These powerful computers allow the giant brokerages to process trades in a fraction of a second. It’s called “High Frequency Trading.” And it’s responsible for about 70 percent of the action on Wall Street.

That stinks. It means that those big brokerages see the market before you do. And that allows them to get better gains than the average investor acting alone. (Studies show individual investors do much worse, over the long run, than institutional traders.)

It’s not right.

There is a way to correct this imbalance. IDE’s Steve McDonald, Editor of The Bond Trader, offers the following advice:

1. Avoid the hot stock or trend of the week. With High Frequency Trading, it can turn against you in a nano-second.

2. Avoid day-trading as much as possible. With so many trades now occurring behind your back, it has become dangerous to play the price movement guessing game.

3. Stick with the investing strategy the entire IDE staff has been advocating since day one: a long-term time horizon, high-quality dividend stocks, and quality bonds at a discount. (For specific recommendations, start reading our flagship newsletter, Sound Profits.)

As a result of the market plunge in 2008, Cindy and Eric Canup had to put off their dream of “buying land in Northern California or Oregon.” Joe Mancini had to put off his retirement. Robert Paynter, a retired Wachovia executive, said the past year made him feel as if he were witnessing his own death.

Recently, The Times went back to find out how these folks are feeling now. The answer: “A whole lot better” about things.

That’s typical. When market values were scraping bottom, they were afraid to invest. Now, after a 55 percent run-up, they are ready to roll.

They all want to recoup their losses. And how did they say they would they do that? By taking more risk.

But, as Bob Irish has pointed out in Investor’s Daily Edge, that is likely to get them deeper in the hole. Especially, he says, after such a strong rally.

There is a place for intelligent speculation. But if you need to rebuild your portfolio, fight the urge to add more risk.

Instead, you should take a more conservative approach — one that makes sense in today’s market. Steve McDonald recommends select corporate bonds. Andrew Gordon likes high-quality, well-managed, and diversified companies that pay you cold hard cash in the form of dividends.

Pick your time frame — short-term, medium-term, or long-term. It doesn’t matter. These are your safest investments. And over the long run, they have also proven to be the most profitable, by far.

Investing aggressively in stocks now is nothing more than gambling. And gambling with your retirement portfolio is just plain dumb.

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I was skeptical. And I was right.

Now cases are popping up all over the world. One source estimates that as much as half the population will be affected by it. Another source predicts that 1.8 million Americans will be hospitalized by it. That doesn’t mean all those people will die, but it does mean there will be a rapid escalation of concern.

Manufacturers of vaccines, syringes, masks, diagnostic equipment, and antivirals have already seen their stock prices run up in anticipation.

IDE’s Steve MacDonald says there are two ways to profit from this:

• You can invest in the companies that are selling the treatments and equipment.

• You can short the companies that could see a huge drop in business because what they do involves enclosed crowds — and that increases the risk of contagion. That includes airlines, hotels, retailers, and certain entertainment companies.

Steve has his eye on several shorting opportunities. To be one of the first to hear about them, go here.

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If you felt 20 years younger right now, what would you want to do first?

• Surprise your spouse with a romantic dinner… and follow up with an equally romantic night, all night long?

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• Effortlessly bike through the magnificent New England countryside, listening to the birds sing?

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I’ve seen investors (including myself) swindled, bamboozled, conned, and just plain charmed.

I’ve seen a lot. And though I have never attempted to figure out the stock market or how to get the better of it, I now have an idea of what works and what doesn’t.

Three caveats, in particular, have come to make sense to me:

1. Don’t put too much money in any one recommendation. By limiting each investment, you’ll never get hurt so badly that you won’t be able to keep going.

2. Never invest in something just because you like the story behind it. A story, by its very nature, is meant to dramatize, not to inform.

3. Don’t leave money in an investment after it turns south. I have many good investment-expert friends who will tell me I’m wrong about this one – but in my experience, when a business starts to fail it will almost always continue in that direction. When it comes to investing in your own business, you know enough about it that you might be able to do something extraordinary to turn things around. But when it comes to other people’s businesses… their success or failure is completely out of your control.

[Ed. Note: One last thing to keep in mind when deciding where and how to invest: Most so-called "Wall Street" experts usually don't know a solid investment from a hole in the ground. Now's your chance to declare your financial independence from the stream of Wall Street mis-advice and gloom and doom. Set yourself free by taking 5 minutes to read our free report here.]

