Understanding the Payment Players

Understanding the Payment Players - Fraud Library
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Each of the players in the payment process has a role to fulfill. They are performing these roles to make money. Understanding this will help you in working with them. In this section we will discuss each of the major players in terms of what their role is, which other players they associate or represent and how they make money.
There are seven major players in the payment process: consumers, merchants, issuing banks, acquiring banks, payment processors, gateway services and card associations.
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Understanding the payment players: Associations, Banks, Payment Processors, Gateways, Merchants and Consumers
Consumers & Merchants
Let’s start with two everyone is familiar with, the “consumer” and “merchant.” The consumer is an individual or organization that has the intent of making a purchase. They have money or credit and they desire goods and services. The merchant is the one with the goods and services and is looking to sell them to consumers.
Now the consumer can be motivated to select a particular merchant by several things: price, service, selection or preference. But the merchant’s main motivation is to make money. The merchant is in business to make money and they do so by selling the goods or services for more money than they bought them. This money between what they bought it for and what they sold it for is called their margin.
There are a lot of different ways to exchange money for services, bartering, cash, checks, debit cards, installment payments or credit cards. Our focus is on credit cards and with credit cards, the consumer and the merchant both have banks that they are working with that manage the credit card payment transactions.
Issuing Bank
The consumer got his credit card from a bank or credit union, called the “issuing bank.” Sometimes you may hear an issuing bank being called an “issuer,” which means the same thing. The issuing bank is not just associated with major credit card brands such as American Express, MasterCard and Visa, but also with credit cards called “private label credit cards.” These are the ones that department stores or shops offer, such as Sears and Target cards.
Issuing banks are lending institutions that work behind these credit cards to grant and manage the extended credit. Some examples of these are Bank of America, Citibank, MBNA, Household Financial, GE and Wells Fargo.
The purpose of the issuing bank is to grant credit directly to a consumer. They are the ones that have a consumer fill out an application, check a consumer’s credit history and maintain their account. The issuing bank is the one that decides what a consumer’s credit limit is, based on credit history and current debt load. There are literally thousands of issuing banks in the United States — any bank or credit union you see on the corner could be an issuer. In Canada and the United Kingdom there are far fewer banks, so the number of issuing banks is much smaller.
What motivates the issuing bank? They are in it for the money as well. They make money on the interest the consumer pays on outstanding balances from previous purchases, and they get a part of every purchase a consumer makes with the card from a merchant.
Acquiring Bank
The acquiring bank represents the merchant. They process all of the merchant’s credit card payments with the associations (American Express , MasterCard, Visa..), and provide the merchant with reconciliation tools. The acquiring bank makes money on every transaction a merchant processes.
There are number of acquiring banks in the United States and abroad, and merchants are free to move from one acquirer to another. Merchants typically select their acquiring bank based on the amount of money, called basis points, they charge per transaction.
Payment Processors & Gateway Services
There is nothing stopping a merchant from directly connecting to their acquiring bank, but there are a number of reasons why they may not want, or be able, to. There are technical and business requirements in conducting the payment process for credit cards, and most merchants don’t want to have to worry about these requirements. Instead they choose to use a third party between them and their acquiring banks. These third parties are called payment processors and gateway services.
Payment processors offer the physical infrastructure for the merchant to communicate with the acquiring banks and the associations. They are the ones that connect everyone together. This allows some very small banks to offer merchant services that they could not provide on their own. Payment processors make their money by charging a flat transaction fee or by charging basis points to the merchant. Some payment processors also provide acquiring bank services directly.
Gateway services offer merchants physical infrastructure as well. They typically offer technology and integration services that are faster, easier and less expensive to get started. They also give the merchant the freedom to move between acquiring banks so they can negotiate better rates without having to make changes to their production systems. The gateway service provider will charge a transaction fee or basis points for their services. These fees are on top of the payment processor fees the merchant is already paying.
If a merchant decides to use a gateway service provider they will still have to set up accounts with an acquirer. The acquirer could be an acquiring bank or a payment processor that offers acquiring.
Card Associations
Finally there are card associations, such as Visa , MasterCard International, American Express and Discover. There are a lot more — this is just a sampling. The card associations are responsible for setting up the guidelines on how transactions, services and disputes are to be handled. They interface with national banking laws and provide the money that covers some of the fraud that occurs within the membership. Each association runs a little differently, so one size does not fit all.
Visa has regions that operate pretty much autonomously. There is Visa U.S.A., Visa Europe, Visa Asia, etc. Each of these regions may have slightly different rules, tools and services they offer. Visa does not actually issue credit cards to consumers; they use issuing banks to issue credit cards that are branded as “Visa.”
MasterCard International is a little different from Visa in that it is one association for the entire globe: all regions go into the same structure. This has some benefits when it comes to regulations and tools. MasterCard International also uses issuing banks to issue credit cards to consumers that are branded as “MasterCard.”
American Express differs even more by acting as the issuer for all American Express branded credit cards. American Express is one global organization with regional coverage. American Express also differs from Visa and MasterCard in allowing merchants to set up direct connections for performing the acquiring functions.
One of the side notes that should be understood is the concept of “co-branding.” Today consumers have credit cards that are being sponsored by airlines, car companies, local clubs, etc. These organizations get a little of the money for each purchase. In some cases it may be that the organization is actually the Issuer, but in a lot of cases it is an actual issuing bank that is offering a number of co-branded credit cards for consumers to choose from. The card is still an American Express, Visa or MasterCard.
Each of these credit card associations has their own network of systems, policies for use and payment processing. Each of these associations develops new fraud-prevention tools and tries to get merchants to adopt them. These fraud-prevention practices are only good for that type of card. Usually if good market adoption occurs, the other cards will adopt a similar technology.
The actual fraud programs and services an association offers changes often, and you should check out their websites often to learn more about the types of fraud-prevention services and solutions they are endorsing.
Conclusion
Aside from the consumers, all of the players we have discussed rely on consumers to make purchases; because they make their money each time the consumer makes a purchase. For each consumer purchase the merchant is trying to make profit from a percentage of money called their margin, which represents the difference between what it cost them to buy and sell the goods and what they sold it for to the consumer.
In that margin the merchant has to pay for all of their overhead, staff, utilities, property, loss, insurance etc.… Profit comes from the margin and the merchant needs that margin to go a long way before they actually make profit, so every penny of it counts.
There is no denying that a merchant makes less profit on an order paid by credit card than by cash. But all merchants understand that having the ability to take credit cards means there are a lot more potential sales that would have never been possible as strictly cash deals. The merchant’s additional costs for credit card transactions come from interchange rates and basis points.
The issuing banks, acquiring banks, associations, and sometimes the payment processors, all get their money from the merchant in terms of basis points paid by the merchant. Basis points are percentage points of a sale a merchant pays on every purchase made with a credit card to the acquiring bank. Merchantsnegotiate with their acquiring banks, and sometimes the associations, to get the best possible interchange rates and basis points. The key point to understand is all of the players, aside from the consumer, have a vested interest in each consumer purchase.
Another key take-away from this section is to really understand that fraud is not defined or felt the same by all players in the payment process. Consumersworry about identity theft and having to rebuild their credit, while merchants worry about losing goods and having to pay fines. Acquiring banks worry about collusive merchants working with fraudsters to defraud the banks. Issuers worry about fraudulent applications, counterfeit cards and stolen cards. Associations worry about how fraud will impact their brand name to consumers, merchants and banks. So when talking, reading or evaluating fraud-prevention techniques remember to check whose perspective you are getting.

Are we heading towards a gold bubble?

BS Reporter / Mumbai April 12, 2009, 0:52 IST
A couple of reports in the American press revealed that more individuals are selling their broken and unwanted gold jewellery as the yellow metal’s price soared, while the recession blues refuse to go away. Back home, we have had a number of queries from investors considering whether or not to invest in gold via exchange-traded funds (ETFs).
Such queries are not surprising at a time when gold is selling near $900/ounce (six years ago it sold for around $325/ounce). Not to mention the leap to over $1,000 an ounce in February. But it is not as if investors are minutely tracking the gold price. It is the presence of Gold ETFs and gold stock funds that makes them all the more aware of the performance of gold.
As on April 2, 2009, Gold ETFs delivered a one-year return of 27.01 per cent as against the diversified equity fund category return of -36.76 per cent. Currently, gold ETFs lie at the top of the heap on just about every performance table other than 1-month: 3-month, 6-month and 1-year. So even if one does not track the precious metal, just looking at the performance of these funds gives you a clear indication of the price. The failure of gold ETFs in the 1-month returns was due to the recent correction of 7.16 per cent (Mar 20, 2009 – Apr 6, 2009).
But still the allure of gold has never been more tempting as in today’s volatile markets. The more important issue isn’t whether an investor should consider investing in gold, but rather the logic behind doing so.
Gold has been historically viewed as a safe haven. But that bit of wisdom does not seem to hold ground anymore. Thanks to Gold ETFs, the metal is now more of a paper asset whose value is increasingly driven by the demand and supply of paper gold on financial markets.
Consider this: In March 2009, NASDAQ Dubai launched the region’s first Sharia-compliant tradable security backed by gold. Named Dubai Gold, it is the first ETF to list on NASDAQ Dubai.
Meanwhile, reports state that in the first six weeks of the year, the buying by gold chasers drove more than 200 tons of gold bullion into SPDR Gold Shares, the world’s largest gold-backed ETF representing more than 1,000 tons of gold.
Gold ETFs have driven up investment demand because of the ease with which individuals may invest in the commodity. As a result, gold is now clearly subject to the same volatility as other financial assets, as investors’ interest flows in and out.

