A home is a place of residence or refuge and comfort. It is usually a place where an individual or usually a family can rest and relax, communicate, share, feast and be able to collect and store their personal properties.

Therefore it is important that when you consider a place to call your home, it must be a safe and pleasant place to be in.

Buying a house is more often than not, the single largest investment most people ever make; yet all too often it’s a decision made in rush without adequate thought and preparation.

In this article we will explore some of the house-buying mistakes to watch out for in your property hunt.

1. Solo Mission
Buying a house is a complex transaction and should not be undertaken alone.

You need to enlist the help of these individuals early in the buying process : Real Estate Agent, Banker, Lawyer and Property Inspector.

It is also wise to get referrals and advise or tips from family and friends.

When assembling your team, select rightly. Lack of experience in the person who’s suppose to be your guide can make your property hunt a frustrating experience.

2. Love At First Sight
You may be in love with the house at first sight, but you have to ask yourself if the house fit your family’s needs and budget.

You have to make sure that you make a list of your needs and wants and also check whether the house fits your requirements.

Besides that, you should check out the neighbourhood and the communities before you buy by visiting at different times of the day and week.

Even if you do not have kids, you should also check out the local schools to make sure your resale value will be good.

Get past the love at first sight to consider what it’d really be like to live there.

3. Pre-qualified and Pre-approved Financing
Being pre-qualified gives you a general idea of how much you can afford to borrow.

It is a good idea to get in touch with your banker or mortgage officer early in the buying process so that you are aware of the amount you can borrow as this will determine your budget for the home.

The mortgage officers will also be in a position to advise you on aspects of financing i.e. the possibility of having joint borrowers to strengthen the application or to lengthen loan tenures should a need arise.

Being pre-approved means your banker has verified your information and credit rating and agreed to provide you with a specific amount of money.

You are in a better position to go house hunting knowing exactly how much you can afford and that you have the financing ready.

4. Over-Buying
You may qualify to borrow more, but you have to ask yourself again whether you can afford it or not.

Borrowing more would mean higher monthly loan commitments for just the purchase of the house. You have not considered the cost of improvements on the house i.e. renovations and furnishings.

What you need to do is analyze your monthly costs – food, transportation, entertainment, car loans and other commitments. Therefore you have to be sure to budget enough to cover closing costs (often two to five percent of the purchase price), plus moving and maintenance.

Beyond mortgage payments, there’ll be costs like insurance. You don’t want your house to deprive you of your lifestyle.

5. Misplacing your trust
Remember that buying a house is a business transaction.

Your decision is binding.

You should do your own research and know your support team’s roles and responsibilities and not just depending on what one says 100%.

6. Verbal Agreement
Get it right and get it in writing.

Written agreements almost always trump verbal ones when it comes to contracts.

Don’t set yourself up for surprises when you move into that new house and some of the items in it are now missing.

There are many details that make up the purchase contract that governs the particulars of your house purchase.

It is not unusual for an item to be missed; especially those requests made by you of the seller or seller’s agent. If you ask for a toilet to be repaired or a chipped tile to be repaired, don’t simply take someone’s word that the item will be repaired prior to transfer of the property. Make sure every item that you agree on is put in the purchase contract.

Verbal agreements are hard to prove and even harder to enforce. They can lead to an ugly “he said, she said” situation.

Once the property transfers to your name; problems or issues that you thought were going to be repaired are now your responsibility. Don’t let miscommunication or failed promises ruin the purchase of your dream home.

Get all commitments – no matter how small – in writing.

7. Fine print
You need to understand what you’re signing.

As soon as possible, review the documents you’ll be signing. You must always ask for documents in advance, make time to read them and ask questions, where necessary.

Don’t just skim through the purchase contract. Real estate contracts are long and dense, but you need to know what you’re committing to.

Wrong assumptions, poorly written or missing clauses, and not understanding how the clauses affect the purchase can lead to increased costs or a void contract.

Do not sign documents in a hurry. Do not rush the closing.

8. Resale
You should avoid buying a home that costs much more than neighbouring homes and think before buying the most expensive house in the area.

Your neighbours’ lower house values will weaken yours.

Remember, markets change.

If you buy intending to flip your investment and the market falls and you have to sell, your selling price may not be enough to even cover your mortgage.

