The engine behind this bull market are low interest rates driven by economic weakness. Bull markets are born out of recessions and this one is no different than many past bulls.

Despite recent relative strength in home building stocks, the housing market is still depressed as there remains an oversupply of homes as well as an abundant supply of foreclosures. Commodity prices are on the rise again however, core inflation and wage inflation remain weak. The employment picture has not yet improved enough to allow the Fed to normalize rates. Therefore, the proverbial punchbowl remains on the table with additional re-fills likely.

Bottom line: There is little competition for stocks.

The Feds commitment to stimulus is likely to persist throughout 2011. The extension of the Bush tax cuts and the 2% cut in the employee payroll tax rate and a 2-year extension of depreciation incentives for business investment is also a form of stimulus. The above coincides with a favorable election cycle period and a market that is trading at a reasonable multiple when the current interest rate environement in considered.

Certainly, the fundamental tailwinds remain strong. More importantly, our longs continue to work and the market refuses to give up much ground. Therefore, we continue to stick with our plan and add new names as they emerge on a stock-by-stock basis.

The big question is: how far out is the market looking forward and when will it cease discounting the positive side of the coin? The answer: no one knows. This is why regardless of how great all the rhetoric sounds, we adhere to strategy.

To put it in simple terms, all the statistics, analysts opinions and pundit predictions on Wall Street wont change the fact that we sell our stocks when they stop us out and we stop buying stocks when they cease to set-up constructively. In my 30 years as a stock trader, I have learned that this is by far more important than opinions and forcasts, including mine.

Until then, we continue to trade the best SEPA situations as we remain on a buy signal, and the party continues.

Mark Minervini

Tis the season for stock picking contests…

Mike from Money Smarts Blog is participating with a few other savvy DIY investors in a stock picking contest. You can read about that here.

HUZ Silver ETF
RIM Research in Motion
CVX Chevron
POT Potash

After visiting The Financial Blogger, I decided I would send in my selections for this year. He has encouraged folks to submit their 4 stock selections to compete against his and his peers offering a prize to the winner if you can beat our group of bloggers for the 2011 Best stock pick contest.
Here is what I picked:

Amongst other savvy DIY investors, click here to view Passive Income Earners selections.

Click here to see Beating The Index selections.

Click here to see Million Dollar Journey selections.

Again, go check out The Financial Blogger for your opportunity to speculate in 2011!

What do you think of my selections?
Who would you pick?

Cheers,
My Own Advisor

Before I acknowledge all the great articles Ive read over the last week or so, I want wish my readers a very Merry Christmas and Happy Holidays!



2010 was a great year for my wife and I and we have lots to be thankful for. I guess like many folks at this time of year, I find myself being very reflective, which is a good thing in my opinion. Over the last 12 months, I started this blog, met some respected bloggers in the Ottawa area like Canadian Capitalist, Big Cajun Man, Michael James and Larry MacDonald, got married and had an amazing honeymoon, travelled to foreign countries, saw my sister-in-law beat cancer, bought and moved into a new house and watched some of our close friends start families with happy, healthy children. It has been a very rewarding year.

My guess is as good as yours what will happen in 2011 but I must say Im looking forward to what that might be


Over the next couple of weeks, chances are youll see some random posts. I do hope to post Part 2 of my interview with Derek Foster before the calendar turns to January but other than that, no promises. Im going to take some time to unwind, settle into the new place, catch up with family and friends and simply enjoy the holidays.  The red wine is calling now…


Whatever your plans are this holiday season, I hope they keep you safe, happy and healthy. I look forward to sharing more of my financial independence journey with you in 2011.  I think it’s going to be a great year!

Merry Christmas!
Mark

Here are just a few of the excellent articles I read this week.

If you’ve been following my blog, you might recall a few months ago I called out to Derek Foster, wondering what Canadas Youngest Retiree has been up to.

Back in September, Derek was a busy guy.  I found out he completed an interview with MoneyTalk host Patricia Lovett-Reid, he was preparing for a speaking engagement in Toronto at Canadian MoneySaver’s Investment Conference, he was putting the finishing touches on his new book and as always, he was helping raise his five kids.  I don’t know about you but that seems more like a year’s worth of work, let alone one month.

For those of you who don’t know who Derek Foster is, here’s a quick bio (photo courtesy of his website):

• Derek was born in Ottawa in 1970.
• Derek was able to become a millionaire and leave the proverbial rat race at the age of 34 by using various investing strategies, many he believes any investor can emulate.
• Derek, ”Canada’s youngest retiree” is a well-known Canadian author and has shared his personal investment experiences and strategies in his National Bestselling Books:
• Stop Working:  Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too:  You Still Can!
• *The Idoit Millionaire (*Latest book, Fall 2010)
• When not writing books or giving speaking engagements, Derek spends time with his wife and five children in Ottawa (in my old neighbourhood no less).

