Scotiabank motives aside (selling products) that seems like a pretty high number almost 4 in 10 Canadians will retire but work in retirement to make ends meet.

The study goes on to state:

56% of Canadians think they will need less than $1 million to fund their retirement, half of those believe they will need less than $300,000 to retire on.
28% of Canadians think they will need between $1 to 2 million to retire on.
16% believe they will need more than $2 million to retire on.

 Financial necessity is a pretty vague term but I hope this doesnt include travelling for a few months each year, playing golf every day, going back to school or buying a house on the ocean like some retirees plan to do. None of these come cheap.

I wonder if they work at a Bell call centre in Toronto?

Whats your magic number? Do you have one?

Cheers,
Financial Cents/My Own Advisor

1. $20 Gold Pieces for Your Heirs
This is one I heard from a coin dealer, so be very skeptical about this and definitely run it by your accountant. The technique is to buy a bunch of rare $20 Gold Pieces which you will eventually leave to your heirs. When I say rare, I mean $100,000 or $200,000 for a coin. When you pass away, because the coins are still considered currency, they will only be valued at $20 each for estate tax purposes (according to this coin dealer). The coin dealer has other suggestions with these coins (i.e. being paid with them to reduce capital gains, etc.), but I’m even more skeptical about that. (Do you think the coin dealer has a hidden motive by saying this?) Like I said, ask your CPA or tax attorney.

2. Anonymous Donations to Charity
If you have ever wanted to make a totally anonymous donation to a charity (and there are several reasons you may want to) but still want to be able to take a tax deduction, here is what you can do. Go to your local post office and buy some Postal Money Orders. You are allowed up to $1000 per money order. Don’t request more than three at once, otherwise the Post Office will request identification from you. On the money orders, write the name of the charity where it says “Pay to” along with the charity’s address, but leave the part where it says “From” blank. However, on the receipt, which you will keep with your tax records, you can fill in your name as the sender. As for the original, send it in to the charitable organization in a plain envelope and no one will be able to trace it back to you.

3. Worthless Stocks
According to the IRS, “a taxpayer who owns stock that was acquired on the open market for investment and that has declined in value is allowed a deduction for a capital loss in the taxable year in which the stock is sold or exchanged or becomes wholly worthless.” But the big question is “When do they become worthless?” Worthless is kind of a nebulous word. Just because a company declares bankruptcy, doesn’t necessarily mean that the stock stops trading. And I’ve seen several stocks stop trading for a year or two then start up again. If you have the stock in the form of a certificate, there are companies that will buy your old certificates as collectibles. It may not be much, maybe only a dollar, unless the company is in an unusual industry or has an interesting picture on it. The sale might be considered a transaction for capital loss purposes, but you need to ask your advisor.

Please note, if a public company committed accounting fraud (e.g Enron), you cannot deduct the loss as a theft loss. The IRS states that they will disallow such deductions and may impose penalties.

4. Short Selling
If you are a short seller, and you short a lot of stocks that pay dividends, remember that technically you owe and pay the dividends to the owner of the shares that you shorted. Since this is an investment expense, make sure your accountant takes this into consideration.

5. Municipal Bonds from US Territories
For the owners of a diverse portfolio of municipal bonds who live in states with income taxes, remember that if you have any munis from Puerto Rico, the Virgin Islands, or Guam, the income is exempt from state income taxes. On the Tax Statement Form from brokerage firms, generally all income from municipal bonds are lumped together in the same section. If you live in California, and you own munis from New York, California, Puerto Rico, and Texas, the interest on the California and Puerto Rico bonds are exempt. Occasionally, staff workers at accounting firms may carve out (in this case) just the California interest, and lump all the other interest together, including the Puerto Rico interest, as taxable California income. Of course, it’s always a good idea to check your entire return before you sign it.

