Would you like to make more $$$?

So wrapping up this erratic week, if you had followed my suggestions, you should have made money at the very least, if not a fortune. Volatility is where the real money is made, I often say. This week proves the statement yet again. Had you not panicked early in the week, and bought more when I told you to, your weekend party funds should look pretty good right now. Furthermore, my suggestion couple weeks ago, Tiffany's & Co (see previous blogs), is now trading at $50 plus. I recommended it at low $40, and this stock has not disappointed. My other picks, EWS, HGT, etc are all trading higher.

I enjoy making money, and have no reservations in helping people make money too. But you gotta listen :) I will continue to offer picks, and tell you what prices to buy them at. If you would like to follow up and discuss selling points with me, feel free to email me.

I cannot guarantee your wealth, but if you follow my recommendations, your chance of making money in the stock market is a no brainer.

Fed's rate cut likely to increast inflation concerns

After two tumultuous days on wall street, it sure feels like a Sauna. 250 pt advance follows a 290 point drop, all at the whims of institutional traders who are trying to play macho against Bernanke. Despite what some experts are saying, in their attempt to explain the recent volatility, I think it's very simple. The market is showing Bernanke that if the Feds do not come to the rescue, stock market will tank. Coupled with a weak housing market, the combined effect would be disastrous to the American economy.

So now the Fed most likely will act at their Friday meeting. Bernanke has lost the battle with the Street, and he will be forced to cut rate. At the very least, signal that a rate cut is due soon. No more will he be able to make speeches about how American economy values free market mechanisms and everything will sort out itself without the government taking actions. \

Free market economy worked great for America, up until now. The global economy now is so intertwined, U.S. government must act in order to help the U.S. economy. Hell, the whole world is doing it, especially the developing nations. When economic super powers like China and Russia are dictating how their economy grows, through subsidies and regulations, U.S. will lose out by playing the old/outdated cards.

Now that Fed will cut rate in order to boost the economy, we will see the stock market jump on that information. Although we have to be extremely cautious about inflation. With materials and natural resources prices jumping through the roof, inflation has been a big concern for the Feds. That is why they are so reluctant to cut rates. On the one hand, sub-prime woes demands a rate cut in order to stabilize the credit market and the financials, on the other, cutting rates now would only boost inflation. Interest rate is really the only weapon the Feds have against inflation. And to cut rates, it fuels more borrowing and lending, and thus increases costs of doing business and ultimately prices. The dollar would be worth as much, when you pump more liquidity (cash) into the market. Investors need to protect their portfolios with some inflation guarded stocks. Oil companies are always a sure bet, along with consumer cyclical.

As I mentioned in my previous blogs, the Financials are now good investments. They have been punished as a group, due to the subprime woes. However, the banks that didnt not have much subprime exposures, have been unfairly punished by the market. Think of it then, as a Wall Street sale. Savy investors such as Warren Buffett and Icahn have been buying up finanical stocks, and so should you.

The following is listed by Stockpicker.com. They found out what Buffett & Co have been buying.

Buffett announced a new nine million-share position in Bank of America (BAC) worth $425 million. Bank of America has $1.5 trillion in assets, trades at nine times earnings and has a dividend yielding 5%.
Buffett also added to his position in US Bancorp (USB). The bank is in the fortunate position of having such little exposure to subprime that the average credit quality of its customers actually increased year over year. US Bancorp, which pays a generous 4.9% yield, has paid a dividend without fail since 1863.

Lampert increased his holdings in Citigroup (C) in the last quarter. Lampert, the CEO of Sears Holdings, is betting that the stock has sold off too much in the mortgage fiasco, and he may also be betting that CEO Chuck Prince is on his way out, a catalyst that many assume will boost the stock.

Short term play on Seagate

Investors can take a look at Seagate. This company now faces a potential take-over by Chinese firms, see story below. China now has billions in foreign reserves, and led by ambitious national government, Chinese companies are looking at buying American technology. Chinese products are still inferior in technology and business management. In order to gain the much needed skills, they are looking to buy up companies that posses them. Although U.S. Congress may repeat it's unreasonable blocking of the deal, one that involved Unocal two years ago, they are unlikely to block this Seagate bid. Seagate technology does not involve national security factors, such as a U.S. oil company or airline would. It is more closely resembles the IBM transaction. Therefore, investors can buy Seagate stocks now, and await a tender off/ take over bid from Chinese company, making a profit.


New York Times reported on the 25th, that leading global supplier Seagate Technology chief executive said Watkins, a Chinese IT companies have expressed interest to acquire the company. This raises concerns the United States government officials the transfer of high technology to China for national security risk, in this case also reminds us three years ago, the Chinese Lenovo's acquisition of IBM PC sector caused by economic competitiveness and national security of the controversial precedent. The New York Times reported on the 25th, Watkins did not identify the Chinese company is looking to buy Seagate Technology, but stressed that the possibility of acquisitions in a number of government departments, bringing down the internal alarm. He said : "The United States government began disturbed." The New York Times said that the recent positive developments in the Chinese military and business - and consumer-oriented advanced technology, more and more nervous. American officials noted that although the hard drive is not included in the technology export control list, but if the industry attempts to purchase a hard drive, remain subject to federal safety review.