COMPARATIVE PERFORMANE
Category
1Mth
3Mth
6Mth
1Yr
Gold ETFs
-6.38
7.9
11.11
27.01
Medium & Long-term Gilt Funds
-2.02
-10.79
9.36
12.11
Medium-term Debt Funds
-0.6
-3.6
6.5
9.05
Cash Funds
0.5
1.5
3.5
7.74
Balanced Funds
10.5
-0.6
-13.9
-24.21
Diversified Equity Funds
14.6
-1.4
-22.3
-36.76
As on April 2, 2009 (All figures are in %)Moreover, gold certainly did not appear to be a great hedge against falling stock prices. Remember, when the global financial panic was at its peak in October 2008, gold prices were at their recent lows. International gold prices peaked in March 2008 and, from then till the end of October, gold fell by about 25 per cent.
Gold is no longer physical wealth but a paper asset whose value can fluctuate widely. No doubt, gold does have its value as a hedge against the dollar and a great option in a worldwide monetary collapse, but it does appear to a lot of market watchers that the price is currently overvalued. We could well be in a gold bubble, which is just as ephemeral as the stock or oil or real estate bubbles were. Waking up to gold one of these days could be like waking up to stocks or real estate in 2007.
Gold ETFs
Scheme
1Mth
3Mth
6Mth
1Yr
Gold Benchmark ETF
-6.38
8.05
11.38
27.48
Quantum Gold
-6.39
7.89
11.18
27.42
Kotak Gold ETF
-6.4
8.0
11.3
27.39
UTI Gold ETF
-6.4
7.9
11.2
27.31
Reliance Gold ETF
-6.4
7.6
10.4
25.45
As on April 2, 2009 (All figures are in %)c
But for every cautious or cynical observer, there are plenty of optimists making predictions of the highs that gold could reach. U.S-based Swiss America Trading Corporation (SATC) came out with an editorial piece in March which listed 70 economists who, on an average, predict that gold is poised for a dramatic surge and could touch $2,000 an ounce.
The justifications varied, the most common being gold as a hedge against anticipated inflation and gold being globally liquid which is of paramount importance with the debasing of currencies in developed economies.
But as a coin dealer in the US was quoted as saying: “If someone says he knows whether it’s a good or bad time to buy gold – run away. Because if he knew that answer, he wouldn’t be working for a living.”

http://www.business-standard.com/india/storypage.php?autono=354785

6 reasons I'm calling a bottom and a new bull

ARROYO GRANDE, Calif. (MarketWatch) -- OK, so you're one of millions of investors impatiently waiting on the sidelines, sitting with $2.5 trillion cash under your mattress, waiting for the right moment, that signal screaming: "Bottom's in, start buying!" Yes, it'll go down again, but the bottom's in, thanks to a great March, possibly the third best month since 1950, so it's time to jump back in and buy, buy, buy!
You heard me, I'm calling the bottom, beating Dr. Doom to the punch again (yes, again). Last time we were predicting the recession. This time we're calling the market bottom and a new bull.
Video: Market recovery or head fake?
Barron's Bob O'Brien says that after the S&P 500 fell to a 12-year low on March 9th, it then experienced a v-shaped recovery shooting 23% off the March Lows. Is this a true rally with staying power, or is the data a fake to the head?Dr. Doom? Of course I'm referring to you-know-who, Nouriel Roubini, the notorious "party-boy economist," as Portfolio magazine calls him, the ubiquitous New York University professor with his well-oiled PR hype machine (and bon vivant lifestyle) that's made him the "go-to" media darling with endless economic predictions.
Portfolio pinpoints Roubini's claim to fame in his February 2008 blog, "The Rising Risk of Systemic Financial Meltdown: The 12 Steps," where he announced the recession actually started in December 2007. We also covered it as a 12-act Shakespearean tragedy.
But today Roubini's got a huge problem, one that'll hurt his fans, investors and credibility.
Last December, Newsweek reported Roubini was predicting "the recession will last until the end of 2009," about nine more months. He also boasted that "eventually, when we get out of this crisis, I'll be the first one to call the recovery ... Then maybe I'll be called Dr. Boom." He made the same boast in Portfolio.
Roubini is a great showman. A century ago he would have outdone P.T. Barnum with his incredible boast, a prediction rivaling historic ones made by other well-known New Yorkers: Babe Ruth's famous home run in the 1932 World Series after pointing his bat into the center field bleachers and Joe Namath's prediction of an upset win over the heavily favored Colts in the 1969 Super Bowl.
Warning: Here are 6 reasons why Roubini can never fulfill his promise ... why he may go down in history, as Portfolio suggests, as the designated "one-hit wonder" ... but worse, any investor waiting for a Roubini "call" is playing Russian roulette, a loser's game ... you will miss the market's real turning point:
1. The stock market turns before the economy bottoms
Regardless of what Dr. Doom or any economist boasts, the stock market has a mind of its own, it's a leading indicator. Stocks historically kick into action earlier than the economy recovers, often six months ahead of the economy's bottom. Witness March.
So while economists' predictions pinpointing a recession may appear earlier than bear market predictions by the notoriously optimistic Wall Street pundits, the cycles work the other way in a recovery: A stock market bottom and new bull may occur six months before the economists call the ending of a recession and an economic recovery. So Dr. Doom's "call" will naturally come months after the stock market in fact turns.
2. Stocks make big money fast then go to sleep
Back in January, Wall Street Journal columnist Jason Zweig reported on some fascinating research: "History shows that the vast majority of the time, the stock market does next to nothing. Then, when no one expects it, the market delivers a giant gain or loss -- and promptly lapses back into its usual stupor."
And the numbers back it up: "Javier Estrada, a finance professor at IESE Business School in Barcelona, Spain, has studied the daily returns of the Dow Jones Industrial Average back to 1900." He "found that if you took away the 10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear. Conversely, had you sidestepped the market's 10 worst days, you would have tripled the actual return of the Dow."
3. No one can predict the next big move
Unfortunately, markets are notoriously unpredictable, ruled by mobs of irrational investors who are all bad guessers, No one can predict in advance when those "10 worst" or "10 best" days will actually occur. Not on Main Street. Certainly not on Wall Street.
Why? In his classic, "Stocks for the Long Run," Wharton economics Prof. Jeremy Siegel studied all the big market moves between 1801 and 2001. Two centuries of data. Siegel concluded that 75% of the time there was no rational explanation for big moves up in stock prices or big moves down. Lesson: Market timing is a loser's game.
4. Famous media-darling pundits inevitably flameout
A month ago Newsweek's science columnist and former Wall Street Journal legend Sharon Begley wrote a fascinating piece, "Why Pundits Get Things Wrong." Her opening: "Pointing out how often pundits' predictions are not only wrong but egregiously wrong -- a 36,000 Dow! euphoric Iraqis welcoming American soldiers with flowers! -- is like shooting fish in a barrel, except in this case the fish refuse to die. No matter how often they miss the mark, pundits just won't shut up."
Think of all the media darlings you know as Begley reviews the data: And "the fact that being chronically, 180-degrees wrong does not disqualify pundits is in large part the media's fault: cable news, talk radio and the blogosphere need all the punditry they can rustle up, track records be damned."
The data comes from Philip Tetlock, a research psychologist at Stanford University: "Tetlock's ongoing study of 82,361 predictions by 284 pundits" concludes that their accuracy has nothing to do with credentials such as a doctorate in economics or political science, or on "policy experience, access to classified information, or being a realist or neocon, liberal or conservative."
What matters? "The best predictor, in a backward sort of way, was fame: the more feted by the media, the worse a pundit's accuracy. ... The media's preferred pundits are forceful, confident and decisive, not tentative and balanced. ... Bold, decisive assertions make better sound bites; bombast, swagger and certainty make for better TV."
They can be totally wrong, so long as they're assertive and entertaining. "The marketplace of ideas does not punish poor punditry. Few of us even remember who got what wrong. We are instead impressed by credentials, affiliation, fame and even looks -- traits that have no bearing on a pundit's accuracy."
5. Even the best economists make huge errors
Go back a decade to that classic article in BusinessWeek, "What Do You Call an Economist With a Prediction? Wrong." Four years later in "So I Was Off by a Trillion," BusinessWeek punctuated the message, reporting on Michael Boskin's classic error. Boskin, a Stanford economist and former chairman of the Council of Economic Advisers under Bush 41, "circulated a startling paper to fellow economists. In it, he argued that the future tax payments on withdrawals from tax-deferred retirement accounts ... were being drastically undercounted. That meant federal budget revenues could potentially be in for a huge, unforeseen windfall ... of almost $12 trillion."
That also meant a political boost for Bush 43: "Larger than the sum of the 75-year actuarial deficits in Social Security and Medicare plus the national debt." Later, however, Boskin checked his numbers and "concluded that he had made a serious mistake: A key term had been left out ... possibly wiping out most of the estimated $12 trillion in savings."
No surprise: Political ideologies often motivate "objective" economists.
6. Will the real Dr. Doom please stand up?
Roubini actually shares the Dr. Doom title with many others, including Hong Kong economist Marc Faber who publishes the "Gloom Boom Doom Report;" legendary Salomon Bros. strategist Henry Kaufman; and Houston billionaire Richard Rainwater, whom Fortune mentioned as Dr. Doom.
In addition, in one of our columns last summer, we reported on many others whose predictions of a coming recession predated Roubini's claim, though not called "Dr. Doom." They include: Pete Peterson, a Blackstone Group founder; Pimco's Bill Gross; Harvard financial historian Niall Ferguson; Warren Buffett; former SEC chairman Arthur Levitt; Jeremy Grantham whose GMO firm manages $100 billion; "Black Swan" author Nassim Nicholas Taleb; and long-time Forbes columnist, economist Gary Shilling.
Noteworthy, way back in 2004 Shilling specifically warned: "Subprime loans are probably the greatest financial problem facing the nation in the years ahead." And later in June 2007 Shilling said: "Just as the U.S. housing bubble is bursting, speculation elsewhere will come to a violent end, if history is any guide. Some astute pioneers, including Richard Bookstaber, who designed various derivative-laden strategies over the years, now fear that financial derivatives and hedge funds -- focal points of today's huge leverage -- will trigger financial meltdown." Then in a November 2007 column, "17 Reasons America needs a recession," Gross predicted a bailout of "Rooseveltian proportions" ahead.
Yes, we were warned. In fact, seems everyone knew. But our denial was too powerful, hidden under our new culture of infectious greed.
The examples go on and on ... strongly suggesting that the "Roubini Hype Machine" may well be the "one-hit wonder" Portfolio calls him. He was not ahead of the competition with his December 2007 recession call. So if you're one of America's 95 million investors waiting for Roubini to call a bottom before getting back in the market, you'll miss the real turning point.
One final, crucial warning: This next bull will be short. First, it will suck money out of the mattresses of investors who are sitting on cash. Then Wall Street will recreate the insanity of the '90's dot-coms and the recent subprime-credit mania.
But underneath it all, Wall Street's bulls will be setting the stage for yet another catastrophic bubble and meltdown. So please be careful when "Dr. Doom's PR Hype Machine" proclaims that Roubini's finally morphed into "Dr. Boom" later this year. It'll be too late.

