Next week is options expiration week, which is typically volatile. Also, important economic reports next week may generate even greater volatility. The Fed (i.e. Federal Reserve) has adopted a “data dependent” policy, which makes inflation related reports most important for the stock market.

Next week economic reports are: Mon–None, Tue–Retail Sales, and Business Inventories, Wed–Capacity Utilization, Industrial Production, Empire State Index, Net Foreign Purchases, Oil Inventories, Thu–Building Permits, Housing Starts, Import & Export Prices, Unemployment Claims, and Fri–PPI, Michigan Consumer Sentiment, Philadelphia Fed.

Inflation related reports are Capacity Utilization, Import Prices, Unemployment Claims, and the PPI. Moreover, the market may perceive strong production and consumption as inflationary, although weak growth with inflation, i.e. stagflation, is also of concern. One month of data don’t make a trend. Nonetheless, the market may react strongly to these reports.

Over the next few weeks, the market will estimate future monetary policy by tying together recent economic reports. Real economic growth is expected to pick-up this quarter to above 3% from the 1% growth rate in the fourth quarter. So, inflation data will be of particular concern.

The unwinding of options will also generate volatility. Some Feb Max Pain expirations are: SPX 1,275 with the value of calls roughly three times greater than the value of puts, OEX 575 with the value of calls over three times more than puts, and QQQQ 42 with the value of calls about 25% greater than puts.

The chart below is an SPX daily chart. Last week, SPX traded within the Dec consolidation area (also, see extended Price-by-Volume bar on left side of chart) roughly between 1,250 and 1,275. Feb Max Pain expirations indicate SPX will trade in the consolidation area again next week. However, the following week, SPX should break to the upside or downside.

In late Jan, the MACD indicator moved towards a potential bullish crossover and then gave a bearish kiss (see circle). Consequently, SPX fell shortly afterwards. Currently, MACD is moving towards another potential bullish crossover, which may determine a breakout above 1,275 or breakdown below 1,250.

The recent bearish megaphone pattern (of higher highs and lower lows) favors a breakdown. However, a MACD crossover may cause a powerful short-term bounce, while another bearish kiss may cause a breakdown below the lower line of the megaphone pattern. Nonetheless, uncertainty about monetary policy may persist for several more weeks, while the market and the Fed are “data dependent.”

Charts available at http://www.peaktrader.com/ Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

Pacific Sunwear (PSUN) operates two mall based retail chains: PacSun and d.e.mo. PacSun is a nationwide surf and skate themed chain with about 900 locations comprising approximately 3.25 million square feet. d.e.m.o. is a hip hop themed chain with about 200 stores comprising approximately 500,000 square feet. Both chains target the “teen” market (specifically, guys and girls ages 12-24).

Locations

Nationwide, PacSun operates approximately 800 PacSun stores and 100 PacSun Outlets. Unlike PacSun stores, which are very evenly distributed on the basis of population, PacSun Outlets are skewed towards highly populous states with large areas of extraordinarily high population density (”suburban sprawl”). The only exceptions are Virginia, North Carolina, and Louisiana. While the number of stores in any one state is small enough that the disproportionate concentration of PacSun Outlets in these states may be purely coincidental, I doubt it.

More likely, PacSun Outlets in these states are meant to benefit from the expected population growth in their surrounding communities, and were developed because of the danger of saturation in states such as New York, New Jersey, Maryland, Michigan, Illinois, and California. I have not heard management discuss this matter. So, it is pure conjecture on my part. It will be interesting to see where the new PacSun and PacSun Outlets are located.

For the most part, PacSun stores are not unusually concentrated in any state or region. In fact, they are eerily evenly distributed relative to state populations. It is likely management has intentionally acted to ensure an even distribution of PacSun stores across the U.S. As a result, regional economic and demographic trends will have no material effect on PacSun’s operations.

d.e.m.o. stores are not (yet) as evenly distributed. They are disproportionately located in Northeastern states, Southeastern states, and California. There are relatively few d.e.m.o. stores west of the Appalachians and east of the Sierra Nevadas. The number of stores in the d.e.m.o. chain is still growing at about 20-25% a year; so, a more even distribution may be achieved in the future. Among teens, hip hop clothing is not limited to the Northeast, Southeast, and California. Therefore, it is unlikely the d.e.m.o. chain will be permanently limited to these regions.

Strategy

Pacific Sunwear’s strategy is to operate two separate, non-cannibalizing chains. Management claims each chain is focused on a different teen “subculture”. I would say subculture is too strong a term (and academics are as guilty as retail executives for stretching the term to the point where it loses its meaning). However, it is true that the two styles, and indeed, the two sets of customers are distinct. There is virtually no overlap between PacSun customers and d.e.m.o. customers.

In April, the company plans to introduce One Thousand Steps, a new mall-based footwear and accessories chain targeting 18-24 year olds. It is very unlikely this chain will prove to be cannibalizing.

Tactics

Pacific Sunwear locates stores in high-traffic malls. The company actively seeks to locate its stores in malls frequented by large numbers of teens, despite the fact that this puts the company in direct competition with rivals such as Abercrombie & Fitch (ANF), American Eagle (AEOS), Aeropostale (ARO), Hot Topic (HOTT), and Gap (GPS). There are malls in which one can find PacSun, Abercrombie & Fitch, Aeropostale, and Hot Topic stores all under the same roof.

PacSun’s footwear offerings have been particularly effective in keeping young men coming back. Shoes, particularly the kind PacSun sells, are a good lure for young men, because men tend to frequent their favorite stores far less often than women do. Even where there are no fashion concerns, shoes must be regularly replaced. Furthermore, males between the ages of 12-24 must buy new shoes, even if there are no aesthetic considerations involved, because old shoes will simply stop fitting their feet.