Prices hit $136 in 2007 and then began a long pullback to around $40. They bottomed in April and have since rebounded to the $50 per pound level. 

Can they go up from here? Based on market fundamentals, yes… and soon. 

Nuclear power contributes 16 percent of world energy demand. In the U.S., it contributes 20 percent. And with 30 nuclear plants under construction and another 38 in pre-construction stages, with dozens more planned, nuclear’s contribution is sure to rise. 

Meanwhile, there won’t be enough uranium to go around. The International Atomic Energy Agency recently said that Russia and the U.S. may cover only 5 percent of world demand by 2015. 

The current shortage in production is being covered by uranium from dismantled weapons the U.S. has been getting from Russia. The government-created company USEC down-blends this uranium for use in nuclear power plants. But that agreement with Russia goes away in 2013. 

The global nuclear power plant construction program isn’t going anywhere, though. With China and India leading the way, nuclear’s resurrection shouldn’t be ignored by investors. 

The entire nuclear industry is revving up, including uranium exploration and mining. (It takes eight to 12 years to build a mine and get the stuff out of the ground.) One of the bigger companies that has been mining uranium for a long time is Cameco (CCJ). Its stock should grow right along with the sector itself.  

[Ed. Note: Andrew Gordon shares his thoughts on the financial markets regularly in ETR's sister publication, Investor's Daily Edge. Get your free subscription here.

You can also check out Andrew's monthly newsletter,INCOME, for regular updates on how to grow your wealth with high yield and market-beating returns.] 

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• Silver does great when people get worried about the market, inflation, and geopolitical risk. Monetary inflation is here – and it is only a matter of time before price and asset inflation arrive as well. Silver is a hard asset that holds its value in inflationary times and will maintain its purchasing power.

• Silver is an industrial metal, which means its price rises when global manufacturing activity picks up. Therefore, it should do quite well when we finally emerge from this economic crisis.

• Silver is in short supply, and the limited aboveground stockpiles are being depleted. With demand exceeding supply, prices for silver should continue to move higher.

• Finally, silver is in a technical uptrend.

Currently, silver is trading around $15 per ounce, already up 40 percent for the year. To take advantage of what is almost sure to be a continuing rise in price, you can buy silver bars or silver coins (e.g., American Silver Eagle bullion coins or Canadian Silver Maple Leaf coins). Physical silver can be stored in a home safe or in a secure hidden location that only you and another trusted person know about.

Another good way to invest in silver is with the silver exchange-traded fund (SLV). This ETF is very liquid and cost-effective.

Whether you choose to invest in bars, coins, or the SLV exchange-traded fund… make sure you own some silver.

[Ed. Note: Silver, gold, oil, agricultural commodities... Ted Peroulakis follows it all and tells you all about it in ETR's sister publication, Investor's Daily Edge. Sign up for free today.]

Remember when it made the rounds over a year ago?

The idea was that even if the U.S. economy caught pneumonia, the rest of the world would at worst get a bad cough. It was argued that Europe and China were much less reliant on the U.S. economy than ever before. And China, with its massive import needs, would also keep economies from Brazil to Australia humming.

This gave governments, businesses, and investors hope. It was about as good as any other unproven theory – but it didn’t quite work out, did it?

America’s economic malaise quickly spread to other countries, including China in a very big way, and they caught much worse than just a cough.

Fact is, replacing the U.S.’s massive market is easier said than done. China’s quickest road to recovery is helping the U.S. recover. That’s why, despite a lot of moaning and groaning, China will continue to finance our growing debt and take their chances on a future devalued dollar.

China’s leaders understand better than most people in America that their heady economic growth was entirely dependent on our “borrow-and-spend” behavior.

With no replacement in sight, it’ll be next-to-impossible for China to turn around its economy. De-coupling has once again miscast China. China is no savior. The crisis began in the West and will end in the West. Only then will a recovery spread elsewhere.

Read my lips: A rescue is not around the corner. You should continue to invest defensively (in gold, for example) or bet the market short, because it still has another leg down to go.

[Ed. Note: You can read more of investment analyst Andrew Gordon's commentary on world markets and his advice for how to deal with them in these tough economic times in Investor's Daily Edge, ETR's free sister publication.]

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This mantra was in response to those in the business who, following a big run-up or downturn in the market, would make the claim that “It’s different this time.” The claim was usually made to support buying at the top of a market or buying when things seemed over-priced.

