What MBA students really want

The NY times recently reported on a survey of M.B.A. students at 15 major business schools in the US, where respondents listed the factors most important to them in choosing a job. The No. 1 factor was not money as most would expect, but “challenging and diverse job responsibilities." Given an average MBA costs around $100,000 I was also surprised at the the fourth-most-important factor which was “potential to make a contribution to society.” However, I am glad that money is not the be-all and end-all for these leaders of the future. Here is full list of responses.

Source : NY Times

Related post : Cost Comparison – Top Australian MBA Programs versus US MBA Programs

Centro (CNP) and Insurance Australia Group

Two stocks I have recently talked about had some newsworthy information today that I thought I would briefly talk about in this post.

Centro (CNP) – Decision time

Following my previous posts on this stock, it has been very volatile and I’m sure a lot of day traders have made and lost a lot of money on it. With D-day now approaching (Wednesday) Centro must get approval from the banks to extend its $4.2 billion debt repayment, or face receivership. There are a number of potential suitors lining up to buy parts of or the whole group, but the key question for existing shareholders is at what price. Also, it is more than likely the banks will consider extending the due date for the debt if there are some serious offers on the table. However, I think after Wednesday the Centro share price will stabilise based on the offer details being made publicity available in the media. This will put a firm floor on the stock price and should reduce the overall volatility.

In a recent note to clients, Macquarie Equities said it had assumed the banks would provide Centro with a further extension, but warned that valuation of the group was "sensitive" to movements in asset values: "We believe the most appropriate valuation [for the overall group] is 0c to 50c per share, as asset values are likely to decline further."

Insurance Australia Group (IAG) – Lower forecast makes a merger/takeover with QBE more likely.

In my recent post on this topic I had a strong position for buying QBE and feel justified given IAG’s reduced forecast. This was due to higher borrowing costs and east coast storm claims which will reduce its insurance margin. The merger now looks more likely given IAG's weakened position. Buying QBE is still the way to profit from this merger in the longer term.

Repeating past investing mistakes and market outlook

This week it was announced that Chartwell Enterprises had joined the list of investment companies that have gone into administration in the past year. While it appears that corporate greed is a major contributor to the company’s downfall, whether there is any legal action taken against Chartwell either by ASIC or clients is yet to be determined.

What concerns me is that investors are failing to learn from the past given that we hear the same stories every decade. Any company promoting returns of 70% p.a. needs serious investigation by prospective investors simply because high returns normally means high risk. As with any good investment strategy however, it is important to diversify your assets and to never place all your eggs in one basket. While every asset carries risk, it is important that investors educate themselves to ensure they understand the level of risk they are taking before they invest.

So what can we expect in the market?

Last week I indicated that for the market to be bullish, it needed to rise above 5697 in the next one to two weeks, which it did yesterday (23 April) rising to 5712 points to confirm the market is bullish in the short term.

While this is a positive sign, investors need to be careful in selecting the right shares if they decide to enter the market because even though many of the top shares are starting to look good, just as many are still looking quite weak. Furthermore, many of the stocks that are rising right now are trading on lower volumes, which suggest that the institutional investors, who contribute to around 80% of our markets liquidity, are still being conservative.

Given this, it is possible that the current rise is a false move and that the market could fall away if more bad news arises. Right now it still pays to be patient and any decision to enter the market should be taken in small increments.

This report was by Dale Gillham , chief analyst of share investment company Wealth Within.

On another note, my recent article titled "3 Free sources to get your Australian dividend and tax information online " appeared in the Carnival of Money Stories #56—Once Upon A Time hosted at Can I Get Rich On A Salary. Thanks to gblogger for including this article on his popular blog.

My Journey to Successfully buying a Home

A good friend of mine recently bought a house in Sydney, after a long and ardorous search. In talking with him I thought his journey to buying a house would make a great post. He was kind enough to agree to write something for Finance ViewPoint and here is his story with real numbers. Thanks for taking the time to do this EH. There are some great learning points here when or if you are already looking to buy a place in today's tough housing market.

Recently my wife and I got married, and for us this was an easy decision. A harder decision was working out where we were going to live and how we wanted to go about becoming financially secure. I have jotted down some of the experiences that we went through recently that may enlighten and assist you in the process of buying a house

Firstly we had to decide where we wanted to live. For me I didn’t care too much but my wife certainly did. She had an area picked out near her parents and family and friends. While it was not a deal breaker for me where I lived, I still wanted to be able to access my family and friends without having to make it a day trip. We agreed we would live near where my wife's parents were [Editors note - He knows what it takes to keep a happy marriage!!]. While not important to us currently, we do want to have kids in the future and so had factored in proximity to train stations and schools.

