Forex For Newbies- Will Forex Investing Work For Me?

What currency is traded in the Forex market?

The item traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most popular currency pairs are:

USD/CHF: Swiss franc
GBP/USD: Pound
USD/CAD: Canadian dollar
USD/JPY: Yen
AUD/USD: Aussie
EUR/USD: Euro

The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.

All currency pairs are quoted with a bid and ask price. The bid (always lower than the ask) is the price your broker is willing to buy at, thus the trader should sell at this price.

When dealing in Forex you will frequently hear the term pip. A pip is the minimum move a currency pair can make. Pip means price interest point. A move in the EUR/USD from 1.2545 to 1.2554 equals 9 pips.

The purpose of trading is to buy low and sell high. The foreign currency market FOREX is no different. The product traded are rates of currencies of different countries.

FOREX is a really unusual market for a variety of reasons. First, it is one of the few markets that it is free of any outside controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.7 trillion US dollars a day.

When this amount of money moves this fast, you can easily understand why a few investors would find it almost impossible to radically increase or decrease the price of a major currency.

The liquidity of the market means that unlike some stocks, traders are able to open and close positions within a few seconds as there are many buyers and sellers.

Margin Trading:

Margin trading refers to the leverage dollars given to the traders in the market.

One of the best features in Forex trading is that traders are able to trade foreign currencies with high margin.

! In Forex , normal trade margins are 100:1 and 150:1, or even 200:1 trade margins. You get 1:1 margin for stock exchanges, 2:1 margin for equity trading, 15:1 margin for futures market. You can easily see how much more attractive Forex Trading is for the average trader.

This very attractive feature can also be dangerous. Traders should be very aware of the margin call and should always avoid them at all cost.

The typical broker will require a minimum account size, also known as account margin or initial margin. Once you have deposited your money you will then be able to trade. The broker will also specify how much they require per position (lot) traded.

There are many automatic trading systems available. Do your research!

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The Tax Deadline Looms: Advice for Last-Minute Filers

Americans get three extra days this year beyond the typical April 15 deadline to file their income tax returns. But those who have put off preparing their returns until the last minute may still find that they'll need to file an extension to avoid penalties if they can't get their returns in the mail by midnight Monday.

With just days to go before taxes are due, last-minute filers need to be prepared and focused to ensure their tax returns are accurate and contain all the necessary information, advises Jackson Hewitt Tax Service (JTX), which is extending its business hours nationwide to deal with the crush of last-minute questions.

"We know as the deadline approaches, many taxpayers will feel overwhelmed and won't know where to begin," says Mark Steber, Jackson Hewitt's chief tax officer. The company's staff is ready to deal with all the questions that last-minute filers so often ask, including how to determine whether they need to file an extension, and how to file one if they do.

An experienced tax preparer can be key in helping you determine whether you owe taxes, and whether or not you need to file for a six-month extension, which gives you until Oct. 17 to file your return. It's important to note, though, that filing for an extension doesn't mean taxpayers can put off paying taxes, says William P. Miller, a certified public accountant based in suburban Minneapolis.

"A late filer must estimate both state and federal taxes owed and pay them by the return due date," he says. Taxpayers will be charged interest as well as a late-filing penalty on any remaining balance that's not paid by the April 18 deadline.

For taxpayers who find themselves making! a last- minute dash to an accountant or tax preparer, Jackson Hewitt offers this partial checklist of documents necessary to compile a complete return:

• Wage Statements (Form W-2)
• Form 1099
• All other income amounts
• Unemployment compensation received (Form W-2G)
• Social Security Card(s)
• Driver's License(s)
• Dependents' social security numbers and dates of birth
• Last year's federal and state tax returns; last year's state refund amount (if applicable)
• Mortgage interest paid and real estate taxes (Form 1098)
• Total of all cash and non-cash charitable contributions
• Any records to support your deductions
• Form HUD-1 or its equivalent if filing for a First-Time Homeowner Credit

Get info on stocks mentioned in this article:

• JTX
• Manage Your Portfolio

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Mastercard (MA): Charge Along With Buffett

by Paul Tracy, editor Street Authority Market Advisor

With more than 988 million of its products in use, $3.5 billion in cash, and a $2 billion buyback, I consider MasterCard (MA) a 'buy it and hold it forever' stock.

And I'm not the only one who feels this way. Just a few months ago, Warren Buffett's Berkshire Hathaway bought 189,000 shares, adding to its 216,000 share stake.

MasterCard racks up $545 billion in transactions each year. But besides its size, what is it about MasterCard that has grabbed Mr. Buffett's attention?

Well for one, even though MasterCard makes credit cards, it doesn't actually take on any credit risk. It simply acts as a "toll" operator.

You see, MasterCard doesn't have anything to do with the debt that investors put on their credit cards -- that's the banks' liability. MasterCard simply earns a small percentage of each transaction.

In other words, MasterCard makes more money as the number of people around the world using its cards grows.

And though that number is growing daily, according to MasterCard CEO, Ajay Banga, close to 90% of all transactions in the world still use cash.

So what Mr. Buffett most likely sees is simple : There's a massive untapped market for credit and debit cards around the world.

And who better to cash in on this opportunity than the world's second-largest credit card company?

So where is this explosive growth coming from? The emerging markets, but more specifically -- China. At the current pace, China will overtake the US as the world's largest credit card market by the end of the decade.

As China moves away from cash and into plastic, MasterCard will be there, growing earnings along the way. In fact, analysts expect MasterCard to grow earnings by 19.6% in the next year alone.

But what really has investors excited are some of MasterCard's recent shareholder-friendly moves.

For exa mple, the company recently announced bumping up its existing buyback program by another $1 billion, so that it is now buying back $2 billion in stock -- roughly 5% of the shares outstanding.

The company also has less than $30 million in debt; its $3.5 billion in cash comes out to more than $28 in cash per share.

With cash in the bank, a growing business, and a shareholder-friendly focus, it's easy to see what investors like Buffett are drawn to this stock.
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Chart Of The Day: Mcdonald¡¯s Winning Strek

McDonald's reported monthly sales for November today, and as usual the results were outstanding: an increase of 9.5% in system-wide sales, with global comparable sales up 7.4% on top of a 4.8% gain in the year-ago period. Comps were strong across all regions: U.S. +6.5%, Europe +6.5% and APMEA (Asia Pacific, Middle East, & Africa) +8.1%.