Until now, the old timers’ advice was always correct. Markets have been the markets. They run up, they fall down. They fall a lot faster than they go up – and if you wait until everyone gets in to convince you its okay to do it, you will lose money.

This time, though, I believe some things have changed. The changes may be of a temporary nature, but this definitely is not your grandfather’s or father’s market. And you’re going to have to prepare yourself mentally to deal with these changes… or get out of the market. You can stay in and try to do the jump in and out game, but you’ll get crushed even faster by doing that than you would have in the past.

Essentially, you’re going to have to adopt a different trading discipline for the next three to five years. (The majority of small investors have no trading discipline anyway, so this will be a new concept for them.) There is still a lot of money to be made in stocks and bonds. It will just take a few shifts in expectations and procedures to get to it.

The biggest change is that this is not a trading market. Some will continue to get lucky with their guesses, and the select few who always seem to make money will keep on making it. But going forward, the big money will be made by those who can wait it out and use dollar cost averaging to their benefit.

Trading requires at least some predictability. But now, the small degree of predictability the markets had has been driven underground by the huge collapse in confidence. The market is jumpier today than at any time in our history. The slightest suspicion, wind shift, or rumor makes it plummet. We will see more falls over the next five years than at a rock climbing competition.

The trader’s position has always been just this side of insane, but now it has crossed the line. With virtually no fundamentals, no confidence that the changes put in place by the Obama administration will produce any lasting results, the debt, the monetization of the debt, the politicizing of the banks, and a world community that has grave misgivings about the future of the global economy, you’d have to be crazy to think you could predict anything.

What will work going forward is positions in companies like Clorox (CLX). There are the usual reasons to own a stock like this, as well as the new reasons that work within the new market rules.

First, the usual reasons: The company recently raised its earnings projections. It will earn around $3.70 this year and $4.17 next. The dividend is $1.84, about a 3.4 percent yield, and there’s plenty of cash to pay it. Its profit margin is rising, it has abundant cash, it’s paying down its debt, and it has stable brands (Clorox Bleach, Kingsford Charcoal, Brita, Glad Bags, Burt’s Bees Skin Care, and Greenworks Detergents).

A solid company with reasonable prospects.

In this economy, that is what I call a slap in the face investment. It is about $51 per share, was as high as $65 in the last 52 weeks, was as low as $46, and has been showing a very nice upward trend for the past three months.

The new reasons to own CLX: It isn’t sexy, it will not run off the charts with breaking news, it pays a good dividend that appears to be safe, it won’t be subject to big swings, it won’t fall off the charts because of a rumor, it is expected to show an incredibly boring growth rate of around 15 percent going forward, and – most important – you can own it, wait out the market volatility, and still retire on time.

In fact, this stock has everything you will need to survive the next five years as an investor: stability, fundamentals, solid management, dividend income, and products that consumers need and will keep buying.

Why is dividend income a factor here? Because I expect to see major – and I mean major – swings in this new market. And while you’re waiting it out, if you don’t have some type of money showing up in your account from a bond or a safe dividend, there will be extended periods when you probably won’t see any money at all.

The second strategy to use in this market is dollar cost averaging. Take advantage of the big price swings. Make the volatility work for you. As Warren Buffett said recently, “I love when things are this bad.”

Investors must learn to cheer when the market crashes. It’s a buying opportunity. If you’re in the right stocks, you have virtually nothing to worry about except where you’ll get more money to buy into the dips.

Shift your expectations and investing style for the next five years or be prepared to be very disappointed. Get out of the Stock of the Month Club, get back to boring, solid companies you can live with.

This is the same advice my old timer friends in the markets have been giving me for years. Maybe things haven’t changed that much after all. Maybe we’ve just been dropkicked back to reality.

[Ed. Note: Steve McDonald has dedicated years of study to the bond market. His expertise is in showing investors how to generate stock market gains without taking stock market risk. And for a select group of investors, Steve has agreed to share his secrets of success... and his top bond recommendations. Click here to learn more... ]

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The banks are back, right?

Goldman Sachs, JP Morgan, Bank of America, Wells Fargo, and even Citigroup all reported profits for the first quarter of 2009. But a closer look under the hood reveals some “creative accounting”…

• Bank of America arbitrarily increased the value of its Merrill Lynch assets.
• Goldman Sachs bunched much of its losses into the month of December – a month it skipped reporting on this year.
• JP Morgan’s bonds fell in price. And that perversely allowed the bank to increase its bottom line.

