WHY SAVING IS FOR LOSERS

The banks will hate me for saying this but it's nothing personal.

No one knows tomorrow, so by all means put some money aside for EMERGENCIES.

However, if your goal is to grow this stash of cash at a decent clip over more than three months, then the worst thing you can do is stash your cash in a bank savings account.

Why?

Because of INFLATION.

Inflation is simply the general rise in the cost of goods and services from one period to another.

When you were thinking of saving you probably didn't even remotely think about inflation right?

Please do so from now on.

You see, when inflation is higher than the interest rate on your savings, what you're essentially doing is lending money to the bank at a cost to you. It costs you because inflation "devalues" your savings.

Think about that for a minute.

It's like you lend someone money (the equivalent of your savings) today at a very cheap rate (the interest rate on your savings). Then by the time they pay back all your money (the savings plus the interest you earned) the whole thing is now worth less than what you originally lent them.

That's how inflation turns savers into losers.

Rather than dump your money in a savings account, which just makes your bank richer at your expense, consider inflation-protected instruments like Treasury Inflation-Protected Securities (TIPS), inflation index-linked Bonds, Money Market accounts and Certificate of Deposits.

So here's the bottom line: ALWAYS CHECK THAT THE INTEREST RATE IS HIGHER THAN INFLATION BEFORE YOU PLUNGE YOUR MONEY INTO A SAVINGS ACCOUNT.

All that said, you should know that nothing beats the stockmarket for growing money, inflation-protected over the long-term. Not even real estate.

6 HOT Global Trends You Should Invest In Now: AGING POPULATION (2)

The world is aging, fast!

According to the United Nations, by 2050, the number of older people (60 years or older) in the world will exceed the number of young people (under 15) for the first time in history. By then, senior citizens will make up 21% of the projected world population of 9 billion people - that's like the whole of China and Europe today full of senior citizens!

Wait, there's more.

In industrialized countries, the UN says older people had already outnumbered young people by 1998! Furthermore, according to the Organization for Economic Cooperation and Development (OECD), by 2050, senior citizens will constitute more than 30% of the population of Japan, Spain, Italy, and Germany. For Japan, they will be over 40%, the highest in the world.

The world is graying fast because people are living longer just as they are having fewer babies - whether fewer babies are being born due to people's choices or to decreasing fertility is not so clear.

One thing's for sure. This rapidly aging global population will fuel a huge, unrelenting demand for long-term healthcare around the world, giving you the investor the golden opportunity to make a killing over the coming decades.

You should know that while demand for healthcare will boom worldwide, the United States spends a larger percentage of its Gross Domestic Product (G.D.P.) and more per capita on healthcare than any other country. This is unlikely to change over the coming years.

Therefore, you really should have some exposure to the U.S. if you're serious about making money from the growing global demand for healthcare.

To ride this healthcare money train all the way to the bank you should consider investing in these four areas: Drugmakers (Pharmaceutical and Biotech companies), Medical Device Manufacturers, Healthcare IT Software Developers, and Healthcare Real Estate Investment Trusts (REITs).

DRUGMAKERS

Investing in drugmakers is the most obvious play on the aging world population.

Pharmaceutical companies and biotechnology companies both make drugs. However, as an investor you should note these differences between them.

The drugmaking business is a notoriously hit-or-miss business.

If you're lucky to invest in a drugmaker that delights with a string of "blockbuster" drugs, then you can make a lot of money. Last week, Bloomberg reported that Swiss drugmaker Roche, which makes the world's best-selling cancer treatment, has minted at least 12 Swiss and German billionaires.

On the flip side, a "flop" drug can be very devastating for the drugmaker and your investment. Therefore, don't get into drugmakers unless you can stand the Russian Roulette nature of the business.

The 800-pound gorilla that may totally put you off this space though is "generic competition". Once a drug patent expires, even a dog can make a copycat of the drug and sell it over the internet.

Generic competition can crush the long-term return on your investment in drugmakers because the tenure of patents seems to be on a downward trend. This means drugmakers are increasing likely to have less time to just recoup investments in their drugs, let alone make any profit off them.

MEDICAL DEVICE MANUFACTURERS

Here's a great description of a medical device by Wikipedia.

