InvestMacro FX

Article courtesy of DividendOpportunities.com

The Legal “Tax Loophole” for Income Investors

Did you know the United States withholds a portion of dividends paid to many foreign investors?

This amount comes right off the top, before the payment even hits an investor’s account. Even after this cut, the foreign investor will still have to pay taxes on what’s left.

But the United States isn’t just being greedy. Just about every nation does something similar.

Switzerland withholds up to 35% of dividends paid to foreign investors… Israel withholds up to 25%… Canada takes 15% off the top.

Typically the higher yields found abroad can make up the difference. For instance, the high yields on foreign utilities can still make them worthwhile to most investors, even with the withholding.

And truth be told, you can get this withheld money back. Investors filing for a foreign tax credit via IRS Form 1116 can reclaim foreign dividends withheld. But you won’t receive this cash until you file your tax return, sometimes up to a year after the actual dividend has been paid.

But there’s also a legal tax loophole you can use to your advantage. And it can mean more income in your pocket immediately, without the hassle of filing additional tax forms and waiting to get your money back.

A Select Cadre of ZERO-Tax Nations
For decades the United States has wanted to attract foreign investment. Likewise, many countries crave American capital.

To promote mutual investment, the United States has signed tax treaties with about 50 countries that reduce the taxes withheld on your dividend payments.

While the treaty terms vary from nation to nation — Switzerland, for example, withholds only 15% of dividends paid to American investors — there is a select cadre of nations where the dividend withholding tax is zero. Every cent paid by the foreign company makes it into your account.

In total, fewer than two dozen countries either have tax treaties with the United States that result in 0% withholding or simply don’t withhold dividends paid to foreign investors. Of those, many are smaller nations that aren’t exactly hotspots for income investing.

Now I’m not saying to ignore any country that withholds dividends — that would be like going to a restaurant and limiting yourself to only one side of the menu. There are simply too many high yields out there that are attractive, even if a little is taken off the top.

But if maximizing short-term income is your primary goal, then this “tax loophole” should be one of your favorite tools.

[Note: Right now 95 profitable companies yielding 13% or more are found abroad… versus 16 here in the U.S. That’s good news if you invest abroad. To help, I’ve put together a brief memo outlining some of the benefits of international high-yield investing. Be sure you don’t miss it.]

Good Investing!

Paul Tracy
Co-Founder — StreetAuthority
Chief Investment Strategist — High-Yield International

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Tech Bubble or Just Hot Air? You Be the Judge…

by Alexander Green, Investment U’s Chief Investment Strategist
Monday, June 13, 2011: Issue #1533

There’s a lot of talk on the Street right now about a new “bubble” in tech stocks.

If you’re talking about social network stocks, this may be true. Is there anyone out there who hasn’t heard how LinkedIn (NYSE: LNKD) doubled right out of the gate after its IPO last month?

But this euphoria has hardly spread to the rest of the sector. The Nasdaq is no higher than it was at the beginning of the year. And while many of our recommended tech stocks are soaring, there’s no tulip-bulb mania like the one that took place in late 1999 and early 2000. Solid fundamentals undergird the current tech rally.

That was not the case in the last real tech bubble – one we called “the greatest investment mania of our lifetimes and perhaps of all time.”

Eleven years ago, the Nasdaq hit an all-time high of 5,048. Valuations hit nosebleed levels. Many tech stocks sold for more than 100 times earnings. Others didn’t even have a multiple. After all, you can’t calculate a P/E if you don’t have an E (earnings)…

Things are different today. For starters, the Nasdaq Index, more than a decade on, trades at less than 60 percent of its March 2000 high.

• Sales and earnings are solid and rising.
• Valuations are reasonable.

Key Indicators That Tech Stocks Remain Promising

And the outlook for tech companies remains promising. Here are just a few key indicators:

• Profit margins at U.S. technology companies are near record highs.

• Chipmakers – who saw sales rise 28 percent in 2010 – are seeing stronger demand for consumer items and businesses are finally making purchases that were delayed in the recession.

• Respected research firm, Gartner, reports that sales of server systems are climbing, a sign that large technology firms are spending again on big tech projects. (Sales of server systems generally precede spending on other technology products, such as storage systems and software.)