Most of the banks did extremely well in fixed-income, currency, and commodities trading this past quarter. So is this the new bank model? Making boatloads of money from Forex and bonds?

Not likely. It looks more like a one-time bonanza to me.

The Fed and European central banks were broadcasting their quantitative easing efforts. It’s not hard to make money when the government is telling you which way rates are going. But now that the run-up to quantitative easing is over, making those oversized profits will get a lot harder. So where else will the banks be getting their money?

A bank’s loans are only good assets if they get paid back. And the brutal recession we’re having is forcing more and more loans into default. When their loans go into default, banks go from earning money to spending money. Each foreclosure, for example, costs a bank about $50,000.

The banks still have some tough sledding ahead.

[Ed. Note: Andrew Gordon is an investment analyst with decades of experience watching the markets. Get his take on the economy, under-the-radar investment opportunities, and more with Investor's Daily Edge, ETR's sister publication. Get your free subscription here.]

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To tell you the truth, this secret is a good way to make money any time.

Andrew Carnegie, Marshall Field, Sam Walton, and Henry Ford are among the mega-wealthy who put this strategy to work.

As Michael Masterson has pointed out, it is “behind many – if not most – of America’s greatest fortunes.” In fact, says Michael, “It may be the most important secret a businessman can know, for it is the most powerful and most reliable way to make a small business grow.”

But many businessmen are afraid of this strategy… and many others simply overlook it.

I’m talking about undercutting the competition.

Andrew Carnegie was able to produce steel cheaply. Marshall Field cut the price of retail shopping. Sam Walton’s Wal-Mart started offering food, clothing, and other goods at rock-bottom prices. Henry Ford made automobiles that the average Joe could afford. All of these men went on to make massive fortunes.

Under-pricing your competition is an exceptionally effective way to rake in profits during lean times.

An interesting article in the Orlando Sentinel recently reported on a number of businesses that have been booming during the recession. Now when you think of “recession-proof” businesses, credit repair services and pawnshops are likely to come to mind. But the Sentinel mentioned several “atypical” businesses that are doing well, including a bank, a restaurant, and an advertising agency.

They are all very different kinds of businesses, but they have something in common: Their focus is on saving their customers money.

Even during a recession, there are some goods and services that people must buy. And if you can save your customers money while giving them what they need, you can make a bundle.

Here’s how to use this undercutting strategy for your business:

• Survey the competition and determine if you can offer the same value for less.

Many small businesses do not even consider charging less for their products and services, no matter what their competition is doing. They settle on a certain price, because they figure that is what it “should” be. And if the economy changes and times get tough, they don’t consider lowering their price, because that’s what they’ve always charged. (Mom-and-pop operations are often guilty of this.)

One of the first successful small businesses I began was a swimming pool maintenance company. When I surveyed what my competitors were charging and calculated my costs, I saw ample room for charging less. Back then, monthly pool service was going for around $45-$50. But I figured out that if I used part-time workers and kept my overhead very low I could charge only $35 and still make a decent profit. When I began promoting my service at that price, I immediately signed up quite a few customers.

I’ve used the same strategy to start other businesses. When, for example, I went into ballroom dance instruction, most studios were charging $60 per hour. But I realized that I didn’t need a studio of my own. By renting space by the hour and also giving private lessons in my clients’ homes, I could charge just $30 an hour. That made dance lessons very affordable for many people who really wanted them, but couldn’t (or didn’t want to) pay $60.

• Make sure your customers know that the quality will still be there.

Many small businesses have extra “fat” they can trim in order to cut their prices. But before you try to use this strategy to steal market share from your competitors, you have to make sure you can deliver the same quality for the lower price.

The first thing people will worry about when they see your bargain price is that they’ll be getting less in terms of quality and/or service. And if you can’t deliver, your customers will quickly leave you. One way to reassure them is to itemize everything they’ll be getting for the price so they can compare it to what your competitors are offering. (That’s what I did with the swimming pool business.) You should also offer a money-back guarantee. That is a good way to make your customers feel confident that you will offer high-quality products and services.

Undercutting your competitor’s prices is an admittedly aggressive strategy. But the business world is a harsh one… especially in this economy. If you want to prosper, you’ve got to be “Street Smart.”

[Ed. Note: Paul Lawrence is a successful entrepreneur who's started over a dozen profitable small businesses. For more information on Paul's "Street Smart" business program, click right here.

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