9 ways to keep your New Year's resolutions

With the start of a new decade, let's make sure you stick to those New Year's resolutions.

If your New Year's resolutions from last year have gone unresolved, you're not alone. Now a new year offers another opportunity to achieve your goals, and these nine tips should help you keep to your New Year's resolutions.

1. Make it something you really want. Don't make it a resolution that you "should" want or what other people tell you to want. It has to fit with your own values.

"Put some thought into it," says Richard O'Connor, author of "Happy at Last: The Thinking Person's Guide to Finding Joy." And avoid knee-jerk New Year's resolutions, he says. "I encourage people not to make cheap resolutions, but to save it for something meaningful."

2. Limit your list to a number you can handle. "It's probably best to make two or three resolutions that you intend to keep," says O'Connor. That way, you're focusing your efforts on the goals you truly want.

3. Be specific. "To be effective, resolutions and goals need to be pretty specific," says O'Connor. Jettison the amorphous "exercise more," in favor of "I'm working out at the gym Monday, Wednesday and Friday at 5:30 p.m."

4. Automate. Automating financial goals can maximize your odds for success without you having to do anything, says Keith Ernst, director of research for the Center for Responsible Lending in Durham, N.C.

If your goal is to save $3,000 this year, calculate the amount out of each check, then arrange to have it automatically deposited into your savings account each time you get paid, says Ernst.

5. Make a plan. Rather than stating one daunting goal, create a series of smaller steps to reach it.

"Have an action plan," O'Connor says. "Figure out exactly what you want to do."

If you need immediate rewards, here's a suggestion. "Ask yourself: What are the short-term goodies?" says Susan Wilson, co-author of "Goal Setting: How to Create an Action Plan and Achieve Your Goals."

For example, if you want to exercise regularly and love spending time with your friends, getting the group together to walk regularly could give you a short-term payoff and help you meet the long-term goal, she says.

6. Be prepared to change some habits. One reason that resolutions fail is people don't change the habits that sabotage them, says Rosalene Glickman, author of "Optimal Thinking: How to Be Your Best Self."

One potent approach is to realize that all you ever have is the present moment. So ask what you can do now that will get you closer to your goal, says Glickman.

It could mean trade-offs such as sacrificing an hour of couch time for your new goals. "That's how you get resolutions implemented," says O'Connor.

Another good strategy is to arrange your life so you don't have to wrestle with temptation, he says.

7. Write down the goal and visualize it regularly. Writing and visualizing are effective tools for fulfilling a goal because they fix it firmly in the subconscious, says Stephen Covey, author of "The 7 Habits of Highly Effective People."

And if you write down your goals, put them in a prominent place where you'll view them frequently, such as on the fridge or on your desk. Glickman keeps her important life goals and priorities on her computer's screen saver. That way, "I have to see them," she says.

8. To tell or not to tell? Having someone hold you accountable can be a powerful tool. "In general, making a public commitment adds motivation," O'Connor says.

Skip the naysayers, but if you have one or two people in your life who will act as cheerleaders or coaches, share the goal with them, says Wilson.

9. Forgive yourself. If you fall off the wagon, jump back on. Many people fall into the trap of believing that if they stumble, they should give up, says O'Connor.

The truth is you don't have to wait for next year or for some magic moment. Instead, realize that "slipping is part of the process," O'Connor says. Then, get back to your goals.

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It's now 2011 Happy New Year Everyone!

Hello there, this is Andy wishing you a very joyous new year! May this 2011 brings you great health, prosperity and plenty of opportunities! I am just about to set new goals for 2011, how about you? ;)

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6 excuses for not saving for retirement

Do you need an excuse?

Like the proverbial grasshopper, some people neglect to save for retirement and have plenty of excuses to justify their lack of foresight.

Every year, the Employee Benefit Research Institute conducts its retirement confidence survey to gauge how prepared Americans are for retirement. The 2010 survey, released in March, found that 54 percent of workers have less than $25,000 saved, excluding the value of their home and any defined benefit plans.

The justifications are endless and investment advisers have heard them all. While some excuses are grounded in reality, others defy logic.

Excuse #1 I'm paying for my kid's college education

Higher education costs money, as does retirement. Though it's a noble goal to fund Junior's college education, it shouldn't come at the expense of saving for retirement.

"Everyone wants to retire; not every kid goes to college," says Peter Donohoe, Certified Financial Planner at PRW Associates in Quincy, Mass.

"If you do have kids that go to college, there are options for kids, student loans and scholarships," he says.

Obviously, no such loans exist for retirees. Given the near extinction of defined benefit plans -- those pension plans where companies foot the retirement bill -- workers need to completely overhaul their spending and saving priorities.