You will of course see a lot of other tax saving tip articles this week. A couple things to keep in mind. Many income and deduction adjustments can trigger the AMT. Also, if you expect your income to be much higher next year, take a longer term approach to planning your deductions. As previously mentioned, check any tax techniques, the ones above and any others that you read about, with your tax advisor.

By Stockerblog.com

This interview was originally published on December 17, 2010 at thekirkreport.com

Charles Kirk: It is with tremendous pleasure that I offer my last interview of 2010 with Mark Minervini.

As with many traders I interview, Mark requires no introduction as he is one of the most highly-respected independent traders of our generation. His blog in recent years has instantly become one of the must reads out there as he often shares market commentary and analysis which shows why the respect so many have for Mark is so well-deserved.

Moreover, his experience and past history of savvy market calls is legendary. It is with little doubt that we can all learn a lot from him! We hope you enjoy and find this focus interview helpful in your own journey toward more success in the markets.

Kirk: Hi, Mark. First of all, thank you for taking the time to answer our questions. I speak for many members who have a great deal of respect for you and we sincerely welcome you to this interview series.

Mark Minervini: You do a great job, Charles, and Im honored to be a part of it.

Kirk: Please tell us a little bit about how you got interested and started in trading.

Mark Minervini: I dropped out of school in the eighth grade in pursuit of a career as a drummer. From the money I made working as musician, I bought my first stock in 1983, which was a few hundred shares of Allis Chalmer. Shortly after, I read Richard Loves book, Superperformance Stocks: An Investment Strategy for the Individual Investor Based on the 4-Year Political Cycle. Everything Ive created with regard to my trading approach since stems from Loves initial impression on me, specifically from his writings in chapter 7.

Kirk: What was one of the most important lessons you learned early on?

Mark Minervini: That no one was going to do it for me; no one was going to make me rich except me. I learned that you must take responsibility for your results in the market and in life if you want to be exceptional. Secondly, I learned that in order to do well in the market you must be consistent; consistency is what separates the pro form the amateur. In order to have consistent success, risk must be managed in relation to potential reward as standard operating procedure. Youre not going to make just one trade, rather hundreds or even thousands of trades; its all about how much you make on average versus how much you lose on average over time. Lastly, I realized that I simply had to get to the bottom of what actually worked in the marketplace and ignore all the opinions and theories.

Kirk: Was there anyone out there who helped you greatly during your initial learning curve? If so, what did you learn most from them?

Mark Minervini: My Mother and my Father. I learned it was ok to do what I love; to go after my dream. I also learned it was ok to be unconventional. I was given the room to be creative. My parents trusted me. I always knew I was supported emotionally. Financially, we were poor but my parents supported my dreams.

Kirk: Indeed, it is so important to have a strong support structure in place. In a nutshell how do you currently approach the market and what is your primary trading strategy?

Mark Minervini: I approach the market from a risk first approach. My trading strategy is called Specific Entry Point Analysis or SEPA. We look to enter trades at low risk entry points relative to potential reward. Primary focus is not to lose money. Secondary focus is not to lose money. And, the final focus is to make more on average than I lose.

Kirk: You remind me of Buffett who said he had only two rules: 1) Never lose money and 2) see rule number 1! What do you see as the primary benefits from employing a strategy that focuses on both fundamentals and technicals?

Mark Minervini: The benefits are having all the pertinent information that is consistent with big winning stocks. We know what to look for both fundamentally and technically. I have seen stocks bought on pure technicals and the guy buying the stock doesnt even know that there was a cash offer or a proposed merger right at the price he paid. Refusing to look at fundamentals or any information that gives you an edge is usually because the individual just doesnt know how to use the info, or has some bias based on personal opinion or tradition.

Kirk: Why is this kind of trading best for you and, more importantly, why do you think it works so well?

Mark Minervini: My strategy works well because its my strategy. I know the strengths and, more importantly, the weaknesses of what it is I do. It also works well because I allow it to work and stick with it even when it runs into difficult times. Nothing works well if you keep changing your approach. To be a master you must be a specialist, not a jack of all trades.

