Why You Should Invest In Green Energy Right Now

It's no secret that the global energy demand continues to rise. Driven by emerging economies and non-OECD nations, total worldwide energy usage is expected to grow by nearly 40% over the next 20 years. That'll require a staggering amount of coal, oil and gas.

But it’s not just fossil fuels that will get the nod. The demand for renewable energy sources is exploding, and according to new study, we haven’t seen anything yet in terms of spending on solar, wind and other green energy projects. For investors, that spending could lead to some serious portfolio green as well.

Rising Market Share

The future is certainly looking pretty “green” for renewable energy bulls. A new study shows that the sector will receive nearly $5.1 trillion worth of investment in new power plants by 2030. According to a new report by Bloomberg New Energy Finance, by 2030, renewable energy sources will account for over 60% of the 5,579 gigawatts of new generation capacity and 65% of the $7.7 trillion in power investment. Overall, fossil fuels, such as coal and natural gas, will see their total share of power generation fall to 46%. That’s a lot, but down from roughly from 64% today.

Large-scale hydropower facilities will command the lion’s share of new capacity among green energy sources. However, the expansion by solar and wind energy will be mighty swift as well.

The Bloomberg report shows that solar and wind will increase their combined share of global generation capacity to 16% from 3% by 2030. The key driver will be utility-scale solar power plants, as well as the vast adoption of rooftop solar arrays in emerging markets lacking modern grid infrastructure. In places like Latin America and India, the lack of infrastructure will actually make rooftop solar a cheaper option for electricity generation. Analysts estimate that Latin America will add nearly 102 GW worth of rooftop solar arrays during the study’s time period.

Bloomberg New Energy predicts that economics will have more to do with the additional generation capacity than subsidies. The same can be said for many Asian nations. Increased solar adoption will benefit from higher costs related to rising liquid natural gas (LNG) imports in the region starting in 2024. Likewise, on- and offshore wind power facilities will see rising capacity as well.

In the developed world, Bloomberg New Energy Finance predicts that CO2 and emission reductions will also help play a major role in adding additional renewable energy to the grid. While the U.S. will still focus much of its attention towards shale gas, developed Europe will spend roughly $67 billion on new green energy capacity by 2030.

Impressive Renewables Growth

While fossil fuels will still be a massive source of power, the growth in renewables will still be impressive. And that impressive growth could be worthy of portfolio position for investors. The easiest way to play it is through the PowerShares WilderHill Clean Energy ETF (PBW).

The $200 million ETF tracks 57 different “green” energy firms, including stalwarts like Canadian Solar Inc. (CSIQ) and International Rectifier (IRF). So far, PBW hasn’t lived up to its promise and the fund has managed to lose around 8% a year since its inception in 2005. That’s versus a 7% gain for the S&P 500. Yet, the fund is truly a long term play and could be a good buy at these levels given the estimated spending. Another option could be the iShares Global Clean Energy (ICLN), which only has about 35% of its portfolio in U.S. stocks.

For solar and wind bulls, both the Guggenheim Solar ETF (TAN) and First Trust ISE Global Wind Energy ETF (FAN) make adding their respective sectors a breeze. Cute tickers aside, both the TAN & FAN have been monster winners over the last few years as both solar and wind power makers have once again returned to profitability. With the sun shining and the wind at their backs, the new report could help push share prices higher over the next few decades.

Finally, as stated above, hydropower will be the dominant renewable energy source driving spending in the years ahead.  While General Electric Co. (GE) exited the hydropower turbine business a few years ago, it still makes software and other products for the industry. More importantly, its recent buy of France’s Alstom SA will put it right back in the driver's seat of the hydro-market. Alstom is one of the leading producers of hydropower turbines in the world. Not to be outdone, rival Siemens AG continues to focus on small-scale hydro-electric facilities. Both GE & Siemens make ideal selections to play that renewable sources expansion.

The Bottom Line

Bloomberg New Energy Finance’s recent report shows just how far renewables will go towards our generation needs. Given the anticipated spending spree in the sector, investors who choose to "go green" could see their holdings grow along with the demand for energy.

If You Buy Stocks Online, You Are Involved in HFTs

High-frequency trading has gotten a lot of buzz following the publication of Michael Lewis’ book “Flash Boys: A Wall Street Revolt”.  Although an astounding tale of how trades get hijacked by high frequency traders, the most compelling information it reveals is how most trades actually get executed. When investors put in an order to buy or sell a stock, they are unaware that often HFTs are involved; actually half to two-thirds of trades executed in the U.S. involve HFT, according to many experts. 

The proliferation of HFT began when the US government implemented new laws aimed at leveling the playing field by giving every trade the same chance of receiving best price execution.  Regulation NMS (National Best Bid and Offer), enacted August 2005, established “order protection rules” designed to prevent the execution of trades at inferior prices by requiring trades get routed to the best prices first then follow an ordered sequence of best prices until the full order is filled.

Reg NMS created a proliferation of exchanges in which orders can be filled; it also opened the door for more nefarious activities like front-running and kickbacks.This occurred in many forms but one in particular, the sale of order flow by online brokers, greatly impacts the individual investor. 

Online brokers sold order flow (the ability to execute orders) to the highest bidders, usually to high-frequency trading firms.  These trading firms took that information to front-run the trades so that the individual trades got executed at a higher price.  Similarly, the banks that regulated the orders also controlled the information about the orders.  As such, they were able to process the orders best befitting their profitability.  Usually that meant first sending it into their “dark pools”, their internal pool of stocks where they match buyers and sellers.  The orders, if not completely filled within the dark pools, were routed to other exchanges and it is surmised that the tread routes the banks chose depended on which exchanges paid the banks to most to receive the orders.  Banks and firms were paid to send orders to some exchanges creating an enormous conflict of interest.  In both cases the individual investor would be none the wiser, unaware of if he was receiving best pricing since online brokerage accounts are at an information disadvantage (online quotes are usually slow to update). 