9. Wrong Price
Many home-buyers forget that the market value of a house is affected a great deal by its neighbours.

The best way to gauge a fair offer price is to get your real estate agent to pull prices that comparable homes nearby recently fetched. The listings will show not just the amounts but how long the house has been on the market and its condition and size.

Note that the nearby houses will affect your house’s value. That means the most expensive house on the street may be pulled down in value by its cheaper neighbours, while a low-end one will benefit from posher surroundings.

10. Conditional Offer
It is good practice to have your offer to purchase the house conditional upon securing financing.

The last thing you want happen to you is the forfeiture of your deposits for backing out on a purchase transaction because of it.

One thing is being pre-approved, the other is the property itself.

The banks will do a valuation on the property to confirm the market value and then to determine the margin of loan they are willing to offer you. There may be other conditions are well that you might want to add in at this point.

11. House Inspection
It is well worth your money engaging a House Inspector to check out the house before committing to the purchase.

These Inspectors know what to look out for and can advise you accordingly on the state of the house, whether it is in need of repairs so that you are fully aware of the additional expenses needed.

Don’t take the word of the seller that certain repairs and maintenance has been made to the home. A formal inspection of wiring, plumbing, and general structure of the home is needed to avoid nasty surprises.

Inspection reports are great negotiating tools when it comes to asking the seller to make repairs.

If a professional home inspector cites specific repairs in the inspection report the seller is more likely to agree to them than if you simply try to negotiate based on your observations. As we mentioned above, make sure that any last minute items that arise based on the inspection report or your own visual inspection during the walk through are addressed in writing and completed before you take ownership of the property.

If the seller agrees to make repairs, have your inspector verify the work is completed properly. Do not assume that everything will be done as promised.

If you’re buying a new house, off the plans from the developer, they will offer the Defect Liability Period upon Vacant Possession, where they will rectify problems, if any, with the house during Handover.

12. Buyer’s Remorse
No place is perfect. There will always be surprises. Don’t let a few initial blips spoil the whole ride.

And don’t miss a great house waiting for the perfect one!

Failing to jump on an opportunity, I believe, is a mistake. Too much shopping around can backfire. When you have done your homework and when you see something you that matches, go for it.

Source: asiaone

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

The causes may have been different, but the collapse of the U.S. markets in early 2008 followed the same behavioral patterns as the collapse in 1929. The recovery pattern seen in 2010, is also very similar to that developed in 1930.

The crash of the Dow Jones Industrials in 1929 was signaled by the development of a well defined head and shoulder pattern, seen most clearly in its monthly chart. It is a reliable pattern that captures the behavior of investors who are becoming increasingly disillusioned about the future prospects for economic growth.

The downside pattern targets in the 1929 Dow were exceeded with a fall of around 49% before the market recovered in 1930. The 2008 dow pattern targets were also exceeded with a market fall of around 52%.

In 1930, the market developed an inverted head and shoulder rebound pattern recovery that led to a 46% rise in the market.  The Dow rebound in 2009 also developed from an inverted head and shoulder pattern. This was a powerful rise of around 69%.

The historical development of the recovery in the DOW in 1930 ended with a new head and shoulder pattern. This was followed by a rapid market decline that created the first part of a long term double dip pattern. This retreat also exceeded the pattern projection targets with a fall of 28%.

Fast forward to today, we’re seeing the Dow is developing a new head and shoulder pattern which indicates a beginning of a bear market. The rally peaks in the Dow appear in January and May and June. The downside projection taken from the neckline of the pattern sets a target at 8,400, or a 25% decline.

A very bearish analysis using the pattern of retreat behavior in 1930 suggests the Dow could retreat to around 7,500 in 2010.

The head and shoulder pattern in the Dow and its downside targets, are invalidated with a sustainable rise above 10,600.  A move above this level does not signal a resumption of the uptrend, but it does reduce the probability of a double dip.

It must be noted that while the behavioral patterns in 1930 and 2010 are similar, they don’t necessary point to the same result. But it does sound a warning that markets could continue to stand on the edge of a precipice.

Source: 2010 CNBC, Inc.