"We're listening to our customers and delivering what they expect from McDonald's by optimizing our menu, modernizing the customer experience and broadening accessibility to our Brand," said McDonald's Chief Executive Officer Jim Skinner. "McDonald's steadfast focus on our customers and our operations under the Plan to Win is driving the sustained momentum of our global business."

The company continues to be one of the best run retailers, if not companies, around the world and the performance over the past 8+ years has been nothing short of incredible �C this was the 103rd consecutive month of positive same-store sales �C that means the last time comps were down was April 2003:

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Li3 Energy Inc. (LIEG) Signs LOI to acquire Important Chilean Land Package

Li3 Energy Inc. (OTCBB: LIEG), a South American based lithium-focused exploration and development company, announced that it has signed an LOI (letter-of-intent) to acquire 100% mining interests in one of the largest possible land packages available near the Maricunga Salar in northern Chile, South America. The LOI covers four projects: SLM Bongo, SLM Clarita, SLM Lithium, and SLM Corral, collectively comprising 74 mining concessions and covering a total of 9,257 hectares, or just under 36 square miles.

The SLM Clarita, SLM Bongo and SLM Lithium projects, totaling 1,507 hectares and 43 concessions, are classified as exploration concessions. The SLM Corral, totaling 7,750 hectares and 31 concessions, is just north of Li3's Maricunga Project Base Camp, and could possibly serve as a site for a commercial processing facility and evaporation ponds. Upon closing, the arrangement would make Li3 Energy one of the largest exploration and land companies in the area, and one of the only companies conducting development work within Maricunga. It would also provide the company a major competitive barrier, effectively neutralizing the ability of other entities to acquire large land assets and encroach upon Li3's Maricunga Project.

Li3 CEO, Luis Saenz, commented on the importance of the intended acquisition to Li3's stated strategy: "Li3 continues to execute on every aspect of its business, exploration and development plan. We are very pleased to have signed this letter of intent for the Bongo, Clarita, Lithium and Corral Projects. These projects are representative of Li3?s overall strategy and if successful, upon development and commercialization, when combined with our flagship Maricunga Project, could bring us one step closer to our goal of becoming a low cost industrial minerals producer. We look forward to working together with the owners of SLM Bongo, SLM Clarita, SLM Lithium and SLM Corral, as we explore the synergies between our companies".

The company's goals are to:

? Support the gl! obal imp lementation of clean and green energy initiatives
? Meet growing lithium market demand
? Become a mid-tier, low cost supplier of lithium, potassium nitrate, iodine, and other strategic minerals, serving global clients in the energy, fertilizer, and specialty chemical industries

Article written by QualityStocks �� Visit www.QualityStocks.net for more emerging growth companies to discover and evaluate.

For Quality Stocks full disclaimer, visit the company's Web site

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Options for Storing Precious Metals

Your client has purchased 50 one-ounce gold coins but isn’t sure how to store them securely. Fortunately, Steve Emerick with precious-metals broker Asset Strategies International, Inc. in Rockville, Md., has a few pointers.

Home Safes

It makes sense to keep some precious metals at home for immediate access during emergencies, Emerick says, but there are significant drawbacks when larger quantities are involved.

Fifty coins would be worth almost $70,000 at today’s prices. Plus, they’re small and easily moved.

Finally, one Gold Eagle looks like every other Gold Eagle, so the coins would be untraceable if stolen.

Those conditions create a security risk if the wrong person should learn about the coins’ presence in the home. Also, many homeowners’ policies limit coverage for coins so the client probably will need supplemental insurance.

Safe-Deposit Boxes

Fifty coins would fit easily into even some of the smaller safe-deposit boxes. The vault is secure, box rental fees are usually low and occasionally banks waive the fee.

There are drawbacks with safe-deposit boxes, though, Emerick notes. There’s a risk of theft if the client drives the coins to and from the bank.

Also, the box is accessible only during the bank’s business hours, which might not always coincide with the client’s needs.

As with a home safe, the client will need to secure insurance for the coins.

Professional Storage Facilities

Emerick says that several companies, such as Diamond State Depository, Delaware Depository, Global Gold in Zurich and Brinks, among others, specialize in the storage of precious metals.

These are highly secured facilities that include insurance as part of the fees paid, says Emerick.

Unlike banks, however, some of these facilities do not allow visitors, while others impose multiple conditions before allowing a customer on-site.

“These are more difficult to access than even a bank,” said Emerick in a phone interview. “With most of these depositories and professional facilities you can’t even go there without making an appointment at least 24 hours in advance and sending your photo I.D.”

Asset Strategies International stores its metals with Diamond State Depository in New Castle, Del.

Emerick reports that the fees are modest for investors using the facility: accounts under $100,000 pay 75 basis points annually (prorated for the days the facility is used) for the company’s standard storage option or a minimum $50 per year.

Clients of Asset Strategies International who store their gold with Diamond State Depository also avoid paying shipping fees and are able to liquidate their holdings more rapidly, according to Emerick.

“I think a lot of it comes to do you ever really believe that you’re going to take delivery of the metals you’re buying?” Emerick said.

“That makes a big difference as far as where you’re having it stored because you want easy access. To have your metals shipped, even though most storage facilities or programs will ship anywhere in the world, obviously it becomes more expensive to ship your coins from Zurich or Australia to the United States than it would from Delaware,” he concluded.

Gulfport Energy Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gulfport Energy (Nasdaq: GPOR  ) fell as much as 10% today after announcing a share offering.

So what: Gulfport will be offering 4 million shares, and another shareholder will offer 1 million shares at a price yet to be determined. Credit Suisse, which is handling the underwriting, will have the option to exercise 600,000 and 150,000 shares from each party, respectively, for over-allotments.

Now what: A plunging stock price is a pretty typical reaction when a share offering is announced, but it's important to keep in mind what the money will be used for. Gulfport intends to repay its revolving credit facility and fund capital expenditures to expand its business with the money. Dilution is never great for shareholders, but in this case, I think strengthening the balance sheet and growing the business should be a positive for the company.

Interested in more info on Gulfport Energy? Add it to your watchlist by clicking here.

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The Question Emerges Again: What If The Well Can’t Be Capped

BP plc (NYSE: BP) was going to put a new cap on its well which is leaking as much as 60,000 barrels a day of crude into the Gulf of Mexico. Then, that plan was delayed over government concerns that it could create unsustainable pressure in the well-head.

