Bank Safety Ratings on the Web

Bankrate now offers bank safety ratings for free on the web. See the Safe and Sound page of the Bankrate website - http://www.bankrate.com/brm/safesound/ss_home.asp

You can search using many different criteria to find the banks you are interested in. Bankrate provides the following summary to describe the service.

"Bankrate.com's Safe & Sound® service is a proprietary system designed to provide information on the relative financial strength and stability of U.S. commercial banks, savings institutions and credit unions. The system employs a series of twenty-two tests to measure the capital adequacy, asset quality, profitability, and liquidity (CAEL) of each rated financial institution. Individual performance levels are determined from publicly available regulatory filings and are compared to asset-size peer norms, industry standards and key absolute benchmarks. Combined results form the basis for our Composite CAEL and Star Ratings, which are described below. When possible, the system also produces a report that provides a detailed explanation of our findings, for each rated financial institution."

Earlier we had warned everyone to get their money over the FDIC limit out of Washington Mutual. It is interesting to note that WaMu recieved the lowest possible ratings, for both the Bankrate star rating and CAEL rating. - http://www.bankrate.com/brm/safesound/thrftmm.asp?fedid=1000508551

How to Screen for Strong Banks

Amidst all the carnage in the financial sector, how can you screen for the stronger banks and financial institutions that are likely go come out of the credit crunch as leaders.

The best starting point is creating a screen that searches for potential candidates. The key question is what criteria should be in this screen. Basically you need to hunt for financial institutions that display the following characteristics.

• The earnings are still positive.
• The yield is above 0.5%.
• The bank stocks trades at reasonable volume above a price of $2
• The bank stock price performance is exhibiting strength against both the S&P 500 and the bank stock index over the past 3 and 6 month periods.
• Technical the bank is exhibiting positive moving average trends in the short term and the rate of change is positive.

A basic bank screen that meets the points above can be created within HingeScreen. A user can go to create mode and add the following criteria. In this case, we are searching for financial institutions priced above $2 with volumes over 10K that have outperformed the S&P 500 and KBW bank index. The trailing dividend yield must be above 0.5% (forward yield can also be considered). Technically the rate of change (ROC) must be positive, while the recent 20 day moving average must be above the 50 day. These technical points will show a recent positive trend in stock pricing.

The screen is saved as BankScanOne.

The next step is to jump to Execute Mode and run the screen. The results align with expectations; it is a mix of stronger regional banks, REITs (primarily with a healthcare focus), and some financial service organizations.

The stronger banks in the results such Valley National Bancorp NJ (VLY), and Wilshire Bancorp (WIBC) are examples of regional institutions that avoided obscene mortgage lending and maintained their balance sheets in good order over the past few years.

The majority of the REITS that show up in the results such as Health Care Property (HCP), Health Care REIT (HCN), and Healthcare Realty Trust (HR) are examples of REITS that are focused on stronger market segments and have easily avoided the worse aspects of the real estate downturn.

A few financial service organizations such as Northern Trust (NTRS) and PNC Financial Serv. (PNC) also show up in the results. A number of players providing financial services have used the downturn to strengthen their offerings and market position.

Using HingeScreen it is easy to save the results to a spreadsheet for further evaluation. Simply press the button on the right that looks like a floppy disk and the results are saved to a spreadsheet format file that can be opened using Excel. By default the saved result files are placed in the C:\Program Files\HingeFire\Results directory.

HingeScreen is a powerful tool to find stocks that meet the performance and diversification needs for your portfolio. It is useful for identifying candidates that are likely to come out of a downturn as leaders in a sector. HingeFire provides an excellent video library outlining how to use the tool at: http://www.hingefire.com/Education/KnowledgeBase/HingeVideos.aspx

Is your online bank account safe?

A recent report by researchers at the University of Michigan demonstrates that bank & brokerage websites are plagued by security flaws. These widespread design flaws make it easier for accounts to be compromised. According to Finextra, an examination of 214 bank websites revealed that more than 75% have cracks in security that hackers could exploit to access customer information and accounts.