If generic competition puts you off drugmakers, then consider medical devicemakers (note, however, that some pharmaceutical firms also manufacture medical devices).

A majority of medical devicemakers around the world don't make just medical devices. They have other businesses to fall back on as this space is as competitive as the drugmaking industry.

North American companies dominate this space, and you can find both small and large players as picks. The biggest global medical devicemaker by revenue is American company Johnson & Johnson (JNJ).

All the research I've seen forecast the growth of the global medical device market to outpace that of the pharmaceutical drugs market for years to come.

I've no positions in any medical devicemaker.

HEALTHCARE INFORMATION TECHNOLOGY (HCIT) VENDORS

Another way you can board the money train of aging global population is to invest in HCIT software developers.

Obviously, medical devices come with integrated software to optimize their uses. That's not the type of software I'm talking about.

What i mean by HCIT sofware are Electronic Healthcare Records (EHRs) software. These software allow medical professionals and facilities to jilt paper (phew!) and electronically capture, digitize, and share medical records of patients across multiple platforms (web, desktop, mobile) and multiple patient engagement points (hospitals, labs, doctor's office, etc.).

The HCIT software industry is highly fragmented across many lines in most countries so you may have a hard time picking a stock wherever you are. In the U.S., the biggest healthcare market in the world, there are over 350 EHRs software vendors of various sizes.

The industry's future seems to be tied to the growth of mobile devices. Therefore, your best approach to picking a stock may be to find a vendor with strides or ambitions in mobile. This is how i got into the voice recognition technology and document imaging company Nuance Communications (NUAN).

The American company is more known for its voice recognition and language translation products but its HCIT business accounts for 30 - 40% of its annual revenue.

HEALTHCARE REITS

As the world's number of senior citizens explodes, developed economy countries will need more of these healthcare properties: Senior Housing Facilities, Skilled Nursing Facilities, and Medical Office Buildings (MOBs).

Developing economy countries will most likely need more MOBs and hospitals because most people in these climes tend to look after their elderly at home. Therefore, senior housing facilities are not common.

Healthcare real estate investment trusts (REITs) own and/or manage these healthcare properties.

REITs are my favorite way to play this hot trend of aging global population because they give you exposure to the two most popular asset classes of stocks and real estate. Throw in the recession-proof nature of healthcare and you're good to go.

Furthermore, you get steady income as REITs typically have to pay out a majority of their profits as dividends to investors.

The healthcare REITs space in most countries tends to be highly concentrated in a few big players and fewer small players. Therefore, you may not have to sweat so much to find a good pick. I used to own Nationwide Health Properties (NHP) until it was acquired by another American REIT, Ventas (VTR), in 2011.

I'm still on the prowl for a small-cap U.S. healthcare REIT. Wish me luck.

Remember, always do your own research before you get into any stock.

Of the six hot global trends discussed in this series, the aging global population is the most sustainable. People will get old and seek healthcare. There's nothing anyone can do about it.

This is the second in a series of posts that examine six hot global trends you should invest in now. In the next blog, i examine the hot trend of Energy Efficiency/Renewable Energy.

6 HOT Global Trends You Should Invest In Now: MOBILE CONSUMPTION (1)

 Mobility is the new normal.

Although sustainable mobile consumption in the future may happen on other devices like wrist watches, smartphones are going to be with us probably till the Martians invade.

Whether in Africa or America, people increasingly want to run their lives on the go, and this is driving an explosive growth of the smartphone, first introduced by Finnish company Nokia (NOK) in 1996.

There are many ways to board this money train.

The most straightforward way is to invest in companies that make the actual handsets - companies like Apple (AAPL), Samsung, Blackberry (BBRY), HTC, Nokia (NOK), etc. However, when it comes to technology investing, i prefer "software" stocks.

If you're also biased towards software, then the smart way to play this trend is to zoom in on companies that make software components for the handset makers. These components typically tackle the three crucial aspects of mobile consumption: Privacy, Security, and Productivity.

Productivity probably determines the buying decisions of most smartphone users. Therefore, in this space you can consider Israeli company LivePerson (LPSN). They make engagements like chat, click-to-call, and email easy on smartphones, so they're big on productivity. So is Nuance Communications (NUAN), the company behind the speech recognition technologies in Apple (SIRI) and Samsung phones. I'm long Nuance.