The Bottom Line

A simple market order may not be so simple after all; individual investors should consider setting a limit on the price to "front run" the front-runners! Otherwise, the next time you hit the “Order Enter” button, you’ve gotta think “Am I getting the best price available?”

"Value" Investments: Social, Faith & Eco-Investing

Your head knows all the reasons why investing is good for you: tax benefits, retirement savings, tuition, mortgage, healthcare. But does your heart have questions? Perhaps you're concerned that companies you invest in are participating in fracking or other environmentally controversial  activities. Or maybe you believe strongly in humane treatment of all animals and don’t want your hard-earned money to go to companies that use animals for testing or other painful purposes. Other common concerns are exploitation of workers in less-developed countries or issues that go against your religious beliefs.

If you want your investments to grow, but not at the expense of beliefs you hold strongly, it’s time to look into investing with your heart – the new "value" investing. So what are your options?

Socially Responsible Investing

Also called ethical investing, socially responsible investing (SRI) aims to provide both profit on investments and encouragement to businesses that promote social good in various areas, including environmental stewardship, human rights, health-related issues and reduction in poverty. Although SRI has been around for decades, its popularity has surged in recent years. According to Forbes, currently $1.00 out of every $9.00 under professional management in the United States is in an SRI investment. While you can invest individually in companies that share your social concerns and goals, most investors choose to simplify the process with mutual funds or exchange-traded funds created around SRI.

Eco-Investing

Eco-investing, or green investing, is a subset of socially responsible investing that focuses on issues related to the environment. Technologies of interest to green investors cover a wide gamut of industries, including:

Renewable energy sources such as wind, solar, hydroelectric and geothermal
Energy-storage technology such as batteries for hybrid or electric cars
Biofuels made from non-petroleum sources
Green and energy-efficient building materials

Recycling

Other technologies related to eco-investing are those used for organic farming, including green pesticides and fertilizers, and green consumer products such as cosmetics, foods, healthcare products and pharmaceuticals.

Some companies often included in lists of eco-friendly investment opportunities aren’t specifically involved in environmental issues, but rather, strive to reduce their carbon footprint by making use of recycled materials, energy-efficient stores and offices, and more efficient shipping practices.

Impact Investing

While socially responsible investing often seeks to avoid doing harm by refraining from funding companies engaged in technologies or practices typically seen as harmful, impact investing funds individuals, companies or technologies not only in expectation of financial returns, but to achieve a measurable positive social impact. While non-profit organizations or for-profit companies most commonly do impact investing, individuals can participate in impact investing through microloans, bonds or impact investing firms such as Mosaic and Calvert Foundation.

Faith-Based Investing

Whether you’re Christian, Jewish, Hindu or Muslim, if your religion is an integral part of your worldview, you might want your investments to share that viewpoint. Faith-based financial managers invest in mutual funds and stocks that do not violate religious beliefs. For example, a Catholic mutual fund firm might steer clear of companies that violate traditional Catholic tenets, such as participating in stem-cell research, marketing products to same-sex couples or manufacturing contraceptives. 

Many faith-based investment firms avoid “sin stocks,” which generally cover alcohol, tobacco, gambling, pornography, weapons and high-interest loans. Typically, funds will invest in stocks of companies that are known to treat employees fairly, not harm the environment and support social good.

Bottom Line

When it comes to investing, your highest priority is probably receiving the best return possible on your money. But that doesn’t mean you have to check your values at the broker's door. When you seek to invest in ways that match your ethical principles, whether that be socially responsible investments, eco-investing, impact investing or faith-based choices, you have the satisfaction of knowing that your investment not only directly helped your own finances, it also worked to promote your beliefs in the world at large.

What's the difference between weighted average cost of capital (WACC) and internal rate of return (IRR)?

Weighted average cost of capital (WACC) is the average after-tax cost of a company’s various capital sources, including common stock, preferred stock, bonds and any other long-term debt. By taking the weighted average, the WACC shows how much interest the company pays for every dollar it finances.

The internal rate of return (IRR), on the other hand, is the discount rate used in capital budgeting that makes the net present value (NPV) of all cash flows (both inflow and outflow) from a particular project equal to zero. It is used by companies to compare and decide between capital projects. For example, a company may evaluate an investment in a new plant versus expanding an existing plant based on the IRR of each project.

The primary difference between WACC and IRR is that where WACC is the expected average future costs of funds (from both debt and equity sources), IRR is an investment analysis technique used by companies to decide if a project should be undertaken. A close relationship exists between WACC and IRR, however, because together these concepts make up the decision for IRR calculations. In general, the IRR method indicates that a project whose IRR is greater than or equal to the firm's cost of capital should be accepted, and a project whose IRR is less than the firm's cost of capital should be rejected.  

Why Your Next Dollar Should Go To Mexican Stocks

The World Cup has brought attention back to former emerging market superstar Brazil. As the 'B' in 'BRIC,' its abundant natural resources, strong government and growing middle class, have made it the poster child for growth in the region. Investors seem to agree, as there is now $4 billion in the broad iShares MSCI Brazil Index ETF (EWZ).

And while there is still plenty of samba left in Brazilian stocks, another Latin American nation could be a better long term bet. America's southern neighbor, Mexico, could be one of the most dynamic places for investors to place their money right now.