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

The Dent Method, developed by company Founder and economic expert Harry S. Dent, Jr. in the late 1980’s, is a long term economic forecasting technique based on the study of and changes in demographic trends and their impact on our economy. It works by showing how predictable consumer spending patterns combined with demographic trends allow us to forecast the economy years or even decades in advance. Harry S. Dent, Jr. is the author of “The Great Depression Ahead”, “The Next Great Bubble Boom”, “Roaring 2000s Investor”…etc.

Source: HS Dent

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

“Is now the perfect time to buy silver instead of the much more expensive gold metal?”

It is critical to step away from all the noise and clutter that passes for knowledge and take the time to gain perspective on where the price of gold and silver are in terms of the ‘big picture’, i.e., where they are in respect to their historical relationship with each other over the long, medium and short term and, based on those relationships, how they might perform in the future.

Bull Market Stages
The key to a secular gold/silver bull is the collective gold/silver transactions of investors worldwide buying and selling gold/silver that ultimately sets the price and determines their fortunes. The collective demand trends of gold/silver investors effectively divide precious metals bulls into 3 distinct demand-driven stages, namely:

1. Stage One which occurs when a devaluation of the dominant currency in which gold is priced, i.e. the USD, leads to a moderate increase in the price of gold. Stage One for gold began on February 15th, 2001 when it reached a 22-year secular low of just US$255.10.

2. Stage Two which occurs when the decoupling of gold from local-currency devaluation begins to outpace the dollar’s losses and gold starts rising significantly in virtually all currencies worldwide. Stage Two began on June 5th, 2005 when gold (at US$417.67) first surpassed 350 Euros for the first time.

3. Stage Three which occurs when the general public around the world starts investing in gold and this deluge of capital into gold causes it to escalate dramatically (i.e. to go parabolic) in price. We are approaching Stage Three and it will become clearly evident when the price for gold begins its daily record ascents to dramatically higher prices.

Gold
We are now in the very early stages of Stage Three with gold having gone up 24% in 2009 and up 13.3% in the first 6 months of 2010. As such there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a US$216.55 closing price on Jan. 1, 1979 to a closing price of US$843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from US$1250 would put gold at $4,866. That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched.

Silver
Silver has proven itself, time and again, to be a safe haven for investors during times of economic uncertainty and, as such, with the current economy in difficulty the silver market has become a flight to quality investment vehicle. The 49% increase in silver in 2009 attests to that in spades (albeit up only 10% in the first 6 months of 2010). During the last parabolic phase for silver in 1979/80 silver went from a low of US$5.94 on January 2nd, 1979 to a close of US$49.45 in early January, 1980 which represented an increase of 732.5% in just over one year. Such a percentage increase from the current price for silver would represent a future parabolic top price of US$155. Frankly, such prices seem impossible in practical terms but that is what the numbers tell us.

Silver:Gold Ratio
How both gold and silver perform, in and of themselves, does not tell the complete picture by a long shot, however. More important is the price relationship – the correlation – of one to the other over time which is called the silver:gold ratio.

Based on silver’s historical correlation r-square with gold of approximately 90 – 95% silver’s daily trading action almost always mirrors, and usually amplifies, underlying moves in gold. With significant increases in the price of gold expected over the next few years even greater increases are anticipated in silver’s price movement in the months and years to come because silver is currently seriously undervalued relative to gold as the following historical relationships attests.

Let’s look at the silver:gold ratio from several different perspectives:
- Over the past 125 years the mean silver:gold ratio (i.e. 50% above and 50% below) has been 45.69 ounces of silver to 1 ounce of gold.
- In the last 25 years (since 1985) the mean silver:gold ratio has increased to 66.9:1
- The present silver:gold ratio is range-bound between 63:1 and 70:1 (66.77:1 at the end of June 2010).
- Interestingly, during the build-up to the parabolic blow-off in 1979/80 silver outpaced gold going up 732.5% vs. gold’s 289.3% causing the ratio to drop from 38:1 in January 1979 to 13.99:1 at the parabolic peak for both metals in January,1980.

Conclusions:
There are many! Let’s look at the various price levels for gold and the various silver:gold ratios mentioned above one by one and see what conclusions we can draw.

First let’s use the mid-year (June 30th, 2010) price of $1243 for gold and apply the various silver:gold ratios mentioned above and see what they do for the potential % increase in, and price of, silver.

