Trading Goddess

Coffee Prevents Diabetes: Look at Coffee Stocks

2012-01-26T09:51:00.001-05:00

According to a study in a recent issue of the Journal of Agricultural and Food Chemistry, Chinese researchers at Wuhan University and Huazhong University of Science and Technology determined that compounds in coffee inhibit human islet amyloid polypeptide, which is a substance linked to diabetes. Previous studies have shown that drinking four or more cups of coffee a day can reduce the risk of developing type 2 diabetes by 50 percent.

It is not just diabetes that coffee can be used to help prevent. It may also reduce depression in women. Another study showed that men who drank six or more cups of coffee per day were found to have a 20% reduction in developing prostate cancer.

Fortunately for investors, plenty of coffee stocks are available to choose from. WallStreetNewsNetwork.com has recently updated its list of publicly traded companies in the coffee business, many that pay dividends.

Peet's Coffee & Tea, Inc. (PEET) is the specialty coffee roaster, marketer, and retailer founded in 1966 in Berkeley, California. The stock trades at 33 times forward earnings. Revenues for the latest quarter were up 13.7%, but earnings tanked by about 60%. The company does not pay a dividend.

Starbucks (SBUX) is the largest coffeehouse retailer in the world, with outlets in 50 countries and over 17,000 shops worldwide. The stock trades at 21 times forward earnings and pays a yield of 1.4%. Earnings for the latest quarter were up 28.5% on an 6.8% increase in revenues.

The J. M. Smucker Co. (SJM) sells the Folgers brand of coffee, along with spreads, toppings, and beverages. The stock has a forward price to earnings ratio of 14.5 and a decent yield of 2.4%. earnings dropped 15% on an 18% rise in sales.

On the non-retail side, there is Coffee Holding Co. (JVA), a roaster of wholesale coffee which markets wholesale green coffee, private label coffee, and branded coffee in the US and Canada. The stock trades at 9 times forward earnings and has a small dividend yield of 1.3%. Unfortunately, earnings for the latest reported quarter dropped by 60% on an 88% increase in revenues.

For a list of all of the coffee stocks, including more than half a dozen that pay dividends, go to WallStreetNewsNetwork.com. The list can be downloaded, sorted, and updated.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

Free Money Thursday - Quoth Bernanke "Forever More"

2012-01-26T09:36:00.001-05:00

But where's my Trillion Dollars?
Federal Reserve officials said they expect to keep short-term interest rates near zero for almost three more years and signaled they could restart a controversial bond-buying program in yet another campaign to rev up the disappointing economic recovery.

The Central Bank's pronouncements came after a two-day policy meeting from which officials emerged still frustrated at the slow pace of growth and a bit more confident that inflation is settling down after climbing last year. The combination of persistent slow growth and low inflation, Fed Chairman Ben Bernanke signaled in a news conference after the meeting, could give the Fed leeway to take more action to support the economy, though he didn't commit to it.
A bond-buying program—also meant to push down long-term interest rates—could be the next step. Mr. Bernanke said there would be a "very strong case" for even more action by the Fed "if the recovery continues to be modest and progress on unemployment very slow and inflation appears to be likely to be below target for a number of years out."

What amazes me is not one reporter at yesterday's news conference asked Dr. Bernanke what is COSTS to ARTIFICIALLY keep rates 3.75% below what his own board considers "normal" for another 3 - 4 years. Maybe that's because we don't know what it cost already, do we? We do know the Fed now has a $3Tn balance sheet. Since I don't recall a bake sale at which the Fed sold $3Tn worth of cookies, I have to imagine that money was borrowed from somewhere and don't things that are borrowed eventually need to be paid back?
I mean, I understand that, since Reagan, there has been a massive effort to destroy the American Education system and make the beautiful sheeple as dumb and compliant as possible (a less crazy article on the subject here) - but surely there must be some reporter who was accidentally exposed to some rudimentary economics who can come up with a better question than "when in 2014?"
Apparently, it is beyond the grasp of the MSM that, when the Government borrows money at 3% and lends money at 0.25% - SOMEONE has to pay that 2.75% difference. I don't know how to put this in the "new math" terms my kids are learning but, in old math, if I borrow $1Tn at 3%, I owe the person I borrowed it from $1,030Bn at the end of the year - are you with me so far?
OK, so then I LEND that Trillion Dollars to my Bankster Buddies for 0.25% and, at the end of the year, they give me back $1,002.5Bn. Here comes the really hard math part (hopefully someone from the NYTimes can keep up) - $1.030Bn minus $1.0025Bn is $27.5Bn and that's the amount we LOST lending money to the Banksters for 0.25%.
What's $27.5Bn between friends, right? Well, that's where this math stuff really kicks in because we lent that $1Tn over and over and over again for the last 3 years so that's 3 x $27.5Bn or $82.5Bn. Still, sounds like chicken feed in the grand scheme of things so why should we care if the Fed extends these ultra-low rates to their Bankster Buddies for 3 more years - after all, if we were in trouble, the Bankers would certainly do the same for us, right?
Unfortunately, we're going to need a calculator now because, funny story, the Fed didn't just lend $1Tn to their pals. In fact, they didn't just lend the $3Tn on their balance sheet. Nope. It is estimated that the Fed lent an additional $7 TRILLION to their friends ON TOP OF the $3Tn they reported. So $3Tn + $7Tn = $10Tn. That means $82.5Bn (3 year loss) x 10 = $825Bn. THAT is how much OF YOUR MONEY Bernanke just gave away yesterday (assuming they don't sneak in another bonus $7Tn) by extending 0.25% for 3 more years.
Even this would not be so terrible if those banks were using all this free money to lend out to American Citizens at ultra-low rates to help them get back on their feet and help businesses refinance through rough economic times but that's not what's happening at all.
In fact, the banks are simply turning around and lending the money back to - you guessed it - US, at 3%. So it not only costs us $825Bn to GIVE the banks a $10Tn loan but they turn around and lend it back to us for another $825Bn. Mommy, when I grow up - I wanna be a BANKER!
I know it seems like the same money but it's not. We borrow first, THEN we give the banks money, THEN they lend us more money and our Deficit grows and grows and grows until, like Greece, a bunch of Bankers decide we're a poor credit risk and decide to foreclose. Don't worry though, they're not done lending us money yet. Before we leave this point, I want to make sure it's clear enough for the Fox viewers - If I borrow $10 at 10%, at the end of the year I owe $11. If I then lend you, my Bankster Buddy, $10 at 0% and then you lend me $10 back at 10%, then at the end of the year I owe $12 and you have $1.
That's right, not only is the Fed screwing us with this scam but they are INEFFICIENTLY SCREWING US - we have to borrow $2 additional dollars in order to give the Banksters $1 - how stupid is that? If we DIDN'T borrow the money to give to the Banksters, then we would not have additional debt and wouldn't need to borrow money from the Banksters. That's why the key to this whole system is to have a society that has poor math skills and an even poorer understanding of economics because - ANYONE ELSE WOULD BE OUTRAGED!
But why should we be upset? After all - "only" 377,000 Americans were laid off last week and that's just 21,000 (5.5%) more than last week and continuing claims "only" went up 88,000, to 3.55M (up 2.4%) - thank goodness for that 99-week limit right! Durable Goods were up 2.1% ex-Transports and up 3% on headlines in December and many, many analysts will tell you how bullish that is - but they will never show you this chart:

That's funny isn't it because, usually, they LOVE showing charts and this one is free from the Government, so the graphics department doesn't have to do anything but put it on screen. Yet, strangely, it's almost as if it didn't exist at all! We love BA and do you know why we love BA? Because BA is the ENTIRE difference between this complete and utter disaster and the lovely, lovely headline numbers you'll be hearing about all day.
Nonetheless, these may be our last 48 hours of being bearish because, if we hold our breakout levels over the weekend - we have no choice but to switch off our brains and run with the bulls. So let's enjoy it while it lasts and short oil at $101 again along with the Dow at 12,800 and the Russell at 800 and see if they can burn us one last time.
After that, we'll be happy to join in the fun.

