World Investment Report Blog

Shares of chipmaking companies soared on Tuesday following Texas Instruments’ late Monday $6.5 billion bid for rival National Semiconductor.

Both companies make analog chips, which are used to help computers sense the world around them.

National Semiconductor (NSM) led the pack, gaining more than 70% in early trading, but other analog chipmakers also rose significantly: Intersil (ISIL) climbed 13%, ON Semiconductor (ONNN) rose 5%, and Fairchild Semiconductor (FCS) gained 3%

Shares of Analog Devices (ADI), Linear Technology (LLTC), Maxim Integrated Products (MXIM),International Rectifier (IRF) all rose about 1%.

The deal would give Texas Instruments (TXN, Fortune 500), already the world’s largest analog chipmaker, an even more sizable lead over its competition. The combined company would control 18% of the market, with the next largest rivals holding a 4% to 6% share.

As a result, analysts anticipate more deals in that segment of the chip market

“We do believe that more consolidation is possible in the analog space given the fragmented and diffuse nature of that market, and given that TI is so much larger than its next few competitors,” said Craig Berger, analyst at FBR Capital Markets.

TI could buy up more analog chipmakers, or smaller competitors could merge for scale and efficiencies, analysts say. Shares of TI fell more than 2%.

Berger sees Fairchild Semiconductor and International Rectifier as the most attractive takeover targets. Both have high exposure to the industrial and automotive sectors, and their share prices are relatively cheap compared to their earnings expectations.

Even Intel (INTC, Fortune 500), AMD (AMD, Fortune 500), and Nvidia (NVDA), which have all suffered through recent slumps and aren’t players in the analog business, were up about 1% on Tuesday.

Chip stocks got knocked around in the past two days, after IHS iSuppli reported that semiconductor suppliers’ string of six consecutive quarters of sequential sales growth ended in the fourth quarter of 2010.

With the recent introduction in Europe of a proposal to tax stock and bond transactions at a rate of 0.1 percent, and derivative contracts at a rate of 0.01 percent, as this KPMG summary highlights, the issue of a possible financial transactions tax here in the U.S. has arisen again.

While it’s critical that the pros and cons of such a tax be studied and debated, it’s worth correcting some misinformation regarding possible legislation on financial transaction taxes. According to Politifact.com/Oregon, an email has been spreading across the Internet, claiming “that (Rep. Peter) DeFazio (D-OR) wants to levy a 1 percent tax on every financial transaction, like depositing a Social Security check or cashing a paycheck. The letter claims his proposed legislation had the blessing of President Barack Obama’s ‘finance team’ and that Democrats are waiting until after the Nov. 2 election to pass H.R. 4646.”

As the Politifact story notes, H.R. 4646 was indeed a proposed bill. But, it was another elected official, Representative Chaka Fattah (D-Penn.) who introduced the Debt Free America Act in early 2010. The proposed bill would have, among other initiatives, “amended “the Internal Revenue Code to impose a 1 percent fee, offset by a corresponding nonrefundable income tax credit, on transactions that use a payment instrument, including any check, cash, credit card, transfer of stock, bonds, or other financial instrument.” However, the bill had no co-sponsors and never became law, GovTrack.us reports. Rep. Fattah reintroduced the bill, now H.R. 1125, in March of this year. Again, it has no co-sponsors.

Senator DeFazio did introduce a bill several years ago that would have taxed some Wall Street trades. However, the amount of the tax and the types of transactions on which it would be levied are much more limited than would be the case under H.R. 4646. Instead, the “Let Wall Street Pay for the Restoration of Main Street Act of 2009” or H.R. 4191, “amends the Internal Revenue Code to impose an excise tax on certain securities transactions, including transactions in stocks, futures, swaps, credit default swaps, and options. Exempts transactions for securities held in tax-exempt retirement accounts, health savings accounts, educational accounts, and regulated investment companies,” according to the GovTrack.us summary. The tax would equal one-fourth of one percent on speculative Wall Street trading and two hundredths of one percent on exotic derivatives, according to information on Rep. DeFazio’s website. The bill was introduced in December, 2009 and did not become law.

If you want to try to generate a little bit of extra cash with what you have squirrelled away then a great way to do so is to trade on the forex. A lot of traditional investment routes are out of limits at the moment thanks to a relatively depressed economy, but the one great thing about the forex market is that there are always fluctuations in the value of currencies, meaning that there is always money to be made. When one currency is struggling, it has to be struggling in
comparison to another currency, which creates the sorts of margins that allow people to make money on the market.

