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We have all heard the self help advice telling us to be proactive in our lives instead of reacting to our lives.
Proactive people are generally ahead of the curve and are more likely to be “lucky” because they are better prepared for any opportunities that arise.

The same can be said of investors. Many of them tend to take a reactive approach to investing.
They buy stocks after analysts upgrade them, they hear news on the TV to form trading ideas and they always miss the big moves.

Does this sound like you?
Here are 7 easy to do things that will get you ahead of the curve and turn you into a proactive investor.

1. Know the trend

This many sound very simple, but it is dreadfully important to keep the market trend in mind at all times, otherwise you may fall victim to a bad trade.
In today’s deflationary markets, the primary trend is down. Even if a stock does rally during this market, the gains are short-lived.
For example, take a look at HP, (symbol HPQ). Here is a company that has an amazing balance sheet, some of the best management, a steady dividend but can’t seem to get off the ground with any of its rallies.
Over the past few months, it has experienced many short term corrections, but in this environment  – it could not keep it up for long.
If you took a long position in HP after it was given a $111 million contract with the US government, or after it expanded its notebook lineup or any of its other good news, you’re probably sitting in the red.

2. Know the big players

Who else is buying / selling your stocks?
Is the institutional ownership of the stock high and are the hedge funds still liquidating? If so, maybe now is not the best time to go long.
What are Buffet, Soros, Templeton  or any of your other favorite big players buying? Can you invest along side of them?
Are the insiders buying up the stock? They may know that the prices are too good to pass up.
This may be a great indicator to help you keep ahead of the markets.

3. Watch the government

Even back in the day when the governments weren’t acting as a giant hedge fund, it still paid to watch what the government was doing.
Under George Bush, defense spending was high and that led to many defense suppliers having amazing years of growth.
When congress enacts a new tax, you can bet retailers will feel the hit as disposable income is reduced.
So stay aware of government actions such as the development of Obama’s infrastructure plan and the growing debt of municipalities to be proactive.

4. Keep track of the rates

Which rates am I talking about? All of them.
You should know the Fed funds rate, LIBOR, prime lending rates in your area, the yield on T-bills and 10 year bonds, tax rates, etc off the top of your head.
You don’t have to be an expert on the many ways each of those effect the current environment but even knowing that the current yield on T-bills is less than your local FDIC / CDIC insured savings account can save you money.

5. Keep an eye on commodities

There is a direct relationship between commodities and currencies and stocks. If you keep up to date with the prices of various commodities, you may be able to get the jump on stock markets.
For example, as crude prices go up, so does the stock of many energy companies. That can damper the prices of airlines and solar companies. Sometimes the damper on solar companies overseas is not as quick to occur as it is in the US. That can make for a profitable arbitrage trade.
If you see the price of gold edging upwards as it is these days, that can put downward pressure on the US $ because it is seen as a hedge against inflation. That may be a good time to invest in TIPS.

6. Use technical analysis

Technical analysis is looked down on by many investors because they don’t see its real benefit to them.
Technical analysis can be used to make a good investment a great one.
If a stock looks attractive based on fundamentals, an investor can be proactive by using simple support / resistance trend lines to get the best entry and exit points.
Use stock alerts, available through Yahoo Finance, to inform you if a stock has broken through resistance, a very bullish sign or if a 50 day moving average was broken or any number of other technical signals to avoid spending too much time with the charts.

7. Mark down important dates

You should know when your stock’s ex-dividend date is, when the company will issue conference calls, earnings release dates, what dates it re-purchases shares et al.
Along side of those dates, you should have a pretty accurate prediction of the announcements. If the company is releasing earnings next week, get to know what the analysts are expecting and what the company projected for this quarter. Does the company have a history of beating expectations? Can you reasonably assume that the economic downturn has hurt the company and is that already priced into the stock?
All of these things will help you get one up on the market making you a more pro-active investor.

