How to Befriend a Bear Market

How to Befriend a Bear Market

Fight the instinct to run away. You may be better off feeding it money

Nobody likes a bear market. The Dow deeps more than 30 percent on average, downdrafts usually last over a year, and it often takes the market another year to recover. But bear markets aren’t all bad. In fact, they can be great buying opportunities.

Consider, for example, the bruising bear market of 1973 and 1974, one of the worst the U.S. has experienced in the XXth century. The Standard & Poor’s 500 stock index lost 43 percent, even with dividends reinvested, and didn’t rebound to its 1972 level until mid-1976.

Nevertheless, people who steadily invested in stocks would have done pretty well. By January 1976, in fact, they would have come out ahead of someone who had put the same amount into Treasury bills, even though T-bills were paying a respectable 6 to 7 percent a year at that time.

The analysis assumed that an investor put $100 a month into stocks beginning in January 1973. When the market hit bottom in September 1974, the investor would have invested a total of $2,100 and held stocks worth less than $1,500. But seven months later, the investor would have been about even with the $2,800 that they had invested. And by the first quarter of 1976, as the stock market was just returning to its previous high, the investor would have had more money than if he or she had instead invested $100 a month in T-bills.

Despite a brief dip in 1979, the long-term outlook remained bright. By the end of 1992, the investor’s $24,000 stake would have been worth $124,000 – more than twice the $54,000 it would have earned in Treasuries.

The average bear in the XXth century lasted 410 days the Dow Jones industrial average dropped some 31 percent. On the upside, there have been 31 bull markets in the same period. On average, they lasted about two years with a near 85 percent increase in the Dow. The last 10 bulls of the century haven’t run quite as strong, however.

Manhattan, New York Downtown. Photo by Elena

Riding out a recession

Like a bear market, recessions reward those with patience. In fact, there are investors who would sooner plunge into the Arctic than the stock market during a recession, which often coincides with a bear market. But many pros say investing when the environment looks bleak could turn out to be a boon. Stock prices – like the price of clothing, cars and condos – also plunge during an economic slowdown. Investors buying stocks for the long run then could end up with solid returns.

Recessions generally last about 11 months, with the market turning up 6 months before the economy picks up. Returns vary, depending on when you invest – before, during or after a recession. The most lucrative time: at the midpoint of a recession. Those who buy at a recession’s start make huge profits. Those who buy at a recession’s midpoint and hold for 12 months after the recession rake can earn even more. Even those who wait until the tail end of a recession to buy can be richer by dozen or so percent one year later.

Tip: Look always at industry groups that lead the way out of past recessions and that have historically scored big gains in the first 12 months after the stock market has bottomed out and their average percent gain, advise Wall Street’s most respectful analysts

Investment Newsletters

Investment Newsletters

Investment newsletters: Tip Sheets You can Use – Top newsletters beat the market, but the worst could lose you lots

It used to be that only Wall Street gnomes looked at stock-tip sheets, and an editor’s call to sell could send a ripple through the market. Today, more than two million people read investment newsletters. Hundreds of advisory publications are published, many of which carry one or more sample stock or mutual fund portfolios for subscribers to follow.

Financial newsletters are founded on the idea that you can beat the market, if you’re just smart enough or fast enough. If you don’t believe in market timing, you’re wasting your time with a newsletter, admit even the top-ranked mutual fund newsletters editors.

Most people subscribe because they think there are geniuses out there who are going to make them rich quickly. But they really should examine the past track record of these newsletters first.

A few sites monitor and rate the performance of the investment newsletters, examining a portfolio’s total return as well as its return on a risk-adjusted basis. If a newsletter recommends more than one portfolio, its ranking is based on an average of its portfolios. Risk-adjusted ratings are based on a ratio of return to risk to measure net profit.

Newsletters with the best-performing portfolios significantly outspace the stock market averages. For example, newsletters at the top of rankings have compound annualized returns of more than 20 percent in their portfolios. That’s one to one-third times the S&P 500 return. Over the same time, index of 5,000 companies show a compound annualized return of over 9 percent.