"People have not been willing to make the sacrifice to save more for retirement. This is really going to hit home when we see people hitting retirement age and not being able to retire," says Carrie Coghill Kuntz, director of consumer education for FreeScore.com.

Excuse #2 My parents died young

Expecting to die young is not a retirement plan. It's tragic when it happens, but it cannot be relied upon as a reason to spend every cent in the present.

"Health and medicine are different now, and statistics are showing that people are living a decade longer. What happens if you don't die at 60?" says Certified Financial Planner Susan Hirshman, president of SHE Ltd., a financial services consulting firm, and author of "Does This Make My Assets Look Fat?"

Another investment adviser runs her clients' financial plans to age 100.

"We tell our clients to have their retirements funded 120 percent. I say, 'Listen, do you have an aunt or uncle who lived into their 90s?' People don't realize how much they really need to save for retirement," says Rosann Roge, a Certified Financial Planner at R.W. Roge & Co. in Bohemia, N.Y.

The prospect of being a penniless 99-year-old should spur many people to save more, but procrastination persists.

Excuse #3 I'll live on Social Security

According to the 2010 trustees report from the Social Security Administration, Social Security reserves will run out in 2037. Projected tax income should be able to cover 75 percent of benefits through 2084. The best-case scenario for younger generations of Americans, with no action from Congress, is 75 percent of their scheduled benefits.

That will be far from adequate to cover living and health care expenses. Today, full Social Security benefits barely allow seniors to surpass the poverty line. The average monthly benefit for retirees is $1,172, according to the Social Security Administration.

"People believe that their lifestyles will change significantly in retirement. And study after study has shown that it does not. Many planners say that people will need 70 (percent) to 80 percent of their working income as retirees. I'm up there closer to 100 percent," says Hirshman.

As the maximum Social Security payout is $2,300 per month, it's likely that savings will have to make up a large portion of your future retirement income.

Excuse #4 I'll keep working

More Americans are continuing to work into their golden years. The Bureau of Labor Statistics predicts that by 2018, workers 55 and older will make up nearly a quarter of the country's working population, or 23.9 percent.

"My biggest worry is what happens to those people when they physically can't work anymore," Kuntz says.

Hirshman agrees.

"Studies show that the reason people retire early has to do with health issues more than anything else. You never know what your health is going to be," she says.

Not to mention the state of the job market.

A study from the John J. Heldrich Center for Workforce Development at Rutgers University found that workers who lost their jobs in 2009 as a result of the recession were still struggling six months later. Only 12 percent of those 50 and older had found full or part-time work compared to 21 percent of workers ages 30 to 49, and 29 percent of those ages 18 to 29.

Clearly, the health of the job market is far from certain, and jobs will not always be abundant.

Excuse #5 Too many current expenses

Not everyone fritters away their money on junk. In many cases, there are just too many expenses in the present to even think about the future.

The expenses can run the gamut from workers sandwiched between the expenses of young kids and elderly parents to student loan payments or credit card debt.

"There are so many current obligations and expenses that some people are not thinking about themselves. They are just making ends meet and hopefully, by some miracle, have some money for retirement," says Hirshman.

No matter what the cause, the cure for overextended finances may be old-fashioned budgeting.

"Getting back to the basics in terms of budgeting can help someone find the resources for saving for retirement. It's like making your mortgage payment. It has to be done. It hasn't sunk in yet how important it is," says Kuntz.

That means tracking expenses and cutting spending to the bone.

"You have to look at trade-offs, what is it going to take to get (to retirement)," says Hirshman. "Don't consider it deprivation today. Think of what you're getting tomorrow."

Excuse #6 I'm unemployed

With no income, retirement planning is forced to take a backseat to such trivialities as food and shelter.

"Retirement savings is one of the first things to go because it is discretionary. In order to live, you don't need to squirrel away 10 percent of your pay," says Donohoe.

Though anyone who's unemployed would like to save as much as possible, it can be difficult to make retirement contributions when the job search turns into a six-month slog.

"There are times when clients really do need to lower how much they are saving for retirement in these situations," says Donohoe.

Once you're back on your feet, retirement planning can swing back into full force.

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10 sweet saving tips for 2011

It might be the right year for you to start saving money for a variety of reasons -- emergencies, retirement, health care or a possible job loss. If you're already saving money, 2011 may be the year to revisit the return on your checking, savings and other accounts.

These tips will get you moving in the right direction.