There is anecdotal evidence for this; but, unfortunately I could not find a study describing the annual change in shoe size for different segments of this age group. There is plenty of data on changes in height for males within this age group. However, it is very unlikely changes in height are concurrent with changes in shoe size. Anecdotal evidence suggests changes in shoe size are more common and more pronounced among males than among females within this age group.

It also suggests changes in shoe size would be more common and more pronounced within the youngest segment of this group. This has important psychological implications, because, if true, selling footwear would tend to cause young men to frequent a particular store at a time when they are more likely to form a habit of shopping there regularly. For instance, one would expect that a male shopper has formed more attachments and stronger attachments to particular stores by the time he is 17 than he had by the time he was 13.

Pacific Sunwear’s stores offer a broad selection of items within each brand. In fact, the company has been responsible for the expansion of some of the brands it carries into new products (particularly footwear and accessories). Pacific Sunwear has encouraged the owners of some of its best known brands to expand beyond their original product and leverage the prominence their brand enjoys within Pacific Sunwear’s stores into nationwide sales of new products.

Pacific Sunwear is able to effect such changes, because the company is usually one of the largest customers for each of its vendors. In several cases, Pacific Sunwear is the largest customer. The company has more influence over vendors than would be suggested by the size of its total sales, because the products it sells tend to have a more limited distribution than the products carried by some of Pacific Sunwear’s larger competitors.

The brands carried in PacSun and d.e.m.o. stores benefit from a greatly enhanced image among the “subculture” they target. These are niche brands that become even more closely associated with their particular niche when they are featured prominently in PacSun and d.e.m.o. stores.

There is anecdotal evidence that a few of the name brands carried in PacSun stores have become so closely associated with the chain, that, within the customer’s mind, the brand’s image and the store’s image have fused. Where a brand carried in PacSun stores is also carried elsewhere, it is almost always much more visible in the PacSun stores, because the target market for PacSun and the target market for the brands it carries are very similar - and the image PacSun projects is relatively undiluted. Other retailers run a greater risk of striking a discordant note.

Merchandise

Pacific Sunwear’s total sales consist of approximately 67% name brand sales and 33% proprietary brand sales. Pacific Sunwear’s two largest individual branded vendors are Quiksilver (ZQK) and Billabong. Both companies are probably still best known for their surf wear; however, they have branched out into other merchandise such as skateboarding and snowboarding apparel and various accessories. Quiksilver is responsible for sales of the Quiksilver, Roxy, and DC Shoes brands; Billabong is responsible for sales of both the Billabong and Element brands.

Each company’s merchandise accounts for about 10% of Pacific Sunwear’s total sales or about 15% of total name brand sales. In other words, about twenty cents of every dollar spent at Pacific Sunwear stores is spent on Quiksilver or Billabong products. These percentages are based on Pacific Sunwear’s company wide total sales numbers; therefore, it is safe to say sales of Quiksilver and Billabong products make up well over one-fourth of all sales at PacSun stores.

Pacific Sunwear’s total sales consist of approximately 65% apparel, 20% accessories, and 15% footwear. Pacific Sunwear has always sold more guys’ apparel than girls’ apparel. In recent years, the gap has narrowed slightly. Currently, apparel sales consist of approximately 55% guys’ apparel and 45% girls’ apparel.

Apparel sales account for a smaller percentage of Pacific Sunwear’s total sales than they had in previous years, because sales of footwear have been growing much faster than sales of apparel. Sales of accessories have grown faster than apparel sales, but slower than footwear sales. Only relative growth is being discussed here; absolute growth has been positive in all categories. Of course, this is not surprising considering the growth in the number of stores operated.

Trends

Recently, growth in the number of total transactions per comparable store at both PacSun and d.e.m.o. has been anemic. However, growth in the average sales transaction was up significantly, allowing Pacific Sunwear to post strong same store sales numbers. Over the last two years, the number of total transaction per comparable store has been virtually flat. Recently, growth in the average sales transaction has been as high as 7-8%.

This may be a short-term trend. Unfortunately, I am not convinced it is. Pacific Sunwear’s performance in terms of growth in the number of total transactions and growth in sales per square foot has not been as strong as the headline numbers suggest. These are two metrics to watch closely in the years ahead.

The general impression given by these metrics (and by much of the other available data) is that the PacSun chain is more mature than Pacific Sunwear’s impressive growth rates suggest. The store count alone might lead some to the conclusion that PacSun’s past growth rates are unsustainable. Of course, every retailer must face this dilemma at some point - and specialty retailers like PacSun must confront the problem sooner than most.

At times, comparable store sales growth at PacSun has outpaced comparable store sales growth at d.e.m.o. The difference has often been small, but that does not make it immaterial. In the most recent period, same store sales were stronger at d.e.m.o. than at PacSun. Still, d.e.m.o. does not have the same potential PacSun did. However, management is intent upon adding new d.e.m.o. stores - and, at present, there is no good reason not to.

Both PacSun and d.e.m.o. have some room for expansion left - and Pacific Sunwear is generating more than enough free cash flow to fund their expansion. The company already has plenty of cash on hand. In fact, it probably has more cash than it can effectively deploy, considering how much free cash flow Pacific Sunwear will generate next year.

Growth

There is still some growth potential at both PacSun and d.e.m.o. However, the attention of most Pacific Sunwear shareholders will likely be fixed on One Thousand Steps, the company’s new mall-based footwear and accessories chain scheduled to launch in April. One Thousand Steps will target 18-24 year olds.