Central banks sit on their bullion reserves

Central banks sit on their bullion reserves
Falling gold sales and loans provide price support; IMF has 400 tons to unload
By Moming Zhou, MarketWatch
Last update: 5:04 p.m. EDT March 24, 2009
NEW YORK (MarketWatch) -- The world's major central banks, which hold more than 15% of global gold stockpiles, are expected to reduce their sales or lending of their bullion reserves this year, potentially restricting supplies and putting a floor under gold prices.
Several precious metals consultancies and the industry's main trade group anticipate total sales from major central banks such as France and Switzerland will decline again this year. One estimate projects sales could tumble to their lowest level in at least a decade.
Fewer sales mean gold supplies, which have been retreating in recent years as mining production has weakened, are likely to keep falling short of demand.
As long as investor appetite stays strong - and that's a big question mark, of course - this trend should support prices over the long term.
"Falling central bank sales have been a part of the gradual improvement in the overall balance between demand and supply in the gold market," said George Milling-Stanley, managing director of the official sector at the producer-funded World Gold Council.
"There are a whole bunch of reasons why the [gold] price has been going up, and I think that lower supply has been one of those reasons," he added.
Jon Nadler, senior analyst at Kitco Bullion Dealers, said falling central bank sales "might put a floor of some kind under gold, near $500 or so."
Analysts also anticipate official holders such as central banks will lend less of their reserves, keeping with a trend of recent years. Some analysts say central banks' loans of their reserves to mining companies and private banks contributed to a slump in gold prices in the second half of last year.
Another important milestone for the supply of official gold this year is the International Monetary Fund. The organization has said it plans to sell more than 400 tons of gold to diversify its revenue and strengthen its balance sheet.
Some investors are worried that the IMF sales could pressure gold prices, although the fund has said it plans to coordinate closely with central banks to minimize the impact of this large gold sale.
The IMF's plan could provide a boost in getting central banks to extend an agreement expiring in September to limit how much gold they will sell every year. That deal, called the Central Bank Gold Agreement, has helped restrain central bank gold supplies over the past decade.
In Tuesday's trading, the London afternoon gold fixing, an important benchmark for gold prices, stood at $923.75 an ounce. That's $88 lower than the record high above $1,000 hit about a year ago.
Bank of England's shocker
Central banks sell gold to rebalance their reserves portfolio by reducing the portion of gold. By selling gold, a country can switch into assets with higher return and better liquidity.
For example, Switzerland, which had held the most gold reserves per capita in Europe in 1999, has sold more than 1,300 tons of its gold reserves. Other major sellers in the past 10 years included France, the Netherlands, and the U.K.
Countries like France, where monetary policy is now set by the European Central Bank, still maintains its own central bank. The U.S. hasn't sold gold.
In the past, abrupt selling has sometimes depressed gold prices. The Bank of England's announcement in early 1999 that it was selling part of its reserves helped gold prices slump to a 20-year low. Gold traded at just above $250 an ounce by the summer of that year.
But efforts to coordinate those sales have reduced those shocks. On Sept. 26, 1999, 15 European central banks, led by the ECB, signed the first CBGA to take concerted moves on gold sales.
The banks agreed that in a five-year period, they will cap their total gold sales at around 400 tons a year, with sales in five years not exceeding 2,000 tons. The CBGA was renewed in 2004 for another five-year period. The second CBGA raised annual ceiling to 500 tons and the five-year limit to 2,500 tons.
"There is a general consensus in the gold market that the two successive CBGAs have been a success for the whole market and for central banks in particular," said WGC's Stanley.
Sales slip, slip some more
In the past 10 years, almost all the official gold sales have been from signatories of the CBGA. Their sales have fallen in recent years and are likely to fall further this year, analysts say.
VM Group, a precious metals consultancy based in London, estimated that selling under the CBGA will fall to 150 tons in the year ended Sept. 26. If realized, this will be the lowest number since 1999, when the first CBGA was signed.
The World Gold Council and CPM Group, a New York-based precious metals consultancy, also anticipate official gold sales will fall this year.
Central bank gold sales declined to 279 tons in the 2008 calendar year, more than 200 tons, or 42%, lower than a year ago, according to data collected by GFMS, a London-based precious metals consultancy.
The fall in official sales is a major contributor to the decline in global gold supply in 2008, GFMS data showed. Meanwhile, the portion of official sales in total gold supply also fell to 8% in 2008 from 14% a year ago.
"Central banks that wanted to reduce their gold holdings have sold most of the gold they wanted to sell by the middle of this decade," said Jeffrey Christian, managing director at CPM Group.
But further selling could come from countries that still hold a big portion of gold in their reserves, such as Germany and Italy, according to analysts at VM. Earlier this year, politicians in Germany were talking about selling gold to fund the country's stimulus package.
Borrowing and hedging
Aside from selling gold, some central banks also lend the metal to miners, big banks and funds. Miners borrow gold to sell forward in order to lock in their future revenue. Funds and banks sometimes sell borrowed gold to invest the proceeds in other markets.
Gold borrowed for these two purposes used to have a dramatic impact on the market because it was immediately sold in spot markets, said WGC's Stanley.
VM estimated that total outstanding balance of central bank gold lending was at 2,345 tons at the end of 2008. That's more than the year's total mining production, the major source of gold supply.
Nonetheless, this balance has shrunk consistently since the late 1990s, reducing its impact on the markets. The balance in 2008 fell almost 50% from 2004's more than 4,300 tons, according to VM.
"Gold mining companies have largely stopped selling production as a hedge, and the hedge funds have largely abandoned the practice of selling gold forward as a speculation," said Stanley.
Miners reduced forward sales by 1.54 million ounces in the fourth quarter, the smallest amount for the year, according to GFMS. Gold producers still had 15.52 million ounces left in hedging at the end of the year.
Still, in the short term, gold borrowing can make a shift in prices.
From last August, when the global credit crunch hit the financial industry, bullion banks borrowed "as much gold as was available and executed gold swaps to raise liquidity," VM analysts led by Carl Firman pointed out in a yearly report released earlier this month.
The activity had an "immediate and very marked affect" on gold by holding prices back, even in the wake of strong retail demand for physical metal, Firman wrote in a report.
Gold prices slumped nearly 30% from July's high to below $700 in November. See related story.
By lending gold, central banks can earn interest on it. Unless central banks can lend out their gold, it earns nothing, and the stockpile in fact is a cost in terms of storage and insurance, said VM's Firman in a telephone interview.
Despite some wild speculations, all evidence indicates that the U.S., the biggest gold holder, is not lending gold, said CPM's Christian.
"The people, the gold conspiracy theorists who claim evidence, twist the truth like Uri Gellar twists spoons," said Christian.
More than half of the 8,133.5 tons of gold held by the U.S. is stored in Fort Knox, Ky., according to the Treasury Department. Gold is also stored in West Point, N.Y., and Denver, Colo.
IMF has 400 tons to unload
The second CBGA is expiring in September. Stanley said he expected a new agreement will be signed. William Lelieveldt, an ECB spokesman, declined to comment on the potential renewal of the agreement.
One of the beneficiaries of a third CBGA will be the IMF, which is considering coordinating with central banks to sell 403 tons of gold.
The fund, which holds more than 3,200 tons of gold, ranking the third in the world after the U.S. and Germany, is facing a widening deficit. With the majority of its income coming from interest payment of the fund's loans, the IMF has been looking for other revenue sources.
One of the plans is the creation of an endowment, with major financing for the endowment coming from the proceeds of gold sales.
The IMF acknowledged drawbacks of gold sales, but also said that the sales could "form part of a package approach" and should "subject to strong safeguards to limit their market impact," according to the plan.
The sales "need to be coordinated with the existing and possible future central bank gold agreements," the committee said in the report. By coordinating with the CBGA framework, IMF gold sales "should not add to the announced volume of sales from official sources."
The WGC's Stanley said the IMF is likely to help push through a third CBGA.
"The proposal was designed not just to plug the income gap, but also to put the IMF's finances on a more diverse, sustainable and stable footing for the longer-term, and less subject to the ups and downs of the world economy," wrote Matthew Turner, an analyst at VM, in a report.
Moming Zhou is a MarketWatch reporter based in New York.

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57 Newsletters
Key: U.S. Equities Int'l Equities U.S. Fixed Income Int'l Fixed Income Gold
Click on column header to sort data
Seq. #
Gain*
Peter Eliades' Stockmarket Cycles
Peter G. Eliades
25.9%
Jan 1985

2
National Trendlines
Douglas Jimerson
0.5%
Jan 1992

3
Mutual Fund Strategist (The)
Holly Hooper-Fournier
-0.6%
Jan 1985

4
Doug Fabian's Successful Investing
Doug Fabian
-0.9%
Jul 1980

5
Sy Harding's Street Smart Report
Sy Harding
-3.1%
Jan 2002

6
Martin Weiss' Safe Money Report
Martin D. Weiss
-5.2%
Apr 2001

7
Coolcat ETF & Fidelity Select Report
Kevin Kennedy
-6.7%
Jan 2003

8
Nasdaq Wizard Long-Term Model
Stephen Brown
-6.8%
Jan 2006

9
Nasdaq Wizard Mid-Term Model
Stephen Brown
-7.0%
Jan 2006

10
TimingCube
F. Minssieux
-7.5%
May 2003

11
No-Load Mutual Fund Selections & Timing Newsletter
Stephen L. McKee
-8.7%
Jan 1990

12
Doug Fabian's ETF Trader
Doug Fabian
-12.7%
Jan 1999

13
Growth Fund Guide
Walter Rouleau
-13.5%
Jul 1980

14
Personal Finance
Elliott Gue
-14.3%
Jan 1984

15
TurnerTrends
Mike Turner
-15.4%
Apr 2004

16
Roger Conrad's Utility Forecaster
Roger S. Conrad
-16.5%
Jan 1993

17
Real Wealth Report
Larry Edelson
-17.5%
Jan 2005

18
Todd Market Forecast
Stephen Todd
-20.2%
Jan 1992

19
Investors Intelligence
Michael L. Burke
-20.7%
Jan 1985

20
Professional Timing Service
Curtis Hesler
-21.1%
Jul 1980

21
Contrarian's View (The)
Nick Chase
-22.7%
Jan 1991

22
Aden Forecast (The)
Mary Anne Aden
-23.6%
Jan 1996

23
All Star Fund Trader
Ronald E. Rowland
-24.6%
Jan 1993

24
Cycles Research Early Warning Service
Bill Meridian
-28.5%
Jan 2007

25
CurrinResearch.com
Rick Currin
-29.8%
Jan 2004

26
Systems and Forecasts
Gerald Appel
-29.9%
Jan 1983

27
Investor's Intelligence ETF Review
Tarquin Coe
-30.2%
Mar 2005

28
Moneyletter
Walter S. Frank
-31.6%
Jan 1987

29
FundAdvice.com
Paul A. Merriman
-31.7%
Jan 1984

30
Peter Dag Portfolio Strategy & Mgmt (The)
George Dagnino
-32.0%
Jan 1983

31
Eric Kobren's Fidelity Insight
Eric Kobren
-32.1%
Jan 1988

32
Fosback's Fund Forecaster
Norman G. Fosback
-32.2%
Jan 2003

33
Michael Murphy's New World Investor
Michael Murphy
-33.6%
Jan 1999

34
Morningstar Mutual Funds
Patrick Dunn
-34.1%
Jan 1991

35
Almanac Investor Newsletter
Jeffrey A. Hirsch
-34.4%
Jan 1994

36
Fidelity Monitor
Jack Bowers
-35.8%
Jan 1987

37
No Load Fund*X
Janet Brown
-37.8%
Jul 1980

38
Richard C. Young's Intelligence Report
Richard C. Young
-38.1%
Jan 1998

39
Fidelity Independent Adviser Sector Momentum Tracker
Donald R. Dion, Jr
-38.3%
Aug 2004

40
ETF Trader
Jim Lowell
-40.9%
Sep 2004

41
Successful Investor (The)
Patrick McKeough
-40.9%
Jan 2002

42
Global Investing
Vivian Lewis
-41.1%
Jan 1994

43
AlphaProfit Sector Investors' Newsletter
Sam Subramanian
-41.4%
Jan 2004

44
Richard Schmidt's Stellar Stock Alert
Richard Schmidt
-42.1%
Jan 1999

45
Forbes/Lehmann Income Securities Investor
Richard Lehmann
-43.9%
Jan 2004

46
Fredhager.com
Rick Currin
-44.3%
Jan 2000

47
Investment Reporter (The)
Marc Johnson
-45.5%
Jan 1984

48
Carla Pasternak's Hi-Yield Investing
Carla Pasternak
-45.8%
Mar 2006

49
Mark Skousen's Forecasts & Strategies
Mark Skousen
-48.0%
Jan 1994

50
Outstanding Investments
Byron King
-50.1%
Jan 2000

51
AI Stock Forecast
Michael Henry
-50.6%
Jan 2000

52
Dines Letter (The)
James Dines
-52.3%
Jul 1980

53
Ruff Times (The)
Howard J. Ruff
-54.1%
Jul 1980

54
International Harry Schultz Letter (The)
Harry Schultz
-59.2%
Jul 1980

55
Charlie Buck's Win Before You Buy
Charlie Buck
-81.1%
Jan 1997

56
Fidelity Independent Adviser Dynamic Global ETF Service
Donald R. Dion, Jr
n/a
Jul 2008

57
P. Q. Wall Forecast, Inc.
P. Q. Wall
n/a
Jan 1990

* Cumulative 1yr performance through Jan 2009

Coupon Web Sites: Never Pay Full Price Again?