The government later decided that the experiment was worth the risk, and the new cap is being slowly put into place. In the last few hours, there is some information coming out that the area around the cap is leaking again.BP is drilling two relief wells which should be in place within a few weeks that it says ought to be able to dump enough mud and cement into the leak to stop it. That plan presents two formidable risks. The first is that the relief wells may hit the ocean floor off the mark. The process of “aiming” them correctly one mile below the Gulf’s surface is extremely difficult.

The other problem with the relief wells is that pumping cement into the leak may slow the rate at which it releases crude, but may not stop it. The cement could cause a build-up of pressure in the oil field near the leaking well, which could cause another rupture in the ocean floor.

The seesaw between hope and despair about whether the leak can be repaired is swinging back into toward despair. That process began when the new cap was delayed. A small leak created during the process worsens the situation. Analysis from scientists about the success of the relief wells is troubling. But, the scientists have been right before. The government and BP said that the amount of the leak was only 5,000 barrels a day early on. Scientists said it could be many times that. There were right.

The problem that the leak could continue until the well runs dry is “on the table” again. That means the scope of the catastrophe could move beyond measurement and any accurate prediction. The possibility that the well could not be capped has been an issue all along. BP is running out of solutions each day. What i! s possib le now may be probable tomorrow.

Douglas A. McIntyre

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Consumer Stock Review: FedEx Needs More Planes, McDonald’s Reports Excellent Sales

FedEx (NYSE:FDX) says it?will buy?30 planes from Boeing (NYSE:BA). The move is to help upgrade its aging gas-guzzling fleet. Sources say the deal could fetch $5.3B for the plane manufacturer, and shares were already up premarket.

GM (NYSE:GM)?is working with regulators?to see if “problems with welded parts or other structural flaws” contributed to the post-crash fires?seen by Chevy Volts. The company will face a House subcommittee hearing on the fires next month.?It declined to comment on reports it has “already developed potential solutions” for protecting the Volt’s battery packs.

Investing Insights: 5 Active Radar Stocks: Ford Drives Lower, Texas Instruments Drops 6%, and H&R Block Announces Dividend Increase.

McDonald’s (NYSE:MCD)?reports?global comparable sales rose 7.4% in November, including a 6.5% gain in the U.S. which beat the consensus estimate of analysts for 4.5% growth. The seasonal Peppermint Mocha and a Chicken McNuggets promotion helped the boost in company sales.

Brown-Forman (BF.A) says?FQ2 profit?rose 2%. Gains were seen especially for its flagship Jack Daniel’s whiskey. Revenue rose 12%, but ad spending jumped 14% Y/Y as the liquor maker spent more to market its new flavored adult beverages. A stronger dollar chills expected earlier profit; BF now predicts full-year EPS at $3.45-$3.70, vs. previous guidance of $3.45-$3.85.

Coca-Cola (NYSE:KO)?transfers?its secret formula for its trademark drink for the first time. The move is from a bank vault to be held (not displayed) with an exhibit at an Atlanta museum. The closely guarded?1886 formula is said to have “psychological” value for the company as it helps keep 125 years of advertising, marketing, and childhood memories percolating.

Procter &?Gamble (NYSE:PG)?is slapped with a �233.6M (~$310M) fine for?fixing laundry de! tergent prices in France?during 1997-2004. Colgate-Palmolive (NYSE:CL) and Henkel (HENKY.PK) are also hit with smaller fines. The companies “met secretly several times a year in hotels and restaurants to discuss pricing and discount strategies,” the French antitrust authority says.

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Previewing Apple: Earnings & Potential Stock Split

After tomorrow’s close we’ll get to see how Apple’s quarter turned out, but more importantly we’ll get a first look at the guidance ahead that includes the previously unincluded numbers for the Apple set-top box for television and the Apple Phone.  We have not heard any forecasts on these devices, and analysts have only started raising longer-term estimates and targets after these were unveiled at MacWorld.

The Banc of America analyst, Keith Bachman, is a 5-star rated analyst with Starmine and he recently reiterated his Buy rating and lifted his $100 target to $110 after the new products were unveiled.  The street is looking for estimates of $0.78, but the Starmine SmartEstimate(R) is for $0.81.  The higher-end of the range is $0.83.  Revenue expectations from Wall Street are roughly $6.43 Billion.  The company only guided $0.70 to $0.73 and $6.0 to $6.2 Billion implied with its last earnings when it gave guidance.

Apple’s chart shows an overbought reading, but that is frequently the case and almost every sell-off in Apple shares has been met with a buying flurry and a surge to newer and higher all-time highs.  On an adjusted basis, Apple is up more than TENFOLD since October 2001 when Windows XP was released and when the economy was choking on the impact from 9/11.  Shares are also up huge from last earnings when its shares went out at $74.29 ahead of earnings.

The real impact from new products is actually two and three quarters away, so there is a lot of calendar between now and the forward guidance.  Any supply hiccups or any real changes in the component markets could speed up or delay the launches, and many research firms will have to try factoring that variable into estimates.  As of one-day out, Options traders appear braced for a move of up to $4.00 in either direction; but that "expectation from options pricing" should compress rapidly after tomorrow’s results come out and as the time ! value le ft on the options will erode in the last 48 hours until Friday’s options expiration date.

We’ll likely see the formal restatement from 2004 to 2006 for the accounting charges from options expensing, and you can expect that many media reports will still be focusing on Steve Jobs and the potential options scandal.  Also, with the stock close to $100.00 you can just assume that this is on STOCK SPLIT watch.

Jon C. Ogg
January 16, 2007

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How To Choose A Home Business Opportunity

There are so many home business opportunities out there that its hard to know where to start. And how do you know you have chosen the best one? It can all get pretty confusing.

One thing that helps when choosing a home business is knowing exactly what it is you want from a home business. That way you can cross off any home business opportunites that dont meet your criteria, and concentrate only on those that do.

But sometimes we dont even know what it is we want from a home business. So I have compiled a short list below about things you might be looking for in a home business.

1. Low start up price. Most people dont want to pay a lot of money before starting up a home business. How much are you willing to spend? Can you afford $2,000? And even if you can, do you want to spend $2000? Or are you looking for something more reasonably priced say $50 to $200?