For a couple of years now, maybe like some of you, I’ve been both entrigued and somewhat skeptical of Derek’s investment journey.  I’ve read a few of his books (Stop Working:  Here’s How You Can! and The Lazy Investor) and to be honest I’ve been more inspired than skeptical of his success.  Sure, he may have had some great timing on his side and some risker investments paid off, but sometimes you make your own luck as well.  I know others don’t feel the same and have written so.  That’s fine because everyone is entitled to their own opinion. 

Overall, I’m happy for Derek because he had a dream, saw it fulfilled and then some.  Investment timing, luck, skill or otherwise, he’s a fortunate guy. 

I’m glad I got the chance to chat with Derek for almost a couple of hours a few weeks back.  Here’s what he had to say in Part 1 of My Own Advisor interview.  I hope you enjoy the read.

*     *     *     *     *     *     *     *     *

My Own Advisor:  Thanks again for the interview Derek. It’s a busy time of year for everyone and I’m glad you got back in touch with me. It’s great to finally chat with you – enough email already!

Well, onto my questions.  Ready?

Derek:  Fire away Mark.

My Own Advisor:  Youve just released the latest book in your Stop Working series entitled The Idiot Millionaire: You Can Become Wealthy! What inspired you to write this book?


Derek:  To be honest, it was largely because of the 2008-2009 economic downturn. Because my personal situation had changed since I originally left the rat race at 34, (I was earning an income from other sources such as book sales, etc), I wanted to switch my portfolio to higher growing dividend-payers as this would save me tax and generate better returns over the long-term. BUT I wasnt as smart as I thought I was; hoping to sell my stocks at one price and trying to get back in at a lower price. In some cases, it worked. I bought businesses like JNJ, Shoppers Drug Mart and Phillip Morris at reasonable prices. For other businesses, it didnt work. For example, I waited too long for Canadian bank stocks. I missed the bottom and their subsequent run ups in price. Admittedly I missed that boat. I would buy some if prices to crept lower. I guess the title of my book really applies to me, kind of tongue-in-cheek.


My Own Advisor:  What makes this book unique in your Stop Working series?

Derek:  More so than any of my previous books, this one discusses a companys competitive advantage. I describe what I mean by this and how investors would do well to invest in those companies that have it and it also offers a list of those companies.


There are many companies out there that are worth owning, companies that pay dividends but they do not have any economic moat around them. This is important because ideally you want to buy companies that not only pay dividends, but that increase their dividends over time and also have great growth opportunities because of their advantaged products and services. My new book includes a pretty good list of these companies in Canada and the U.S. In the U.S. for example, Coca-Cola quickly comes to mind. In Canada, Enbridge.

My Own Advisor:  Switching gears a bit, tell me about your investment strategy. Still a dividend investor?


Derek:  Absolutely, but my approach or maybe should I say my focus has changed. Before I was more focused on higher yields for income generation, maybe slower-growing stuff but now my needs have changed. I mean the books generate income which was an unexpected surprise (because being an author or a writer is not usually the path to riches). Really though, Im fortunate to have some other income streams with no debt and so things are different for me at 40 than 34 when I wrote Stop Working (Heres How You Can Too!). Geez, that was six years ago. Im now more focused on companies that have their moats and good long-term growth prospects. I try to explain that in plain language in the new book.


Also, the reality is many folks dont retire from the workforce at 34, or even 40 or 50. They are working their way towards retirement bit by bit and hopefully this book will provide them with a more complete list of companies to help them out.

My Own Advisor:  A short time ago, when the market was falling (in 2008-2009) you sold all your dividend payers. I read a few articles about that. You took some heat. Can you walk us through that decision?

Derek:  I was an idiot but at that time, I sold my shares in early February 2009, I thought I could get back in later and at cheaper prices. Turns out I did and I didnt as I told you before. I managed to buy a lot of stocks much more cheaply but a large part of this was luck. I benefitted from put-option premiums and the incredible strength of the Canadian dollar. After I sold my stocks, I remember humming and hawing for a couple of weeks – should I say anything to the media? The books encouraged folks to do the opposite; buy and hold dividend-payers for income. I didnt want to be hypocritical but I can see why some people were a little put off, you know what I mean? In the end, my approach did save me money and I came out ahead but not on everything; I missed the boat on those Canadian bank stocks and some other companies I would like to own.