Productivity and privacy are important but i think the sweet-spot of mobile consumption is security. You may not want to chat with Whatsapp or may feel uncomfortable with mobile banking, but would you want to take a chance with malware squatting on your phone?

That's why I'm also long Chinese firm NQ Mobile Inc. (NQ). NQ is primarily a mobile security firm, but as it turns out, also provides privacy and productivity services in over 100 countries worldwide. This company, which identifies and neutralizes over 75% of all global malware threats before any other company in the world, is adding 400,000 new customers a day. It's currently trading below its 200-day moving average, so this is a good time to long the stock. I expect NQ to ride this wave of exploding mobile consumption high.

This is the first in a series of posts that examine six hot global trends you should invest in now. In the next blog, i examine the hot trend of Aging  Population.

6 HOT GLOBAL TRENDS YOU SHOULD INVEST IN NOW!

40 years ago, Motorola had not invented the cellular (mobile) phone.

Today, wherever you are in the world, you've probably heard of the mobile phone - unless you're a member of a recently discovered ancient "tribe" in the Amazon rainforest. There are now almost as many mobile subscriptions in the world as there are people.

Imagine if you knew today what could be a business phenomenon like the mobile phone 20, 30, 40 years from now. Even better, imagine if set yourself and/or your dependents up now to make money from such a phenomenon.

Well, fellow self-directed (retail) investors, one way to discover future business gems is to research and study trends. A trend simply is the progressive tendency or inclination of something.

I have identified the following six global trends that are facilitating the emergence of companies and businesses likely to make their investors very rich years from now:

1. Mobile Consumption
2. Aging Population
3. Energy Efficiency/Renewable Energy
4. Scarcity of Freshwater 
5. The Age of Robotics
6. Frontiers Exploration.

WHAT’S WRONG WITH NIGERIAN STOCK MARKET REPORTS?

The short answer is that they are useless for stock market investors.

Whenever I read a local newspaper report on market activity on the Nigerian Stock Exchange (NSE) I’m just frustrated. All you get is that the market gyrated by some basis points and who the gainers and losers were. That’s it.

There’s hardly any mention of what moved - or could have moved - the market or a stock. Nothing inspires or motivates you to look deeper into the market or a stock for possible investment. Nothing makes you curious about stocks or the stock market. It’s like the journalists are too lazy to write something insightful.

For example, look at the stock market report for Monday, February 11, 2013, from Nigeria’s Business Day. Now compare that report to this report for Tuesday, February 12, 2013 from Reuters on U.K. market activity. See the difference? Nigerian commentators don’t try to connect the dots for uninitiated readers.

It’s no different when I hear a market report on radio.

Maybe this lack of easily-accessible and insightful stock market information is why most Nigerians don’t care about investing in stocks, which remains one of the easiest and fastest ways to make money wherever you are in the world.

I’m amazed at the increasing number of Foreign Exchange (forex) trading seminar ads I see in Nigerian newspapers. I doubt Nigerians trade forex in droves. Nonetheless, if Nigerians can take to forex trading then they can take to stocks trading because the forex market is a lot more complex than the stock market and Nigerians love simplicity.

Nigerian stock market commentators and writers need to do more than report statistics. The Financial Times and The Wall Street Journal are dailies yet they certainly try to get behind the numbers.

The regulators should take note. There’s no point in the Central Bank of Nigeria and/or the Securities and Exchange Commission compelling companies to list on the NSE when a majority of Nigerians don’t have the financial education to invest in the stock market.

I became a self-directed investor in 2006 - a year after I got out of B-School in the U.S. At the time I knew nada about investing in stocks, other than what I’d learned at B-School.

I learned the basics of stock market investing mostly from reading financial dailies and periodic magazines – Fortune Magazine is great for investigative journalism. I also frequented educational sites like the Motley Fool (www.fool.com) and Investopedia (www.investopedia.com).

I was so excited about what I was learning that I started this blog to share as I learned.

Google vs. China: the End Game

It's quite interesting to watch the current Google (ticker GOOG) vs. China Chess match over web search results censorship in China. It seems both parties are digging in their heels with tactics.