Tip #1 Start an emergency savings account

The biggest barrier to saving is not being in the habit of saving. The best way to get in the habit is to pay yourself first by having money directly deposited from your paycheck or even your checking account into a dedicated emergency savings account. This can be done concurrently with other goals such as paying down debt or saving for retirement, not instead of those goals. You won't miss what you don't see, and putting your savings on autopilot is a great way to reinforce the savings habit when unplanned expenses inevitably come along and chew a hole in what you've saved. You're only one paycheck away from beginning to replenish your savings balance.

Tip #2 Get a high-yield savings account

OK, maybe these days "high-yield savings account" is a contradiction in terms, but there are three requirements when looking for a place to put your rainy day fund. It must be liquid, meaning you can get to the money whenever you need it. It must be free of investment risk. And you must earn a return that preserves your buying power against the erosive effect of inflation.

The top-yielding savings accounts and money market deposit accounts insured by the Federal Deposit Insurance Corp. meet all three of these requirements. And they can be obtained with little or no minimum deposit, and are available to consumers anywhere in the 50 states. Check Bankrate.com for the highest-yielding, FDIC-insured savings accounts available nationwide.

Tip #3 Find a free checking account

Having the wrong checking account can take hundreds of hard-earned dollars out of your pocket every year. The average interest-bearing checking account charges a monthly service fee of $13.04 and requires maintaining a balance of more than $3,800 at a near-zero rate of interest to avoid fees.

Instead, look for one of the many accounts that charge no monthly service fees or per-transaction fees, and don't require a minimum balance. Bankrate.com found that 65 percent of large banks and thrifts in markets around the country still offer a noninterest, free checking account. An additional 23 percent offer an account that can become free by signing up for direct deposit or using a debit card a handful of times per month.

Although large banks are jumping off the free-checking bandwagon, free checking accounts can still be found at smaller community banks, credit unions and online banks. Check out Bankrate.com's tips on avoiding fees and find a free checking account that meets your needs.

Tip #4 Track your monthly spending

People hate to use the "B" word -- budgeting. Call it what you want, but you do need to get a handle on your spending. Doing so does two things. It helps you determine where you can cut back and helps maximize your savings efforts.

Begin by tracking your spending for a two-month period. Then take this information and build a realistic monthly budget (or "spending plan," if you prefer). Finally, track all of your monthly expenses, everything from the $1 tip to the grocery store bag boy to the monthly mortgage payment. At the month's end, tally up your spending against the plan and see where you did well and where you didn't. If you spent less than planned, move the excess into your high-yield savings account or use it to pay down debt.

Tip #5 Pay down high-interest credit card debt

For many households, the best return on your money is to pay down credit card debt. Whether carrying balances at 12 percent or 22 percent, credit card debt is typically the costliest debt households have. Plowing excess cash into repayment of credit card debt is a double-digit, risk-free return because it reduces the outstanding balance and the resulting interest charges. This is a sound move now as credit card rates are likely to move in one direction -- higher -- over the next few years.

When prioritizing your debt repayment, start with the highest-rate credit card first and focus on paying off the balances in descending order. Use Bankrate.com's debt pay-down calculator to develop a custom, month-by-month plan on repaying your debt.

Tip #6 Begin or boost contributions for retirement

The burden of supporting ourselves in retirement is increasingly on our shoulders. The first introduction to retirement savings often comes through a workplace retirement plan such as a 401(k). Contributions not only reduce your taxable income now, but your investment goes to work immediately and grows without the drag from taxes until you begin withdrawals in retirement. The regular contributions made with each paycheck represent the best example of dollar-cost averaging, buying fewer shares when values are high but more shares when prices fall. Any employer contribution, even at a reduced rate, still represents free money, so be sure to contribute at least enough to maximize any employer contribution.

If your employer offers a Roth 401(k), your contributions are made with after-tax dollars but withdrawals in retirement will not be dinged by taxes at all, allowing you to keep your entire nest egg.

Tip #7 Make an IRA contribution

If you or your spouse has earned income, then you are eligible to contribute to an Individual Retirement Account. Those under age 50 can contribute a maximum of $5,000 and those 50 and older can contribute up to $6,000, thanks to permissible catch-up contributions.

With an IRA, you can choose investments that aren't available in your workplace retirement plan, such as commodities, individual stocks or certificates of deposit, giving you access to investment options that result in a more diversified portfolio.

A traditional IRA offers tax-deferred savings while a Roth IRA offers tax-free savings for retirement. But Roth IRA contributions are limited based on household income.

Tip #8 Rebalance your investments

It has been a positive year for stocks and bonds, with many emerging markets and commodities off to the races. Meanwhile, cash yields are hovering near zero. Given this variation in returns, your portfolio may look much different than it did at the beginning of the year. Outsized performance by some asset classes can distort your asset allocation widely from its intended target, so rebalancing your investments back in line with your goals and risk tolerance is a prudent step.