An in-depth look into India

India's offshoring sector, the world's largest and fastest growing, is dominated by IT services, which play a major role in the country's overall economic growth. In 2004–05, the Indian offshore IT and business-process-outsourcing industry will generate approximately $17.3 billion in revenues and employ an estimated 695,000 people. By 2007–08, that workforce will consist of about 1,450,000 to 1,550,000 people, and the industry will account for 7 percent of India's GDP.
Yet clouds are gathering on the offshore horizon. Research by the McKinsey Global Institute (MGI) shows that India's vast supply of graduates is smaller than it seems once their suitability for employment by multinational companies is considered.
In the country's most popular offshoring locations, such as Bangalore, rising wages and high turnover among engineers—the professionals most in demand for IT services—provide evidence that local constraints on the supply of talent already exist. And just as these bottlenecks are developing, other low-wage countries, such as China, Hungary, and the Philippines, are gearing up to challenge India's lead.
But the end of India's offshoring bonanza isn't necessarily at hand. India has other attractive qualities beyond low-wage professionals for companies that want to offshore their operations. In 15 years of offshoring, the country has developed a stable of world-class IT services vendors that can save foreign companies the trouble of setting up their own offshore centers. And it has a large supply of qualified talent in areas outside IT, such as R&D, finance and accounting, call centers, and back-office administration.
Still India's leaders have to ensure that a company hunting for an offshoring location doesn't turn to other countries: the government must not only adjust the country's educational policies to ward off the looming squeeze on talent but also invest more money in infrastructure. So far, offshoring has been largely a private-sector affair, and in some respects the lack of government involvement has been the secret of its success. But private-sector investment in air-conditioned offices, apartments, and shopping malls in offshoring centers has not been matched by public investment in airports, roads, and utilities—improvements necessary to enable the millions of people attracted to these locations to live and work more efficiently. From now on, government and business must work together if offshoring is to remain India's growth engine.
How deep is India's talent pool?
India's pool of young university graduates (those with seven years or less of work experience) is estimated at 14 million—the largest of all 28 countries MGI has studied. It is 1.5 times the size of China's and almost twice that of the United States. This huge number of young graduates is topped up by 2.5 million new ones every year. As in other low-wage countries, however, only a fraction of these people are suited for work in multinational companies.
A poll of 83 human-resources managers at multinationals that look for talent in the emerging world. Those with experience in India praise the cultural fit and work ethic of their Indian employees but would still, on average, consider employing only 10 to 25 percent of the country's graduates—a higher proportion of suitable graduates than China produces but only half that of Central Europe. The proportion of suitable graduates also varies by field of study: just 10 percent of the Indian students with generalist degrees in the arts and humanities are suitable, for example, compared with 25 percent of all Indian engineering graduates. Nonetheless, the proportion of suitable engineers in Central Europe is twice as high.
Why is the average level of suitability so low? The answer, largely, is that the quality of India's universities varies a great deal. Graduates of the top schools, such as the seven Indian Institutes of Technology (IITs) and the six Indian Institutes of Management (IIMs), are world class, but elsewhere the level of quality declines steeply.
One problem is poor English. Although it is an official language in India, not every graduate speaks it well enough to work for the multinationals or for the Indian vendors that serve them. Graduates from certain regions appear to be handicapped by strong local accents that don't lend themselves to jobs in call centers and other workplaces requiring interaction with foreigners. Some companies have relocated call centers from India to the Philippines (where people tend to speak English with an accent closer to that of the US population) because customers complained that they couldn't understand the operators. Even HR managers in software and IT services firms rank language problems as one of the top three handicaps of engineering applicants.
High rates of emigration among graduates of the top schools further depress local supplies of suitable talent. An estimated 40,000 IIT graduates, for example, have gone to work in the United States, though India's buoyant IT services sector is now said to be attracting many of them back. Another hitch is the fact that the country's domestic economy is still largely shielded from global competition, so few older graduates or middle managers have the international experience to switch to the multinationals.
A looming shortage of talent
In India only 1.2 million people hold engineering degrees—4 percent of the total university-educated workforce, as compared with 20 percent in Germany and 33 percent in China. Combined with the generally low level of suitability among Indian graduates, this means that India could face an overall shortage of engineers in the next few years, with a particular squeeze in certain cities. Wages for India's graduate software engineers have already risen steeply in the most popular offshoring destinations, such as Bangalore and Mumbai.
The country does have a growing number of people who hold engineering diplomas (degrees from three-year rather than four-year programs): 1.75 million in 2003–04, increasing by 130,000 people a year. Diploma holders are not as highly trained as graduates but can fill gaps at the less creative end of the IT value chain. Yet even they will not be sufficiently numerous to alleviate the coming shortages. Our forecasts show that demand for India's young professional engineers is likely to exceed supply by 2008 if current rates of growth in demand (especially from the United Kingdom and the United States) persist. Significant shortfalls of talent are also expected in the field of business process offshoring, driven by the likelihood that demand and job growth will increase much faster in this industry than they will in IT services over the next three to five years.
The talent squeeze is already beginning to affect the top cities in India, and Hyderabad's recent history shows how fast hot spots can become overheated. The city became a hub for software and IT in the 1990s, when large IT- outsourcing services firms, such as Satyam and Tata Consultancy Services, established themselves there. At least 20 major Indian and US software vendors have set up large engineering centers in Hyderabad since 1998. Activity ballooned after 2002: six new centers, with a total of about 5,000 employees, were established in 2004 alone. Local supplies of suitable candidates for most occupations are ample. But universities and colleges in the Hyderabad region graduate 25,000 engineers a year, which will not be enough to satisfy the demand at current growth rates if only 25 percent are suitable for employment in multinationals. As early as 2006, the demand for suitable engineers will surpass the local supply; by 2008, we reckon, demand will hit 138 percent of supply.
Even so, India's graduates are highly mobile compared with those from other emerging markets. Companies may therefore find that they can easily attract suitable engineers to Hyderabad (in the state of Andra Pradesh) from the country's other cities. Andra Pradesh has been expanding its tertiary-education system unusually quickly since 2001, and the fruits of that expansion have only just begun to reach the labor market. Furthermore, both the state government and local companies are working to improve the suitability and quantity of local graduates and diploma holders. Taking all this into account, Hyderabad may have enough suitable engineers to put off the labor squeeze for a few years beyond 2008. All the same, five years ago no one expected Bangalore and Mumbai to experience the talent shortages they face now. Hyderabad's authorities and companies are right to focus on stepping up the local supply of suitable engineers.
In the country as a whole, middle managers are also becoming scarce. Although India has more of them than other offshoring destinations do, the country also has higher demand because the offshoring sector has grown so fast: over the past decade, the number of middle managers it employs has expanded by more than 20 percent a year, and even more briskly in some cities. New entrants often lure qualified managers from existing businesses instead of training their own. Sometimes they poach across borders as well—Russian entrepreneurs, for example, have hired middle managers from India. Rapidly rising remuneration is evidence of their scarcity. Annual wages for project managers in India's export-oriented IT sector, for instance, have increased, on average, by 23 percent annually over the past four years, while the salaries of programmers have risen by 13 percent.

