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The global credit crisis has its indelible effect on the stock markets around the world as they are suffering terrible loses. The US housing market has collapsed as loans were handed out to people without income, jobs or assets. But when the interest rates are low the poor credit histories can relax as the banks have the option to repossess and make a profit on the property. But now when the market is heading towards a recession, it happens to be all about thriving in the depression market.

The bad mortgages are the prime reason on why the building societies are going kaput. The financial engineering and the globalization of the finance market has actually aggravated and spread the crisis. To counter this problem, the ‘collateral debt obligation’ was ideated, and this bond was thought to be a good investment option as the mortgages were backed by property. But as the mortgage saga happened to be faulty itself, the bond never yielded positive results and a whole lot of banks in the US, France and Germany have refused to value funds which are backed by these debt instruments.

This has led to a slump in the interest rates and if the stock market further slumps, it will chip away the possibility of any probable rise in the rates. So, naturally it is not a high time for the stock market shareholders. Every fall will make them cumulatively poorer. The fundamentals have always been the same, which is to buy low and sell high. Therefore, the investors must not panic and start selling their shares. Stock market investment on a particular medium should always be on a long term basis. But if the investor has touched the burning pie called the high risk investment, in the form of hedge funds, contracts for difference and spread betting, it is casualty guaranteed.

With the housing market grinding to a halt aided with the stock market slump, there will be a severe cut down on the expensive mortgages. Even if a low single digit growth in the housing prices can be achieved, that can be the ‘best’ possible accomplishment.

But with respect to the shares, it will be wrong to predict a total meltdown. According to the International Monetary Fund, this current crisis is manageable, since the world’s Central banks are squeezing in funds into the stock market. But the stock market cannot cease to be apprehensive.

Best Growth Stock Market Report provides you with the best stock picks and market advices.

Inflation in India is a worrying factor as compared to the general performance of the Indian economy. The inflation rate has spiraled to over 12% in the past few months. The prices of everything from food grains to apartment rentals to gas have sky-rocketed. Rising living costs not only affect your cash flow but also erode your savings considerably. Choose your investments carefully to protect your investment portfolio. A good investment plan should cushion your future consumption from price increase.

Here are some pointers to shield you from inflationary losses.

• The first thing to do is to get ready for rising prices by cutting down on your expenses and saving a considerable portion of your annual income. Curtail splurging urges. Don’t use your credit cards injudiciously.
• Decide on the rate of inflation that you would base your planning on. The Consumer Price index for Urban -Non Manual Employees which is released every month would be a good index to base your projections on. Do a little bit of research to get an idea of the inflationary trend in the coming 6 months. Taking this into consideration your aim would be to invest in instruments which yield a return higher than the rate of inflation. Review and revise the inflation rate that you have assumed every year.
• Your best bet would be to invest in assets which pay a variable return. The dividends accruing to investors of equity stock rise with inflation and respond positively. Equity stocks also afford an opportunity for capital appreciation which could be hedged against inflation. Opt out of speculative stocks as the risk percentage is very high. Invest in good stocks that have a good track record and those that will give you the maximum return in the long run. Buy and hold stocks long term as it is a good hedge against inflation.
• Another safe option to protect you from the ravages of inflation would be to invest in mutual funds that invest in energy and natural resources based companies, oil and gas companies and companies dealing with precious metals. These companies have a good track record and their value keeps appreciating.
• Real Estate prices have appreciated like never before and in par with inflation. So this is one investment where you can never go wrong.
• Direct investment in precious metals like gold, silver and platinum is also recommended as these have always been considered safe investments. Gold has appreciated by a whopping 49% in the last one year. Gold coins and biscuits are preferred over jewelry.
• Invest in inflation protected bonds /Capital Indexed Bonds where it is available.

Weigh the pros and cons of the various investments and act prudently while taking investment decisions.

Addi Sharma is a well known author and has been writing content for iTrust. iTrust is the leading personal finance portal in India providing excellent financial planning, real estate services, and best home loan in India.

It is obvious that The Western nations have an intense fear of Russia. This fear has been with them even before the Russian revolution. The Mongolian Hordes once swept through Western Europe and slaughtered millions before they were repulsed. The Second World War recreated history when the Russian army was ready to march until the English Channel. Only the threat of the atomic bomb stopped their advance. Mongolian blood still flows through the veins of the Russian People. The free nations of the world must make sure that Russia will never march again.

The best way to keep the Russians within their own borders is to westernize their economy and government. Free market systems will tranquilize the Russian mind and bring the Russian people down to Earth. This can be done by exerting pressure on Russia’s leaders to open their borders to western financial institutions and corporations. All restrictions on imports and foreign business investments must be lifted in order for this plan to work. It will take less than five years of Western know-how to tame their wanderlust. Afterwards the Russian people will never militarize or march again.

All of Russian financial institutions and industries must be owned by foreign investors. The costs of business startup costs will be minimal to them. Available energy and land will make an investment in Russia a sure winner. Cheap labor is one of Russia’s best assets. Russians are ingrained with a strong work ethic and enough intelligence to make them the ideal workforce. They ask little and work hard. No other industrialized nation but Russia has the advantage of having an unlimited amount of oil and minerals. Russia is self contained. Without any competition from energy starved nations they will become the largest exporter of products in the world.