Where is it going to end?

At this point Google has probably gone too far with all the moves they have made to try to avoid censorship. It will not be a "good look" for their image if they were to totally back down now - though it will look good for the stock.

My prediction?

Google will close shop in China (including Hong Kong, where China will frustrate them).

Quitting China will probably not harm their stock because they currently don't make much of their money there. However, Google will be leaving a lot of money on the table in the long-run and this may prove too tempting.

Will Lawsuits Become Apple's Waterloo?

I don't hold Apple stock, but it's a hugely successful company and I admire success anywhere.

If I were an Apple investor though, I'd be a little worried.

Why?

Well I've noticed Apple is filing more lawsuits and - perhaps consequently - increasingly becoming a target itself.

I've taken a look at Apple's 10-K for its fiscal year ended September 2009. There are eight pages of lawsuits, and the list is about to get longer with Apple's latest salvo against Taiwanese company HTC. Some analysts have described this lawsuit as an "indirect" shot at Google, since HTC is a major partner with Google on the Android smartphone system.

No matter how big and successful a company is, lawsuits are always bad news. They distract management and even employees.

I know when you're at the top everyone's gunning for you. But Apple could become so mired in all these lawsuits that it starts to lose its focus, and it's "magical" edge. And if Apple loses its edge, it will become rotten. Maybe I'm wrong.

Investing Money In Plain English

4 Stock Picking Tips for Those Who Hate Numbers

Unless you want to be a day trader or a propeller head in technical analysis, you should always study the past, current, and projected financial fundamentals of a company before you invest in its stock for the long-term.

In self-directed investing, a little homework always goes a long way.

However, if you’re too lazy or too terrified to look at numbers other than those on your shopping receipts, then here are four non-financial indicators to consider before you buy a stock:

1. Institutional Ownership

Institutional investors are outfits such as pension funds, insurance companies, hedge funds, asset managers, university endowments, sovereign wealth funds, to name a few.

These Wall Street titans have better access than individual investors do to corporate decision makers, so they often see and hear what other investors don’t. They also have more financial muscle to conduct deep stock research and run all kinds of fancy computer models to no end.

Therefore, if you see a stock with heavy institutional ownership, especially a stock with many institutional owners, then it’s probably because the stock is worth holding for a good return.

Now, be aware of this. Sometimes, institutional investors pile in on a stock for short-term gain, for instance, to benefit from a dividend distribution. Therefore, you may want to get a historical sense of a stock’s institutional ownership before you put your faith in this indicator.

2. Customer Service

Before you invest in a company, try to experience its customer service. Pretend to have a problem, call customer service, and push your issue as far as you can up the ranks just to see how the company responds to you or treats you throughout the process.

If you already do business with a company, then you’ve probably had more than enough dry runs to make a good judgment. I had a checking account with Bank of America before I bought the stock. Similarly, I had an eBay account way before I got into the stock.

Admittedly, this indicator is very subjective and can be inconsistent. You may call up today and get someone in a good mood, only to call another day and experience someone hell-bent on showing you who’s boss. You just have to go with your gut feeling.

Anyway, I have found the overall quality of a company’s customer service to be a good indicator of how well the managers run the company. Obviously, a consistently well-managed company is likely, ceteris paribus, to earn you a good return on your investment in the long-term.

3. International Exposure

Ask yourself this question. In this age of globalized trading and communications, is there really a good excuse for a company not to conduct business outside its home country? I can’t think of one.

You wouldn’t put all your eggs in one basket, so never invest in a company that is scared of the outside world.

International exposure is not just a fancy term. There are real tangible and intangible benefits to a company - big or small - doing business overseas…bigger market, cheaper sources of raw materials, income diversification, multicultural workforce, etc.

Back when I was looking to add a discretionary stock to my portfolio, the final choice was a close call between Costco and Target. I picked Costco primarily because it has international operations and Target does not.

I think Target is being complacent, perhaps because they've done very well so far without international expansion. Their day of reckoning is coming though, because more and more of the world's GDP is being produced outside the U.S.

Some of America’s most successful companies – GE, IBM, Procter & Gamble – now earn more from their overseas operations than they do from their U.S. operations. They go where the money is.