Improving India's offshoring prospects
How can India stay on top of the offshoring ladder? A number of longer-term policy actions must be taken if the country is to remain attractive to companies that want to move their operations offshore—and fixing those aspects of its notoriously weak infrastructure that can hamper a company's efficiency is just one. But in the short term, the priorities for Indian policy makers and for senior managers at companies seeking to offshore operations to India are the squeeze on IT and business-process-outsourcing talent in the offshoring hot spots and the looming general shortage of engineering talent.
Raise the quality of university education
To preempt the impending shortage of talent and to increase the supply of graduates suitable for offshoring in general, India must bring more of its fast-growing multitude of graduates up to the level of quality that multinational employers require. Raising the mediocre universities to the standard of the very best will be a tough and lengthy job. Private providers, such as the university-affiliated software-engineering schools of Oracle and Satyam, have driven an explosion in the number of graduates in IT-related disciplines; both private providers and government-funded institutions have contributed to the increasing number of potential candidates for business process jobs.
The central government's policy makers can play an important part in raising standards, by defining curriculums that reflect current and future demand in employment. India's state authorities can help by developing better certification procedures and promoting higher standards of quality for colleges. Both tiers of government could support the expansion of top-quality private schools.
Companies too can play a role. Private initiatives and joint efforts by companies and universities have helped raise the quality of talent elsewhere in the developing world. In Russia, for instance, associations of software businesses have provided practical management education for engineering students. A recent report from India's National Association of Software and Service Companies (Nasscom) proposed an agenda for improving the suitability of the country's graduates. The agenda included strengthening the collaboration between industry and educational institutions in defining curriculums as well as establishing an IIT in every Indian state.
The vast majority of India's estimated 14 million young university graduates hold generalist degrees, the least attractive ones for multinational employers. Offering grants to study the disciplines—especially engineering—that these companies most covet could also help to raise the proportion of suitable graduates.
Move beyond offshoring hot spots
Wage inflation and high attrition rates in key offshoring locations are understandably making companies nervous about India's supply of talent. But these problems are confined to specific occupations and cities. To some extent, moreover, offshoring companies have created difficulties for themselves by crowding into the same places. Although clustering creates advantages at first, they soon dissipate if demand for talent overwhelms the supply and if infrastructure investments don't keep pace.
Policy makers should encourage companies to look for talent in cities that haven't been touched by the offshoring bandwagon, where cheap supply may well exceed demand. India has huge numbers of skilled graduates in disciplines other than engineering. What's more, MGI research shows that it has the lowest labor cost for university-educated employees of the 16 potential offshore countries we studied (roughly 12 percent of the US cost, on an hourly basis). India's graduates also work the longest hours—on average, 2,350 a year, as compared with 1,900 in the United States and 1,700 in Germany.

Although India's graduates are more mobile than those elsewhere, our estimates show that one-fifth of them still aren't easily accessible to multinationals or Indian service vendors. Indeed, roughly half of the country's graduates study in cities with no international airport. Inaccessibility is a genuine threat to India's offshoring supremacy; our study of supply conditions in 28 low-wage countries shows that many smaller ones have much larger pools of suitable graduates than the size of their populations would suggest. India's policy makers must make a priority of helping companies to avail themselves of the country's untapped pockets of supply before too many more of them discover the charms of other offshoring locations. The government may, for instance, have to build airports in less well-known cities and help them with their marketing. Companies exploring these second-tier cities could consider telecommuting as a way of gaining access to additional employees or offer housing deals to get more graduates to move.
Concern about rising wages is somewhat misplaced, however: as a result of local wage inflation, some offshoring companies worry that Indian rates will soon reach US levels. Our projections show that average wages for young professionals in service jobs in India probably won't exceed 30 percent of US levels, because of competitive pressures: when average Indian wages reach that threshold, companies will try to employ graduates from countries with lower or comparable wages. Supply from these countries will satisfy all likely demand for the foreseeable future. I therefore do not think that average wages for graduates employed in any of the low-wage countries involved in offshoring, India included, will rise any higher than 30 percent of current wages for young professionals in the United States—about what young professionals in Mexico earn today.
Improve the infrastructure
Interviews with the multinationals' senior managers show that they rank India's infrastructure as the country's most serious flaw. On a scale of 1 to 5 (good to bad), China rates 2.5 for its infrastructure; India and Russia, each at 3.3, jointly hold last place among the 16 countries we assessed. More direct flights now link Europe with India's offshoring centers, but their poor roads and rudimentary traffic management make local commuting arduous. In 2004 India spent $2 billion on its road network; China spent $30 billion. And despite improvements, India's telecom network still suffers from quality issues.
To stay at the cutting edge of offshoring, India must invest a lot more in its infrastructure—and a lot faster. Government neglect of offshoring may arguably have been benign up to now, but continued neglect of the infrastructure would be a mistake. Only the state can mobilize funds for the airports, communications networks, and utilities that the whole economy requires for healthy future growth
Move beyond IT and software
India's leaders should start trumpeting its advantages as an offshore location not only for IT but also for industrial R&D and medical research and for back-office functions. This year, the country recognized full product patents on pharmaceuticals. That should reassure international pharma companies, which had feared that any intellectual property they developed in India might not be protected sufficiently. In these new fields, where India offers the requisite talent but is far from having the dominance it enjoys in IT, it would do well to target global companies in the United Kingdom and the United States, which have so far been the pioneers in offshoring.

