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In addition to being one of the world?s wealthiest men, Warren Buffet is also known for his common sense investment advice. Instead of chasing hot stocks and market trends, the straight-shooting septuagenarian preaches simple and logical investment strategies that even the least financially inclined investors can follow. While there are as many stock-picking strategies as there are stocks to pick, Buffet?s long-run returns serve as compelling testimony to the effectiveness of his methods.

While numerous books have been written about Buffet?s investment advice, the primary focus of his philosophy is to look for companies with strong intrinsic value. Rather than relying solely on balance sheets or assumptions of value, he encourages investors to reflect on the nature of the company and its future. Who are their competitors? Is it a business with a high degree of customer loyalty? What are the barriers to entry? Are there any major logistical flaws in the company?s business plan? By following Buffet?s advice, an individual would have fared well through the technology bubble of the 1990s. The acceptable downside to this investment strategy is that the investor would also have missed out on many profitable opportunities that existed before tech stocks began to plummet.

In keeping with his common sense investment advice, Buffet emphasizes that an investor should invest in companies that he or she understands. He reasons that investing in the latest technology-oriented hot stock may lead an investor away from the use of common sense valuation techniques, causing the investor to make decisions based on hype rather than logic. Along those lines, he has been quoted advising individuals to invest in the companies where they spend their own money. Since doing business with a company is one of the best ways to see how it operates, it stands to reason that it would offer insight about the company?s value as an investment. Instead of selecting companies that ?everyone? is talking about, he argues that you should buy shares of the companies that everyone you know is doing business with, especially if price and market interest levels don?t seem to reflect the quality you know is there.

While Buffet offers excellent non-technical investment advice, he also offers tips for those who know their way around a balance sheet. Instead of looking for companies that pay large dividends on a regular basis, he advises investors to Read more…

This has been a painful month in commodity land especially for anyone who bought around May 12, the peak of the most current gold rally. Since then, gold investors have lost 20% from its high of $730/oz to Friday?s (6/8) close of $608/oz. However, those that bought on the last day of this past year have a slightly differently perspective. Gold could have then been purchased for $517/oz. Over the past five years gold has averaged a return of 15% per year. No one wants to suffer through a 20% draw down over 4 weeks, but a 41% return in 4 ? months was simply unsustainable. This is why I am a strong advocate of dollar cost averaging. If you made the decision to to try commodity investing and went all in on May 12, you are probably ready to give up now.

Former Treasury Secretary and current Harvard University President Lawrence Summers concluded in a 1988 published research piece that stocks and commodities are out of phase with each other (refer to link below). In one half of the cycle, stocks significantly outperform commodities and then in the second half of the cycle commodities outperforming stocks. This relationship continues to prove itself. Back in the late 90?s the fastest payback of capital was in internet infrastructure companies. Venture capital companies were crawling over each other to invest in the next Cisco. Meanwhile, commodity prices were at multi-decade lows with oil at $15 per barrel and gold at $250/oz. Mining companies were going out of business and projects were delayed due to the low prices and inadequate capital. Obviously the stock prices reflected the business cycle with technology stocks at all their all-time highs and commodity stocks at their lows. The internet frenzy concluded the stock cycle in 2000 and we are now 5 years in to the commodity cycle.

A simple investment strategy can be developed using the above information combined with the fact that bull markets tend to run on average17 years (Adam Hamilton/Jim Rogers links below). For example, the last two US-based bulls markets have been technology in 1982-2000 and commodities 1968-1982. The strategy is to simply dollar cost average into the broad market using an Exchange Traded Fund (ETF) like the SPY (an ETF tracking the S

If you can’t rely on your own research, or if you don?t have time to do the research, you might as well make your investment decisions based on tips from that smart guy at work. No, no, I’m just kidding. Tips are for restaurants.

Important Rules to Follow When Buying a Stock

These suggestions are presented with the assumption that you intend to remain a casual investor. I strongly recommend mastering the art of technical analysis (reading charts, analyzing price and volume moves) if you intend to become more serious about the timing of your purchases.