4. Employee Benefits

If you study Fortune Magazine’s latest list of the “100 Best Companies to Work For”, you will notice most of the companies made the list based significantly on the benefits they offer employees.

Companies that offer very generous benefits attract the best employees. And there’s nothing like a motivated workforce to make a company thrive.

Furthermore, as you probably know, many of these benefits, such as 100% health-care insurance premium coverage, onsite child-care facilities, and tuition reimbursements for graduate study, are costly to maintain over the long-term.

Therefore, a company that offers generous benefits to many employees must be confident of its long-term financial health and is worth a closer look for investment.

Forget Your Stockbroker: How to Measure and Monitor the Correlation of Your Stocks Using Excel

Correlation is a measure of the degree to which a stock tends to move in the same direction as another stock or the broad market.

Normally, correlation measures use stock returns but in Excel you don’t have to use returns, as this article reveals.

The lower the correlations of your stocks with one another and with the market, the better diversified your portfolio – this does not mean the higher your returns though. Correlations range from 0 to 1 and a measure of 0.5 or higher indicates a high correlation.

When you know the correlations of your stocks, you are able to make objective buy or sell decisions.

For example, say, two of yours stocks, A and B, are highly correlated and you want to sell one of them to rebalance or reallocate your portfolio. Say stock A is also highly correlated with the S&P 500 while stock B is not. To improve the diversification of your portfolio, your best move would be to sell stock A - even if you're in love with it - because it correlates more with the market.

While you can get a stock’s correlation with the S&P on good financial information sites like Yahoo!Finance, you still need to know your stocks’ correlations with one another.

If you don’t have software that can give you these statistics at the press of a button, you can easily get them in Excel by using the “CORREL” function.

The trick is to use a system of letters or numbers to indicate up and down movements, and then apply the CORREL function to the two data sets for the two stocks in question, to get the correlation between them.

In the picture illustration below, you see that I use 1 (green shade) for upside movement and 2 (red shade) for downside movement.



To format your cells to flag high correlations – indicated by the yellow cells in the picture – you use the “Conditional Formatting” feature in Excel.

The good thing about the layout in the picture above is that you can see all your correlations in one window and make quick comparisons.

Of course, the downside to this whole exercise is that you have to manually record the daily movements of your stocks. Otherwise, you may not get accurate measurements.

Apple’s Excellent Customer Service Makes the Stock a Buy

I don’t have any Apple (AAPL) products yet, not even a "Pod". However, I do use iTunes, but that’s not a product, it’s a service.

Anyway, last week I had an issue with purchasing iTunes gift certificates online. Although there was no helpdesk number to call – something that’s now common practice with companies – I did get to “chat” online with a customer service rep who promised to follow up through email…and actually did!

Not only was there a follow-up email, dude went back and forth with me on email until he confirmed I was satisfied with the problem’s resolution. I thought to myself, that’s what customer service is.

Now, AAPL does make cool products, but I don’t think that’s the sole reason for the company’s success. Excellent customer service has to be part of the reason.

I know what you’re thinking. Maybe the dude who attended to me had just reunited with his high-school sweetheart. Nah. I think great customer service is just how AAPL rolls; it’s part of their mojo.

I’ve been in their store many times and “test-driven” like 10 different Pods and Macs without buying a thing, and none of their people gave me as much as a “beat it” look.

Look, if you want to know how well or awful a company is run, just experience its customer service. And Wall Street knows this. That's why the stocks of well managed companies often command a premium in the market. Just compare the price/earnings (P/E) ratio of AAPL with those of its competitors.

Costco (COST) is another company that enjoys a higher premium than its competitors partly because Wall Street believes it's better managed.

I have thought about buying some AAPL (no pun intended), but my portfolio is already tech heavy – it’s 18% weighted in tech versus S&P 500’s 15%.

Furthermore, I am not a fan of “hardware” tech stocks, because they are more susceptible to commodity prices than their “software” counterparts are. This doesn’t mean I won’t buy or use AAPL products though.

If you’re looking to get into a tech stock you should consider AAPL. I admit customer service is a crude way to decide whether to invest in a stock, but it seems to be an accurate predictor of a long-term moneymaker.