But in research, India faces stiff competition from China, Russia, and the United States, as R&D often gravitates to countries with large domestic markets for the resulting products. India enjoyed annual GDP growth of 6 percent from 2001 to 2004, for a total GDP of around $600 billion, but that isn't enough to offset China's advantage. India also suffers by comparison because of its income distribution. China's wealthy elite is small compared with its large, fast-growing middle class; India's elite is relatively larger, but in 2002 some 74 percent of the country's households earned less than $2,000, which weakens the domestic market's overall purchasing power.
For back-office activities such as finance, HR, analytic and modeling services, and call centers, our projections indicate that India will have enough suitable labor to meet projected demand over the next five years. But the supply of suitable call-center employees will become tighter in some popular locations unless the hiring companies are encouraged to consider other cities. If companies go on crowding into the same few locations made popular by IT services, local wage inflation and high attrition rates will develop even in these new occupations. Policy makers really must try to disperse demand.
Thanks to the dynamism of India's IT services, the country is the world's preeminent offshoring destination. But other low-wage nations are now broadcasting their potential as offshore locations, and demand will quickly exceed India's supply of talent suitable for international companies. To stay on top, India must not only produce more top-quality engineers but also improve the suitability of other graduates. Finally, it has to show companies the depth and quality of its talent in areas other than IT—especially R&D and back-office work in industries such as finance and accounting. - Sourced from McKinsey.com.

Prevailing in a Mad market

If this market doesn't give you whiplash, stop reading. But if a 300-point drop in the Dow evokes the sensation of digesting bad oysters, here are a few tips to ease your market-induced stress.
Be True to Your Goals
• Investing is about meeting life goals, so make sure your allocation reflects your aspirations.
I hate when people say that investing in the stock market is gambling. Money thrown on a blackjack table in Las Vegas can evaporate instantly (which, regrettably, I learned the hard way). But that's never happened with a reasonably diversified portfolio of stocks and bonds.
On the other hand, a diversified portfolio will swing in value, a natural reflection of the economic cycle. The investor's best defense is to develop a specific allocation strategy that's like Donald Trump's hairstyle -- highly individualistic and oblivious to passing fads.
"It's important to come up with an allocation to meet and achieve goals -- that's the biggest disconnect I see," says Michael Steiner, wealth manager with RegentAtlantic Capital in Chatham, N.J. "Clients will come in with a portfolio, and when I ask what the objective of the portfolio is, 99 percent say, 'To make money.' But what's the money for?"
Be Realistic
• Financial goals need to be concrete, precise and measurable -- with real timeframes and credible numbers.
For instance, Steiner says, "If you want to retire at 62 and live on a $70,000 after-tax [income], then the portfolio should be constructed to meet that goal."
Nobel laureate Harry Markowitz demonstrated that the bulk of investment returns come from allocation -- the mix of investments -- rather than the choices made in each category. It's kind of like nutrition: You'll get fat if you eat more ice cream than vegetables. It doesn't matter whether it's Ben & Jerry's Chunky Monkey or Edy's Cookie Dough.
"That's the most basic investment decision most people will make -- how much you have in cash, bonds, and stocks," says Charles Farrell, of Northstar Investment Advisors in Denver. "Then, within the bond and stock categories, check to ensure that you're adequately diversified. People debate the appropriate amounts, and there's no correct answer, but what generally makes sense is to have a broadly diversified and balanced account."
By contrast, if you're in the market with vague hopes of getting rich, you'll likely abandon ship when stocks decline -- which everyone knows is the ideal time to get in. "It's been proven time and time again: When there's doom and gloom, it's usually the best time to buy," says Steiner. "Emotionally, it's the hardest decision to make, even though fundamentally it makes sense."
Be Patient
• Stocks are an excellent investment -- over time.
If you're unnerved by the latest market rout, it may be time to reconsider your risk tolerance. But first look at the timeframe of your investments.
"The more time you have -- for instance, until retirement -- the more you can tolerate the natural gyrations of the markets," says Michael Furois, president of The Planning Associates in Phoenix. Ariz. "When looking at your 401(k) or other investment account statements, you may have to remember this: The reduced value of your investments is only a temporary decline in price, not a permanent loss in value."
In its best year, the S&P 500 rose nearly 54 percent; in its worst year, it dropped about 43 percent, according to Ibbotson Research. Nobody knows what's going to happen in the future, but studies based on the past performance of the S&P 500 have found that since 1925, the chance of losing money over a year is 28 percent; over 5 years, 10 percent; over 10 years, 3 percent; and over 20 years, 0 percent.
"One good way to test your comfort level is to take a hypothetical market decline and apply it to the amount you have invested in the market," Farrell suggests. "For instance, if the market declines 20 percent, that will affect each one of us differently. If this is my first year as an investor and I have $5,000 in the market, my account might decline $1,000. Probably not a life-changing event. If I have $500,000 in the market and am age 50, I might see a decline of $100,000. Each investor has to honestly answer whether they're comfortable with that type of volatility."
From 2000 to 2002, investors experienced declines of 50 percent. Farrell points out: "Apply that number to the amount you have in equities and see how you feel. If you can stay committed during that type of cycle, and focus on the probability of long-term positive returns, then you're probably in the right place," he says. "If the potential decline in your account value concerns you, then you may be taking too much risk and it's probably time to consider some modifications."
In the meantime, also consider that from its low point in 2002, the Dow has risen about 6,000 points, or roughly 80 percent.
Be Introspective
• Market volatility can be a reminder to reassess risk and rebalance.
If the market roller coaster is keeping you up at night, don't get down on yourself. You probably couldn't have predicted you would feel this way.
People make predictive errors for a variety of reasons, but one that's perhaps most germane here is something called "the hot/cold empathy gap." When people are in a "cold" or neutral emotional state, they often have trouble imagining how they would feel or what they would do if they were in a "hot" state -- angry, hungry, in pain, or, say, watching their E*Trade account plummet in value.
On the other hand, when we're experiencing a hot state, we have difficulty imagining that we'll cool off at some point (which is why, in the heat of the moment, it seems perfectly reasonable to sell all the stocks in your E*Trade portfolio and put the money under your mattress).
Meanwhile, studies on loss aversion have found investors tend to feel the pain of losses more than the joy of gains. "Investors generally make mistakes when they're reacting out of either fear or greed," says Farrell. "Having a balanced and diversified account generally helps combat the tendency to be driven by those two very powerful emotions."
Once you design an allocation strategy, rebalance it at least once a year to reflect the original mix. "Maybe you let those winners ride a little too long and weren't diligent about maintaining your allocation," says Steiner. "Maybe your 60-40 stock-to-bond ratios went to 50-50, and you felt too overconfident."
Get Help
If you're not sure how much risk to take, or whether your investments accurately reflect your life goals or appropriate timeframes, get some help. Many 401(k) providers have investment professionals available to talk to participants about their allocations. Or consider talking with a fee-only financial planner. Alternatively, you can email me at no charge.
If you prefer to pay, you can find a planner online at the web site of the National Association of Personal Financial Advisors, or the Garrett Planning Network, a group of advisors who charge by the hour. - sourced from Yahoo Finance.