There are economic interests in Russia at this moment that are hogging all the wealth and are holding back economic progress. Thousands of Russian billionaires give nothing back to a nation that is poverty stricken. They control a raggedy army with rotting food and little fighting ability. The rusting hydrogen bombs that no longer work are their only weapons. But their power is temporary, because the same voices of freedom and progress that brought down the Berlin wall will bring down the crumbling one in Russia.

Melpol

Retired and single recluse

The Southernmost of the Dakotas may be home to the national treasure that is Mt. Rushmore, but ND is holding it’s own treasure that’s nothing to sneeze at. According to the website of the State Land Department, there are currently more than $23 million in North Dakota unclaimed money, waiting to be reunited with the citizens who lost track of it somewhere along the way. The only thing standing between these citizens and their money, beyond knowledge of the existence of these assets, is the knowledge of how to track them down and reclaim them.

North Dakotans are lucky to live in a state that ranks among the top 5 in the nation for percentage of unclaimed fund returned to residents. At the same time, the state has one of the smallest populations in the country, at just over 640,000. What this means is that ND residents have great odds of discovering and taking back money that is rightfully theirs.

The first rule of searching for unclaimed property is to search frequently. One of the biggest mistakes searchers often make is to search only once on the first website they find that has a search box and end their search there. This doesn’t take in to account that the vast majority of missing money websites don’t have accurate data, and even the state’s official records are often slow to be updated. This is a problem, not only because someone in a state office has to manually input the record once it’s been given to the state, but because there are different periods of time which must pass, unique to each type of abandoned asset, before they are turned over to the state.

Some of the most common types of forgotten funds are dormant savings and checking accounts, stocks, bonds, mutual funds, refunds, wages, payroll, salary, money orders, paid-up life insurance policies, deposits, commissions, uncashed checks, death benefits, dividends, insurance payments, and others. Most of these have dormancy periods of 1-5 years, which means that if it’s only been 1 or 2 years when a person searches; they will not find a record for an asset that has a dormancy period of 3 or more years.

In addition to needing to search the right websites often, many people don’t realize that they should search records outside of North Dakota. Believe it or not, a person could theoretically have never been outside of the state of ND, but have money owed to them in other states. This occurs when assets from insurance companies or employers originate in other states. Often times the actual corporate headquarters for an employer exists in a state separate from where given employee works. For this reason, unclaimed monies being held by institutions in these situations will be handed over to the proper division of the company’s home state’s treasury department. What this means is that North Dakota will never have any record of this cash, so a resident who wishes to locate and claim it will need to use the same search strategies in other states.

These are just few of the most common issues that hinder the searches of uninformed ND citizens. But people can overcome these issues, and countless others, by spending a little bit of time educating themselves on the search practices used by professional searchers before putting their own feet in the water.

Unclaimed money and property expert Russ Johnson has been assisting Americans in finding their unclaimed money online since 1997. His site, http://www.unclaimedmoney.net, is updated regularly and offers guaranteed official searches for North Dakota unclaimed money and missing money across the country.

Last week’s rally was a farce through and through.

As I’m sure you’re aware, last week the market rallied more than 4%. It’s not surprising: stocks were dramatically oversold. However, what was surprising was the fact that the rally was created not by genuine bulls, but by the SEC crushing short-sellers.

On Tuesday the SEC announced it was changing the rules for short-selling on 19 key financial firms, including the major mortgage lenders Fannie Mae and Freddie Mac. In simple terms, the SEC stated that naked short-selling of these firms is illegal.

But it already was.

As I’ve mentioned before on these pages, during a typical short-sale the seller borrows the shares prior to selling them on the open market. If you don’t borrow the shares in advance but simply sell them on the market-thereby turning profits out of nothing-it’s considered “naked short-selling.” Another version of naked short selling comes from traders’ “failure to deliver,” that is, failing to deliver the shares they sold to the buyer within three days of the transaction.

All of this sounds quite confusing. And it is. Naked short-selling has actually been illegal for years. The SEC’s changes are not changes at all. They’re simply a public reiteration of something they’ve already been saying for years! It’d be as if the Justice Department suddenly made a public service announcement stating that murder is now considered an illegal act. Nothing new there.

However, because no one in their right mind would suddenly call a press conference to introduce “new” policies that have already been in place for years, traders confused the SEC’s statements with the idea that ALL short-selling of 19 key financial firms will now be illegal. What followed was an enormous rally in financial stocks-Fannie Mae and Freddie Mac nearly doubled in four days-as traders covered their shorts.

This whole situation is not only ironic, it’s flat out appalling. For years the SEC looked the other way while Wall Street and other large financial institutions engaged in hundreds of illegal practices. Anyone in doubt of this should consider the over the counter derivatives market in which there are well over $620 TRILLION worth of derivatives outstanding. What are the odds that most of these would “fail to deliver” if called in?

Similarly, most of the large financial institutions-the ones the SEC is now moving to protect-are leveraged by as much as 30-to-1. If their underlying off book assets fell by even 5% in value ALL of their shareholder equity would be wiped out. Sounds like a lot of potential for failure to deliver there.

My point is this: most of the large financial institutions have been engaging in failure to deliver practices for years. The SEC didn’t care then. But now that those same institutions are down in the dumps, the SEC is stepping in to try and protect them from short-sellers.

It’s absolutely appalling.