Our next step was to decide what type of place we wanted to live in. After living in a unit before and in our early days of married life we knew we would like to have a stand alone/single family house. Some people are happy to live in a unit and there are advantages to that like little or no yard maintenance. However, for us we wanted some space to bring up a family so a house with a reasonable backyard was our preference.

The next item for us was research. I cannot stress how important this has been and how much the internet helps. We signed up to a few of the local real estate agents and were on their mailing lists. We would subscribe to web sites such as realestate.com.au and domain.com.au and every second night we would be on the web looking at new places. We didn’t set a tight limit initially as we wanted to get a feel for what places around the area were worth. So our range was $400,000 (something that was derelict and in a poor location) to $700,000 (something that we knew we would never be able to really afford). What it did give us was an idea about what price gave you what features. Generally we found that in the area we were looking (Southern Sydney) $500,000-$550,000 was mostly a knock down job. They would be rented places where the tenants didn’t seem to care about the place and the owners were happy to let it run down. The house would also be in a poor location, ie on a main road, too close to a school (all the parents cars flood your street at 8:30 am and then again at 3:30pm that was a nightmare)

$550,000-$600,000 would fetch you a place that may have been in a solid area but the place would require moderate to extensive repairs. Alternatively you could get a well kept house with moderate to low repairs but in a poorer area. $600,000-$650,000 would give you either a good location and well kept house or a great location (water glimpses is the term used by local real estate agents) and a place that would require moderate repairs. $700,000+ would give you a great location (water views) and a decent house; location generally spiked the price from there.

We did this research over 6-12 months and had a feel for what things were worth after about 6 months. The reason I had added the extra 6 months was due to the market being extremely volatile at the time we were looking with interest rates going up every second month or so. So we were watching the impact of the rates increases on home prices and they did drop a little. During this time, clearance rates for Sydney dropped about 20% to 40% in Feb 2008. However, in the area we were looking at, clearance rates were still above 65%.

With changing interest rates we needed to set a limit that we could afford. Our thoughts were that we would aim for a good block with a house that needed moderate to significant repairs. (I classify $20,000 as a moderate repair budget and $50,000 as significant). We developed a sliding scale to factor in the rising interest rate impacts, which would be partially offset by our increased savings over that time. If we found a place we loved in February 2008 our top price would be $560,000 and in April 2008 our top price would be $580,000. However with more time to save, by July that would be $600,000 and by the end of the year we could go up to $620,000.

The approach help us greatly when looking at places. There were a couple that were outside our top price, but we kept an eye on them knowing that if they didn’t sell, as the months would go on, it might come down a little due to lack of interest and increasing interest rates, and we would have more money as we kept saving for a deposit. In March, a place came on the market at offers from $540,000. From the pictures on the Internet it looked like it could be worth more $540,000 place so we went to take a look. (Tip : A big help here was to go to open homes, even again if it is not what you want, it gives you an idea of what you get for your money based on market supply/demand).

Looking at this place in person confirmed our view that it was worth much more than $540,000 and so we were very interested. If the place sold for less than $550,000 it would be a bargain. So going back to our research we looked at what nearby places were initially listed for and what they sold for, and also looked at the agents’ history. We found out that this agent almost always undervalues a property. This is to attract interest and on the first open home there was plenty of interest.

We knew that this place would be in the high $500’s and our initial thoughts were $580,000 was where this place should have been listed. A place two doors up in better repair went for $630,000 only a few months ago. We guesstimated that we would need about $50,000 for repairs and worked back from the $630,000 to get a price we thought we would need to pay.

The place was up for auction and we asked the agent what price would take it off the market. The agent said if the got a high $580’s offer the owners would accept an offer and sell the place. But at the time we could not afford that, again using our sliding scales we kept to our budget. The place of your dreams can turn into a nightmare if you are up to your eye balls in debt. It ruins the feel of your new home and puts unnecessary stress on your relationship. We decided that we would hold off but told the agent we were keen on the place and if any offers came in then to let us know.

Over the weeks we kept in constant contact with the agent until two weeks to go. There was no other offers on the table. The agent was playing games about how many contracts went out to interested people, as we felt that maybe there was really only one or two people out there ready to buy that wanted this place. So we took our chances, got a building report and pest inspection done. Sure enough the reports came back saying that there was about $50,000 worth of repairs needed. The reports always sound worse then they are, (this is my opinion anyway) for the inspection companies to cover themselves. So armed with this knowledge we informed the agent of the required repairs.