If you think that it is something that you could be successful in, then it is very simple to get going in, but you do have to remember that Rome wasn’t built in a day, so you have to approach things sensibly. The first step for anyone new to markets should be to find a broker. Although this inevitably means losing a small amount of your profits, it is certainly worth it considering you probably wouldn’t have any profits to lose if you tried to go it alone! The best thing to do is to search for forex brokers on the internet. You will find that they are easy to come across, and won’t cost you as much as you think considering just how much money they
could make you in a short space of time.

I’m normally not excited by water heaters, but I do love the idea of investing small money upfront to lower my expenses and save big money in the future. We currently have a 10-year old electric water heater which I’d like to replace soon due to age and inadequate size. We live in a warmer climate and thus considered a solar hot water heater, but the combination of cost and having to cut and install water pipes through our roof didn’t sound especially fun. I just saw that until October 5th, Lowe’s is selling the GE GeoSpring 50-Gallon Hybrid Electric Water Heater for $999. Currently, both GEAppliances.com and Sears also have it at $999. If you can get free delivery in your area, one may be cheaper than the other. Both Lowe’s and Sears offer another 5% off if you have their store credit card.

Tax credits. There is a Federal tax credit of $300 available on electric heat pump water heaters. In addition, check for state energy rebates here, and you may get even more back (look carefully, as many states have already exhausted their rebate funding). Without anything local available for me, this makes the net cost $700. A conventional 50 gallon electric heater with a shorter warranty can be found for about $300, with a 9+ year warranty runs about $400. This makes the cost difference with no state credits to be no more than $400. Both could be installed yourself if you’re handy, otherwise installation is extra.

Potential $2,400 in savings. With average electric cost assumptions, this heater is supposed to save about $25 a month, or $320 a year in electricity costs. If you have your electric bill handy, you can do the math yourself as a 50-gallon standard electric tank water heater uses about 4881 kWh per year vs. the GE Hybrid water heater at 1856 kWh per year. Using their standard numbers, this hybrid system would pay for itself less than two years. Assuming a 10-year usage, you would then have 8 years x $300 a year = $2,400 of potential total savings.

What’s a hybrid water heater? It’s called a hybrid because it can heat up your water using a heat pump as well as the conventional electric resistance coil. I was having flashbacks to my thermodynamics college courses while learning about it, but essentially a heat pump takes the heat from ambient air and transfers it into the water. This is kind of like an air conditioner in reverse, which takes the heat in the air and moves it outside with the aid of a refrigerant like Freon. The heat pump is more energy efficient than the electric coil, but slower, so the coil is still there as a backup during times of high demand. A heat pump works better in warmer climates, as there is more heat in the air. You’ll also end up with condensation which will need a drain unless you want to empty out a water pan every few days.

The added complexity of the heat pump does make for more things to go wrong, which is why I suppose it comes with a rather long warranty. It is worth the upfront investment? I think so for us, but I’ll haven’t fully run the numbers on a similar whole-house tankless system. Thoughts?

Beware of Financial Clutter

When I work with a new client in my financial planning practice, I often come across a condition that I call “financial clutter.” This has many forms, but a common version might look like this:

• Husband and wife have worked at several jobs and have a number of 401(k) plans left with their former employers.
• Three Roth IRA accounts are held with various custodians.
• Four Traditional IRA accounts are scattered among several custodians.
• The husband and wife each have a 401(k) account at a current employer.
• There are two taxable brokerage accounts, an annuity, and two accounts directly held via mutual fund companies, each with a single fund holding.
• Overall, there are 53 distinct holdings among these accounts.

What’s wrong with this picture? In my experience:

• Typically, clients with this type of profile have not looked at their holdings as an overall portfolio. In fact, they have generally not reviewed the individual holdings since the time at which they were purchased.
• Such clients are not aware of their overall asset allocation. Are they taking too much risk or too little? Is there a high degree of overlap (of the underlying holdings) within the funds held?

These problems are a sign of a collection of investments accumulated over time for various reasons, instead of a portfolio that was built as the result of a financial plan tailored to their unique situation.