First the Federal Reserve uses tax payer money to facilitate the Bear Stearns deal, now the SEC is trying to protect Wall Street-the biggest perpetrators of financial fraud on the planet-from short selling. Last week, the SEC, in effect, manipulated the market-there’s nothing new about their “new” policies-to protect the very group of individuals they are meant to crack down on.

Things are beginning to get very ugly in financial markets. And the powers that be are engaged in widespread manipulation. I’ll detail another farce-Hank Paulson’s “blank check” to bail out financial firms-in tomorrow’s essay. Until then…

Best Regards,

Graham Summers

http://www.globalstockmonitor.com

Denial is a ubiquitous psychological defense mechanism. It involves the repression of bad news, unpleasant information, and anxiety-inducing experiences. Judging by the German press, the country is in a state of denial regarding the waning health of its economy and the dwindling fortunes of its financial system.

Commerzbank, Germany’s fourth largest lender, saw its shares decimated by more than 80 percent to a 19-year low, having increased its loan-loss provisions to cover flood-submerged east German debts. Faced with a precipitous drop in net profit, it reacted reflexively by sacking yet more staff. The shares of many other German banks trade below book value.

Dresdner Bank - Germany’s third largest private establishment - already trimmed an unprecedented one fifth of its workforce this year alone. Other leading German banks - such as Deutsche Bank and Hypovereinsbank - resorted to panic selling of equity portfolios, real-estate, non-core activities, and securitized assets to patch up their ailing income statements. Deutsche Bank, for instance, unloaded its US leasing and custody businesses.

On September 19, Moody’s changed its outlook for Germany’s largest banks from “stable” to “negative”. In a scathing remark, it said:

“The rating agency stated several times already that current difficult economic conditions that are hurting the banking business in Germany come on top of the legacy of past strategies that were less focused on strengthening the banks’ recurring earning power. Indeed, the German private-sector banks, as a group, remain among the lowest-performing large European banks.”

Last week, Fitch Ratings, the international agency, followed suit and downgraded the long-term , short- term, and individual ratings of Dresdner Bank and of Bayerische Hypo- und Vereinsbank (HVB).

These were only the last in a series of negative outlooks pertaining to German insurers and banks. It is ironic that Fitch cited the “bear equity markets (that) have taken their toll not only on trading results but also on sales to private customers, the fund management business and on corporate finance.”

Germans used to be immune to the stock exchange and its lures until they were caught in the frenzied global equities bubble. Moody’s observes wryly that “a material and stable retail franchise in its home market, even if more modestly profitable, can and does represent a reliable line of defence against temporary difficulties in financial and wholesale markets.”

The technology-laden and scandal-ridden Neuer Markt - Europe’s answer to America’s NASDAQ - as well as the SMAX exchange for small-caps were shut down last week, the former having lost a staggering 96 percent of its value since March 2000. This compared to Britain’s AIM, which lost “only” half its worth. Even Britain’s infamous FTSE-TechMARK faded by a “mere” 88 percent.

Only 1 company floated on the Neuer Markt this year - compared to more than 130 two years ago. In an unprecedented show of “no-confidence”, more than 40 companies withdrew their listings last year. The Duetsche Boerse promised to create two new classes of shares on the Frankfurt Stock Exchange. It belatedly vowed to introduce more transparency and openness to foreign investors.

Banks have been accused by irate customers of helping to list inappropriate firms and providing fraudulent advisory services. Court cases are pending against the likes of Commerzbank. These proceedings may dash the bank’s hopes to move from retail into private banking.

To further compound matters, Germany is in the throes of a tsunami of corporate insolvencies. This long-overdue restructuring, though beneficial in the long run, couldn’t have transpired at a worse time, as far as the banks go. Massive provisions and write-downs have voraciously consumed their capital base even as operating profits have plummeted. This double whammy more than eroded the benefits of their painful cost-cutting measures.

German banks - not unlike Japanese ones - maintain incestuous relationships with their clients. When it finally collapsed in April, Philip Holzmann AG owed billions to Deutsche Bank with whom it had a cordial working relationship for more than a century. But the bank also owned 19.6 percent of the ailing construction behemoth and chaired its supervisory board - the relics of previous shambolic rescue packages.

Germany competes with Austria in over-branching, with Japan in souring assets, and with Russia in overhead. According to the German daily, Frankfurter Allgemeine Zeitung, the cost to income ratio of German banks is 90 percent. Mass bankruptcies and consolidation - voluntary or enforced - are unavoidable, especially in the cooperative, mortgage, and savings banks sectors, concludes the paper. The process is a decade-old. More than 1500 banks vanished from the German landscape in this period. Another 2500 remain making Germany still one of the most over-banked countries in the world.

Moody’s don’t put much stock in the cost-cutting measures of the German banks. Added competition and a “more realistic pricing” of loans and services are far more important to their shriveling bottom line. But “that light is not yet visible at the end of the tunnel … and challenging market conditions are likely to persist for the time being.”

The woeful state of Germany’s financial system reflects not only Germany’s economic malaise - “The Economist” called it the “sick man” of Europe - but its failed attempt to imitate and emulate the inimitable financial centers of London and New-York. It is a rebuke to the misguided belief that capitalistic models - and institutions - can be transplanted in their entirety across cultural barriers. It is incontrovertible proof that history - and the core competencies it spawns - still matter.