Coupon Web Sites: Never Pay Full Price Again?
by Melissa Korn
Tuesday, February 3, 2009
provided by


These days, it seems there’s no sense buying something unless you can get at a steep discount. That goes for big-ticket items like houses and cars, down to such smaller purchases as vacation packages, electronics and clothes.

More from WSJ.com:

• Mobile Banking Finds New Users

• Travel, Debt and SATs

• The Urge to Splurge: Don't Worry, It'll Pass

According to research group comScore Inc., 27 million Americans visited coupon sites in October, up 33% from a year earlier. And from last January to September, the number of coupon-related Web searches doubled. So it’s clear more of us are hunting for deals.

Scores of Web sites aggregate coupons and promotional codes that help people shop online without ever having to pay full price. Some, like Coupons.com, are geared toward grocery and drug store staples. (Today, that site is featuring $1 off Velveeta cheese and $2 off Perdue Frozen Fully Cooked Chicken on its home page.)

But others, like CouponCabin.com and RetailMeNot.com, offer a wider array of discounts for popular retailers, usable in-store and online. CouponCabin claims to have more than 100,000 discounts from more than 20,000 merchants.

More from Yahoo! Finance:

• As Prices Rise, Some See $2 Gas

• Celebrity Charity Auctions

• More Travelers Redeeming Miles for Merchandise

--------------------------------------------------------------------------------
Visit the Family & Home Center

While some sites require subscriptions to get at the good stuff, most offer coupons for free. The sites make money by selling ad space or offering “featured discount” status to stores for a set fee.

Here’s how it works: I happen to be in the market for a new comforter, as mine was mauled by a pair of scissors (an arts and crafts project gone bad). At CouponCabin.com, I found a discount code for $15 off any order over $75 at Macy’s, which is having its own sale. I click the coupon link, which takes me to Macy’s site, find the item I want, enter the code upon checkout, and, voila — a new comforter for Melissa. CouponCabin.com even shows a screen shot of where to enter the promotional code on a store’s Web site.

Most coupon sites allow you to sort discounts by retailer, so if my comforter didn’t qualify for the minimum dollar amount of one Macy’s coupon, I could always check to see if it made the cut for another.

Coupon sites vary in breadth of offerings, but also in practicality. Users should scour these sites after picking out a specific item on a store’s Web site or when they want a certain item (say, a just-released DVD) but don’t care where they buy it. But if you’re tempted to buy things just because they’re on sale, steer clear, as these sites can turn your computers into a money pit.

RetailMeNot.com, for example, has shopping tips for certain stores, as well as a separate forum for shoppers to trade details on one-day sales and new markdowns. Sensible for people who have been eyeing those fabulous but otherwise too-expensive jeans. Not so much for people who just like to browse.

One nifty thing RetailMeNot.com does have is a downloadable browser application that alerts you to promotions and coupons when you are on a retailer’s Web site. If you don’t mind the extra software, it may be a good way to ensure savings even if you forget to consult a coupon site pre-checkout. RetailMeNot.com also provides success rates for coupon codes so you know whether that hot 30% off code at J.Crew is likely to work when it comes time to check out.

Of course, coupon sites aren’t always all they’re cracked up to be in terms of actual bargains. Some ask contributors to send in those alphanumeric codes they get after making purchases, the ones that promise a percentage off the person’s next purchase above and beyond other promotions. But they also include nothing-special “savings.” Right now, AnyCoupons.com (along with a half-dozen other sites) lists free shipping on purchases totaling $150 or more at Banana Republic. But the store’s own Web site advertises that one, and has done so for at least a few weeks. Because so many stores are discounting deeply and offering incentives, make sure to check out the sidebars on retailers’ own sites for discount codes.

