August 24, 2011

Investing in Precious Metal ETFs

Precious Metal ETFs (Exchange Traded Funds) allow investors to gain exposure to the various Precious Metals on the Market. The most popular are Gold ETFs which investors use to profit from either a rise or decline in Gold Prices. The reason I mention that it is possible to profit from a falling Gold Price, is because there is a Gold ETF which is known as an "inverse" ETF. What this basically means is that the Shares of this security - which trades on the New York Stock Exchange - is specifically designed to rise in value when The Gold Spot Price is falling. There is a similar product for Silver that allows investors to profit from a decline in Silver Prices. Of course there are also Silver ETFs which Rise in Value as Silver Prices Rise. Both the Precious Metals, have ETFs associated with them that are considered "Ultra."

This is a reference to basically mean that the stated objective of these particular ETFs is to double the daily return of the metal being tracked. In other words, for the Gold Ultra ETF, when Gold prices rise 3 percent in a single day, the ETF shares will rise by about 6 percent - these type of ETFs are known as Leveraged ETFs. If Gold Prices fall however, the decline in the Value of the Ultra Shares, could fall, but by twice the percentage amount. Because of this, Investing in these Shares can be quite profitable, but come with the added risk of potentially larger losses.

Platinum and Palladium ETFs

The other two popular Precious Metals with ETFs designed to track their price and performance, are Platinum and Palladium. Both of these metals can seem expensive to the average investor if purchasing them on the Open Spot Market. The Platinum ETF however, tracks the Platinum Market Price and trades at about one tenth of the price. For example, if Platinum is trading on the Spot Market at $1,800 per troy ounce, than the ETF that tracks it, will be trading at about $180 per share. This makes it convenient and affordable for investors wanting to gain exposure to the Platinum market, without actually having to buy any of the metal itself! There is also an ETF for Palladium.

This ETF also tracks Palladium Prices but costs about one tenth the price of Palladium being sold on the open market. Today, the Price of Palladium is at $741 per troy ounce, and the ETF shares that track it, are trading at $74.25. To learn more about the ETFs mentioned above including viewing live charts for each one, follow any of the links above. To learn more about Precious Metal ETFs in General, visit the Website which covers Exchange Traded Funds in more detail. Discover the other Market Segments beyond just Precious Metals that ETFs have been created to track. From Market sectors, ETFs for Oil, to the various industry groups, the creation of ETFs now provide investors an opportunity to gain exposure to the different segments of the World Economy.

August 21, 2011

Qaddafi Cornered, Libyan Rebels in Tripoli

It appears that the imminent fall of the Government in Libya headed by Moammar Qaddafi is just days away. Libyan Rebels pushed into the Capital, making their way to the center of Tripoli. It has been reported by several news agencies that the unit assigned to protect Qaddafi had surrendered to the Rebel forces and many have even switched sides in the six month long civil war. Although the Libyan Rebels have often claimed to be hours away from taking the capital, this time it appears that their claims can be backed by the situation on the ground. According to the Associated Press, the rebels claim to be moving into Tripoli and meeting little resistance along the way. It should be noted that the Rebel advance on the ground was coordinated with NATO Air Support, most likely giving the Rebels the decisive advantage in the battle. It was reported Qaddafi's son Seif al-Islam, had been arrested and taken into custody. Seif was thought at one time to be the heir to take the reins of government, after his father's rule.

A defiant Qaddafi was heard in an audio broadcast that was recently released, saying, "How come you allow Tripoli the capital, to be under occupation once again?. The traitors are paving the way for the occupation forces to be deployed in Tripoli." Interviews with Rebels on the ground, revealed that many believed the fall of Tripoli would occur in just hours. Fighting was reported in several neighborhoods all around Tripoli as what was left of the crumbling Qaddafi forces, fought the lighting fast rebel advance. Earlier in the day, a major military base just outside the capital had fallen into rebel hands who claimed they confiscated military hardware that they could use in the push to control Tripoli. Rebels said they were just one and a half miles away from the iconic "Green Square" where supporters of the Qaddafi regime often gathered in defiance, broadcasting images around the world of the Libyan leader's supporters. Capturing this square, would be a significant psychological blow to the government, and may even signal its impending collapse. As news of the Rebel's advance on Tripoli spread, celebration in the streets were seen across Libya.