Beating the market on a risk-adjusted basis – the comparison is performance per unit of risk – is more difficult. Only few do it and the lowest-risk market-beating strategy approach is more statistical and sophisticated than common strategies, and only few make good use of index options.

One of the highest risk-takers to beat the market was The Chartist, edited by Dan Sullivan, a rare newsletter with a real account. Sullivan who erred on the side of caution, made his mark by buying when the market was declining.

Manhattan Island. Photo - Elena.

Two other market-beating timers, Zweig Forecast and Zweig Performance Ratings Report both published by Martin Zweig, took on average risk. Zweig’s Ph.D. in finance provides a clue to his rigorous investing, but most of his overall success rate can be traced to a hedge he bought smartly.

Overall, however, most newsletters’ real or sample portfolios have only turned in so-so performances. Seventy percent of the newsletters don’t make the grade. Only thirty percent of the letter beat the market over two market cycles.

Most readers, of course, don’t slavishly follow the investment advice dished out. Yet, some investors who already know what they want may still rely on an editor’s talent for market timing to flash a red or green light when it’s time to climb in or out of the market altogether. Many newsletters used to record daily messages on telephone hotlines for their subscribers. Because newsletter don’t earn a commission on your stock transactions, they may be more objective than a traditional stockbroker. After all, it’s their insights that convince subscribers to pay, on average, $100 to $300 a year.

But in their efforts to lure subscribers, newsletters often make exaggerated advertising claims and routinely cherry-pick statistics. Sometimes investment letter advertising makes outrageous claims that strain the business’ high tolerance for hype. For example, a well-known newsletter advertised that its editor was considered by many to be America’s foremost stock market analyst. In fact, many years of performance data for his newsletter showed that it was second from the bottom in rankings…

Apple : The Largest Taxpayer in the World

Apple: The Largest Taxpayer in the World

The facts about Apple’s tax payments

By paying over $35 billion in corporate income taxes in the last three years, Apple has become the largest tax paying company in the world. Because Apple’s worldwide effective tax rate is higher than average, at 24.6 percent, the company states that they are happy with the amount of economic contribution they have brought to the various communities around the world. In order to provide proof for the public, Apple published a few facts about their tax payments on November 6, 2017. Prior to this release, there had been a report by the International Consortium of Investigative Journalists that suggested some foul play by Apple and its leaders. The November tax release brought many of these accusations to light and discounted them

Apple pays billions of dollars in taxes to the US at the required 35% on investment income from all overseas cash and they pay a consistent 21 percent on their foreign earnings.

The 2015changes Apple made to its corporate structure, were specially designed to preserve its tax payments to the United States. They denied doing it in order to reduce its taxes. Apple also denied that operations or investments had been moved from Ireland. Apple put out an official statement saying, “When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we’ve paid $1.5 billion in tax.” They insisted that these changes did not change the amount paid to the US. This controversy still exists however, since the companies have not actually provided any paper.

Why the Apple employees don't wear Louboutins? Photo by Elena

Apple also made the statement that the debate shouldn’t be about how much they owe. It should be important to discuss where it goes instead. They stated that they have paid over $35 billion in corporate income taxes and had billions of added taxes in property tax, payroll tax, sales tax and VAT as well and are very proud of the economic contributions they have made to the communities that surround them.

“Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States - where we do our design, development, engineering work and much more - so the majority of our taxes are owed to the US.”

Apple understands some people want the tax so multinationals’ taxes are spread differently across the countries where they operate, however, despite different opinions, Apple continues to follow the laws and complies when the laws are changed. They state,  “We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that.”

Because Apple has a dedication to designing new products and establishing new industries, it has led to the creation of revolutionary products and services that have profoundly improved people’s lives. Not only that, but it has created millions of jobs around the world.