Kirk: What do you trade mostly? Equities, options, futures, ETFs, currencies, etc.?

Mark Minervini: Only equities.

Kirk: In an average week how many trades do you make? What is your average hold time and how many positions do you have open at any given time?

Mark Minervini: During an average year I may make 400-500 trades. About half of that turnover is a result of taking small losses, which Im out of pretty quickly.

Kirk: What would you say are your primary strengths and weaknesses as a trader?

Mark Minervini: Discipline is my primary strength. And the willingness to admit when Im wrong and move on. My weakness is I usually sell early and often leave money on the table. But I dont really view that as a weakness, just something that could be improved upon. When you move in size you have to get out when the getting is good.

Kirk: In my experience it is often better to sell too early than too late Mark! How have you learned to mitigate your weaknesses and focus more on your strengths?

Mark Minervini: By not focusing too much on my strengths. If youre good at buying and bad at selling I would focus on selling; if you improve your selling you will have a complete game. Focus on making your weaknesses strengths and then you will have no weaknesses. Exploit your strengths and improve your weaknesses.

Kirk: What have been some of the most challenging lessons you have learned?

Mark Minervini: That you cant be everything. You must commit to a strategy and sacrifice other strategies. The problem with the market is its like playing poker however; you always get to see the next cards even though the hand is over. You always see what would have happened. This is very difficult to deal with for many people. To be successful, you have to understand that trading is NOT about picking highs and lows, its about making money.

Kirk: Very good. What are some of the key rules that you consider before selecting any potential trading opportunity?

Mark Minervini: How much am I risking is the very first concern. Also, does the stock meet all the necessary criteria? If the risk is acceptable and all the entry criteria are met, I enter the trade.

Kirk: What would you say is your average win: loss ratio for your trades?

Mark Minervini: I average 2 to 1.

Kirk: How has your overall performance been recently, as well as over the past few years?

Mark Minervini: Its been about the same as always. Im a consistent 2:1 trader.

Kirk: What would you say are your favorite kinds of technical and fundamental set-ups?

Mark Minervini: The ideal set-up is a stock emerging from a constructive consolidation with strong accelerating earnings and sales.

Kirk: Can you give us a recent example of a set-up you found to be very attractive and worked well in this market?

Mark Minervini: CML. Bought it on 11/24. Sold it on 12/7 for a quick profit.

Kirk: Have you noticed any trading set-ups more prone to failure than they have been in the past?

Mark Minervini: No. Not much has changed. Contrary to what many believe, its not different this time. LOL

Kirk: To help us understand your trading approach, can you talk about a recent successful trade from start to finish?

Mark Minervini: LULU. Supported by excellent fundamentals, the stock emerged from a double bottom pattern that formed from 4/15 11/04. I bought the stock on 11/05 the day the market topped just before a pullback of about 5% in the major averages. The stock was held through that market pullback because it acted normal and held above our stop. This gave me the conviction to add to the position as it emerged through its next buy point in November. I sold the stock (most likely too early) on 12/09 when they reported earnings up about +50% from the initial purchase from about a month earlier.

Kirk: Now please tell us about a recent unsuccessful trade.

Mark Minervini: Shorted GMCR; shorted the rally in October and November after the big break on SEC news. Stock rallied and stopped us out

Kirk: One of the things I most appreciate about you is how much you stress proper risk management. If we can, lets talk a little bit about position sizing. Can you provide an example of a recent trade and explain your method for determining the size relative to your own trading portfolio?

Mark Minervini: I want to own as much as I can but generally no more than 25% of my portfolio (as liquidity permits). You are not going to make huge returns being too diversified. However, I only risk what I can get out of safely based on liquidity.

Kirk: Thats interesting. I think many would be surprised at the idea of having any position anywhere near 25% of an entire portfolio. Besides over diversification and liquidity concerns, what common mistakes do you think many traders make concerning position sizing?

