The US Economy is Busted and the Time of Prosperity is Over
September 14, 2011
To get the weaalth engine primed again takes at least 15-20 years or we have the year 2030.
Gold or Silver, and why Silver may outperform Gold
Augusrt 5, 2011
Silver price update from James Turk and Eric Sprott:
Risks on the Markets:
In NYSE 70% of all trading is between computers only...
Six graphs that forever change your thinking as an investor
Nobody cares of the fact that DOW index mimics the GDP of the USA?
It is not a coincidence. DOW index integrates the value of the 30 largest companies in the USA. What happens to these companies will for sure show up in the economy at large as their activities radiate throughout the whole Nation and even the World. It would be very peculiar if DOW and GDP would not behave like twin brothers.
The above six graphs is all you need to know to become successful as an investor. You can figure out many other pairs as well and they all give a new view of what is important and what is just random walk.
Many other successful strategies do exist but this is simple enough for people who have a life to live.
At bottom both investing and economics on practical level are simple. Not complicated, like the politicians and economists are claiming using their local pub specific slangs to intimidate outsiders and sometimes they get confused themselves!
What is complicated is to know what gadgets people will buy years ahead in the future and if they even have any money to do that. We all need food, clothing, shelter and energy to survive, everything else is just optional. Just the same way like learning is not compulsory nor is survival.
Investing in DOW index has has had a compounding return of about 3.4% since 1792. And as a matter of fact it would have no big difference if you used gold, silver or any major stock index and then just stay stuck to it over the time you, your children and their children, etc., have on this planet.
Simply switching between Gold and DOW or silver and DOW would produce a return between 10% and 18% depending on how successful you would be in the timing the switches. Timing is important as it impacts the return in your investments.
Gold and silver themselves form also a pair of vehicles as the world has only about 10 grams of gold and 2.3 grams of silver to give to each of it's habitants. Additionally both gold and silver have been used as money many times in history indicating that they would always have some value. Silver has an edge as it has more industrial uses than gold but the supply of both is still highly limited.
Both are almost irreplaceable in electronics while silver is often preferred as less expensive. Rare earth metals can be used for the same purposes but as their names indicate they are rare. China has most of the known resources and it is the principal producer for the world!
The above is not to be taken as an investment suggestion or advise. It is just to open the eyes and mind to look for new options to invest. All decisions and responsibilities to check everything are yours, the most important guardian of your own money and resources.
Note: Ever wondered why we have had major wars with around 40 years between them? The compounding interest is actually the eighth wonder of the world like Albert Einstein stated. It is unacceptable for the Kings and Lords that the money would accumulate to other hands of slaves and a timely purging process has to be used to return it back to its "rightfull owners".
Three investing rules that solve your retirement worries
"Forget chasing growth stocks. Invest in dividend payers."
"It's tempting to take the cash... but it's more profitable to reinvest it."
The below graph tells waht this means. Note that dividents tend to gro with passing years as the companies grow.
"If you've got a choice between a 5% yield and a 10% yield, take the higher yield."
Note that escessively high yied means high rsik as investors have figured out that this company is in trouble.
1. Dividend payers beat non-dividend payers.
According to Ned Davis Research, firms in the S&P 500 that raised dividends gained an average of +8.8% per year between 1972 and 2008. Those that cut dividends or never paid them produced zero return over the entire span.
2. Higher yields beat lower yields.
This is such a "no-brainer" that it doesn't require explanation. Clearly, a bigger dividend puts more cash in your pocket. But what isn't so obvious is how big a difference this makes. The highest-yielding 30% of U.S. stocks turned $1,000 into $5 million between 1926 and 2000. The lowest-yielding 30% returned less than a third of that.
3. Reinvesting your checks beats cashing them.
This buys you more shares, which leads to larger dividend checks, which buy you even more shares, and so on. If you and your brother each invest $20,000 in a stock yielding 7% you'll both get $1,400 the first year. But if you reinvest your dividends your annual take will be $2,754 in 10 years -- versus your brother's unchanged $1,400. If your dividend grows 5% a year, you'll be pocketing $5,299 -- an effective yield of 26.5%.
4. Small caps beat large caps.
A 70-year study of different equity classes showed that $1,000 invested in small-cap stocks grew to $3,425,250. In large-cap stocks it grew to only $973,850.
5. International beats domestic.
The average U.S. stock pays just 2.0%. That's peanuts compared to yields overseas. Stocks in New Zealand yield 4.4%... stocks in Brazil yield 4.1%... in Australia 4.5%... and in Germany 3.6%.
6. Emerging markets beat developed.
It's much easier for a small economy to post fast growth than a large one. And investors who know this benefit. Since 1994, Vanguard's Emerging Markets Stock Index Fund is up +268%. Stocks throughout the developed world, as measured by Morgan Stanley's EAFE index, are up just +55%.
7. Tax-free beats taxable.
Tax-free securities offer lower yields, but they often put more cash in your pocket at the end of the day -- especially if you're in a high tax bracket. A muni fund yielding 6.0% pays you a tax-equivalent yield of 9.2% if you're in the 35% tax bracket. This is precisely the type of tax-advantaged situation that can transform your portfolio into a daily income machine.
8. Monthly payouts beat annual payout.
It's not just more convenient to be paid this often, you actually earn more that way. Thanks to compounding, a stock paying out 1% monthly doesn't have a yield of 12%, but actually 12.68% if you reinvest. Look at the chart below and you'll see how big a difference this makes -- a $60,057 difference in this case.