2. Money-back guarantee. Is the Company willing to give you your money back if you decide it isnt for you? Is a money-back guarantee important to you?

3. Support and training. What kind of support and training does the Company offer? What kind of support and training do you want when you start up your home business? Are you happy with general training materials or do you want more personal support and training?

4. Products you love. Obviously, its pretty hard to decide whether you love the products before you have tried them. But does the Company produce top-quality products that you think you will love once you try them? And is there a money-back guarantee for the products in case you find you dont like them? Do the products come with testimonials? This might also be a good time to think about the type of products you would like from your home business opportunity.

5. Compensation plan. What type of money and rewards system do you want to see in your home business opportunity? How easy/difficult does it seem to achieve any financial success? Are there clear goals that you can strive for and achieve? Does th! e Compan y reward success?

This is just a sample of the types of things that may be important to you. Feel free to change it or add to it as you wish. The important thing is for you to gain a good picture of what it is you want. That way you can pick the home business that is right for you.

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3 Cloud Plays Floating Higher

Even in a choppy market, these cloud-computing companies are getting support from institutional investors, with this week’s buying spurred by recent M&A action in the sector, writes MoneyShow.com contributor Kate Stalter.

Enterprise software makers were in the spotlight Monday after SAP (SAP) said it would acquire SuccessFactors (SFSF) for $3.4 billion. The move is part of SAP’s strategy to migrate more of its software services to cloud-based platforms.

Even before that news, a few companies from the business-software subsector were showing good technical action. The general industry was already viewed with optimism, following Oracle’s (ORCL) October acquisition of RightNow Technologies (RNOW).

One name from the industry that bolted this week on the SuccessFactors news was Taleo (TLEO), gapping up nearly 20% Monday in monster volume to a new all-time high.

Taleo, which specializes in human-resources software, was one among smaller growth names in the 2009 rally. Shares continued trending higher in 2010 and in the early months of this year. However, the fundamentals weakened in 2010, with year-over-year earnings up by only a penny, growth of just 1%.

That picture has improved this year, and Wall Street expects 2011 to wrap up with income of $1.03, a 32% gain. For 2012, profit is seen growing at a rate of 10%.

Technically, the stock had been correcting since pulling back from an all-time high in May. It declined almost 44%, a fairly steep rate, although it’s common for growth stocks to drop more sharply than the major indices. The stock began etching the right side of that consolidation in August.

The stock is in buy range after its gap-up, but it wouldn’t be unusual to see a pullback now, as investors who bought in the past few months—as the stock was climbing higher—now take the opportunity to pocket ! some pro fits.

However, the huge buying is a vote of confidence in a company that’s also being viewed as an acquisition target, so once the stock digests some of the post-gap-up gains, it could be well-positioned to move higher.

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Pepsico: Major Institutions Supporting Shares in Q3

Insiders are generally long-term investors due to restriction in making short-term profits. In contrast, wealth management institutions always have short-term investment. Wall St. Watchdog reveals information regarding the insiders and institutions which recently increased stock shares of Pepsico, Inc. (NYSE:PEP).

SEC data indicate that no insiders have bought Pepsico, Inc.��s stock since 06/30/2011.

SEC data indicate that these institutions significantly increased their stock shares of Pepsico, Inc. in Q3 2011:

• CARLSON CAPITAL L P: On 06/30/2011, held 0 shares. On 09/30/2011, held 1,142,719 shares, worth $79,190,427.
• EMPLOYEES RETIREMENT SYSTEM OF TEXAS: On 06/30/2011, held 0 shares. On 09/30/2011, held 1,081,816 shares, worth $74,969,849.
• DEPRINCE RACE & ZOLLO INC: On 06/30/2011, held 0 shares. On 09/30/2011, held 785,875 shares, worth $54,461,138.
• HGK ASSET MANAGEMENT INC: On 06/30/2011, held 0 shares. On 09/30/2011, held 751,187 shares, worth $52,057,259.
• MARSHALL & ILSLEY CORP: On 06/30/2011, held 0 shares. On 09/30/2011, held 744,077 shares, worth $51,564,536.

About the company: PepsiCo, Inc. operates worldwide beverage, snack and food businesses. The Company manufacture or uses contract manufacturers, market and sell a variety of grain-based snacks, carbonated and non-carbonated beverages and foods in countries throughout the world.

Competitors to Watch: The Coca-Cola Company (NYSE:KO), Dr Pepper Snapple Group Inc. (NYSE:DPS), Coca-Cola Enterprises Inc. (NYSE:CCE), Hansen Natural Corporation (NASDAQ:HANS), Reed��s, Inc. (NASDAQ:REED), Cott Corporation (NYSE:COT), National Beverage Corp. (NASDAQ:FIZZ), Jones Soda Co. (NYSE:USA) (NASDAQ:JSDA), Celsius Holdings, Inc. (NASDAQ:CELH), and Fomento Economico Mexicano SAB (NYSE:FMX).

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Whole Life Insurance: A Good Way to Plan Ahead

In today's economy, it's a struggle to survive from one paycheck to the next; thus, many feel that they are unable to plan for the future. No one knows what may be to come. However, one thing is certain: no one is exempt from the possibility of mishaps. Everyone should try to save a little, whether for retirement, the kids' college tuition, or just the proverbial 'rainy day'.

It's impossible to predict exactly what will happen in the far-off future. However, one can plan to have funds available, in case they should be needed at some point. Investing wisely to secure your financial future, and that of your family, is always a good decision. One time-tested investment measure is the purchase of life insurance, which can help to make sure that your family's financial needs are met, even if you're not there to provide for them yourself.

A wide variety of life insurance options is available; 'term life' and 'whole life' are widely popular types of policies. Term life insurance covers only a particular time period. Whole life insurance, on the other hand, covers you for the rest of your life, so long as the premiums are paid. In addition, whole life policies have certain other advantages over term life policies.

One such benefit of whole life insurance is that when the policyholder dies, the beneficiaries receive all of the death benefits, regardless of the timing of the death. With term life, however, the family receives the death benefits only if the death occurred during the policy period. Oh, the term life policy ran out last week, wasn't renewed, and the policyholder died today? Too bad - the policyholder's family will receive nothing. Since whole life policies don't expire, one needn't worry about remembering to renew them - or about getting the nasty surprise that a policy wasn't renewed when it should have been.