Once upon a Great Recession, while I pondered Global Depression,
Over what the New Year's markets may have yet in store,
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
`'Tis some creditor,' I muttered, `tapping at my chamber door -
Only this, and nothing more.'
Back into the chamber turning, all my soul within me burning,
Soon again I heard a tapping somewhat louder than before.
`Surely,' said I, `surely that is something at my window lattice;
Let me see then, what thereat is, and this mystery explore -
Let my heart be still a moment and this mystery explore; -
'Tis a Mormon, nothing more!'
Open here I flung the shutter, when, with many a flirt and flutter,
In stepped Ben Bernanke right on through my chamber door.
Not the least of greeting gave he; not a minute stopped or stayed he;
But, to my charts he went directly and drew on each of them a floor -
TLT at 116, Dow 12,000, 20 VIX -
Twenty VIX and nothing more.
`Profits!' said I, `this is evil! - profitable still, but clearly evil! -
You tempt us yet, what of the risks your plans ignore,
What of Debt and high inflation, the lack of jobs throughout the nation -
Surely you don't want stagflation - tell me truly, I implore -
Is there an end to you manipulation? - tell me - tell me, I implore!'
Quoth Bernanke, `Nevermore.'

Tuesday - Topping Out or Just Pinning the Fed?

2012-01-24T09:23:00.001-05:00

Tough call today.
The Dollar bounced off 79.75 this morning, nothing to crow about for Dollar bulls as the Euro remains just over the critical $1.30 mark and the Pound is solidly over $1.55 for the moment.
You could say it's a bearish sign that the Dow and the NYSE stopped dead at our breakout levels but that's to be expected on a first attempt at breaking out - even if they have already attempted the same move back in late October, when the Dow was 5% lower in it's test and the NYSE was testing the same line (7,866).
Our broadest market index is the one that's holding everyone back as what little volume there has been in this rally has been fairly narrowly focused on certain leaders. Now a pessimist might say that this is a reflection of the blatant manipulation of the indexes in which certain Banksters place buys on stocks that have disproportionate positive effects on the junior indexes in order to fool retail traders into believing there is a rally while the Banksters drive the VIX down to multi-year lows, dump all their stocks on the bagholders and prepare to cash in by crashing the markets on a major event like tomorrow's FOMC Rate Decision which is, in fact, very unlikely to have any language specific to the QE3 that has been promised by the MSM since Thanksgiving.
An optimist would say - well, you can read almost any MSM site for that. It's lonely at the top of the range when you are bearish, one by one the other bears capitulate and soon you are there all by yourself with your shorts - your lovely, lovely, cheap shorts! The Dow shot up yesterday to just over the 12,749 breakout line we have as the tippy top of the range on our Big Chart so of course I called for DIA puts in Member Chat. The DIA Feb $123 puts, which came in around .75 and finished the day not much higher at .78 after topping out at .95. Ranges usually hold - if you're not going to have conviction at the very top of a range to short - when will you? For one thing - you have a very good stop line to watch!
As noted by Dave Fry in his SPY chart, the bulls have engineered their golden cross and have spent a hell of a lot of money and time doing it - now they are counting on machines and retailers to respond like Pavlov's dogs to the sign of the cross and take all those expensive shares off their hands.
Or maybe CAT should be at $106. The p/e is a reasonable-looking 16 and they are projected to grow next year despite the Global outlook for a mild recession in the first half. Looking at other major Dow components: CVX at $107 is only 10% higher than it was in 2008, when oil was $140 a barrel (with projections of $200) and Natural Gas was $8 - makes sense to you, doesn't it? BA I do think is worth $75 for many reasons and IBM at $189 is more than I'd pay but I wouldn't kick them out of bed either.
JNJ is $5 off it's 2008 highs, KO is 5% over, MCD is 50% higher than it was in 2008, MMM is back to $90, PG is $10 shy of their $75 high, UTX is back to $80 (but down from $90 in July), XOM is a bit shy of their $95 high (also with oil 40% lower and nat gas 70% lower) and TRV wasn't in the Dow in 2008 but is over their highs by 10%. Those are the Dow components over $50 - the ones that count in this price-weighted index.
MCD Just reported nice revenues of $6.8Bn in Q4 along with $1.33 in earnings and that was indeed quite a bit better than 2008, where we had 0.87 EPS on $5.6Bn in earnings so nice - but is it up 50% nice? Maybe the problem is that there are so few good stocks these days, that the really good ones are now fetching a hefty premium, which helps explain the Dow's relative outperformance since November.
Without risk (see above diagram), you can make a case for pricing MCD at $100 but are we accounting for the current risk in these prices? Are we accounting for the risk that sent MCD from $66 in Aug 2008 to $46 in October?
Of course they were a screaming buy at $46 but the fact that they CAN fall that far needs to be taken into account when determining the VALUE (not PRICE) of a stock as a part of your portfolio. We could go over the components one by one (maybe on a weekend) but the bottom line is we are priced to perfection at the moment and that perfection includes ONE TRILLION additional dollars being poured into our $15Tn economy (6.66%) by the Fed pretty much TOMORROW.
Anything less than that may lead to a bit of disappointment.
Not to be nitpicky - but the Dollar was at 88 in Q4 2008 so the Dollars MCD was collecting then were 10% more valuable than they are now. While the growth of MCD is still impressive - they are a bit of a "Recession Stock" that benefits from the decaying buying power of the Global Middle Class, who have traded down to Happy Meals and the Dollar Menu to the benefit of MCD - other Dow components and other companies in general are far less impressive when viewed in the light of the earnings power provided them by the worth(10%)less Dollars they are now reporting earnings in.
Of course, if you are an American, you have to buy your MCD in Dollars too so it's right that they should charge you an additional 10% for their very valuable stock, isn't it? Priced in Euros, in fact, MCD dropped 2% this week but it's not about the day to day picture - it's about the Global Macros. In 2008, we didn't think the entire system would collapse in a single quarter, we didn't know the housing market would collapse or that over 100M people World-wide would lose their jobs in the next two years or that entire nations would face bankruptcy. So maybe, just maybe, we can be excused for ignoring the risks.
But now? REALLY??? Are we back to completely ignoring risk as if everything is all better in Europe and Japan and China and the good old USA despite the fact that pretty much NONE of those 100M people got their jobs back and another 100M people were born and they don't have jobs either!
STAGnant Global economy, rampant inFLATION and we are pricing things BETTER than they were in 2008 - before we were made aware of how many problems lay just below that bullish surface?
I suppose it's the lack of a sense of risk that is really bothering me. As you can see from the chart - we've been this complacent before (and paid the price) but, as I said to Members yesterday - if we break our levels we'll just have to switch off our brains and stop reading the news so we can invest properly along with the crowd.
But we're not there yet. Where's my Trillion Dollars Dr. Bernanke? Where's the deal on Greece? Where are the jobs? Where are my breakout levels? It's hard to be patient but I believe the risk is real and I'd rather be relieved to find out I'm wrong and my biggest problem is how to deploy my pile of cash than to be fully invested and falling off a cliff - at least I learned that in 2008.