August 18, 2011

Standard and Poor's Under Investigation

The U.S. Justice Department is now investigating the Standard and Poor's rating agency for improperly rating dozens of Mortgage Backed Securities with very high ratings, after many of those investment turned out to be worthless. I find the timing interesting because it seems like Americans in general are aware of the idea that the rating agencies contributed to the Recession that started in 2008. By giving many of these investment securities a top rating, many investors were duped into purchasing them, and insurance companies into insuring them. When the value of these securities imploded, many were left holding worthless bonds. Why is it now that the Justice Department seems to be making a public case that an investigation is being conducting against the agency? Well of course, I think the answer seems to be pretty apparent: The U.S. is not happy with the recent Downgrade of the nation's debt

and has decided to strike back at the rating agency. Although I welcome the Departments inquiry into the ratings handed out that contributed to the crisis, it should have been conducted whether the Nation was downgraded or not! According to the NY Times article Justice Inquiry is Said to Focus on S&P Ratings, the Justice Department began the investigation before the Nations triple AAA credit rating was lowered to AA+. If that were true, this is the first time I've heard about it and I read several newspapers each day! This seems like a clear case of getting some revenge if you ask me for my first response to this story.

Were S&P Ratings Driven by Profit?

In the investigation itself, Justice Department officials are focusing on times when analyst working for the company wanted to rate specific mortgage bonds lower, only to be ruled over by other S&P managers. Standard and Poor's made huge profits during the recent boom years (2002-2006) handing out the highest possible ratings on bonds that were backed by pooled mortgage loans, making them appear more valuable than they turned out to be. Many companies and countries (excluding the U.S.) pay the rating agency to provide ratings for a variety of securities. Follow the link to view the Different Levels of the Standard and Poor's Ratings.

It really makes me wonder if the U.S. paid for ratings, whether they still would have been downgraded! It was reported before the recent crisis, some banks paid Standard and Poor's up to $100,000 to get a rating from them. Obviously this seems like a clear example of a conflict of interest! Paying to get your rating most likely meant your securities being rated were going get favorable treatment. I would like to point out that this is not the first time rating agencies in general, have been accused of improper behavior that heavily contributed to a recession or even a market crash. The famous Stock Trader named Jesse Livermore, gave a statement to the Newspapers in 1929 to defend himself against accusers who were directly blaming him for causing the 1929 Market Crash. He said, "It is very foolish to think that an individual or combination of individuals could artificially bring about a decline in the stock market in a country so large and prosperous as the United States, What happened during the last few weeks is the inevitable result of a long period of continuous rank manipulation of many stock issues causing their prices to rise many times above their actual worth, based on real earnings and yield returns."

August 16, 2011

Gold ETF - Gaining Exposure to Gold Prices

Gaining exposure to the Gold Market without having to actually pay the price per troy ounce, which was $1,740 last time I checked, has never been easier. The answer is through purchases of Investment securities known as Commodity ETFs or Exchange Traded Funds. Some of these ETFs sell shares which can be bought and sold on a stock Exchange, such as the NYSE Arca, and derive their value from Gold owned by the issuer. The beauty of these investments is that they can range in price from one tenth the price of gold, to one one hundredth the price of gold. In other words, if Gold is trading at $1,740 per troy ounce, there is a Gold ETF that trades at $174.00 per share and another ETF that is $17.40 per share. To see which ETFs these are, and view live updating charts of the four different Gold backed ETFs I follow, visit my Gold ETF to learn more.

There is one Gold ETF in particular on the page that I linked to above, that rather than tracking the price of Gold, it tracks the Market Vectors Gold Miners Index. This is a Stock Index comprised of 30 mining companies. When Gold mining companies appear to be generally rising, These share may be a suitable option for investors who want to profit from the rise, since the ETF is designed to track the performance and replicate the direction of that particular Index, this is another way to gain exposure to the Gold Market for investors not willing to purchase gold at its current market prices. There is also an ETF which I cover that is designed to double the returns and backed by Gold. For example, If the price of Gold goes up by 10 percent, the investment returns of these shares will be about 20 percent. While there is a risk in larger losses, it comes with the incentive of the potential for larger gains! These type of securities are known as Leveraged ETFs and provide a larger risk/reward investment return. In other words, make sure you are as right as possible on the future direction of Gold prices, be clear on the risks, and this investment could pay off a magnified return as a result.

August 9, 2011

Dow Jones Averages and their Use

I have spent the last several weeks studying Charles Dow, the Dow Jones Company, and the creation, calculation, and importance of the various Averages created. The three Averages in particular that I have been focusing on in my research, are the Dow Jones Industrial Average, Dow Jones Transportation Average, and the Dow Jones Utility Average. These are indices that investors follow to gauge market direction and performance. Charles Dow, who is one of the co-founders of the company and the driving force behind the creation of the Dow Jones Averages, was a brilliant technical analyst who realized that it was possible to track the general stock market if done in an intelligent, systematic manner

Before the Dow Jones Industrial Average was introduced to the world in 1896, investors did not really have a definitive method for measuring the stock market's general performance. For example, if an investors portfolio went up 7% in a year, it was hard to determine whether that was a decent, great, or exceptional return. With the absence of a benchmark to measure performance against, investors found it difficult to compare their performance to the stock market in general. What Charles Dow and the Dow Jones Company gave to the world, was a new way to interpret the movements of the market, and provide an orderly way to measure investment returns. Before the creation of the Dow Jones Averages, there had not been a clear and systematic approach for identifying and measuring the movements of the stock market and determining its general direction.