The vendor still wanted high 580’s a price we could not go to. So we decided that we would go to the auction and see really what the market is saying. There are good and bad things about an auction. The good thing is that it is all in the open. No matter how many sales you go through, you will never know if/when the agent is telling the truth and when there is a little bending of that truth. With an auction it is no longer in the agents’ hands. The people interested have to sign up and you can see really what bids are out there. The bad thing about an auction is that it is stressful and you need to be able to provide a 10% deposit on the day. The agent will generally accept a personal cheque.

We went to the auction and eventually had our top bid of $570,000 accepted. A great feeling which you have to go through in person to understand! Our research gave us the knowledge to know what the place was really worth and our discipline and sliding scale approach ensured we could realistically afford the place.

If you have any questions please leave a comment on this post and I will endeavour to get back to you as soon as possible.

[Andy] If you enjoyed this post, look out for 2 additional posts by EH on tips for buying a house in Sydney (based on his 18 month search) and on how to succeed in an auction sale.

Lame way to tackle Fuel Prices

The Australian Competition and Consumer Commission (ACCC) announced yesterday that motorists would get at least 15 hours notice to buy petrol before prices increased under a government fuel monitoring scheme.

Some points of note from the announcement were:

- The ACCC will operate the scheme, which is expected to start by the end of the year and will give consumers information about the next day's petrol prices via text messages, email or website.

- Consumers will know when the price is going to increase or decrease and they can therefore defer their buying until they (fuel prices) get to their lowest points."

- Every petrol station that was part of the scheme would be required to lodge with the ACCC their proposed fuel price for the following day. The ACCC would then publish those prices within one hour of the information being lodged. The price would apply from 6am the following day for 24 hours.

- "More importantly through SMS services, through email and through our website, you will be able to tell which service station that is reasonably close to you will be selling petrol at the lowest prices." said ACCC chairman Mr Samuels

- Mr Samuels warned the system was not designed to save consumers money but to give them more power. "You will know if a price increase is going to occur and you've got about 15 hours to buy your petrol before it hits."

I almost laughed at the article. Firstly the chairman, Graeme Samuels said that the system "was not designed to save money but to give them [consumers] power". Give me a break. 15 hrs notice will suddenly give us power - we already know that on certain days fuel is cheaper. See my post on that topic here.

I am sure the refiners and the petrol station owners (who can choose to participate in the scheme voluntarily) will figure out ways to work around this weak system. The telco's will also be happy with the extra income from all the SMS messages! I just see this system resulting in long lines at the pump on the supposedly "cheap" fuel days.

When will the government begin to tackle the fuel price rises more seriously, like reducing the excise tax on fuel, encouraging hybrid cars, better public transportation and looking for long term ways to reduce our dependency of fuel. Schemes like the ones above are just political stunts designed to waste tax payers money.

Winner of SOW DVD competition and Weekly market report

Firstly I would like to announce that louise is the winner of the SOW DVD competition thanks to her comment on the Investing 101 : Selling Shares post. Congratulations. Louse - click here to contact me via email so that I can get your address details for sending the DVD set to. Thanks to everyone how left a comment over the past 2 weeks while the competition was running.


With that, here is the latest installment of Dale Gillham's weekly market report:

Everyone enjoys the market when it is bullish because it is generally easier to generate positive returns without too much effort. It is not until we experience the events of the past 9 months that we really regain our respect for the share market because we tend to fall into a false sense of security believing the bull run will last forever.

In the past 4 months, many shares have fallen heavily including Centro, ABC Learning Centres, Allco, Tattersals and Tabcorp to name a few, falling as much as 50% or more. Unfortunately many investors have continued to buy more shares in these companies in an attempt to dollar cost average their returns only to see the stock fall away further. What concerns me about this is that most of these stocks provided signals to exit a minimum of 6 to 12 months prior to falling heavily. Therefore, this trend suggests that investors need to educate themselves in how to sell shares so as to preserve their capital given that these stocks will need to double in price for the investor to simply break even on where they were 12 months ago.

So what can we expect in the market?

On Monday the market continued to trade down as expected, however it quickly found support and turned to rise over the next 3 days which is a very positive sign. That said this could simply be a move counter to the recent downtrend rather than a new uptrend emerging. If this is the case, the market will start to fall away again any day now, and given that the US is currently in the middle of reporting season, it is possible that any unexpected news will increase the likelihood of the market falling away.

Even though there are some positive signs emerging, I suggest people sit tight until we can confirm the direction of the market. If the market is bullish, it needs to rise above 5697 in the next one to two weeks. As I have previously indicated, however, probability still suggests that the market will experience further falls in the short term.

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Also thanks to Glbl for featuring my post - Investing 101 : Selling Shares - in the carnival of personal finance, earlier this week. Check out all the other great articles there.