Taxes alone can be complex, but they become even more complex when they are for multinational companies. There is; however, a principle rule that the taxes are to be based on wherever the value is created. The Organisation for Economic Co-operation and Development, Ireland, the United States and others all agree on this principle.

When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place. Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.

The vast majority of the value in Apple products is created in the United States, where design, development, engineering work and more are accomplished. So, under the current international tax system, the majority of Apple taxes are owed to the US.

Back in 2016, the US Treasury published a white paper, expressing concern over European regulators’ attempts to tax money that is owed to the US. They claimed that the amount of foreign taxes imposed should not have been attributable to the relevant Member State and claimed that it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.

Apple sells the majority of its products overseas so, naturally, they have cash overseas as well. Under the current tax system, post-tax earnings from foreign sales are subject to US tax. In addition to the $35 billion the company paid in corporate income taxes over the past three years, Apple earmarked more than $36 billion to cover US deferred taxes.

Apple has been a strong advocate for simplification of the tax code. They support a reform that will allow a free flow of capital claiming that it will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments, and ensure certainty of law for taxpayers.

Well, and finally, if you have an old Apple product to sell for top price, you can always do it here : https://igotoffer.com

Amateurs Beat the Profs

How Amateurs Beat the Profs

You and Your Friend Have a Good Chance of Beating the Market

You are afraid to deep into the stock market alone? You can try an investment club, a group of like-minded people who pool their time, skills and money to research and invest in stocks. There are nearly 15,000 investment clubs in the United States, with more than 300,000 members holding an estimated $70 billion of stocks. The average club has a portfolio of $95,000, although the average member`s portfolio is $200,000.

Small wonder. Today, 50% of investment clubs perform as well as or better than the Standard & Poor’s 500 stock index, according to the National Association of Investors Corp., the parent organisation of Investment Clubs of America. Fewer than 25 percent of Wall Street heaviest hitters beat the S&P during any given period.

The stock-picking credo of NAIC group is simple. First, look for companies with five-year growth rates in earnings and revenues of about 15 percent a year or more. Try to buy stocks when the price earnings ratio (share price divided by the company’s earnings per share), is at or below their average price/earnings ratio over the past five years.

Once you’ve picked a stock, stick with it. Reinvest dividends and earnings and don’t sell unless the company really sours. One or two down quarters isn’t enough to trigger a sell. So long as the company’s underlying financials are still healthy, it may be a good time to buy. Finally, diversify your portfolio to spread the risk.

Manhattan Island. Photo by Elena

How to Start an Investment Club

Want to launch your own Investment Club? Here are some tips of how to get it off the ground:

• Invite interested family, co-workers or friends to a meeting. Ask each of them to bring someone else but limit the total number to fewer than 30. Your goal is to have 10 to 15 members of varied interests and ages. Be sure all prospective members know they are expected to investigate and analyze securities and make periodic reports. Screen out those who are joining as a way to get rich quick. NAIC officials have found that 40 percent of clubs break up within two years.
• At the first meeting discuss how much money each member will invest. Most groups set a monthly figure of $20 to $200 per person, although many allow members to occasionally invest larger sums.
• Choose an investment strategy. Will the club buy stock for long-term gain or current income?
• Pick a broker or a discount brokerage. In many cases you can buy stock directly from companies through dividend reinvestment plans, sidestepping commissions and management fees.
• Join the National Association of Investors which provides a wealth of educational materials, including step-by-step guidelines and a sample partnership agreement. An investor’s manual helps you get your club together, tells you how to conduct meetings, find and pick stocks, maintain tax records, and other basics. Consult annual membership costs for the club and for each member.
• If you’d rather join an existing investment club, you’ll have to do some digging to locate one in your area. Most investment clubs are also social groups, and members save opening for other friends. The NAIC doesn’t release names and addresses of clubs in your area, but some sites and magazines carry lists of regional contacts who may be able to steer you. Once you have found a club in your area, try to attend at least one meeting as an observer. See if the personalities and investment goals fit your own before you sign on.