I have mixed feelings about One Thousand Steps. The concept could be a good growth vehicle. Pacific Sunwear needs someplace to put all the cash it’s generating, and a new concept may be a better long-term bet than continuing to expand the PacSun chain.

There is a real danger of overexpansion at PacSun. If things turn negative, Pacific Sunwear will suffer mightily. But, that’s the nature of retail. Between the operating leases and the fixed costs associated with each store, specialty retailers are highly leveraged.

Sales increases produce spectacular profit growth; sales decreases cause a rapid erosion of those profits. It is not realistic to assume that a retailer can get out from under the burden of its stores in the same way marketers and manufacturers can exit a particular line of business. The biggest difference is the speed at which profits evaporate. A specialty retailer has little time to adjust course.

One Thousand Steps has promise. Pacific Sunwear has demonstrated its ability to manage the growth of mall-based chains. The target audience for One Thousand Steps is part of the same age group targeted by Pacific Sunwear’s other two chains. Like d.e.m.o., One Thousand Steps will target a very different segment from existing Pacific Sunwear stores. One Thousand Steps is unlikely to attract the same customers who frequent PacSun or d.e.m.o. Therefore, it should be another non-cannibalizing growth vehicle.

Footwear is a good choice for a new mall-based chain. Generally, most malls have underserved the teen footwear market. Although there are some notable footwear chains, a nationwide comparison by store count suggests there is plenty of room for a new mall-based teen footwear retailer. Teen footwear stores are very scarce relative to teen apparel stores.

The margins on both shoes and accessories are good. Just as important, Pacific Sunwear has demonstrated its ability to successfully sell both types of merchandise. One particularly appealing aspect of selling footwear is the strong appeal of name brands. Obviously, customers form stronger attachments to footwear brands than to apparel brand. This is not surprising given the limited number of footwear items purchased relative to apparel items and the frequency with which any one shoe is worn.

There are important differences between Pacific Sunwear’s two existing chains and the One Thousand Steps concept. Both PacSun and d.e.m.o. sell entire outfits. They offer everything needed to dress in the style of the particular “subculture” they serve. One Thousand Steps will not sell entire outfits. So, the new chain is unlikely to enjoy the same kind of customer stickiness that PacSun and d.e.m.o. enjoy.

One Thousand Steps will not be as distinctive as PacSun and d.e.m.o. For now, it is difficult to say how distinctive One Thousand Steps will be. However, it is safe to say the new chain will be less distinct in the minds of customers than either PacSun or d.e.m.o. That isn’t surprising. Very few stores are as distinct as PacSun or d.e.m.o. None of Pacific Sunwear’s major competitors operates stores that have as well defined an image as PacSun or d.e.m.o.

Pacific Sunwear will manage the One Thousand Steps chain better than any other company possible could. If you first described the One Thousand Steps concept and then asked what company would be best suited to manage it, I would need only a fraction of a second to say Pacific Sunwear. No company is more knowledgeable about selling footwear to young customers.

The PacSun chain has done a tremendous job selling name brand footwear to teens. PacSun is directly responsible for the lasting success of several of the brands it carries. Although brand name footwear was already an important part of many skaters’ lives (and more importantly their spending habits), PacSun greatly magnified that importance. Without PacSun, the value of the major skate shoe brands would be significantly less than it is today. Very few retailers have had this kind of positive influence on the brands they carry.

It is impossible to evaluate the One Thousand Steps concept at this point. I will be watching the chain carefully to see how it distinguishes itself from its competition, how it increases customer stickiness, and how it selects the brands it carries. The more different One Thousand Steps is, the more successful it will be.

Pacific Sunwear plans to open 8-10 One Thousand Steps stores during the first half of 2006. Management believes the chain could grow to 600 - 800 stores. At an average size of 2,500 square feet, that would mean the chain could grow to between 1.5 million and 2 million square feet.

Upon announcing the new concept (last year), Pacific Sunwear CEO Seth Johnson made the following statement:

Footwear has been a highly successful part of our assortment in PacSun stores. One Thousand Steps will enable us to leverage our brand management skills in what we believe is an underserved market. This new concept gives us an exciting growth vehicle that adds a new and distinct customer base to our business. Combined with out existing PacSun and d.e.m.o. businesses, we will have the opportunity to achieve significant sales and profit growth in the future.

I am cautiously optimistic about One Thousand Steps. The concept is more promising than d.e.m.o. However, I will have to wait until I see an actual store before I can offer any assessment of the chain’s profit potential.

Estimates

Analysts are optimistic about Pacific Sunwear’s future earnings, but pessimistic about Pacific Sunwear’s shares. Wall Street is estimating 16-17% earnings growth over the next five years. That’s lower than the growth rate Pacific Sunwear achieved over the last ten years. However, it’s higher than the growth rate I would predict.

The average 5-year earnings estimate from analysts is in the 16-17% range; but, the average recommendation is a hold. These two opinions are mutually exclusive. They are utterly incompatible. You can not predict a 16-17% earnings growth rate for Pacific Sunwear without also predicting the company’s shares will outperform the S&P. Well, actually you can, because a great many analysts have done exactly that. But, you shouldn’t.

PSUN is trading at a P/E of about 14. The argument for a significant multiple contraction is very weak. What company is going to grow earnings at 16-17% a year and sport a P/E well below 12? The obvious answer would be a company weighed down by a tremendous debt burden. So, how much debt does Pacific Sunwear have? None.