Mark Minervini: They dont know what an optimal position size should be based on their own risk/reward and risk tolerance. For instance, if youre a 2:1 trader, your optimal position size is 25%.

Kirk: Ok. I think I understand what you mean, but please explain this position sizing formula more in detail so others can perhaps apply it in their own trading. Can you offer another example?

Mark Minervini: Ok. First, its important to understand that you are not going to achieve huge returns consistently being overly diversified or by relying on diversification for protection. You will only get a smoothing effect. When you own a bunch of stocks you end up with two problems: the first being that you just cant watch and know all you need to know about each of them. The second problem is that you will have a difficult time getting fully invested quickly when opportunity presents itself and more importantly, getting liquid if you need to raise cash in a hurry. In addition, the math just doesnt support it. Depending on the size and risk tolerance of your portfolio you should typically have between 4 or 8 stocks and for large portfolios maybe up to as many as 10 or 12 stocks. This would provide sufficient diversification but not too much. The Optimal-f formula can act as a starting place for you to understand optimal position sizing based on expectation. If Ken Heebner of CGM Funds can move around billions of dollars in just twenty names and still manage to beat the market, then a personal portfolio can surely manage sufficiently with 4-5 or 10-12 stocks. If you lose 5-6% on average and even if your position size is at 25% exposure, youre still only be risking about 1.25% of your capital per trade. Of course, if you dont have an edge, then you will lose no matter what your position sizing is.

Kirk: Good, thats helpful. So, do you use and set stops, Mark? If so, whats your stop loss method?

Mark Minervini: I always know where Im going to get out of a trade before I get in. I aim to lose no more than 5-6% on average over time on my losers.

Kirk: Do you ever average down into a losing trade?

Mark Minervini: Theres a reason Paul Tudor Jones had a sign posted on his wall that read Losers average losers, and that reason is because its true. I almost always only add to a position if it proves itself and then I may add to my position at a higher price, not lower.

Kirk: Do you scale up and into winning positions? If so, how do you know when to increase a position size relative to your overall portfolio?

Mark Minervini: Yes. I generally move money into the better performing names at subsequent pivot points or set-ups.

Kirk: All good traders dedicate a lot of time and effort to improvement and reducing mistakes. How has your trading method evolved and improved over the years?

Mark Minervini: It just becomes more and more crystallized because I continue to focus on the same timeless principles, which allows me to become more and more of a specialist. The power of a narrow focus is amazing. The key is to be a real pro at something. Know all you can about a style or a tactic. Then you can build on that foundation. Traders give up too easily and jump around too much when things get difficult. How good do you think Kobe Bryant would be if while he was developing his skills growing up every time he had a really tough game he changed to a different sport or played a different position?

Kirk: I couldnt agree with you more Mark. I see this problem among many. Can you provide an example of something you thought was true when trading early in your career and now believe is just completely wrong?

Mark Minervini: Yeah, everything. But I learned very quickly sound principles. It just took me many years to master the application.

Kirk: Why do you think most traders fail?

Mark Minervini: Here are 6 reasons:

1. Poor selection criteria; usually based on personal opinion, theory or tips and bad advice
2. They dont stick to and commit to an approach; style drift
3. Dont cut losses (#1 mistake made by virtually all investors)
4. Dont know the truth about their trading they fail to conduct in-depth post analysis
5. Treat trading as a hobby not a business
6. Want too much too fast; learning a skill takes time

Kirk: Please describe a typical trading day for you. How do you organize and dedicate your time?

Mark Minervini: Most of my work is done the night before. I already know what Im going to trade before the open. I watch the market all day long, never leaving my desk for more than a few minutes during trading hours.

Kirk: How much time and attention do you pay to others opinions about the market and/or stocks you are trading?

Mark Minervini: Zero. I avoid outside opinions like the plague!

Kirk: Are there any tricks of the trade that you use to help maintain a consistent successful approach over a long period of time?