Gold @ $1243 using the current 66.77:1 silver:gold ratio puts silver at $18.61 (June 30/10)
Gold @ $1243 using the above 45.69:1 silver:gold ratio puts silver at $27.20 (i.e. +46.2%)
Gold @ $1243 using the above 13.99:1 silver:gold: ratio puts silver at $88.85 (i.e. +377.4%)

Now let’s apply the the silver:gold ratio to projected gold prices of US$10, 000, US$5,000 and US$2,500 respectively to see what that suggests is the parabolic top for silver.

@ $10,000 Gold
Gold @ $10,000 using the silver:gold ratio of 66:1 puts silver at $150
Gold @ $10,000 using the silver:gold ratio of 45:1 puts silver at $222
Gold @ $10,000 using the silver:gold ratio of 14:1 puts silver at $714!!

@ $5,000 Gold
Gold @ $5,000 using the silver:gold ratio of 66.1 puts silver at $75
Gold @ $5,000 using the silver:gold ratio of 45:1 puts silver at $111
Gold @ $5,000 using the silver:gold ratio of 14:1 puts silver at $357

@ $2,500 Gold
Gold @ $2,500 using the silver:gold ratio of 66:1 puts silver at $38
Gold @ $2,500 using the silver:gold ratio of 45:1 puts silver at $55.50
Gold @ $2,500 using the silver:gold ratio of 14:1 puts silver at $178.50

From the above it seems that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns than investing in gold bullion.

Summary
History will look back at the artificially high silver to gold ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. This fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks and warrants.

Indeed, while gold’s meteoric rise still has room to run, silver’s run is yet to get started. As such, it certainly appears evident that now is the time to buy all things silver.

Source: MunKnee.com

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

From a chartist perspective, we’re looking expecting a bullish scenario in the long term, but not without some selling pressure in the short term.

The daily comex gold chart shows three significant patterns. The first pattern is the parabolic trend seen from October to December in 2009. The rapid rises were unsustainable, and the move to the right of the parabolic trend line led to a sudden and severe collapse, causing the price to lose 13% very quickly.

The recovery from this fall leads to the second pattern, which is the inverted head and shoulder pattern developing from December, 2009, to March, 2010. The pattern was used to project the next price target – $1,249 – which has been achieved.

The behavior of the gold price after this target has created the third pattern – the upward sloping triangle. This started with a horizontal resistance level near $1249, which was also the price target for the inverted head and shoulder pattern. The second part of the triangle pattern is the sloping trend line. This trend line defines the price rise starting in March, 2010.

This trend is important and a fall below this line indicated significant trend weakness, and the tumble to $1,206 was a clear downside break below the trend line.

The third part of the triangle is the vertical base. This is created when the price collapsed in May to $1,177. The height of this base is measured and the value is projected upwards, giving the next breakout target – $1,319.

Based on this analysis, where are gold prices headed?

The recent price activity is near to the apex of the triangle pattern. Gold has moved above the $1,249 level twice, but the breakout strength has not continued, which indicates bearish reaction with cautious traders taking profits. Measuring the height of the base gives a downside target of $1,160.

But while prices may weaken in the near term, the underlying trend is strong, shown by the separation in the long term group of moving averages in the Guppy Multiple Moving Average indicator.

This suggests investors are strong buyers whenever there is a fall in the gold price, and that will continue to lend support to the market.

Source: 2010 CNBC, Inc.

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

7 reasons for my pessimism:

1. Sovereign debt crisis leaving investors worried: More and more investors are viewing Europe’s sovereign debt crisis as a sneak preview of the future in U.S. After all – U.S. debts is far greater than the PIIGS (Portugal, Ireland, Italy, Greece, Spain)!

2. High U.S. unemployment rate: Despite everything Washington has tried to do, nearly 1 in 4 American workers is still struggling to get by without a paycheck. Worse: The job growth of recent months has now dwindled to nearly nothing. After 431,000 new jobs were created in May, only 83,000 appeared in June.

3. 70% of the U.S. economy is beginning to shut down: Domestic consumption is responsible for 70% of all economic activity in U.S. – and consumer confidence is cratering. Worse: U.S. retail sales are already plunging!