Learn how to count bases

What is a bull trap? It's a stock that looks great and has everything going for it -- but is actually poised for a major fall.


Late-stage bases usually are such a trap. By the time a stock makes a fourth base, it already has three solid bases and advances under its belt. It has come a long way.



By this time, stocks are too well known to investors, and the amount of new buyers diminishes.


And the biggest shareholders -- the mutual funds, banks and other institutions that drive most of the buying -- are sitting on big gains.


What is a late-stage base? Usually it's the fourth base a stock builds, although in some cases stocks peak after their third base.


It can be the fourth base since the start of a bull market, or since the stock becomes a bona fide growth company. So bases that form while the stock is losing money or making limited gains don't count.


Many stocks in late-stage bases have prime numbers going for them: Sales and earnings growth could be booming, margins are wide and its IBD ratings are likely strong.


But that's the trap. Those great fundamentals drove the stock higher from at least three bases already.


You're buying into an old story. And the shareholders from lower prices in earlier bases seeking an orderly exit welcome such buyers.


How can you spot a late-stage base? It's just a matter of counting bases.
CAN SLIM investors know to look for one of a limited number of base types. Those are the cup with handle, cup without handle, flat base and double bottom. A more rare example, but still necessary to count, is the ascending base.


Remember, you must see an advance of at least 20% from any given breakout to the start of the next base. Otherwise, you're probably looking at a base-on-base pattern. And that just counts as one base.
Look at CheckFree (CKFR), a provider of e-commerce transactions services, portfolio management and other financial services.


From the start of the bull market in 2003 through 2006, the stock formed four bases. (The first doesn't appear on the accompanying chart.).
The first three produced gains of more than 20%.


But the fourth-stage base really petered out badly (point 1). It didn't take long for CheckFree to fall below its 50.65 buy point 14d proceed to go into a long slide.
CheckFree dived 42% until bottoming about a year ago.

If investors had taken my advise in the last few weeks, they would have profited from nearly every stock I recommended. Now, if you are one of those investors, it's probably a good time for you to take more risks, now that you have more confidence and money on your side. I believe in taking sound, calculated risks for maximum return. To do so, I believe the Financial sector is currently on sale, and is a good investment.

Bank of America invested $2 billion in Countrywide, the nation's leading mortgage lender, in what Countrywide called a "vote of confidence" as it weathers the credit crunch. Countrywide shares jumped more than 20 percent in after-hours trading. Bank of America said it looked at Countrywide's books and found the company to be undervalued. (Bloomberg) "Countrywide is no longer on the endangered company list," said Punk Ziegel analyst Dick Bove. "And it is a prize despite what has been said recently." (Los Angeles Times)

Encouraging news from banks -- including large central-bank borrowing by four U.S. banks and Bank of America's investment in Countrywide -- helped boost optimism early today that the damage from the credit market drought would be contained. (MarketWatch) Asian markets ended their day higher, with the Shanghai Composite Index closing above 5,000 for the first time. Japan's Nikkei 225 rose 2.6 percent, despite the Bank of Japan's decision to leave its interest rates unchanged. (AP in Yahoo! Finance) "The market is getting more comfortable," said ABN Amro Morgans analyst Tony Russell. "But confidence can certainly be shattered by any more revelations." (Reuters)

Putting together these signs, on top of Warren Buffett's investment into Wells Fargo, investors should also get into the scene now. Look into the large cap Financials and/or buy index funds. You can contact me for specific stock names and purchase price points.

Safe Asia Pacific Pick

For investors who are looking overseas for safe investments, PHI offers attractive dividends and high growth emerging market status.

Philippine Long Distance Telephone Company, together with its subsidiaries, provides telecommunications services in the Philippines.As of December 31, 2006, the company had 24,175,384 subscribers; 1,776,647 fixed line subscribers; and 264,649 broadband subscribers.

Dvidend yields at 4.1%. it tumbled below its 200-day moving average line Thursday as it fell victim to worries about the U.S. stock market. The Phillipines-based company provides local, domestic and international phone service to more than 20 million customers.

Currency plays

The U.S. central bank cut the discount rate on Friday in a surprise move that sparked a wave of buying by global investors relieved that a financial crisis stemming from subprime mortgage failures may have been averted.

European stocks shot into positive territory and prices surged after U.S. stock market opened as investors perceived the U.S. Federal Reserve would not neglect its role as lender of last resort amid a global tightening of credit.

"That's the right support for the market. This is an important message. The central bank is signalling that it is standing by to lend support," said Max Holzer, head of portfolio management at Union Investment in Frankfurt, Germany.

The Fed, in slashing the rate at which it lends directly to banks to 5.75 percent from 6.25 percent, noted that tighter credit conditions and increased uncertainty "have the potential to restrain economic growth going forward."
A group of major U.S. and some foreign banks, the Clearing House Association, said it endorsed the Fed's action as a step that could improve credit market conditions.