Regaining Manufacturing Muscle 

Thanks to a series of free-trade agreements with the United States and other nations, Mexico is quickly becoming a manufacturing powerhouse. Trade now represents 60% of Mexico's total GDP, and more than 80% of its exports are manufactured goods. That figure has quietly tripled since 1980, and has strengthened even more since the implementation of North American Free Trade Agreement (NAFTA).

And even better days could be ahead for Mexico.

Those trade agreements, with Japan and nations in the European Union, have brought in a tremendous amount of foreign direct investment. According to Mexico’s Finance and Public Credit Secretariat, the nation saw a record amount of FDI in 2013 at over $35 billion. That’s nearly a 178% increase over 2012. And that number is set to grow even more as several multinational corporations like Callaway Golf Co. (ELY) and Caterpillar Inc. (CAT) have begun expanding their operations in Mexico.

The reason is simple: lower costs.

Mexico continues to gain manufacturing market share away from rivals like China. First, energy costs are cheaper, as Mexico benefits from cheap natural gas produced in the United States, as well as its own petroleum production. There are now several pipelines that move natural gas downwards into the nation for electricity generation. Secondly, transportation costs are low, as both rail and truck traffic into the U.S. is robust. Finally, Mexico benefits from lower labor costs. Due to Chinese wage inflation, labor costs in Mexico are now about 20% cheaper. Just ten years ago, it was double China’s rate.

That shift and manufacturing growth will help Mexico see a 3.9% boost to its GDP this year, and a 4.7% increase in 2015, according to Mexico's finance ministry.

Tapping Into Mexican Manufacturing 

Given Mexico’s continued success as the world’s manufacturer, investors may want to consider overweighting it in their portfolios. While most Latin American focused ETFs, such as the SPDR S&P Emerging Latin America (GML), include hefty allocations to Mexico, there are ways to directly tap into Mexico’s maquiladora muscle. The easiest is through the iShares MSCI Mexico Capped ETF (EWW).

EWW tracks 59 different Mexican firms, including telecom giant America Movil (AMX) and Wal-Mart Stores, Inc.'s (WMT) Mexican subsidary Wal-Mart de Mexico (WMMVY). Expenses for the nearly $3 billion fund are low at 0.48%. More importantly, EWW has been a tremendous performer. Since its inception in 1996, the fund is up nearly 845%. The Deutsche MSCI Mexico Hedged Equity ETF (DBMX) can be used, as well, to take the peso out of the equation.

One of the benefit of NAFTA has been the proliferation of Mexican companies on U.S. exchanges. One of the best plays could be cement producer CEMEX (CX). CX was hit hard during the recession, as a result of dwindling construction activity, as well as an ill-timed acquisition. However, things seem to be on the mend, as the recovery in the U.S. bodes well for CEMEX’s bottom line. Analysts now have a $14 price target on the stock. Likewise, steel maker Grupo Simec (SIM) could be a good U.S. recovery choice.

Finally, as we’ve seen in other parts of the emerging world, an expanding local economy leads to an expanding middle class. And Mexico is no different. That makes both FEMSA (KOF) and Grupo Televisa (TV) prime picks. KOF is the leading Coca-Cola Co. (KO) bottler in thw world, while TV is the leading television broadcaster/programmer in Mexico.

The Bottom Line

Mexico is quickly moving to become a leading world manufacturer. Several free-trade agreements, along with lower labor and transportation costs, are boosting its manufacturing muscle.

Dealing With Stronger Trends

Currencies moving around the world, bringing up on strong Forex Trend. To your acknowledgement there are several ways we can enter our trades moving forward through the direction of Strong Trading.

Many traders of all experience levels follow a simple Forex strategy called trend trading. This article aids on learning ways to enter trades into the direction of a strong Forex trend.
The Forex market consistently attracts traders of all skill levels and strategies. With unconventional methods of economic stimulus becoming more conventional recently, strong trends have developed in the valuation of currencies. One common Forex strategy utilized is a trend following strategy.

There are 3 ways to identify trading opportunities into the direction of a strong trend.
1.Buy the dips, sell the rallies
2.Breakouts into new highs or lows
3.Diversify with currency baskets

Buy Dips

A common Forex strategy is to buy low and sell high. This type of strategy is generally sought out by many newer traders. More experienced traders will also buy dips and sell rallies too, but they bring a filter with an edge to this strategy. More experienced traders filter signals with a strong trend.
You see, many traders utilize indicators and oscillators to help them determine when currency pairs have become oversold so they can buy low. On the other hand, traders look for overbought levels on the oscillator to aid them in deciding when to sell. The signals on oscillators are generally straightforward and easy to read. However, one trading tip we offer in our Forex courses is to filter your signals in the direction of the trend.

Breakouts
A breakout strategy is technically the opposite of buying dips in a rally. In a breakout, wait for the price to move higher, and then buy at a higher price than you would have when buying dips. This begs the question, why somebody would want to do this?
The reason is because the market is made up of emotions. There are times when the prices don’t seem rational which is how bubbles develop. Breakout trading simply looks to play on those emotions because the reason prices are moving higher may not be rooted in fundamentals, but that traders are getting greedy and buying with all they have. Several famous traders like the Turtle traders used a breakout strategy.
Therefore, the advantage a breakout strategy is confirmation. You get entered into the buying position only when prices have confirmed they are ready to trade at new highs. Therefore, if the confirmation doesn’t come and if prices do not trade to new highs, then you have been kept away from a losing trade.