‘Says Atul Prakash, professor in the department of electrical engineering and computer science: "To our surprise, design flaws that could compromise security were widespread and included some of the largest banks in the country. Our focus was on users who try to be careful, but unfortunately some bank sites make it hard for customers to make the right security decisions when doing online banking."’

This should be a cause for concern for all banking customers, the prospect of going online and finding your account cleared out is a nightmare. Security remains the top concern for banking institutions, and regular steps have been taken to improve the situation. The state of affairs is not as dire as outlined by researchers because many of the security flaws are difficult to exploit.

The real issue with the banking industry is the lack of a systematic defined approach to security testing their websites. There needs to be a single standard that all online financial institutions are tested against.

Cisco has some excellent initiatives such as SAFE that improve the security of customer deployments by defining configurations and testing steps that reduce vulnerabilities. The company also has service-focused teams of specialists that aid customers in securing their networks.

During my time at Cisco, I drove an initiative called SITE (Security Integration, Test and Evaluation) which defined a structured process for evaluating potential vulnerabilities, performing boundary & penetration testing, and evaluating the results in a logical matter. This approach was incorporated as part of the quality system and utilized across the company in testing multiple product lines. The process could be scaled from “light” to “heavy” based on the needs of the team performing the evaluation. The use of automation tools for “fuzzing” (sending in deliberately mal-formed packets) and other security testing was crucial for meeting tight deliverable schedules within the framework of SITE. Over the years, the original SITE initiative has evolved and now is included within the scope of other security enhancement programs (run by some real sharp engineers) that raise the standards to even a higher level.

What does the banking industry lack? Basically the online financial industry needs to define a SITE type of initiative and a set of common standards for securing their websites. The problem is not the inclusion of vulnerabilities (which will always pop-up), but the lack of screening for vulnerabilities in a structured manner. Banks do not have a methodical approach to find the vulnerabilities, nor a structured system for ranking and resolving the issues. Most banks are flying blind to what potential vulnerabilities currently exist on their websites because testing has only been performed piecemeal over time.

Banks and brokerages have a lot at stake; losses from compromised accounts continue to mount. It is time to raise the bar in the financial industry and reduce the exposure faced by customers. This requires a change in direction for security practices, and includes a need for information services cooperation between competing institutions. The best approach would be to create a focused team with IT representatives from multiple banks to define a central testing standard utilizing a structured approach for evaluating the security of online banking websites. After adoption, the methodology would need to be driven as a requirement across the industry.

FREE forecasts for all the major commodity markets

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FreeWeek is always exciting, but we're especially excited to share this one with you, as EWI opens its new Futures Junctures video portal to you. The new portal combines all of EWI's world-class commodities analysis onto one easy-to-navigate webpage. It allows you to easily toggle between near-, intermediate- and long-term forecasts and analysis, plus the hottest commodity opportunities presented in both video and text. And, only during FreeWeek, you get totally free access with no obligation to buy – ever!

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Hitting Top Returns in midst of Market Turmoil

What does it take to hit solid market returns even when market conditions are leaving the most experienced investors fearful? It comes down to proper stock selection and having the appropriate tools to find the best investments on both the long and short side of the market.

The FREE HingeFire stock screener is a powerful product that merges fundamental and technical indicators in a single tool. This helps put the market edge in the corner of investors.

GregB is now ranked 267 out of 18824 players in the Wall Street Survivor Contest (Traders Wanted - Play $50,000 Stock Trading Game). The evening before the contest, I ran the HingeBuy and HingeSell screens in the HingeScreen 1.5 product. These screens normally produce 30 to 50 results. HingeBuy provides a list of stocks that have the potential to out-perform the market; while HingeSell produces a list of stocks that are likely to under-perform.

It comes down to proper stock selection enabled by the HingeScreen product. I only had to pick a set of stocks once, at the very beginning of the contest to be successful. No need to churn the portfolio or trade.

A summary of the results to date are provided below. Note that all of the longs are still above water despite the violent downtrend in the market over the past few weeks. The balanced long and short portfolio is an excellent example of how to squeeze excess alpha out of the market. The overall return of the portfolio was +14.74% over a few weeks (72.68% on a yearly basis).