Buy into QBE

With the recent proposed and rejected merger/takeover the game is on between Insurance Australia Group (IAG) and QBE. The first offer was a salvo by QBE to see the reaction of investors and regulators. It was never meant to be the final offer and I think they will pay more to takeover QBE. I have written a number of times on both stocks and my preference is still QBE. I say this despite owning IAG shares, which have had a nice rise over the last week. IAG's stock closed at $4.38 yesterday compared with the $3.99 value of QBE's stock and cash takeover offer. So the market clearly expects a higher offer. I wouldn't be surprised if other local and overseas suitors are re-running the numbers over IAG, now that QBE has made its interest in the stock official.

Here's what the analysts are saying:

- QBE could pay as much as A$5 a share for Insurance Australia, Credit Suisse Group analyst Arjan van Veen said in a note to clients today. Citigroup Inc.'s Nigel Pittaway estimated a price of A$4.50, and Ryan Fisher at Goldman Sachs JBWere Pty said an offer in the ``mid-A$4s'' was possible.

- Merrill Lynch, meanwhile, believes QBE will come back with another bid and could offer up to $5.10 per IAG share and still make the deal cash earnings break-even.

- According to broker Credit Suisse, QBE's offer is greater than four times IAG's net tangible asset (NTA) value compared to recent QBE transactions at 1.5 to 1.75 times NTA.

- Analysts are unsure if the mega-merger will eventuate, with some musing that QBE, with its conservative approach to valuing targets, could find cheaper buys elsewhere. With or without IAG, analysts agreed with the assertion that QBE still has a decent pipeline of offshore deal opportunities.

- Goldman Sachs JBWere (GSJBW) believes that while QBE has room to increase its offer, it is unlikely to stump up enough capital to satisfy the IAG board, which is adamant IAG's shares are undervalued in a tough market.

What the companies are saying:

- IAG chairman James Strong acknowledged on Tuesday the merits of a tie-up between the two insurers, but only at the right price.

- In a sign the price might never be right, QBE indicated that it would not deviate from its usual deal requirement of achieving earnings accretion in year one.

How to profit from this merger

For short term investors the best way to make some money from this merger is to buy IAG shares. There is between 10-20% upside based on the average analyst recommendation. QBE's offer of $4, provides the floor for the stock, so at most you will lost 10% if QBE pulls out of the
merger/takeover tomorrow.

For longer term investors, like me, invest in QBE. It is a quality company that has taken a hit of late due to the global credit crisis. It is far better run than IAG from all reports. If it takes over/merges with IAG it will likely take some time to realize the synergies from the merger, but once it does it will probably add another $5 - $10 to the stock price in the medium term. Even if the takeover doesn't go ahead, QBE will find other options for growth and I see the share price going back to $30 by next year (assuming no major natural or man made catastrophes).

The rise of the US markets overnight should buoy both stock prices today, but stay tuned as there is a way to go with this deal.

Save time - 3 Free sources to get your Australian dividend and tax information online

Recently, a close family member was finalising his taxes and one the challenges he encountered was getting his stock dividend information for the past financial year. For many of us who own dividend paying stocks, we generally get 2 dividend payments in the year. Normally you get an online or mailed notice when each of these payments are made (you can make this election when you initially buy the stock). But, like a lot of us, you normally read these notices and forget about them. Then when tax time comes around, you are desperately running around to find the dividend notices and more often than not you can't find one or more of them. Trying to calculate the dividend payments and associated taxes manually can be a frustrating, complex and time consuming exercise as every payment is different based on the number of stocks owned, franking credits, franking percentage and other information you need for your tax return. Fear not though, I have the answer to make this task simple.

A little known fact - most if not all your specific dividend and associated tax information is now available on line. Everyone (should) know that they can find their share holdings at their online broker websites. However, a number of the brokers don't have the specific shareholder dividend information as they do not manage dividend payments. Companies pay out the dividends and in most cases they outsource it to one of Australia's 2 main share registry companies. Smaller or newer companies manage the dividends payouts internally due to cost reasons, but this is normally the exception.

So to get your dividend and associated tax information, there are 3 main sources you can go to:

- Computershare : Almost 60% of Australian companies use this company.

- Link Market services (formerly Perpetual Trustees Australia Limited) : They are the second largest registry company and those not with Computershare, tend to use this company.

- Company websites : If you cannot find your dividend information from the above 2 sites, most likely the company manages its dividend payments in house. The best bet is to then go to the company website which should have an investor relations or share holder information section.

You do need to register with Computershare or Link Market services to get your information. Don’t worry – its free and very simple. Here is a walk through of the sign-up process with Computershare (thanks AJ), via their website:

1. Go to their home page at http://www.computershare.com.au/

2. Click on “Manage your shares online” link in the Securityholder section as highlighted in the screenshot below and this will take you to their secure login page.