The dollar fell broadly on Friday after the Federal Reserve slashed its discount rate on loans to banks and said U.S. economic growth could slow in light of tightening credit markets.

The dollar started to pull back from a seven-week high against a basket of major currencies on Thursday after investors sought safe-haven bids in low-interest currencies and U.S. Treasuries in the midst of a global equities weakness.

n late afternoon trades, the euro was 0.5 percent higher at $1.3485, on pace for the biggest gain in a month.

The dollar index (DXY), which tracks the dollar's performance versus a basket of currencies, was down 0.44 percent to 81.371, after reaching a seven-week high early Thursday of 82.132.

Against the yen, the dollar was nearly flat at 114.28 yen, while the euro climbed 0.42 percent to 153.99 yen.

Currency fluctuations have not been nearly as volatitle as it has been this summer. Investors can consider arbitraging currecies, along with equity plays.

Don't rush into the market just yet~

Despite a sharp rebound on Friday, after the Federal Reserve cut its discount rate, the major averages finished another turbulent week lower.

Stocks have traded in extremely erratic fashion over the past few weeks, with the the Dow Jones Industrial Average consistently showing triple-digit swings and the S&P 500 recently falling more than 10% below its peak – the definition of a market correction – before paring its losses. The volatile trading follows a period last month when both the S&P 500 and Dow saw record finishes.

The Fed's move on Friday to change its discount rate – the rate at which it lends funds to banks – from 6.25% to 5.75%, however, was a welcome relief for investors and helped calm the global markets amid signs that credit was drying up. To be sure, it saved the market from posting more sizable losses for the week and served as a welcome confidence boost.

The decision to cut the discount rate was especially notable since the Fed showed concern about the turmoil in the financial markets and stated that it is ready to help support overall economic growth if necessary. In other words, if it is necessary, the Fed will cut the fed funds rate, which it left unchanged at 5.25%.

I do not believe this market is ready to rebound back to a bull market just yet. The credit crunch is not yet over, as the Fed move is more like a band aid then a cure. Initially the market reacted to the Fed move with a 300 point advance. However, that increase lost steam as institutional investors and average investors both, sold into the strength. By 12pm ET, Dow was barely holding onto its triple digit gain. That move, demonstrates a lack of confidence for the sustainability of the rebound. Although Dow finished with over 200 point increase, investors should observe the market on Monday before jumping back into the market big time. Paying special attention to Financials and Construction.

The timing of the Fed's action was also notable as it followed in the wake of an alarming announcement Thursday from Countrywide Financial (CFC) that it had drawn down the entirety of its $11.5 billion unsecured credit facility to supplement its funding liquidity position.

Incidentally, Countrywide's news fueled a 300+-point drop in the Dow at one point on Thursday, before a furious short-covering rally in the financial sector late in the session brought the Dow all the way back to virtually unchanged for the day.

It didn't appear as if there would be any follow-through early Friday, though, as a global market sell-off, led by a 5.4% decline in Japan, had investors on edge. When news of the Fed's action broke, though, the tone changed dramatically and stocks rallied out of the gate. The indices didn't close at their highs, but they finished the week on an upbeat note.

In other developments this week, the Commerce Department on Thursday showed that July housing starts fell 6.1% to a 1.381 million annual rate as builders continue to struggle with the housing downturn. That was down nearly 21% from the year ago level and marked the slowest pace since January 1997. Homebuilding stocks, not surprisingly, remained under heavy selling pressure.

Wal-Mart (WMT), meanwhile, posted disappointing second quarter results and offered a bleak outlook for the remainder of the year, exacerbating concerns about consumer spending. The retailer attributed the disappointing performance to pressure from the housing market.

In turn, Home Depot (HD) reported its first quarterly sales decline in more than four years due to the housing slowdown, while mortgage REIT Thornburg Mortgage (TMA) said it will delay its second quarter dividend payment due to significant disruptions in the mortgage market and a subsequent increase in margin calls from creditors.

On the economic front, the July CPI inflation data on Wednesday was reasonably good, and in line with expectations. July CPI was up just 0.1%. The core rate was also up 0.2%. Those are reasonably tame numbers that reflect modest inflationary pressures. The July Producer Price Index produced a mixed result with a larger than expected 0.6% rise in total PPI and a smaller than expected 0.1% increase in core-PPI.

In this market, I have suggested to many investors to invest in more defensive stocks, such as food and energy. I would continue to advocate that. I know investors might want to just hold cash, and wait-it-out, so to speak. But remember, investing wisely in a downturn, would mean better than average return when the market recovers. Cash at best gives you 4-5% in a CD. A market rebound, as traditionally seen in American markets, can easily give you double digit gains in less than a year. Think about it~

Apparently the housing market is in such dire straights that not even the lowest reading in confidence among homebuilders in 16 years has been a catalyst to move stocks (or bonds). At the top of the hour, The National Association of Home Builders/Wells Fargo index of builder confidence fell to 22, from 24 in July. That was also the second weakest reading since the survey's inception in 1985.
However, since the gauge was widely expected to fall for six straight month amid rising defaults on subprime mortgages and an inventory glut, the weak report has been overlooked, leaving investors focused on tomorrow's more influential housing starts and building permits data to paint a more accurate yet dismal picture of the ongoing housing correction.

Market loses more steam in early trading

As I forecasted, the market continues to go downhill in this early Tuesday trading. Traditionally summer are the "slow" times of the year, as many traders go on vacations. Coupled with the credit crunch issues, this market sees no sustainable recovery anytime soon, especially in the Financial sector.



In times like this, investors should begin to look at investments that are "safer" with low P/E ratios and solid earnings. Here's my advise to investors who are risk-averse and uncomfortable with complex vehicles such as ETFs. Look for American companies that has international exposures. The real growth, at least in the near future, will not come from America. You want to leverage solid multinationals that provides growth and value in your portfolio. Take a look at solid American multinationals that can benefit from its international exposure. Additionally, their large cap status needs to be appreciated in a volatile market, hence reducing its downside due to speculative trading.