The company’s total liabilities are about equal to current inventory levels. Current assets (ex other) are about $350 million; total liabilities are about $250 million. The company has about $125 million in cash and marketable securities. Pacific Sunwear can probably generate over $150 million in cash from operations each year.

It is unlikely the company can open new stores fast enough to keep free cash flow from reaching 50 - $75 million a year. This is a fast growing company that is generating cash much faster than it can spend it.

There is a good chance that, five years from now, there will be fewer shares outstanding than there are today. Therefore, whatever multiple contraction these analyst are expecting would have to bring Pacific Sunwear’s stock down to a P/E rarely seen by healthy, growing U.S. companies.

The company’s PEG ratio is well below 1, and its forward P/E is about 12. I don’t pay any attention to these numbers, but analysts seem to. So, why don’t they rate PSUN a buy? I don’t know and I don’t care. It probably has something to do with the industry.

Compared to analysts, I’m less optimistic about Pacific Sunwear’s earnings growth, but more optimistic about the company’s shares.

Profitability

Pacific Sunwear has consistently earned high returns on equity while employing very little debt. Over the past 10 years, the company has achieved returns on equity of about 17%. Returns in recent years have been higher than returns at the beginning of the ten year period. However, the company’s return on equity has been above average throughout the period, and the difference between the ROE of recent years and the ROE of the more distant past is not particularly significant. Basically, this has been a business with a 17% return on equity for some time.

Pacific Sunwear scores well on every profitability metric. The company has a high free cash flow margin - and an even higher owner’s earnings margin, because the company has invested much more in capital expenditures than required for maintenance alone.

Pacific Sunwear’s return on retained earnings has ranged from 25-50% and its pre-tax return on non-cash assets has ranged from 20-30%. Both of these numbers are quite healthy, especially considering the consistency with which they have been achieved.

Pacific Sunwear, like most of its rivals, leases its retail stores under long-term operating leases. The initial term of each lease is usually ten years. The use of operating leases makes it difficult to compare the profitability of companies like Pacific Sunwear with the profitability of companies that do not have any such long-term obligations.

Pacific Sunwear has about $700 million in minimum future rental commitments. The present value of these commitments should be estimated at well under $500 million for purposes of comparison. So, even if one were to compare Pacific Sunwear’s capital structure with that of non-retailers, PSUN would not appear to be unduly leveraged.

Conclusions

I don’t like owning retailers, and I don’t like valuing retailers. If I had to pick an expected 10-year annual return for the investor who buys shares of PSUN at tomorrow’s opening price, I would pick 12-13%. This rate of return should be enough to beat the market, but is short of the magical 15% rate of return that I believe will lead to a 3-5% real after-tax return for the buy and hold investor.

It is quite conceivable Pacific Sunwear will perform much better than I expect. If everything goes the way management hopes, and each of the three chains is expanded to the stated goals, the 10-year return could be closer to 15-17%. However, I believe such a high rate of return is unlikely. I’m sticking with 13%.

If I had to choose between being 100% invested in the S&P 500 or being 100% invested in PSUN, I would probably choose PSUN. If I had to choose between being 25-50% invested in S&P 500 or 25-50% invested in PSUN, I would definitely choose PSUN. Regardless, I expect shares of Pacific Sunwear will beat the market over the next ten years.

If you own more than a handful of stocks, PSUN would probably make a fine addition to your portfolio (if acquired at the $22.50 or so at which the stock last traded).

Geoff Gannon writes a daily value investing blog and produces a twice weekly (half hour) value investing podcast at Gannon on Investing.

Real Estate Basics

The business of real estate can seem confusing to anyone not in the business of buying and selling houses. There are many different kinds of real estate, and the rules that govern the business require education, licensing, and the memorization of a number of industry-specific jargon terms.

There are many terms in real estate that can be confusing to an outsider of the business. For example, the terms Real Estate Agent, Real Estate Broker, and Realtor all mean something slightly different in terms of the credentials, education, experience, and certification of the person in question. There are also real estate companies, real estate lawyers, and private equity funds that invest in real restate deals. In addition, there are rules that govern the process of buying and selling property.

The business of real estate varies in accordance with the market. Sometimes it is a “bull market” and sometimes it is a “bear market.” There is also a significant difference between residential real estate and commercial real estate. Commercial real estate is better in that it tends to offer more stability and deliver higher profits, but it also requires a significant investment in capital that can be tied up for longer periods of time. Residential real estate also requires capital investment, as well as investment in time, repairs, renovations, though with a quicker turn around.

Whether looking to buy or sell personal property or enter into the business of real estate as a buyer, seller, renovator or representative, it is important to understand as much about the world of real estate as possible.

In the stock market, there is an old Wall Street adage to “Sell in May and go away.” It refers to the market’s tendency to perform much better during the six month period beginning on November 1st and ending on April 30th than during the period of the same length beginning on May 1st and ending on October 31st. It’s also known as the Halloween Indicator.

According to the 2005 edition of the Stock Trader’s Almanac, the six month period beginning in November gained 10,599.68 Dow Jones Industrial Average points in 54 years. The remaining six months, from the beginning of May through the end of October, lost 588.44 points. The S&P 500 index gained 1089.23 points in the November-April period and gained just 62.09 points during the May-October period.

A $10,000 investment in the Dow made in 1950 and ending in 2003 would have grown to $483,060 during the November-April period and lost $328 during the May-October period. That’s the origin of the saying to “Sell in May and go away.”

So, on the surface, it seems like a no-brainer. Just invest in the stock market during the best six months of the year and do something else with your money during the rest of the year. In fact, there are quite a few investment strategies based on doing just that.