When German insurers and banks, for instance, branched into faddish businesses - such as the Internet and mobile telephony - they did so in vacuum. Germany has few venture capitalists and American-style entrepreneurs. This misguided strategy resulted in a frightening erosion of the strength and capital base of the intrepid investors.

In a sense, Germany - and definitely its eastern Lander - is a country in transition. Risk-aversion is giving way to risk-seeking in the forms of investments in equities and derivatives and venture capital. Family ownership is gradually supplanted by stock exchange listings, imported management, and mergers, acquisitions, and takeovers - both friendly and hostile. The social contracts regarding employment, pensions, the role of the trade unions, the balance between human and pecuniary capital, and the carving up of monopoly market niches - are being re-written.

Global integration means that, as sovereignty is transferred to supranational entities, the cozy relationship between the banks and the German government on all levels is over. Last October, Hans Eichel, the German finance minister, announced OECD-inspired anti-money laundering measures that are likely to compromise bank secrecy and client anonymity and, thus, hurt the German - sometimes murky - banking business. Erstwhile rampant government intervention is now mitigated or outright prohibited by the European Union.

Thus, German Laender are forced, by the European Commission, to partly abolish, three years hence, their guarantees to the Landesbanken (regional development banks) and Sparkassen (thrifts). German diversification to Austria and central and east Europe will provide only temporary respite. As the EU enlarges and digests, at the very least, the Czech Republic, Hungary, and Poland in 2004-5 - German franchises there will come under the uncompromising remit of the Commission once more.

In general, Germans fared worse than Austrians in their extraterritorial banking ventures. Less cosmopolitan, with less exposure to the parts of the former Habsburg Empire, and struggling with a stagnant domestic economy - German banks found it difficult to turn central European banks around as successfully as the likes of the Austrian Erste Bank did. They did make inroads into niche structured financing markets in north Europe and the USA - but these seem to be random excursions rather a studied shift of business emphasis.

On the bright side, Moody’s - though it maintains a negative outlook on German banking - noted, in November 2001, the banks’ “intrinsic financial strength and diversified operating base”. Tax reform and the hesitant introduction of private pensions are also cause for restrained optimism.

Pursuant to the purchase of Drsedner Bank by Allianz, Moody’s welcome the emergence of bancassurance and Allfinanz models - financial services one stop shops. German banks are also positioned to reap the benefits of their considerable investments in e-commerce, technology, and the restructuring of their branch networks.

The Depression on 1929-1936 may have started with the meltdown of capital markets, especially that of Wall Street - but it was exacerbated by the collapse of the concatenated international banking system. The world today is even more integrated. The collapse of one or more major German banks can result in dire consequences and not only in the euro zone. The IMF says as much in its “World Economic Outlook” published on September 25.

The Germans deny this prognosis - and the diagnosis - vehemently. Bundesbank President Ernst Welteke - a board member of the European Central Bank - spent the better part of last week implausibly denying any crisis in German banking. These are mere “structural problems in the weak phase”, he told a press conference. Nothing consolidation can’t solve.

It is this consistent refusal to confront reality that is the most worrisome. In the short to medium term, German banks are likely to outlive the storm. In the process, they will lose their iron grip on the domestic market as customer loyalty dissipates and foreign competition increases. If they do not confront their plight with honesty and open-mindedness, they may well be reduced to glorified back-office extensions of the global giants.

About The Author

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, PopMatters, and eBookWeb , a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory Bellaonline, and Suite101 .

Until recently, he served as the Economic Advisor to the Government of Macedonia.

Visit Sam’s Web site at http://samvak.tripod.com; palma@unet.com.mk

They buy and sell several times a day, the exchange volumes very high, and therefore receive daily big discounts of the brokerage.

One day, traders focusing solely on the dynamics and trends. They are more patient and wait for a ride on the strong who can move that day. They are far fewer trades that these traders.
Many day traders sell their positions before the market closes for the trading day to avoid the risk of price differentials (the difference between the day and close to the open overnight price), to open it. One day, traders say it is a golden rule to be respected at all times. Other traders think they should let the profits run, it is acceptable to stay with a position after the market closes.

Day traders often borrow money to trade. Since margins are typically charged interest on balances overnight, the additional costs also discourage them from holding positions overnight.
Risks and benefits

Because of the nature of leverage and speed of returns are possible, day trading can be extremely profitable or highly profitable, and high-risk profile traders can generate huge percentage is huge percentage returns or losses. One day, the operators are able to earn millions each year, only by day trading.

Because of the high profits (or losses), which enables the trading day, these traders are sometimes described as “bandits” or “players” with other investors. Some people, however, make a consistent living day trading.

But day trading can be very risky, especially if it was bad discipline, risk or managing money. The common use of purchases on margin (with borrowed funds) magnifies gains and losses, such as losses or gains may occur in a very short time. In addition, brokers will usually from the higher margins for day traders. When the night margins required to hold a stock position are normally 50% of the value of the stock, many brokers allow pattern day trader accounts to use levels as low as 25% for purchases intraday. That means one day negotiating with the legal minimum $ 25000 in his account can buy a $ 100000 stock during the day, as long as half of those positions were released before the market close. Due to the high risk margin of the use and the other day business practices, a day trader will often leave for a losing position very quickly, in order to avoid a greater, unacceptable loss, or even a catastrophic loss, much larger than its initial investment, even larger than its total assets.