Here's an industry that I would recommend. Take a look at high-end American luxury goods retailer/manufacture. These companies can benefit from the weak dollar, international exposure (as China is now the 3rd largest economy in the world and its consumers are buying up luxury goods like there's no tomorrow), and is safe enough to sustain anymore market downturn through solid earnings and creative hedging strategies. One name everyone would recognize would be Tiffany & Co. (TIF), it also pays about 1.3% in dividends. TIF is on sale now because investors are worried that a credit crunch would keep consumers wallets tight, however, high-end retailers traditionally are not affected by interest rates. Most of the TIF shoppers are affluent enough, and they will continue to shop for their significant others. A large contrast with shoppers going to Target or Walmart. So pick it up around low $40's.

Ways to profit in this chaotic market

After the central banks around the world added cash into their respective markets last week, investors now can expect liquidity in the market. Of course, one needs to distinguish between liquidity and confidence. Although the two often goes hand in hand, confidence is what's keeping this market worried right now. I expect the volatility to continue and the market to remain tricky for most investors.

For safer investments, investors should look into natural resource stocks as well as basic materials. With Asia and Eastern Europe driving the growth globally, experts continue to expect a huge demand in these materials, thus driving up the prices. CMC for example, are benefiting from the basic law of supply and demand. Their stock price reflects their strong earnings, despite the recent shakedown of the stock market.

ConocoPhillips, the nation's third-largest oil company, authorized a $15 billion buyback program through 2008 that includes $2 billion left over from the $4 billion plan implemented in February.
Shareholders may cheer the buyback because it demonstrates management's commitment to return more cash to shareholders. It's also comforting to know that it can afford it. After looking at the company's free cash flow, asset sales and compensation from its Venezuelan production, a buyback of this size is easily within its means.

The Houston oil giant reported first quarter net income of $3.5 billion or $2.12 a share and revenue of $41.3 billion.

Bernstein Research reiterated an outperform rating stressing that the buyback program should boost shareholder value. Secondly, and equally important, with a buyback of this size, the directors are basically telling the shareholders they will not sell the company, at least not in the near term.

"ConocoPhillips has constantly lived under a dark acquisition cloud since the Burlington transaction," Bernstein says, but now shareholders should be relieved from that fear -- at least for the next 18 months. Bernstein raised its price target to $95 from $88.
Investing legend Warren Buffett also is a fan. In fact, ConocoPhillips currently accounts for 2.1% of his portfolio.

More on natural resource plays: As I anticipated in my forecast, XTO Energy produced profits for pleased shareholders this quarter. The company beat its own production guidance, with gas and liquids output up 12% over the prior year. Along with strong pricing, particularly for natural gas, this output growth led to a 35% rise in adjusted earnings. This figure backs out one-time items such as last year's large gain on a distribution from Hugoton Royalty Trust, HGT, a high-yielding company spin-off.

Part of the reason for the torrid production growth was the backlog in the Barnett Shale. Some infrastructure projects were delayed within this prolific unconventional gas play, which prevented a lot of wells from being completed. Completion is the last stage before a well can start pumping out the hydrocarbons. Once the infrastructure came online, so did a whole lot of wells. Barnett's output rose a massive 24% sequentially, a gain that's unlikely to repeat itself.

Lest you be concerned about XTO's exposure to recently weakening natural gas prices, there's actually a large hedging program in effect here. Hedging, in this case, means that the company caps its exposure to commodity price fluctuations, both to the upside and the downside. Management is comfortable with hedging one-half to two-thirds of its production.

This program doesn't just limit risk. It also "keeps an orderly shop," allowing the company to go about doing what it does best -- increasing production with minimal expense -- without having to worry too much about timing that level of production to the commodity cycle. This hedging program could certainly hold XTO's shares back in the event of a sharp rise in the natural gas price,

Following the same thought, buying into foreign ETFs trailing indexes would be a good investment as well. There are several ETFs that tracks stock markets of emerging markets, that investors should take a look at, here's a few: Taiwan, India, Malaysia, and Africa.

Volatility continues

Following Thursday's big drop in the market, Dow closed down 30 points today. This index does not reflect the true market condition, however, due to Fed's injection of billions of dollars into the market.





The Dow Jones industrials, down more than 200 points during the session, ended with just a 31-point deficit and managed to post a gain for the week.





The stock market, which has been gyrating for weeks over fears that credit is drying up, pared its losses after the Fed's injections of cash and following morning comments from the central bank that it would do all it can to "facilitate the orderly functioning of financial markets." The steep declines seen at times during the session and persistent volatility, however, showed the depths of fear that had some investors yanking money out of stocks.





The New York Fed, which carries out the central bank's market operation, announced a three-day repurchase agreement of mortgage backed securities and then two more of the so-called "repo" moves to inject liquidity into the market. The Fed's maneuvers came after the fed funds rate, the amount banks charge each other for overnight loans, ticked above 6 percent again Friday -- well above the Fed's target of 5.25 percent and a sign that credit was becoming harder to obtain.



The Fed stepped in after the same occurrence Thursday, injecting $24 billion in temporary reserves to the U.S. banking system. In a repo, the Fed arranges to buy securities from dealers, who then deposit the money the Fed has paid them into commercial banks.





At this rate, Fed will need to cut rates in order to boost the market despite the inflation issue. Note the similarity when Fed rate cuts that calmed the market after the 1998 Russian debt crisis and the implosion of the hedge fund Long-Term Capital Management. I expect a rate cut soon.





More on the Fed move. It is interesting for them to have done so in this juncture in time. Investor confidence worldwide has been shaken by the credit market problems. In Asia, stocks fell Friday after regulators including the Bank of Japan added liquidity. The European Central Bank for the second day added cash to its money markets.