Financial clutter can also extend beyond investments and may include:

• Nonexistent or missing beneficiary designations on insurance policies, annuities, and retirement accounts. The beneficiary designation is the final determinant as to how these types of assets are distributed at death. A missing or outdated beneficiary designation can cause these assets to go to someone other than whom you would choose. Beneficiary designations may need to be updated for various life changes, including marriage, divorce, birth of a child, or a family death.
• Outdated or nonexistent estate-planning documents. If you have minor children, you must have an up-to-date will that designates your desired guardian for those children. (Check with an attorney for the requirements in your state.) Without these documents, in the worst-case scenario, the outcome for your children and your family could potentially be very ugly. For more help, see my previous blog post, “How Often Should I Update My Estate-Planning Documents?”
• Lost or misplaced assets. This is a huge problem and the reason why most states have an unclaimed property department (usually in the office of the state treasurer). This situation can even happen to professionals. About a year ago, I discovered that around $1,500 had been sent to a former address in 1985. I completed the paperwork, and 12 weeks later I received my check from the Wisconsin treasurer.

Macfarlane’s new report on how to invest offshore in rare earth metals and rare industrial metals – and how you can invest in these physical methods for privacy and profit!
With gold having reached an all time high again yesterday, and silver soaring back upwards, investors’ eyes are once again closely focused on precious metals. Our advice in Q Bytes of a few weeks ago to buy up gold has paid off handsomely again. One client recently wrote in about how surprised he is that the world seems to be going bankrupt. On both sides of the Atlantic, emotions and concerns are running high. Asia is the notable exception to the doom and gloom – which is why we are running our next event there this October. More details soon, or email us if you would like to be notified in advance.
Meanwhile, offshore banking expert and consultant Peter Macfarlane has just finished his latest new research report that he’s been busy on for the last few months. It’s downloadable as of today free of charge for Q Wealth members – just log in and look under ‘Special Reports for Members.‘. It’s about another metal investing class, one that we also expect will see substantial gains over the next few years. And once again it’s also about investing in physical, hard money assets with no reliance on banks, stock markets or the global financial system.
This report is about rare earth and rare industrial metals. These rare metals are essential ingredients in many high tech products, from iPads to solar panels. They have been called ‘green elements’ (although this report explains why that is really a misnomer) Still, we believe that the world will continue to consume and demand more and more of these metals for complex industrial processes
Investing offshore in rare metals is also an investment play on Asia and especially the Chinese economy and currency. China currently controls 97% of the world’s supply of rare earth metals. The Chinese have effectively stopped exports of these essential rare metals to the rest of the world, simply because they need their entire production capacity and more to feed the Chinese industrial giant.
This report explains how you as a private individual anywhere in the world can buy physical rare metals and have them stored in a tax-free Swiss vault. Any time you want to take physical delivery you can (subject of course to taxes and shipping costs and government restrictions.) Stockpiling rare metals seems to us like an excellent way to secure a part of your wealth offshore for the future. Unlike gold and silver, these metals are less sensitive to governments since they are not traditionally used as money. There are no reporting requirements on this asset class. In fact, there’s even a way to hold this investment completely anonymously.
For further details of how you can achieve privacy, profit and asset protection read our Rare Metals Investing page, or go directly to the report in the Members Area. If you are not yet a member of Q Wealth, besides instant access to this report you can get a whole range of other exclusive benefits that are listed here.
IMPORTANT: this report also contains a number of warnings about how NOT to invest in rare earth metals. Some classes of investment are already in bubble mode. Please take note.

A CFD, short for Contract for Difference, is an agreement between an account holder and an issuer of CFD. The price of a CFD depends on an Underlying Reference Instrument, which is normally a share, commodity, index, index futures or any other financial instrument traded in a stock, commodity or currency exchange.
A CFD issuing company may offer different types of accounts but the features that govern CFD trades are the same for all types of accounts.
Salient Features of a CFD
- CFD is primarily a speculative product.
- A CFD is not ownership of the Underlying Reference Instrument.
- A CFD cannot be traded in an exchange.
- The profit or loss that an account holder makes is the difference between the CFD price at the time of opening and closing of positions multiplied by the number of CFDs traded. This is regardless of whether a single or multiple positions were created in a CFD. However, in the end, the opening and closing positions must be equal and opposite of the opening order.
- All transactions (opening and closing of positions) relating to a CFD can be made only with the same issuer and not with any third party.
- The issuer may charge a pre-agreed commission and finance and rollover charges on each CFD entered into with the account holder.
CFDs are speculative products and offered over-the-counter. Since it is an unregulated market, it is of utmost importance that people interested in CFDs educate themselves. Of particular importance is the risk involved, regardless of the fact whether you are buying or selling a CFD.

One of the stories that was circulating through CNN’s news coverage this weekend (but which may have now been crowded out by swine flu, on which more later), was a major bust of counterfeit goods in Brooklyn, New York. Authorities had discovered a storage center with room after room full of the fake items you see on city sidewalks, including “Air Obamas” — Nike Airs with the image of the president on them. These, in particular, seemed to irk the Brooklyn DA.