3. If you don’t have an account, click on the blue “Register Now” button below the login box to go to the secure registration page.

4. You should then be presented with the screen shown below. To complete this you will need to have ANY one of your share holding notices that indicate the SRN or HIN number. This notice should say whether the stock is managed by Computershare or Link Market services in top right corner. Obviously if you are using the Computershare site, select a stock/company that uses them . Enter all the relevant information - I have provided examples on the screenshot.
You really need at least one share holding notice to get the SRN/HIN/Holder number required in the registration screen below. Call your brokerage company to get this information if needed.

5. Click on the Submit button. Once this is done and here’s the best part, it will magically pull up ALL your shareholding details (thanks to your SRN/HIN number) that are managed by Computershare. You will then be prompted to create a user name and password to setup your account.

6. All done. You can now manage your stock address details, TFN number, payment details and get your past year tax information online. Print this out for reference at your next accountant meeting.

If you have any problems both sites have an extensive help section or you can just leave a comment on this post and I will try and assist. While this won’t reduce the taxes you pay on your dividends, it will make getting organised for tax season much easier. Hope this post helped you.

Top Income and Dividend Stocks

High yield cash savings accounts in Australia (like ING Direct, Bank West) are currently providing an 8% or so pre-tax return. Not bad when you consider that the stock market is down more than 20% this year. Why would you even think about investing in the stock market, when getting an 8% return is so easy and risk free? Well, because the after tax returns of stocks are going to be much higher than the cash savings account over the medium to long term. A stock provides two sources of return – capital growth and more importantly in this climate, dividend income. I agree that the capital growth aspect is pretty lousy at the moment, but there are some solid dividend paying stocks to look for that pay a better than 8% return over the next couple of years. Also, if you include franking credits from dividend payments, the dividend income can be substantially higher when compared to the equivalent after tax return from high yield savings account. An 8% pre-tax return on a high yield cash account is equivalent to 5% to 6% on an after tax basis. Whereas, an 8% return on a 100% fully franked dividend is equal to an after tax return of between 12% to 15%, depending on your tax rate. Which do you think is better now?

So what are these dividend stocks that pay more than 8%? Well, from Aegis Equity Research, here is a list of the highest paying fully franked and unfranked/partially franked dividend paying stocks. Franked or partially franked dividends provide franking credits (i.e. the tax the company has already paid) which you can use to offset your regular income provided you are an Australian resident. Unfranked dividends don’t have those franking credits. This could be for reasons that include, but not limited to, the company earnings are overseas or they did not pay taxes (due to how they account for their profits). Also for non-residents, like me, these can be better investments as I cannot access the franking credits and they tend to offer higher yields to offset the franking credit tax benefits.

From the list (click on list to enlarge), you can see plenty of stocks from the Macquarie Group(MQG) and Babcock and Brown (BNB) stable of investment vehicles. They have created these "stocks" to invest in a particular types of industry or assets. For example, Babcock and Brown wind partners (BBW) invests in wind energy generation assets and Macquarie Airport (MAP) invests in airports. These type of stocks tend to have a stable cash flow and thanks to legal accounting loopholes they are able to provide good tax-deferred returns. Due to the fact they are highly leveraged, they have taken a big hit to their prices from the credit crisis and their dividend yields have gone up because the actual dividend amounts have not beet cut. Macquarie and BNB managed investment vehicles are pretty well capitalized and have the implicit backing of their parent companies, so their share prices should eventually recover, which means current prices provide good entry points.

Overall, the stocks I like from the above lists are:

Suncorp Metway (SUN), Commonwealth bank (CBA) because these two financial companies are among the best of breed in their financial sectors. Apart from dividend growth they have got strong potential for capital growth in the medium term. I like Tabcorp (TAH) and Telstra (TLS) for their defensive nature and should hold up when the times get tough. For the unfranked or partially franked top stocks, I like Babcock and Brown Power (BBP), SP Ausnet (SPN), Ascianco Group (AIO), Macquarie Communication Group (MCG) and Babcock and Brown wind partners (BBW). I would stay away from the retail and consumer stocks like Pacific Brands (PBG) and Wattyl (WYL) because I think consumer spending will fall significantly when the economy starts heading south. Look my upcoming post “Is Australia entering a recession?” for more on my views on the tough times I think are in store.

Most of the companies in the above lists attract investors through their higher than average dividend yields. So they will be reluctant to cut dividends in fear of losing investor support and will instead focus on cost cutting measures to keep payouts at current levels.

Eventually, the share market will bottom out and begin its climb up. The appreciating share prices will then boost your capital gains, which combined with the current dividend yields make share investing a much more profitable (especially when you factor in tax) venture over the medium to long term than leaving your money in cash accounts.