4. The housing slump in U.S. has returned with a vengeance: New home sales just cratered by 33%, the biggest decline on record. Foreclosures are increasing again, creating new nightmares for U.S. largest banks. Worse: ARM(Adjustable Rate Mortgage) resets just started in May this year and more foreclosures is expected, as explained in my post U.S. Housing Crisis Over? Re-think Again! 2nd Wave Maybe Coming!

5. Most U.S. states drowning in debt, eg. New York, California and others going down for the 3rd time: The 50 U.S. states now have a cumulative deficit of US$127.5 billion. Plus, states have more than US$1 trillion in pension obligations they can’t pay. They must make massive spending cuts to survive - cuts that are sure to impact corporate earnings and stock prices from coast to coast.

6. U.S. economy is quickly running out of gas: The recovery that followed the bear market was bought and paid for with US$2 trillion in government stimulus money. Now, that money is running out! U.S. economy and stock market are running out of steam. And with no new stimulus on the horizon, there’s nothing left to keep stocks from declining. If U.S. goes down, rest assured that the rest of the world will be pulled down as well, including our little red-dot called Singapore.

7. China’s economy maybe slowing down: With Europe as one of its largest exporter, the Europe’s debt crisis is going to hit the demand for Chineses goods.

In my humble opinion, I feel that we have NOT seen the low of the global stock markets and I expect to see further decline from here. Short-selling is the way to ride this current market weakness. In fact, people should consider liquidating their long positions into any rallies, rather than buying aggressively into the market right now. In view of the possibility of high inflation, precious metals, like gold, silver, commodities, natural resources and hard assets are also good instruments for us to protect our precious wealth.

I really hope that I am wrong and I have to admit that I always am! Please be prepared for the worst as we will see more bumpy road ahead!! I want to stress again that the downside risk is much higher than the upside potential at this point of the time. So please be extremely careful!

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

Fortunately for us, he’s willing to share his secrets. To achieve his stunning track record, he clung to 8 simple principles. Here they are:

1. Know what you own
Seems elementary, right? But as someone who talks to lots of investors, I can report that you’d be shocked at how few investors actually do their research. Scroll down to No. 7 for a good first step in getting ahead of the game.

2. It’s futile to predict the economy and interest rates (so don’t waste time trying)
After 2008’s crash, I noticed a distinct increase in armchair economists. We financial types do enjoy water cooler talk about interest rates, trade deficits, debt levels, etc. But there’s a danger in converting thought into action.

The U.S. economy is an extraordinarily complex system, with 300 million people acting in their own self-interest and responding to each others’ actions, government incentives, and external shocks. And that’s before we factor in our increasingly frequent interactions with the rest of the world.

Trying to time the market is futile. Set up a financial plan that allocates your assets based on your risk tolerance, so that you can sleep well at night.

3. You have plenty of time to identify and recognize exceptional companies
Lynch mentions that Wal-Mart was a 10-bagger — i.e. its stock rose to 10 times its initial price — 10 years after it went public. Even if you had gotten in after waiting a decade, though, you’d be sitting on a 100-bagger.

Some would argue that it’s still not too late to get in on Wal-Mart, decades after going public. While the company’s no longer a monster growth story, it continues to crank out 20% returns on equity year after year. That type of consistent ROE is a huge positive indicator of management’s ability to effectively allocate capital.

A similar tale can be told about Microsoft’s early growth years, right on down to its still-impressive current return on equity (42%).

And Amazon.com, though only 13 years old as a public company, has seen its stock double since its 10th birthday. Of these three, it’s the only company still trading at growth-stock valuations. Bulls are hitching their wagon to Amazon.com’s ability to expand its role as the premier online retailer, and its upside in the cloud-computing space.

The lesson of Wal-Mart, Microsoft, and Amazon.com? You don’t need to immediately jump into the hot stock you just heard about. There’s plenty of time to do your research first. See No. 1.

4. Avoid long shots
Lynch claims he was 0-for-25 in investing in companies that had no revenue but a great story. Remember, the guy who averaged 29% returns went oh-fer on long shots. You and I are unlikely to do much better.

Use companies with proven track records as our baseline. ExxonMobil, IBM, and Procter & Gamble are selling for 9, 11, and 16 times forward earnings, respectively. This is what the market is charging for solid, low-to-moderate-growth companies that dominate (or at least co-dominate) their spaces. Expect to pay more for higher-growth prospects, but make sure the risk-reward trade-off on an unproven company is worth it.