When deciding whether to get into a stock, some investors look at fundamentals, others look at technicals. Now you can go one up on them by also looking at customer service.

5 Stock Market Tips to Make You A Smarter Newbie Investor

In investing, the most potent firearm to carry is knowledge. As you begin to invest in stocks, here are five tips to help you navigate the choppy waters of the stock markets:

1. Never invest in the market more money than you can afford to lose. Okay, so this is more a rule than a tip, but it’s probably the most important point to make about investing in stocks.

While you can make a lot of money investing in stocks, you can also lose big, though the chances of you losing big decrease the longer you stay invested in the market and the less frequently you trade.

If you are highly risk-averse, then it’s better to totally avoid the stock market. Stick to cash or money market instruments like certificate of deposits (CDs) and commercial paper.

2. Never invest in a stock unless you understand how the company makes money. If you’re going to hold a stock for a very long time, it pays to understand how the company makes money. This will help you make better buy and sell decisions – see tip 4.

To understand how a company makes money, you’ll probably have to read its Annual Report or 10-K. Another good way to get this insight is to listen in on a company’s earnings conference call, where stock analysts grill company executives about the strategy and financial health of a company.

3. Practice Dollar Cost Averaging (DCA) when building position in a stock. DCA is an investing strategy whereby you invest the same amount of money in a stock at regular intervals – like every week or month – regardless of the price of the stock when you buy it.

If you buy when the stock is trading high, you get fewer of the stock, and if you buy when the stock is trading low, you get more of it. Many online stock broking companies will automate this process for you.

DCA allows you to build a position in a stock at a pace or contribution level you are comfortable with. Furthermore, with DCA, you don’t have to “time” the market - to try to buy at a particular price.

Until you know what you’re doing, DCA is more reasonable than buying on “gut” feeling or buying because Jim Cramer said something good about the stock on Mad Money.

4. Buy on the rumors and sell on the news. This is a common adage among investors. Once you’ve built position in a stock to a level you’re satisfied with you may want to buy and sell some of it once in a while.

Studies have shown that when the market anticipates good news from a company - like a good earnings report - its stock price often starts to rise days before the news becomes official.

Therefore, you want to buy the stock once the rumor breaks. If you buy on the day the company delivers the good news, you’d probably miss out on much of the gains.

Traders, who typically don’t hold stocks for a long time, will often sell and take “profit” once the company breaks the good news. This is what investors mean by “sell on the news”.

If the market expects bad news, then don’t wait until the company breaks the news before you sell because by that time, the stock may have bled profusely.

Now, realize that your stock does not have to be the news-maker before you act. If you hold company A’s stock and Company B, a competitor, is the news-maker, then your stock is likely to react to company B’s news since they are in the same industry.

5. To get the best prices make your trades at the start or at the end of the trading day. The first and last 20 minutes or so of the trading day often witness the most activity by investors.

During the start of trading, investors try to capitalize on news before the opening bell, so the scramble to get in or out of a stock tends to make stocks “gap up” (price shoots higher than previous day’s high) or “gap down” (price shoots lower than previous day’s low) depending on the nature of the news.

Institutional investors often come into the market to trade during the quiet times - like lunchtime - or towards the end of the trading day.

The Learning Never Stops

Continue to arm yourself with knowledge and recognize that a "trader" is different from an "investor". A trader hits and runs while an investor buys and holds.

These days, however, most self-directed investors are not on the extremes. Sometimes they run like traders, and other times they walk like investors. Get in where you fit in.

Africa On My Mind

Africa remains the only region I am currently not exposed to in any meaningful shape or form. I say meaningful because I do have a small exposure to South Africa and Egypt through the MSCI Emerging Markets Index Fund (EEM), which is one of my favorite holdings.

I don't want to be exposed to just one Africa country, so what I'm looking for is an Exchange Traded Fund (ETF) stock that covers several African countries. To this end, I've got the Market Vectors Africa ETF (AFK) on my watch list.

When I took a closer look at AFK, i realized it's heavily weighted in the fastest growing sectors of the continent, such as telecommunications and banking, which is a good thing.

