts use a definite period which range from a month to a few months and then the contract expires. You can hold your contract in those times and can exit it the moment you get the purchase price you are looking for. However, remember that since such contracts will be leveraged ones, you are able to lose money as soon as you can make them.

The advantage of futures trading is this leverage. You can get the benefit of trading in a bigger amount of shares if you are paying a percentage with the total money as margin and place long or short calls on the market on stocks, commodities, foreign exchange and so on. Whenever you trade in cash, you would need to pay the full amount for your quantity of shares you wish to trade in and never many will have that sum together.

You need to be conscious that futures trading price is not based on the exchange but by demand and supply that is why the liquidity could become a problem occasionally. This form of trading is especially used by hedgers to guard their downside risk around the underlying. Speculators on the other hand use future trading to take advantage of market volatilities.

It's also necessary to be aware that you must have deep pockets to get involved with futures trading while you should be able to meet margin calls out of your broker if the price of the stock fall where you have taken a lengthy position. You may also use this money to balance your position so that you can make an exit when situations turn favorable.

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Non Tradable, Non Exchange Traded or Private REITs - Paul's Gang by Paul Cusick

This week's blog is about non tradable Real Estate Investment Trusts (REITs). These also go under the names: non exchange traded REIT and private REIT. My family inherited a non tradable REIT, Inland American Real Estate Trust, Inc. and that raised the question in my mind:  is this a good investment for your income generating bucket of money (a relatively risk free source of income)?
The non tradable REITs have the same qualifications as exchange traded REITs (REIT blog: http://paulsgang.blogspot.com/2010/07/reits.html).  The following are the major qualifications of REITs:

·         Pay dividends of at least 90% of the REIT's taxable income

·         Have shares of transferable certificates of interest

·         Owned by 100 or more persons

·         At least 75% of their total investment must be in real estate

·         Have at least 95% of gross income from dividends, mortgage income or property income

·         Derive at least 75% of gross income from mortgage interest or rents

The major difference between tradable and non tradable REITs is the first are traded on a stock exchange and the second are not. You can sell tradable REITs like any other stock which makes them liquid. You know the value of your investment at any time. 

The first major problem with non tradable REITs is they are not traded on stock exchanges which make them illiquid. You can only sell non tradable REIT shares to the REIT company that you bought them from if they have a stock repurchase program, or on a secondary market. If a non tradable REIT has a stock repurchase program, it may impose restrictions that can make it barely more liquid than a REIT without a stock repurchase program. Such restrictions might  include: you can only sell the shares after a number years of owning them, some non tradable REITs will only buy back a percentage of outstanding shares (for example 5%) and they can stop the stock repurchase plan at any time. During the current real estate financial crisis many of the largest non tradable REITs have suspended their repurchase programs. Inland American is one of the non tradable REITs that have done this. The only way you can sell your shares in on the secondary market.

The second problem is that non tradable REITs have high upfront cost (sales commission). The upfront cost can be as high as 15% (on the other hand the purchase cost of tradable REITs can be as little as $5 per trade). For example, if you purchase $100,000 of a non tradable REIT, your financial advisor just made $15,000 (it is very difficult to be unbiased when you are being paid a very high commission).

Inland American is the eighth largest retail real estate owner in the United States, located in 47 states with managed assets of $25.3 billion. Currently they pay a 5% dividend yield, reduced from a 6.2% dividend yield in January 2009.  Inland American stopped their stock repurchase plan in March 2009. The Inland American shares were bought for $10 in 2005. After checking several non tradable REIT secondary market companies, the highest price they were willing to pay for the shares was $4. In 6 six years the investment has taken a 60% 'haircut' (loss) in the value of Inland American shares. The company that buys the shares on the secondary market would get a 12.5% dividend yield.

There are much better investments for your income generating bucket of money for example, short term (duration) bond funds, annuities (for example a gift annuity that includes a tax free portion), etc. An illiquid investment carries higher risks than a liquid one; this becomes exacerbated during times of financial problems/crises. The investment becomes much more difficult to unload, or you can only do so by losing a lot of money on it. The high upfront cost is another problem - it is hard to swallow paying somebody 15% for their 'financial advice' (how unbiased can you be when you are getting such a hefty commission?).

You should be very careful when you invest in non tradable REITs and - like all investments - you need to understand the advantages and disadvantages of the investment. In 6 six years the value of the Inland American investment dropped 60% for a 5% dividend yield. I question if my relative's 'financial advisor' ever talked about the disadvantages of non tradable REITs, my assumption is he only talked about the 6.2% dividend yield.