However, like anything else that seems too good to be true, on closer examination it’s not quite that simple. According to Mark Hulbert, editor of Market Watch, the Halloween Indicator has done much better since 1970 than during the years before.

Since 1970, the average six-month return during the November-April period is +8.39%, which on an annualized basis is more than 17%. And the return during the May-October period is -0.03%. But, before 1970, the return during the best six months is +3.62% and the return during the worse six months is +2.71% — a statistically insignificant difference.

So what’s the deal? Did something fundamentally change in 1970? It’s hard to say and that’s the problem. There have been attempts to explain what may have changed. According to a study done by the American Economic Review, the timing of summer vacations may have something to do with it. Before 1970, the timing and length of summer vacations was significantly different than in the last three or four decades.

Hmm… I’m not so sure about that. In fact, as far as I’m concerned it’s never been adequately explained why the stock market would do better during one six month period of time than another, no matter which years you’re talking about. But I know this — an indicator that can’t be explained on its merits should probably not be the basis for investing money — no matter what the historical return.

Larry Holmes invites you to visit http://www.Money-Management-Wisdom.com/
You will learn how to become debt-free, save and invest money, cut taxes, manage risk, and achieve financial freedom in a much shorter time than you dreamed possible.

With visions of an ATM in every neighborhood in China, foreign banks and investment firms are queuing up to join the “China Club.”

Moneybags Communism

The initiation fee for the “China Club” is straightforward and pure moneybags communism: invest cold hard cash in its largely insolvent state-owned banks, put your reputation on the line, reassure nervous foreign investors about upcoming IPO’s, and share your risk management, corporate banking and other expertise with eager Chinese executives. The benefits of membership in the China Club are alluring but mostly maybes. Perhaps you will get some of your money back by underwriting an IPO or working in China with the bank in the areas of wealth management, credit cards or corporate banking.

But the temptation is too much too resist and they are lining up for membership. Bank of America, the German bank Allianz, Goldman Sachs, Merrill Lynch, UBS, and the Royal Bank of Scotland (RBS) have all agreed to or are in ongoing negotiations to take equity stakes in China’s big four state-owned banks. There is another twist to the tale. Membership fees are not the same for everyone but are negotiated one by one and this can leave a sweet or sour taste depending on the deal that’s cut.

Paying More for Uncertainty

The recent deal inked by the Royal Bank of Scotland led consortium is the best so far and beats the well publicized Bank of America deal hands down.

Bank of America purchased a 9% stake in China Construction Bank for $3 billion. The Royal Bank of Scotland (RBS) invested $1.6 billion for a 5% stake and brought along Merrill Lynch and Hong Kong tycoon Li-Ka Shing along to share the risks bringing the total investment to $3.1 billion for a combined 10% stake. The RBS group also paid less than Bank of America which paid 1.2 times stated book value. Even better than putting up less cash and getting slightly better value, the Scots were able to extract a life preserver from their Chinese partners. While details have not been released, the RBS group will get some of their money back if there are black holes in the books, if the IPO scheduled for early next year is cancelled or if the banks just don’t see eye to eye.

Thank You. May I Have Another

The question is will membership fees decrease over time or get steeper? Goldman Sachs and Allianz are in talks to pay about $1 billion for a stake in China’s largest state-owned bank - the Industrial and Commercial Bank of China. China favored UBS is also discussing an investment of $500 million in the Bank of China to cement its lead underwriting role in next years IPO.

This rush by foreign banks to get a piece of the China action should make shareholders pause. Just like when you join the local country club, there are unforeseen risks and expenses. Soon the monthly dues are raised and then there are the dreaded “special assessments” for new greens, a swimming pool or a new irrigation system.

Risk, Return - Maybe?

China’s large state-owned banks have an enormous burden of non-performing loans made over the years to poorly performing state-owned companies. With a small minority stake, foreign banks will have very limited say about the management of their partner bank. As the old banking adage goes, if you owe the bank a little money, the bank owns you, if you owe the bank a lot of money, you own the bank. For investment banks, the payoff seems even slimmer. Investment banking and underwriting fees are notoriously slim in Asia and IPO after market appreciation will have to be substantial to enjoy a risk-adjusted return.

And don’t even think of missing a payment. Last year Citigroup was chosen to underwrite a $5 billion listing for China Construction Bank after offering to purchase an equity stake. It was later dropped like a hot potato after failing to follow through.

I hope all of these banks make lots of money in China - but it may not be wise to trade billions of hard earned capital for a maybe.

Carl Delfeld is head of the global advisory firm Chartwell Partners and editor of the Chartwell Advisor and the Asia Investor Intelligence newsletters. He served on the executive board of the Asian Development Bank and is the author of The New Global Investor (iUniverse:2005). For more information go to http://www.chartwelladvisor.com or call 877-221-1496

For most of us owning a home is an agenda that tops our list of “things to do before I retire.” But the unfortunate part is that in most cases all this remains a mere fantasy, which dies an unfortunate death the moment it meets the reality of monetary considerations.

Don’t let your dream home remain a mere air castle for you. You can now translate your dream home into a concrete reality by availing a mortgage. As a first time buyer there are bound to be a lot of doubts in your mind. This piece of writing hopes to address some of those queries.

The first thing for you to do before taking the plunge into the property market is to ask yourself these questions: how much can I afford? What kind of a home do I want to live in and finally how much of a mortgage do I need to borrow?

There are various elements that ascertain the amount of mortgage you can borrow. Your credit history and the deposit that you can make towards your mortgage are some of the key elements. The bottom line is that higher is your deposit on the mortgage, more will be the mortgage options you will have at your disposal.