If you follow the tips above you will have a better grasp of the market as a whole and be able to make better decisions.
Malcolm Gladwell, in his book Blink, wrote that time wasting research can sometimes be less effective than a knowledgeable mind’s intuition.
So take that to heart and be as well prepared as you can be to take on the many opportunities in the markets.

I spend a lot of time on the Internet looking better ways to quickly gauge the markets. Today I discovered a tool that some people probably know about but it awed me.

I am speaking about FINVIZ.com of course.

FINVIZ offers a very cool heat map of the market with separated sectors and stocks. They offer lots of information about any stock on one screen, which isn’t the easiest to look at but it offers any piece of data that you might need.

Their daily with technical indicators pre-drawn charts are a nice change from the simple Yahoo and Google finance charts.

They also offer a very functional screener with many built in screens.

I could go on about the up to the minute insider trading lists and news and the many other features of the website but I suggest that you visit the site for yourself and watch their introductory video for yourself at http://www.finviz.com/help_guidedtour.ashx

Enjoy this one.

The Tribune is one of America’s biggest media companies and has filed for Chapter 11 bankruptcy. This news does not bode well for its competitors who should now be reminded of their own mortality in a medium which is quickly going from being the norm to becoming the niche.

Stocks to watch because of this: NYT & WPO

“As of the week of November 16 stock losses in United States markets during 2008 as measured by the S&P 500 were equivalent to those suffered in 1931, over 50%. Total losses during the Great Depression exceeded 80% but that was over a three year period.”

The histogram on the left shows the relative performance of the S&P 500 year over year since 1925. The current year is running with a bad crowd – 1931, when there were between 4 and 5 million people unemployed in the US.

As for today, we saw a lot of resistance in the S&P 500 at the 900 level. The bulls were pushing it to higher lows but the bears (and those covering their positions) refused to let it go above that magic number. If you were looking at an intra-day chart you saw that the lows were getting higher and a market move on the upside or a breakdown on the downside was imminent.

I was surprised that there was even a challenge to the bears today, after all the bad news which was released. Higher unemployment, lower export and import prices, worse than expected trade balance and a lag of the auto bailout in the senate did not seem to discourage the market. I almost thought that the market had priced all of that in already.

In the end, the bulls succumbed to the bad news and left the battlefield. I would like to thank them for their efforts, but my short investments thank them for laying down.

There are a lot of juicy numbers coming out tomorrow. Be prepared for a bearish day in the markets.

For a list of all the economic releases I use Yahoo Economic Calendar, a part of Yahoo Finance – their only profitable product.

P.S. Watch out for Yahoo, it seems to be shedding its clothing and taking off its chastity belt trying to lure a buyer – one might just give them second look.

The graph was original posted on: http://www.dailykos.com/storyonly/2008/12/2/102214/940/743/668445

Looking for some free money?
You’ve come to the right place.

I recently saw an advertisement for the Citizen’s Bank of Canada. It was offering $50 free if you open a savings and checking account (for free) and deposit $100.

The one catch is that you have to keep that $100 parked in there for at least 3 months, otherwise your $50 is taken away.

I did not see any downside to this and immediately opened an account because I am a firm believer that every little bit counts and a 50% return on $100 in 3 months is definitely worthwhile.

It is also not the first time I have joined a bank because of a promotion. A few months back I switched to RBC in order to get a free Asus EEE PC, which I immediately pawned for $200. The account fees cost me $42 and I netted a good profit without much effort. Turns out I really like the features of that account and I’m keeping it. It was a double victory.

Here is the link to the promotion: https://www.citizensbank.ca/Personal/Products/BankAccounts/50GiftPromo/

Happy returns.

HIG today

A few interesting things happened today.

I have recently switched to thinkorswim.ca for my investing needs, mostly because they have free software and $5 trades.

They have been called Interactive Brokers’ little brother. Something to note here is that IB (Interactive Brokers) requires $10,000 to open an account and thinkorswm.ca doesn’t have that kind of requirement.

