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LETTER FROM THE EDITOR
The broader market indices had a roller coaster ride during the month of October 2009 with mixed economic news and corporate earning reports. The disappointing economic news that influenced a pull back in the markets was an unexpected drop in consumer spending and a drop in new home sales. The only positive economic news was that the American government reported a positive growth in GDP at a rate of 3.5 percent during the third quarter, a growth after over a year since the recession started. The jobless claims during the month did not face much of a change, but an important question still remains unanswered - if the employment rate goes up by early 2010, what would create new jobs? In the corporate sector, many firms including some of the financials posted a better than expected earning reports that led to rallies on some days.
US Dollar
One of the widely spoken topics in the news has been the falling US Dollar against the basket of major currencies. Since March 2009, the ICE US Dollar Index that tracks the US Dollar against the basket of six major currencies has tanked from 89 to 75 points, by more than 18 percent. ICE US Dollar Index is one of the popular Indices used in the financial markets to track the US dollar against a basket of six major currencies composed of the EURO, Japanese Yen, British Pound, Canadian Dollar, Swedish Krone, and Swiss Franc. Although the falling dollars does not constitute an outright collapse, it surely is a cause of concern. The falling US Dollar may be good news for some and a pain for others, depending on their standpoints. The domestic producers in the US find the falling dollar attractive because their goods get cheaper (competitive) compared to that of their foreign counterparts, and therefore resulting in an increased demand for domestic goods in the global markets. Moreover, foreign tourists from Europe would find it less expensive to shop during their vacations in the US with a stronger Euro. In other words, Europeans can buy more in the US with their Euros.
Although falling dollar has been beneficial to a few groups, it has been a cause of concern for others especially for developing countries like China, Russia, and India, who hold a major portion of their foreign reserves in the US Dollars. Most developing countries that view investing in US Dollar as safe haven are now trying to diversify their portfolio by buying gold. Recently, India’s Central Bank purchased 200 metric tones of gold from the International Monetary Fund for the same purpose of diversifying of their foreign reserves and reducing their exposure to the falling dollar. The dollar may not possibly rise in the near future because there has been a lot of speculation in the market that Fed would keep the interest rates near-zero until further confirmations of stable growth and strong recovery from recession.
Mr. Monty Guild, founder and investment manager at Guild Investment Management, writes an article titled “How to Hedge Against a Falling U.S. Dollar” for Investor Concepts subscribers. This article discusses on a hedging strategy to hedge a portfolio’s exposure to the falling dollar using commodities, foreign currencies, and US stocks. In addition, Mr. Guild also talks about the activities in the commodities markets and the rising US Deficits.
GDP
The United States economy expanded by more than expected at a rate of 3.5 percent during the third quarter of 2009 as reported by the Department of Commerce on October 29, 2009. The increase of GDP during this quarter was primarily due to the positive contributions from few factors like the personal consumption expenditure, private inventory investment, federal government spending, and residential fixed investment. Firstly, the real personal consumption expenditure increased by 3.4 percent during the third quarter, as opposed to 0.9 percent decrease in the second quarter. This number was largely reflected due to the “Cash for Clunkers” program. Secondly, the real federal government expenditure and investment increased by 7.9 percent during the third quarter, compared with an increase of 11.4 percent in the second quarter. The questions still remains unanswered - If the increase in economic growth will be sustainable in the future? Is the government going to intervene in the markets like it did during the third quarter by providing credits for first time home buyers and introducing the cash for clunkers program to boost automobile sales.
Corporate Earnings
A busy corporate earning season continued with a number of earning surprises and disappointments.
Disappointing profits were seen at Verizon, McGraw-Hill, United States Steel Corp, AK Steel Holding Corp., Chevron Corp., Nintendo, Coco-Cola, and Boeing. Exxon Mobil disappointed as well, reporting unchanging production levels and a 68% drop in earnings per share.
Even with a number of negative news, a few companies did perform better than expected, including Motorola, Procter & Gamble, Estee Lauder Cos., Intel, Hasbro, Apple, and McDonalds. In financials, Citigroup, Goldman Sachs, and American Express beat the Wall Street expectations in their earning report.