The key to a good property hunt is research. Get on the Internet and you are sure to find out for how much was a property similar to the one you want to buy sold at. This will give you a fair estimate about the asking price of the property before you go knocking on the estate agent’s door.

Before you sign a contract with your estate agent, you must ensure that s/he is registered with National Association of Estate Agents (NAEA). Such a move will allow you to take your complaints to a third party for redress, should such a situation arise.

Also, before you actually make up your mind, be sure to visit the property a couple of times and at different times of the day. Also try and find out about the typical monthly bills of amenities like water, gas and council tax. This will help you to realistically gauge the actual cost of living in the home. Don’t forget to make leeway for additional costs like solicitor’s fees, conveyance fees and other taxes.

A great way of getting the mortgage of your choice is to request for multiple mortgage quotes online. This will give you a fair idea about how much you can avail. Follow all the aforementioned tips and in no time at all you will become the proud owner of a new home.

Webmaster
http://www.seek.uk.com

Yesterday we learned that 74% of all wealth is created by people who own their own business. Below are a few facts about owning your own business, specifically a home-based business that you may not be aware of.

Fact: The fastest growing segment is home-based businesses.

Fact: A new home-based business is started every 11 seconds.

Fact: Unlike traditional business start-ups, 95% of home-based businesses succeed in their first year.

Fact: 85% are still doing well after 3 years.

Fact: People who own a home based business have an annual average income of $50,250, more than double the average American wage.

Fact: Owning a home-based business is the best tax strategy in existence today!

Today we will overcome the two roadblocks most people run into when attempting to start a business. Then show you how to fund a new business and put money in your pocket this month!
The two reasons people never get their own business off the ground, are FEAR, and lack of capital.

FEAR.

First lets address the fear issues. Most people used to believe that working for a major corporation was a safe place to earn a living. In recent years, as downsizing, massive layoffs, and total disregard for employees, has become the way of life in major corporations, the perception has changed. Most people realize that they have no real security working for someone else and, if you don’t own your own business, you always follow the same rules.

Rule #1: He who owns the company makes all the rules.
Rule #2: If you don’t agree with the owners decisions, see Rule #1.

Still, employees routinely sell themselves to a company at far less than they are worth in the name of security. Your employer tells you how much you can make, when to come to work, how long to work, when or if you can take time off, and most employees soon find themselves in a trap.

They don’t earn enough income to provide the things they want out of life, so they begin to use leverage in the form of credit to acquire the things they cant afford. Soon they make just enough income to service the debt and monthly bills, and are now trapped in their job. Even small increases in wages are soon offset by additional purchases and all the while the interest on their debts, eats their income up at alarming rates.

At this point employees ride a fine line between maintaining their debt service and total financial collapse, AND they have no control over their income. The employer or company can, and routinely does, layoff, right size, downsize or FIRE (the old fashion word for it) the employees.

What would a 90 day job search do to your present financial condition? Could you get by with ZERO income for the next 90 days? What if on the other hand you had a business started that created passive monthly income larger than your monthly bills. Would your loss of income matter? Absolutely not!

The fact is that the only real security is creating and controlling your own source of income, and the smartest time to begin creating your own income is before you need it!

As it turns out, not only is starting and running your own business the predominant way to create wealth, it’s also much safer than depending on outside forces for your income.

The other common fear people have when starting a business is lack of expert knowledge. Most average people do not have a tax advisor, financial planner, or attorney on call, to advise them when they run into challenges. At the end of today’s lesson we will show you how you can have a live tax advisor, and attorney, on call, every day, to asset you with any expert advice, for less than the price of a cup of Starbucks coffee! For now, relax in the knowledge that inexpensive help will be available to you for your new business.

Lack Of capital.

What is your number one expense? Is it your mortgage, your car payment, educational bills, credit card payments or loan payments? NO! Your number one expense is, TAXES! Federal Income Tax is typically the #1 expense for every U.S. household earning over $25,000 annually.

If you take a look at your regular paycheck you will notice the dramatic difference between your Gross Income and your Net Income. The difference is your largest expense, taxes. What’s even worse, if you are a regular employee, you are paying the highest percentage of taxes with the fewest deductions of any category of taxpayer. Haven’t we always heard that wealthy people pay less in taxes as a percentage, than the poor and middle class. Well sadly it’s true. The wealthy have the expert knowledge available to them, to reduce their number expense, taxes. Starting today you too, will have that knowledge.

Wealthy people realize that buy owning and running a business they can actually reduce, or eliminate in some cases, a major portion of their taxes.

It gets even better, did you know that just by starting a business with the intent to make a profit you can actually put cash in your pocket! Cash that can be used to fund your new business venture without having to borrow money or take any risk. The U.S. government will actually help you fund your new business, by increasing your eligible deductions. You can then translate that into immediate, monthly, take-home pay!

So how can starting a business put cash in your pocket today?
Take a look at one of your recent pay stubs from your last payroll check from your current employer (assuming you are working for an employer). Look at the difference between the Gross amount, and the NET amount. The majority of these taxes are federal and FICA withholding taxes. Have you ever stopped to think about just what’s going on here? In effect you are loaning the US government money by pre-paying a portion of the estimated taxes you will owe at the end of the year. Taxes in the U.S. are due on April 15th of the following year. So lets say you pay your estimated taxes for January of this year. You have just paid the government 16 months in advance of the date the taxes are owed. You are paying your taxes “as earned” instead of at the end of the tax period. The system is set up “as earned” for several reasons primarily to make sure Uncle Sam get his money first before your even allowed to cash your check!