Related Posts:

Fallen share prices drive dividend yields up
Stock Review : JB Hi-Fi (JBH)
Top Australian Dividend Stocks

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Investors need to be better informed

Here is the latest installment of Dale Gillham's weekly market report:

The collapse of Opes Prime last week once again highlights the need for investors to be better informed and better educated. It seems that all too often we hear stories of consumers losing money because of companies going bust. Some of the blame needs to be placed squarely in the hands of the regulators who need to ensure consumers are properly informed before they invest, but consumers also need to take responsibility to ensure they understand what they are investing in.

Investors tend to focus considerable attention on returns and costs, and while these are important, consumers need to look beyond this to ensure they are fully informed and educated about the investment they are undertaking. As an educator and fund manager I see many investment opportunities come across my desk and on the surface they generally look pretty good but once I read the fine print, most end up in the bin. It seems that only after these disastrous events do the regulators and consumers look at the fine print and try to do something about it – but as we all know this is often too late.

So what can we expect in the market?

In my last report I indicated that the market was likely to find resistance to the current rise around 5666 points. On Friday, 4 April, the market traded through this level, however, it failed to close above it. On Monday, 7 April, the market tried to rally higher once again but there was not a lot of strength in the move, suggesting the market was about to fall again.

Over the past 3 days the All Ordinaries has fallen just over 2% and I expect this fall to continue at least into next week. If the market is bullish, it should find support soon and start to rise up next week, however as I have mentioned before I believe there is a high probability of further falls to around 4800 points before the market finds support and starts to rise in its next bull run. Remember patience is the key right now.

Dale Gillham is chief analyst of share investment company Wealth Within

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Investing 101 : Selling Shares

I am starting a new series of posts called "Investing 101 : <Topic Name>", where I talk about some basic, yet overlooked aspects of investing. In this post I talk about knowing when to sell a share or stock - often much harder than the process you go through when buying it. Knowing when to sell a stock, and actually doing it, is tough and that is why most people like to buy and hold stocks. What is especially tough is selling a stock on which you are losing money. Rather than cut ones losses, most people - including me - hold onto losing stocks when we really should have sold. A lot of this is driven by emotion - when you sell when a stock is down, you feel like you're giving up. When a stock's price is soaring, people are less reluctant to sell because they don't want to miss any upside, enjoy seeing the share price rise every other day and/or feel that it will keep rising forever, especially in a bull market -  even though that can be the best time to sell.

There's nothing wrong with a buy and hold strategy if you are investing in a well run company and your horizon is 5+ years, but even then you will get dud stocks and you need to learn to say "sell". The market's ongoing volatility might be making you want to say, "Sell it all. I'll sit this out until things calm down." But you shouldn't let fear guide your investment decisions. Instead, look for these telltale signs to help you decide if the time is right.

1. A change in the company's fundamentals. Usually the best clue for when to sell a stock comes from the issuing company, itself. If a company's earnings stop growing, if its top management quits or is forced out, if it stops creating new products, or its products aren't receiving regulatory approval, the company's stocks could be headed for a fall.

One sure sign of trouble is if a company is having cash-flow problems. A cash flow statement gets to the guts of a business -- the cash it receives and the cash it pays out. It's especially handy when researching companies that don't have profits. You can find the information in the company's annual reports (via their website or at ASX.com) or at news.com.au (business section). If you are with an online broker, they should also have this information available for free in their "research" sections.  Look for the following changes in free cash flow:
- Is operating cash flow growing slower than net income?
- Is inventory rising faster than sales?
- Are receivables rising faster than sales? These are early warning signs that it might be time to sell the company's stock.

2. The stock's too hot. If a company's stock price is soaring but its fundamentals, such as earnings growth, aren't following suit, it may be time to sell. A stock with an especially high price-earnings (P/E) ratio may be the victim of investors' unrealistic expectations. The P/E is calculated via dividing the current share price by the company's earnings per share and is also available at most finance sites. You can compare a stock's P/E with that of the overall market, the average P/E of its industry, or against the company's past P/Es. If the company's ratio is unusually high, it could have a hard time sustaining that price.

Experts recommend picking a target P/E when you first invest in a stock. If the price jumps but the earnings keep up, you won't have to sell. This method can help give you the discipline to dump the stock before it becomes overpriced.

3. The stock's not keeping up. The market's rallying, but your stock isn't. This can be a sign to sell, especially for popular or trendy stocks that tend to move in sync with the market. For example, if stock was $100, drops to $80 but doesn't bounce back or even falls below that level, sell.

