FinancialEdge: Can Games Make You A Better Investor?

Games don't always get their due. Psychologists and neuroscientists have long known that games, far from being trivial wastes of time, can actively reshape the human brain and improve a variety of cognitive and emotional functions. As investing is a great example of an activity that draws on a wide range of mental and emotional skills, it is worth exploring how to improve this skill set.

Investing is more than just memorizing ratios, accounting rules or gimmicky screening formulas. It requires a variety of mental attributes and abilities that gaming can enhance. The more practice investors have in skills such as probability, prudent risk-taking, strategic thinking and asset management, the better their investing outcomes ought to be. Conveniently enough, these all seem to be skills that can be honed through games.

Please read the full column here:
http://www.investopedia.com/articles/basics/12/can-games-make-better-investors.asp

Investopedia: A Refreshing Reminder Of What Matters In Investing

For the most part, investors would do well to take anything that the management of a publicly-traded company has to say with a grain (or two) of salt. After all, CEOs are evaluated in large part on the price of the stock, and keeping investors enthusiastic and positive is a larger part of the job description than most would care to admit.

That said, every once in a while investors can find straight-shooting companies that offer insights that go beyond the fundamentals of the particular company in question. Berkshire Hathaway CEO Warren Buffett's annual letters to shareholders are rightly famous for their far-reaching discussions of management and investment philosophy, and the CEOs of other companies including Coca-Cola, General Electric and JPMorgan often pen high-quality letters as well.

A few months ago, however, I read a presentation from a small company, Contango Oil & Gas, that I found refreshing and well worth reading for most investors. At a minimum, it's a valuable reminder of what investors ought to hold as important when approaching long-term investments.

Please click here for the full column:
http://www.investopedia.com/articles/basics/12/what-matters-in-investing.asp

FinancialEdge: If The U.S. Was A Real Household

There's no question that discussions about the deficit and debt dominate coverage of the United States federal government - especially during an election cycle. It's easy to get overwhelmed by the numbers to the point where they become simple abstractions. Let us consider, then, what the fiscal state of the U.S. looks like in terms of numbers that are a bit more relatable to everyday experience.

The Bare Numbers
I recently saw a picture sent around Facebook that portrayed U.S. government finances in a simplified form that dropped eight zeros from the numbers. Do that for the 2012 budget that Obama proposed and you get the following:

Income - $26,270
Expenses - $37,290

That means that the U.S. has to borrow $11,020 (or almost half of its income) to pay its bills.

To read the full piece, please click here:
http://financialedge.investopedia.com/financial-edge/0212/If-The-U.S.-Was-A-Real-Household.aspx#axzz1lpJam3d6

FinancialEdge: 5 Doom And Gloom Wall Street Prophets

People often decry the fact that the media focuses virtually all of its attention on the negative. However, media is a business and business is predicated on demand. If the news says "Everything's hunky-dory, details at 11 p.m.," how many people would tune in? On the flip side, if the news tease is "Something in your house may be slowly killing your children," it's a much more compelling decision not to miss that report. (For more on past predictions, read Guru Investing Advice For Today's Market.)

 

So it is with the business of Wall Street prophet-hood. Many financial commentators have made a name for themselves, by stepping up and declaring that a particular emperor had no clothes, often well before the majority of people are willing to consider the possibility.

Nouriel Roubini  

Roubini was hardly an unknown before the 2000s, having worked at the IMF, Federal Reserve and within the Clinton administration, but this economist really made his name with his prophecies regarding the housing market in the United States. Called "Dr. Doom," Roubini began commenting in 2005 that the housing market in the U.S. was a bubble, and that there would be a tremendous global fallout from the eventual market collapse and collateral damage in mortgage-backed securities.

Read the full column here:
http://financialedge.investopedia.com/financial-edge/1111/5-Doom-And-Gloom-Wall-Street-Prophets.aspx#axzz1dAlhM3Vx

FinancialEdge: How Protests Could Change Banking

Amidst the macro worries about European sovereign debt and the ignition of the next election cycle, a protest movement called Occupy Wall Street has garnered a great deal of attention for itself. The demands of this movement are vague, and it is an open question as to whether much of what they object to is a byproduct of corporate policy or public policy (or an admixture of the two). Nevertheless, it is clear that their anger is directed, in large part, at some of the biggest banks in this country. (For more on how banking has evolved, read The Evolution Of Banking.)