Even when one has made a profit, the trader has to compensate for transaction costs and interest on the margin. It is commonly said that 80-90% of day traders lose money. An analysis of the Taiwanese stock market suggests that “less than 20% of day traders profit net of transaction costs.”

History

Originally, the largest American stocks were traded on the New York Stock Exchange. An operator will contact a stockbroker, which would be about relay to a specialist on the floor of the New York Stock Exchange. These specialists to visit each market in only a handful of stocks. The specialist could correspond to the buyer with another broker seller; write tickets natural that, once treated, would have the effect of transferring the stock and relay the information to both brokers. The brokerage commissions were set at 1% of the transaction amount, ie for the purchase of a value of $ 10000 inventory costs to the buyer $ 100 in commissions.

One of the first steps to make day trading shares potentially profitable was the regime change of the commission. In 1975, the United States Securities and Exchange Commission. (SEC) has set the commission rate illegal, giving rise to a lot of brokers offering commission rate reduced.
Financial Regulations

Financial institutions to be used much longer periods: Before the early 1990’s in the London Exchange, for example, the stock could be paid for a maximum of 10 working days after it was bought, which allows traders to buy (or sell) shares at the beginning of a settlement period only to sell (or buy) by the end of the period of hope for a higher (or lower) prices. This activity is identical to the negotiation of modern times, but for the longest period of settlement. But today, in order to reduce market risk, the settlement period is generally three days. Reducing the settlement period of default reduces the likelihood, but it was not possible before the advent of the electronic transfer of ownership.

The next important step in the facilitation of the day was the founder in 1971 of the NASDAQ - a virtual exchange on which the orders were transmitted electronically. Switching from paper and wrote share certificates to the registers dematerialized shares, negotiation and computerized registration not only requires amendments to the legislation, but also the development of technology necessary: online, real-time systems, rather than in batches; electronic communications rather than the postal service, telex or physical shipment of computer tapes, and the development of secure cryptographic algorithms.

This marked the advent of “market makers”: the Nasdaq NYSE equivalent of a specialist. A market maker is an inventory of stocks to buy and sell, and at the same time offers to buy and sell the same title. Obviously, it will offer to sell shares at a higher price than the price at which it offers to buy. This difference is known as the “spread”. It is of no importance for the market-maker if the price of a stock goes up or down, because it has sufficient capital stock and always buy cheaper than it sells. Today, there are nearly 500 companies participating as market makers on the RET, each one giving a market generally four to forty different stocks. Without any legal obligation, the market makers are free to offer small deviations ECN’s than on the NASDAQ. A small investor might have to pay $ 0.25 spread (for example, it might have to pay $ 10.50 to buy a share of stock, but could not get $ 10.25 for sale), while the institution would only pay a spread 0.05 $ (10.40 $ buying and selling at $ 10.35).

Day trading is undoubtedly very lucrative for traders willing to put the time and effort to learning how it really works. It is not passive income. This is a career. But a very lucrative if done correctly.

Get your Day Trading Stocks Blog and view my daily diary of my day trading method here at: http://www.blogofdaytrader.com

The motive behind our investments is to make money and increase our monetary wealth. With so many factors involved, investment decision is a complex one. Small investors often go with their gut feelings when trying to choose among numerous alternatives to invest. Big investors use various analyzing techniques. Globalization and the growth of internet have introduced many new opportunities and threats to ponder upon. When investing, you are committing your assets for sometime, that is why you need to cover all aspects before making an investment decision.

Expected Return:
The most basic investment decisions revolve around the comparison of expected return and risk involved. No investor will take on higher risk if there is no chance of equally higher returns. Investors strive to reach on the best trade-off point between risk and return which go well with their financial requirements. These expected returns are not always equal to what an investor actually gets after some time. The possibility that actual return will not be the same what they expect is called risk.

Risk Factor:
There is hardly some form of investment which doesn’t involve risk. Government securities come close to be called risk free; but even they have some risks attached to them. Risk actually is the balancing factor of the financial markets. Various types of investment risk exist, such as financial risk, currency risk, inflation risk or capital risk are the most common one. Different investors react differently to these risks. While majority of the investors are risk averse, there are some investors who are seeking more risky ones with expectations of higher yields.

Investor’s Hunch:
Every investor will finish off with a different conclusion although the market, economy and all statistical facts and figures are same for everyone. This difference comes from the investor’s intuition. Some will start from research; by collecting lots of information and then analyzing to decide, others start from defining their objectives and then going for opportunities that suit their needs.

Globalization Factor:
Investors have slowly started to realize the advantages of international investments. Some emerging markets present better returns while other stable markets provide lesser risks. Investors have often conquered risk by diversification, and an international market provides more opportunities to achieve portfolio diversification as compared to a local market. Ignoring global markets for investment is turning your back on a whole new world of opportunities.

William King is the director of UK Wholesale Suppliers & Dropshippers and Wholesale Trade Suppliers. He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.

Investments in Costa Rica?… isn’t that an island?…somewhere in the Caribbean?

My wife and I moved to Costa Rica six years ago from the frigid climate of Minnesota where we had owned a printing business for 15 years. For as long as we could remember we had worked 12 hour days and spent most of our time figuring out how to stay even…getting ahead wasn’t even in the cards.