FED to Start Forecasting Rates this Week.

2012-01-22T12:23:00.005-05:00

Coming week is full of big fundamental announcements, including from central banks. On Tuesday, the Bank of Japan will disclose its interest rate decision. The BoJ has no room to cut rates any more, but it could introduce some unconventional measures. After all, the Japanese central bank lags behind its counterpart in this area. For example, it still has plenty room to expand asset purchases within the JPY 15 trillion ceiling that has so far been announced. In addition, this ceiling could be raised to, say 20-25 trillion. Of course, the real issue here is the ever-stronger Yen, which is not showing any weakness, in particular against the USD.

The BoJ will be followed on Wednesday with policy meetings in the USA and New Zealand. While the RBNZ announcement has the highest probability of some action, all eyes will be on the FED. Nobody expects a change this time, but it will be the first meeting when the central bank releases its interest rate projections. It goes without saying that everybody wants find out when FED expects the first interest rate hike and how much tightening is projected in the following years. Also, in recent few weeks public comments by regional FED presidents seem to signal a willingness to ease monetary policy further this year, the so-called QE 3. Latest fundamental data has been mostly positive, indicating economic growth, well, recovery in the USA. That does not rule out any action, but it probably pushes any announcement of a major policy move out to meeting later in the year. We will find out in few days.

Recently the uptrend in the AUD-CHF has become very choppy, as if ready to reverse. Corrections are bigger, volatility is higher, possibly building a top on the intermediate term chart. I would like to short it if the price dips under the recent low of 0.9695, with entry at 0.9690. This trade, if filled, will attempt to capture 120 pips. Alternatively, if the AUD-CHF continues higher and makes a new high, it is likely to form a divergence with the MACD. In such event, it could offer a decent shorting opportunity.

Another currency pair of interest is the EUR-CAD, also on the 4H chart. Here the price already bounced from the low of 1.2875 to 1.3147, perhaps forming a bottom. I want to go long on a bullish breakout with entry at 1.3155. The target is 1.3300. There is a small complication; I would like to see a little more pullback first. Not necessarily much lower, but I do not want to enter into a trade if the EUR-CAD rises right after the open. Initial opening moves often lead to false breakouts, something I want to avoid. After the first few hours, the order becomes valid.

While waiting for those trades, which could take some time because of relatively large time scale, I will look for shorter-term opportunities. One of them could materialize in the GBP-USD, among others. After a sharp rally on Friday, the cable is likely to go through a correction. Preferably, I would like to see a little continuation, but the signal itself will be a bearish reversal candlestick pattern on the hourly chart. Objective will be 50 pips, although details will have to be worked out once the entry is confirmed. Have a great trading week!

Mike K.
www.fxmadness,com

Thrilling Thursday - Our "One Trade" Does Good!

2012-01-19T09:36:00.001-05:00

One trade to rule them all!
That was our goal and our one precious trade for 2012 was BAC on January 5th, buying the stock at $5.75 and selling the 2013 $5 puts and calls for $2.55 for a net $3.20/4.10 entry (see "How to Buy a Stock for a 15-20% Discount" for more on this strategy). On Tuesday afternoon, I modified the entry live on TV at about 3:45, with BAC at $6.70 and you can see the immediate reaction the stock had on my pick into the close.
BAC was $6.49 on Tuesday afternoon at the start of my interview but the 2013 $5 puts and calls were $3.10 so the net was only $3.39/4.20 - not a huge change. BAC came through on earnings this morning and is up at $7.20 pre-market and we're well on our way to our 56% profit target, now with a 30% cushion.
It's no wonder that the TV crowd jumps on my picks as my last two appearances gave them a GNW spread on 10/24 for a 127% gain and an AXP spread from 10/5 for a 140% gain. BAC was, by comparison, a fairly conservative play and that's because, as you know if you've been reading this week - I'm not entirely convinced that this rally is sustainable - but I'm feeling much better about it now that we have BAC earnings out of the way!
This is a great time to thank my friendbuddypal Jim Cramer for chasing all his sheeple out of BAC this year with his SELLSELLSELL rating - without you and your half-assed opinions Jim, we'd have to work for a living! Why just yesterday, my trade idea for Members in the morning Alert was the FAS Feb $67/70 bull call spread at $2, selling the Feb $55 puts for $1.30 for net .70 on the $3 spread but last night - Jim didn't like my bullish Financials pick:

Financials were, in fact, one of my "Secret Santa's Inflation Hedges for 2011" that were published on Christmas Day, 2010 (and you can read that post for the logic behind each trade). All 4 of those trades are done tomorrow so let's see how they performed for the year:

30 XHB Jan $15/18 bull call spreads at $1.40 ($4,200), selling 20 XHB Jan $14 puts for $1.70 ($3,400) for net $800.

XHB Finished the day yesterday at $19.12 so we collect $3 on the bull call spread ($9,000) and the short puts expire worthless for a $4,800 gain (600%).

2 XLE Jan $55/60 bull call spreads at $2.60 ($520), selling 1 Jan $50 put for $4 ($400) for net $120.

This was a trade just to pay for gas and the 2012 spread finished at $1,000 and the puts are expiring worthless with XLE at $71.08 yesterday so a profit of $880 is up 733% for the year - paying for a few tanks of gas, as intended.

6 DBA Jan $26/29 bull call spreads at $1.90 ($1,140), selling 4 DBA Jan $25 puts for $1.90 ($760) for net $380

The Jan 2012 spread finished way in the money for $1,800 and DBA closed yesterday at $28.63 so the short puts should expire worthless and that's a net profit of $1,420 or 373%. The goal was to knock $100 a month off the cost of groceries.

40 XLF Jan $12/13 bull call spread at .80 ($3,200), selling 40 Jan $11 puts for .40 ($1,600) for net $1,600.

XLF finished the day at $13.92 so we collect $4,000 on the bull call spread and owe nothing on the short puts for a $2,400 gain (150%)