• There’s plenty of fuel for merger and acquisition activity. U.S. corporations are currently sitting on nearly $2 trillion in cash.

• The Fed’s Beige Book reports that manufacturers of high-tech products are operating near maximum capacity of late.

• Due in part to record demand in Asia and Latin America, the market for mobile devices such as handsets and media players is expected to top two billion this year.

• International Data Corporation (IDC) estimates that worldwide IT spending will top $1.5 trillion in 2011, with spending on PCs, servers, and storage and networking gear expected to soar.

• Global capital spending on wireless infrastructure will rise dramatically as carriers in the developed world start deploying next-generation 4G networks.

• The Telecommunications Industry Association (TIA) reports that broadband stimulus funds will contribute to double-digit growth in backbone infrastructure spending this year and next.

Investing in Technology – A Smart Business Move

With the economic recovery weak and consumer spending soft, most businesses aren’t willing to hire in a big way right now or commit funds to major building projects. But they’re eager to cut costs in order to maintain or increase corporate profits.

That makes investing in technology a smart business move. And that, in turn, indicates that business for many tech firms will keep rising in the months ahead.

Right now we’re sitting on more than a dozen double- and triple-digit gains on the tech stocks in our paid advisory portfolios.

Outside of social networks, we see no tech bubble. Quite the opposite, in fact. Leading technology firms should see rising sales, earnings and share price appreciation in the months ahead. In our view, the best is yet to come.

Good investing,

Alexander Green

By Chris Vermeulen, thegoldandoilguy.com

Many investors are trying to gauge whether the US can gain ground this week after hints at an interest rate increase in Europe failed to spurn investors to go long on the EUR/USD. Analysts appear to be scanning the horizon for news which could support the view of a dollar uptick in the next week. Tomorrow’s retail sales data may be the info needed to fill a gap in the economic picture.

The retail sales and core retail sales figures are scheduled to be released side-by-side at 13:30 GMT tomorrow alongside this month’s PPI figure. The grim forecast for both retail sales report grants a cushion of low expectations. Even a mildly bullish figure above these weak forecasts could be enough to push the USD higher in this week’s trading.

Read more forex trading news on our forex blog.

Monetary data out of China this morning suggest an impending uptick for the yuan (renminbi). The M2 money supply grew this past month less than forecast, which could suggest that China is honoring its commitment to lower its currency’s value.

Forecasts had anticipated an increase of 15.5% growth for the month of May, but this morning’s release revealed a 15.1% increase, indicative of a slow down in domestic money printing. The concurrent decline in new domestic loans may also explain part of this sluggishness. The data so far appears to be granting a mild uptick for the CNY, but analysts are expecting heightened volatility tomorrow considering the heavy slew of news getting published out of China.

Read more forex trading news on our forex blog.

By Ulli G. Niemann

If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, “load” simply refers to the commission paid to the broker selling the fund. “No load” means there is no commission on the purchase or sale.

Most discussions in the past have centered exclusively on performance comparisons. Even rating services like Morningstar have occasionally chimed in with their opinion. However, rather than focusing only on performance, there are some other issues I consider far more important:

1. Who is selling load funds and why?

2. Who markets no load funds?

3. Which one is right for you?

Who is selling load funds and why? Most load funds are being sold through brokerage houses, financial planners and Registered Representatives. With few exceptions, most of those folks operate on the basis of selling as much product as possible. They collect their commissions up front, as a back end charge, or both (usually in the range of 5 – 6%). Whether you make money or not is not their primary concern. What matters most to those operating under this approach is how often you buy-and thereby generate new commissions for them.

Who markets no load funds? No Load funds are either marketed directly by the mutual fund companies or, more commonly these days, offered through discount houses like Schwab, Fidelity, and many others. The advantage to this is that you have an unlimited choice of funds in one place and don’t have to open separate accounts for each mutual fund family that you are considering.

Most fee based investment advisors, like myself, have independent relationships with such major discount firms and are able to offer clients just about any no load mutual fund available. They receive no compensation from the firm and only get paid by the client at a pre-determined fee arrangement. Under this arrangement, there is no hidden motivation to sell you a particular fund or to try and sell more in order to get a larger commission.

Which one is right for you? Whether you prefer dealing with someone selling load funds or an advisor getting you into no loads, let me make one thing very clear: You can make money or lose money either way! Why?