Glossary of Terms

Glossary of Terms

Precious Metals Websites

Precious Metals Websites


Gold as investment
Paper currencies pose a risk of being inflated, possibly to the point of hyperinflation. In times of inflation, people seek to protect their savings by purchasing liquid, tangible assets that are valued for some other purpose. Gold is in this respect a good candidate, since producing more is far more difficult than issuing new fiat currency, and its value does not rely on any particular government's health. Gold has a long history of being an inflation proof investment. During times of low or negative real interest rates, when significant inflation is present and interest rates are relatively low, investors seek the safe haven of gold to protect their capital. It is best to gold in the cheapest form, and generally the cheapest ways to buy gold are bars, krugerrands or sovereigns. Buy gold when its price is low rather than high. Many people are tempted to buy gold when they hear that the price has risen. Although this can be the right action if the price continues to rise, it is often better to buy after the price has fallen. When trying to compare different forms of gold, compare the percentage over the gold price for each option.
Kingsgate's rapidly growing reserve/resource position is fuelled by exploration within a surrounding gold province which exhibits world class potential. Click here for more information on our products and services...
Gold Price Australia
http://www.goldprice.com.au/Provides current gold price charts in grams, ounces and kilos in Australian Dollars and all major national currencies. Gold commentary and news.
Gold Stock Center
http://www.goldstockcenter.com/Home Page for the Worlds Gold Stock Investors.
Established in 1998, Gold Stock Center has evolved into the world's largest gold stock specific investment portal providing comprehensive daily news and resources to the thousands of gold stock investors and professionals that visit the goldstockcenter.com web site every day. Gold Stock Center has garnered worldwide acclaim, receiving numerous online awards, top rankings and "Best On The Web" accolades, and has been highlighted in numerous international publications including 'The Washington Post' and 'NewsBytes'. Gold Stock Center has offices in Hamilton, Ontario, Canada and Brooklyn, New York, USA.
Gold Australian Producers Index
http://www.sharelynx.com/Here you will find the largest collection of GOLDEN INFORMATION on the internet - more charts, more links, articles, news & access to information concerning all aspects of the precious metals & gold markets as well as a wealth of resources concerning global financial & economic markets. SHARELYNX GOLD specializes in charts & focuses on designing & developing precious metal indices, indicators & technical analysis methods for evaluating the GOLDEN SECTOR. We collect & collate all the various precious metal indicators from across the web, charting numerous gold feeds - lease rates - stockpiles - currencies - ratios - spreads & in-house indicators. Currently plotting over 40 gold indices with many modelled specifically to represent the various sectors of the gold markets. With over 1200 pages, containing many thousands of charts covering all the PM markets; Commodities, Forex, Currencies, Indices & Stocks you will find SHARELYNX GOLD absolutely unique & overflowing with GOLDEN INFORMATION.
GoldNerds - Links to Gold information
http://goldnerds.com.au/We're crazy about information and set to transform the way investors look at the ASX Gold & Silver Sector. GoldNerds provides excel spreadsheets with everything you need to know. There are two versions, a standard one with the market cap and resources information, and a professional one with more financial information and EVs. We're comprehensive. The professional version has an array of over 9000 cells. All up, there are over 80,000 words in comments describing companies. Usually, we're more up to date than the company websites are. Features over 300 companies, 20-30 columns of info, updated every two weeks, customisable scores, etc.
Kitco - Gold & Precious Metals - Buy Gold & Sell Gold, Silver, Platinum - Charts, Graphs, Prices, Quotes
http://www.kitco.com/Kitco - Gold & Precious Metals - Buy Gold & Sell Gold, Silver, Platinum - Charts, Graphs, Prices, Quotes
Since 1977,Kitco has earned a reputation as one of the world’s premier retailers of precious metals.We offer a complete line of the highest quality bullion bars and coins for investors and refining services for the jewelry manufacturing industry, as well as mill products. Our customers rely on Kitco for superior service and the highest quality products at competitive prices.Kitco serves the needs of both small and large investors, as well as the precious metals industry. To serve our customer even better, our services are available 24 hours a day, seven days a week on the Internet.
Gold Forecaster - Global Watch: Weekly Fundamental & Technical Review of the Global Picture as it Relates to Gold
http://goldforecaster.com/Gold, Newsletter, Silver, platinum, palladium, precious metals, weekly, information, gold news, gold charts, quotes, gold markets, commentary, gold newsletters, gold stocks, gold quotes and more gold information. Weekly Gold & Silver newsletter.
In "Global Watch - The Gold Forecaster", we present the global picture, as it relates to gold and its price whilst synthesising these factors to forecast the gold price. The price of gold is an amalgam of diverse and changing influences, from Currencies to Jewellery, from Investors to Speculators. From Asia, to India, to Australia, to Canada, to South Africa, to the U.S.A. and to Asia, the gold price is of interest to all. It cannot be seen in isolation as a metal, but must be understood as a Global Thermometer measuring monetary, political, economic, stability as well as the raw demand / supply features of the metal itself. These factors do not merely add up to the price but interact in sometimes strange ways, to produce the gold price. For example, rising prices often lead consequently to rising demand, as the appetite for the metal grows. Its price may rise in one currency and fall in another, at the same time. Overall, it reacts sensitively to the overall level of global stability, which, in turn, gives us the gold price. It is our task in this letter to track these different features, giving you both the Technical Analysis and the Fundamental features impacting on the gold price each week. It is our goal to help you to understand and profit from this market, wherever you are on this globe, in a professional manner. We welcome any input or observations you may have, which contribute to the enhancement of this service.
Gold Price
http://goldprice.org/GOLDPRICE.ORG - The No. 1 current gold price site for fast loading live gold price charts in ounces, grams and kilos in 23 major currencies. Plus historical gold prices and hard hitting gold commentary.
GOLDPRICE.ORG provides you with fast loading charts of the current gold price per ounce, gram and kilogram in 23 major currencies . We also provide you with the latest gold news, timely and accurate gold commentary, gold price history charts for the past 30 days, 60 days, 1, 5 and 10 years and gold futures quotes and charts.
AnyGoldNow to buy e-gold, e gold, EMO, evocash debit cards
http://www.anygoldnow.com/Welcome to AnyGoldNow, where you can buy e-gold, buy e-gold with credit card, evocash, debit cards, EMO
e-gold, e-Bullion, Pecunix are Gold backed e-currencies - They are the easiest and safest way for anybody to Buy or Sell Gold today, and take advantage of the Gold price uptrend. Click Here to find out all there is to know about it. «Digital Gold Currencies» (DGC) include e-gold, GoldMoney, Pecunix, etc. You can trade them right here from anywhere in the world.
Gold prices and gold market information - Certified Gold Exchange
http://www.certifiedgoldexchange.com/Find daily gold prices and information on the gold market. Get free information on precious metals investing and gold trading.
Certified Gold Exchange, Inc. (CGE) is North America's premier precious metals trading platform. Offering licensed dealers, institutional and household investors real-time quotes when buying or selling gold, silver and platinum products. We only buy, sell or trade in products independently certified by one of the following authorities: Government issued gold or silver bullion coins Johnson Matthey or Credit Swiss gold bars PCGS or NGC certified gold and silver rare coins Johnson Matthey or Engelhard silver bars (pure) Any Comex Acceptable Bars
Digital Gold Currency Standards Consortium
http://www.dgcsc.org/Digital Gold Currency Standards Consortium
Gold prices : current gold price & charts
http://www.galmarley.com/FREE gold charts : spot gold price, US$ price of gold & FX gold prices
World Gold Council > The global advocate for gold.
http://www.gold.org/World Gold Council > The global advocate for gold.
Founded in 1987, the World Gold Council is an organisation formed and funded by the world's leading gold mining companies with the aim of stimulating and maximising the demand for, and holding of, gold by consumers, investors, industry, and the official sector. As well as undertaking marketing initiatives to drive demand, the World Gold Council is also instrumental in working to lower regulatory barriers to the widespread ownership of gold products, helping to develop distribution systems and promoting the role of gold as a reserve asset in the official sector.
Gold Seek: Your leading, free, online resource for gold & precious metals information and financial truth - GoldSeek.com
http://www.goldseek.com/Gold, Silver, platinum, palladium & precious metals information, gold news, gold charts, quotes, gold markets, commentary, gold newsletters, gold stocks, gold quotes and more gold information. Offering a range of free information on gold including the latest gold news from around the world, gold commentary, gold market updates, gold stock reports, gold coin information, gold, silver, platinum, palldium, dollar, HUI, XAU and international gold quotes, charts, newsletters plus much more!
Marketvector.com's Homepage--Your Online Source of Market Forecasts.
http://www.marketvector.com/Marketvector.com provides free stock market, interest rate, exchange rate and economic forecasts.
MarketVector uses state-of-the-art artificial intelligence to forecast the global financial markets.
Current Primary and Scrap Metal Prices - LME (London Metal Exchange), COMEX, NYMEX, Copper, Aluminum, Nickel, Tin, Lead, Zinc, Iron, Steel, Specialty Steel, Stainless Steel, Nickel Alloy, Chrome, Titanium, Ferrochrome, Cobalt, Molybdenum, Antimo
http://www.metalprices.com/Metals Prices and News. London Metal Exchange LME, Nickel Alloys, Nickel, Copper, Aluminum, Tin,Lead, Zinc, Titanium, Chrome, Cobalt, Molybdenum, Vanadium, Tungsten, historical charts, graphs, conferences,current news
Metalprices.com produces current charts for LME Aluminum, Copper, Nickel, Tin, Lead, and Zinc prices, as well as COMEX Copper and Aluminum prices. Metal charts Every metal on Metalprices.com has its own dedicated main page. Copper Aluminum, Nickel, Tin, Lead, & Zinc price pages are linked below.
Gold bullion - Gold bars - Gold coins - Gold prices
http://www.onlygold.com/We present the basic facts you need, and up-to-date information about our oldest and most-treasured of elements- gold. Whether you're involved with gold as a buyer, seller, trader, investor, jeweler, dealer, or just curious about this most universal of metals, OnlyGold.com has something for you.
The role of gold as money, as value, as treasure itself is a basic and long-lived story, but it shouldn't be at all mysterious. This site, we hope, will take the mystery away and show you gold simply for what it is. OnlyGold.com is a resource open to anyone, providing information about gold and bullion, and making it easily available to those who want to purchase gold in the most cost effective forms available. Gold makes possible the private conversion of some of your assets into a portable and permanent form.
Technical Indicators - Stock Market, Commodities, Currencies
http://www.technicalindicators.com/Technical Indicators and Technical and Fundamental Analysis of Stock Market, Gold, Silver, Currencies, Updated nightly. Charts, Quotes,Commitment of Traders Reports, more
BullionVault.com
http://www.bullionvault.com/BullionVault is the place to buy gold bullion online at live gold prices as fully allocated gold bullion, held in the gold vault and country of your choice. View live gold price charts with real-time gold prices and extensive historical gold prices to help you decide the best gold price and when you should be buying gold bullion. Watch the live gold market with realtime updating of gold prices. Learn how to buy gold with our online help and comprehensive gold topics. You can buy gold here today. You will own proven, pure gold grams of approved bullion market gold bars. Bypass gold dealers – buying gold bullion directly on a gold exchange gets you a far better gold price. Store the gold you buy in the professional vault of your choice: in New York, London or Zurich.
SPOT Precious Metals prices
http://lynncoins.com/Free Precious Metal prices and values - spot bullion price quotes - Current market values for Gold, Silver, Platinum, and Palladium bullion quotes.
One might say that the "spot" price is the price quoted for large bars of precious metal. Each larger metal bar is stored in a certified warehouse. Usually only the receipt of ownership changes hands. Keep in mind that the spot price does not include broker commissions, shipping, postal insurance, etc. When purchasing precious metals in the form of coins or smaller bars expect to pay a premium for the manufacture, some kind of commission or markup, and of course postage/insurance to receive your purchase.
GoldEx Buy / Sell / Exchange e-gold
http://www.goldex.net/We are the company you can trust to look after all your e-gold needs! Buy, sell and exchange e-gold securely, quickly and safely online with ease. Our services are efficient, quick and professional. Follow our simple ordering process and experience what thousands of happy return customers already enjoy. Excellent service with support just a phone call, email or instant message away. We will ensure your next purchase of e-gold will go smoothly and your account funded the same day your funds are received. Our rates are very competitive, and for this level of service you will not find better rates anywhere in the world. Make your next purchase with ease, purchase from GoldEx, a proven secure and safe e-gold exchange operator.
Gold Chart - Live Gold Price Chart and Gold Bullion News
http://www.livecharts.co.uk/Live Charts UK is a provider of stock market charts for daytrading. Live Charts provides free commodity trading charts, forex live charts, FTSE 100, Gold price charts,crude oil charts, index and stock charts. In addition to our charts we also provide historical data and stock market message boards in our members area.
Trading markets carries a significant risk to your capital, here at Live Charts UK we recommend you try trading with a demo account first before risking any real money in the markets.
Gold Prices
http://www.gold-prices.biz/Welcome to Gold Prices- The latest news on world gold prices, gold price charts and more. We are a small group of investors who primarily invest our own funds in various trading opportunities. We first traded gold back in 1980 when our charts consisted of simple graphs updated manually on a daily basis for the calculation of moving averages, etc.
These days you can find moving averages, stockastics, Relative strength Index, MACD and a multitude of other indicators at the push of button. We are of the firm belief that it is the correct interpretation of these indicators along with a good understanding of the fundamentals and market timing that are crucial to sound decision-making. We trade only on the North American markets, as this is where we see the real action being based.
Currency converter, Foreign exchange rates & gold prices - South Africa
http://www.southafrica.co.za/South Africa - Currency converter, Foreign exchange rates, Forex rates for major currencies & gold prices. Check out our on-line forex rate and currency exchange rate for over twenty countries - whatever forex rates you are looking for you should find them here! We also have the latest gold prices. Scroll down to the bottom of the page - they are listed after the foreign exchange rates. This is the place to find out about South Africa. From its early history to the words of the National Anthem and much more. We are adding content on a daily basis... so check back often to see what's new.
Live Gold Prices & News
http://goldinfo.net/Check the Gold Information Network first for the latest live gold price, gold spot price, world gold price, London gold price, and silver price. If you're looking to invest in precious metals, please call our Gold Specialists anytime seven days a week at 1-800-668-8771.
Gold Specialists are on duty 9am to 9pm central time, seven days to answer questions, quote gold prices, and take your orders. We can update you with live gold prices and gold price quotes for American Eagles or other gold bullion coins.
World Gold Prices
http://goldprices.com/FREE gold prices, gold information and gold research from Austin Rare Coins & Bullion. Gold prices.com has current gold prices, the price of gold on world markets, spot gold prices, platinum prices, silver prices and world gold prices.
Get the latest live gold prices, world gold prices, London gold prices, silver prices, and gold bullion prices online. If you want more precious metals info, want to check current gold prices or have questions, visit Austin Rare Coins or call us seven days a week at 1-800-928-6468.
1st Gold Information - Gold Charts Online
http://www.1st-gold-information.com/As a free service to our network of users, we provide the latest and most accurate Gold Charts online. These charts are available in both Australian and US Dollars for your convenience. Our charts are updated every minute, so remember to click ‘refresh’ in your browser to clear your cache memory and view the very latest available information.
Gold is a rare metallic element with a melting point of 1064 degrees centigrade and a boiling point of 2808 degrees centigrade. Its chemical symbol, Au, is short for the Latin word for gold, 'Aurum', which literally means 'Glowing Dawn'. It has several properties that have made it very useful to mankind over the years, notably its excellent conductive properties and its inability to react with water or oxygen.
Goldbullion.com.au
http://www.goldbullion.com.au/Gold Bullion Securities, an initiative of the World Gold Council, offers Australian investors easy access to the gold market in a manner that is innovative, cost effective, secure and transparent.
Investors in Gold Bullion Securities, which are traded on the Australian Stock Exchange under the symbol GOLD, become beneficial owners of the gold backing each share. This securitisation of gold bullion overcomes a number of issues that have proved to be barriers to accessing gold’s unique qualities.
Gold Price Crash
http://www.goldpricecrash.com/Goldpricecrash is an interactive community that not only tracks the price of gold but also other commodities and examines implications for the wider global economy. Goldpricecrash provides an alternative to mainstream media reporting of events in the global commodities markets.This website has been created at the height of the bull run on gold, but like the yellow metal this isn’t just a flash in the pan.
Like any other asset, gold prices fluctuate and when this happens you really need to sit up and take notice because the price of gold and other commodities provide a very effective barometer on the world economy. As long as the dollar falls and the world’s economies look vulnerable, gold will climb, but beware, when the economic climate changes - you could be left it on your hands.
Gold-Stocks.com - Gold Mining Stocks and
http://www.gold-stocks.com/Gold-Stocks.com In this article, Joe Investor presents two things about the price of Gold: (1) Over the long term, there is a hidden multi-year uptrend or "divergence" in Gold which is carrying it higher than the mere downtrend in the US Dollar; and, (2) Studying Gold's divergence from the Dollar on a daily basis helps to identify manipulations or other temporary anomalies so as to better predict the price of Gold in the short term. As discussed in other articles, the price of Gold can be anticipated as an opposite move to the U.S. Dollar. Gold is priced in U.S. Dollars. Thus, if the value of the U.S. Dollar goes down, more of those Dollars are needed to buy the same amount of Gold, so the price of Gold instantly goes up; conversely, if the U.S. Dollar goes up, the price of Gold goes down. It's a direct, mathematical relationship.
LBMA - London Gold & Silver Statistics
http://www.lbma.org.uk/The website of the London Bullion Market Association. London is the global hub of OTC precious metals trading, bridging time zones and providing an unparalleled range of products and services for its customers.
The LBMA is the trade association that acts as the co-ordinator for activities conducted on behalf of its members and other participants in the London bullion market.
It acts as the principal point of contact between the market and its regulators. Through its staff and its committees, it works to ensure that London continues to meet the evolving needs of the global bullion market. There are two categories of full membership: market making and ordinary. A third category of membership - Associate - is designed for companies with strong ties to the London bullion market.
The Australian gold mining stock index.
http://www.the-privateer.com/Our stock market updates are part of our newsletter's work to make it easy for you to find the information you want. Much of it is free, including gold and stock market charts.