Then 9/11 happened. And for us it was an epiphany. Life was too short to spend the balance of our lives on a treadmill that went nowhere. We accelerated our retirement plans by almost ten years.
And over the next year we sold everything we owned and eventually found ourselves in Costa Rica (which, mind you, we had only visited once previously…and on vacation at that !).

Stupid? In retrospect, sure. To move to a foreign country where we knew no one, didn’t know the language and our only exposure was the internet? Of course, it was stupid.

But…we loved it, even in spite of the fact that life here was completely different than the books portrayed or the internet showed. We rented a small home about an hour outside of San Jose in a community which was rural, coffee country and yet still large enough to have a hospital and within 45 minutes of the main airport.

And we purchased land…and we built a house. And luckily, Rhonda had the temperament to deal with the local builders, even though we didn’t understand much Spanish. I still remained a type A and the manana attitude drove me crazy.

And much of the real estate and construction business was definitely not in any “how to…” book that we ever found. And we definitely made mistakes. But luckily they didn’t hurt us TOO much financially. And we asked a lot of questions and we learned, little by little, how the real estate market functioned in Costa Rica.

And we decided that we wanted to let others know the things that we had to learn the hard way. We started a real estate company whose sole aim was to present properties which reflected prices that locals paid…because there is a two tier real estate market in Costa Rica…one for “gringos” and one for Ticos (locals, as Costa Ricans call themselves).

Because there are very few rules or regulations for real estate here, our “exposure” of the market didn’t make us very popular with other real estate people. (remember, Costa Rica is a VERY small country…about the size of West Virginia or Houston). So our website didn’t exactly endear us to local agents who were used to charging whatever prices and commissions that they thought the traffic would bear.

And slowly we began to get a reputation…admittedly, some was good, some bad…depending upon who you talked to. And we began to get publicity…unsolicited publicity from magazines like Newsweek and Investors Business Daily. And our business grew. And grew some more.

As our business grew we began to meet more people from Costa Rica…some influential, some not… some quality, some not. And we became exposed to many more types of investments that were totally foreign to us. And we learned who really “controls” the country and which people control investment capital and have the influence to make policy. To illustrate how much of our education was “coincidence” (and I personally do not believe in coincidences… I believe that they happen for a reason) our third attorney was introduced to us purely second hand at a local gathering; “coincidentally” his wife was from Minnesota…Rhonda was then invited to a weekly gathering of “gringas”, all of which married Ticos 35-40 years ago and who have now ALL become very influential ; e.g., Minister of Finance; Minister of Agriculture and two other former cabinet members.

Because of our real estate organization (see it here: www.cr-home.com) we are able to see daily what people are seeking and watch the ebb and flow of interest. And not only are we able to gauge areas of interest but also types of properties or homes that are attracting the most interest…e.g., we know that beach properties or condominiums at present are receiving very little interest and the high end beach properties sales are very slow. We have our own hypotheses as to why this is occurring but we are dealing with “what is”, not what we think “should be”…nor do we look for esoteric explanations to explain the status. We are big believers in the KISS philosophy…” keep it simple, stupid.”

Over the past three years we have made a number of investments here…none have shown a loss and others have turned a 100% return within a 60 day period. Some have unrealized profits. We have yet to take a loss. Please understand here that we are not professional investors (if there indeed is such an animal)… we have simply taken advantage of situations that we consider to be extremely low risk. WE ARE NOT SIMPLY “HOPPING ON THE COSTA RICAN REAL ESTATE BANDWAGON”…because if we had done that, we would have already lost a significant amount of money.

Let me explain…
Our website and mission statement is all about value…and it is about education and knowing “the good, bad and ugly” BEFORE buying. Too many people get caught up in the emotion and beauty of Costa Rica and buy on impulse. And these are the people that ultimately run the risk of losing their entire investment. (con men and fraud exist everywhere but are more common here simply because of the lack of comprehensive rules and regulations concerning real estate and construction). That being said…we attract a different type of clientele…one that typically wants to ensure that he gets the most value for his or her money….and definitely not one that is an impulse buyer. We deal primarily with the “baby boomer” who is looking at Costa Rica as a retirement destination AND the buyer who wants to ensure that he or she gets the most value for their investment.
And the above paragraph illustrates the best, most concise reason why our business is almost recession proof and not affected by the “subprime crisis” and will allow us to continue to capitalize of various forms of investment in Costa Rica.