If you are thinkong of joining please email me because they have a $50 bonus for refferals

So anyway, in my stocks to watch portfolio on Google Finance I hold some of the market’s biggest and most volatile stocks. These allow me to quickly gauge the big players to see which sectors might be up or down that day.

I saw the Prudential (PRU) was up 17% within minutes of the open on very little news with the rest of the market slumping so I shorted the stock and bought back a little bit lower as I saw the volume and price gyrations start to decrease. It wasn’t an indicator that told me to leave, it was more of a feeling that I got when the bid sizes (avail on yahoo finance for free) seemed to drop. I am glad I got out of that when I did because by the end of the day the stock was up 35%.

My only other trade, and this is the one I learnt something from, was Hartford (HIG). On the Google Finance homepage, this stock made the biggest price movers list mid day and I decided to look at it.

The move was fundamental because HIG had a great guidance for 2008 EPS. The stock was already up massive, like 70% or so, but with news like that in this bear market I knew that this would be a rally lasting longer than a day.

I am a firm believer that people with money are busy throughout the day making that money and only hear about good news at the end of the day. The weekend is also a good time for them to catch up on the news. This group of investors contacts their broker over the weekend or in the evening and asks for them to follow through on this good news and on the following morning (or Monday morning) the stocks that were in the news favorably are rallied with their money.

Because of that belief, I bough HIG and decided to hold onto it (with a stop loss order in place of course).

What I didn’t expect though was that big players that were trading this stock along side of me would pull out at the end of the day. Perhaps it is because it’s a Friday, or perhaps they do that at the end of every day to lock in their gains, but I saw a very linear devaluing of the stock from3:40 – 4:00PM. The peaks of this decline were very systematic and the trendline connecting them was very smooth. It triggered my trailing stop loss.

I was disappointed at this seemingly programmatic sell-off because I had a good entry point and if my theory stated above holds up, this stock could stand to open much higher on Monday morning.

Perhaps I had too tight of a limit on that trade or maybe I was expecting too much. All I know is that I will avoid the last 30 minutes of the day for all honest, non-programmed trading from now on – at least until Jim Cramer becomes the SEC Chairman and restores order!

As if the markets were volatile enough, here come the 3x ETFs to make them more-so.

http://everydayfinance.blogspot.com/2008/11/3x-return-etfs-are-here-long-and-short.html

Check out the volatility in the 3x Financials Bear ETF here

If moves from 165 down to the 50s then up to the 80s in 7 trading days aren’t scary to you, i’d like to know what you do for a living.

For the rest of us, invest in these with great caution.

I personally believe that these days the markets seem to follow through on a trend throughout the day so if the markets open  lower they will continue lower throughout the day and end much lower. Same on the other side of the line.

So don’t buy these into the open, but if the trend of the market is stable for the day, wet your beak a little with high returns on this ETF then pull out before the end of the day with your gains for tomorrow will be another unpredicatible day.

Here is an awesome recap of last night’s Mad Money in which Jim Cramer basically summarized his book “Real Money” (buy it on Amazon here). These 25 rules are very useful and good to keep in mind when investing or trading.

25 Rules for Investing

seekingalpha.com — In Jim Cramer ’s Mad Money Show, he outlined 25 rules that he says will help investors play the markets defensively to avoid big losses and keep their money safe.

Everyone has their own collection of “tools” that they use to analyze the markets. Here is a list of some of my favorites and why I use them.

1. Google Finance

Google Finance is obviously a de-facto go-to for quick information about stocks and the markets. The front page can display multiple stock portfolios which I can keep an eye on and the graph at the top of the page is a quick overview of the direction the markets are taking.

2. Schaeffers Research

This is probably a website that many of you have not heard of. It is however a very useful tool. As soon as you type in a ticker it’ll plot for you 6 charts as shown above. The charts include a 90 day price history, put/call open interest, open interest configuration, buy/sell/hold ratings, volatility index, and short interest. There is enormous benefits in this tool if you’re looking to get a feel for the trend of a stock without doing too much in-depth analysis.