Let’s assume for the moment that there is no difference in performance between the types of funds-some of either kind will do well and some of either kind won’t. What then determines the successful outcome of you buying either a load or a no load fund?

The key is the advice you’re getting. And the fact is that many brokerage houses and Registered Representatives tend to be more interested in their profits than yours. Their investment advice is generally centered around Buy and Hold or dollar cost averaging and similar financially questionable recommendations. Hardly ever will you receive advice about when and why you should exit the market, either because of accumulated profits or to limit your losses. Getting out of the market is simply not in their best interest, though it may be in yours.

I must confess that, as a fee based advisor, I am somewhat biased and I prefer no load funds for my clients. I believe that this type of arrangement is best for all parties involved. It allows me to avoid any conflict of interest and to work exclusively for my clients’ financial benefit. And the better my clients do, the better I do.

I am able to choose no load funds and make buy decisions solely on the basis of my mutual fund trend tracking methodology. Following its signals, I can get clients into the market or out of it as often as is necessary to maximize profit or protect assets. And because I work with no load funds, other than a very occasional short term redemption fee, there are no transaction charges no matter how many times we move into or out of the market.

If market conditions dictate that we stand aside in a money market for an extended time in order to avoid a bear market (as was the case from 10/13/2000 to 4/28/2003), I can advise that because it is in the best interest of my client. I am always thinking about what will benefit my client, not worrying about lost commissions. (Please see my article “How we eluded the Bear in 2000.”

Bottom line: Load fund vs. No Load mutual fund shouldn’t be the issue. Having a methodical plan and reliable advice as to when to buy and when to sell is far more important and will help you to secure a prosperous financial future.

© Ulli G. Niemann

Commodities in general are beginning to feel the pinch as weak Chinese economic data combined with declines in equity markets and a strengthening dollar have begun to weigh on both spot gold silver prices.

Gold and silver prices continue their slump from last week as weaker than expected Chinese lending and a drop in the Chinese money supply weigh on commodity prices. On Friday spot gold prices dropped by $12 after a report showed increased selling of the yellow metal by the International Monetary Fund. In turn silver prices were also dragged lower by almost $1.50.

The latest CFTC Commitments of Traders Reports indicated that investors increased their long gold positions and may be encroaching on an overextended market positioning, thereby contributing to the sharp declines on Friday.

Equity markets continue to sell-off with the S&P 500 down for the sixth consecutive weak. The SPX has made a firm break of the 1290 and technicals indicate further downside potential. The decline in equity prices has not been supportive of gold prices despite the metal’s use as a safe-haven. One explanation for this may be the strengthening dollar versus the euro.

A strong greenback may have also contributed to the declines as this makes gold more expensive for investors who do not hold US dollars. The greenback could continue to come off its recent lows versus the euro should the EU/IMF/ECB fail to come to an agreement for a medium term financing program for Greece.

One potential catalyst for spot metal prices would be any additional steps taken by the Federal Reserve to support the struggling US economy. The enactment of QEIII would likely offer support to spot gold prices as this would require a readjustment of US inflation expectations. Thus spot gold prices may have scope to test the $1,552 resistance level with spot silver respectively at $37.80. In the near term support is found at $1,518 and $35.00.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

Traders this week are bouncing back and forth between an interest rate differential approach, which favors the EUR, and a debt concern approach which favors the USD. Both carry an ominous overtone for the global economy. Whichever of these approaches wins out will depend on data being released over the next several weeks of summer.

Economic News

USD – USD Up as Traders Caught between Debt and Differentials

Commentators are beginning to view the potential of a rebound in US dollar values this week after last week’s underwhelming rate statement by the European Central Bank (ECB). So far, the US dollar appears to be gaining from this sentiment.

The Fed’s record low interest rates will likely persist for the foreseeable future, and the ECB may end up lifting rates again this year, but so far investors are paying closer attention to the potential for a meltdown in Greece due to ravaging debt concerns.

The EUR/USD rose to a monthly high last week, reaching towards 1.4750 before settling below 1.4350 Friday. Soft data out of the American economy continues to fuel a slight run-up in the safe-haven Japanese yen and Swiss franc, but the USD has only gained moderately from the shifts in investment.