Rebalancing also enforces the discipline of buying low and selling high, as you'll be shifting some money out of the assets that have performed well and into those that have lagged on a relative basis. This also helps reduce the susceptibility of your portfolio to a sharp correction in the markets.

Rebalancing is a good habit to undertake each year, but it is particularly important in a year of volatile movements or disparate returns between asset classes.

Tip #9 Sign up for a flexible spending account

Almost everyone incurs costs for medicine, prescriptions and health insurance copayments. Perhaps you also have dependent-care expenses while you're working, or you have to pay commuting costs to get to work. If your employer offers a flexible spending account as part of your benefits, consider signing up.

A flexible spending account, or FSA, allows you to pay for medical, dependent care or transportation costs with pretax dollars set aside with every paycheck. By paying with pretax dollars instead of after-tax dollars, you're essentially getting a discount on all these expenses you regularly incur. How big a discount? It depends on your marginal tax bracket, but those in the 15 percent bracket are saving 15 percent by paying with pretax money instead of money that has already been taxed. Contact your employee benefits department to get specific information.

Tip #10 Consider a rewards credit card

Do you always pay your credit card balance in full? If so, you're the ideal candidate for a rewards credit card. With a rewards credit card, you are compensated in the form of cash back, airline miles or one of many other methods for everyday purchases you make. Identify what type of reward is most appealing to you and compare credit card offers based on what percentage of your purchases are paid out in rewards.

A 1 percent reward ratio is typical, but many credit cards exist that have higher payouts for certain categories of spending or for spending above a certain threshold. Finding the card that best fits your spending pattern can put hundreds of dollars per year in your pocket for expenses you'd incur anyway.

The keys to success are always paying the balance in full and resisting the urge to overspend just for the sake of the reward. Check out Bankrate.com to find the best card for you.

-BankRate-

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Believe It or Not, These $100+ Stocks Are Cheap

Everyone loves a $5 stock that doubles, including me. But right now I'm finding some of the biggest gains are coming from stocks trading in the $100 range. Don't make the mistake of thinking a $100 stock is expensive. With growth rates going through the roof and strong buying pressure, these stocks should prove to be bargains at current valuations.

I'm here to help you make money year in and year out and right now there's money to be made in the five stocks I'm going to tell you about today. Let's start with Apple (AAPL) and Amazon.com (AMZN).

Both of these companies have been on my favorites list for more than a year. I first recommended APPL in October of 2009 when shares were nearly $190 apiece! I'm sure there were people out there who thought I was crazy, but with the launch of iPhone 4 and the iPad since and shares now trading around $330, crazy like a fox is more like it. And right now I still like the company at current prices and would recommend it for purchase in just about any portfolio.

The same is true for AMZN. I recommended this one in my Blue Chip Growth service back in June of 2009 when shares were about $83 a share. This may have seemed like a pricey stock in a sector that many were writing off–online retail–but I saw the potential for the company to grab customers looking for a bargain. And boy has that paid off. The stock is up 122% for my subscribers and even with shares trading over $185 right now, I still think the company has a bright future.

Across all four of my newsletters, there are about 14 stocks trading near or above $100 a share. In addition to AAPL and AMZN, the three that I like best right now are Netflix (NFLX), Novo Nordisk A/S (NVO) and Millicom International (MICC).

These are fantastic companies with incredible growth prospects that you shouldn't be afraid to buy at current prices.

Netflix (NFLX): This movie rental company has developed an ingenious business model built around the idea that individuals don't want to leave their houses in order to rent a movie. Instead, Netflix sends movies directly to consumers; through the mail… people walk no further than their mailboxes to rent DVDs. Netflix says that it ships around 2 million DVDs every day. It also streams thousands of movies directly to subscribers through their computers and video game consoles at no extra charge. Netflix caters to the "inner couch potato," and since we all have that potato inside of us to some degree, it should come as no surprise that the company boasts more than 12 million subscribers! NFLX currently trades at about $178 a share and I'm recommending it as a buy in Emerging Growth.

Novo Nordisk A/S (NVO): This company has made multiple appearances on my Buy Lists because it is one of the world's leading producers of insulin. The company also makes insulin injection devices and diabetes education materials. Its products include Levemir and NovoLog (which mimic natural insulin regulation more closely than human insulin) and FlexPen, a prefilled insulin injection tool. In addition to its diabetes portfolio, Novo Nordisk also has products in the areas of blood clotting management, human growth hormone regimens and hormone replacement therapies. Forward growth estimates are compelling and that's why this $111 stock is a top buy in my Global Growth service.