Longs
Symbol Return
------------------------
MOS +15.92%
XEC +0.86%
AXYS +0.46%
DAR +10.36%
BMI +0.06%

Shorts
Symbol Return
------------------------
FSNM +53.83%
GSAT +31.12%
CIX +22.65%
LYTS +19.54%
MEDX -5.19%


Disclosure: These stocks have been selected in a fantasy stock selection contest. They are not held in my real portfolio. Investing involves risk. Your results using software screening informational tools may vary. Proper portfolio diversification is important and any outlined investments may not be appropriate for your financial objectives or risk tolerance. This is not a solicitation to buy or sell securities.

Screening for the Top 2%

How does an investor land up ranked in the top 2%? It takes a serious approach to screening the universe of stocks to sort out the wheat from the chaff. Screening a list of potential candidate stocks is just the first step.

GregB is now ranked 284 out of 17989 players in the Wall Street Survivor Contest (Traders Wanted - Play $50,000 Stock Trading Game). The evening before the contest, I ran the HingeBuy and HingeSell screens in the HingeScreen 1.5 product. These screens normally produce 30 to 50 results. HingeBuy provides a list of stocks that have the potential to out-perform the market; while HingeSell produces a list of stocks that are likely to under-perform.

The next immediate question is how did I narrow these lists down to 5 stocks as longs and 5 stocks as short to use in the Wall Street Survivor contest.

In terms of the five stocks I selected from the HingeBuy list for the contest. I pulled up each stock on the list at the time (there were about 30 to 40) and took a detailed look at the charts, industries, fundamental info, and technical indicators to narrow down the selection. For the HingeSell (short) candidates I basically look for the inverse of the outline below.

Basically the following were evaluated for each potential long stock:

1) Strength of the chart over the past year. Look for a chart where the stock is continually rising with some minor pull-backs. Look for strong increases in the past six months. Do not want a stock where the stock price had a one time big bump due to a news event; nor a stock where the chart is basically flat but still outperformed the associated indexes.

2) Evaluate the industry that the company is in and the industry performance over the last six months compared to other others.

3) Rank the stock within the Industry from a relative performance perspective.

4) Fundamental information evaluation with a focus on earnings growth, revenue growth, cash flow, debt and their associated ratios. Do not focus on forward P/E etc. because many times the projections are nonsense.

5) Technical evaluation of the price chart looking for divergence between the price action and technical indicators (MACD, RSI, etc.). Divergence may indicate an impending change in price action. Also look for extreme readings in oscillator-based indicators which may show that a bounce-back is overdue. Keep in mind that technical indicators are good for evaluating short term action; long term price is driven by fundamentals.

6) Take a look at news from corporate press releases. Look for management churn, re-orgs, layoffs, product cancellations, guidance (vs. price reaction), and regulatory action. These are generally not positive developments.

Basically rank all the stocks on the HingeBuy candidate list from 1 to 5 using the criteria above. Five being the strongest. Select the five stocks with the highest rating.

For HingeSell and shorts - look for the inverse.

Note in my terms, the outline above is my light-weight starting point evaluation. I normally dig into the 10Q / 10K reports when selecting stocks for my actual portfolio. I would urge everyone else to do the same. A stock screener is a tool to find stocks that meet your basic criteria - a more detailed follow-up analysis is needed to find the best stocks for your portfolio that meet your diversification and risk-tolerance needs.

Disclosure: These stocks have been selected in a fantasy stock selection contest. They are not held in my real portfolio. Investing involves risk. Your results using software screening informational tools may vary. Proper portfolio diversification is important and any outlined investments may not be appropriate for your financial objectives or risk tolerance. This is not a solicitation to buy or sell securities.

Are You in the Top 5% of Investors

GregB is currently ranked 350 out of 15872 investors in the current Wall Street Survivor contest - Traders Wanted - Play $50,000 Stock Trading Game

This is the third time I have selected 5 stocks from the HingeBuy list as longs and 5 stocks from the HingeSell list as shorts the night before a contest opened and held the picks with no trades. The outcome has been the same in all three contests, the results are in the top 5%.

Isn’t time that you used information that could power top-ranked investing results? This is the power of the automated HingeBull and HingeBear selection process that is integrated in the FREE HingeScreen product.