3. Morningstar’s Market Barometer & Yield Curve

Yet another tool that many have probably not heard about. The Morningstar barometer lets you gauge very quickly the movements of the types of stocks in the market. The cube displayed in the picture above shows that the every size market cap for all stocks from value to growth gained over 1.25% today. It also shows that this is slightly lower than the same baskets 3 years ago, much lower than these baskets 1 year and 3 months ago, and that large cap stocks have been hurt much less in the last month and last week than the medium and small cap stocks.

The bottom picture is another tool offered by Morningstar. The prices of the energy commodities is clearly listed and easy to read and underneath that the treasury yield graph compares the yields 1 year ago with yields today.

The benefit of these tools is to quickly observe several important facts about the market. I use the barometer when investigating investor sentiment. Are investors flooding to value stocks or growth stocks? Has growth become favorable again? etc

4. Seeking Alpha’s Wall Street Breakfast

The Wall Street Breakfast is an email that I receive every morning. It contains many of the developments of the day before as well as an economic calendar of what could move the markets today.

As you can see, today the Asian markets were affected by the previous day in the western markets and that the US markets are poised to open higher. There are a few key numbers released today that could adversely affect that though such as the preliminary GDP numbers. When you get these emails you can click on any of the events on the calendar and see the actual numbers. What I haven’t shown you above is the analysis of the previous days events. One of them is the Citibank bailout.

I find this email very useful to gauge what to watch for during the day. The information not shown here is also important because that is the same information that professionals who are investors receive through their evening news and invest upon today.

5. AOL Money

I know this might seem redundant when I have already placed Google Finance as my #1 tool, but AOL money has a feature in its graph which I have not seen displayed on other sites without having to create something custom – a seasonal chart.

This is a chart of Citigroup (C) as a seasonal chart on AOL Money. As you can see it is clean and the colors make the chart easy to read. The chart displays the performance of the stock for the past 5 years for the full year. I find this very useful when analyzing whether a stock is seasonal. How many of you know the release patterns of software companies and gaming companies and would probably like to see how this affects their stock prices. How many of you would like to know how the Christmas season reflects on the stocks of retailers? This graph can show it to you.

6. Stockcharts

There is nothing I like more than a detailed customizable candle chart and Stockcharts.com offers it. You can customize the size of the chart, the indicators, whether to overlay volume, etc, etc. It also has a Java module which allows you to annotate charts, draw your own trend lines and more.

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There are quite a few more tools which I employ on occasion which I will blog about later but try out those first 6 and see for yourself how useful they are, I promise that you won’t be disappointed.

This is important so check it out.
Canada has finally introduced a Roth style retirement account.
I have been waiting for this for the past 2 – 3 years since it was first introduced in the states.
It’s called a TFSA (Tax free savings account) and it comes out in January 2009.

The benefits to you and I:

• All earnings of any type within the TFSA are not taxed.
• Most common security types (stocks, mutual funds etc) are allowed to be purchased in account.

Unlike an RRSP the money you deposit into these accounts is after-tax money and there is a limit of $5000 / year.
The benefits are obvious… tax free capital gains from investing…

Now the long term strategy is to put money into the TFSA while you’re young and not making boat loads of money cause your tax rate is lower.
When you retire (hopefully with a higher standard of living than right now) you’ll probably withdraw more money per year than you’re earning now.
On an RRSP you would be taxed when you withdraw the higher sum at a higher rate.

Also, unlike an RRSP, if you withdraw early there is no charge because it’s simply a savings account.

My plan:
- Put $5000 per year into the TFSA until I’m in a high tax bracket at which point I’ll deposit into an RRSP
- Use the money to invest
- Skillfully withdraw money from both the TFSA and RRSP in the future to minimize my taxes

For a more detailed comparison please visit:
Morningstar’s TFSA vs RRSP comparison

Four Pillars Investing’s TFSA vs Roth IRA comparison