With this said, you should still be able to buy good stocks if you follow these rules:

1.Don’t ever buy a stock without first examining its financial health. You are going to learn how to do this.

2. Don’t ever buy a stock without first learning about its business and who its competition is. You want to focus on the leaders in an industry.

3. Buy when market indexes are in an up-trend. Don’t try to bottom-guess, wait until the stock or the market has clearly turned around, with several days of price increases on larger than usual volume.

4. Buy the top companies of industries or market sectors with many stocks hitting new highs.

5. Buy companies with new products or services that are expanding (profitably), especially young companies.

6. Determine if large or small-cap stocks are favored in the current market.

7. Pick companies with high management ownership. With their personal stake, there will be a tendency to Read more…

Having read through the May 23rd newsletter ?Energy and Capital,? we were astounded to read about Mike Schaeffer?s favorite coalbed methane (CBM) stock, Pacific Asia China Energy (TSX: PCE). The widely read CBM guru aggressively argues PCE will become a major winner for his subscribers, telling his subscribers, ?The bottom line: PCE is a dreamboat company?All the pieces are falling into place. The only thing you need to do is sit back and enjoy the ride up.?

What pieces is Schaeffer talking about? Prior to his initial recommendation of Pacific Asia China Energy (acronym is PACE; ticker is PCE.V), the stock quickly doubled on (a) anticipation of drilling and (b) Schaeffer?s recommendation of this stock. Those who have closely followed Schaeffer have come to realize he has one of the best eyes for a CBM deal before the company rockets up the stock charts. And they do take off.

The initial drilling amazed Schaeffer (and us). He wrote in his recent recommendation, ?PACE examined twenty coal samples from nine seams. When they did, they found that the initial gas content was high ? much higher than they expected. In fact, in only 6 days (out of the originally planned 60 days) of drilling, PACE was able to confirm Sproule?s ?most likely? estimate of 5.2 TCF. In other words, it?s almost a shoe-in that PACE will be able to extract much more gas than outlined by Sproule.?

Let?s clarify what Schaeffer is talking about. Sproule International is a Calgary-based engineering company, which evaluates the economic viability of many of the world?s CBM projects. Many consider Sproule to be the leading CBM resource evaluation firm. They were among the first to negotiate joint venture research projects with the Chinese, through the state-owned China United Coalbed Methane (CUCBM). TCF is a trillion cubic feet. In an earlier interview with Eric Nuttall, a research analyst with Sprott Asset Management, which has a stake in PACE, Nuttall explained that each TCF might equate to $1 billion in market capitalization (and of course warning of various discounts with regards to developing projects elsewhere, maturity of a project, etc). Using Nuttall?s appraisal method of $1 billion for 1 TCF, and PACE, according to both Schaeffer and Sproule, might have five times that. Well, we?re not going to print anything that could be construed as a price target here, but the math is not rocket science.

Schaeffer appraised PACE?s potential market capitalization relative to Great Eastern Energy, which trades on London?s AIM stock exchange. He wrote, ?In comparison, Great Eastern?s in place methane Read more…

There are 2 kinds of investments:

a) investments for the rich and

b) investments for everybody else.

If you want to make like the rich, you got to have you’re own business. Without a business you can’t afford the investments that rich people do.

The only reason for you to start a business is to accumulate lots and lots of values.

I want to underline the difference between an employee who makes investments and a business that makes investments.

The majority of the investments are too expensive if you want to do them as an employee. But they become accessible if you make them through you’re business.

The only thing that investors have to do is to learn how to make money work hard for them.

WHY THE IDEA OF INVESTMENTS SCARES US?

First of all, the term “investment” is a different notion for different people. The things that people call investments are not necessary investments.

They talk about totally different things, but they think they talk about the same thing.

Different people invest in different things.

a) A solid preparation, and job that offers financial security and other benefits, is what some people call investments.

b) Some people make extern investments.

Here is a list of some types of objects for investments?

a) Stocks, bonds, mutual funds, real estate, insurance, merchandise, savings, collectibles, precious metals, etc.

b) All this can be divided in different subgroups.

Stocks?