Wasn't that fun! Just like BAC, I love to have just a few simple trades for lazy people (or people who have real lives) that don't want to sit around trading all day trying to "beat the market." The trick is to be realistic. If you have $100,000 to invest and you hope to make 10% for the year - then you only need to put $1,500 into a trade that has the potential to make 733%, right?
In this case, $2,900 of cash put into these inflation hedges returns $9,500 - a very respectable blended 227% gain and, of course, as inflation hedges against things you are forced to buy every day - if they "lose" then you spend less at the pump and at the grocery store so it's a true hedge, meant to guarantee your buying power at the cost (potentially) of some of the savings you would have gotten if we were wrong and hit a deflationary cycle. As it was, 227% has kept us well ahead of actual inflation - so far!
We've been holding off on getting bullish in 2012 until we A) See some earnings and B) See the NYSE over our 7,866 target. Earnings have not been that hot and the NYSE has exactly 100 points to go after yesterday's close as it sits at a very unusual 10% below the Dow's on our 5% Rule Big Chart.
The Dow has it's own big level to hit at 12,749 and it's not likely to happen today but let's now prepare to get bullish next week. I'll be laying out a new round of Inflation Hedges for 2012 and we'll certainly have more upside picks like yesterday's FAS trade idea but first we need our indexes to SHOW US THE LEVELS!
Corporate earnings are simply not that impressive so far, we still have a concern about Europe that doesn't seem too irrational and who knows what's going on in China but it doesn't sound all that good. We're not seeing data that reassures us the US itself isn't in the throes of a recession (but we are definitely in denial of one) and it's gotta be a concern that the ECB handed out €489Bn to EU banks and they simply turned around and deposited €502B in the ECB's overnight facility (a record). You're not creating economic liquidity when all the banks do is park the money and collect interest!
Putting on my happy hat though, we are seeing a flow of capital out of bonds and into equities. Perhaps the ridiculously low rates paid for bond risk - even as Greece prepares to give their bondholders 70% haircuts with other countries in just as bad shape - is forcing people to move to dividend-paying stocks as well as riskier equities in search of the kind of returns that can keep them up with inflation.
We've been partial to cash and cash has been very good to us as the Dollar has marched from 74 in October to 82 last week - giving us 10% more buying power from our sidelined money but if the Euro is "fixed" and getting stronger - we need to get off the sidelines and into things that generate good returns - like our One BAC trade or yesterday's more aggressive FAS spread.
Last Wednesday, I reviewed or trades from the first 5 sessions of 2012 and we were surprisingly bullish but that was because there were lots of good bullish opportunities and, above all, we try to stay balanced - no matter how bullish or bearish we feel.
Recently, we've seen better ISM numbers in the US (53.9) and Consumer Confidence jumped to 74 while Chinese GDP is rolling along at an 8.9% growth rate. China's Industrial Production rose 12.8% in 2011 and, although they seemed to slow down in Q4 (waiting for better data), we are not yet making a good case for a "hard landing" over there. Just this morning, in fact, the PBOC put their foot back on the gas and will allow the Nation's 5 largest banks to increase Q1 lending by 5% over last year (when their lending seemed out of control).
This is the kind of NEW INFORMATION that forces us to rethink our bearish premise. We already know the ECB is pouring $1.5Tn into the Banks through the EFSF and the Fed has put in Trillions of Dollars through the back door into US banks and the BOJ and the SNB are both printing like crazy trying to devalue their own currencies at least fast enough to keep up with the money printing in the US and EU so, at a certain point - we can't afford to be bearish or we may drown at the bottom of Trillions of freshly printed Yen, Euros, Francs and Dollars - money, Money, MONEY!

Over in the Eurozone, those bond auctions are certainly going swell so far, just weeks after $700Bn was dumped into the market and 3% on French paper certainly beats 0.25% in the overnight vaults of the ECB and it's "so far - so good" except we're only taking the first of 1,000 steps towards a true recovery. Oh sorry, I'm supposed to be thinking only happy thoughts...
We got our EU downgrades and they were taken in stride and Germany's ZEW Investor Survey dramatically improved and they are the guys with all the money in the EU so we have to pay heed to their opinion on the subject. So our risk factors are certainly "improving" and certainly better looking than they seemed before the ECB pledged another Trillion Euros and, from the EU's perspective, before Obama had another $1.2Tn of his own spending money "approved" (ie. not blocked) yesterday.
So it's MONEYMONEYMONEY keeping the markets from going down in 2012 - so far and, if they can keep it up next week - we'll have to start taking it seriously. For the rest of this week, however, we'll continue to just sit back and enjoy the show!

World Bank Wednesday – Another Trillion Isn’t Enough?

2012-01-18T09:22:00.001-05:00

The World Bank cut it's Global Growth Outlook – Again.

The Washington-based institution said the world economy this year will grow 2.5 percent, down from a June estimate of 3.6 percent (DOWN 25%). The World Bank sees the euro area contracting 0.3 percent in 2012 (RECESSION), compared with a previous estimate of 1.8 percent growth (DOWN 120%). The U.S. outlook was cut to an expansion of 2.2 percent from 2.9 percent (DOWN 24%). “Even achieving these much weaker outturns is very uncertain,” the World Bank said in its Global Economic Prospects report saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico.

Hello, McFly – Are you starting to put together the dots or shall we spend another day debating the merits of going long on oil and retail?

“The downturn in Europe and weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome.” The World Bank urged developing economies to “prepare for the worst” as it sees a continued risk for the European turmoil to turn into a global financial crisis reminiscent of 2008.

Euro-area industrial production declined for a third straight month in November, a report last week showed, adding to signs the economy failed to expand in the fourth quarter as leaders struggled to quell the region’s fiscal crisis. The revision is the largest since January 2009, when the World Bank cut its global estimate for that year by 2.1 percentage points.

“Despite the significant measures that have been taken, the possibility of a further escalation of the crisis in Europe cannot be ruled out,” the World Bank said. “Some of the big developing countries that have been the motor of growth in the post 2008-2009 period now have slowed,” Andrew Burns, who heads the World Bank’s global macroeconomics team, told reporters on a conference call.

That prompted the IMF to IMMEDIATELY seek to boost its lending resources by another $1,000,000,000,000 this morning, in order to have the firepower to cope with any worsening of the EU debt crisis. The organization is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, although whether they'll heed the call is another matter entirely. This, I pointed out to Members (as we shorted the Futures this morning) is…

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Why Brazil Stocks?

2012-01-18T01:16:00.000-05:00

Last week, the rating agency, Standard & Poor's, downgraded the credit ratings for nine countries, France, Austria, Italy, Portugal, Spain, Cyprus, Malta, Slovakia and Slovenia. Yet just a couple months ago, S&P raised Brazil's foreign currency rating with little fanfare. According to John Chambers, S&P Managing Director Sovereign Ratings, "the upgrade of Brazil was supported by the current administration's growing track record of prudent macroeconomic policies, including fairly consistent primary surpluses of close to 3% of GDP."

From an economic standpoint, Brazil is the seventh largest country in the world based on GDP. The country is the world leader in renewable source energy, especially ethanol which it generates from sugarcane.

Fortunately for investors, there are plenty of Brazilian stocks that trade on the New York Stock Exchange and NASDAQ. Based on the free list of Brazil stocks at WallStreetNewsNetwork.com, twenty-five Brazilian stocks are available to US investors and almost all of them pay dividends.

One example is Braskem S.A. (BAK), the largest chemical company in South America. It makes and markets petrochemical and thermoplastic products. The stock trades at 15 times forward earnings and sports a very generous yield of 7.0%. Revenues for the latest reported quarter were up over 15%.

In the area of beverages, Companhia de Bebidas das Americas (ABV), also known as Ambev, makes and sells beer, soft drinks, malt, and other non-alcoholic and non-carbonated products. The stock has a forward price to earnings ratio of 20, and a yield of 4.3%. Revenues were up 6.6% for the latest quarter, although earnings were down 7%.

Gerdau S.A. (GGB), founded in 1901, manufactures and markets steel products. The stock trades at eight times forward earnings and offers investors a 2.9% yield. Latest quarter revenues were up 9.5%, with earnings up 31.9%.

Telefonica Brasil, S.A. ADS (VIV) is a fixed-line telecommunications company with a forward PE of 10, a yield of 1.4%. Quarterly earnings were up 105% on a 108% rise in revenues.

To see other dividend paying Brazil stocks, you can access a free list of Brazil stocks at WallStreetNewsNetwork.com, which can be downloaded, updated, and sorted.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Testy Tuesday - How Many Times Will You Fall for the Same Thing?