Another interesting deal in mergers and acquisitions was Xerox’s purchase of Affiliated Computer Services, Inc.
WHAT IS NEW?
October was an eventful month for us here at Investor Concepts. We are on an aggressive growth path and intend to remain that way for the foreseeable future. What this means to you “our reader” is lots of new and relevant content and tools integrated into our website that is made with a purpose of equipping you to be a smart and sophisticated investor to make the right investment decisions.
So what have we accomplished during the month of October? Here is the short list.
• Added three new authors who are practitioners in the investment industry.
• We have licensed to integrate the largest financial glossary on InvestorConcepts.com that is written by Mr. Campbell Harvey, Ph.D., a well renowned professor of finance at Duke University,
• We have expanded a few content areas: Concepts, Books, and Investor Tools.
• We still continue to expand our Concepts section by including concepts in Spanish.
• We are working on to have a News Release section on our website that would include both national and international news released by corporate and government entities.
• Added content categorization feature that allows tagging and topical navigation of published articles.
• Expanded the Events calendar to include a variety of online and offline financial events.
FEATURED ARTICLES
During the month of October we had a number of very interesting articles published on our site, many of which deal with financial planning, investor education, commodity trading, and technical analysis. We’ve also had some primary research published and are beginning to see some forecasts. Below is a list of articles that caught our attention and we recommend reading them. For a complete list of published content for the month of October visit our Monthly Content Archive.
- “How to Hedge Against a Falling U.S. Dollar” by Monty Guild
In this article Mr. Monty Guild, founder and investment manager of Guild Investment Management, talks on how to hedge your portfolio exposure to the falling US Dollar by using commodities, foreign currencies, and US stocks. In addition, he also talks about the commodities market and US deficits. - “Three Keys to a Successful Retirement Plan” by Liz Davidson
In this article Ms. Liz Davidson, founder and chief executive officer of Financial Finesse, offers advise on three keys fundamental factors in designing and managing a successful retirement plan. Smart learning’s that she has gained working with many Fortune 500 companies over the past ten years. - “Investing in “Fund of Hedge Funds” Explained” by Vinod Thomas
This article talks about the rising prominence of the Fund of Hedge Funds in the past two decades. In addition, this article talks about the benefits and disadvantages of investing in these funds that every prospective investors needs to know to evaluate the risks of investing in these funds. - “What Top Traders Know That You Don’t” by Robert Moskowitz
In this article, our newcomer Mr. Robert Moskowitz discusses on the topic of investor psychology. He also talks on how to make money by understanding the new science of investment psychology.
FREE METASTOCK TRAINING WEBINAR
Investor Concepts has partnered with MetaStock to offer you the following free webinar scheduled on Tuesday the November 17, 2009 - 9:00 PM EST:
This 60-minute webinar will demonstrate one of MetaStock's most praised systems, the Rahul Mohindar Oscillator or simply, the RMO. This presentation will include the following:
- How to identify specific entry and exit points
- How to set up specific stops to protect your account from losses
- How the RMO can be used to protect your trading profits
- How you can identify primary, intermediate, and short-term trends in the stocks, futures, and indexes you are trading
Note: You must come to the webinar to receive this special. Don't hesitate to register today. We expect this webinar to reach capacity.
Missed the webinar you wanted to see? Check out our library of recorded trainings. Many of past webinars are available here.
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MARKET PERFORMANCE RECAP
October turned out to have a rollercoaster ride with mixed positive and negative economic and business news.
• Dow Jones Industrial Average +2.14%
• NASDAQ Composite - 0.06 %
• Standard & Poor’s 500 +0.62%
• Russell 3000 +0.02%
• Dow Jones Wilshire 5000 Composite -0.01%
INDUSTRIES
Most Bullish
1. Energy + 3.42% | Most Bearish
1. Leisure – 5.71% |
SECTORS
Most Bullish
1. Music & Video Stores +14.67% | Most Bearish
1. Surety & Title Insurance -17.68% |
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