So…now that we have established our background…WHY are we recommending Costa Rica as a basis for specific types of investments?
We are not attempting to “sell” Costa Rica because we expect anyone who is examining Costa Rica as an investment to do their own due diligence. So…
- Costa Rica is home to the longest running democracy in Latin America. Its stability is unquestioned and it is allied closely with the U.S.
- Almost a third of the land mass of Costa Rica is set aside for national parks. Costa Ricans themselves are huge lovers of wildlife, flora and fauna.
- There is virtually no mineral exploration and absolutely no oil drilling in Costa Rica for environmental protection.
- The literacy rate in Costa Rica exceeds that of the States or Canada.
- Medical care is superb and available to everyone…even to those who are unable to pay.
- Costa Rica is more familiar to Americans than nearly any other foreign destination…for vacation. Nearly everyone who has visited Costa Rica wants to return and, in fact, Costa Rica has the highest return rate for vacationers of any other destination in the world.
- While Costa Rica is technically a “second world country”, its infrastructure is excellent.
- Costa Rica’s economy, while operating at a deficit, is in excellent shape.
- Costa Rica has no standing army, thus expends no funds on a national defense.
- Costa Rica espouses family values and many visitors liken it to the States from the 50s. The pace of living is slower and the Costa Rican people (Ticos) have different values than their counter parts in America and Canada.
- There are literally dozens of microclimates within a two hour drive from anywhere in the country. Where else can you drive for a day and see two oceans, several volcanoes, sandy beaches, mountains, waterfalls, lakes, rain forests, cloud forests, agricultural land, hot springs, wildlife preserves, and much much more…?
- Cost of living estimated at approximately 30% of equivalent lifestyle cost in the States or Canada.
- An estimated 30% of the population speaks or understand some degree of English.
This is only the abbreviated version of the positives of Costa Rica…other countries such as nearby Panama, Nicaragua and Mexico are attempting to woo the “baby boomers” but OUR belief is that the “blue chip” of Latin American investment will almost always win out. Just because land in Nicaragua or Panama maybe 20% cheaper or because the government offers one time incentives to expats….does not necessarily mean that it is worth the risk of your hard earned savings. Weigh the pros and cons. Some say that Costa Rica is overpriced…some say that its time has passed for investment…we say “take a look at the number of people that visit here…and that return…do your homework…then make your decision.”

Okay, we have subjectives about Costa Rica and why people visit here and keep returning. Now we need facts.
During the first six months of 2008, more than 125,000 foreigners visited Costa Rica…and this is a 16% increase over last year. And remember, this is in a so called recession which is worldwide. Don’t believe that the trend will continue?…try this: ask your friends what their impressions are of Costa Rica or what they have heard ABOUT Costa Rica. I can guarantee that the responses will be overwhelmingly positive. Subjective ? Yes, but still highly convincing and you will not get these types of responses from any other location or destination.

Numbers of weekly airline flights are climbing…ranging from American Airlines with 43, to Continental with 25, Delta with 24 down to Spirit and U.S. Airways each with 7. This does obviously not take into account visitors from other parts of the globe. Currently, the States and Canada account for over half of all visitors and tourists to Costa Rica. Europe accounts for nearly 20% and the rest of the world, the balance. This is another good rationale why our business is expanding instead of collapsing like many of the local pundits have predicted…the slowdown in the States is more than counterbalanced by Canada (which is experiencing a VERY strong economy and a very strong currency) and Europeans… who are also experiencing gains with the rise of the euro vs. the dollar and other currencies. The Costa Rican real estate market is simply not dependent upon one country or group of people to experience strong real estate interest. And please also keep in mind that Costa Rican real estate is a microcosm of Economics 101…the areas of interest for the “boomers” and second home buyers are small and it is easy to see that there are more buyers than sellers (which is really what the markets are all about… remember our KISS theory?)

We have established statistically that more and more visitors are arriving in Costa Rica. Now we need to establish a base for our investment philosophies…and it is primarily centered upon the huge number of “baby boomers” which are just beginning their retirement years. We do not need a huge elaboration as to why “boomers” are examining overseas destinations in increasing numbers…but here are a few of the major reasons:
- Cost of living…it is no surprise that costs of almost everything are climbing daily. The equivalent cost of living in Costa Rica is roughly a third as much.
- Medical care is excellent and only at a fraction of the cost.
- There is a tremendous amount of diversity here and an almost unending list of activities and sightseeing which is available daily…you will definitely never be bored!
- Stable government and environment.
- High literacy rate and people are genuinely friendly.
- Only a short plane ride from the States.
- Infrastructure is good and water is drinkable everywhere in the country.
- The banking system is excellent and safe.
- There is a huge amount of flora and fauna here which is literally unequalled anywhere in the world…and over 25% of the country’s land is set aside for national parks.
- Land and construction is still extremely affordable by comparison.
- Crime is still relatively low, especially when compared to its counterparts and “competition”.
Okay, now that we have established that Costa Rica is a viable, growing and stable marketplace AND that the “boomers” have the potential to have a major influence on the marketplace in Costa Rica…let’s pinpoint specifics which will allow us to make significant investment gains:
Most “gringos” say that they would prefer beach living. The reality is that over 50% of all people who buy on the beach sell within five years. We have found over the past five years that most gringos prefer acreage with the following features:
- Views…either the ocean from a distance or the Central Valley
- Access to good medical and professional services
- Not “too remote”
- Good shopping and dining accessibility within a reasonable drive.
- Internet availability…good infrastructure
- More moderate temperatures
- More rural than urban but still amenities available closeby
- Within a “reasonable” drive to an international airport.
- Private, but not too private; i.e., neighbors nearby but not TOO close.
- At least half to an acre of land…river, waterfall or lake if possible.
- Fruit trees and other vegetation a major plus.

With the above in mind, Rhonda and I settled in Grecia which was approximately half an hour from the country’s major airport, 45 minutes from a first class hospital (yet only 10 minutes to a municipal hospital, in Grecia). We chose to be in the mountains overlooking the town and the Central Valley. Major shopping was 45 minutes away as was “better dining” and (for me) bookstores. Notice how we fit the above “profile”? BTW, we also had a river on our property. Why do we bring this up here?…because our “property preferences” were (and are) the same as 80% of most gringos that move to Costa Rica to retire (full or part time.)