Traders are bouncing back and forth between an interest rate differential approach, which favors the EUR, and a debt concern approach which favors the USD. Whichever of these approaches wins out will depend on data being released over the next several weeks of summer.

Today, with most of Europe on holiday for Whit Day, the day which follows Pentecost, and with the US posting no news, most traders are withholding their trades until later in the week when these economic giants come back online.

EUR – EUR Mixed as Investors Consider ECB Rate Statement

The euro has been experiencing mixed results following last week’s rate statement by the European Central Bank (ECB). Despite a semi-hawkish statement that garnered support for an impending rate hike, traders appeared more concerned with the potential Greece implosion as its economy struggles to make steps to secure another installment of its financial bailout.

While debt concerns loom in the euro zone, and industrial production still appears to be faltering globally, the higher yielding assets like the GBP and EUR appear positioned to lose value despite hints at growth policies being undertaken shortly by both.

The EUR/USD rose to a monthly high last week, reaching towards 1.4750 before settling moderately lower. Soft data out of the American economy continues to fuel a slight run-up in the safe-haven Japanese yen and Swiss franc, but the USD has only gained moderately from the shifts in investment and the EUR is slowly benefiting less and less from the shifts back into risk.

As for Monday, the euro looks to be anticipating mixed results against the other major currencies as traders are largely absent from the region due to several bank holidays. In observance of Whit Day, Switzerland, France and Germany will be closing, but Italy will still be publishing its industrial production figures at 9:00 GMT. The resulting limited trading volume will likely give cause for a slow opening day.

JPY – Japanese Yen Moving Upward as Data Supports Growth

The USD/JPY has been trading lower recently as investors move sporadically in and out of the greenback. After reaching upwards of 81.00 on Friday, the pair quickly dropped to 80.20 as of this morning. Japan’s economy has published several positive figures over the last week, much of which has helped establish the yen’s recent bullishness. Whether it will be enough to reverse much of the negative sentiment surrounding Japan is yet to be determined.

The yen suffers from its own economic concerns, while shifts in consumer sentiment have helped lift yen values against a number of its rivals. Last week’s data, however, provided a ray of light which caused a secondary shift towards the yen for reasons other than safety. The USD/JPY looks to be continuing this movement for the foreseeable future as a result, especially given the massive shift away from the US dollar which is helping to lift the island currency.

Oil – Crude Oil Prices Steady Near $102 a Barrel

Oil prices held steady this morning with the $102 price level acting as a firm footing for this commodity. US oil stockpiles sunk sharply last week, falling well below expectations and helping to hold the value of Light, Sweet Crude steady near its current mark. The price of black gold has been trading within a consolidation pattern these past several days and traders are beginning to anticipate a breach sometime this week.

The value of the US dollar versus the euro in recent trading has also dropped towards a six-day low of 1.4330, which has helped prevent oil prices from taking off after last week’s surprisingly unhinged OPEC meeting. With today’s steady sideways movement, traders appear likely to see oil reaching a decision point this week. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or pull away from oil out of a perceived glut, is something traders will bear witness to this week.

Technical News

EUR/USD

A three week rally was met with a failure of the pair to breach 1.4700, a level not far from the previous trend line which opened the door for a significant pullback that retraced 50% of the late May to early June gains. The week’s declines ended at the 20-day moving average at 1.4330 and will serve as initial support. Falling daily stochastics suggest the move lower may have scope to continue where the pair may find resistance at 1.4250, a level that coincides with the 61% retracement and the rising trend line from the May low. A breach here and the pair will test the 100-day moving average followed by the May low at 1.3970. To the upside, resistance will likely come in 1.4570 followed by 1.4700.

GBP/USD

The weekly candlestick suggests further declines may be in store as last week’s candlestick ended on a shaven bottom, indicating momentum is moving to the downside. A confirmation will be needed from this week’s trade to confirm the bearish pattern. In the meanwhile the move lower finished at the 38% retracement level of the December to April move and is quickly approaching the trend line off the May 2010 low at 1.6180. The pair could receive a bounce from this level, as was the case in late May. Resistance is located at 1.6400 and 1.6460, and 1.6550. Should the pair not receive a bounce at the trend line declines could mount to 1.6060 and the April low at 1.5935.