2012-01-17T09:31:00.001-05:00

Isn't this exciting!
The pre-markets are up 1% after a long weekend. That hasn't happened since - two weeks ago! Of course last Tuesday, we were jammed up as well and the Tuesday after Christmas, we were jammed up as well but THIS TIME - we're REALLY feeling it, right?
The funniest thing is the way they have dozens of idiots saying all sorts of ridiculous things on CNBC and not one of them mentions even the vaguest hit of deja vu in what has been the most consistent pattern of late 2011, early 2012.
On this Dollar chart from Scott Pluschau, you can see the dives that are occasionally taken to goose the markets and we have another one this morning with the Dollar down 1%, making the 1% pop in the futures slightly less impressive when taken in context.
This time may be different because, according to Friday's Legacy Commitments of Traders Report released by the CTFC, Commercial Traders are now net short on the Dollar to the tune of 59,023 to just 6,061 longs - about a 10:1 ratio that is EXTREME to say the least. Non-Reportable, Non-Commercial Traders (ie. Speculators), on the other hand, are almost 10:1 the other way with 9,765 long contracts and just 1,390 shorts. Reportable Non-Commercial Traders (Hedge Funds) fill out the rest of the longs with 52,644 long contracts against just 8,057 shorts.
To some extent, hedge funds are also speculators and usually you would assume their bets are covered but that's kind of hard to see with a 7:1 long/short ratio. Keep in mind that Commercial Traders are institutions with business reasons to hedge - they are not going to be flip-flopping their positions so they will NOT be buying Dollars just because they get cheaper. So, if it all hits the fan and the Funds shift to short - we could get quite a tidal-wave of Dollar selling.
That's an odd sort of positions for the speculating class to be taking (super-long on the Dollar) considering the possibility of a highly dilutive quantitative event (QE3) in the very near future. This is why we can't be gung-ho bearish - tempting though it may be and this is why every little rumor of Europe being "fixed" sends the Dollar flying down - there are no buyers - only nervous long Dollar holders.
As you can see from the chart above, it's not unreasonable to look at the Global situation and assume the Dollar can get much stronger as it can still gain 50% and not be back to 2002 highs. Of course, as we know, the 20% run in the Dollar from early 2000 to 2002 is the reason "partying like it's 1999" has a negative connotation for stock traders and, at 81, a 20% run in the Dollar only gets us back to 97.20 - not "strong" by any measure.
The commodity pushers want the Dollar as low as possible (so they get more of them) and our stocks are also priced in Dollars so our Corporate Masters also like a weak Dollar as it pumps up their balance sheets and makes them look clever as they make more money for selling the same or even less stuff as our own Federal Reserve take inflation denial to new heights with each glowing report on our economy.
Yet you fall for it EVERY TIME - it's amazing really. If investors were rats, they would be shipped back from the behavioral laboratory to the rat farm as "defective" - unable to learn even the simplest of mazes as they head down the wrong path over and over and over again. It's not your fault though - this is a pattern that's been going on for over 100 years as America's "dirty little secret" has always been currency debasement as a secret tax on it's working citizens (ie. the bottom 99%):

At what point on this chart would it have made sense to lend the United States money for 30 years at 3% interest? THAT's why we had a very bad bond auction last Thursday as Global Lenders have their own problems and, without a strengthening Dollar, they have no reason to risk their relatively sound currencies to fund our continuing deficits. If not for Europe LOOKING even worse than we do at the moment - the Dollar would be at new all-time lows. Just take a look at the damage that's been done to the economy in the Great Recession:

Here we are with many stocks and commodities right back at 2007 levels - as if we haven't skipped a beat. Does something seem wrong with this picture? If so, you are what they used to call "rational" but are now called a "nattering nabob of negatavism" - a term first used by Spiro Agnew (written for him by the great William Safire) to dismiss the various crimes and economic catastrophe of the Nixon Administration and recently brought back by Phil Gramm, who's economic strategy for John McCain was to tell the American people to "suck it up" and "stop whining" about the Bush economy.
It's always good to label your enemies with alliteration - it makes you seem smart and gives them a label that sticks in people's minds and, as we know from the Smashing Pumpkins:

The world is a vampire, sent to drain
Secret destroyers, hold you up to the flames
And what do I get, for my pain?
Betrayed desires, and a piece of the game

Despite all my rage I am still just a rat in a cage

At PSW, we don't have to run through the maze 5 times before we know what lever to push! Like last Tuesday and the Tuesday before that and the Tuesday before that, we took the opportunity in early morning Member Chat to short the BS Futures rally and already (8:50), our Egg McMuffins are paid for as we got a nice little sell-off. We'll be happy to go bullish - truly we will - when there is ACTUAL EVIDENCE that indicates we should.
So far, we are NOT feeling it this morning with MTB missing by .49 (out of $1.53 expected) and C missing by .10 (out of .48 expected). CHKP beat by a bit, EDU had a slight miss, AMTD had a slight beat in earnings but missed revenues by a smidge, WFC was in-line, FRC small beat, MMR big beat and FRX had a small beat. Unfortunately, misses by two big banks trumps so-so results by the rest and should not support $14 on XLF today.
We have plenty more "real" evidence this week to gather with PNFP tonight, SCHW and GS tomorrow morning, FFIV and KMP Wednesday night, BAC, FCS, PGR and UNH Thursday morning followed by ED, PBCT and SWKS that night and Friday we hear from Poppa GE along with SLB adn STI and THAT will give us a pretty good picture of what really went on in Q4.
Unfortunately, that means we continue to play it close to the vest, using our cash to poke at a few opportunities and picking up some good deals (like RCL this morning on the dip) but generally for quick trades until we get a clearer picture of where things stand.
The FT pointed out this weekend that the ongoing Iran crisis is masking internal signs of Brent weakness - something we're also picking up in the above-mentioned Commitment Report. Backwardation is changing to contango in the oil contracts and that's often the sign of a correction coming (we are long SCO already) and, if Iran doesn't "come through" for the oil bulls and do something very crazy very soon - the serious lack of Global demand for crude combined with the record supplies that are now on-line are capable of leading to a very sharp correction (see "The Oil Hawks are Living in Cloud Cuckoo Land" - also from the FT this weekend).

Our position on oil has been very clear - over $100 we short it. At $101, we short it. At $102 (which we had early this morning), we short it. At $103.50 - we back up the truck and short it. Why? BECAUSE OIL IS NOT WORTH $100 A BARREL. I'm sorry, it's just not. Gold is also not worth $1,500 an ounce but that doesn't mean there aren't going to be idiots lining up to buy it.
Thank goodness for those idiots - they pay for all our Egg McMuffins!

Kate Middleton Stock Index Outperforms the Dow Jones Industrial Average

2012-01-17T00:23:00.003-05:00

Her Royal Highness Princess William, Duchess of Cambridge, Countess of Strathearn, Baroness Carrickfergus is the official name of Catherine 'Kate' Middleton, the wife of Prince William. Ever since their engagement was announced on November 16, 2010, news on the couple, and more specifically Kate, has been constant: what she's wearing, where she's going, what she's doing. The marriage has been a boon to the press, especially the British publications, such as The Times and The Sun, published by News Corporation (NWS) (NWSA).

It is not just the newspapers that are benefiting from all the publicity surrounding Kate. Look what has happened with the clothing retailers whenever Kate buys another dress. Web site hits have skyrocketed and inventory was cleaned out at many dress stores. As a matter of fact, when Kate wore a dress from Reiss to meet President and Mrs. Obama, the company website crashed due to the influx of orders.

Reiss is a privately held company, but there are several publicly companies that have benefited from the 'Kate Effect'. When Kate wore a beige trenchcoat from Burberry (BRBY.L) on her trip to Belfast in March, sales spiked and the trenchcoat sold out. Burberry, which also makes perfume and accessories in addition to clothing, has been around since 1856. The stock is part of the FTSE 100 Index.

Kate has also worn lots of French Connection (FCCN.L) clothing, including tops and dresses. French Connection, also known as FCUK, was founded in 1972 and trades on the London Stock Exchange.