Baskets
A currency basket is a collection of currency pairs traded where the sole purpose is to highlight a specific currency’s move. For example, if you felt the US Dollar was going to gain strength and wanted to buy a US Dollar basket, you might look to place the following trades:
•Buy USDJPY
•Sell EURUSD
•Sell GBPUSD
•Sell AUDUSD

One advantage of basket trading is diversification. Since exchange rates are quoted as currency pairs, but wrong on the trade. For example, let’s assume you decide to trade the USDJPY because of US Dollar strength. If the JPY gains more strength than the USD, then you would have been right about US Dollar strength, but wrong on the trade simply due the other currency you matched it up against.
On the other hand, if you diversifying the trade as a basket, then you are boiling the trade down to a US Dollar move. Forex trends can last a while, so a powerful basket approach can be a less stressful way to trade these trends.

Good luck with your trading!

5 Ways To Avoid Analysis Paralysis in Trading

Analysis paralysis is the trading version of information overload. A trader is overwhelmed by multiple scenarios and possibilities of movement in price action, for every case there’s an opposing view in the mind of the trader. The conflicting views create confusion and make it almost impossible to take action and execute trades with clarity and discipline.

I had my fair share of analysis paralysis before I learned to keep things simple and stay focused. I used to delve in the details putting together speculative theories that sound great, but when it came down to pushing the button to execute a trade, I couldn’t do it!

1. Know What to Look ForThis obviously involves referring to your trading plan which outlines your trading style and mentions in detail the patterns or conditions you look for in a certain trading instrument to execute your trades. For example, whenever I’m looking for Gartley Patterns to trade, I always look for the impulse advance or decline that breaks the previous price structure and starts a new trend.
This gives me clarity when looking at charts because now I don’t have to scan through every bar/candlestick. Instead, I only look for the move that broke previous levels, then see if the Gartley conditions apply and asses my reward to risk ratios.

2. Focus on The Task at HandThe incredible availability of information in this age make it very hard not to get distracted by something, think about it for a moment, then google the term or idea, read a little here and a little there… And before you know it, you forget what you were looking for in the first place, or you wasted an hour or two on something irrelevant to your trading AND you haven’t taken the trade yet.
Keep a note book handy, if a certain idea occurs to your mind and you think it is worth researching, write it down. Make a deal with yourself that you only research ideas after you finish your current task, which is getting your analysis done and your trade executed.
Getting into the habit of researching only after you’ve finished your trading task at hand will also increase your discipline. Deep into your mind it will become some form of reward to look for ideas with passion after you’ve put in the important work.

3. Take the Top-Down Approach
Start from the top level, and drill down lower. It could be starting with the Macro levels if you are into fundamentals or starting with higher time frames or trend indicators in the technical field.
This will not only make it easier for you to analyze markets and trading instruments, it will also keep your attention on the bigger picture by giving you direction. This will make it harder for you to get distracted while analyzing markets.

4.Turn the TV Of
I strongly believe that the financial media is misleading at best. Looking at financial news channels is a leisure activity for me. I know that’s a bold claim right there but it comes from years of observation.
What normally happens is you have this great trade setting up, you’ve calculated your potential risk and potential reward, everything is set and you are ready to execute. Now in the background the TV is on and a financial news channel mentions stock XYZ which you’ve just completed the analysis for. Your mind picks it up quickly because of the focus and the recency factors, you pay attention to the news and an analyst presents this detailed view that he backs with evidence and extensive study. Sound good? Unfortunately, his case is completely against your analysis.
Even if your are not easily convinced by him. Trust me, when the doubts start creeping to your mind, this little piece of information will be 10 times as important as you thought it would be. Plus, why consume garbage information if you don’t need it in the first place?

5. Simplify, Simplify and SimplifyComplex things aren’t always better. For me, I think that the more simple things are, the more profound they will be. Generally traders are attracted to complex methods and systems. Complexity however introduces risks of over-optimization and curve fitting, which make systems sensitive to any change in volatility or market behavior.
Choose the methods that make sense to you, that you feel comfortable using and are good at. The possible scenarios will be clear to you, therefore you will be able to effectively assess situations and risks then execute with conviction.
Remember trading is simple, it might be a tough business, but the principles are simple.

How Are You Able To maintain Your Cash From Losing Value

In uncertain economic times, it is wise to have a chunk of cash set on the sidelines. You need to have some sort of a safety fund plus you never know what opportunities might swing by in times of distress and undervaluation. You know, the I-wish-I-had-the-cash sort of scenarios.
The idea in and of itself is profound and simple. And it is easy to implement – if you have the cash of course. However, the excess volatility (over $4 trillion daily volume) in the currency markets can make it difficult to stay on track in terms of value and stability. Obviously, the purpose of keeping this kind of cash is not speculation. It is there to mitigate risk and have some sort of a safe haven as opposed to taking on additional, unnecessary and “out of context” risk. This is about wealth preservation.

So the big question then is, how do we avoid exposing our hard-earned cash to currency exchange risks?

Well, many people resort to the 50:50 model, where they have 50% of their cash in Euros and 50% in the mighty greenback. On the face of it, this model sounds reasonable. However, the fact that 75% of the EUR/USD is the reverse of the USD makes things different in reality.
To clear things up, let’s consider this example. Suppose you have $80,000 in cash and you want to hedge the risk using the 50:50 model. You withdraw $40,000 , exchange them into Euros and deposit them in a Euro-based account. And you leave the other 40K in your original Dollar-based account.
Now since 75% of the EUR/USD pair is the reverse of the US Dollar Index, you have 75% of your funds or ($60,000 worth) fully hedged. They are minus 100% correlated. If half of the 75% goes one way, the other half goes completely the opposite way – which is not bad, but why not have a full hedge when you actually can? After all, 25% is not a small percentage of your capital ($20,000 in this example).

Being Fully HedgedSo, there is a possibility for a full hedge in this case. Elliott Wave International has created the Stable Currency Index as a way to fully hedge your cash to prevent exchange rate fluctuation and maintain purchasing power. It can also be a hedge against currency defaults.