The #1 Financial Strategy in America today is to start a home based business. By implementing a new home based business, you will be able to take advantage of the many tremendous tax deductions now available to you as a 21st century entrepreneur.

These new tax deductions can allow you to cash flow your business with up to several hundred dollars a month, from the very first day you start. That’s right, by starting and operating a home based business “with an intention for a profit”, you can legally convert a portion of your current, non-deductible personal expenses into new deductible business expenses. These deductions will then carry over to your individual 1040 tax return at the end of the year. This could lower your taxable income by thousands of dollars and quite possibly even lower your tax bracket.

Because you may owe less at the end of the tax year, you can adjust your W4 withholding form, and change the “as earned” withholding to properly account for the new deductions. This reduces the amount of taxes taken out on each check. Translation…. MORE CASH IN YOUR POCKET, THIS MONTH!
Here comes that fear again!

When most people think about dealing with taxes and specifically the U.S. government they get gun-shy. Most people will tell you imagined horror stories of the audits that will surely happen if you fool with your taxes. Nothing could be more distorted than the irrational fear of the IRS.

The bottom line is, it’s your money! And you should take advantage of every Legal deduction possible! Just by doing so you can immediately increase your monthly income, and use that money to start and run your new business!

To learn more about the complete financial fitness system, click here Wealth Building | Debt Reduction | Affiliate Marketing | Home Business or visit us at http://www.financially-fit.net

There are only THREE ways to earn money in this world!! 1. Get a
job. 2. Start a business, or 3. Put your money to work! All
right, omit the job. If you wanted one of those we wouldn’t be
wasting our time so let’s go to the next choice. Ask yourself,
do you have the leadership ability? Can you handle pressure and
responsibilities? Can you protect yourself from litigations? Can
you commit to the long extra hours? Do you have the knowledge,
and the financial backing to run a business? Are you able to
accept the fact that a large majority of all new businesses
fail? Now let’s look at being an investor for a minute.
According to Einstein, “COMPOUNDING IS THE GREATEST FORCE IN THE
UNIVERSE” and he called it the 8th wonder of the world. Have you
ever used the power of compounding with money? Once you fully
understand the concept, your outlook on life will change
instantly! You will want to compound every dollar, yen, franc,
pound, etc that you can get your hands on.

Before reviewing the recommended enclosed programs, let’s look
at an example of a monthly compounding investment. Let’s assume
that you invest $100 each and every month. After a period of one
year, you can draw $1,455 per month for as long as you keep
investing $100 per month. You can double that monthly income by
investing $200, or triple that monthly income with $300 and so
on. If that doesn’t exite you, I really don’t think I can help
you. However, if this interests you, you will find this
investment offer when you click “InvestPlace Private Fund”
within “Invest Place” program enclosed below. Here are some
“SELECT” programs which I participate in. You can take advantage
of the time and money I invested before arriving at these final
selections, The choice is now yours. Isn’t it a wonderful thing
when I can say that I will continue making tons of money no
matter what you decide to do. The reason is, I do not need to
sell, work, promote, recommend, convince, advertise, recruit,
sponsor, talk, commute, move, have a boss, make payroll, pay
company bills, or get out of my shorts UNLESS I FEEL LIKE IT!

For complete details logon to:

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Did you ever see the movie The Italian Job, and if so do you
remember when John Bridger asked: “you see those pillars over
there, that’s where they used to string up thieves who felt
fine.” Make the transition from paper trading to real money
trading and you will feel FINE too - Freaked-out Insecure
Neurotic and Emotional. And what a great analogy ’string up’ is,
because after all those months of paper trading winners are
replaced with real money losses, that is exactly what you will
feel like doing to yourself.

The Trading Psychology Viewpoint

No discussion about trading, or the consideration to begin
trading, can be done without a harsh realization - the vast
majority of all traders lose.

It is said that the reason that most traders lose is because
they are not psychologically prepared to trade, that is they are
not prepared to accept financial risk for something of which
they have no control over the outcome. Trading is much more of a
psychological problem then a methodological one, only the
traders who have first accepted this have a chance of being
consistently successful traders. Without an understanding of
trading psychology and the various issues that circumvent
method, there will be virtually no chance to overcome the fear,
confusion, and despair that can be inherent in trading.
Ultimately, after a series of consecutive losses, method becomes
replaced with a feeling that it is impossible to do anything
right; if for no other reason than this situation, trading
psychology is more critical than trading method.

New Trader Scenario

Consider a scenario where a trader develops a method for day
trading an index future. The method gives 15 trades per day, and
the trader has gotten to the point where they are able to paper
trade with the following results: 9 wining trades averaging $85
each, and 6 losing trades averaging -$65 each - thus giving $375
average daily gains. The trader has achieved these results for
three consecutive months; their paper trading goals have been
met and it is time to start trading real money. Real money
trading begins, but things quickly change. Instead of trading
their method like they did when paper trading, the trader starts
’skipping’ trades trying to pick the winners instead of
accepting the 40% losers; of course, they invariably pick more
losers than winners. Trying to then correct this problem, the
trader decides that maybe they are entering their trades too
late. So now instead of letting the setup complete and then
doing the trade, the trigger is anticipated so the trade can be
entered earlier - the losses get worse.

With the continued losses the emotions take over: “What is
wrong, why am I such a pathetic loser? Maybe it’s not my fault,
maybe the method just doesn’t really work.”

The problems get worse with each trade, more emotions and more
loses - the trader quits trading. The trader now decides that
their paper trading results weren’t really adequate to begin
real money trading. They will go back to paper trading and
studying again.