Alexander McQueen dresses designed by Sarah Burton on Kate are a common site. The company is a luxury fashion house founded by designer Alexander McQueen, and is a Subsidiary of PPR (PP.PA), a French holding company that specializing in retail shops and luxury brands. The company was started in 1963 and the stock trades on Euronext Paris and is a part of the CAC 40 index.

Even entrepreneurs are taking advantage of the Royal Wedding through eBay (EBAY). If you do a search on eBay for Kate Middleton, you will find a couple thousand items, everything from magazines to photographs to jewelry to dolls! eBay trades on NASDAQ and trades at 13 times forward earnings. Speaking of entrepreneurs, Kate's parents started their own party supply company, called Party Pieces, back in 1987. Since the wedding news, company sales have grown enormously. Sorry, you can't buy stock in it, it's a private company.

Show business is getting in on the act. Two movies have been made about the wedding. The first was a Lifetime movie called William & Kate. Lifetime is owned by A&E Television Networks, which is owned partially by Disney (DIS). Disney trades at 11.5 times forward earnings and yields 1.6%.

The second movie was William & Catherine: A Royal Romance, which was distributed by the Hallmark Channel. Hallmark is owned by the California based media production company, Crown Media Holdings, Inc. (CRWN). [Crown Media? That's an interesting coincidence.]

Many celebrities have an effect on companies that they are connected with in some way, whether the celebrity is a supermodel, such as Gisele Bunchen, an actress like Angelina Jolie, or just a celebrity for unknown reasons, such as Paris Hilton. Examining all the companies that Kate is connected with, an analysis can be made showing how the Kate stocks compare to stock indexes. If you look at the chart below, you will see the one-year time frame from the date of her engagement announcement. The Kate Index is the blue line on top.

As you can see, the Kate Middleton Stock Index has greatly outperformed the Dow Jones Industrial Average. During those twelve months, the Kate Index was up 18.1% versus the Dow, which was up only 10.9%.

To see a free list of the stocks in the Kate Middleton Stock Index, which includes some financial information on the companies, go to WallStreetNewsNetwork.com. The list can be downloaded, sorted, and updated.

Disclosure: Author owned DIS and EBAY at the time the article was written.

Copyright-free picture courtesy of Wikipedia. No celebrity endorsement, expressed or implied.

By Fred Fuld III at Stockerblog.com

Chocolate is Used to Treat Wrinkles, Coughs, and Brain Freezes: How About Chocolate Stocks?

2012-01-15T16:35:00.002-05:00

Most people love chocolate, and not just for its taste. Some eat chocolate to help reduce wrinkles. It is now being used in cough medicines. Many students eat chocolate before taking a test, due to the fact that chocolate has been found by researchers to improve brain function. Even Warren Buffett likes chocolate, as his company, Berkshire Hathaway (BRK-A) (BRK-B), owns See's Candies.

With Valentine's Day coming up next month, investors are wondering if they should nibble on chocolate and sugar stocks. WallStreetNewsNetwork.com just updated its free list of several chocolate stocks that may be worth feasting on. Here are a few that may satisfy your portfolio.

Rocky Mountain Chocolate Factory (RMCF), based in Durango, Colorado, makes and markets caramels, creams, mints, and truffles. The company, founded in 1981, has over 300 franchise locations in 40 states, plus Canada and the United Arab Emirates. The stock trades at 12.5 times forward earnings, and the company pays a mouth-watering yield of 4.6%. The company just announced its third quarter operating results. For the latest quarter, total revenues increased 4.6 percent to approximately $8.3 million, factory sales rose by 5.6 percent, mostly due to a 29.4 percent increase in sales to customers outside the Company's network of franchise retail stores.

However, earnings dropped 17.0 percent, mostly due to increased operating costs related to the Company's Aspen Leaf Yogurt division, an increase in uncollectable accounts reserves, and a drop in the franchise fees.

Then there is the classic company known for its chocolate bars, Hershey (HSY), that was founded in 1894. It is the largest manufacturer of chocolate in North America and one of the largest chocolate and candy companies in the world. It is famous for its Hershey's Kisses which were invented in 1901 and the chocolate chips that were brought out in 1928. The stock has forward price to earnings ratio of 19.7, with a scrumptious yield of 2.3%.

There is also the world-famous Nestle (NSRGY.PK), which sports a forward P/E of 14.8 and yields 3.7%. This Swiss chocolate manufacturer was founded in 1867.

If you want to see a free list of all the publicly traded chocolate and candy stocks, go to WallStreetNewsNetwork.com. The list, which includes five companies that pay dividends, can be downloaded, updated, and sorted.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Now Japan Feels the Heat.

2012-01-15T13:44:00.005-05:00

The major market mover on Friday turned out to be not the dismal US Trade Balance, which again showed growing deficit, but a wholesale downgrade of European countries by Standard & Poor’s. After months of threats, the rating agency finally delivered the goods, ending France's and Austria's triple-A status Friday. It lowered Italy's and Spain's by two notches and did the same for Portugal and Cyprus. S&P also cut ratings on Malta, Slovakia and Slovenia. France's downgrade to AA+ lowers it to the level of U.S. long-term debt, which S&P downgraded last summer.

Now Japan feels the threat of similar action. Her prime minister, attempting to build support for painful fiscal reforms, said Saturday that the country should be alarmed by ratings cuts in Europe and must tackle its massive public debts to avoid becoming the next target. Noda says Japan urgently needs to reduce its debt burden as the nation ages and its labor force shrinks, putting a greater burden on the social security and tax systems. He has promised to submit a bill by the end of March to raise the 5 percent sales tax in two stages, to 8 percent in 2014 and to 10 percent by 2015. To be fair, most of Japanese debt is held internally and not internationally, but another downgrade could be painful and seemingly official feel the heat.

Meanwhile in France, the Prime Minister Fillon said Saturday his country would push ahead with cost-cutting measures. The downgrade confirmed his conservative government's plans for more reforms to bring down debts, despite worries that more austerity measures could suffocate growth. However, the government would not adjust the budget yet, saying it had been devised with an assumption of higher borrowing costs. This is typical of what we have been hearing from Europe in the last two years - plenty of talk but very little practical steps. In the end, Friday's downgrades provide Germany with even bigger clout than before which could have a profound impact on what the EU will do to combat the problem (if they ever do anything).

Few days ago, I discussed a weekly chart of the EUR-NZD, which showed a strong possibility of MACD divergence. For a while, the weekly chart almost produced a reversal pattern, but a steep selloff on Friday closed at almost the weekly low. However, this choppiness created another probable MACD divergence, this time on the 4H chart. The divergence itself is almost guaranteed now, as long as the price makes a new low, but the EUR-NZD still needs to show a bullish reversal pattern. I would like to see a hammer or a bullish engulfing line, which would act as the trigger here, with at least 200 pips objective.

Meanwhile the CAD-CHF has consolidated, building a potential Head and Shoulders reversal on the intermediate term chart. For the pattern complete, the price must move under the latest low of 0.9238. I have a sell order at 0.9230, targeting 100 pips if it is initiated. Should the advance continue I would look for signs of resistance at 0.9400. Another pullback from that level could create a buying opportunity on a follow up breakout. As for immediate concerns, opening gaps could form and those are often exploitable. Have a great trading week!

Mike K.
www.fxmadness.com

Woman Named Beer was Banned from Beer Making Competition - Plus Top Beer Stocks

2012-01-13T13:06:00.001-05:00

A woman named Rachel Beer was banned from a brewing competition in Queensland, New Zealand. And is wasn't because she was named 'Beer'. It was because she wasn't a man. Apparently the rules of the home brewing competition require that the entrants be male. She complained but the contest official didn't give in. She was told to suggest a 'mixed' competition for next year.