The question is whether these protesters can actually impact the banks they target and
what options are available to those who share the protesters views and concerns.

The Source of the Problem
The Occupy Wall Street movement is a diverse group with no particular singular principles. Nevertheless, it is not hard to find a lot of potential sources of unhappiness from the conduct of America's large banks.

Read the full column here:
http://financialedge.investopedia.com/financial-edge/1011/How-Protests-Can-Change-Banking.aspx

FinancialEdge: How Will China's Currency Moves Affect The U.S.?

Much of the financial media may still be focused on the accelerating downward spiral of Greece or the anti-Wall Street protests in New York City, but China took a page from Glenn Close's book Wednesday and reminded the markets that it will not be ignored. The real question, though, is whether China's currency combat techniques and prickly sense of sovereignty represent a clear and present danger to U.S. businesses, consumers and investors.

What Happened 

The exchange rate between the U.S. dollar and the Chinese yuan has been a matter of contention between the two governments for quite some time. Put simply, the U.S. accuses China of manipulating the currency exchange rate. Strictly speaking, that is exactly right as it must be for unilaterally fixed exchange rates. In practice, the USD/CNY currency rate trades at a rate higher where it would be in a free-floating market, making China's exports cheaper than they would otherwise be and making imports into China correspondingly more expensive.

Read the full column here:
http://financialedge.investopedia.com/financial-edge/1011/How-Will-Chinas-Currency-Moves-Affect-The-U.S.aspx#axzz1aPf3YKKm

FinancialEdge: The Scariest Days On Wall Street

What goes up, must come down, and sometimes it comes down hard. For as long as there have been financial markets, there have been bowel-clenching days where it seems like every asset is deep in the red. Arguably, just as bad are those periods of pronounced malaise where there are few, if any, signature bad days, yet it seems like the markets are just leaking every week. Let us look at some of the worst times that Wall Street has seen. (For ways you can invest in these unpredictable times, read How To Retain Your Sanity In A Volatile Market.)

Crashes 

Curiously, some of the worst days in the history of Wall Street had no clear cause. Oh true, there were concerns about valuations and global economic conditions, but nothing has really ever adequately explained why there have been some particularly terrible days on Wall Street.

To read the full column, click the link:
http://financialedge.investopedia.com/financial-edge/1011/The-Scariest-Days-On-Wall-Street.aspx#axzz1aPf3YKKm

FinancialEdge: Top 6 Scariest Possibilities For The U.S. Economy

If it can go wrong, it will go wrong. That will no doubt strike some as the unofficial motto of the pessimists' society, and savvy institutional investors often make decisions on that basis. While there are many things that investors can do to diversify their exposure to the U.S. economy, the reality is that for many people the health of their portfolios is predicated on the health of the U.S. economy. To that end, and a bit ahead of the upcoming Halloween season, it is worth examining some of the scariest possibilities for the U.S. economy. (For more, read 10 Reasons To Fear The U.S. Economy.)

Energy Shock 

An energy shock may be one of the most credible threats to the U.S. economy. Although the Arab Spring movement seems to be petering out and al-Qaida has been undermined, it is still not ridiculous to think that Saudi Arabia could be vulnerable to violent revolution. Similarly, if Israel were to inflame Mideast tensions (say, a strike on Iran's nuclear facilities) it could lead to another OPEC boycott.

To read the full column, click the link:
http://financialedge.investopedia.com/financial-edge/1011/Top-6-Scariest-Possibilities-For-The-U.S.-Economy.aspx#axzz1Z4sq1iTA

FinancialEdge: Could Higher Correlations Wreck Your Diversification Strategy?

Don't look now, but asset correlations have been rising again. While asset correlation is normally only a subject that would interest the true finance and math nerds among us, it has a very real impact on the regular investor's portfolio. In particular, it threatens the very heart of diversification and investors who believe themselves to be insulated from bad markets by a broad portfolio may be in for a very rude surprise. (For related reading, also see Top 5 Signs Of A Credit Crisis.)


What is Correlation?
Correlation is basically a mathematical measure of the extent to which two variables "move together". If Stock A moves 5% and Stock B moves 5%, the correlation is 100% (or 1.0). If there is no apparent linkage between the move of Stock A and Stock B, the correlation may be zero, and in some cases there can be negative correlation (as one goes up, the other goes down).