The book (The Idiot Millionaire) actually includes some of this stuff and Ive got some details in there about my prices when I got back in.


My Own Advisor:  Made any recent purchases?


Derek – Yeah, I bought Strayer Inc (a for-profit university) at a pretty reasonable price. It just made sense with our Canadian dollar being so high and the recent stock price weakness due to pending potential changes to loans for students. Im very comfortable with this holding but I realize there are potential risks. The stock price had dropped from over $250 earlier this year to under $140 where I bought it. This is even cheaper than at the March 2009 low of $159 and the Canadian dollar is much stronger now, so the stock price is actually 30% below the March 2009 bear market low (in Canadian dollar terms).


My Own Advisor:  Something more fun now. Whats on your Christmas list for 2010?


Derek:  Well with five kids in house, Christmas is really for them, not me. Ive never been one to covet stuff, Im not materialistic. I finally got a GPS this summer for our trip out West and Ive got a laptop computer. During our trip, once the kids were in bed and all the chatter had stopped for the day, I pulled out my laptop and wrote a couple of pages (for the new book). Honestly, Im a cheap guy. If a burglar came to my house, he would quickly leave in disgust as my material possessions are not really worth stealing (except perhaps for my Sienna minivan). When I look at stuff, I always ask myself, is this really going to add any value to my life? If the answer is no, I dont buy it. I guess nothing Mark. I dont even own a cell phone. I guess I dont consider myself important enough to need one.


I had to laugh at this last response. I mean, with five kids, how can Christmas NOT be all about them?
 
It was great to chat with Derek.  He’s a bright and funny guy.  Foster’s fast track to early retirement through  savings and diligent investing in Canadian and U.S. dividend paying stocks may not appeal to everyone but I think it’s inspirational.  In the end, we’re all trying to achieve financial freedom and regardless if you’re a fan or a critic, learning something from Derek Foster can and should be done.  That doesn’t mean you need to follow his path or emulate what he did.  Knowledge is always different than the application, but learning what works and what doesn’t for you is important.  I’m trying to build my investment knowledge and application all the time because in my opinion, continuous improvement is critical to success. 
 
In Part 2 of my interview, you’ll hear more from Derek about his portfolio allocation and his stock market predictions for 2011.  Stay tuned for that blogpost after Christmas. 
 
I hope you enjoyed Part 1 and as always, I look forward to any comments!
 
Cheers,
Financial Cents

Ken Fisher Interview Part 6
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: In regards to Congress, in your book, you do show the analysis of a change in parties and how it can affect the market, but have you done research on Congressional changes from one party to another?

Fisher: Those don’t matter much. What matters is do they have power to pass or not.

It’s really not whether the Republicans are better or the Democrats are better. When you move from one party has got the power to nobody’s got the power, the market likes it better.

Let me put it this way. Markets really don’t like political change. They don’t like having legislation. It doesn’t matter if it’s legislation that the Democrats would prefer or legislation that the Republicans would prefer.

So if you take the time period like the 1994 midterms with the Republican revolution, that worked really well because the Republicans didn’t have big margins when they won, in 1994. They had a big election to get there but they didn’t have big margins, and then they had a Democratic president who could veto. So not much got done after that.

This time we’ll have the same thing. Almost certainly, the Republicans will take the House of Representatives. (ed. note: interview took place Oct. 27) The Democrats won’t have any margin and won’t be able to pass anything, and the Republicans will pick up steam, and while its very unlikely they will take control of the Senate, with one House in one party and another house in another party, it’s like what Ronald Reagan had in 1983.

Stockerblog: Now Bunk Number 36, I think most investors, obviously incorrectly, fear higher taxes. This is the one about stocks love lower taxes.

Fisher: We kind of talked about this before. Those fears are already priced into the markets.

This can be done one of two ways. The one people are worried about now is the sun-setting of the so-called Bush tax cuts. Everybody knows that’s fair and have had a lot of time to react to it.

Let’s step back for a minute. The United States is part of the world is important, but it’s not the only part of the world, and of the United States, more money than not isn’t taxable than is. Most of the money that’s taxable doesn’t get sold anyway, like Bill Gates owning shares in Microsoft or me owning Fisher Investments. It’s not like a stock that you’re going to turn around and sell right away. And then the people that are taxable investors, if you think about it now after what we’ve been through in the last few years, not that many of them have a lot of capital gains to take. If they wanted to take them and realize the gains, they have had all this time to do it before the tax change occurs. So it’s not like they didn’t have lots of lead time.

So you can say, who in their right mind if they’ve got a thousand shares of stock X at a big capital gain, and they want the lower rate, who in their right mind is holding off until after the change. The selling’s all done in the here and now. The odds are that the market doesn’t have a problem with that moving forward.