Ask the Mole: Are investment newsletters worth $300? - Mar. 26, 2008

Ask the Mole: Are investment newsletters worth $300? - Mar. 26, 2008

Where Are U.S. Consumer Goods Prices Headed? by Michael S. Rozeff

Where Are U.S. Consumer Goods Prices Headed? by Michael S. Rozeff

http://www.aheadoftheherd.com/blog/

01/29/09
09:46:00 am, by admin , 1454 words, 6 views Categories: General

Up a great deal. More than at any time since World War II. How much is a great deal? Probably far more than you expect. Read on.
We’d like to know what’s going to happen in the future to a host of variables, such as stock prices, commodity prices, the price of gold, short and long-term interest rates, consumer goods prices, real estate prices, gross domestic product, employment, etc. This article focuses on the prices of consumer goods.
Instead of examining theories, this article uses an FAQ format to answer the question: where are consumer goods prices headed? This provides a degree of simplicity and clarity. Calculations do not always add because of variations in dating, seasonal adjustments or not, rounding, etc. The specific references are all to U.S. data.
1. What is the monetary base?
The monetary base is the sum of notes and coins in circulation and in bank vaults and reserves held by banks on deposit with the central bank. In the U.S., the central bank is the Federal Reserve (or Fed) and the notes primarily are Federal Reserve notes.
2. What is the current size of the U.S. monetary base?
Approximately $1,774 billion, as of 1/14/09. This consisted of about $951 billion of bank reserves and $823 billion of currency in circulation.
3. What are bank reserves?
Bank reserves consist of currency banks hold (vault cash) and reserves they hold on deposit at the Fed. Their reserves at the Fed are like a checking account they hold at the Fed.
4. At what level are current bank reserves, and what is the usual level?
Bank reserves as of 12/1/08 were $821 billion. Bank reserves were $40–$44 billion from late 2005 until August of 2008.
5. What are excess reserves?
Excess reserves are bank reserves (or deposits) held at the Fed in excess of reserves required by the Fed’s regulations.
As of 12/1/08, total bank reserves were $821 billion; required reserves were $54 billion; and excess reserves were $767 billion.
6. What is the usual level of excess reserves?
Prior to September of 2008, excess bank reserves were about $2 billion.
7. What is the importance of excess bank reserves and, by extension, the monetary base?
Excess reserves and the monetary base provide banks with the capacity to make loans to customers. In the fractional-reserve banking systems that nations have today, the loans are a multiple of these reserves.
8. What is a money multiplier?
A money multiplier is a ratio with a measure of money in the numerator and the monetary base in the denominator.
The M1 money multiplier is the ratio of the M1 money measure divided by the monetary base. The M2 money multiplier is the ratio of the M2 money measure divided by the monetary base.
9. How large is the M1 money multiplier and what is its recent behavior?
The M1 money supply is currently less than the monetary base. M1, which is primarily currency plus demand deposits, is $1,602 billion. The multiplier is about 0.9 as of 1/14/09.
The M1 multiplier has been about 1.6 in recent years. The drop to 0.9 has occurred starting in late September of 2008. It is due to the greater rise in the monetary base than M1. M1 has risen from $1,392 billion in early September to $1,602 billion at present, or at an annualized rate of about 36 percent a year. The monetary base has risen from $870 billion to $1,774 billion. The annualized rate is about 249 percent.
10. How high would M1 rise if the M1 multiplier were to return to its level of 1.6?
M1 will rise to about $2,563 billion if the multiplier of 1.6 is restored. That is an increase of about 84 percent over its early September level of $1,392 billion.
11. What are borrowed and non-borrowed reserves?
Member banks can borrow from the Fed via the "discount window" or by other "facilities." This borrowing is analogous to going to a teller’s window in a bank and borrowing from the bank. When the banks borrow and do not withdraw the amounts they borrow, it goes into their checking accounts (reserves) at the Fed. That borrowed portion of their reserves is borrowed reserves. The rest is non-borrowed reserves.
12. What are the levels of borrowed and non-borrowed reserves?
As of 12/1/08, borrowed reserves were $654 billion. About $407 billion of this were reserves obtained through the Term Auction Facility (TAF), and the rest were mostly from discount window borrowing (about $210 billion). Non-borrowed reserves were $167 billion.
13. What are the usual levels of borrowed and non-borrowed reserves?
Total bank reserves were $40–$44 billion from late 2005 until August of 2008. This approximated required reserves, and excess reserves were small. Non-borrowed reserves also approximated total and required reserves during this period. Borrowed reserves were small or nil.
14. In what forms have banks borrowed from the Fed?
Borrowing from the discount window has traditionally been negligible (often under $100 million.) Starting in March of 2008, this borrowing shot up to $19 billion. By October of 2008, discount window borrowing reached a peak level of $404 billion.
The Fed offered a new way to borrow using a different form of collateral in December of 2007. This is the TAF. The TAF borrowing maxed out at $150 billion in June of 2008. The Fed expanded the program in October, at which point TAF borrowing rose sharply. It replaced some of the discount window borrowing.
15. Why did bank borrowing from the Fed increase so sharply?
(i) Bank borrowing increased because banks wanted financing (cash inflows). Banks faced a sharp rise in loan losses and nonperforming loans that reduced their cash inflows. They faced declining demand for the commercial paper that they use as a means of finance. Inter-bank lending slowed. The banks needed to pay out cash to meet their obligations, but their cash flows were falling. Some banks obtained long-term sources of cash by issuing long-term debt and equity, but this source of cash is much more expensive that borrowing from the Fed.
(ii) The Fed provided hundreds of billions of dollars of loans at low cost to the banks.
(iii) The Fed took questionable bank loans as collateral. The banks were able to dress up their balance sheets. They were able to inventory cash for future use at low cost.
16. Why have banks kept much of the bank reserves and not loaned them out?
Loan demand declines during and for 2 to3 years after recessions. This occurs as households and businesses retrench and business activity slows. Banks may also be reluctant to make loans aggressively because they want to rebuild their balance sheets. After several years, loan demand picks up and then continues to rise.
17. What has been the past behavior of the consumer goods prices (as measured by the CPI) after recessions?
There have been 12 recessions since 1945. The CPI usually stabilizes, rises more slowly, or occasionally declines during these recessions. Most typically, it rises more slowly during the recession but still rises. In the recovery period, prices tend to rise much more. For example, from 1975 to 1980, the CPI advanced by 55 percent.
18. What determines the rate of increase of the CPI?
An important factor is prior rates of growth in money supply over periods of 5 to 10 years. The CPI rose by 33 percent between 1945 and 1950, reflecting high money growth during World War II. Money growth was subdued in the 1950s and so was CPI growth. Money growth accelerated in the 1960s and 1970s, and so did CPI growth.
19. What is the prognosis for future rates of increase in the CPI?
The current M1 growth is the steepest in 25 years. Past accelerations in M1 growth were accompanied or preceded by rates of growth in the monetary base of almost 12 percent a year. The M1 growth rates were at least as high as the growth rates in the monetary base.
The current rate of growth of the base is 249 percent a year. The M1 money growth rate can rise from its current 20 percent year-over-year rate to a substantially higher rate. This typically leads to higher CPI growth.
The prognosis is for much higher rates of CPI growth than at any time in post-World War II U.S. history.
These price increases are not going to be immediate. There are lags. There is no smooth or mechanical relation between today’s money growth and today’s consumer prices. These things take time. General price level increases depend on both the growth in money supply in past years and on whether that growth is sustained over many years. The Obama administration and the Fed have both told us that they intend to sustain their stimulus for years to come. Add that to the fact that the existing rate of growth of the monetary base already is at a rate that is typical of a banana or coconut republic. Similar results are highly likely.
Michael S. Rozeff is a retired Professor of Finance living in East Amherst, New York.

Seasonal Timing Strategy™ (STS).

www.StreetSmartReport.com

Market Timing! Stocks! Short Sales! Mutual Funds! Bonds! Gold! Street Smart Commentary!



STREET SMART REPORT ONLINESy Harding www.StreetSmartReport.com
Market Timing! Stocks! Short Sales! Mutual Funds! Bonds! Gold! Street Smart Commentary!
From: Asset Management Research Corp. Our 22nd year of providing research to serious investors!

Our long-time proven Seasonal Timing Strategy™ (STS).
Occasionally we read funny comments about our Seasonal Timing Strategy.
Introduced in 1998, over the last ten years our STS has gained more than 7 times as much as the Dow, and much more than that compared to the S&P 500 and Nasdaq. In fact, its gain over the last 10 years can't even be calculated as a multiple of the gains of those two indexes, since they both had no gains, actually lost money over the last ten years.
For years our subscribers have been raving about what our STS has done for their financial health, as well as their mental health (by avoiding the stress of periodic large losses), and passing the word along to their friends and relatives.
But sometimes a non-subscriber thinks he or she has discovered a flaw, and says, "Your STS doesn't work. It under-performed the market in 2003 and in 2006." A few financial columnists have also written that "The market's seasonal pattern is an iffy thing. Sometimes it doesn't work."
Those are silly observations, apparently given with no thought or analysis.
So, let's us give those observations some thought. The following table shows the real-time performance of our Seasonal Timing Strategy over the last 10 years. That includes 6 years of bull market, and 4 years of bear market, so favors buy & hold. Yet the market-timing provided by the seasonal strategy blew away the performance of the market on a buy & hold basis.
That is true whether one looks at a 1 year, 3-year, 5-year, or 10-year performance comparison.