One of the primary beliefs of the founders of HingeFire is that investors do not need $3000 seminars to be successful in the market. Investors simply need the tools to provide an edge in the market and a community of like-minded investors to work with. The objective of HingeFire is to build the tools and community to enable the success of investors at all levels.

I will confess that my results when I try to simply pick stocks that are “hot” or I got a “tip from a friend on" – are dismal. This is why it is important to use tools that can objectively screen the universe of stocks to define the stocks with the most potential. Start using the HingeFire stock screener today and get the information that will give you this type of edge on the market.

Disclosure: These stocks have been selected in a fantasy stock selection contest. They are not held in my real portfolio. Investing involves risk. Your results using software screening informational tools may vary. Proper portfolio diversification is important and any outlined investments may not be appropriate for your financial objectives or risk tolerance. This is not a solicitation to buy or sell securities.

The Independent Trader Crash Course

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More About the Independent Trader Crash Course

You've heard them say, "Buy low, sell high." You've also heard, "The trend is your friend." Then there's, "Don't fight the Fed" and many other age-old trading principles.

But have you ever actually tried to live by them? If so, you know that it's easier said than done. Because, for example, how do you know if you're really buying "low" and selling "high"?

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Introducing the Hinge Awards for inferior financial reporting

Every week brings its own set of inane articles in the financial press. The time has arrived to start awarding prizes for the worst examples of mainstream financial articles. Maybe in some small way this will help enable the improvement in business reporting, however unlikely the probability.

To kick this off, a set of three Hinge Awards have been created that will be presented quarterly. Naturally none of these awards are for excellence in financial reporting; in fact they are to outline examples of inferior business press.

The three categories for the Hinge Awards are provided below:

HingePitch – an article which is really a disguised pitch for a company, product, or service while pretending to give useful information. These pitches are common in the industry. Nearly 20% of the articles read in the mainstream financial media are effectively "paid-for" placement pieces. However some of these articles perform such a commendable pitch for a product while pretending to be an unbiased neutral resource that they are worthy of an award - especially if the product or service is really not in the best interest of most consumers.

HingeDuh – awarded for personal finance article where the information is obvious even to the most dimwitted consumer. The majority of these articles of fluff pieces containing meaningless quotes from selected "subject matter experts" with the simple objective of enabling the article to be at least an entire page long. Leading to the immediate question - don't the editors have something more meaningful for these business mavens to be writing about.

HingeCrock – the underlying facts are absolutely wrong in the article or the conclusions make no economic sense. Many of these articles use the selectable parsing of "facts" to slant the conclusions towards a designated point of view. A vast majority are politically oriented and have a pre-selected bias. Most turn plausible financial ingredients into inedible economic gruel.

Send your nominations to gregb@hingefire.com
Please list the award category in the subject header.

Wall Street Survivor Update

Is anyone else earning 88.57% returns on a yearly basis?

HingeBuy and HingeSell can help you achieve this type of return.

At the beginning of May, I entered the latest Wall Street Survivor contest. I selected 5 stocks from the HingeBuy list as longs and 5 stocks from the HingeSell list as shorts the night before the contest opened. Wall Street Survivor provides each player with $100,000 in “cash” for investing in the contest. I placed $10,000 into each stock on the first day of the contest and have not made any trades whatsoever since this time.

The longs were:
Symbol Return
------------------------
MOS +24.84%
XEC +11.49%
AXYS +6.16%
DAR +12.72%
BMI -7.92%

The shorts were:
Symbol Return
------------------------
FSNM +33.44%
GSAT +7.25%
CIX +21.57%
LYTS +17.25%
MEDX +1.37%

I did not use leverage (i.e. excess margin) in the contest. The portfolio is currently worth $112,617.93; this is a 12.62% return over a few weeks (or 88.57% on a yearly basis). Player GregB is currently ranked 326 out of 14762 players. Most other players in the contest trade regularly. My result is not bad for simply picking ten stocks, not trading them, and not using leverage.

This demonstrates the power of the HingeBuy and HingeSell automated selection process. Start using the HingeFire stock screener and get the information that will give you this type of edge on the market.

