Monday March 21st

Only a few minutes away from the opening bell for this week in trading and its looking like a very strong start for the week.  Potentially pull back the losses incurred over the past 2-3 weeks due to the Earthquake in Japan and the Libyan revolt.

For my Portfolio VOD is in lock step with the London exchange for this company with a 4% gain at this moment.

AA which was one of my hardest hit stocks over that time frame is up 1.5% and should be about 5.25% off break even point.

CIM performed on the market over the same time frame practically flat and was very pleased as to my prediction for the price stability of it, though pre-market the stock is up 1.2% which is always a good thing.

Lets all get rich and quit our jobs!!!

Edit: It would appear the Vodafone jump is due to an increase in valuation of Mobil telecom companies with the acquisition of T-Mobil by AT&T. http://www.bloomberg.com/news/2011-03-21/vodafone-rises-as-verizon-seen-to-gain-from-at-t-t-mobile-deal.html

Earnings per Share

Something i have wanted to get more into is explaining the terms used in investing and how they can be used to analyze the value of a company.  First one i will get into is Earnings per Share which is one of the most important pieces of data about the stock and also the company itself.  A simple definition of this ratio is to show how much profit the company earns in the most recent 4 quarters for each individual share.

For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M).

Also another aspect of this is Projected Earnings per Share or Forward Earnings per Share, which is an estimate either done by the company itself or by 3rd party analysts.  This is far more important then regular Earnings per Share but it is not a fact like the former but a prediction, and a miss on the estimate of the company profits will have a drastic effect on the value of the stock.  One thing to take in mind when reading the company reports is the nature of how the company reports, some will be overly optimistic and set goals that are high but if missed can really damage a stock and others that are more conservative and will set lower goals but have a greater likelihood of meeting or exceeding these goals.

Why do People Invest in Gold?

Some people have an understanding of why so many people invest in gold, but i hope to shed some further light on this subject on the uninformed, and maybe some extra insight even to the ones that know already.  The main purpose for people to invest in gold is not for capital appreciation, though based on the increases in the price of gold over the years this might seem to be the case.  The purpose is capital protection against inflation and against down turns in the market.  Inflation is linked with the concept of  Fiat Currency, which is money that holds no intrinsic value to it other then through government regulation.  Which also means the Value of the currency can go up and down based on the total supply of it in the Economic System.

Gold on the other hand is used as a hedge against inflation and to protect the value of your current assets into the future.  The best method for demonstrating this is not to compare the value of it to a Fiat Currency but to the value of other material items.  I will use an example i found for comparing the value of 1 oz of gold to the cost of bread.  Scholars estimate through presevered records that in 400 BC. 1 oz of gold could purchase you 350 loaves of bread, now compare this with the modern cost of bread in USD and compare with the value of 1 oz of gold in USD.  Gold is currently at arround  $1400USD for 1oz. of Gold which divided by 350 comes out to $4USD per loaf of bread. Seems to me a fairly accurate comparison when u take into account this is over the span of almost 2,500 years of human history.  Though due to speculation on the price of gold will raise the price of gold artificially to create a bubble, which would account for the difference in the price of bread to gold ratio being different by a few cents.  The chart below shows the value of the US dollar in purchasing power since the creation of the Federal Reserve.