Millicom International (MICC): As you can probably guess by the name, Millicom provides cellular phone service. It has more than 23 million subscribers in 16 emerging markets. These are subscribers who typically have limited landline exposure because of a lack of infrastructure. Millicon's core market is Latin America, where it does approximately 75% of its business, but the company also has cellular operations and licenses in countries in Africa and Asia. Nearly all of Millicom's subscribers are prepaid wireless service users. This gives the company a great opportunity to upsell its products to this new customer base and ensure growth for the company. MICC is trading just under $100 right now and I'm betting that it will cross the $100 threshold and more in the weeks to come. My Quantum Growth subscribers are up about 3% in this position, but it's really early in the game for MICC and there's still time for you to grab your share of the profits in this play.

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Goldman-Sachs Makes a $500 Million Bet

Investors who hate Goldman-Sachs (NYSE: GS) have one more reason to despise the former investment banking giant.

The firm recently laid a $500 million bet on Facebook - the pre-IPO social networking website with over 500 million users worldwide. And they've valued it at $50 billion, meaning they have a one percent stake.

So why hate Goldman because of this deal?

Part of the untold story is that in exchange for the $500 million in up-front cash, Goldman obtained the ability for their clients to buy up to $1.5 billion in equity.

It's these kinds of back-door, pre-IPO deals that completely let big "banksters" and institutional traders jump in line in front of even the savviest individual investors.

In effect, it's likely already too late to profit from the inevitable Facebook IPO...

But Chief Investment Strategist Ian Wyatt of Wyatt Investment Research recently put together a proprietary research report on three technology investments that aren't under the thumb of Goldman-Sachs.

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Top 6 Stocks for January 2011

Technical strength should make these picks winners

Best Buys for the New Year - Top Stocks to Buy

Stocks had one of the best Decembers in recent years, and the internal and sentiment indicators are now very overbought. But with an enormous inflow of cash into the system from pension, profit sharing and 401(k) plans, and other sources that generally put money to work early in the year, we are unlikely to see a correction before mid-January.

A pullback later in the month would be welcome, though, since it could provide an excellent opportunity to jump on some of our favorite growth and cyclical stocks. The following technical picks represent the best stocks to buy for the month ahead.

Top Stock #1 – Anadarko Petroleum Corp. (APC)

Oil and gas exploration and production company, Anadarko Petroleum Corporation (NYSE: APC), has operations primarily in the United States, the deepwater of the Gulf of Mexico, and Algeria.

APC is in a bull market that began in October 2008. The stock spent most of 2010 retracing a breakdown that occurred in April. In December, the stock broke out on a huge breakaway gap amid rumors that BHP Billiton Limited (NYSE: BHP) had its sights set on APC after it failed to acquire Potash Corp. of Saskatchewan (NYSE: POT). The rumors have not been confirmed, but based on the current price, the stock is still worth purchasing as a play on the continuing increase in the price of crude oil. Technically, the breakout has a target of $90-plus

Top Stock #2 – Oracle Corp. (ORCL)

Enterprise software company Oracle Corp. (NASDAQ: ORCL) broke from a double-top in September to a new two-year high. The breakout was supported by very high volume and is a strong signal that even higher prices are in the stock’s future.

The acquisition of Sun Microsystems has “transformed ORCL into a software and systems vendor,” according to S&P. And S&P currently rates the stock a “five-star strong buy” with a fundamental price target of $37. The trading target for the breakout is $35.

Top Stock #3 – PowerShares DB Agriculture Fund (DBA)

The PowerShares DB Agriculture Fund (NYSE: DBA) seeks to track the price and performance of the Deutsche Bank Liquid Commodity Index. Food shortages and higher prices for commodities like wheat, corn, soybeans and sugar are being forecast by economists worldwide. And the recent move by China to raise interest rates is evidence that the country’s central planners are concerned about possible inflation in food prices that could cripple their economy.

Note the impressive pickup in volume on the chart, as well as the golden cross and the recent breakout from a double-top following a bounce from its 50-day moving average. Traders should target $36 for a quick trade since DBA broke down from $36 in August 2008, but long-term investors may want to hold this ETF as a cornerstone investment with a price objective north of $50.

Top Stock #4 – Rio Tinto (RIO)

Metal and mineral production company Rio Tinto (NYSE: RIO), which is based in London, is one of the world’s largest mining companies. It produces aluminum, copper, diamonds, coal, iron ore, uranium, gold and a variety of industrial minerals. The current demand from China and India for manufacturing metals, especially for base metals, particularly iron ore and copper, bodes well for the company.