Traders Wanted - Play $50,000 Stock Trading Game

Disclosure: These stocks have been selected in a fantasy stock selection contest. They are not held in my real portfolio. Investing involves risk. Your results using software screening informational tools may vary. Proper portfolio diversification is important and any outlined investments may not be appropriate for your financial objectives or risk tolerance. This is not a solicitation to buy or sell securities.

See the HingeFire Videos

Want to lean how to use HingeScreen to improve your investing? See the excellent videos at the HingeFire website that explain how to use the tool.

The website also contains a wealth of other educational material. Explanations of all the indicators can be found within the Knowledge Base. A full set of documentation for HingeScreen can be found under Support.

HingeFire provides the tools and information that enables investors to improve their understanding of the market. So heat up your investing today, check out the HingeFire resources!

FreeWeek is Back!

We’re excited to announce that our friends at Elliott Wave International have announced a FreeWeek of expert financial forecasting for U.S. Stocks, Bonds, Gold, Silver and the U.S. Dollar from noon Wednesday, June 18 to noon Wednesday, June 25.

FreeWeek is always exciting, but we’re especially excited to share this one with you, as EWI has opened its new Financial Forecast Service delivery portal to you. The new portal combines all of EWI’s world-class analysis onto one easy-to-navigate webpage. It allows you to toggle between near, intermediate and long-term forecasts and analysis with ease, including recent archives. And, only during FreeWeek, will you get totally free access with no obligation to buy – ever!

You’ll get analysis and commentary from EWI’s top three analysts, including Robert Prechter himself, who’s latest Elliott Wave Theorist is interestingly titled Stocks and Oil; Barack and Hillary.

In today’s markets, having an independent market forecasting and analysis service on your side is more important now than ever. FreeWeek lets you test drive EWI’s U.S. forecasting service, giving you top-level access and FREE forecasts for U.S. Stocks, Bonds, Gold, Silver and the U.S. Dollar. This is not an opportunity you’ll want to pass up.

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Does HingeBuy and HingeSell really work?

Yes, you better believe it!

At the beginning of May, I entered the latest Wall Street Survivor contest.

I selected 5 stocks from the HingeBuy list as longs and 5 stocks from the HingeSell list as shorts the night before the contest opened. Wall Street Survivor provides each player with $100,000 in “cash” for investing in the contest. I placed $10,000 into each stock on the first day of the contest and have not made any trades whatsoever since this time.

The longs were:
Symbol Return
------------------------
MOS +24.77%
XEC +11.44%
AXYS +6.47%
DAR +5.11%
BMI -7.16%

The shorts were:
Symbol Return
------------------------
FSNM +25.89%
GSAT +13.29%
CIX +12.48%
LYTS +9.82%
MEDX -2.73%

I did not use leverage (i.e. excess margin) in the contest. The portfolio is currently worth $109,847.18; this is a 9.85% return over a few weeks (or 79.78% on a yearly basis).

Player GregB is currently ranked 373 out of 13850 players. Most other players in the contest trade regularly. My result is not bad for simply picking ten stocks, not trading them, and not using leverage. This shows the power of the HingeBuy and HingeSell automated selection process.

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Go to My Broker Feature

One of the additions to the new HingeScreen 1.5 release is a “Go to My Broker” feature. This functionality in the Execute Mode pane allows you to go to your stock broker’s website with the click of a single button. This is a very useful feature at times when you are screening the market for new opportunities.

The image of the gentleman at the top of the screen is the link to your selected default brokerage website.

Under the Options menu at the top, there is a My Broker item. Pulling up this menu shows an Edit Brokers item at the top of the list. The remainder of the list consists of direct website links to major online brokers.

Pressing on the Edit Broker item pulls up a pop up that allows you to add, delete, and edit brokers in the list. Three buttons are at the top, Create New Broker Entry, Save Broker Details, and Delete this Active Broker. A drop down box below this contains a list of brokers, selecting an item displays the broker’s url in the text box below.

The user can select a broker and press the Default button at the bottom to have the broker set as the default (when you press on the image in the Execute Mode pane). Remember to hit the Apply button at the bottom left after all transactions to make them permanent.

The Go to My Broker website feature is a very useful function in the HingeScreen 1.5 release. Users can perform screens and easily pull up their broker’s website to perform trades or get more information.