Ladies’ Clubs

Curiously enough, women who make up their Ladies exclusive investment clubs enjoy an impressive percent average return of portfolios fewer than 20 stocks. In the old bestseller The Beardstown Ladies Common Sense Investment Guide (Hyperion, 1994), a group of the Beardstown Ladies Investment Club of Illinois revealed their top ten reasons for choosing a stock, as adapted below:

• The company is ranked in the top of its industry by Value Line.
• The Value Line timeliness rating (how fast it will grow relative to other stocks) is one (highest) or two (above average).
• The Value Line safety rating is one (highest) or two (above average).
• Its total debt is no more than a third of total assets.
• Its beta falls between 0.90 and 1.10 (Beta compares the volatility of a stock’s price relative to the total market).
• The company has had five years of growth in sales and earnings, and is projected to grow 12 to 15 percent in the next several years.
• Its price per share is $25 or less.
• The price-earnings ratio is below the company’s average p/e ratio for the last five years.
• Its upside-down ratio is at least 3 to 1. (The upside-down ratio evaluates the relative odds of potential gain versus the risk of loss for a given price per share).
• The company has competent and experienced management.

E-Business Development

E-Business Development

The advent of the Internet allowed previously unseen interaction. People all over the world are now able to instantly communicate, despite divergences in location or life paths.

E-business relies on Information and Communication Technologies (ICT) to carry out its operations throughout the value chain. In his work concerning Business Process Redesign (BPR), Phan (2003) enumerates conventional forms of e-business:

•     Business to Business (B2B)
•     Business to Consumer (B2C)
•     Consumer to Business (C2B)
•     Consumer to Consumer (C2C)
•     People to People (P2P)
•     Government to Citizen (G2C)
•     Citizen to Government (C2G)
•     Exchange to Exchange (E2E)
•     Intra-Business (Organization Unit to Organization Unit)

Globalization and ICT altered the business landscape forever. An encyclopaedia (Lee, 2010) discusses Teams of Leaders (ToL), a term originating in the US Army in the aftermath of the Cold War. ToL can be transposed to business development promoting actionable understanding and restoring cohesiveness. ToL and High Performing Leader Teams (HPLTs) share information and knowledge.

Communication basics teach one that information travels horizontally (e.g. among colleagues) and vertically (top down and from subordinates up). Transparency and confidence are valued to say the least in today’s business environment, and ToL enhances trust and contributes to business growth by developing expertise, insight and multiorganizational outlook.

Three major elements of corporate strategy are customer relations, supply and management (Suchanek, 2008). E-business activity is facilitated by Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP). Dubbing the concept system modularity, the author talks about expanding on what is already in place. He also describes the paid Search Engine Optimization (SEO) service and Pay-Per-Click (PPC) links as a wise investment. A campaign of the like would result in the business being easier to find as well as securing greater market share.

Letters in the Sky - Michel love. Photo by Elena

E-businesses must ensure that financial transactions take place securely and that personal information remains protected. User interface is also pivotal. As for any other form of business, investment and profits go together.

The dot-com bubble, sometimes referred to as the IT or TMT bubble, took place in the ending years of the last millennium. Like all speculative bubbles, it was characterized by increasing trading activity and then bursting, leading to price deflation. Phan (2003) presents a case study of e-business of the Intel Corporation. Intel experienced outstanding success and after its initial e-business deployment, in 1998, made an astonishing $1 billion each month. Despite the repercussions of the dot-com bubble and the recession, the processor technology and silicon innovation company has managed to thrive.

References:

•     Lee, I. ed. Encyclopaedia of E-Business development and management in the global economy: Volume II. Business Science Reference. Hershey, NY: 2010.
•     Phan, D. D. (2003). E-business development for competitive advantages: A case study. Information & Management, 40; 581-590.
•     Suchanek, P. (2008). E-business development key areas. Proceedings of the 5th International Symposium on Business Administration, 537-543.