UNEMPLOYMENT RATE or PAYROLL: WHICH IS A BETTER GAUGE of the JOBS MARKET?

Last week, the U.S. Fed released its monthly statement on monetary policy (http://www.federalreserve.gov/newsevents/press/monetary/20140319a.htm) in Washington, D.C. Often released the day after the Federal Open Market Committee (FOMC) meeting on interest rates, the statement created some confusion in the market about whether the Fed will henceforth consider the unemployment rate in setting interest rates.

Every first Friday of the month, the U.S. Department of Labor releases data on the health of the labor market. This data includes the unemployment rate and payrolls, i.e., the number of jobs employers created.

Soon after the Fed statement release and the following press conference it was in the business media that the Fed will no longer consider the unemployment rate when setting interest rates (http://finance.fortune.cnn.com/2014/03/19/fed-unemployment-rate/). Although i didn't listen to the press conference, I read and reread the statement and, honestly, i didn't see anything like a ditching of the unemployment rate in that statement. However, I'm not well-versed in Fed Speak, so i may be lost in translation.

Nonetheless, if it is true that the Fed will now give the unemployment rate the cold shoulder, then this is a welcome development. Other countries may do it differently but the U.S. Department of Labor uses a household survey to determine the unemployment rate.

This is an unreliable way to gauge the true health of a labor market.

For instance, if someone is not working but this person is for whatever reason not looking for a job, will the survey say this person is unemployed? I don't know if it does but it will be wrong to do so, because a household survey can't truly capture the willingness to work. Besides, people tend to lie a lot on surveys, especially when it's not face-to-face.

A more reliable metric to gauge the health of the jobs market is the non-farm payrolls, which is the number of people employers actually hired.

My Suggestion

If the Department of Labor really like surveys and insist on using one for the unemployment rate, then i suggest they survey employers for the number of employees they have and express this aggregate as a percentage of the overall working-age population. This will give an employment rate, and one minus this figure is the unemployment rate.

What do you think of my suggestion?

AFRICANS, NOW THE IMF COULD FORCE YOUR GOVERNMENT TO SEIZE YOUR BANK SAVINGS AND DEPOSITS!

The International Monetary Fund (IMF) has a bad reputation in Africa. Many Nigerians, for instance, will tell you the country has never recovered from the debilitating effects of the IMF's Structural Adjustment Programs (SAPs) of the late 80s.

The fund's conditionalities for bailout loans to Africa often appear to be harsher than those for loans to other continents.

Now, because of a shocking, unprecedented development over the weekend in the little island of Cyprus, these conditionalities could get even harsher.

Cyprus, with Nicosia as capital, is a small east Mediterranean island of around one million inhabitants. You've probably heard that for years Turkey and Greece both laid ownership claims to the island, going to war over it in 1974.

What you may not have heard about Cyprus is that it's a tax haven for high net-worth non-resident individuals, from Russia in particular.

Tax havens like to keep a low profile to avoid much scrutiny, so i don't even know why Cyprus joined the 17-member Euro zone.

Anyway, the country seems to have been doing just fine until Greece got into financial trouble, and Brussels forced Cypriot banks to play good neighbor by loading up on toxic Greek government bonds to the hilt. It was only a matter of time before this heavy load became unbearable for Nicosia.

Well, the chicken has come home to roost.

On Saturday, the same Brussels forced down the throat of Cyprus a multi-billion bailout package with an unprecedented condition that has shocked the world: Nicosia must grab at least 6.75% of ALL savings and deposits in its banks and contribute this seizure to the bailout package. Otherwise, Brussels will simply cut off funding to Cypriot banks and let the country of one million go to the dogs.

This is a scary development for Africa because the IMF was heavily involved in thrashing out the bailout package.

Hate to say it but the IMF still tends to push Africa around. If it can support this kind of bank raid by a Euro zone country, albeit a small one, on its citizens' deposits, then it can surely push for stricter versions of this poison pill for African countries that seek bailouts.

African governments should see the writing on the wall.

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.

Bullish on Africa With AFK

A couple of weeks ago, I was still searching for a stock with which to play Africa.

Well, I finally got into AFK, which is an exchange traded fund (ETF) that tracks the Dow Jones Africa Titans 50 Index.

Now my portfolio is exposed to every nook and cranny of the world, and AFK constitutes 9% of the portfolio. Yeah, that's right...9%!

I got into AFK at $22 a piece, well before the stock crossed its 200-day moving average to the upside, which is always a bullish technical signal.

Here's Jim Cramer of CNBC's Mad Money show talking up AFK in the video below.
Yes, like Cramer said, over a quarter of AFK is weighted in South African stocks, but i have a feeling this will gradually change as the economies of smaller African countries kick into gear.

In fact, it has to change. Take a look the latest sector allocation for AFK, Banks, Basic Materials, Oil & Gas, and Telecoms dominate the list. Three of these sectors - excluding Basic Materials - are growing fastest not in South Africa but in other African countries. Therefore, at some point the fund will have to account for this faster growth in smaller countries.

As at the close of trading on May 22, 2009, I'm up almost 18% from my entry point into AFK, so I'm sitting pretty.

However, compared to other emerging market ETFs, AFK still has a long way to go in terms of year-to-date (YTD) returns.

Let's go Africa!

The Banks Just Pimped Us

No, seriously.

Six months ago free market capitalism as we know it was about to end, and big bank stocks were trading for less than an ATM access fee.

Analysts were breathing down the necks of bank executives, daring them to declare just how "balanced" their balance sheets were.

To keep hedgies from turning their companies into penny stocks and avoid the wrath of average Joe and Jane, executives begged the government for mercy and got plenty of government funds and government guarantees of their debt. I don't buy the argument that banks were forced to take the money. If they hadn't taken it how many of these banks would be around today?

Now, all of a sudden, they don't need this money anymore?

I smell a rat.

After using taxpayers money to pay executive compensation, raise capital, and avoid a mutiny by investors, could it be that the big banks now want to return the money before government clamps down on executive compensation and credit card interest rates hikes?

Well, well, well. If that's not pimping taxpayers, then i don't know what is.