USD/JPY

The yen was relatively unchanged from the previous week after an attempt to breach below the 80 yen level was only briefly successful before the pair was bid higher. While most oscillators remain in neutral territory, the pair continues to trade lower with resistance at the falling trend line from late May high which comes in near the 20-day moving average at 81.00. This level may offer traders a better price to enter short. Further resistance is located at 81.75 from the May 31st high followed by 82.25 of the May 19th high. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.

USD/CHF

The pair is testing a short term resistance level at 0.8450 and a breach here would expose the resistance at 0.8855 which lies just below the 20-day moving average. A rise to this price may offer traders better levels at which to enter short. Above these levels rests the falling trend line from the mid-February high which comes in at 0.8720. Support is found at the all-time low at 0.8325.

The Wild Card

S&P 500

After six weeks of declines the S&P 500 appears to have confirmed a break below the 1290 support level. Forex traders may target the next major support at 1250 from the mid-March low. This area has further significance as the 200-day moving average comes in at 1252.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By David Adams

The success statistics in e-mini are just plain startling. The vast majority of e-mini traders are not consistently successful, and the ratio is not even close to positive. The question has to be asked “Why is there a wide disparity in the number of consistently successful traders and traders who are inconsistent and just plain fail?”

The numbers on success/failure vary widely from author to author, but some round figures that I feel confident in quoting are:

• 15% of active traders are successful and profitable
• 35% of active survive in a “boom and bust” cycle, alternating between very profitable, and then losing their profits.
• 50% of trading enter the business and exit within three months, usually without a balance in their futures account trading balance.

I learned a trade the “old school” way; I started with a Wall Street institution and 50 other traders. We received several weeks of instruction and then all 50 of us were sent to a bullpen for a few weeks of trading, and they kept the five traders they thought had the best potential. Incidentally, as they announced the traders they were going to keep, mine was the last name called. There were no online traders in those days, but the odds of making it as a trading room trader were considered slim. I was either too stupid or too stubborn to quit, and eventually I made it. That’s enough about me.

Now we have online traders, and very few institutionally trained educators. The methods I see being taught are sometimes quite sound and often times bizarre. In my mind, I often wonder about the quality of training many new traders are receiving, but I can only speak for my room and the quality exhibited there. What bothers me most is the fact that only 15% of new traders seem to be able to learn to trade consistently; something is terribly wrong either in the method we teach new traders to trade or the quality of traders we are attracting. I have no empirical evidence to support either supposition, nor do I have an opinion which option is true. But there is a reason that 15% of the active traders can consistently make enough money to earn a great living.

Gambling is a game of chance and probability. Some gamblers understand probability better than others and gamble in games and venues that probability gives them an even or better than even chance of winning. Still, if the gambler is too good, or has a memory that allows him to remember all the cards that are thrown, is generally banned from that particular casino and finally from all casinos. We have no such restrictions in e-mini trading. The very best trader’s job is to take money out of the pockets of the very worst traders.

With proper training and flawless technique, learning to trade consistently it really isn’t such a difficult feat. It’s not gambling when the probability weighs heavily in your favor. This is the same principle casinos use to ban superior gamblers, these gamblers have superior abilities and the probability favors the gambler not the casino.

Yet so many people losing money on such a consistent basis, it stands to reason that the 15% of active traders are, by and large, the recipients of that lost money. I think this is, to a certain degree, a true statement.

The challenge of new traders is to approach the e-mini trading business as a business, not a roll of the dice. Successful traders have a rigid emotional standards they hold themselves to, and a tried and true trading system that, day after day, puts money in their pockets. Gamblers can’t do that. Traders do that. Find an e-mini trading system that works, one that is based on price action chart reading, one that is based on support and resistance, and you’ll find yourself a profitable trader. On the other hand, if you’re taking trades based on an indicator-based system, or your gut feeling, you are little better than a gambler. Gamblers don’t stay in business long; the cards are stacked against you.

In summary, I have tried to make a distinction between gambling and trading. In doing so, I have also pointed out some similarities in these two professions. But trading is an unrestricted marketplace and those who are willing to learn the proper emotional considerations and trading technique can become consistent money earners. I know; I watch well-trained traders come and go for my room on a consistent basis, because they can read charts and understand price action. They aren’t gambling, they’re playing a game of probability. And when the odds are in your favor on a consistent basis you will make money consistently.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here