S&P rates RIO a “five-star strong buy” with a 12-month price target of $75. Our trading target is $82 with a longer-term target of $100.

Top Stock #5 – Suntech Power Holdings (STP)

Suntech Power Holdings (NYSE: STP) is one of the leaders in the manufacturing of photovoltaic (PV) cells for use in both residential and commercial applications. Sales are expected to be up 24% in 2011, according to S&P, and annual profit margins are estimated to increase to 20% from 18% in 2010. Long-term demand from China and encouragement from the U.S. authorities are all positives for this solar company.

Daiwa Securities’ target was raised to $9.90 in early December. Technically, the stock is still in a downtrend, but recently got a buy signal from the stochastic. If it can reverse its trend with a strong close over the bearish resistance line at $8.50, the trading target would be $10. This is a “bottom-fishing” choice.

Top Stock #6 – Thermo Fisher Scientific (TMO)

Formed from the merger of Thermo Electron and Fisher Scientific, Thermo Fisher Scientific (NYSE: TMO) is a leading maker of lab and scientific instruments used in life sciences, drug discovery, etc. According to S&P, Thermo Fisher has made significant inroads in China and is undervalued versus its peers. S&P has a “five-star strong buy” rating on TMO with a 12-month price target of $68.

Technically, the stock has hesitated at $56, a double-top, and appears to be vulnerable to profit-taking. But a pullback to the open gap at just under $54 could be an excellent opportunity to buy TMO for a breakout target of $68.

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Opening View: DJIA Futures Plunge 80 Points Ahead of ADP Jobs Data

Falling commodity prices provide fuel for Wall Street sell-off

Futures on the Dow Jones Industrial Average (DJIA) are trading sharply lower this morning, pointing toward a potential opening loss of about 82 points. The S&P 500 Index (SPX) is also on the rocks this morning, with futures trading about 9.4 points below fair value. Yesterday's modest bump, following the release of minutes from the Federal Open Market Committee's latest meeting, has faded quickly, with a sharp drop in commodities and anxiety ahead of today's ADP employment report taking center stage.

Technically, short-term resistance at the 11,700 level looms large for the Dow, with the blue chip barometer closing a hair's breadth below this hurdle on Tuesday. Look for the DJIA to struggle here today, while support should materialize near the 11,550-11,600 region. Meanwhile, the SPX edged above 1,270 yesterday, but the victory appears to be short lived. Resistance remains firm in the 1,275-1,280 area, with short-term support creating a floor near 1,255-1260.

-Schaeffer-

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Three Reasons to Buy Stocks in 2011

Despite bearish and neutral reports from the financial media, you should expect the market to move higher to begin the new year. In fact, 2011 could very well be the best year for stocks in recent memory, according to several important sentiment indicators.

Don’t get me wrong — 2010 was a great year for the stock market. Stocks finally reached levels not seen since before the 2008 financial crisis, and it was the second straight year the market had posted gains.

Now, it appears that the market’s steady climb from its 2009 lows could be the beginning of a much bigger move higher.

The bears have expressed concern that soggy unemployment numbers and a decimated real estate market will kill any chances of an extended stock market run. These, and other concerns regarding QE2 and a weak Eurozone, are all valid.

However, I believe the bears are overlooking several strong indicators that show a market that’s not only recovering, but heading higher this year.

Look no further than these three important events from the end of 2010 for confirmation:

* The gap between bonds and stocks is rapidly growing. As StockCharts.com accurately reports

, stock and bond investments have been moving in opposite directions since August. The separation increased in December, showing us that investor’s risk appetite is growing. Investors are pulling money out of bonds and mutual funds, as they again begin to see stocks a more viable option to grow their money.

* Earnings are strong, and stocks remain cheap. Corporate earnings have risen 20% since the beginning of September, yet many stocks remain “cheap” relative to commonly used metrics. According to the Associate Press, The price-to-earnings ratio for S&P 500 index stocks was less than 16 late last month, compared to the 20-year average of 23. Also, many recognizable, name-brand stocks such as Apple and Netflix posted spectacular earnings and returns in 2010. This helps convince the average market watcher that it’s safe to go back to stocks.

* The Dow Theory Flashes the “buy” signal. In November, The Dow Industrials and the Dow Transportation indexes rocketed to 2010 highs. After consolidating later that month, a December rally pushed both indexes back to new highs. The industrials and transportation indexes tell a simple story: companies are producing goods, and these goods are being shipped. It’s a key component in the Dow Theory that points to a healthy rally. Expect sentiment to grow increasingly bullish if both of these indexes hold their respective gains and move higher.

Right now, the market is telling us that stocks will provide the best returns in the near-term. Carefully selected stocks — especially small-caps — should handily beat out other investments during the first fiscal quarter.