To read the full column, please click here:
http://financialedge.investopedia.com/financial-edge/0911/Could-Higher-Correlations-Wreck-Your-Diversification-Strategy.aspx#axzz1Z4sq1iTA

FinancialEdge: Requirements For A Post-Housing-Bust Mortgage

With all of the talk about foreclosures and stagnant home sales it is easy to overlook the fact that people are still out there trying to buy houses. For the vast majority of people, buying a house still means qualifying for a mortgage. With that in mind, what does it take to get a bank to sign off on a mortgage these days?

FHA Still in the Game 

It would take a separate column to detail all of the differences between Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The FHA does not make loans, does not buy mortgages and operates basically as a government-subsidized mortgage insurance company. The FHA is still operating and homebuyers can still get FHA-insured loans. Mortgage qualification rules are still changing in the wake of the subprime crisis and there is still some confusion between proposed rules and implemented rules. Moreover, there is a difference between FHA minimums and the minimums of the banks that write FHA-insured mortgages. (Don't be overwhelmed when filling out these forms. For more, see Understanding FHA Home Loans.)

Read the full column here:
http://financialedge.investopedia.com/financial-edge/0911/Requirements-For-A-Post-Housing-Bust-Mortgage.aspx#axzz1Z4sq1iTA

FinancialEdge: How To Be Smarter Than Your Financial Advisor

Any way you slice it, there is big money in running money - there are trillions of dollars out there in pension funds, mutual funds and individual investor accounts. The financial services industry is a multi-billion dollar enterprise predicated on helping people do what they cannot (or do not wish to) do for themselves.

The question is how much of this is really necessary. Are you better off paying a professional to run or advise you how to run your money, or can you go it alone? Said more bluntly, are you smarter than your financial advisor. If not, can you learn to be?

The Case for Professional Management 

To start with, it is important to note that there are a lot of diligent professionals out there; people who not only work hard to deliver the best results and service possible, but also work to improve their education and knowledge bases. It is also important to realize that good tools can be just as important as innate (or acquired) genius. Many financial services firms give their brokers and advisors access to powerful databases and financial planning tools that can help predict future needs and recommend optimal savings and investment strategies for given risk tolerances. (Learn how to weed out those who are just out to make a quick buck. For more, see Find The Right Financial Advisor.)

Read more here:
http://financialedge.investopedia.com/financial-edge/0911/How-To-Be-Smarter-Than-Your-Financial-Advisor.aspx#axzz1Z4sq1iTA

FinancialEdge: Top Qualities Of An Effective CEO

With Apple's (Nasdaq:AAPL) near-legendary CEO Steve Jobs heading back to semi-retirement and Hewlett-Packard (NYSE:HPQ) recently changing the name on the door of the executive suite once again, the quality of executive management is a hot topic. Time and time again, the markets have proven that even companies in low-growth or commodity industries can offer winning stocks on the basis of exceptional management. Likewise, the markets have shown that few stocks can thrive for the long term with suboptimal leadership. (For some ways a CEO can help improve a company, check out Management Strategies From A Top CEO.) 

What, then, goes into making a CEO and how does he or she build value for shareholders?

The Traits of Highly Effective CEOs 

Unfortunately, there are no objective quantifiable markers of a good CEO. Great CEOs have come from the Ivy League and from Nowhere State. Likewise, good CEOs have had deep backgrounds in a single industry or wide-ranging careers across many functions and sectors. Nevertheless, a few key traits seem to come up over and over again.

Read the full piece here:
http://financialedge.investopedia.com/financial-edge/0911/Top-Qualities-Of-An-Effective-CEO.aspx#axzz1YOY6xEze

FinancialEdge: 5 Industries Looking Strong In The Summer

The summer of 2011 has not been one of the nicer summers in recent memories. Crushing heat across much of the country is bad enough in its own right, but it is paired up with ongoing financial trouble in Europe, an unprecedented sovereign downgrade for the United States, economic worries all around and a weak stock market. Yet, even against this dour backdrop, there are still areas of the strength in corporate America.

For purposes of this article, strength refers to the momentum in corporate sales and earnings, as well as the trajectory of analyst expectations. Curiously, there are numerous divergences between those industries showing fundamental strength and stock market strength, and these may well prove to be trading opportunities for investors.