Mark Minervini: Yeah, long hours, hard work, a sound approach and discipline. There are no tricks or big secrets. Again, is there a secret to having a good basketball shot? It starts with a good coach, proper practice, plenty of hard work, discipline and sacrifice.

Kirk: Amen. However, most traders I know have a set of rules that they have learned from past mistakes. What are a few of yours that you think most traders would benefit from?

Mark Minervini: Hard work alone wont cut if you dont have a sound approach and if youre not doing the right things. You must be facing west if youre looking for a sun set. Approach each trade from risk first; ask how much can I lose. Dont risk more than you can expect to gain on average. Know the truth about your trading; study your results carefully. Never average down. Always cut your losses; keep your losses small. These are fundamental rules that should never be compromised.

Kirk: I suspect like all good traders you are working on improving your performance in some manner. Can you share what youre specifically working on right now?

Mark Minervini: Sticking to the rules. Always making sure we stick to the rules. We have a great approach, I dont like to get to tricky and over complicate something that requires a straight forward approach.

Kirk: Youve been trading for some time now. What would you say are the biggest changes in the markets and trading in general youve seen during your career, both good and bad?

Mark Minervini: The order handling rule change in 1997 has changed the way stocks move short-term because Market Makers dont really keep inventory anymore. Its a topic that would require a lengthy discussion; maybe we could talk about it another time. Other than that, not much has changed except more information moves faster than before.

Kirk: What advice would you give a person just now beginning to trade the markets?

Mark Minervini: Find a good mentor. Commit to a strategy. Cut your losses. Tune out the media. Take full responsibility for your results.
Kirk: What do you think are the greatest misconceptions beginning traders have about trading the markets and about trading systems?

Mark Minervini: Way too many to mention. Just about everything a beginner thinks is a misconception.

Kirk: A number of people who read my website desire to trade for a living and I receive a lot of questions concerning capital requirements needed to start and how to make the transition to trade full-time. Do you have any words of wisdom or rules of thumb to share along these lines?

Mark Minervini: I started with a very small sum of money and turned it into a fortune. Capital is not the challenge. Mastering yourself is the challenge. Discipline is the challenge. Persistence is the challenge.

Kirk: Do you think trading for a living is getting more difficult or easier for the average individual investor? Why?

Mark Minervini: Much easier. Tools for pros and amateurs are virtually identical. The pro has no edge. The individual has the advantage. No real liquidity concerns for the small trader versus the big fund manager. Its a fantastic time to be a stock trader!

Kirk: When all is said and done, in your experience, what is the best way to learn how to trade?

Mark Minervini: Trade. As Ralph Waldo Emerson said: Do the thing and you shall have the power. And then conduct post analysis. Learn to be objective. You could try and find a mentor. However, the chances of getting great advice are slim at best. Trading is just like any other profession, there are only a handful of really outstanding practitioners.

Kirk: Do you have any books, websites, etc. that you highly recommend beyond your own website?

Mark Minervini: The Kirk Report. Why is there anything else? LOL!!!

Kirk: You are too kind Mark. Although I know both of us share a love for the markets and trading, what are your long-term career plans and future for your website?

Mark Minervini: I honestly dont know for sure. My long-term plans are too stay healthy and be a good father to my daughter. This past year I started a pilot training program. Also, we now offer my research to the individual investor not just exclusively to the institution anymore. It feels good to help others achieve their goals. I think I may continue to develop that. Why hog all the good trades for myself? LOL!

Kirk: What are some of your personal passions beyond the market?

Mark Minervini: Ive been a drummer since I was 6 years old and I continue to play. I play tennis, train boxing and lift weights to stay in shape, and I play an occasional round of golf.

Kirk: Finally, if you had only one piece of advice to share with all traders, what would it be?

Mark Minervini: Believe in yourself and never give up. Persistence is more important than knowledge. Make an unconditional commitment to trading and you will not fail.