These banks and others around the world haven't worked together to inject liquidity into the markets since the aftermath of the Sept. 11, 2001, attacks. But the measures, intended to keep financial markets well-oiled, also seemed to confirm investor fears of a larger problem in the credit markets that will stall corporate growth -- including the burst of takeover activity that powered stocks higher this year.





Overseas, Japan's Nikkei stock average fell 2.4 percent. Hong Kong's Hang Seng Index fell 2.9 percent. Britain's FTSE 100 fell 3.71 percent, Germany's DAX index finished down 1.48 percent, and France's CAC-40 fell 3.13 percent.





So how do investors profit in this market? Well, despite the market turmoil, have you noticed that large cap tech stocks are holding their ground? Although the recent drop in the market reminds us of the dot com bubble in early 2000's, this credit nightmare have not affected large cap tech stocks too much. Boosted by their good earnings, here's some reasons why you should look into tech stocks.





And exchange traded funds that group tech company stocks are shining.
One of the brightest performers for the past several weeks has been Merrill Lynch's Internet Architecture HOLDRs Trust IAH. It's up 24% for the year. Some of the top holdings includes the following.



Big Blue
The heaviest of all is IBM, the fund's top-weighted holding. Its stock climbed 4% last month after the company announced a second-quarter profit of $1.50 a share on better-than-expected earnings.
On Thursday, Big Blue launched a new ePedigree system to strike back at drug counterfeiters. The black market in counterfeit drugs is estimated to reach $75 billion by 2010.
The system will also help companies follow new track-and-trace regulations, which will be in effect in some states by 2009. Tagging each bottle or package with serial numbers will allow the system to track each stop on the supply chain, from manufacturer to distributor to point 15f sale at a pharmacy or hospital.
Recent mainframe simplifications and increased use of Linux have also helped boost IBM's stock performance, analysts say.

Another top holding, Juniper Networks JNPR continued to hit new highs this week. The uptrend follows a 12% surge last month after the network equipment maker raised its sales forecast to more than $2.7 billion from $2.6 billion.
The company recently announced an $86.2 million profit for the second quarter of 2007. Over the same period last year, Juniper lost $1.21 billion. The turnaround came as Juniper released new products and pushed service sales during the quarter.

Cisco Systems
Technology touchstone Cisco Systems CSCO another of the fund's top holdings, saw its stock climb more than 7% this week on huge volume. At 31.84, the stock is the highest it's been since 2004.
The swell came after officials announced Tuesday that the company's earnings per share leaped 32% to $1.17 in fiscal '07 from 89 cents in fiscal '06.
Companies' increased need for network upgrades helped fuel Cisco's earnings jump, said Chairman John Chambers. Investors were especially pleased that the company also raised its long-term revenue forecast.

Oddly enough, tech stocks look great in this market downturn that looks remarkably similar to the dot com bubble.

Markets rebound this week

After the Fed Chief reassured the market yesterday at the FOMC meeting, the broad market rallied. Cash sitting on the sideline is entering the market again. Pension funds such as CALPRS with its billions of cash on hand are now returning as well. What does this all mean for investors? Well, if one bought in on Friday of last week, when DOW plunged more than 290 points, you would be smiling. But for the rest of the us, what do we do? Should I buy in now, and risk the market volatility? Should I hedge against that risk by buying index funds? Should I diversify with investments into emerging markets, where a upturn in U.S. market usually leads to their markets soaring a day after? The answer to all those question is a solid "YES".

Here's what the market looks like, taking a snapshot of it during lunch time ET. The upbeat technology news, along with strong gains in beleaguered financial and home building stocks, came a day after the Federal Reserve said that despite an increasingly difficult credit environment, the economy should keep growing moderately. "Basically, the Fed's telling us we're back to business as usual," said John C. Forelli, portfolio manager for Independence Investment LLC in Boston.

In midday trading, the Dow rose 64.95, or 0.48 percent, to 13,569.25, after briefly rising more than 100 points.

The Standard & Poor's 500 index rose 12.31, or 0.83 percent, to 1,489.02.

The Nasdaq composite index and Russell 2000 index -- which include technology companies and small-cap stocks -- made even sharper gains.

With the broad market rallying, and with a broad based increase, you can profit from the momentum. However, I do not believe the volatility is far beyond us. Investing in markets outside of the U.S. would provide growth to your portfolio. If you feel uneasy about investing in foreign markets right now, then you want to look into high dividend yield companies. Some of those companies are natural resource providers, amusement parks, and financials. A solid one from the group is a propane gas distributor in New Jersey. The stock is hitting a bump in the road after climbing 90% from a year and half ago. This bump, is a cyclical slowdown in heating needs in the East Coast, combined with the overall market sell-off we had. But going back to the basics: There are not much need for heating during the summer times, as one could imagine. But comes winter, all the snow in the East Coast and Mid West, where this company distributes heating energy, will have a strong demand for their products. Hence, buying in now, you would be looking at a easy 5% gain by winter, coupled with their attractive 7% dividend they provide their shareholders. I would rate this a strong buy: SPH

Here's also a list of stocks with positive earnings this week for your to consider.

AXP, C, CSCO, CTX, PCLN

They all have nice gains today, and with solid earnings will continue to look attractive for investors.

U.S. Market Volatility

The recent volatility in the U.S. stock market has left many investors clueless. How could Dow at 14000 turn into 2 weeks of sell-off? Acutally, like what they say on wall street, "volatility is where the real money is made".

One can make lots of money when the market is going up, but can also make a ton of money when the market is going downward. Traditionally, one of the best methods of doing so is to short stocks of specific companies, which means you would bet the stock price of that company to go down. Now, creative investment vehicles have been developed, such as electronically traded funds (ETF). Some new ETFs, makes it much easier for an investor to profit by betting company stocks and index to drop, hence making a handsome profit in a bear market.

This blog will make recommendations for investors who wants to profit with both a bull market and a bear market. Here's just a sample of a few ETFs doing shorts, and have gone up more than 10% since July 31, 2007. SMN, DUG, DXD