Many insurers offer excellent whole life insurance policies at a surprisingly affordable price. Moreover, a whole life policy purchaser may be abl! e to obt ain a 'level premium' option, in which the price per month is based on the average cost of the policy, stretched out over the expected life of the policyholder. This may mean that you have to pay a bit more up front than you'd prefer. However, because the premiums never change, it's easy to budget the payments, and you won't face a situation where your premiums go up shortly before maturation of the policy to such an extent that you lose the entire investment - as sometimes happens with term life.

A final reason why some prefer whole life insurance over term life insurance is that you can borrow against the policy, use the cash value of the policy as collateral for a loan, or cash out the policy in advance. This comes in handy when funds are needed in an emergency, or for a large purchase, such as a car, or a down payment on a home. Borrowing against one's insurance policy is often less expensive than taking out a bank loan, because interest rates through your insurer are usually much lower than the rates charged by most banks. These and other benefits are solid reasons why purchasing whole life insurance is a good investment decision.

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Wal-Mart Retains Sell Rating At Deutsch Bank

Analysts at Deutsche Bank reiterated Sell rating on the shares of Wal-Mart Stores, Inc. (NYSE: WMT) with a price target of $50. They state that Wal-Mart has materially increased its promotional presence year-over-year over the past few months.

DB analysts state that Wal-Mart's U.S. comp of 1.3 percent in Q3 FY2011 was respectable, but they believe higher food inflation and increased SKU count across the store drove the entire comp, masking traffic softness. They add that utilizing Market Track data that surveys circular activity suggests that WMT's measured advertising increased 143 percent year-over-year in October following a 37 percent increase in August and September, on average. They state that the number of inserts per market during October rose from 1.2x to 2x on a weekly basis while page count increased to 16 per insert compared to 12 a year ago. Looking ahead, the benefit from these factors, coupled with its recently restored layaway program should help same stores sales trend continue into Q4. They add that the bigger question on their minds is what will be the impact to both inventory turns and gross profit margins from these initiatives going forward as they observed in the company's Q3 results.

On a year-to-date basis, Wal-Mart Stores has a share performance of 6.12 percent, and as compared to Standard & Poor's, it has an YTD share performance of 9.78 percent.

Wal-Mart Stores is the leading retail stores operator in various formats worldwide. The company's Wal-Mart U.S. segment offers meat, produce, deli, bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, and floral and dry grocery. It has a market capitalization of $196.57 billion with a P/E ratio of 12.08.

Shares of Wal-Mart gained 0.69 percent, or $0.39, to trade at $57.03.

{$end}

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Blue chips can't keep up the rally

NEW YORK (CNNMoney) -- U.S. stocks ended mixed Thursday, after a big rally on Wednesday, as investors were reluctant to push prices higher amid ongoing worries about Europe.

The Dow Jones industrial average (INDU) lost 26 points, or 0.21%, to 12,020. The S&P 500 (SPX) fell 2 points, or 0.2% to 1,244. But the Nasdaq (COMP) composite added 6 points, or 0.2%, to end at 2,626.

On Wednesday, all three major stock indexes closed the session more than 4% higher. The Dow's 490-point gain is the largest of 2011, and the best percentage gain since March, 2009.

Art Hogan, a managing director at Lazard Capital Markets, said a retreat is not surprising given the strong gains stock markets have made this week.

"We've virtually clawed back everything we gave up in November -- in three days," Hogan said. "It's difficult to not expect a bit of a pullback."

Stocks surged Wednesday after the Federal Reserve said it will work with other central banks to support the global economy.

The move gave investors hope that world leaders are taking the necessary steps to avoid a credit crunch stemming from Europe's sovereign debt crisis. It was also seen as a sign of how acute the problems have become and the continued lack of a long-term solution.

Tobias Blattner, economist at Daiwa Capital Markets, said the action "provided further momentum to the general improvement in investor sentiment this week."

"But yesterday's (over)reaction by markets to a policy measure that did little else than lowering the cost of U.S. dollar funding for banks in Europe and elsewhere just shows how desperately markets are searching for positive news during these difficult times," Blattner wrote in a note to clients.

Meanwhile, French President Nicolas Sarkozy called for a new treaty to increase solidarity and financial discipline across Europe.

"Let's face it, Europe can be swept by the crisis if it does not pull itself together, if it do! es not c hange," Sarkozy said in a lengthy speech addressed to the French people.

German Chancellor Angela Merkel is expected to discuss the need for a more centralized budget policies in a speech Friday.

Meanwhile, European Central Bank president Mario Draghi said Europe needs a "new fiscal compact" to ensure that budget rules are respected and enforced.

In a comment that some investors interpreted as a sign the ECB could step up its rescue efforts, Draghi told the European Parliament that "other elements might follow" if the compact is adopted.

Fears about U.S. keep investors in Europe

Investors have been clamoring for the ECB to intervene in eurozone sovereign debt markets on a large and unlimited basis. But the central bank is reluctant to prop up government finances and risk inflation by printing money.

The ECB is widely expected to announce a second interest rate cut at its policy meeting next week, after the bank lowered rates to 1.25% last month.

In addition, European political leaders are expected to announce details of their plan to ensure fiscal discipline at a summit next week.

Economy: The number of people filing for initial unemployment benefits rose by 6,000 to 402,000 in the latest week, the government said. That was higher than expected, with economists forecasting jobless claims to have totaled 390,000 for the week ending Nov. 26.

Setting the stage for Friday's closely-watched government jobs data, a report from Automatic Data Processing showed Wednesday that private-sector employment grew by 206,000 jobs in November.

Young workers getting hired again

A CNNMoney survey of 21 economists predicts that the monthly jobs report due Friday will show that the economy added 110,000 jobs in November. In October, 80,000 jobs were added to payrolls. Most of the gain will likely come from the private sector, where it's estimated another 135,000 jobs were added.

The ISM manufacturing Index, a survey ! of purch asing managers, rose 1.9 to 52.7 in November. Analysts were expecting the index to hit 51.0, according to consensus estimates from Briefing.com.

Construction spending in October rose 0.8% to $798.5 billion, compared with a forecasted 0.3% increase.

Same-store sales for several major retailers rose in November, according to preliminary figures from Thomson Reuters.

Companies: Shares of Yahoo (YHOO, Fortune 500) jumped more than 3% Thursday, amid speculation that Chinese Internet giant Alibaba and several private equity firms are planning to bid for all of Yahoo. The news followed reports on Wednesday, that Microsoft (MSFT, Fortune 500) and private equity firm Silver Lake were considering making an offer for a minority stake in Yahoo.