Next factor: there are very very few rules and regulations when it comes to real estate and construction in this country. There are ways to protect yourself legally but there are no sure methods of ascertaining what is a “fair and honest” price. There is no MLS system and there is not a system of comparables. For the most part, real estate is bought and sold the way it has been for decades…primarily word of mouth. This is specifically why people flock to the real estate industry…because of “net selling” or the simple fact that it is almost impossible to know what is a fair price. (net selling refers to “marking up” a property over and above what the seller wishes to “net…very commonplace here.)

Next: There are very few American style houses for sale here… and Tico houses simply are not satisfactory for 98% of “gringos” that move here (lower ceilings, smaller rooms, not enough land, no 220V power, no views, etc). This obviously brings up the logical conclusion…if there is a market, and it appears that it is highly skewed in favor of the sellers…is there an opportunity here to capitalize on that imbalance? (for those of you who are thinking ahead here…remodeling is difficult because almost all construction here is block and steel and all wiring and plumbing is encased in concrete…remodeling costs actually exceed “STARTING FROM SCRATCH”.)

Because there is a two tier market here…one for locals and one for “everyone else” it is important to ensure that pricing received is comparable to others of comparison (as much as possible in a country where “comparables” are simply conversation over coffee.) A “gringo” certainly can look for his or her own property but it is almost a guarantee that prices will be at least 50% higher as locals share the common perception that “gringos” have money trees “back home” and that we will pay almost “any asking price” because we don’t know the culture or the area.

And remember we know the markets…who is buying, what they are seeking and what they will pay. And then obviously the determination has to be made if it is possible to make a profit.

The last item to take into account is the simple fact of Costa Rican land itself…without the “gringo factor”. Ticos (Costa Ricans) are accustomed to an inflation rate of around 12% annually and many compensate by buying additional land and simply holding hard assets. And when selling, Ticos know that if they do not get their price today…they will in six months or in a year. The trick then becomes to truly know the markets and to be able to take advantage of buyers that MUST sell and that need money.

On to “brass tacks” and specifics…
1. The void of, and lack of, American style houses in many areas is crying to be filled. The following is a quick “down and dirty” summary of approximate profits to be made from such an investment: Land cost: (one acre…view property in Grecia or environs) $50,000; American style house of 3 BR, 1500-1600 sq. meters: $75,000…misc costs including architect, utilities and landscaping: $10,000. Selling price: $190-195,000, possibly more. Estimated gross ROI (before payout to limited partner or construction supervisor)…50%.

2. Smaller developments can be even more profitable…we prefer to stick with a much smaller number of homes as it is more manageable and you fly under the municipality’s radar…nothing illegal, just avoiding the possibility of locals swarming around with their hands out. Typically, we raise money in smaller increments (shares) as the amounts normally exceed $250,000.

Profit estimates here are extraordinary.
3. Oftentimes, at least bimonthly, we see a property at an extraordinary price…one that we know is substantially below market value. Sometimes these properties can be resold almost immediately…other times they involve buying a larger piece and reselling smaller units of land. A good example is a block of four quarter acre beach front parcels which are titled and located only 1 ½ hours from San Jose on the Central Pacific coast. The owner is in the States and is admittedly desperate. The units can be picked up as a whole and resold for at least a 50% profit (our opinion). They are RARE and gorgeous.

4. Recently, we were contacted by the owner of a small house in Grecia. We had previously listed it at a decent price…but no takers. It has a gorgeous view and the house needs probably $5000 worthy of work. In our opinion, the owner is now willing to sell for close to land value only. Not a huge winner, but percentage wise, probably a 50% profit is available. Estimated ROI to the investor…50%+

5. Occasionally we are shown properties which have a “glitch” in their titles…not major problems but simple filings to correct them. “informacion processoria” properties are normally those which have passed down from family member to family member over the years without doing proper registration or filings. It is a simple matter for a competent attorney to correct the oversight (and, in many cases, it was simply not done for lack of funds). These properties can oftentimes be had at substantial discounts. A good example is a property currently being offered of nearly two acres just on the outskirts of San Jose…a suburb called Aserri. The property HAD to be sold (family financial emergency)…asking price was actually less than 20% of what comparable properties were currently selling for ADJACENT to this property. Estimated “fix” time is six months…properties like this do not often surface and, most of the time they are “no brainers”.

Now, we are the first to admit that 99.9% of people that read about these investments are not able to do them themselves. This is why we have typically set up “arrangements” or agreements to handle the everyday details and carry the project from start to finish. Obviously, investments such as the Aserri property, or others that are shorter term investments that can be resold quickly, do not need “special handling”.

Hopefully, this investment overview has sparked your interest. We have met nearly all of our investors…some before the physical and actual investment, other afterward. We have an annual pigroast in January and typically nearly all of our investors along with friends and neighbors from Costa Rica get together for fun and an overview of each investment status. In the past it has been a huge hit…plus of course, it is a great excuse to come to Costa Rica.

If you have an interest in discussing investments of these forms… please email or call us.

Randy and his wife Rhonda settled in Grecia six years ago and have built a company which has become , arguably, Costa Rica’s most recognized real estate and investment company. You can see their website at http://www.cr-home.com All are invited!

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