5. Good management is very important; good businesses matter more
The pithier Lynchism is: “Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.”

For a prototypical example of a so-easy-a-caveman-could-run-it company, think the aforementioned Procter & Gamble.

6. Be flexible and humble, and learn from mistakes
Lynch has said: “In this business, if you’re good, you’re right six times out of 10. You’re NEVER going to be right nine times out of 10.”

You’re going to be wrong. Diversification and the ability to honestly analyze your mistakes are your best tools to minimize the damage.

7. Before you make a purchase, you should be able to explain why you’re buying
Specifically, you should be able to explain your thesis in three sentences or less. And in terms an 11-year-old could understand. Once this simply stated thesis starts breaking down, it’s time to sell.

8. There’s always something to worry about.
Lynch noted that investors made a killing in the 1950s despite the very new threat of nuclear war. There are plenty of fears to choose from right now, but we’ve survived a Great Depression, two world wars, an oil crisis, and double-digit inflation.

Always remember, if our worst fears come true, there’ll be a heck of a lot more to worry about than some stock market losses. Lynch’s parting shot is that investing is more about stomach than brains.

Peter’s principles in action
So there you have it. These are the 8 principles Peter Lynch used to bring the market to its knees. They seem simple, but trust me, sticking to them is harder than it sounds.

Source: Motley Fool

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

The dollar’s recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar’s chart – particularly the dollar index – suggests the currency may be primed for a collapse.

The dramatic dollar index rise from $0.81 to $0.87 in recent weeks shows the chart’s developed a dramatic and possibly dangerous parabolic trend. This trend has four important features.

The first is the way it captures an acceleration in behavior. The trend starts slowly and then gathers speed, rapidly moving up with increasing volatility.

The second feature is the shape of the curved parabolic trend rise. This is not a true parabolic curve because as the trend accelerates the curve changes shape until it becomes vertical. It’s the vertical section of the curve which is most useful because it provides a exact date when the trend will inevitably collapse.

This type of trend line curve was first identified in the 1930’s and it was mistakenly called a parabolic curve. We continue to use the name, even though it is not an accurate description. In the 1930’s this was a rare behavior. In the last decade this curve has become increasingly common as volatility has increased in modern markets. This type of trend should not be confused with the parabolic Stop and Reverse indicator.

The third feature of the parabolic trend line centers on the candles that build the pattern. Every day a new candle is added to the right of the previous days candle. Eventually, and inevitably, a candle will move to the right of the vertical  section of the parabolic trend line and signal and end to the trend. The trend has a final ending date that can be calculated in advance using the vertical section of the trend line.

The fourth feature of the parabolic trend line is the high probability of a very rapid collapse in the trend. A good example is the parabolic trend in the oil market in 2008. When this trend collapsed the price dropped from $145 to $90 in 13 weeks.

The dollar index suggests the greenback will continue to stengthen until the end of June, with a target near $0.89-$0.91, before it collapses to a downside target of $0.81.

Source: 2010 CNBC, Inc.

Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.

As with the weather, there were some hints of trouble here and there on Wall Street. But all in all, things could not have seemed better. Little did we know, the stormy end of 9/10/07 signaled a very large bubble that had just popped.

That was the day when the Dow Jones Industrial Average hit its historic peak. From there, it was all downhill — slowly but steadily at first, and then violently after August — until the Dow bottomed (for now) on March 9 of last year. Over that span, the index lost 54% of its value.

It’s been a crushing blow to just about everyone. But it’s already being referred to as the crash. As if the unpleasantness were now all behind us. More likely, in the future it will be seen as, simply, the first crash.

Don’t believe it? In a moment you will, when you see the scariest graph of the year.

But let’s quickly recall what’s already happened. During the late, great housing boom, interest rates were at microscopic levels, while bankers were encouraged to grant home loans on little more than a wink and a nudge. In order to inflate their balance sheets, those bankers resorted to all sorts of gimmicky, adjustable rate mortgages (ARMs), whose common feature was an interest rate that would eventually reset. That is, it would balloon somewhere down the road. And those most likely to come quickly to grief were the riskiest borrowers, who held loans known as “subprime.”