Shares of Lululemon (LULU) sank 5%, after the athletic appeal maker reported quarterly profits and sales figures that rose from last year, but missed analysts' expectations.

Barnes and Nobel (BKS, Fortune 500) shares plunged 16%, after the bookseller reported a $6.6 million net loss for the second quarter as total sales declined.

Currencies and commodities: The dollar slumped against the euro and British pound, but rose versus the Japanese yen.

Oil for January delivery slipped 13 cents to $100.06 a barrel.

Gold futures for December delivery fell $9.10 to $1,749 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury slipped, pushing the yield up to 2.08% from 2.07% late Wednesday.

World markets: European stocks ended their session lower Thursday. Britain's FTSE 100 (UKX) slipped 0.3%, the DAX (DAX) in Germany edged lower 0.9% and France's CAC 40 (CAC40) shed 0.8%.

Asian markets ended sharply higher during the trading session, after Wall Street's big rally Wednesday.

The Shanghai Composite (SHCOMP) jumped 2.3%, the Hang Seng (HSI) in Hong Kong rallied 5.6% and Japan's Nikkei (N225) rose 1.9%.

The gains came despite a report showing that Chinese manufacturing slowed ! in Novem ber. The HSBC Purchasing Managers' Index (PMI) for China fell to a reading of 47.7 last month -- the lowest level since March 2009, and down from the previous month's level of 51. 

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Obama renews push for consumer bureau chief

WASHINGTON (CNNMoney) -- The Obama Administration is renewing its push for the Senate to confirm a director to run the Consumer Financial Protection Bureau.

"The longer we wait to confirm a director, the more we're leaving millions of Americans who aren't doing business with banks vulnerable to the kind of predation and abuse that caused so much damage in this crisis," said Treasury Secretary Tim Geithner at a press conference Thursday.

"Our strategy is to make the case as compelling as we can," said Geithner at the event, which he called to focus attention on the issue.

It may be an exercise in futility. Senate Republicans have said they'll maintain a block on the confirmation until Democrats yield to their demands for changes to the structure of the consumer bureau.

In May, Senate Republicans sent a letter to the White House insisting on three big changes to the Consumer Financial Protection Bureau: to replace the director with a board, to make the bureau ask Congress for money each year, and to prevent the bureau from making rules that could threaten the health of financial institutions.

The only Senate Republican who supports confirming a director for the bureau is Sen. Scott Brown of Massachusetts.

The Consumer Financial Protection Bureau (CFPB) is an independent watchdog agency tasked with regulating financial products such as mortgages and credit cards.

But without a director, the bureau can't wield some of its most important powers, like regulating financial industries that now operate in the shadows, such as payday lenders and mortgage servicers. The consumer bureau also won't be able to declare specific banking or credit card fees deceptive or abusive and ban them.

In July, President Obama bypassed Elizabeth Warren to nominate Richard Cordray, a former Ohio attorney general, to run the CFPB.

At an October Senate hearing, Republicans pressed Geithner to respond to their requests. At the time, Geithner made! it clea r that the Administration wouldn't consider changes to the consumer bureau.

Geithner reiterated that position Thursday, saying "we don't see a case" for changing the checks and balances Congress put in place when they passed Wall Street reforms in 2010.

The White House's renewed push for a director is a "political exercise," said Jaret Seiberg, a senior policy analyst at the Washington Research Group.

"At worst, Democrats will get to accuse Republicans of hobbling the agency designed to protect consumers," he wrote in a research note. "If Republicans buckle, they get Cordray running CFPB. Either way, it is a political win."

Even one of the authors of the Dodd-Frank Act, which created the consumer bureau, said he didn't expect the bureau to get a confirmed director before the 2012 elections.

"I think it depends on the next election," said Rep. Barney Frank, a Massachusetts Democrat, at a conference Thursday sponsored by the Consumer Federation of America. "I don't see that deadlock being broken."

Frank also said in his speech that making the consumer bureau's new powers dependent on Senate confirmation of a director was one of his few regrets in crafting Wall Street reforms. "But that was the Senate's effort to protect its prerogative" to confirm, Frank said. 

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Futures Sink on U.S. and European Debt Problems

European stocks fell hard on Monday and U.S. equities were poised to follow them down, as investors continued to focus on Europe’s debt problems, and the congressional supercommittee charged with cutting U.S. debt appears to be on the brink of failure. The German DAX dropped 2% and France’s CAC 40 was off 2.1%. Moody’s said that France’s AAA rating might be in jeopardy,

Dow futures fell 142 points to 11,625; S&P 500 futures fell 15.9 points to 1,198.

Pharmasset (VRUS) soared 85% after agreeing to be bought by Gilead Sciences (GILD).

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The American Ecomomy Can Heal Itself, If Only The Economy Would Help

The stock market is back to where it was a month ago. The frightening sell-off is over. Now that Intel (NASDAQ: INTC) has posted spectacular results, Wall St. believes that both the consumer and enterprise sectors are spending on tech again. People and companies that can afford PCs and servers must be doing well.

Nouriel Roubini’s call for more stimulus spending to keep the US economy out of another recession has gone nearly unheard. The Administration and Congress will not invest any more money in the recovery. Perhaps that is because they fear incurring the wrath of voters angry over the growing deficit. Some politicians may actually feel that the GDP machine of America is so large and resilient that it can bounce back the way that it did in 1973 and 1982. With such a strong set of precedents, this recession may well be just like any other.

The caution that fell over Washington and the market a month or two ago has dissipated some. The Fed said that the economy has weakened a bit, but its key pronouncement is that GDP is still expanding, and will keep doing so. If that is so, then improvements in unemployment must be around the next corner.The markets shrugged off two important pieces of news. The first is that the trade gap grew 4.8% to $42.3 billion in May, the highest level since November 2008, well into the most recent recession. Imports from China were up 12.1%. That seems to roughly coincide with the improvement in China exports. The trade surplus of the world’s most populous country widened to $20.02 billion in June.? May and June may be the start of a trend.

What a difference a 30 days makes. Housing was in deep trouble in May. Unemployment did not improve much. Census workers are being laid off, and as many as 700,000 may be out of work soon. Consumer confidence was falling off.