At this point I'm yet to find another ETF similar to AFK in exclusivity to Africa, so right now it's in pole position to become the portfolio flagbearer for Africa. I shall decide soon.

eBay Fees Were Killing Me So I Bought the Stock

The Chief Financial Officer (CFO) position at eBay should auction to the highest bidder, hopefully a linear programmer, because the company just cannot make up its mind how much to charge sellers for listing items. The latest ‘renovation’ of prices – the second of the year - happened about two weeks ago and takes effect on September 16. This time the firm cut the fees it charges sellers for fixed price listings.

I do more selling than buying on eBay. Therefore, I have often wondered if the CFO, or whoever is in charge of pricing, has a clue. I have been trading on eBay since 2005 and I don’t remember a year when there was no tweaking of seller fees. It has become an increasingly irritating ritual.

I guess eBay is trying to attract more buyers by encouraging sellers to list items at fixed prices, rather than letting buyers go at it via auction. However, eBay will cease to exist if it kills auctioning. Auction sales are what make eBay fun and enticing for sellers. A fixed price sale cannot give a seller the adrenalin rush of watching buyers snipe one another as an auction reaches a crescendo.

A related issue to listing fees is the “Final Value Fee (FVF)”, which is eBay’s cut on an item’s sales price. Try selling pricey items like gaming devices or multimedia storage devices and watch these fees snowball.

In 2007, I’d finally had enough of the incessant tweaking and bleeding fees and decided there was only one way to fight back: buy the stock. Dividends should soothe the pain of high sales fees. Yes, I know eBay, like many growth tech stocks, has never paid a dividend but that’s another matter. If you intend to trade on eBay for a long time, buying the stock is a good way to hedge against the tweaking and bleeding. If you do not intend to trade for long, eBay still is not a bad stock, so long as they have PayPal.

The Central Bank is Killing Us!

Unemployment or Inflation: Which is the better of these two evils? Put another way, if you were the governor of a Central Bank what would concern you the most: average Joe losing his job today - unemployment - or average Joe paying much higher prices for bread and milk tomorrow - inflation? That’s a tough one, isn’t it? Well, that’s the choice Federal Reserve Chairman (or U.S. Central Bank governor) Ben Bernanke and his posse of regional governors – collectively known as the Fed - have now faced for a year.

You would probably say it’s better for average Joe to pay a higher price for bread tomorrow than to lose his job today. Well, guess what. The Fed agrees with you, which is why it’s been cutting interest rates since September 2007. Lately, the Fed has got very aggressive on rate cuts and this is making me nervous. Chairman Bernanke reportedly has reduced interest rates faster than any Fed Chairman since 1982.

However, when the subprime slime started around this time in 2007 the Fed saw things differently. Back then, the Fed was more concerned about inflation than job losses and was more reluctant to cut interest rates. So what changed the mind of the Fed? I don’t know. Perhaps it’s politics, since it’s an election year. Whatever it is the Fed has blown it. It’s now trying to prevent a recession at the risk of higher inflation tomorrow. Big mistake.

Interest rate cuts fuel inflation by weakening the dollar and thus making imports more expensive. Rising oil and food grain prices, which the Fed cannot control, also fuel inflation. So hasn’t it noticed that oil is now over $100 a barrel and that the price of wheat, which is a principal ingredient in many food products, reached a record high last week? Gold, which is a natural hedge against rising inflation, is fast approaching a record $1,000 an ounce and the price of Silver is up almost 34% year-to-date (YTD), a run-up not seen since 1980. By the way, if you don't already have some commodities in your portfolio now is not the right time to buy.

Laugh Now, Cry Later

Maybe the Fed knows something the market does not but it seems to me we already have enough inflation coming our way. In 2007, inflation jumped 4.1%, reportedly the fastest pace since 1990. No wonder the price of milk at my local organic store has crept up. Why aggressively cut interest rates to put the economy on a K-leg only for inflation to crush it two or three years from now?

I think the Fed’s fear of a recession is misplaced. A mild recession today is better than hyperinflation tomorrow because inflation can do much more damage to the economy than a recession. Inflation can cause a recession but a recession cannot cause inflation. The recession this year probably will be short-lived because of the “economic stimulus” tax rebates the government just approved.