4. The stock is taking over your portfolio. If you went into your stock purchases aiming for diversification, revisit your portfolio once a quarter to see if your holdings are still in balance. If you have one or two big winners and their futures still look bright, you may want to consider taking some profits off the table -- and adding to your other holdings -- just so you won't be overexposed if the unexpected happens.


Ideally, you sell a stock when it's up so you can make a profit. But sometimes you have to cut your losses and sell when a stock is down. However selling for a loss may not be all bad, especially if you have made some profits (capital gains) during the year.  Losses offset capital gains -- from other stock sales or managed fund distributions -- and, if you have more losses than gains, up to $3,000 of net loss can be deducted against other kinds of income (US only). Part of your tax planning strategy should involve reducing your capital gains exposure by assessing and selling the under performing stocks in your portfolio.

In today's volatile market, it is even more important to know when to sell your dud stocks. The right time to unload stocks is one of the toughest calls investors have to make, but holding on to them could mean you end up with nothing but a story of regret.

Is Dubai the place to be? A review.

Dubai, the shining light of the Middle East, is going gangbusters. It has enjoyed two decades of rapid growth, going from a small desert city to a western society representation of the riches the Arab world has to offer. The economic growth has fueled strong demand for foreign workers and they have been coming in troves to this Desert oasis in the pursuit of (tax free) wealth and a pampered lifestyle. Professional white collar and executive level expats have mainly come from the UK (who controlled the region until 1971) and Europe. However of late there has been a strong influx of Australian and American citizens drawn to regions high paying jobs. Most jobs come with perks like housing allowances, international schools for the kids and home help. However, like all things that look too good to be true there are also various drawbacks to living and working Dubai. Here I examine both sides of the argument - the pro-Dubai side and why the place may be over rated. Feel free to share your comments as well.

The best of both worlds

Here are some compelling reasons and examples of why Dubai is the place to work and live:

- Dubai's rapid economic growth will continue to drive the country forward and reward those who with participate in the boom. As salaries in the western world stagnate or are eaten up by inflation, they are booming in Dubai. Best of all, the income is tax free.

- Brad Dennis, an accountant from Chicago, more than doubled his salary by leaving the country. He came to Dubai two years ago after being headhunted by a global firm. He now makes $250,000 a year and drives a Mercedes-Benz provided by his company. At night, he gets past the velvet rope at some of Dubai's hottest clubs, each time accompanied by a different woman. Among the new expats is Mare Elston, who was one of the few Americans in Dubai 10 years ago but who left and returned again recently. She works as a specialist in communications and event planning, and while she wouldn't reveal her salary, it's likely she takes home at least twice what she would earn in a comparable job back home in the U.S.

- "Dubai has become a magnet for ambitious young people who want an environment where they can make a lot of money and also have fun," says Kashif Arbab, a Briton of Pakistani origin who trades for equities firm Killik & Co. in Dubai. As Dubai's profile in the grows and more Multinational companies open offices here—oil-industry-­services company Halliburton, for one, relocated its global headquarters from Texas to Dubai in 2007. In order to attract those professionals, firms in Dubai are paying top dollar. According to one C.E.O. of a major bank in Dubai, the average compensation package for an expat working at his bank is around $150,000, and he expects that number to grow in the coming years as competition for employees increases. In addition, firms typically give housing allowances of up to $10,000 per month to their top executives, in addition to transportation budgets of another $5,000 per month. Further sweetening the deal is the fact that none of that income is taxed in Dubai.

- A wide range of industries in Dubai are hiring, especially those being hardest hit in the U.S. and Europe. New sovereign wealth funds are being created, real estate companies are expanding, financial-services firms are sprouting like palm trees, international banks seem to be opening branches here almost daily, and the hospitality industry is growing exponentially. That means more midlevel and upper-management executives are needed in the United Arab Emirates, particularly in Dubai, which has been exploding at warp speed. "The region has a shortage of qualified executives," says Patrick Satamian, head of Kraft Foods in the Middle East. "Companies are continually looking for talent."

- There are miles of shopping malls with stores representing every major luxury brand. There are long waiting lists for Ferraris and Lamborghinis—even Gulfstream jets. There is nothing that you get in the western world, or Asian for that matter, which you cannot get in Dubai. From Starbucks coffee to the latest Indian fashions, it's all available here.

- Dubai is the most moderate of the United Arab Emirates in terms of the way of life Western expats can enjoy. You can drink alcohol in your own homes and in some hotel bars and restaurants for example, women can work and most western oriented living and working zones are safe.

Everything that shines isn't golden

Living in Dubai may not be as wonderful and glamorous, as many would have you believe. Here are some reasons why:

- Dubai's 1.3-million person population is set to explode, with an anticipated doubling by the year 2010. As thousands of retirees, expatriates and holidaymakers pour into the country, many are eyeing the property market and its boom, wondering how anyone can actually afford to live in Dubai. If you think Sydney or New York are expensive, you should check out some of the real estate prices in Dubai, where $5+ properties are quite common.