No one should be surprised if the market rallies on the results of Intel and improved numbers from other big companies. The jobless recovery will work! until i t doesn’t.

Douglas A. McIntyre

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1 Reason the Street Should Expect Big Things From Eastman Chemical

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized.

Is the current inventory situation at Eastman Chemical (NYSE: EMN  ) out of line? To figure that out, start by comparing the company's figures to those from peers and competitors:

Company	TTM Revenue Growth	TTM Inventory Growth
Eastman Chemical	36.8%	30.4%
Dow Chemical (NYSE: DOW  )	13.9%	15.6%
Air Products & Chemicals (NYSE: APD  )	11.7%	19.2%
Albemarle (NYSE: ALB  )	19.5%	27.2%

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. TTM = trailing 12 months.

Ho! w is Eas tman Chemical doing by this quick checkup? At first glance, OK, it seems. Trailing-12-month revenue increased 36.8%, and inventory increased 30.4%. Over the sequential quarterly period, the trend looks worrisome. Revenue dropped 3.9%, and inventory grew 13.6%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at Eastman Chemical? I chart the details below for both quarterly and 12-month periods.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's! dig int o the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 34.4%. On a sequential-quarter basis, raw materials inventory was also the fastest-growing segment, up 12%. Eastman Chemical may display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

I run these quick inventory checks every quarter. To stay on top of the inventory story at your favorite companies, just use the handy links below to add companies to your free watchlist, and we'll deliver our latest coverage right to your inbox.

• Add Eastman Chemical to My Watchlist.
• Add Dow Chemical to My Watchlist.
• Add Air Products & Chemicals to My Watchlist.
• Add Albemarle to My Watchlist.

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Here's How Arch Coal Is Making You So Much Cash

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Arch Coal (NYSE: ACI  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Arch Coal generated $402.9 million cash while it booked net income of $129.9 million. That means it turned 10.6% of its revenue into FCF. That sounds pretty impressive. Since a single-company snapshot doesn't offer much context, it always pays to compare that figure to sector and industry peers and competitors, to see how your business stacks up.

Company	TTM Revenue	TTM FCF	TTM FCF Margin
Arch Coal	$3,812	$403	10.6%
Alliance Resource Partners (Nasdaq: ARLP  )	$1,788	$286	16.0%
Alliance Holdings (Nasdaq: AHGP  )	$1,787	$283	15.9%
Alpha Natural Resources (NYSE: ANR  )	$6,017	$319	5.3%

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections! so much . Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Arch Coal look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 11.4% of operating cash flow coming from questionable sources, Arch Coal investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 8.8% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 43.4% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated! home-ru n stocks that provide the market's best returns.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

• Add Arch Coal to My Watchlist.
• Add Alliance Resource Partners to My Watchlist.
• Add Alliance Holdings to My Watchlist.
• Add Alpha Natural Resources to My Watchlist.

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Are You Watching This Trend at Krispy Kreme Doughnuts?

Margins matter. The more Krispy Kreme Doughnuts (NYSE: KKD  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, comparisons to sector peers and competitors, and any trend that may tell me how strong Krispy Kreme Doughnuts' competitive position could be.

Here's the current margin snapshot for Krispy Kreme Doughnuts and some of its sector and industry peers and direct competitors.

Company	TTM Gross Margin	TTM Operating Margin	TTM Net Margin
Krispy Kreme Doughnuts	13.8%	6.2%	5.4%
Tim Hortons (NYSE: THI  )	24.6%	19.2%	24.2%
Sara Lee (NYSE: SLE  )	32.2%	9.4%	9.9%
Dunkin' Brands (Nasdaq: DNKN  )	80.3%	32.7%	1.2%

Source: S&P Capital IQ. TTM = trailing 12 months.

Unfortunately, that table doesn't tell us much about where Krispy Kreme Doughnuts has been, or where it's going. A company with rising gross and operating margins often fuels its gro! wth by i ncreasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter. You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Krispy Kreme Doughnuts over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

• Over the past five years, gross margin peaked at 15.6% and averaged 12.8%. Operating margin peaked at 5.3% and averaged 2.4%. Net margin peaked at 2.1% and averaged -4.7%.
• TTM gross margin is 13.8%, 100 basis points better than the five-year average! . TTM op erating margin is 6.2%, 380 basis points better than the five-year average. TTM net margin is 5.4%, 1,010 basis points better than the five-year average.

With recent TTM operating margins exceeding historical averages, Krispy Kreme Doughnuts looks like it is doing fine.

If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the best returns in the stock market. ?Got an opinion on the margins at Krispy Kreme Doughnuts? Let us know in the comments below.

• Add Krispy Kreme Doughnuts to My Watchlist.
• Add Tim Hortons to My Watchlist.
• Add Sara Lee to My Watchlist.
• Add Dunkin' Brands Group to My Watchlist.

Tags: 2012 Best Stocks ,Best Stocks For 2012 ,Best Stocks To Own ,Best Stocks To Own 2012 ,Dividends ,REITs ,Mortgage REITs can be great dividend plays, if you're careful

Understanding Theta and Time Decay

While a number of other factors (such as Delta, Gamma, and implied volatility) weigh into overall option pricing, a sound understanding of Theta and the impact of time decay is highly important.

Most investors and traders new to options markets prefer to buy calls and puts because of their limited risk and unlimited profit potential. Buying puts or calls is typically a way for investors and traders to speculate with only a fraction of their capital. But these straight option buyers miss many of the best features of stock and commodity options, such as the opportunity to turn time-value decay into potential profits.

When they establish a position, option sellers collect time-value premiums, paid by option buyers. Rather than struggling against the ravages of time value, the option seller can benefit from the passage of time, and time-value decay becomes money in the bank even if the underlying is stationary.

For option writers (sellers), time-value decay thus becomes an ally instead of a foe. If you have ever sold covered calls against stock positions, you can appreciate the beauty of selling time value.

In this article, I focus on the importance of time value in the option-pricing equation. But before turning to a detailed look at the phenomenon of time value and time-value decay, let's review some basic option concepts that will make it easier for you to understand what we mean by time value.

Options and Strike Price

Depending on where the underlying price is in relation to the option strike price, the option can be in, out, or at the money. Let's look at this relationship while keeping in mind our central focus on time value.