Composition of the SCIThe SCI is comprised of four equal amounts of the Swiss Franc, Singapore Dollar, New Zealand Dollar and the US Dollar.

 Pie Chart courtesy of Elliott Wave International

 EWI chose the currencies (one currency from each quadrant) based on political and financial stability. The US Dollar was included because it is a stabilizing factor and still the world’s reserve currency.

Proving EffectivenessIn this chart below (courtesy of Elliott Wave International), the Stable Currency Benchmark is the horizontal line at 1. There’s no question to its performance in having a fully hedged currency portfolio.

Courtesy of EWI

Investing in the SCIAccording to Elliott Wave International, you can invest in the Index using one of 4 ways:
◾If you are wealth-preservation oriented, you can, through Safe Wealth Consultants Ltd., establish a relationship with a Swiss institution under which you can buy currencies in a mix that tracks the SCI: clientservices@safewealthconsultants.com or (011 from the U.S.) + 41-21-966-7200. Minimum investment: 250,000 USD or counter equivalent.
◾Open an account at a safe bank that will obtain short-term government debt instruments in the four SCI currencies for your account.
◾Buy bonds, bills or certificates of deposit in equal portions in each SCI country.
◾Set up a bank account in each SCI country and fund it.
Regardless of your financial goals in life, it is always better to have wealth preservation on your list. Otherwise, you’ll lose purchasing power and value faster than you accumulate funds. It pays to be on the lookout for new and innovative ways to minimize risk in places where you don’t need it.

Has the Stock Market Turned?

Talking Points:

• The Uk100 has failed to break over 6,900
• Price is still trading above support
• A lower low must be made for the trend to turn

Stock markets around the world have been making record runs over the past few years. However, with prices taking a pause, many traders are left to wonder if or when their favorite equities indices will turn. While fundamentally this can become a challenge, technical traders can use a series of price action clues to help them identify if indeed the market has turned. Today we will review the UK100 and identify tips to help better time the market. Let’s get started!

Learn Forex –UK100 Resistance Points

(Created using GCM’s Marketscope 2.0 charts)

Support & Resistance

The first clues that a trend has turned revolve around finding levels of support and resistance. In the event of an uptrend prices must be making higher highs, which in turn suggest rising points of resistance. The chart above displays a weekly graph of the UK100 (FTSE). Even though prices have generally been rising, prices have stalled under 6,900. While the lack of a new high doesn’t suggest that the market has turned, in the absence of a new breakout the trend should be at least in the interim considered stalled.
Now to get the full story of price action, technical traders should also identify key areas of support. In order for an uptrend to be concluded price must be seen breaking down towards a series of lower lows. These areas can be identified by pinpointing areas of price support. Below we can again see the UK100, but this time we have added an advancing line of support as a series of higher lows have been printed on the chart. In the absence of a breakout or any lower lows, traders can continue to say that the prevailing trend has not changed.

Learn Forex –EURUSD Trading Blocks

(Created using GCM’s Marketscope 2.0 charts)

Trading a Turn

Even in the absence of new highs or lows traders can begin looking for new trading opportunities. In these scenarios traders should consider trading a breakout. This will allow traders the opportunity to have entry orders pending in the event that price does turn and moves towards a fresh low. Entry orders can also be helpful in the event that a trend continues. If your order is set to sell the market pending a reversal under a point of support and price breaks resistance to a higher high, the order can simply be deleted. Traders will then be free to look for other opportunities.
Identifying key technical levels takes practice. You can get started analyzing the UK100 along with your favorite currency pairs such as the EURUSD with a Free Forex Demo with FXCM. This way you can develop your trading skills while tracking the market in real time!

Register HERE to start your FOREX learning now!

This Asian Nation Is Poised For Steady Growth

The Philippines presents one of the most spectacular comeback stories in recent times. The country, which had been lagging far behind its regional peers, is now making its presence know among the world's most vibrant economies, and is now spoken of as a ‘tiger cub’ and ‘Next Eleven economy.’

The leadership of President Benigno Aquino III has provided needed stability for the archipelago nation, which has been known for its political tumult. That has allowed a revival in domestic and international business confidence for a nation that once was second only to Japan in prosperity. Need proof? The Philippines recently hosted the World Economic Forum on East Asia, where corporate leaders, policymakers and the press from across the globe met to talk business.

The Philippine economy has witnessed a tremendous transition to growth over the last decade. It has managed stellar returns and amassed huge foreign exchange reserves while keeping inflation and interest rates under check. Despite Typhoon Haiyan (known as 'Yolanda' in the Philippines), which hammered the country in 2013, the Philippine economy grew by 7.2% last year, making it the fifth-largest in Southeast Asia. That compares to to a 4.7% average from 2008-2012. According to research by IHS Inc., the Philippines economy is projected to have a long-term economic growth of 4.5-5% (per year) from 2016 to 2030, reaching $1.2 trillion by 2030. 

Stocks Respond to Growth

Backed by strong economic growth, Philippine stocks have outpaced regional peers. In fact, the Philippine market has been in an extended uptrend over the last four years, and has withstood global headwinds and weakening confidence in emerging markets. The market’s PSEi Index posted YTD returns of over 16% as of early June 2014, led by sectors such as business process outsourcing (BPO), cement and consumer products.

The availability of a skilled and educated work force that is proficient in English – along with low labor costs – make the Philippines a preferred BPO destination. The BPO sector is expected to grow rapidly and offer employment to approximately 110,000 additional workers over the next two-to-three years. Interestingly, there is no publicly listed company that derives the bulk of its revenue from the BPO business. Instead, investors can allocate to companies that merely benefit from BPO, such as real estate. Leading names in this category are Robinsons Land Corp. (RLC), SM Investments Corp. (SM), SM Prime Holdings, Inc. (SMPH), Megaworld Corp. (MEG) and Ayala Land, Inc. (ALI).