- High salaries and rapid growth also mean a high cost of living. Even if you earn $10,000 p/month (with allowances), the cost of an average home (most are apartments) is $3000 - $4000 p/month. The only thing cheaper here is labor. Yes, you can have a maid – but a bag of washed lettuce will cost you almost $10. So living costs quickly eat up those big salaries and allowances. If you have a family, add on the high costs of schooling. Further, as there is not much else to do apart from travelling, dining out or shopping - entertainment costs are much higher than average.

- Some expats have commented that, Dubai will never feel like home - "It has spectacular beaches, but it is not Australia", said an Australian. Some have said that living in Dubai is like a vacation to Los Vegas, that is good for only a few days before you get sick of it. A few miles out of Dubai is like going to a different world where "western society" rules no longer apply and you are back to strict Shariah laws. This can be a big culture shock for those not prepared and a timely reminder that this ain't home.

- So many people have been attracted by high income, low tax job offers and the thought of living in a playground in the sun that there are overcrowding issues plaguing the emirate and causing some expats to regret their relocation. If you're thinking of moving to live in the UAE, factor in that Dubai may be a great place to work but a terrible place to live. Some reports claim that the congestion in Dubai rivals that of Los Angeles or London during rush hour.

- You do not have the freedom of rights enjoyed in western countries. The government blocks all web sites that it deems "offensive" to the "religious, moral, and cultural values" of the UAE. Simple services like VOIP are banned - so no cheap internet phone calls back home.

- The weather - it is really hot in Summer! It can get as hot as 50 degrees Celsius (or 120 F) with nearly 100% humidity. Do not look to the wind for relief. This is the equivalent of pointing a hairdryer on full blast directly at your face. Pour fine moon dust-like sand over your head as you do this and you get the picture.

- Others complain life is too materialistic in Dubai. With shiny 7 star hotels, expensive cars and designer shops, its focus is on satisfying the more affluent population's material needs. A lot of the working labour class are from neighbouring low cost Asian countries (Pakistan, India and Bangladesh) and live in "slums" with hardly any worker rights. People who move here from western countries are shocked when they see this dark underbelly of Dubai.


Conclusion:

So, there are certainly downsides to living in such a fast expanding community. But then you can negate at least some of these issues with the attractive (tax free) salaries many of those working in Dubai enjoy. I think it depends on who you are, what you want out of life and the elements of your family, work and social life that make you tick as to whether you see Dubai as an all work and no play location in which a high salary comes at a high cost, or whether you see Dubai as a fantastic party town where you can work hard, play harder and really get a lot out of life. I am looking at Dubai as a potential option for furthering my career, but for the above reasons need to make my choices carefully. Like they say, to really know the place, you have to go there and experience it for yourself.

Referenced articles and other useful information:

- It Turns Out, Mecca Is in the Middle East
- Living in Dubai
- 10 Top Tips for Expatriates Moving to Live in Dubai

Picture courtesy pbo31

Interesting Reading - The Clinton's Tax Returns, 2000-2006

Want to know what a US president or Senator earns? Then check out the Clinton's tax returns for the last few years, available via the link below from slate.com. For the year 2000, Hillary Clinton (occupation: attorney) and her husband, Bill Clinton (occupation: U.S. president) paid close to $50,000 in federal income taxes on their adjusted gross income of $357,000. For 2006, Hillary (occupation now: US Senator) and Bill (occupation now: Speaking & Writing) had upped their adjusted gross income to more than $16 million and paid $4.6 million in annual federal taxes. The way their income has grown, you can definitely conclude that politics has been great for them and see why Hilary now wants to be president.

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Weekly Market Report - How prepared are we for retirement?

Here is the latest installment of Dale Gillham's weekly market report:

A common question that is often asked is how prepared are we for retirement? According to statistics, approximately 1 in 5 people are not sure they can afford to retire and one third don’t know how much money they need in retirement, while the remaining believe they can comfortably retire at age 65. The concern for many investors nearing retirement right now, however, is whether they will have sufficient income given that the volatility in the share market in the past nine months has had a significant impact on superannuation funds. Add to this the fact that we are living longer and you can start to see why there is continuing concern that many may not have enough to sustain themselves in retirement.

Given this, when it comes to investing it pays to ensure you spread your risk across various asset classes so as to minimise your exposure to the downside risk in any one asset class. In other words, building up a diversified portfolio of shares, property cash and/or bonds will ensure you have a balanced portfolio that will support you in accumulating wealth to enjoy your yea