Auto Parts
The auto parts industry best highlights that dichotomy between financial and stock market strength. With strong results from companies ranging from American Axle (NYSE:AXL) to Dana (NYSE:DAN) to Tenneco (NYSE:TEN), the auto parts industry has shown very healthy revenue and profit momentum as car sales have risen more than 10% year-to-date. Curiously, this is also one of the weakest sectors year-to-date, as stocks in this group have fallen almost 20%. Perhaps investors have been spooked by the recent slowdown in passenger vehicle sales and have decided to take profits in names that, in many cases, have appreciated several times over since the worst of the recession. (For related reading, see 2011 Cars With The Highest Resale Value.)

To read the full piece, follow the link below:
http://financialedge.investopedia.com/financial-edge/0811/5-Industries-Looking-Strong-In-The-Summer.aspx#axzz1V9d0n1Yu

FinancialEdge: Just How Smart Is Wall Street?

Individual investors see a steady stream of paeans to Wall Street, praising not only the substantial resources of professional investors, but also suggesting (sometimes subtly, sometimes not) that these professionals are smarter and more capable than the average investor. While there are certainly plenty of columns out there decrying the mistakes of professional investors and pointing out that disciplined individuals can do just as well, the fact remains that the financial media overwhelmingly tilts towards the idea that Wall Street is smarter than you or me.


But is it really? The word "smart" has plenty of definitions, but Wall Street has such a peculiar inability to learn from certain mistakes that it seems worthwhile to question just how smart the Street really is.

They Can't Stay Away From the Bubbles 
Nothing of any real size can happen in the investment world without the involvement of institutional investors. So while retail investors are often dismissed as the "dumb" money, it is the professionals who ultimately add the most air to investment bubbles.

To read the full piece, please click below:
http://financialedge.investopedia.com/financial-edge/0811/Just-How-Smart-Is-Wall-Street.aspx

FinancialEdge: The Cost Of Unemployment To The U.S. Economy

Unemployment is universally recognized as a bad thing. While economists and academics make convincing arguments that there is a certain natural level of unemployment that cannot be erased, elevated unemployment imposes significant costs on the individual, the society and the country. Worse yet, most of the costs are of the dead loss variety where there are no offsetting gains to the costs that everyone must bear. (Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate. Check out The Unemployment Rate: Get Real.)


The Costs to the Individual
The costs of unemployment to the individual are not hard to imagine. When a person loses his or her job, there is often an immediate impact to that person's standard of living. Prior to the Great Recession, the average savings rate in the U.S. had been drifting down towards zero (and sometimes below), and there are anecdotal reports that the average person is only a few weeks away from serious financial trouble without a paying job.

To read the full column, click below:
http://financialedge.investopedia.com/financial-edge/0811/The-Cost-Of-Unemployment-To-The-Economy.aspx

FinancialEdge: How Safe Are U.S. Bonds?

There is a pervasive notion out there in the investing world that U.S. government debt (be they notes, bills or bonds) is one of, if not the safest instruments out there for investors. There is no such thing as a free lunch though, and investors need to take a broader view of risk when evaluating this topic. While U.S. government securities are indeed some of the safest investments available by certain measures, they are by no means a risk-free investment option.

The Faulty, but Convenient, Premise of "Risk-Free Return"
Part of what bulwarks the idea that government securities are risk-free is that financial models seem to say that they are. After all, concepts and models like modern portfolio theory, Black-Scholes, and the capital asset pricing model all require a "risk-free" rate of return in the calculations. While alternatives like German bond rates and Euribor rates have been used from time to time, U.S. government securities often fill the role as a proxy for that risk-free rate.

To read the full piece, click the link:
http://financialedge.investopedia.com/financial-edge/0811/Are-U.S.-Bonds-Really-Risk-Free.aspx

FinancialEdge: What If There Were No Government?

Whenever Congress and the president lock horns over a vital national interest, it is easy to declare "a pox on both their houses" and reflect fondly on those nonexistent days when government worked brilliantly. This time though, the public mood is a little different. Self-defined libertarians, pseudo-anarchists, Tea Partiers and other formerly fringe groups have come into national prominence by openly questioning the federal government's scope and role in America.

As a thought exercise, then, consider what would happen if there was no federal government anymore. For purposes of this experiment, assume that one day government just disappears - the people still exist and the infrastructure is there, but the laws, rules, systems and policies disappear. Admittedly it is an outlandish scenario, but what would life in the United States look like? (For more read Why You Don't Want A Government Shutdown.)