Rising infrastructure investment, along with need to rebuild after last year's typhoon and earthquakes (the nation sees frequent seismic and volcanic activity), means that cement companies could be a good play. Companies like Holcim Philippines, Inc. (HLCM) and Lafarge Republic, Inc. (LRI) stand to benefit.

And in a nation of roughly 100 million people, the consumer products sector should not be ignored. Companies to study include Universal Robina Corp. (URC), Pepsi-Cola Products Philippines, Inc. (PIP) and RFM Corp. (RFM). Similarly, energy producer First Gen Corp. (FGEN) should be considered.

How to Gain Access?

• Direct Route

One way international investors can access individual Philippine stocks is through a local brokerage house that serves international clients. Investors content with paying the higher commissions by going this route can access a wide array of sectors and stocks, not to mention have more flexibility on entering and exiting positions. Some well-known brokers include Citiseconline, FirstMetroSec and BPItrade.

• American Depositary Receipts (ADRs)

Access via ADRs is a more conventional route, but your choice is limited to the Philippine Long Distance Telephone Co. (PHI), the only Philippine company currently trading on NYSE. There are many companies that trade on the pink sheets or over the counter (OTC), however.

• Mutual Funds

Conservative investors interested in accessing the Philippine market, albeit somewhat indirectly, can choose diversified Asia-focused mutual funds, as there are no funds that invest exclusively in the Philippines. Most funds have small allocations to the Philippines, though, because market values in the country tend to be small by comparison. 

• Exchange-Traded Funds (ETFs)

Gaining access to the Philippines market through an ETF is a convenient option. Investors can pick either a general ETF that features the Philippines or a Philippine-focused ETF that offers exclusive exposure to the country. The only ETF focused solely on the Philippine markets is the iShares MSCI Philippines Investable Market Index Fund (EPHE), which offers exposure to around 44 companies and has a net asset value of about $354 million. The fund's top-five holdings are Ayala Land, Inc. (ALI), Universal Robino Corp. (URC), BDO Unibank, Inc. (BDO), JG Summit Holdings, Inc. (JGS) and Philippine Long Distance Telephone Co. (TEL).  (For more on this topic, see: Five Minute Guide To Philippines ETF Investing)

The Bottom Line

The challenge for the Philippine economy lies in the sustainability of economic growth. Its economy is primarily driven by what's arguably an overreliance on the BPO sector and remittances from over 11 million overseas Filipino workers. Poverty and unemployment remain salient issues, as well as an uneven distribution of wealth. The country’s business climate needs to be improved to attract foreign direct investment FDI – namely into into manufacturing and tourism – and to mobilize domestic investment. With newfound political stability and a large, skilled, and motivated workforce, many are betting that the Philippines will rediscover past prosperity.

Why Interest Rates Matter

Talking Points:

• Capital flows calculates money moving in and out of a currency
• Traders follow rates to maximize yield
• As rates change, money will flow between currencies

There are many fundamental factors to consider when trading your favorite Forex pairs. While many traders may be quick to dismiss fundamentals these underlying factors have the ability to cause shifts in buying and selling patterns of traders. As demand increases for a currency so does its value. Likewise as money flows out of a currency its value begins to decrease.
To get a better understanding of market fundamentals, today we will look at capital flows and interest rates. Let’s get started!

What is a Capital Flow

Capital flows are the basics of Forex fundamentals. Just as the name implies this describes the flow of funds from one designated currency to another. Normally this flow is directly related to capital investments inside of a particular country. One typical example of this is if a foreign investor wanted to invest in stocks on the S&P 500, it would require Dollars to do so. This means money would flow into the USD from another currency to make the purchase.

The logic from here is one of supply and demand. If capital inflows exceed outflows that means there is a demand for countries currency. This can provide fundamental trading opportunities as for traders as prices rise to accommodate the new demand. This is also true with a net capital outflow. As there is less demand for a particular countries currency, we would expect a fundamental opportunity to place new sell orders.

Why Interest Rates Matter

Interest rates are one of the primary reasons for the international flow of capital. As investors, speculators, and traders all look to maximize their returns they tend to look towards higher yielding investments. That means countries with the highest interest rates coupled with strong economic data tend to see their countries currency strengthen due to capital flows.

Keeping an eye on the economic calendar can help traders become aware of potential changes in interest rates. Central banks are charges with setting the banking rates for their designated region, and will periodically hold meetings to make any changes to this policy. As these changes take place, demand for a specific currency can fluctuate based off of the decision. Let’s take a look at an example of this theory in action.

NZDUSD & Interest Rates

Below we can see a 1Hour chart for the NZDUSD. This is a great example of capital flows at work. As of 21:00 GMT on Wednesday the RBNZ (Reserve Bank of New Zealand) released their rate decision. The outcome was a rate hike of .25%, moving their central bank target rate to 3.25%. Almost immediately after the event prices of the NZD (New Zealand Dollar) began to rise. Why did this happen?

When the RBNZ raised rates, they also made it more attractive to hold the NZD relative to lower yielding currencies. When compared to the USD, the differential between their respective rates expanded to 3.00%! Traders and investors looking to take advantage of this yield differential were actively selling the USD (US Dollar) while purchasing the NZD (New Zealand Dollar). As demand for the NZD increased, money quickly began to flow out of the USD causing the prices and momentum on the chart depicted below to rise.

Learn the Market

As a fundamental trader, it is important to know how different events affect the valuation of a currency. To learn more about the flows of the currency market, make sure to sign up for “New to Forex” course presented by CGM Education. Registration is free, and the course will include videos and a variety of topics to help you with your trading.