How to use Market News at HingeFire

One of the innovative community features offered at the HingeFire website is Market News. Users can submit financial news story links, and allow other members to discuss & comment on the articles.

It is easy to submit a link, simply go to Market News à Submit News at the top after you are logged into the site. A form appears asking you to provide a Title, Summary, url, and category before hitting “publish” at the bottom to post the news.

A direct link to submission is here (need to be logged in).

Market News is a great community feature and I would urge users to try it out!

Great News! HingeScreen 1.5 Now Available

The new HingeScreen 1.5 software client includes many features asked for by the user community; more fundamental indicators, additional technical indicators, and new candlestick & chart pattern indicators. The 1.5 software client contains links to many community features at the new website including a Forum, Market News, Broker Ratings, and the Blog.

There is a wealth of educational information at the new HingeFire Site. Some of the best information to see on using the new HingeScreen 1.5 release includes:

Take a Tour
http://www.hingefire.com/Education/TakeaTour.aspx

Videos on usingHingeScreen
http://www.hingefire.com/Education/KnowledgeBase/HingeVideos.aspx

User Documents
http://www.hingefire.com/Support/Documentation.aspx

Information on Indicators
http://www.hingefire.com/Education/KnowledgeBase/Indicators.aspx

One of the primary beliefs of the founders of HingeFire is that investors do not need $3000 seminars to be successful in the market. Investors simply need the tools to provide an edge in the market and a community of like-minded investors to work with. The objective of HingeFire is to build the tools and community to enable the success of investors at all levels.

Coming Wednesday: HingeScreen Release 1.5

Great News! HingeScreen 1.5 has arrived.

The new software release 1.5, and the totally updated website will become available during the day on Wednesday June 11th.

This does have a couple of important ramifications for the user community.

1) Users will have to download the new HingeScreen 1.5 software client at the new site in order to keep using the tool. The earlier 1.2 client is no longer supported. All of your existing screens, and results will automatically transfer on your PC when you upgrade to the same directory, so you will not lose any information.

2) All users' passwords have been reset to your username plus 123. For example an account with the username "paul" will have a default password of "paul123". Users will be able to immediately change their default passwords at their profiles on the new site.

The new HingeScreen 1.5 software client is still FREE, and includes many features asked for by the user community: more fundamental indicators, additional technical indicators, and new candlestick & chart pattern indicators. The 1.5 software client contains links to many community features at the new website including a forum, market news, broker ratings, and the blog. For a full list of the exciting new features in release 1.5, please see the Products section in the new website. A wealth of educational material and training videos are also provided on the new website.

I would like to thank the beta testers who gave feedback over the past couple of months. Our team is working to have a smooth transition tomorrow, and get the full-featured website and software release available to the entire community.

Saving on Food: Avoiding the checkout coronary

The cost of food keeps going up. Most customers cringe when going through the checkout line at their local grocery store these days. Coupons are back in vogue, and many people are comparison shopping between brands and stores to save money.

One problem is that the most standard items like milk, eggs, and bread that have risen in price significantly don’t normally have coupon discounts. One way our family is saving is by going to big wholesale discount centers such as Sam’s to buy these items. Milk at Sam’s is cheaper than any of the local groceries. Until recently we were not focused on using discount centers for food purchased; when I used to think of Sam’s it was for cheap electronics, office supplies, and other stuff. Times have changed – thanks to the rapid inflation in food prices.

On an interesting financial note, regulators are proposing to increase the margins for agricultural products in the commodities markets to curb speculation. This step was recently enacted for energy futures to reduce volatility, apparently it has not worked out very well – Oil jumped $10 today.

One recent article outlined “How to Save $400 a Month on Groceries”. The piece outlines some of the websites and strategies for finding coupons that will help you save in the checkout line.

Wall Street’s Graveyard

Bear Stearns was not the first firm to implode and float belly up on Wall Street. Portfolio.com takes us through the colorful history of other firms that have gone kaput since 1970.

Greed and lack of risk control is not a new story. However the danger in the modern era is that many of the firms are built on a mountain of derivatives and the collapse of one can lead to a cascading failure of others. Increased regulation of the derivatives market is needed to prevent this type of event.