There’s this part that I find amazing, which is the arrogance of presuming that an investor sees something that pretty much every other investor ought to be able to see, and from that, you continue to see that its a smart economic decision. That might be true outside of the world’s capital markets but the whole role of capital markets makes that impossible.

End of Part 6

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

Part 3 of this interview is available HERE.

Part 4 of this interview is available HERE.

Part 5 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the articles were written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

Ken Fisher Interview Part 5
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: Bunk number 40 actually surprised me. This is the one about ‘Presidential term cycles are voodoo.’ I would have thought that this would have been a typical bunk that wouldn’t really have patterns.

Fisher: You think it would be something like the Super Bowl indicator?

Stockerblog: Yes. That’s what I would have thought and I think a lot of readers would have thought so.

Fisher: I think most people’s reaction is that’s what it is. Most people’s reaction is something like what you articulated, and I’m just going to make a series of points. One of the points which is actually in here which is coming right at us, not only are the data on page 154 and 175 about the third year president’s term true, but the history of twelve months after a mid-term election is positive, not just the year but down to the six months. All are positive, some more positive, some less positive.

I believe what happens based on my analysis of political processes is, I spent a lot of time analyzing this and I think I know what I’m doing, is that the president that I’ve described in this pushes his most onerous legislation in the first and second year of his term because he knows that his party almost always, this is relative power of the opposition in the mid-term which is exactly what’s going to happen six days from now [ed. note: interview was Oct. 27], and he knows he won’t be able to do later, so he does and the more he does it, the more his party loses power to the opposition party in the mid-term.

This is a pattern that we do over and over again that we never seem to fully recognize. There are very few exceptions to it in history and presidents feel lucky when they get those exceptions. In the first two years when we do all that heavy legislation, the people don’t recognize this because of the way liberals and conservatives think is similar is just opposite. They think that whatever he passed that they want to do is what’s right, but what they miss is anything you legislate, other than platitude statements, is taking from somebody to give to somebody else in some way, One of the lessons of behavioral finance is that the average American hates a loss two and a half times as the love a gain, so when you take from these to give to those, the people you take from hate it more than the people you give to like it, and everybody else fears you are going to come and get them next.

So when we do that politically, which is in the first and second year of presidents’ terms, the process of what could be referred to a political risk aversion rises, and when political risk aversion rise, total risk aversion rises, and you get more market-bad times. On the other hand, between about June of the second year of the president’s term and September of the third year of the presidents term, political risk aversion in America in a predictable way goes from an all time highest level in the four year cycle to its all time lowest lever in the four year cycle. As that political risk aversion falls to the floor, total risk aversion has a tendency to fall.

So if you take this year, the one flavor where you have a Democratic President and Congress, you saw legislation that you know about. You had all kinds of people that didn’t like that squealing like stuffed pigs, how terrible it is, how the world’s going to hell, how Obama is a socialist, and, and, and, and, and. From their viewpoint, that all makes sense. But they don’t fully appreciate that that stuff ended. It’s over. When I say it’s over, were going to have effectively the equivalent of a hung parliament. The only things they are going to pass after this election are things that have very broad agreement, and there’s not that much of that. So the takes from these to those is completely over.

Therefore, political risk aversion is over, and when political risk aversion falls, total risk aversion falls, the market’s going to do better than not. That’s what’s behind that cycle. The key, as I said in my The Only Three Questions book, to recognizing a pattern is a bunk like the Super Bowl indicator or whether it’s something real is to actually come up with an underlying economic mechanism that drives something that relates to either the economy or markets.

In this case, it’s simply, presidents are really good at elective politics, that’s how you become president. If you are not good at elective politics, you don’t become president, and they know what happens with mid-term elections. When President Obama got elected, he know that he had two years to get things to Congress so if he couldn’t get them through in the first two years, he’s never going to get them through in the back two years, so he rammed a lot of stuff through and he did that rather successfully. He got a lot of stuff through but not a much as he wanted to, but he still got a lot of stuff through, and made a lot of people hate it, made a lot of people upset, and increased political risk aversion. But now that’s going away.

We did predict last year, that basically we would get the election outcome approximately that we are going to get next week, which is a Congress that can’t do anything. I’m always amazed that because so many people are so interested in politics, they don’t seem to be able to see the forest from the trees.

End of Part 5

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

Part 3 of this interview is available HERE.

Part 4 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the articles were written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

Brazil has done extremely well over the last decade from an economic standpoint, with unemployment way down and per capital income way up, reduced poverty and an export boom. With a track record like this, investors are taking a close look, and income investors can find plenty of Brazil dividend payers that trade on the New York Stock Exchange, twenty according to WallStreetNewsNetwork.com.