1) Usual stocks

2) Special stocks

3) Secure stocks

4) Stocks that sells at low price

5) Stocks that sells at high price

6) Read more…

Wells Fargo

All in all i’m glad I turned the computer off yesterday. It was a fools day for trading. Nobody knew where the market was going in the morning and in the end it dropped significantly.

I tuned back in just before close and the drop astounded me. If I’d have bought then and sold this morning I’d have made money but it was 50 / 50. I could just as easily have been out of the money.

And if you ask me, the slight pick up this morning is a result of people betting that it can’t get much lower and gambling that they’re near the bottom. I like solid trends and I think waiting until tomorrow is not a bad idea [ok, that doesn't signify a solid trend, but at least a little bit more certainty]. And remember, we still haven’t clawed back yesterday’s losses.

I’m still keeping my eye on mining: they’re leading on the way down and on the way up.

But Read more…

Due to the fact that most, if not all, of the information that impact us in our daily lives is on the Internet, we can access financial information for free any time. We no longer have to call our broker to get information that was once only available to few privileged people.

I check three main financial websites everyday and they are given below:

Let us start with commodities and precious metals which include gold and silver. Probably, the best website that I can think of is of Kitco?s. Its website is www.kitco.com. It is a Canadian company based in Montreal. Kitco provides the latest prices of rhodium, palladium, platinum, gold and silver. The website also has latest news and commentary on commodities and other relevant topics such as inflation. It also offers technical and fundamental analysis on gold, silver and other precious metals.

Raw statistical data is extremely use for economic research and in particular, economic forecasting. Economagic is one such website that offers us latest statistics on inflation, GDP, interest rates, employment and housing market. Its website is www.economagic.com.

You can also create your own charts by using these data and compare interest rates with inflation, GDP growth and other statistics.

My favorite financial website that is, in my opinion, useful to all Read more…

Monday is the exception to the general rule: if London catches a cold then America sneezes; the FTSE is still heading down and so the American markets will probably follow suit when they wake. And we’re all catching the virus because of the Asian sell off.

This weekend I got scared. I try not to let things influence me but who can not read the papers, right? I figured this to be a minor correction with a chance to make some money on the up-curve but it’s beginning to look like a more significant drop. What began to look cheap on Friday is now beginning to look [still] overpriced.

But you have to be careful of hype. Best approach is to wait and see until tomorrow. Why buy today when prices could be lower tomorrow? Also, with this volatility, it might be wise to wait two days. Sure, you could take a risk and try to catch the bottom of an up-curve, but with no one knowing what’s really going on, Read more…

Publicly traded limited partnership Cedar Fair (FUN) will acquire the Paramount Parks business of CBS Corp (CBS) for approximately $1.25 billion. The five parks involved in the deal are located near Cincinnati (OH), Richmond (VA), Charlotte (NC), Santa Clara (CA), and Toronto.

Cedar Fair already operates seven amusement parks and five water parks, including the company?s flagship Cedar Point property on Lake Erie. The company intends to keep all five properties. The deal will be financed by a $2 billion loan from Bear Stearns (BSC). The interest rate charged will be determined once Cedar Fair?s debt has been rated.

The acquisition is quite large relative to the size of Cedar Fair?s existing business. Cedar Fair generated $569 million in revenues during 2005. During the same time period, the Paramount Parks properties generated $423 million in revenues.

In addition to the five parks, Cedar Fair will receive Star Trek: The Experience (at the Las Vegas Hilton) and the Nickelodeon license at the five Paramount Parks.

The Paramount Parks properties encompass about 1,250 owned acres and 180 leased acres. Based on past attendance, the five acquired properties will likely be some of the most visited parks in the new Cedar Fair portfolio. However, none of the new properties is likely to eclipse Cedar Fair?s two most visited properties: Cedar Point and Knott?s Berry Farm.

By far the two largest parks being acquired are Canada?s Wonderland (located near Toronto) and Kings Island (located near Cincinnati).

Cedar Fair?s chairman Dick Kinzel said:

“This acquisition will provide exciting new growth opportunities and the potential for meaningful incremental free cash flow as we realize $20-$30 million in annual cash Read more…