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Three New Year's Resolutions That Will Bolster Your Investment Portfolio in 2011
If everyone kept their New Year's resolutions, most of America would be thin, fit and rich.
That's because the three most popular resolutions tend to involve dieting, working out and improving the family finances.
Most of those promises tend to fall by the wayside before each New Year gets too far along.
But 2011 can be different – at least in terms of your finances … that is, if you embrace the three easy-to-follow resolutions that I'm about to reveal.
In fact, if you follow these, your investing future will be much, much richer.
Goldman Sachs (NYSE: GS) $450 Million Investment Fuels Facebook IPO Speculation
Goldman Sachs Group Inc. (NYSE: GS) invested $450 million in Facebook, valuing the popular social networking site at $50 billion and heightening speculation on whether or not Facebook will go public this year.
The deal, announced in a report in The New York Times Sunday night, makes Facebook worth more than Internet-related companies like eBay Inc. (Nasdaq: EBAY), Yahoo! Inc. (Nasdaq: YHOO) and Time Warner Inc. (NYSE: TWX). It'll give the company a competitive edge in the tech arena and allow it to pursue more acquisitions.
Digital Sky Technologies, a Russian investment firm that has already put about half a billion dollars into Facebook, also invested an additional $50 million in the deal. Goldman has the right to sell up to $75 million of its stake to Digital Sky. Digital Sky started its involvement in the social networker in 2009 with a $200 million investment and now has about a 10% stake through stock purchases from Facebook employees.
The deal highlights the booming popularity of social media sites like Facebook, Twitter and Groupon – all of which are gaining increased attention from investors. Facebook jumped ahead of Google Inc. (Nasdaq: GOOG) as the most-visited Web site in 2010, according to Internet research firm Experian Hitwise.
FCC's Net Neutrality Plan Disappoints Comcast Corp. (Nasdaq: CMCSA), Netflix Inc. (Nasdaq: NFLX)
The Federal Communications Commission on Tuesday approved its net neutrality proposal, aiming to protect the free flow of information over the Internet and limit the power of Internet service providers (ISPs) to act as Web gatekeepers.
Net neutrality means providers like Comcast Corp. (Nasdaq: CMCSA) must treat all Internet content equally and cannot interfere with legal Web traffic. It also prohibits "unreasonable discrimination," meaning ISPs can't deliver Amazon.com Inc. (Nasdaq: AMZN) faster than eBay Inc. (Nasdaq: EBAY), or block bandwidth-straining Netflix Inc. (Nasdaq: NFLX).
The rules also require ISPs to provide customers with more information on download speeds and usage limits, and give the FCC power to reject "paid priority" agreements where a content provider like Google Inc. (Nasdaq: GOOG) would pay Comcast more for faster delivery.
"We must take action to protect consumers against price hikes and closed access to the Internet – and our proposed framework is designed to do just that: to guard against these risks while recognizing the legitimate needs and interests of broadband providers," FCC Chairman Julius Genachowski wrote in a blog posting earlier this month.
Warren Buffett Emphasizes Investment Risk Management With Successor Pick Todd Combs
Warren Buffett's announcement Monday that a little-known hedge fund manager, Todd Combs, will help oversee his $100 billion investment portfolio at Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) surprised investors and highlighted Buffett's emphasis on risk management for investment success.
Adding 39-year-old Combs to the Berkshire team makes him a top contender to take over Buffett's investment management duties whenever the Oracle of Omaha leaves his company.
"He is a 100% fit for our culture," said Buffett. "I can define the culture while I am here, but we want a culture that is so embedded that it doesn't get tested when the founder of it isn't around. Todd is perfect in that respect."
Defensive Investing: Covered Calls Increase Cash Flow, Up Protection
Once you get beyond buying puts or calls for purely speculative purposes, no other options strategy is more popular than selling covered calls – and with good reason: Few investment techniques offer more potential benefits with such a low level of risk.
Considered the most conservative of all option plays, this strategy – which basically involves selling (or "writing") one call option for each 100 shares of a stock you own – can be employed for one or more of five distinct purposes:
- To generate a stream of additional income – over and above dividend payments – from individual stocks in your equity portfolio.
- To generate a stream of income from stocks you own that pay no dividends.
- To reduce the effective cost basis of longer-term stock holdings by bringing in option premiums, thus recovering some of the original purchase price.