At least she can invest in beer stocks in the mean time. According to a free recently updated list at WallStreetNewsNetwork.com, there are over ten publicly traded breweries and beer retailers. In addition, half a dozen of the beer stocks pay dividends, ranging up to almost 3%.

One example is Anheuser-Busch InBev (BUD), which has the memorable stock symbol representing its popular Budweiser brand. It also sells Stella Artois, Beck's, Leffe, Bud Light, Skol, Brahma, Quilmes, Michelob, and many other brands. The stock has a current price to earnings ratio of 20, a forward PE of 14, and a 1.44 PEG. The stock sports a yield of 1.6%.

Another dividend paying brewery is Molson Coors Brewing Company (TAP), a Canadian based company that markets the Coors Light, Molson, Carling, Pilsner, Keystone Light, and Granville Island brands. The stock trades at 14 times current earnings and 12 times forward earnings, with a reasonable price to earnings growth ratio of 2.29. In addition, the company pays a decent CD beating yield of 2.9%.

Heineken NV (HINKY.PK) pays a yield of 2.4% and trades at 13 times forward earnings.

If you are looking for more beer stock ideas, check out the free list at WallStreetNewsNetwork.com, which can be updated, sorted, and downloaded.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Start the New Year with Tax Free Income

2012-01-13T13:04:00.001-05:00

What better way to start the new year than with tax free income. Now is a great time to look at your portfolio and consider moving some of the funds you have in a regular bank account (making less than 1% interest, fully taxable) to either municipal bonds or 'tax free stocks'.

Tax free stocks are technically closed end funds or CEFs that own municipal bonds which pay tax free interest. There are risks of course like any investment, such as the potential increase in interest rates, which would cause the price of the shares to drop. In addition, many CEFs use leverage to obtain higher yields.

But there are many advantages besides the tax free income feature. Almost all of these CEFs pay dividends monthly, whereas, if you by an individual bond, the interest is paid semi-annually. CEFs have no minimum investment, whereas bonds are sold in $5,000 denominations and many brokers have minimum purchases ranging from $15,000 to $25,000. You also have better liquidity with CEFs as prices are quoted real time and quotes are immediately available on the Internet. CEFs provide diversification through a group of bonds in the portfolio.

Municipal bonds pay interest that is exempt from Federal taxes and may be exempt from state taxes if issued in the state you live in or issued by one of the US territories, such as Puerto Rico, the Virgin Islands, or Guam. Munis are generally issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments.WallStreetNewsNetwork.com just recently updated over 150 of these tax-free income CEFs, and more than 100 providing yields in excess of 5%.

One example, appropriate for New York residents, is Nuveen New York Investment Quality Municipal Fund Inc. (NQN) which seeks to provide current income exempt from regular Federal and New York State and City income tax, and pays a fairly high yield of 6.2%. However, it does use leverage, to the tune of 38%, to achieve its high yield. The fund trades at about a 3% discount to net asset value, also referred to NAV, at the time of writing. The management fee of 0.68% is below the overall average of all tax free CEFs. It has been paying dividends since 1990. Slightly less than 10% of the bonds in the portfolio are subject to the alternative minimum tax, also referred to as AMT.

California residents might want to take a look at the Nuveen California Municipal Value Fund Inc. (NCA), which doesn't use any leverage to achieve its 5.0% yield, free of Federal and state income taxes. It currently trades at an 8.3% discount to NAV, and carries a reasonable 0.57% management fee. The CEF, which has been around since 1987, has about 8.5% of its portfolio in AMT bonds.

For a CEF that is diversified nationwide, there is the Federated Premier Intermediate Municipal Income Fund (FPT), which seeks to provide current income exempt from federal income tax, including AMT. The fund yields 5.6% and has no AMT bonds in the portfolio. It is trading at a 1.9% discount to net asset value. Leverage is quite high at 40% but the management fee is a reasonable 0.46%. Income has been paid since 2002.

Another option is the Western Asset Municipal Partners Fund Inc. (MNP), yielding 5.2%, and trading at a 5.6% discount to NAV. Leverage is at 37%, and the CEF carries a management fee of 0.82%, slightly above the average. The CEF has been around since 1992.

The issues to watch out for with tax free CEFs:
* high leverage
* high management fees
* trading at a premium to NAV
* bonds in the portfolio that may be subject to the Alternative Minimum Tax
* quality of bonds in the portfolio

For a list of tax free income closed end funds, which includes yields, discounts and premiums, leverage, management fees, date founded, and other information, go to WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Stem Cell Stocks

2012-01-13T13:02:00.000-05:00

On Sunday evening, 60 Minutes broadcast an extensive report on stem cell scams. It reported on companies around the world that make outrageous claims with regards to the treatment and cures that stem cells can provide. Numerous people who have incurable diseases are desperately looking for cures, and are being taking advantage of by charlatans purporting to solve all their medical issues.

However, stem cells are being used currently for medical treatments. Look at bone marrow transplants that are used to treat leukemia utilizing adult stem cells. Scientists are actively looking at stem cells to treat diseases such as cancer, Parkinson's disease, and spinal cord injuries.

There are actually many publicly traded companies involved in stem cell research. WallStreetNewsNetwork.com has turned up over 20 stem cell stocks, half of which are currently profitable.

Integra Lifesciences Holdings (IART) is a New Jersey based company that develops, manufactures, and sells medical devices, implants, biomaterials, and instruments to the stem cell, surgery, and soft tissue repair markets. The stock trades at 17 times current earnings, and 7.5 times forward earnings. However, earnings for the latest quarter were down 31.8%.

Alexion Pharmaceuticals (ALXN) is a Connecticut based company with an $13.7 billion market capitalization that is involved in the development of biologic therapeutic products for the treatment of hematologic and cardiovascular disorders, auto-immune diseases, and cancer. The company licenses porcine embryonic stem cells for transgenic animals. The stock has a price to earnings ratio of 92 and a forward PE of 45. Earnings for the latest quarter were up an amazing 135.2% on a 44% rise in revenues.

Cellgene (CELG) is a $29.8 billion market cap company involved in the discovery and production of therapies designed to treat cancer and immune-inflammatory-related diseases. One of the company's main products is Thalomid, which is used for the treatment of erythema nodosum leprosum, a complication of leprosy. They also received a patent on placental stem cell recovery. The stock sports a PE ratio of 28 and a forward PE of 15. Quarterly earnings were up 32.7% on a 37% revenue increase.

For a free list of over twenty stem cell stocks which you can download, sort, and update, go to WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Friday the 13th's Follow-Through Failure Forecast

2012-01-13T09:07:00.001-05:00

Happy Friday the 13th!
Will the market's luck change today or will we break through the mirror at 1,297 on the S&P which could spell 7 years of bad luck for the bears (or maybe 7 weeks).
Surly Trader has a chart (see Phil's Favorites) that says only 9% of the S&Ps sales come from Europe, which means we really shouldn't care so much what they do but he also has a frightening chart of the Baltic Dry Index, which has fallen off a cliff since mid December and that matches up with this terrifying collapse in Rail Traffic that started earlier and also isn't finished.
The last time intermodal traffic dipped to this level, we were in denial that we were in a Recession and indeed the Dow continued to march from 11,500 in January of 2008 all the way to just above 13,000 in May before it began the long march to 6,600.
Of course, a pessimist may say that by the time traffic had dropped this badly, it was December and the Dow ars already at 8,000 or an even bigger pessimist may point out that, since these are year over year comparisons, that we've never even recovered the original 20% drop and now we're down again and worst than we were at the time.
But I don't like to be a pessimist so I'll just quote David Fry, who titled yesterday's post: "Bulls Blind to Bad Data Once Again," noting:

In the eurozone today ECB president Draghi decided the best defense is a good offense and cleverly spun a yarn that his policies are working. Draghi further states that “interest rates will remain low for an extended period”…where have we heard this before? This statement caused the euro to rally about 1% on the day perhaps squeezing some shorts.