Kirk: Thank you so much Mark. I really enjoyed this interview and Im sure others will find it helpful.

One way to define cloud computing is having your programs and data stored remotely on a server far away, instead of on individual computers. As long as you have an Internet connection, you can have a fairly dumb computer ans still utilize cloud computing. The clouds are simply the servers of companies that provide this service, and those servers can be located anywhere in the world. If you have Yahoo (YHOO) mail, Google (GOOG) gmail, or hotmail, then you are using cloud computing in a small way. You don’t have the email servers in your office or home, you use the Yahoo or Google servers. Many colleges and universities are turning over their student email services to Google, which saves them money on servers and saves on staffing for support.

These same benefits apply to the private sector, especially when you extend it to data storage and computer software. You don’t need a technician to come out and install new software to each employees’ station. You don’t need a bunch of network administrators monitoring the company’s servers. You don’t need to periodically upgrade computers. You don’t need to own a bunch of servers. You cut down on the costs and issues relating to the disposal of old computers and servers. You don’t need to deal with data security, as that is the job of the cloud computing company. The benefits of clouds are extensive, and there are over 25 stocks in the cloud industry to choose from, according to the Cloud Computer Stock list at WallStreetNewsNetwork.com, including companies involved in server farms and outsourced storage systems.

Cloud computing as a growing industry now appears almost every day in the financial press. And the interest from investors has been significant. Take for example Salesforce.com (CRM), which is up over 600% since it started trading in 2004.

Salesforce.com is a provider of customer-relationship management services that has promoted ‘the end of software’. Salesforce has customers of all sizes, including Corporate Express division of Staples (SPLS), Daiwa Securities (DSECY.PK), Expedia (EXPE), Dow Jones Newswires subsidiary of News Corp. (NWS-A), SunTrust Banks (STI), and Kaiser Permanente. Salesforce trades at a lofty 89 times forward earnings, debt in the amount of $495 million, with over $769 million in cash. The company just reported a quarterly sales increase of 29.8% year over year, with a 1.8% increase in earnings.

VMware (VMW) is another major cloud and virtualization player. Its product VMware vSphere is a cloud computing data center platform. It sports a forward PE ratio of 49.6. The company has $450 million in debt with $2.9 billion in cash. The company reported that latest earnings increased an incredible 121.4% in earnings on a 45.8% increase in revenues.

Citrix Systems, Inc. (CTXS) provides on demand applications and online services, including GoToMeeting, GoToWebinar, GoToTraining, GoToAssist, and GoToMyPC. This debt free company has $902 million in cash and carries a forward PE of 30. The latest quarterly earnings were up 64.3% on a revenue increase of 17.8%.

To access a free Excel spreadsheet database of numerous companies involved in cloud computing in some way, that can be downloaded, sorted, and updated, go to wsnn.com. You can also get info on the green aspects of cloud computing from my book The Green Light on Green Stocks: A Quick Guide to Green Investing and Making Money in Alternative Energy Stocks, in which I described cloud computing as a green industry and a way of providing money saving services to many corporations.

Disclosure: Author owns YHOO.

By Stockerblog.com

With Gold (GLD) reaching all-time highs again this week more investors are putting cash into anything precious metal related but I am here to caution you on doing so. There are far better opportunities than gold right now and chasing this trend is not the formula for generating short-term growth. We have traded GLD call options 8 times this year (7 profitable) in the ETF TRADR portfolio but now its time to step away. Of course, what type of tradr would I be if I failed to offer a better alternative.

First off, it would be very difficult to find a long-term chart more strong and persistent than the Gold chart its nothing short of amazing (and at the same time scary for the future of the dollar). That said, even as Gold has made new highs in recent days there is a better place to focus your trading capital. The semiconductor industry has lifted off in recent days and I expect it to continue. Heres the performance chart between the headline-making Gold (GLD) rally and the Semiconductor ETF (SMH).

read more

by Andrew Hart ETFTRADR.com

I think its safe to say that everyone knows the markets are manipulated but during options expiry week we tend to see prices move beyond key resistance and support levels during times of light volume which triggers/shakes traders out of their positions.