Investors and the Dow Benchmarks

The creation of the Dow Averages, allowed investors to compare their own investing performance, to the performance of the index they were tracking. If the Dow Jones Industrial Average was up 10% in a year, and an investor's portfolio was up 15% in the same time frame, the investor could now assess their performance based on how the broader market did (as measured by the Average). Charles told investors that they could identify the longer term direction of the Stock Market by analyzing a chart of the Dow Jones Industrial Average, the Dow Rail Average (now called the Dow Jones Transportation Average) and observing the market's volume (how many shares traded hands in a single trading day) to get a sense of the underlying strength behind an existing trend.

Although this seems like elementary now to many investors, it was revolutionary in The early days of the Dow Averages. They are still used to this day for the same purpose they were initially created for, to gauge and measure the general performance of the stock markets. To see a list of companies that belong to each one of the Dow Jones Averages, follow the links above. They will take you to the Investing for Beginners website where I dedicated a section of my website to providing more detail about the Dow Averages mentioned in this blog post. You will also find self updating charts and stock quotes for each company.

August 8, 2011

Standard and Poors Gave US Early Warning

The United States lost its triple AAA credit rating a couple days ago from Standard and Poor's Rating Agency. This obviously had an impact on the Stock Market today, as can be seen by the 635 point drop of the Dow Jones Industrial Average. Although Treasury Secretary Tim Geithner and U.S. President Barack Obama both criticized the Rating Agency for their decision, I think Standard and Poor's gave the United States plenty of warning ahead of time, to prevent a downgrade. For example, On April 18, 2011, I blogged about a warning given to the U.S. by Standard and Poor's that the U.S. needed to proactively deal with the deficit to maintain the top credit rating. This was nearly four months ago and the U.S. waited literally to the last minute to raise the debt ceiling and allow the government the power to borrow in the financial markets to meet its debt obligations. This was not only poor judgement, but poor leadership from both parties. This issue should have been dealt with in a timely manner.

Instead, leaders from both parties wanted to play politics, and try to score political points for their hardened stances. The American people were not fooled. As a matter fact, a poll released the other day, showed that the U.S. congress had an 82% disapproval rating, which was the highest on record since the poll was first conducted back in 1977! The same poll showed that the majority of the the American people felt the debt ceiling debate was not about doing what's right for the country, but purely about trying to gain political advantages. I am happy the American people are finally waking up! It's taken long enough!! This not only costs the United States its stellar Credit rating, it spooked the markets, and as a result, millions of dollars in wealth have disappeared in the Stock Market, resulting from a broad fall in stock prices. Although I do think it sounds funny to say the U.S. needs to take on more debt to pay its debt, there is a time and a place for that debate, and these politicians obviously chose the wrong time to have it!

Rather than conducting two Wars that have become insanely expensive, or what the treasury secretary called a mistake - a 700 billion dollar tax break for the rich (that the U.S. needs to borrow to do), America should be making wiser choices in the first place. Hopefully this is a lesson to all of us, that if our leaders can't get the job done, than they should no longer be the leaders! There is too much at stake right now, and the American people need to take their responsibility as citizens seriously, and vote in people who remember their role - public servants! This means finding ways to create jobs, moving in a direction that gets the economy moving again, and knowing the right time and place to have specific debates that help rather than harm the people and the image of the United States.

London Rioters Hit the Streets

The London riots that have been going on for the past three days, should send a loud clear message to governments around the world. When enough people are fed up and feel desperate, they will turn to desperate measures. Although I personally condemn the looting and rioting in London that has occurred recently, I am at the same time, sympathetic to those who take to the streets, angered that their needs are not being listened to and their struggle is not being sufficiently addressed. I don't think it is any coincidence that the riots are happening after the largest demonstration in Israeli History over the weekend, with 270,000 people coming out into the streets to demand better pay, and fairer living conditions.

There has also been mass demonstrations in Chile recently with the masses demanding better education, social justice, equal opportunity. Around the world, it appears that the younger generation, between the ages of 20 to 45 years old, realize how they have been lied to. They are no longer accepting the statement "the rich are getting richer while the poor are getting poorer" as just simply "that's just the way it is." They are organizing, and in the case of London, they are fighting back! Their built-up frustration is turning to visible anger, and this will spread further across the planet, if not properly and proactively handled. I can't help but think that if the Rich were in the same predicament, they would react the same way. The income equality is a ticking time bomb waiting to happen, and what we are seeing recently, maybe the fuse being pulled! I am following closely what is happening in London and will blog more if any new developments occur.