-Penny Sleuth-

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Buy a house...then buy another

Renting in the City: All the Cool Kids Are Doing It

* The trend is favoring a lifetime of renting
* But buying a house may still be a great hedge against QE3 through QE6
* For the sake of your finances please forget that suburbia ever existed

Gary Gibson, Baltimore, Maryland…

It’s getting more expensive to live in Baltimore….at least if you’re a renter.

According to a recent article in the Baltimore Sun rents are up more than 6% over what they were last year in the Baltimore metro area. If you count the drop in various concessions — like waived application fees or initial free rent — then the increase is even more.

There is a drag on the rental market, however: the regretful buyers who now need to rent out the homes they can’t sell.

Lois Foster, a Baltimore real estate agent who helps people find homes to rent and manages properties for owners-turned-landlords, said she’s seeing rents of $200 to $500 less a month than owners could have gotten two or three years ago. There’s just a lot of competition, she said.

The guild is off the buying lily. All the credit that oozed out of the banks found its way into the national psyche. There it gave off a funny smelling gas that puffed up hopes and dizzied senses.

Stock prices were the first beneficiaries. Fattening 401(k)s danced 1920’s-style energetic jigs with dreams of early retirement. Even as those 401(k)s and those hopes tired and finally dropped dead on the dance floor, the Fed held down interest rates and more funny air kept the nation high. People pinned new hopes on — and sent reams of borrowed new money into — real estate.

That’s came to the sort of end you’d expect. While government cheerleading and easy credit drew in increasing numbers of bigger fools, the rental market found itself a lot emptier. All the people who really couldn’t afford to buy and who should have been renting were too busy buying on greater margins and not renting.

Some hotspot cities like New York and Boston saw their rental markets surging along with their real estate markets…but third-stringers like Baltimore…” Cohan, with Southern Management, said some competitors were offering as much as three to four months of free rent to get people in the door in 2008 and 2009. Not anymore.”

It’s no wonder that they were having such a hard time. The real estate market started to crater in 2006, but the ship of public opinion doesn’t exactly turn on a dime. You don’t nearly a century of brainwashing at the start of a downturn. By 2008 and 2009, renters were still considered to be socially backward and intellectually impaired…maybe even in need of corrective medication.

Upon finding out that a person was renting, someone else was likely to voice sincere worry: “What’s wrong with him? Is he unemployed? Illiterate? Dead?”

Being a renter was worse than gauche. For men it was worse than driving a beaten up old car. Even $7-an-hour female filing clerks were all getting mortgage approvals for $200,000 homes. Any man who couldn’t (or wouldn’t) score a mortgage was parading his lack of fitness to breed. To rent instead of own was to advertise your status as a loser, not the kind of sire any sensible woman would settle for. Your only hope was to troll among hipsters and other car-less, urban trash. A corpse could get a mortgage, but a renter couldn’t get a date.

But now opinions are changing, as they must. Reality can only be ignored for so long. According to a 2010 study o the Joint Center for Housing Studies of Harvard University, between 2004 and 2009, the number of renter households rose nearly 10%.

From the article “The Echo Boom: A New Wave of Market Change” on Wrightwood.com (emphases mine)…

Certainly, most young people rent apartments in their first years out of college, but there are reasons to believe that this generation will be renting far longer than their parents did. They have the largest college debt load in history – averaging over $20,000 per student. They also face a very different labor market from their parents: a fifth of them will likely be self-employed following the trend for all employers to offer more and more short-term contracts. Renting may make economic sense, not just when they are beginning their careers, but for many more years to come. Since the end of World War II, the trend was for more and more young families to purchase a home in the suburbs, leaving rental apartments to young singles. Based on the economics today, that trend may shift towards renting throughout their lives.

And from a July, 2010, article on CNN.com…

In May, U.S. Housing and Urban Development Secretary Shaun Donovan testified before a House committee that the financial crisis proved the need for a better balance between ownership and rental housing. And HUD senior official Raphael Bostic last week told the Washington Post: “In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” Bostic said. “You’re not going to hear us say that.”

Left to its own devices, the market pretty efficiently figures out who ought to own and who ought to rent. Those who can afford to do so buy a home because under normal circumstances, buying a home is not any more of an investment than owning one.

So the policies from DC that got their start under that busybody Herbert Hoover to “encourage” homeownership were never a good idea.

The article continues…

Hoover signed the Federal Home Loan Act, and in 1933, Franklin D. Roosevelt created the Home Owners’ Loan Corporation to provide low interest loans.