5 Ways To Double Your Investment

There's something about the idea of doubling one's money on an investment that intrigues most investors. It's a badge of honor dragged out at cocktail parties, a promise made by over-zealous advisors, and a headline that frequents the cover of some of the most popular personal finance magazines.


Perhaps it comes from deep in our investor psychology; that risk-taking part of us that loves the quick buck. Whatever the source though, it is both a realistic goal that investors should always be moving towards, as well as something that can lure many people into impulsive investing mistakes. Knowing some of the most trusted avenues to doubling your money is something that all investors should have in their toolboxes.

1. The Classic Way - Earn It Slowly

Investors who have been around for a while will remember the classic Smith Barney commercial from the 1980s, where British actor John Houseman informs viewers in his unmistakable accent that they "make money the old fashioned way – they earn it." 


Perhaps the most tested way to double your money over a reasonable amount of time is too invest in a solid, non-speculative portfolio that's diversified between blue-chip stocks and investment grade bonds. While that portfolio won't double in a year, it almost surely will eventually, thanks to the old rule of 72. (To learn more about the rule of 72, check out the answer to our frequently asked question, What is the 'rule of 72'?)


Considering that large blue-chip stocks have returned roughly 10% over the last 100 years, and investment grade bonds have returned roughly 6%, a portfolio that is divided evenly between the two should return about 8%. Dividing that expected return (8%) into 72, gives a portfolio that should double every nine years. 

2. The Contrarian Way – Blood in the Streets

Just like great athletes go through slumps when many fans turn their backs, the stock prices of otherwise great companies occasionally go through slumps because fickle investors head for the hills. These instances can bring about situations where good investments become oversold, which presents a buying opportunity for brave investors who have done their homework.


Perhaps the most classic barometers used to gauge when a stock may be oversold, is the price-to-earnings ratio and the book value for a company. Both of these measures have fairly well established historical norms for both the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors will smell an opportunity to double their money. 

3. The Safe Way

For those investors who are afraid of wrapping their portfolios around a telephone pole, bonds may provide a significantly less precarious journey to the same destination. But investors taking less risk by using bonds don't have to give up their dreams of one day proudly bragging around the lunchroom about doubling their money. In fact, zero-coupon bonds (including classic U.S. Savings Bonds), can keep you in the "double your money" discussion.


One hidden benefit that many zero-coupon bondholders love is the absence of reinvestment risk. With standard coupon bonds, there's the ongoing challenge of reinvesting the interest payments when they're received. With zero coupon bonds, which simply "accrete" or grow towards maturity, there's no hassle of trying to invest smaller interest rate payments or risk of falling interest rates.

4. The Speculative Way

While slow and steady might work for some investors, others may find themselves falling asleep at the wheel. For these folks, the fastest ways to super-size the nest egg may be the use of options, margin or penny stocks. Stock options, such as simple puts and calls, can be used to speculate on any company's stock going up or down, and can turbo-charge a portfolio's performance.


For those who want don't want to learn the ins and outs of options, but do want to leverage their faith (or doubt) about a certain stock, there's the option of buying on margin or selling a stock short.


Lastly, extreme bargain hunting can quickly turn your pennies into dollars. Whether you decide to roll the dice on the numerous former blue-chip companies that are now selling for less than a dollar, or you sink a few thousand into the next big thing, penny stocks can double your money in a single trading day. 

5.The Best Way

While it's not nearly as fun as watching your favorite stock on the evening news, the undisputed heavyweight champ of doubling your money is that matching contribution you receive in your employer's retirement plan. Making it even better is the fact that the money going into your 401(k) or other employer-sponsored retirement plan comes right off the top of what your employer reports to the IRS. 


Before you start complaining about how your employer doesn't have a 401(k) or how your company has cut its contribution because of the economy, don't forget that the government also "matches" some portion of the retirement contributions of taxpayers earning less than a certain amount.

Conclusion

There's an old saying: "If something seems too good to be true, then it probably is." That's sage advice when it comes to doubling your money, considering that there are far more investment scams out there than sure things. While there certainly are other ways to approach doubling your money than the ones mentioned so far, always be suspicious when you're promised results. Whether it's your broker, your brother-in-law or a late night infomercial, take the time to make sure that people are not using you to double their money.

10 Tips For The Successful Long-Term Investor

While it may be true that in the stock market there is no rule without an exception, there are some principles that are tough to dispute. Let's review 10 general principles to help investors get a better grasp of how to approach the market from a long-term view. Every point embodies some fundamental concept every investor should know. 

Sell the losers and let the winners ride!

Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined in the hope of a rebound. If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice.

Don't chase a "hot tip"

Whether the tip comes from your brother, your cousin, your neighbor or even your broker, you shouldn't accept it as law. When you make an investment, it's important you know the reasons for doing so; do your own research and analysis of any company before you even consider investing your hard-earned money. Relying on a tidbit of information from someone else is not only an attempt at taking the easy way out, it's also a type of gambling. Sure, with some luck, tips sometimes pan out. But they will never make you an informed investor, which is what you need to be to be successful in the long run. 

Don't sweat the small stuff

As a long-term investor, you shouldn't panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term. Also, don't overemphasize the few cents difference you might save from using a limit versus market order.


Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself. 

Don't overemphasize the P/E ratio

Investors often place too much importance on the price-earnings ratio (P/E ratio). Because it is one key tool among many, using only this ratio to make buy or sell decisions is dangerous and ill-advised. The P/E ratio must be interpreted within a context, and it should be used in conjunction with other analytical processes. So, a low P/E ratio doesn't necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. 