- To provide a limited hedge against potential losses in portfolio value as a result of overall market pullbacks or cyclical downturns in the prices of specific stocks.
- As an income-producing substitute for a "limit-sell order" – intended to liquidate a stock position when a specific profit target is achieved.
As the Rescue of the Chilean Miners Shows, this South American Country is Superbly Managed and an Enticing Investment
The efficient, well-managed rescue of the 33 Chilean miners was an affecting spectacle for the world. It also should remind us that Chile is a well-run country, and that in an era when commodities are ever more important to the global economy, it is becoming an essential part of investors' portfolios.
China Manufacturing Slowdown Not Enough to Cause "Double Dip"
The China manufacturing sector expanded at the slowest rate in 17 months in July, showing the government's efforts to tighten lending is weighing on the country's economy. But the Asian juggernaut is still posting strong enough growth to keep the rest of the world out of a "double dip" recession.
The HSBC China Manufacturing Purchasing Managers' Index released Sunday showed activity fell to 49.4 in July from 50.4 in June. A reading above 50 signals expansion, indicating manufacturing activity actually contracted for the first time since China's economic recovery began.
The HSBC PMI's reading was the first below 50 since March 2009. Measures of output, orders and export orders all showed contractions. Another measure, the official government PMI released yesterday (Monday), fell to 51.2 in July from 52.1 in June, the third straight month it has declined.
Similarly, HSBC Holdings plc (NYSE ADR: HBC) economist Qu Hongbin said China is having a "slowdown not a meltdown" and "there is no need to panic."
BP's Offshore Plans Spark Talk of Drilling Ban Among Concerned European Nations
BP PLC's (NYSE ADR: BP) plans to drill for oil and gas off the coast of Libya within weeks has caused nearby European countries like Italy to sound the alarm for a drilling ban until they ensure the safety of surrounding waters.
Italy's Environment Minister Stefania Prestigiacomo was the first European Union official to suggest a drilling ban to give nations around the Mediterranean Sea time to coordinate a drilling policy.
"A moratorium could be a right approach for potentially dangerous drilling…to give Europe time to define a new and specific strategy for the Mediterranean especially in light of the risk exposed by the Deepwater Horizon spill," Prestigiacomo wrote to the Financial Times.
BP has a rig in Libya's Gulf of Sirte, about 500 kilometers from Italian and Maltese territory. The first of five planned wells will be about 200 meters deeper than the Macondo well that spewed as much as 184 million gallons of oil into the Gulf of Mexico for almost three months.
BP Hopes for a CEO Savior in American Robert Dudley
BP PLC (NYSE ADR: BP) plans to oust Chief Executive Officer Tony Hayward from the top spot and to appoint Robert Dudley – an American and an insider – in an attempt to regain U.S. trust after a highly criticized, ineffective response to the Gulf oil spill.
BP is expected to announce the change today (Tuesday) when it releases its second-quarter financial report and Hayward addresses shareholders. The official appointment would be effective Oct. 1 – following a transition period that would give BP time to permanently seal the massive oil leak and to clean up most of the five million barrels of oil that have polluted the Gulf region as a result of the worst environmental disaster in U.S. history.
G20 Summit Bogged Down by a Shaky Global Recovery
The Group of 20 (G20) countries concluded their weekend summit with an outline for reducing budget deficits and a delay in global banking reform, but failed to create a unified policy as nations find themselves in different phases of economic recovery.
Leaders pushed decisions on global banking regulations to the agenda of the November session in Seoul, South Korea. The meeting's concluding statement expressed unity in countries' desires to reduce debt, but did little to alter austerity plans and stimulus measures countries have already created.
"With the common efforts of G20 members and the international community, the world economy is gradually recovering, but the foundations of the recovery are still not solid, the process is not balanced and there are still many uncertainties," said Chinese President Hu Jintao. "All this shows that the deeper impacts of the financial crisis have still not been surmounted, and systemic and structural risks to the world economy remain very grave."
The G20 communique underscored the countries' focus on achieving "growth friendly" fiscal policies while acknowledging that leaders must reduce the budget deficits, although policies and budget cuts should be tailored to suit each individual nation.
"The path of adjustment must be carefully calibrated to sustain the recovery in private demand," the G20 nations wrote. "There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth."
Analysts said the divergent views on how to sustain economic recovery marked the lack of effectiveness of the G20 forum.