YEAR
NASDAQ
S&P 500
DJIA
STS using DJIA Index Fund
1999 (Bull Market)
+ 85.6%
+ 20.1%
+ 26.8%
+ 35.1%
2000 (Bear Market)
- 39.3%
- 9.1%
- 4.6%
+ 2.1%
2001 (Bear Market)
- 21.1%
- 11.9%
- 5.3%
+ 11.1%
2002 (Bear Market)
- 31.5%
- 22.1%
- 14.7%
+ 3.1%
2003 (Bull Market)
+ 50.0%
+ 28.7%
+ 27.6%
+ 11.2%
2004 (Bull Market)
+ 8.6%
+ 10.9%
+ 5.5%
+ 8.1%
2005 (Bull Market)
+ 1.4%
+ 4.8%
+ 1.6%
+ 0.6%
2006 (Bull Market)
+ 9.5%
+ 15.4%
+ 18.5%
+ 14.2%
2007 (Bull Market)
+ 9.8%
+ 5.4%
+ 8.6%
+ 11.2%
2008 (Bear Market)
- 40.5%
- 36.1%
- 31.3%
- 3.6%
Data includes dividends and interest on cash.

10 -Year Return
- 28.0%
- 13.2%
+ 17.9%
+ 132.5%
5 - Year Return
- 21.2%
- 9.6%
- 5.2%
+ 47.2%
3 - Year Return
- 28.5%
- 22.3%
- 11.6%
+ 22.4%

Our Aggressive STS portfolio was up 3.2% in 2008. Our non-seasonal Market-Timing Strategy portfolio was up 9.2% for 2008.

Yes, it's true that STS did not outperform the market in 2003 or 2006. But you know what? There is no strategy that beats the market in every individual year.
That certainly includes a buy & hold strategy. Just look at the individual years (2000, 2001, 2002, 2008) when 'buy & hold' not only did not out-perform the market, but had serious losses.
Yet when STS under-performed the market in 2003 and 2006 it still made double-digit gains.
In fact, in the last ten years STS had only one down year, 2008, and it was down all of 3.6%, in the worst bear market year since 1931. It was a year in which even the conservative Dow was down 31.3% (with dividends added back to lessen its actual decline).
Yet in the great bull market bubble year of 1999 our STS strategy also outperformed both the Dow and S&P 500.
How's that for outstanding performance in all kinds of markets? (And with considerably lower risk since it's only in the market four to seven months a year).
Even 'best investor in the world' Warren Buffett has numerous individual years of large losses. But not STS, at least not in 50 years (40 years of back-tested data, and ten years of real-time use in our newsletter).
As shown in the following chart, the holding company for Buffett's investments, Berkshire Hathaway, declined 49.7% from its 1999 peak, and it was almost 5 years before it was back to even. It had other fairly serious declines of up to 19% even in the new bull market that began in 2002. And it was down as much as 48% in the 2007-2008 bear market, about the same decline as the market itself at the November, 2008 low. And like the market it went virtually nowhere over the last 11 years on a buy and hold basis, at one point in 2008 being back approximately to its level of 1998. And that's with the superior stock-picking ability of Warren Buffett.
You don't hear much in the media about that kind of painful volatility when they are touting Buffett's performance.


The correct observation regarding STS in 2003 and 2006, was that the strategy did not out-perform the market in those individual years, but it still made double-digit gains in those years. And of course its outstanding long-term performance included those two years when it 'under-performed'.
However, when a buy and hold investor, or a follower of any other strategy, has an under-performing year it is not a case of merely making a decent but smaller profit, but of suffering significant losses, which then often require years to get back to even.
While the yellow table above shows the parallel performance over the last 10 years of the Dow, S&P 500, and Nasdaq compared to STS each year, as they say a picture is worth a thousand words. The next chart shows visually how the market performed for buy and hold investors over the same period.
After its exciting rip-roaring bull market bubble years of 1997-2000, which had everyone clamoring to buy even more excitedly near the top, the market took back virtually all of the 'bubble' years gains in the 2000-2002 bear market. It then recovered in the 2002-2007 bull market just in time for the current bear market, which took back all the gains again.
Unusual to have two bear markets in 10 years? Over the last 100 years there have been 24 bear markets or one on average of every 4.1 years.


Obviously what is needed is a strategy that works in both bull and bear markets. And our STS has certainly proven that it is such a strategy. We know of nothing that touches it for performance, or for its risk management (which is an important portion of successful long-term investing).
The background:
Previous research on seasonality, which led to the well-known, but flawed, market slogan 'Sell in May and Go Away', was very generalized. It indicated that the market’s pattern of favorable seasonality begins October 1st, (based on the 1980s research of Ned Davis Research Inc.), or November 1st (based on the 1980s research of the Hirsch Organization), and ends May 1. However, the intention of both researchers was only to determine whether the market moves in recognizable seasonal patterns, and they apparently used month-end data to make that determination.
It was our intention to develop the market’s seasonality into a specific investment strategy, one that would work in both bull and bear markets, so it could be offered in my 1999 book Riding the Bear – How to Prosper in the Coming Bear Market, as the strategy that would allow an investor to continue making gains in the 1990s bull market, and to keep those gains, and then make more in the severe bear market our work was telling us to expect.
We began by back-testing a hundred years of market data, with the goal of determining the exact days of the year, rather than the month, that on average would produce the best entry and exit dates for investing according to the market’s seasonality.
We discovered that those best days on average are October 16 for the entry into the market for its favorable seasonal period, and April 20 for the exit from the market’s favorable season. However, those are just the best days as averaged over a very long time period. Obviously the market does not begin a rally on the same day each year, or begin to decline from a top on the same day each year. And recognition of that obvious fact is the most important aspect of our strategy.
So we then concentrated on determining a means by which the entries and exits could be more accurately pinpointed for each individual year.
The result was our Seasonal Timing Strategy, or STS.
Since the market does not begin or end its positive period on the same day each year, we combined the market’s best average calendar entry and exit day with a technical indicator, the Moving Average Convergence Divergence indicator, or MACD. It is a short-term momentum-reversal indicator developed by Gerald Appel in the 1980s, designed to signal when the market has begun either a short-term rally, or a short-term correction.
The idea is that if a rally is underway when the October 16 calendar date for seasonal entry arrives, as indicated by the MACD indicator, we will enter at that time. However, if the MACD indicator is on a sell signal when the October 16 calendar date arrives, indicating a market decline is underway, it would not make sense to enter before that decline ends, even though the best average calendar entry date has arrived. Instead, our Seasonal Timing Strategy simply waits to enter until MACD gives its next buy signal, indicating that the decline has ended.
We use the same method to better pinpoint the end of the market’s favorable period in the spring. If MACD is on a sell signal when the calendar exit day of April 20 arrives, we exit at that point. However, if the technical indicator is on a buy signal, indicating the market is in a rally when April 20 arrives, it makes no sense to exit the market just because the calendar date has arrived. So our Seasonal Timing Strategy’s ‘exit rule’ is to simply remain in the market until MACD triggers its next sell signal indicating the rally has ended.
Using this strategy we are able to take advantage of the fact that although the market’s favorable and unfavorable seasonal periods average approximately six months each, they actually vary significantly from year to year, sometimes being as brief as four months, other times lasting as long as seven months.
The following chart demonstrates our Seasonal Timing Strategy applied to the DJIA, and how well it worked even in the strong bull market years of 1997-1999, to have investors in for the 'favorable' seasonal periods when the market usually makes most of its gains each year, and out for the 'unfavorable' seasonal periods when the market tends to suffer most of its declines (whether it is in a bull or bear market).
Thus did it not only make good gains in the bull market years, avoiding intermediate-term corrections, but also avoided the big declines in the bear market years of the 2000-2002 bear, and the 2008 bear, as by far the most severe portions of bear market declines also take place in the 'unfavorable' seasons, while bear market rallies tend to take place in the favorable seasons.