When we say an option is at the money, we mean the strike price of the option is equal to the current price of the underlying stock or commodity. When the price of a commodity or stock is the same as the strike price (also known as the exercise price), it has zero intrinsic value, but it also has the maxim! um level of time value compared to that of all the other option strike prices for the same month.

Figure 1 provides a table of possible positions of the underlying in relationship to an option's strike price.

As can be seen in Figure 1 above, when a put option is in the money, the underlying price is less than the option strike price. For a call option, “in the money” means that the underlying price is greater than the option strike price.

For example, if we have an S&P 500 call with a strike price of 1100 (an example we will use to illustrate time value below), and if the underlying stock index at expiration closes at 1150, the option will have expired 50 points in the money (1150 - 1100 = 50).

In the case of a put option at the same strike price of 1100 and the underlying at 1050, the option at expiration also would be 50 points in the money (1100 -1050 = 50).

For out-of-the-money options, the exact reverse applies. That is, to be out of the money, the put's strike would be less than the underlying price, and the call's strike would be greater than the underlying price.

Finally, both put and call options would be at the money when the strike price and underlying expire at the exact same price. While we are referring here to the position of the option at expiration, the same rules apply at any time before the options expire.

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Profiting in 2011: What Are Your 2011 Investing Strategies?

After a year of rocky economic recovery and a mixed bag of U.S. data, market strategists are waxing optimistic about the profit prospects in 2011.

"There is still an awful lot of pain out there for sure, but if you get this creeping confidence to accelerate a little bit, it's surprising how fast things can turn," Sandy Lincoln, chief investment strategist at M&I Investment Management, told MarketWatch.

A year plagued with Europe's debt contagion, the May 6 market "flash crash" and constant fears of a double-dip recession caused many investors to keep money parked on the sidelines.

But the Standard & Poor's 500 Index gained 12% this year, the Dow Jones Industrial Average rose 10% and Nasdaq Composite Index climbed 17%. Those who stayed in the game - and made the right plays - netted considerable profits.

Now those eager investors who sat out on 2010's bull market are determined to avoid that mistake in 2011. This surge of investing is what Money Morning's Chief Investment Strategist Keith Fitz-Gerald calls "professional performance anxiety."

"A lot of professionals were surprised by the ferocity of the run off of the March 2009 lows," Fitz-Gerald told Fox Business News' Varney & Co. program on Dec. 21. "And what that means is they, like a lot of small investors, have actually got money on the sidelines or they've just begun to put it to work and in 2011 they're going to be anxious to make up what could be a hole in their performance run rate over the last few years. That could add a nice tailwind in and of itself."

Those who avoided the market missed this year's gains and should consider giving stocks another chance.

For investors looking for 2011's hottest stock picks, Money Morning Contributing Editor Shah Gilani pointed to sectors! expecte d to shine in his U.S. market forecast.

"The high-tech, energy, materials and commodities sectors will be hot in the New Year," said Gilani. "And the U.S. stock market will get an added boost from the fact that U.S. Treasuries, municipal bonds (munis) and euro-based investments will not."

Investors who favored bonds in 2010 should also change their strategies.

Money Morning Contributing Editor Martin Hutchinson warned investors that the safe haven they sought with bond investing in 2010 will no longer pay off in the New Year due to low interest rates and rising inflation.

"[T]oday the forward-looking downside risk in bonds is in many cases much greater than it is in stocks. Indeed, as interest rates rise back toward their historic norms, bonds now seem poised for a long-term bear market," said Hutchinson.

Still, there are always ways to play the downside. Hutchinson recommended investors get out of low-yielding bonds and turn to an "inverse" bond exchange-traded fund to profit as Treasury bond prices decline.

This brings us to next week's Money Morning "Question of the Week:" What are your 2011 investing strategies? Are you changing your strategies in the New Year? What market sectors or investment vehicles do you think will do the best and worst?

Send your answers to mailbag@moneymappress.com. We want to hear from you!

[Editor's Note: Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at mailbag@moneymappress.com. Make sure to reference "question of the week suggestion" in the subject line.

We reserve the right to edit responses for length, grammar and clarity.

Thanks to everyone who took the time to participate - via e-mail o! r by pos ting their comments directly on the Money Morning Web site.]

Tags: 2012 China Stocks ,China Stocks ,FSLR ,Growth China Stocks ,Growth Stocks 2012 ,Growth Stocks To Hold 2012 ,JKS ,TSL ,Trina Solar Falls in Solar Shakeout

Clearwire hinges its LTE rollout on raising new public funds

(gigaom.com) -- Sprint’s(c S) $1.6 billion deal last week to save Clearwire committed the funds the WiMAX operator needed to stay in business, but what it didn’t provide was the capital that Clearwire needs to get its new LTE network built. On Monday, Clearwire revealed exactly how it planned to raise that desperately-needed network money: new shareholders.

Clearwire plans to issue new common stock worth $300 million, with an option to underwriters to purchase another $45 million within 30 days. That would give it half the capital it needs for the first phase of its new time-division-LTE (TD-LTE) network. As for the other half, Clearwire is counting on Sprint to chip in the funds as via prior arrangement.

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A new public offering would dilute Sprint and every other investor’s current shares. If Sprint wants to maintain its 49.6 percent majority stake in Clearwire, it has to pony up more equity, which Sprint has agreed to do last week up to $347 million. The only issue is that Sprint’s investment commitment doesn’t kick in unless Clearwire raises at least $400 million. That means Clearwire not only has to pull off this ! public o ffering, it also needs to find another $100 million in investment before it will ever see any of Sprint’s matching funds.

If Clearwire can raise $400 million, though, it will have accomplished one heck of turnaround.  Last month, Clearwire was flirting with bankruptcy — its nationwide WiMAX rollout halted and its retail business in jeopardy, all the while engaged in a very public tiff with its primary investor and customer Sprint. Clearwire also was burning through cash and didn’t have a penny to put toward its TD-LTE network. Now Clearwire has guarantees on WiMAX and future TD-LTE service revenues. If it can execute its equity sale, it will have the money and then some to move into the LTE age.

Clearwire still faces plenty of hurdles: its initial LTE plans are quite conservative and depend almost entirely on Sprint as a customer, while its cable investors Comcast and Time Warner have indicated they plan to dump WiMAX and tap Verizon’s networks for their future wireless needs. But Clearwire would still be a lot better off than when it started this year.

Feature image courtesy of Flickr user zzzack

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