Please chime in with comments about non tradable REITs.  What are your favorite financial and investment books, ideas for future blogs, etc.?  Future blogs that I will be will be writing:

Evaluating NetFlix stock

Income generating bucket of money

Investing in possible buyout companies

© 2010 Paul Cusick

http://paulsgang.blogspot.com/2010/10/non-tradable-non-exchange-traded-or.html

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Over 30 years of investment experieicne.

Safe Investing in 2010 After The Meltdown - Part 1 by john s

If we look back to what has happened in previous time, like the 1930, the great depression, the world wars, we have gone through many transformational shifting.The American neo conservative have targeted china, they have started a hate china campaign. They do seem to want a cold war.

But there is a real concern at the moment with political development and currency problems. It seems that there is always one nation that is likely to be the scapegoat for these problems, and it would be easy to just say, "lets have another war!" but wars are massively destructive of capital, progress and human beings. Unfortunately wars have been going on for as long as we know, and there are people who will tell you that whenever you have a shortage of raw materials that this will eventually lead to war.

At present it is obvious that we are in a period where we have a shortage of raw materials and commodities are becoming more and more acute. And if history serves us well, it is obvious we will soon have another war. It makes logical sense. Even if this fact is right or wrong we do know that if you have a dominant country falling, and a stagnate country rise, these countries have always clashes. A good example of this is with the US on the decline and China on the rise, there is a lot of tension there at present. This does not mean these countries will go to war. But it is obvious there is a strong tension there that we have not seen before. Where this leads is anyone's guess.

In terms of the financial crisis, Mr Ben Bernanke is trying to solve the issues at hand, but all he has been really doing is printing money. This is not a good sign, but that is about all they keep doing in Washington also. It is not good for a country debasing their currency. Many countries in history have tried this to
revive their economy. It has never worked in the short term or long term.

Unfortunately Mr Bernanke does not understand economics, or currencies or anything else for that matter. There is a real misconception about how one can protect themselves from what is coming. But the smart thing to do to protect oneself is to put your money into real assets, or in other currencies besides the US dollar. The US dollar will not go down dramatically everyday and every year. But Please do learn about protecting yourself. Because the real way to protect yourself through the ages is in sound currencies or real hard core assets.

Recently there has been a lot of people talk about gold and silver. In the last 6 months we have seen prices skyrocketing, and buying these now might be a bit dangerous. But if and when they have a correction, even if it was a violent one it would be wise to buy some gold and silver.

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Get rid of Peak protection 2010 From Your computer by George zimmerman

As a computer user I am sure you have heard of several different types of malicious programs that could get on your computer and do several different things. From speed reduction, file corruption and even hijacking your computer and all of these things and more can happen from thing such as viruses, malware and spyware.

One type of malicious programming that is not discussed as often is one referred to as "scareware". These programs are often designed to mimic real antivirus and anti-malware tools and can also use screens that look similar to your operating system to try and convince you that your computer is seriously in need of their assistance to get rid of infections. At times they are also designed to terminate programs you want opened and hijack your internet browser all in the hope of scaring you into buying them. That's what the program Peak Protection 2010 is, a combination of spyware and scareware and you need to get rid of peak protection 2010 from your computer quickly.

The first sign that peak protection 2010 is on your computer is that for some reason your computer wants to reboot on its own. You may be prompted to reboot so that updates can be completed. You may also just have your computer reboot on you without even wanting it to. Once it comes back up you will get a screen that says that the peak protection 2010 software is going to scan your PC for malicious programs.

While this may not sound like a bad thing what is bad about it are the results it comes back with are always fake. Either they are small, harmless files placed there when peak protection 2010 was installed or they are files you need to run programs on your computer. None of these infections are even real. You will still be told that your computer is in need of help though.

You will also start experiencing programs that will either not start up when you open them or shut down randomly in the middle of working on them. You will also get messages that pop up on the screen that often says:
The program that you are trying to use has been found to contain a malicious program. The program has been terminated to in order to protect your computer security. To clean up this issue you will need to activate your copy of peak protection 2010. From this point you are expected to run, get your credit or debit card and purchase a copy of the software in the hopes of getting your computer working properly again.

Instead of doing this, you should start to get rid of peak protection 2010 before it causes real problems and compromises your credit card details and your passwords. In the long run, it will be easier and less expensive to do.

To get rid of this malware you will need to download a system and registry scanner. this will scan your computer for errors on your system and malware hiding in there. If you try to get rid of peak protection 2010 manually you will find it impossible to find all the files and there may be other malware and scareware on your computer that you do not even know about. By running a system scan you can find this is minutes and make your computer safer and faster. Run a system scan now and protect your PC. Get rid of Peak Protection 2010 and make your PC safer and faster, just click here now.

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