The chart shows the action of the DJIA from mid-1997 to mid-1999, which encompasses two of the market’s favorable seasonal periods. The lower window of the chart shows the DJIA itself, while the upper window shows the MACD indicator.
The vertical lines are the calendar entry days of October 16, and the calendar exit days of April 20 the following year.
Note at the left end of the chart that when October 16, 1997 arrived MACD was on a sell signal. The entry rule of STS is that we are not to enter until MACD triggers its next buy signal. As indicated by the up-arrow that did not take place until mid-November.
When April 20 of 1998 arrived, MACD was on a buy signal. The STS exit rule is that we therefore are not to exit until MACD triggers its next sell signal, which in this case was just a few days later, and actually at a lower price than had we used the calendar date.
Moving on to the entry in the fall of 1998, when October 16 arrived, the earliest entry date acceptable to STS, the MACD indicator was already on a buy signal, so we would enter at that point.
However, when the exit date of April 20 arrived the following spring MACD was on a buy signal, meaning the exit would be postponed until MACD triggered its next sell signal. That did not occur until mid-May, providing almost an extra month of higher prices before STS signaled that the market’s favorable seasonal period was over.
Note that MACD, like the calendar dates, does not get an investor in at the exact bottom in the fall, nor out at the exact top in the spring. No strategy could possibly do that. But MACD does most often provide a better entry and exit than simply using the calendar, and produces market-beating gains over the long-term by avoiding most serious market corrections and then getting back in at a lower level.
Since risk management is an essential part of money management it’s also important to note that seasonal investing also completely avoids individual stock risk, and sector risk, and even significantly decreases market risk, by only be in the market roughly half the time, and safely earning interest on cash during the highest risk period (the market's unfavorable season).
I introduced STS publicly in my 1999 book Riding the Bear - How to Prosper in the Coming Bear Market.Yale and Jeff Hirsch reported in their newsletter;
"We applied Harding's system, which he developed based on the Dow's seasonal pattern, to the S&P 500. The results were astounding!" Smart Money, July, 1999
They also included the following in their year 2000 edition of The Stock Traders Almanac.
"Tested over the last 51 years, the strategy more than doubled the already outstanding performance of the basic 'Best Six Months' seasonal strategy."
Bloomberg Personal Finance Magazine reported;
"Remarkably simple but also remarkably profitable, at least in the hands of a disciplined practitioner like Sy Harding, editor of StreetSmart Report.com."
What Creates the Seasonal Pattern?
Why would the market move in such consistent seasonal patterns regardless of the surrounding economic and political conditions?
The driving force is the same force that creates all sustained market moves, a change in the amount of money flowing into the market. Just as the extra money that flows into the market at the end of each month creates the short-term ‘monthly strength period’, so significant changes take place in the amount of money that flows into the market in pre-determined patterns in the fall and spring months, which produces the annual seasonal pattern.
As the market enters the fall season, investors begin receiving large chunks of extra cash most of which is automatically invested in the market. For instance, most mutual funds have fiscal years that end September 30 so they can get their books closed and make their capital gains and dividend distributions to their investors in November and December. Most mutual fund accounts are marked for automatic re-investment of dividends. Additionally, third and fourth quarter dividend distributions from corporations are paid to investors in the period between November and March. Most dividends are marked for automatic re-investment. Employers make their contributions to employee profit-sharing plans, and year-end contributions to their employees’ 401K and pension plans. Those are automatically invested in the market.
Then there are Christmas bonuses, year-end bonuses, income tax refunds in the spring, etc. Highly paid hedge-fund managers collect their large year-end fees at the end of the year. Small business owners close their books at the end of each year, and by February or March their accountants let them know what their profits were, and they then distribute those profits to themselves.
And much of that extra cash finds its way into the stock market.
Wall Street institutions, money-management firms, and knowledgeable investors, aware of the market's seasonal tendency, also begin buying more heavily, often in October, in anticipation that the market will make its usual impressive gains in the favorable season.
However, in the spring of the year that huge flow of extra money into the market dries up, with income tax refunds being the final act.
That creates a sizable decrease in buying pressure, which allows whatever selling there is to have more influence on the direction of the market. It also deprives mutual funds and investors of the extra money needed to buy the dips, which might otherwise prevent a market decline from taking place.
In addition, Wall Street institutions, money-management firms, and knowledgeable investors, aware of the frequent effect of the market's unfavorable season on stock prices, take profits from the favorable season and lighten up on holdings for the summer months. Interest in the market also diminishes significantly as many investors and traders go off on vacations. That can be seen in the way trading volume dries up significantly during the ‘summer doldrums’.
Thus does the market tend to make most of its gains each year in the favorable seasonal period when hundreds of billions of dollars of extra money flow in, and suffer most of its losses in the unfavorable seasonal period when that extra fuel dries up, and is not there to offset any selling pressure that develops during the unfavorable season as a result of bad news or economic conditions.
Seasonality is also the answer to the age old question of why the stock market is sometimes able to ‘climb a wall of worry’ (shrug off bad news), while other times it seems unable to rally even on good news. It is simply that when large amounts of extra money are flowing in during the favorable season, the market is able to rally no matter that surrounding news may be negative. But when the flow of that extra ‘fuel’ dries up in the unfavorable season it is often difficult for the market to rally even if the surrounding news is positive.
QUESTIONS.
After we introduced our Seasonal Timing Strategy to the general public in Riding the Bear in 1999, we received hundreds of letters with good questions.
What were the worst down-years you encountered in back-testing the strategy?
There have been only six years since 1970 in which the strategy was down for the year. The worst of those declines was last year's 3.6% decline (in 2008). Prior to that the worst decline for a year was 2.5% in 1977.
What about the tax consequences of seasonal timing?
Being in the market only four to seven months each year would have a tax penalty for some investors. Whether that penalty would be serious enough to offset the benefit of tripling, quadrupling, and more the performance of the Dow, S&P 500, and NASDAQ over the long term, is certainly doubtful, but in any event would be difficult to determine in a manner satisfactory to everyone.
Tax rates vary dramatically depending on an investor's tax bracket. Additionally, some states impose additional state taxes on capital gains, while others do not.
Further, Congress changes the tax holding periods and capital gains rates so frequently as to make it difficult to back test an after-tax performance, and impossible to predict what it would be in the future.
However, we can know seasonal timing would have no tax impact on assets in IRAs, 401Ks, Keough plans, and other tax-deferred portfolios. Nor would it have any impact on those already following a strategy of mutual fund switching, or of making portfolio changes to follow changes in market leadership.
It also would not affect those who think of themselves as buy and hold investors, but on looking back at their portfolio activity realize that is not the reality, that they have engaged in a fair amount of switching in and out of holdings anyway for one reason or another.
We also believe seasonal timing would have a positive impact, even considering taxes, for the majority of those who have been led to believe that since ‘the market always comes back’, they should simply buy and hold. It is our contention that they will bail out when losses pile up in the next bear market (if not before when bad news hits the particular stock or mutual fund they have invested in). But they will bail out in disgust near the lows, rather than near the highs that are usually in place by the end of favorable seasonal periods. At least, that is what has happened to the majority of those who became determined buy and hold investors in previous bull markets.
A few additional observations about taxes that are not specifically related to seasonal timing;
Using money borrowed from the government, which is what deferring taxes by not selling holdings really is, is similar to buying on margin. It leverages one's portfolio. That is wonderful on the way up, as gains are not only being made on the investor's own money, but on the money that would be owed to the government if holdings were sold. But, the portfolio is also leveraged in a down market, and so declines hit investors not only on their own money, but on that portion which is deferred taxes.
Investors also need to realize that if they're sitting on long-term capital gains on which they would pay 15% to 22% in capital gains taxes (federal and state) if they sold the holdings, they are not cushioned against a market correction of 15% to 22% by not selling. What they are saving is paying the 15% to 22% tax only on that portion of their portfolio which is profit. Even then they're not saving it, but just deferring the payment, (and hoping capital gains rates don't go back up). But, in a market correction, the decline takes place on the entire portfolio; the investor's original investment, those paper profits, and the portion that is the government's deferred taxes.
Is your Seasonal Timing Strategy valid only for the DJIA and S&P 500 indexes?
The Seasonal Timing Strategy was back-tested only against the DJIA and S&P 500 because the Dow data goes back to the late 1800s, while the S&P 500 goes back more than 50 years. So both provide enough data to be statistically meaningful and predictive.
And STS is used as one of our Street Smart Report newsletter portfolios in real-time utilizing only index mutual funds (or exchange-traded-funds (ETFs)), on the DJIA and S&P 500 for the same reason. We are not comfortable using some other index, for example the NASDAQ, or a sector index, to follow the signals since they were not specifically included in the research, and have not been around long enough to necessarily provide sufficient historical data to be statistically meaningful.
While other holdings might do as well or better, it is only by using a Dow or S&P 500 Index fund that we can say that if history is any guide, our Seasonal Timing System should continue to greatly outperform the Dow, S&P 500, and Nasdaq over the long term, while using only an index fund on either the Dow or S&P 500.
However, since when the market goes up to any degree it carries most stocks and sectors up with it, it’s reasonable to expect other indexes and sectors would have similar seasonal patterns.
Would the STS strategy be useful using managed mutual funds?
Probably. Again, since the stock market makes most of its gains in its favorable seasons, most stocks and mutual funds should also make most of their gains in the market's favorable seasons. However, individual managed mutual funds were not included in the research for very simple reasons. More than 75% of mutual funds were not in existence even 20 years ago. So there is no way to statistically correlate their past performance with how they might perform in the future. In addition, even if they have longer track records, a change in manager frequently changes the performance.
Have you considered (fill in the blank) as a possible improvement to STS?
The answer in general is that in the course of our research we tried many, many variations in our work to optimize the strategy, and what we have is by far the best we could find. For instance, there are technical indicators other than MACD that have been a bit better in specific periods, but were not as consistent over the long haul.
What about brokerage firms and mutual fund managers that say there is no useful seasonal pattern?
Brokerage firms and mutual fund companies would have a tough time surviving if very many investors were aware of the market's seasonality and moved their money to cash for four to seven months every year. So they must go to whatever lengths they can to distort the information.
Their problem is that numbers don’t lie, they are what they are. So, invariably in trying to refute the very clear proof of the market's consistent seasonal patterns as best they can, these firms run their data from 1900, and even 1850, even though all of the research on seasonality shows the seasonal pattern did not begin to show up until 1950.
As noted before, the seasonal pattern is the result of the extra chunks of money that flow into investors' hands beginning in the fall, from distributions from mutual funds, from Christmas and year-end bonuses, from profit-sharing bonuses, from year-end contributions to 401 K, IRA, and Keough plans, from income tax refunds, and so forth.
However, there were no such extra chunks of money to create favorable seasons prior to 1950, because there were no mutual funds, no 401K plans, IRAs, Keough plans, very few money managers collecting monthly fees, no hedge-fund managers collecting 20% performance fees at the end of each year. The concept of companies sharing their profits with employees through profit-sharing plans had not yet appeared. Income taxes were non-existent (and when they were introduced were a tiny fraction of what they are today), so income tax refunds were not a factor. And so on.
No one who has engaged in research on the market’s seasonality has ever claimed there was a significant seasonal pattern prior to 1950. So when a brokerage firm tries to refute the market's seasonality by running their numbers from 1900 or 1850, and then claim that the advantage of the seasonal periods is too small to utilize, they have totally distorted the results they know they would have if they ran the numbers from 1950 when the market’s clear seasonal patterns began.
Further, they invariably do not include the interest on cash that a seasonal investor would receive in the unfavorable seasons. That may not seem like much in these times when interest rates are very low. However, over the long-term, interest rates repeatedly cycle between being low and being high, with many periods when they have been in double-digits, when an investor would have added an additional 5% to 6% per year to their profits just in the six months they were out of the market. Leaving interest income out of back-testing historical data is a gross distortion of statistical analysis.
Additionally, none of the firms whose seasonal research developed into the ‘Sell in May and Go Away’ observation ever claimed that an investor would outperform the market by investing only in the market's favorable season of Nov. 1 to May 1. The research showed only that an investor so investing would have matched the performance of the S&P 500 over the last 50 years, while taking only 50% of market risk (since they would only be in the market six months out of every twelve).
The brokerage firms acknowledge that when they say that “the advantage of the seasonal periods is too small to utilize, that one might as well remain invested on a buy and hold basis”. (In doing so they ignore the fact that risk management is a very important part of portfolio management).
However, most importantly, Wall Street’s attempts to refute the market's seasonality only refer to the calendar-based ‘Sell in May and Go Away’ maxim. They do not tackle our Seasonal Timing Strategy, which employs MACD to produce seasonal periods that vary from four to seven months in duration.
It is only the combination of the momentum reversal indicator MACD with our more closely defined basic calendar dates that produces the back-tested and real-time performance, in which our Seasonal Timing Strategy approximately triples the performance of the S&P 500.
Does the fact that STS did not beat the market in 2003 and 2006 mean seasonal timing no longer works? Absolutely not! See the first paragraph at the top of this article. Just as there are with all strategies, historically there have been some individual years in which STS did not beat the market. Those years did not prevent the remarkable 50-year record, any more than the underperformance in 2003 and 2006 prevented the record of the last 9 years.
And there is still more that can be done. So we continue that portion of our research that is dedicated to the market's seasonal patterns, working on searching out the different patterns of the Nasdaq, various industry sectors, international markets, mutual funds, ETFs, etc.
Please subscribe now so you too can follow the strategy and get its accurate buy and sell signals in a timely manner. You can subscribe very easily on-line by clicking on the SUBSCRIBE button at the top of the page, and selecting one of the subscription choices. A one year subscription works out about the cost of two cups of coffee a week. A very small investment that has the potential to provide such a large long term return.
And you don't get 'just' our Seasonal Timing System. A subscription includes our non-seasonal market timing (which has kept us consistently in the Top Ten Market Timers in the U.S. ranking since 1990), our specific non-seasonal buy, sell, or hold recommendations on stocks, short sales, mutual funds, gold, and bonds, our 8-page investment newsletter, The Street Smart Report, published every 3 weeks (on-line), its interim hotline updates (every Wednesday evening, more often when needed), a multi-page mid-week short-term and intermediate-term update every Wednesday with charts and commentary, our 'Being Street Smart' articles aimed at keeping you aware of the misleading propaganda from Wall Street, our Street Smart School of on-going seminars on technical analysis, charting, and market timing.
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NOTE: This report express our opinions and suggestions, provided only as a supplement to your own further research and decisions. We take care to assure accuracy of contents but accuracy is not guaranteed. Past performance does not imply future results.Copyright © 2009 Asset Management Research Corp. -- ALL RIGHTS RESERVED.
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