In speaking to the assembled reporters he made the point that the public continued to be outraged by this business. My astute wife responded by saying that of course the public was not at all outraged by it, but enjoyed buying knock off Marc Jacobs bags, and that the people who were actually upset were the producers of the real products.

Which made me wonder why they would be upset about this. For many of these products, the overlap between consumers of real products and fake is quite small. Knock offs are significantly cheaper than the real deal; a designer bag that sells for $800 in a department store might have a sidewalk fake counterpart that goes for $50. It’s hard to imagine that these products cost them sales (and they may indirectly create sales for the designers, by improving brand awareness and creating aspirational buyers).

This looks to me like a missed opportunity for price discrimination. To put it another way, why don’t designers sell their own knock offs? Even if they couldn’t put other counterfeiters out of business, they’d at least capture some share of the revenue. And while perhaps the designers aren’t all that interested in investing in such a low margin business, one would think they’d at least consider licensing someone to legally produce knock offs. That looks to me like big bills left on the sidewalk.

The trick, I think, would be to produce authentic knock offs. They couldn’t be too good, or the value of the originals would be risked. Firms would have to aim to replicate real counterfeiter craftsmanship, which might be harder than you’d expect.

Read more: http://www.portfolio.com/views/blogs/market-movers/2009/04/26/be-your-own-counterfeiter#ixzz1Mcli3btc

The recently released Investment Trends report that suggests that CFD Traders performed better than traders engaged in Spread Betting. CFD Trading (Contracts for Difference) was found to have provided returns of an average of 20%. Financial Spread Betting, on the other hand, was found to provide average returns of around 9%.

Further, the number of traders turning to trade CFDs has leapt by over 40% over the year, as an article from the Independent Investor states. The actual number of traders (in numeric terms) trading CFDs in the UK has increased to 25000, up from 18000.

The report cites reasons for the growth in CFD Trading as the high leverage being made possible by margin trading and
the low-cost barriers to entry for traders looking to trade CFDs. The report also forecasts a further 9000 could be expected to turn to CFDs during 2011, which would be a drastic increase in the number of traders and a significant expanse in the retail CFD Market.

The market for CFD brokers has also grown manifold; with dozens of new players entering the market in apparent response to the growing demand for CFDs. Industry leaders ETX Capital, IG Index and City Index have however strengthened their respective positions at the top of the league.

“Between 2008 and 2011, we spent heavily – about £5 million – on technology, to the point where we now have a very comparable platform (to the competition). Now we are developing mobile phone apps, and we have
developed bespoke trade-through charting – a function on your computer screen by which you can trade interactively via a graphic and chart your investments, allowing you to pick points for buy or sell orders, stop losses or limit orders” ETX Capital’s CEO Andrew Edwards told the Evening Standard.

“Ultimately, we do not want the customer to lose because we can then lose the customer. For us, the game is the spread capture game. In a high-volume, low-value game, whether the clients win or lose does not matter to us. What we want to see is the customer trading for longer” he continued.

However, how the industry will respond to an expected slump in the worldwide economic recovery is yet to be seen.

Investment guru Kevin O’Leary is well known for appearing on television with pro-market financial advice. In an interview with the website wheels.ca O’Leary explains how when he got his first car he bought from various car insurance companies his main drive was not making money but attracting the ladies.

With the same ambition and analytical skills that would make him a success in finance, O’Leary realized as a teen that he not only needed a car in order to pick up dates but that a nice car would make the process run even more smoothly. For his first car he chose a 1972 BMW 2002, one of the first models to be widely released in America. Some of the features which drew him towards the BMW 2002 included four comfortable seats, a large amount of trunk room, and a powerful well-functioning engine. While the car was attractive and flashy O’Leary’s primary motivation was having a quality, functional vehicle, and attitude which could be applied to prudent investment.

O’Leary used his business savvy in order to keep the BMW a reliable, roadworthy vehicle. In order to do this he found independent German mechanics with specific expertise and a love for BMWs who would do the work at significantly reduced rates. By finding qualified technicians and making use of his strong negotiation skills O’Leary was able to maintain an otherwise expensive car at a relatively low cost.

O’Leary’s relationship with his first car demonstrates all of the traits that would make him successful in business even though his primary motivation was driving dates around. The diligence, practicality, prudence, and hard work that O’Leary applied to obtaining and maintaining his first car all provide lessons about wise, long-term investment.