CPFL Energia S.A. (CPL) is one example of a company that is participating in Brazil’s growth. This Sao Paulo based electric utility has 6.6 million customers. The stock trades at 13.5 times forward earnings and pays a generous yield of 7.9%, payable semi-annually. The dividend payout was recently increased.

CPFL’s dividend payouts of $905 million is well covered by the $1.58 billion cash flow. The stock has $5.70 in cash per share. The company earnings announcement will be held November 10, 2010. Even Jim Cramer likes the stock, who said on October 15, “I like CPFL Energia S.A. It’s got a better yield. Let’s just stick with quality.“

To see all twenty of the dividend paying Brazil stocks, along with several of the non-dividend payers, go the WallStreetNewsNetwork.com. For more information about investing in Brazil, you might want to get the book, Investing in Brazil Stocks: Get Rich from the South American Giant (it was written by me a couple years ago).

Disclosure: The author did not own any of the above stocks at the time the article was written.

By Stockerblog.com

One recent article I read said the key to avoiding another recession rests with stabilized U.S. housing prices. Another article says we’re on the verge of a housing bubble in Canada. One day, Canada’s oil sands are doomed because of the dirty stigma associated with them. The next, “dirty oil” is here to stay everyone because North America’s thirst for black gold isn’t going anywhere soon and if anything, it’s going to go up. Markets up, markets down. A bubble over here and a bubble over there. No doubt the good news and bad news stories are everywhere. My head is spinning just thinking about the economic rollercoster ride and spindoctors in the media…

Instead of dwelling on that, I’m going to relax this weekend amongst some other commitments and read a few of my favourite blogs. There are a number of posts I didn’t get to, but many I did and below are a list of my favourites. Amongst a wedding and completing a course I signed up for almost six months ago (I have to complete it this weekend), my wife and I have some work to do around the house. But, once the chores are done, I fully intend to chill out and get some personal finance reading done. I’m feeling much better now; over my small illness, so although we have much to do this weekend, it’s time to celebrate and enjoy it. I hope you find time to do the same.

Happy reading!

Mich from Beating The Index put the latest interest rate forecast into the spotlight, questioning whether anyone (including all the talking heads) really knows where rates will go do you?

Balance Junkie had an insightful and reflective post about her stock allocation all in and none at all?

Andrew Hallam told us that Canadians might actually turn down Vanguard if they came north. Could he be right?

Boomer from Boomer & Echo wrote about having a financial plan and building retirement income.

Larry MacDonald introduced us to Nora Dunn, a lady with no fixed address who is a self-professed professional (and successful) hobo.

Canadian Capitalist informed us why he prefers US-listed ETFs, not ETFs hedged in Canadian dollars (and makes a good case for it as a long-term ETF holder).

Dan from Canadian Couch Potato told us how to reduce the costs of currency exchange.

Big Cajun Man shared his experience with TD Bank and the RESP cashing-in-process. Check it out!

Dividend Growth Investor wrote an excellent post about high income stocks you should consider holding in your portfolio.

Dividend Dollar told us not to let our emergency fund rot!

Dividend Monk told us to walk the path between investor overconfidence and fear to be successful. A great read, and likely a narrow path for many DIY investors!

Money Energy reminded us about corruption and greed that exists on Wall Street. What are those seven deadly sins again?

Kevin from Invest It Wisely got a little philosophical this week and reflected on opportunity costs, why they shouldnt be ignored.

The Loonie Bin wrote about early retirement. I’m trying!

Michael James reminded us to manage our expectations for investing returns and always think in post-inflationary dollars. I need to do that more!

Passive Income Earner reported his net worth update for the month and kudos to him, it keeps climbing…

Young & Thrifty wrote to her readers about spending money to look good.

Preet from Where Does All My Money Go and Dan Bortolotti from CCP are giving away tickets to see Sir Richard Branson! Oh yeah, and some other guy, the CEO from ING Direct.

Cheers!
Financial Cents

It is refreshing to read, after seeing so many doom and gloom books blaming the failure of capitalism, a new book about how capitalism is the solution and not the problem.

I was very happy to read Steve Forbes’ recently released book, How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy, which very clearly shows us that capitalism is here to stay and will get us out of this mess.

Capitalism works well when governments stay out of the way. Steve Forbes explains very clearly that the solution to our economic problems is to let the free enterprise system run.

A great read that also makes a great gift, How Capitalism Will Save Us by Steve Forbes and Elizabeth Ames is the book worth getting.