Resist the lure of penny stocks

A common misconception is that there is less to lose in buying a low-priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same, either way you've lost 100% of your initial investment. A lousy $5 company has just as much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it.

Pick a strategy and stick with it

Different people use different methods to pick stocks and fulfill investing goals. There are many ways to be successful and no one strategy is inherently better than any other. However, once you find your style, stick with it. An investor who flounders between different stock-picking strategies will probably experience the worst, rather than the best, of each. Constantly switching strategies effectively makes you a market timer, and this is definitely territory most investors should avoid. Take Warren Buffett's actions during the dotcom boom of the late '90s as an example. Buffett's value-oriented strategy had worked for him for decades, and - despite criticism from the media - it prevented him from getting sucked into tech startups that had no earnings and eventually crashed. 

Focus on the future

The tough part about investing is that we are trying to make informed decisions based on things that are yet to happen. It's important to keep in mind that even though we use past data as an indication of things to come, it's what happens in the future that matters most.


A quote from Peter Lynch's book "One Up on Wall Street" (1990) about his experience with Subaru demonstrates this: "If I'd bothered to ask myself, 'How can this stock go any higher?' I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that." The point is to base a decision on future potential rather than on what has already happened in the past. 

Adopt a long-term perspective

Large short-term profits can often entice those who are new to the market. But adopting a long-term horizon and dismissing the "get in, get out and make a killing" mentality is a must for any investor. This doesn't mean that it's impossible to make money by actively trading in the short term. But, as we already mentioned, investing and trading are very different ways of making gains from the market. Trading involves very different risks that buy-and-hold investors don't experience. As such, active trading requires certain specialized skills. 

Be open-minded

Many great companies are household names, but many good investments are not household names. Thousands of smaller companies have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have had greater returns than large-caps; over the decades from 1926-2001, small-cap stocks in the U.S. returned an average of 12.27% while the Standard & Poor's 500 Index (S&P 500) returned 10.53%. 


This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather, understand that there are many great companies beyond those in the Dow Jones Industrial Average (DJIA), and that by neglecting all these lesser-known companies, you could also be neglecting some of the biggest gains. 

Be concerned about taxes, but don't worry

Putting taxes above all else is a dangerous strategy, as it can often cause investors to make poor, misguided decisions. Yes, tax implications are important, but they are a secondary concern. The primary goals in investing are to grow and secure your money. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you'll want to put tax considerations above all else when making an investment decision.

Conclusion

There are exceptions to every rule, but we hope that these solid tips for long-term investors and the common-sense principles we've discussed benefit you overall and provide some insight into how you should think about investing.

Trade Like a Top Hedge Fund With No Work

Hedge funds spend loads of money and time trying to find great trade ideas. On a quarterly basis hedge funds (over $100 million) are required to reveal their positions--and thus what they are most interested in--to the public. Until recently poring through all those hedge funds positions likely wouldn't have been of much use. It took as much time to go through the data as it did to do some personal research. A series of "guru" ETFs is changing that. The ETFs invest in stocks which are being accumulated by hedge funds, using filters and proprietary methods to supposedly find the best of the best. The idea behind of the funds is to give everyday investors a way to make hedge fund-like returns, hopefully. 

The Global X Guru Index ETF (ARCA:GURU) is comprised of U.S. listed securities and has a 0.75% expense ratio. Over the last year GURU is up 24.24%, versus the S&P 500 SPDR (ARCA:SPY) which is up 18.69%. The holdings within the ETF are stocks which the fund believes hedge funds are accumulating based on hedge fund position disclosures. Top holdings currently include Nationstar Mortgage Holdings (NYSE:NSM) and American Airlines (Nasdaq:AAL). The ETF has moderate volume, averaging more than 210,000 shares per day. 

Another fund in the guru series is Global X Guru Small Cap Index ETF (ARCA:GURX), focusing on small cap U.S. listed securities which the ETF believes hold the highest conviction with hedge funds. It has an expense ratio of 0.75% and began trading on March 11 2014, so historical performance is limited. Since inception, the fund is up 0%, compared to the iShares Russell 2000 ETF (ARCA:IWM)--which focuses on small caps--which is down 1.18% over the same time period. Volume is still very light in this new fund, averaging about 4,700 shares per day. This may make it difficult to enter or exit large positions, and therefore it is not suitable for short-term trading. If the volume deters you, top holdings in the fund include Vanda Pharmaceuticals (Nasdaq:VNDA) and Halozyme Therapeutics (Nasdaq:HALO); both are actively traded and in short-term uptrends. 

The Global X Guru International Index ETF (ARCA:GURI) acquires U.S. listed international stocks that the ETF views as being held in high regard by hedge funds. This fund also has limited historical performance, as it began trading on March 11, 2014. The expense ratio is 0.75%. Since inception the fund is up 4.42%. Volume is still very light in this new fund, averaging about 1,600 shares per day. This may make it difficult to enter or exit large positions, and therefore it is not suitable for short-term trading. Top holdings in the ETF include Canadian Pacific Railway (NYSE:CP) and Baidu (Nasdaq:BIDU); both are actively traded and in uptrends. 

The Bottom Line

These funds actively seek out stocks which hedge funds are accumulating and holding. The GURX and GURI funds still lack volume, therefore simply looking at the ETF holdings provides insight into which stocks hedge funds are accumulating. The GURU ETF is better established and has higher volume. Invest in the fund if you are a passive investor who wants to (hopefully) benefit from the insight and trading activity of top hedge funds. Active traders can take a peak inside the fund's holdings too see which stocks are likely to outperform based on hedge fund buying. Unfortunately, just because a hedge fund purchased a stock in the past--they only report quarterly--doesn't mean that stocks or these ETFs itself will continue to rise in the future.