“But not to worry,” borrowers were told. “Betting on ever-rising home prices is the safest wager in the whole wide world. If you have problems with cash flow when the ARM resets, your house will be worth a lot more, so you can simply sell it and walk away with a nice chunk of change in your pocket.” Uh-huh.

The bankers themselves were a little more concerned about the deterioration of their portfolios. They took out insurance in the form of credit default swaps (CDSs). These were a brand-new invention in world financial history, allowing mortgages to be sold and resold until they were leveraged 20 times over. They became the shakiest part of a huge global derivatives market, with a nominal value in the tens of trillions of dollars.

For a while, this Ponzi scheme even worked. But then, as they had to, the ARMs began resetting, and there were defaults. Then more of them. Because at the same time, the housing market was cooling off and the economy was stalling out. More and more people were trapped in a situation where they owed more on their home than they could sell it for. Many simply mailed their keys to the bank and moved on.

All of this wreaked havoc in the derivatives market. Sellers of these exotic packages could no longer establish what they were worth. Buyers couldn’t determine a fair price and so stopped buying. As the ripples spread through the world financial system, trust disappeared and liquidity dried up.

Now consider that the base cause for all that dislocation was the subprime sector. And how big is that? Not very. Subprime mortgages account for only about 15% of all home loans. Their influence has been way out of proportion to their numbers, because of derivatives. Here’s the good news: the subprime meltdown has about run its course. These loans were resetting en masse in 2007 and the first eight months of ‘08. Now they’re pretty much done.

And the bad news? No one in the mainstream media seems to be asking what should be a pretty obvious question: What about loans OTHER THAN SUBPRIME? Truth is, the banks didn’t just trick up their subprime loans. ARMs were the order of the day – across the board.

Now, here’s that frightening graph we referred to earlier.

Take a good, long look. You can see that from the beginning of 2007 through September of 2008, subprime loans (the gray bars above) were resetting like crazy. Those are the ones people were walking away from, sending a shockwave from defaults and foreclosures smack into the middle of the economy. Now they’re gone.

The ARM market got very quiet between December 2008 and March 2009, hitting a low that won’t be seen again until November of 2011. Small wonder a few “green shoots” have poked their heads above ground. But in April, resets began to increase and will reach an intermediate peak in June. After that, they tail off a little, going basically flat for the next ten months.

It’s not until May of 2010 that the next wave really hits. From there to October of 2011, the resets will be coming fast and furious. That’s 18 months of further turmoil in the housing market, and the beginning is either HERE or not too far away!!

While it isn’t subprime ARMs that are resetting this time, neither are they prime loans. Those eligible for prime loans wisely tended to stay away from ARMs in the first place, as indicated by the relatively small space they take up on each bar.

No, the next to go are Alt-A’s (the white bars), Option ARMs (green) and Unsecuritized ARMs (blue). Alt-A’s are loans to the folks who are a small step up from subprime. Unsecuritized loans are a 50-50 proposition; either the borrowers were good enough that they weren’t thrown into the CDS pool, or they were so risky no one would insure them.

Those two are bad enough. But Option ARMs are the real black sheep, loans with choices on how large a payment the borrower will make. The options include interest-only or, worse, a minimum payment that is less than interest-only, leading to “negative amortization”-a loan balance that continually gets bigger, not smaller. Imagine what happens with those when the piper calls.

Once the carnage begins, will it be as bad as the subprime crisis? That’s the $64K question. Perhaps not. For one thing, subprime loans were a much larger chunk of the market when they started going south. For another, there’s been a lot of refinancing as interest rates dropped; that should help ease the default rate. And the government has massively intervened, with measures designed to prop up those who would otherwise lose their homes.

On the other hand, we’re experiencing a slow down in the economy, which wasn’t the case when the subprime crisis started. More people will be unable to meet payments. And the housing market has continued to decline, pressuring both marginal homeowners and banks that can’t sell foreclosed properties.

Is the stock market’s next 9/10/07 on the way? Yes. Which day will it be? That’s unknowable. It could be HERE, in a week, or not for another year.

But make no mistake about it, the second crash is coming. It can’t be prevented, no matter what desperate measures Obama and his hapless financial advisors come up with. All we can hope for is that, with a little luck, it won’t be as severe as the first one. But it will last longer. We aren’t even in the middle of the woods yet, much less on the way out.

Source: www.gold-eagle.com

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