Trading during low volume sessions Pre/Post holidays for swing traders or between 11:30am 3:00pm ET for day traders tends have increased volatility and false breakouts. This happens because the market markets for individual stocks can slowly walk the prices up and down beyond short term support and resistance levels simply because there is a lack of participation in the market.
SP500 4 Hour Candlestick Chart

That being said, the chart below of the SPY (SP500 ETF) shows that last Thursday, (the day before Friday options expiry) the put call ratio was showing extreme bullishness. I also mentioned that we should expect a pop of 0.5 -2% in the next 24 hours as big guys will try to shake everyone out of their short positions (put options).

The put/call ratio indicator at the bottom of this chart is a contrarian indicator. When it shows that everyone has jumped to the bullish side, the big money knows its about time to change the direction so they can cash in at premium price levels.

read the rest

Chris Vermeulen
www.TheGoldAndOilGuy.com

Thursday Sept 9th, 2010

I am going to step out on a limb in this report and cover what I think to be an intermediate top in the precious metals sector. Everyone I speak with and from the hundreds of emails I get I would say the vast majority are bullish on gold and silver. That being said, I feel we are 3-8 days away from a pop and drop in the price of gold.

Below are my explanation and charts of what I think is unfolding.
HUI Gold Bugs Index

This chart tracks a basket of gold companies and can be used as a leading indicator for gold bullion at times. This index tends to lead the price of gold before rallies and also during declines. I have seen this lead by a few hours and even up to 7 days. I find it out perform when gold is about to rally, and under perform when gold is topping or about to start another move down.

It looks as though we are forming a triple top which also happens to be at a previous 2009 resistance level. Each time this level has been reached sellers take control and send the market sharply lower. There have been several long upper wicks formed in the past few sessions telling me that buyers are pushing the price up, but sellers hit the sell button pulling the market right back down. If this triple tops plays out, I would expect a multi month correction to take place. Read the rest HERE

By Chris Vermeulen

Due to the pressure being put on the conglomerate by over 40 members of Congress as well as senators, BP share prices have now lost over 35% of their value since the explosion and sinking of the Deepwater Horizon rig earlier this year and the recent oil spill. Prior to these catastrophes taking place, BP was Britains largest oil company; since then the market cap of BP has seen a loss of more than $60 billion.

As BP continues to see their share prices fall, their competitors are expected to reap the benefits despite having to also endure falling stock prices. Chevron (CVX), ExxonMobile Corp (XOM) and Royal Dutch Shell (RDS-B) are all anticipating taking on the benefits of the oil spill both at the pump and on the stock market. Yet at the moment they all have to accept the damage that has been done to the overall state of the market.

ExxonMobil, for example, has had to witness a drop in its stock price as shares fell from a high of $69 to a current price of $59. The company sells for nine times forward earnings and pays a favorable yield of 2.9%.

Royal Dutch Shell has also experienced a stock price plunge over the same period. The stock has a price to earnings ratio of 11 and sports a very high yield of 6.3%.

This collective loss of revenue is due to the public disdain that has followed since the major oil spill, which consequently has had an effect on sales at the pump as the negative coverage continues to haunt BPs share prices. Analysts expect that BPs competitors will be the ones to benefit from the catastrophe. One such company that may see a rise in its share price is Helmerich and Payne (HP) as a significant portion of their business comes from exploring and extracting fossil fuels on land. The stock sells for 13 times forward earnings and pays a small 0.6% yield.

If you are interested in having a look at how the oil spill will affect other major energy conglomerates then WallStreetNewsNetwork.com has a list of the companies paying out the highest yields and other valuable information relating to oil stocks.

Author does not own any of the above.