Thoughts that are going through the trader’s mind now: “Maybe I
should try different trading methods until I can eliminate those
losing trades - then I will be ready to trade real money again.
Really, maybe I should just quit trading altogether - maybe I am
just a loser, and that’s why I can’t trade.”

The Trading Psychology Plan

What should be very apparent from this scenario is that the
trader never traded their paper trading method plan after
transitioning to real money trading. Unfortunately, the trader
is unable to realize what they have done, instead their emotions
first place blame on the method thinking that it really doesn’t
work, and then on themselves for being “such a pathetic loser”.
The final result being that the trader quits trading, and if the
real underlying reasons for what has happened aren’t accepted
and changed, this trader will never be able to trade real money
even if their paper trading results become 100% winners, which
of course is not going to happen.

The trader had a trading method plan, but they did not have a
trading psychology plan. They did not have a way to make the
transition from fear and emotion directed trading to actually
trading the method as designed. They did not have a plan to
objectively access and understand their given non-method
actions, and then define a ’setup’ for replacing them.

The trading psychology plan must begin with an honest assessment
and acceptance for what really happened: the trader never traded
their method plan; there is no other blame to be placed, or
excuses to be made. There is nothing wrong with the trading
plan, and regardless, the trader has not traded it in order to
be able to make that evaluation. As well, traders cannot
internalize trade loses where they lead to their viewpoint of
themselves - you are not a loser because your trade is a loser.

Trading Psychology Plan Components

* Accept that losing will be a normal part of trading. Not only
is it impossible to be perfect, it is not an objective or
necessary to be a profitable trader. * Replace the focus of
winning and losing with the objective of following your plan.
This was not done while paper trading, as the trader had a
specific profitability goal that they used to tell them when
they were prepared to trade real money. They did not understand
that the reason they achieved this goal was because of how they
followed their plan.

* Remain neutral and non-judgmental towards yourself. If
profitable trading is ever going to be possible, this is
mandatory. There is no way that you are going to be able to
trust yourself to manage risk while you are also telling
yourself that you are ’stupid’ or a ‘pathetic loser’ each time
you lose or feel that you have done something wrong.

* Eliminating your emotions is not the objective; I actually do
not think this is possible. Emotions are always going to enter
into trading - learn to control the emotions, instead of having
them control you.

* Accept that emotions are a part of life; they aren’t by
definition good or bad, and actually if you can shift the focus
of what the emotion represents, they can be very beneficial for
the trader. For instance, if I am feeling confused and that
causes an emotional response or hesitation, I want to feel that
emotion. This emotion becomes a warning to me that I should wait
and try to find more chart-market clarity before taking a trade,
something that can be very typical when markets are in
congestion.

* Start slowly - this may be the most important component of
your plan. For instance, begin trading real money for an hour at
a time, and then assess what you have done, always asking
yourself the question: did I follow my plan, or did I take
non-method trades.

Granted, you will not be able to approximate your paper trading
results as the expectancy of that plan was achieved by averaging
15 trades per day. However, not only will this help further to
shift the focus from how much money did I make to did I follow
my plan, it will also allow you to acclimate to the logistics of
real time-real money execution, and the related initial
emotions, where all of a sudden the market feels like it is
moving considerably faster. By doing this you will ‘build-up’ to
trading your full plan at a pace that won’t cause you to become
so overwhelmed by the process, and immediately cause you to
avoid what you had intended to do as fear and emotion becomes
too strong.

You have a great trading method and trading plan. You have
profitably paper traded, and you ARE now ready to start trading
real money - just be sure that you have a trading psychology
plan that is as good as your trading method plan, and that you
realize that neither will be of any use to you without the
other.

Frustrated by all the symbols in a stock quote? Here’s a basic overview to reading a stock quote on Yahoo Finance.

If you’re like many new stock market investors you are learning all sorts of new things, one of the many things you need to know is how to read a stock quote.

Yahoo Finance has a nice stock quote page, please follow along and go to this web page http://finance.yahoo.com/q?s=msft and find out what everything means.

Near the top of the page it will tell you that you are looking up Microsoft Corp. (MSFT) this tells us what company we are looking at. You will then see the last price (which is delayed 20 minutes) and you will see how much the stock has gone up or down for the day.

If you scroll down the page you will find a table with a bunch of data.

Last Trade: This is the last trade that happened on this stock (delayed 20 minutes)
Trade Time: This is the date or the time of the trade
Change: Amount the stock traded up or down in dollars and percentage
Prev. Close: The amount the stock closed at the last day it traded. Generally the day before, unless holiday or weekend
Open: Price the stock opened at today or if weekend or holiday last day it traded
Bid: What various investors are looking to buy the stock for at the current moment
Ask: What various investors are willing to sell the stock for at the current moment
1 yr Est: Estimate for the stock’s price in one year’s time
Day’s Range: The range in price the stock has traded that day
52wk Range: Stock price from low to high over the past year of trading
Volume: Number of shares of stock traded so far today
Avg. Vol (3m): Average number of shares traded each day for the past 3 months
Market Cap: This is the market price for the company take the number of shares outstanding and multiple by the price of the stock
P/E: Price to earnings ratio
EPS: Earnings per share
Div & Yield: The dividend (if any) that you could receive from the company for owning stock

Those are the basic items on that Yahoo finance page; you can also find charts, headlines and some more background information on the company.

Reed Floren runs a stock market forum where you can find answers to all your stock market questions register for your free membership at this stock market forum http://www.reedfloren.com/forums/index.php?act=Reg&CODE=00