And the government was just getting started: a flurry of legislation was passed over the ensuing decades, helping veterans, minorities and the populace as a whole secure mortgages. But it appears the pendulum has swung.

“The government shouldn’t blindly encourage homeownership,” says Joe Gyourko, real estate finance professor at University of Pennsylvania’s Wharton School. “If the government does anything the government should encourage people to make the right decision.”

Owners don’t pay the landlord, but they pay taxes and maintenance costs on their house, and Gyourko says those costs can end up being roughly the same.

As far as buying a house as a smart long-term investment, Gyourko says that’s not always true. He says between 1975 and 2008, the price for houses of similar quality and size appreciated an average of about 1% per year after inflation. Investors could have earned more by buying Treasury bills.

Turns out that under most circumstances, homeownership is just another form of consumption. You need a place to live. So you can pay rent, out of which the landlord collects some small profit after mortgage, taxes and maintenance…or you can “buy” your house, or more accurately saddle yourself with debt and pay the mortgage, taxes and maintenance yourself.

But when you have meddling federal policies to encourage it…coupled with ever-increasing amounts of central bank credit to fuel the bidding…prices tend to rise enough to make generations sing in unison “housing always goes up!”

It took generations for this debt-addled Ponzi scheme to collapse; years of government meddling finally coupled furiously with easy credit from the central bank. The result is a veritable orgasm of tumbling prices. We’re in the shame and regret phase that follows these sorts of things. Stay tuned for more.

Buy a House… Then Buy Another

Investment ideas are cyclical. They come and go, like fashions or cicadas, obeying their own curious rhythms. In the last few years, rare was the investment thinker who said you should buy a house. Housing was in a bubble that was deflating.

But the investment seasons turn. Today some smart investors are once again saying you should a buy house. John Paulson is one of them.

You may know him as the man who turned the greatest trade of all time. Betting against the housing market, he netted a cool billion dollars for himself in 2007. One fund he managed rose 590% that year. Today, he is one of the richest men in America.

His advice today is very different. “If you don’t own a home, buy one,” Paulson said. “If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.”

That’s a strong endorsement. It sounds similar to the advice another investor gave his audience in 1971, at the dawn of another inflationary age. It was Adam Smith (George Goodman) on The Dick Cavett Show. Here is a snippet from that conversation:

Smith: The best investment you can make is a house. That one is easy.

Cavett: A house? We were talking about the stock market. Investments…

Smith: You asked me the best investment. There are always individual stocks that will go up more, but you don’t want to give tips on a television show. For most people, the best investment is a house.

Cavett: I already own a house. Now what?

Smith: Buy another one.

It was good advice. In the 1970s, U.S. stocks returned about 5% annually, which failed to keep pace with inflation. Still, it was an up-and-down ride. In 1974, the stock market fell 49%. But here are the average selling prices for existing homes in the 1970s as inflation heated up:

* 1972 — $30,000
* 1973 — $32,900
* 1974 — $35,800
* 1975 — $39,000
* 1976 — $42,200
* 1977 — $47,900
* 1978 — $55,500
* 1979 — $64,200

You can see that housing held up pretty well. And think about the effect of a mortgage on 80% of that house in 1972. That would mean $6,000 in equity, a sum that went up fivefold in eight years. It’s hard to find a better inflation fighter than that. Granted, today’s market is different, but still.

Apart from this, you might also reflect on the fact that it is quite absurd today to think that anyone can buy an average house for any of these prices — and that, too, is the point. The average price today is $257,500 — even after the great collapse in the last few years.

“If you have a 7% mortgage and your house is worth half a million dollars,” Adam Smith writes, “you may gripe about shoes and lamb chops and tuitions like everybody else, but your heart isn’t in it.” Your heart won’t be in it because you’ll be in fine fettle with your house.

Of course, you can do a lot better than 7% today. For the first time, the rate on 30-year mortgages slipped below that on the 30-year Treasury bond. You can get a 30-year mortgage at little more than 4% today.

Factoring in mortgage rates, housing affordability is back to where it was in September 1996. Then mortgage rates were 8% and the average price of a home was $171,600. As Murray Stahl writes: “One can actually buy a home for a monthly payment that is not very many dollars different from the monthly payment one would have needed in September 1996, when rates were significantly higher.”

Adjusted for inflation, Stahl points out that the payment for an average-priced home today is about 30% lower than it was 14 years ago.

The advice of Paulson and Smith starts to make sense now, doesn’t it?

Essentially, real estate is a way to buy now and pay later. It is a way to short (or bet against) the dollar. And the case for housing extends to other property types, too. Owners of quality real estate are getting deals on mortgages that we are unlikely to see for a generation.

-Whiskey & Gunpowder-

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