By Stockerblog.com

(Al Pacino in “The Devil’s Advocate” (1997))

After reading some of the negative comments to my Me & My Money article in the Globe and Mail from July 23rd, I thought it would be interesting to play the devils advocate to my dividend investing approach. Is there a blind madness to my financial independence method? Is the devil whispering in my ear correct if I continue on my dividend investing journey will a ball of fire engulf me whole? OK, maybe too drastic. I dont expect everyone to be sold on the benefits of dividend investing or DRIPs. Not everyone needs to be a believer and the devil is certainly correct about some things. So todays post takes the devils advocate position with DRIPing, why its not in favour with many investors but I will also take this opportunity to explain to the devil what he might not know about full plans with Share Purchase Plans (SPPs) or even synthetic plans with brokerage accounts. If you’re going to be a critic, you should understand both sides of the story…shouldn’t you?

What the angry soul with the horns-on-fire is saying:

1. In a full DRIP you cant control the price or timing of the dividend reinvestment purchase.
2. In a full DRIP you are not using dividend income to be strategic; buying more shares when the stock price is attractive to you.
3. Setting up a full DRIP is work and time consuming.
4. To set up a full DRIP, in some cases, there are costs to buy shares and get the share certificated.
5. Even with a synthetic DRIP (in a brokerage account) you need enough dividend income to buy one full share.
6. You need good accounting skills to keep track of your adjusted cost base; especially when you sell your stocks.
7. Some full DRIPs with SPPs have minimum purchase requirements (e.g., $100/stock/quarter). 8. You cant own the best companies since they dont all offer full DRIPs.
9. There are notification delays (i.e., about a week) from the transfer agents regarding dividend investment transactions.

What the calm investor is saying back to the angry soul in the funny red suit:

1. Yes, you dont control the price of the dividend reinvestment purchase but you can make use of full DRIPs with SPPs to make strategic purchases when the stock price is right for you.
2. Full DRIPs provide dollar-cost averaging (Don’t most financial experts recommend DCA?)
3. Full DRIPs allow you to buy partial shares (This accelerates your stock ownership (and your wealth)).
4. Full DRIPs have little to zero transaction fees.
5. Full DRIPs take advantage of compounding (Didnt Einstein say compound interest was the greatest mathematical discovery of all time? Who’s to argue him?)
6. Using the transfer agents, if you want a share certificated, it doesnt cost you anything.
7. Many great stocks (contrary to the devils thinking) do offer full DRIPs with SPPs.
8. Many great stocks have SPPs with no minimum purchase requirement (How many people can afford to buy $5,000 worth of stock at one time?)
9. Yes, you need to keep track of your adjusted cost base but then again capital gains only occurs when you sell a stock (If you own great stocks you wouldn’t need to sell them very often!)
10. Full DRIPs are always working so you dont have to someday.
11. You can turn off your DRIP, easily, when you want to and get the dividend income instead.
12. Full DRIPs encourage you to save money.
13. Full DRIPs can help take the emotion out of investing.
14. Full DRIPs can be a great set and forget wealth building plan.
15. Relax (dear devil), its NOT the ONLY WAY to invest!

Full DRIPs with SPPs or even synthetic DRIPs in brokerage accounts offer many pros and cons. (What investing choice doesnt have benefits or risks?) Although the devil with his hair on fire makes some strong points, I believe there are considerable advantages to dividend investing; how full DRIPs with SPPs can be used to build wealth. My Globe and Mail article on July 23rd didnt say it was full DRIPs or nothing – it’s not this way or no way. It said:

“First and foremost, I consider myself a dividend investor who predominantly invests in established companies that have a history of paying dividends.” I use “full DRIPs…to buy partial stock shares each quarter the dividends are paid.” For me, it’s an excellent way to build stock ownership over time, month after month, to compliment my other investment approaches which combined are getting me closer every day to financial independence.

DRIPing is not the only investment strategy around just one of the best I know.

Are the horns on or off, when it comes to DRIPing for you?