The Immediate Aftermath
If America woke up to no federal government, there would be absolute chaos in the financial markets. U.S. federal debt is the largest single investment instrument in the market, and the disappearance of a federal government would have everyone scrambling to figure out who, if anybody, would honor that debt. Moreover, since each and every U.S. dollar is essentially a debt instrument backed by the "full faith and credit of the U.S. government", what would that be worth (and also, of the billions of dollars of reserves held around the world in U.S. dollars) with no U.S. government?


To read the full column, please follow this link:
http://financialedge.investopedia.com/financial-edge/0811/What-If-There-Were-No-Government.aspx

FinancialEdge: Buying Power Around The World

Anyone who has traveled outside of North America has likely noticed that prices can be very different around the world. What are luxuries in some countries are relatively common in others and vice versa. Price is a central mechanism in economics as it represents the place where suppliers and consumers do business, so it is interesting to explore these differences and the factors that shape them. (If you want to take advantage of the increase in consumer prices, check out A Guide To Investing In Consumer Staples.)

Same Foods, Very Different Prices 

Food is a good proxy for some of the differences in prices between countries, as everybody eats and an egg is an egg wherever one may roam. While The Economist has long used its Big Mac Index as a means of measuring purchasing power parity (PPP) between countries, the Big Mac is simply one particular food item. It is interesting, then to explore some of the other discrepancies. 

Ground beef sells for about $3 a pound in much of the U.S., but nearly $6 in Australia and $11.50 in Taiwan. While the latter makes sense (there aren't large herds of cattle wandering Taiwan), Australia is a bit surprising with its ranching culture. Sticking with fruits of the bovine, milk retails for about $2.25 in the U.S., but only 70 cents in India and a little over a dollar in Brazil and South Africa. Curiously, milk in Hong Kong retails for about $2, while the price in Taiwan is more than twice as high.

To read the full column, please click below:
http://financialedge.investopedia.com/financial-edge/0711/Buying-Power-Around-The-World.aspx

FinancialEdge: Will The Greek Crisis Affect Your Retirement?

There seems to be something universal about the human fascination with disaster. Although everyone decries those who slow down to look at an accident on the highway, it is probable that everybody has done it. So it is only natural that the ongoing crisis and drama in Greece captures a lot of attention over here. This isn't just about voyeurism, though, as the ongoing crisis may well have long-term ramifications on your retirement. (Find out how to determine whether you're on the path to a comfortable retirement , or financial ruin. See Will Your Retirement Income Be Enough?)

Defaulting to an Older Europe?
Greece has not been kicked out of the euro yet, and nobody seems to be seriously discussing the idea of Greece withdrawing (or being forced out). Nevertheless, it cannot be excluded as a potential outcome. Greece may find that the cost of staying in the currency union is just too high and unpalatable for its people and may feel that going back to the drachma, and the ability to devalue/depreciate the currency, is too useful to ignore.


Continue to the full text:
http://financialedge.investopedia.com/financial-edge/0711/Will-The-Greek-Crisis-Affect-Your-Retirement.aspx

FinancialEdge: Is Someone Listening To Your Phone Messages?

Most of us put a premium on our privacy, but as the News Corp/News of the World scandal in the U.K. has shown again, we cannot always assume that our privacy is secure. In fact, this current scandal is not all that exceptional. Paris Hilton was subjected to a similar violation about six years ago, and numerous celebrities (including Sienna Miller and Scarlett Johansson) have had their cellphones hacked - often in an attempt to garner some salacious bit of information or compromising photo that can go straight to newstands and websites. (For some ways to keep your information safe, check out Tips For Keeping Your Financial Data Safe Online.)


Not surprisingly, many people are wondering just how safe their technology is and whether or not someone may be listening to their phone messages. So, what steps can people take to minimize the risks that their own information can be stolen from them?

Use a Little Common Sense and Originality
According to a study by Daniel Amitay, and assuming that Apple (Nasdaq:AAPL) iPhone users are basically as smart and security-savvy as anybody else, I can dial my way into any iPhone user's voice mail and have about a 5% chance of accessing their voice mail simply by assuming that they used "1234" as their PIN number. Add "0000" and "2580" (which is straight down the middle of a keypad) and the odds jump to almost one-in-10.

To read the complete column, please follow the link below:
http://financialedge.investopedia.com/financial-edge/0711/Is-Someone-Listening-To-Your-Phone-Messages.aspx