Even if consumers don’t spend the bulk of their rebates businesses will reinvest their tax credits, which will boost the economy and stave off a brutal recession. So the chances of average Joe being unemployed for a long time if he lost his job today are slim. However, if we get hyperinflation in a few years…..well, just look at what is happening with food prices in Zimbabwe. Even Wall Street fears inflation more than a recession.

Yes, I know the housing sector is bleeding and the lending department at your local bank won’t give you the time of the day even with good credit. However, it was the aggressive rate cuts by former Fed Chairman Alan Greenspan that partially caused this mess we’re in today. The inflation signal is now flashing red. The Central Bank should stop leading us to the slaughterhouse again with aggressive rate cuts.

Water Please, Not Coke!

Atlanta, Georgia, HQ for soft-drink giant Coca-Cola, made the headlines a few days ago for something that’s a harbinger of things to come for all cities around the world. It’s about to run out of water, literally. In fact, unless the city takes drastic action - read mandatory rationing - it may run out of potable water in a matter of months! Here’s the soundbite from Carol Couch, the director of the Environmental Protection Agency (EPA) Division in Georgia: “Without any intervention, we are likely to run out of water in three months." Well, that was about a month ago so…sure you know what I’m thinking.

Guess what? Georgia is not alone. Cities all over the Southeastern US are sounding the same alarm about the dearth of freshwater resources due to a sustained drought. Have you heard the one about Florida butting heads with Alabama and Georgia over Florida’s desperate attempt to draw water from a shared river basin?

Dry, Dry, West

Oh, don’t even talk about California and the dry, dry, west. They already have voluntary rationing in Long Beach, and the last I heard, city officials say they may have to go mandatory to wake people up. The Colorado River, which is the lifeblood of the Southwest, is drying up and with it freshwater supplies for millions of west coasters in California, Arizona, Nevada, Texas, and Utah.

Water War I

Wait a minute. This is not just an American problem. Egypt is ready to go to war with Sudan and Ethiopia over the River Nile. The Jordan River basin remains a flashpoint because it serves Israel, Palestine, Jordan, Syria, and Lebanon. The Chinese are fretting about how they’re going to meet the water needs of 1.5 billion people in 2050 and the UN says “tensions and disagreements over water are erupting along the Mekong River in Indochina as well as around the Aral Sea in Eastern Europe.” Many analysts have for years been predicting the next World War will be over water. That’s a scary thought.

Planet Saltwater

Okay, so you get the picture. Whether or not it’s global warming the world is facing acute water shortages. Therefore, as an individual investor how can you make money from the impeding water crisis. Well, remember Samuel Taylor Coleridge famous complaint that “Water, water everywhere, nor any drop to drink."

You see, the world is running out of freshwater supplies but we’re not running out of water. Actually, water covers about 97% of the earth’s surface. The only problem is that the bulk of this is saltwater, and around the world now, there are companies investing billions of dollars to make this saltwater potable for human consumption. You’d be wise to invest in these companies not now but right now.

Play it Safe

This “water services” space, which comprises companies that provide potable water, water treatment and other technologies and services related to water consumption, is poised for phenomenal growth. Companies that stand to benefit from this growth range from well-known names like GE (US) and Suez (France) to smaller companies from India, China, South Korea, Brazil, and so on.

The water services industry is primarily a high-growth, small to medium-cap space so it is better to play it through an index fund or Exchange-traded Fund (ETF), which are baskets of individual stocks of companies involved in similar businesses. It is too risky to play the sector with a single stock, say, GE, for two reasons. First, most of the companies do not derive all of their revenue from water services. Therefore, you’d be getting too much of what you don’t want with a single stock play. Second, the industry is very capital-intensive so you don’t want to put your money in just one firm in case it goes bust.

There are about four or five ETFs focused on the water industry but the manager personally is invested in the PowerShares Global Water Portfolio ETF (PIO), which currently holds 40 international stocks that generate at least 50% of their revenue from water or water-related services. PIO currently is the most international of the ETFs. Companies are added or removed from this fund regularly (rebalanced) to make sure they all meet the minimum 50% revenue requirement and thus remain focused on water services.

So talk to your broker or investment adviser about water. Invest in water now so when mandatory rationing comes to a town near you, it would not feel so bad to go without a shower for a couple of days!