Stocks just don’t seem to care about much and are hopeful future earnings reports will justify their enthusiasm. As noted yesterday the trailing PE is around 13X for the S&P 500 which is low but not historically so. Forward earnings are what bulls should care about if the current rally is to have legs. Below is a chart indicating forward looking earnings are flattening out.

From the WSJ’s analysis of FOMC Minutes Thursday is this nugget suggesting both Bernanke and Geithner were incompetent regarding the housing market decline beginning in 2006: “Bernanke, who took over from Alan Greenspan as Fed chairman in February 2006, is cautious in making forecasts about housing and the wider economy. But, together with then New York Fed chief Timothy Geithner, he believes the slowdown in housing is healthy and likely to end well.” On this kind of ineffectiveness he gets reappointed and Geithner is promoted.

It was Memorial Day of 2008, when I began a week of articles exposing the blatant manipulation that had driven the price to $130 and, at the time, I said oil should be trading at $42. The next day, I said "Oil is certainly the new housing so good luck to all the speculators playing hot potato with those front-month contracts, it will be fun to see who gets burned…" but what's interesting from that post and the reason I got deja vu this morning was this comment:

The Asian markets burned through another 5% drop on the Hang Seng while we were closed although the Nikkei bounced back 203 points today after yesterday’s 350-point drop. As is often the case with Nikkei "rallies" the gains all came in just 2 hours, the opening gap up and a big run from 1:30 to 2:30 so it remains to be seen whether it sticks... Very little happened over the weekend other than the usual attack from Rent-A-Rebel over in Nigeria attempting to support $130 crude.

This week, we have a series of late-day saves in the Asian markets as well as Rent-A-Union action over in Nigeria. Hey, you fell for the fake rebels as an excuse to drive oil higher, why not fake labor disputes. It's Nigeria - who's going to check?
Oil continued to rally through June in 2008, topping out at $145 and we learned the very valuable lesson that Keynes learned 100 years ago - That the markets can remain irrational longer than you can remain solvent. That's why I hate to hammer on my bearish outlook because, like 2008, I can be too far ahead of the curve. That's why we have plenty of bullish trade ideas (see Wednesday's review) to go with our bearish ones as BALANCE is the key (see our Education and Virtual Portfolio sections to hear this said over and over and over again) to riding out the market waves.
That's also why we practice and practice rolling in our virtual portfolios. You can be right about a stock but wrong about your timing and knowing how to salvage a position is a much more important skill than knowing how to enter and exit one yet most traders only have those two tools in their belt.
Cramer does not teach his sheeple to scale in or scale out because it doesn't fit into a sound-byte. He has somehow turned stampeding people in and out of positions into a badge of honor - I suppose along the logic that America loves a "decider" - whether or not the decision is a wise one.
Other than our aggressive, short-term Portfolios, where we "go with our gut," we are never all bullish or all bearish - usually 60/40 one way or another with 70/30 being extreme and not usually long-lasting.
Our Income Portfolio couldn't possibly be any duller and, if you are sick of riding the stock market roller coaster and want to set up and account that has an excellent chance of making a consistent 10% a year, without all the drama - I would suggest taking this long weekend to read 9 months' worth of posts outlining how we built and adjusted a virtual portfolio that we now only adjust about once a month. That's very impressive as the market has had a 30% range during that time.
During that time we had our more aggressive "May Flowering Inflation Hedges" and "September's Dozen" as well our our running "$25,000 Portfolio", which closed early and made way for the "White Christmas Portfolio." Now we have a new $25,000 Portfolio and, so far - so bad as we have been bearish and the market has not agreed with us. That's OK though as the $10,000 Portfolio of 2010 that became the $25,000 Portfolio of 2011 that finished at $135,000 started off with a $4,600 loss as we were wrong then too!

What did we do "wrong" on June 11th, 2010 with $10,000?

10,000 shares of YRCW as .21
20 C Dec 2010 $3/4 bull call spreads at .62, selling 20 Jan 2011 $4 puts at $1.08
20 TASR Jan 2011 $5/7 bull calls spreads at .35, selling 10 Jan $5 puts for $1.30
10 BP Jan 2011 $17.50 puts sold for $2.
20 XLF Jan 2011 $21/29 bull call spreads at $1, selling 10 XLF Jan 2011 $15 puts for $2

A very bullish set but, on June 11th, 2010, the Dow was at 10,500 and, by the end of that month, it was at 9,600 and our positions were down terribly - ON PAPER! That's why I now hammer home the difference between realized and unrealized losses. None of those trades were anywhere near expiration but they were leveraged and the losses on paper were tremendous.
YRCW fell to 8 cents and, rather than bail out, we spent $1,600 to buy 20,000 more shares, which gave us a basis of 12.3 cents and we got back out at 25 cents. C fell to $3.50 but finished the year at $5, TASR also fell to $3.50 and also finished the year at $5 (someone should look into the TASR/Citigroup connection), BP dropped another $10 to $26.50 in June (like a rock) and finished the year at $45 and XLF dropped to $13 and finished the year at $16.
So, were we wrong or right? You can't always time your entries and even a great stock will go down once in a while. As a Fundamental trader, you have to have conviction in your positions but you also have to know when to fold 'em - and that's very difficult when you trade stocks you care about.
In short-term trading, we can't afford to care about anything too much but, when we initiate a short-term Porfolio from cash, we can afford to pick positions we have long-term faith in and, if our timing appears to be off, then we follow our patented Rawhide Strategy and go "rollin', rollin', rollin'."

Have a great weekend!
- Phil

Wednesday Wheeeee - We Love it When a Plan Comes Together!

2012-01-11T09:38:00.001-05:00

Once again, we're done with our day before you get up.
In my 5am note to Members, I said: "I see nothing in the news to justify this pre-market "recovery" and I hate to sound like a broken record but I like shorting oil (/CL) if we get below that $102 line with tight stops and the Dow (/YM) is right at 12,400, which is a great spot to short. RUT (/TF) is at 762 and below 760 (same as yesterday) will confirm a downturn but 12,400 is a great line so why wait?" By 6:26, I was able to follow it up with:

And wheeeeeeeeeeeeeeeeeeeeeeeee! There go the Futures!

It's 7:07 and we're still going down, with oil at $101.24 (up $760 per contract) and the Dow at 12,340 (up $300 per contract) and, as Dennis said: "Good enough for steak and eggs for me!" Roro got up late but still caught the Dow at 6:16 and that was right on the nose for the oil drop as well as we hit it right on the nose this morning and now we're done and waiting for the next good set-up.

Of course we scale in and scale out of positions as there's no need to get greedy in the Futures, where a single remaining contract catching a $1 move down in oil (now $101.25 again) pays $1,000. This week, we have even stationed our own Craigzooka in New Zealand, where it's tomorrow - which makes it much easier to bet on today's action as he can tell us what happened already! Not that today was all that hard to predict, right? My comment to Members LAST Wednesday was:

It’s been a pretty reliable bet that they tank the markets into the longer-term note auctions because it scares people into T-Bills and keeps the rates low. From this line-up, it seems to me they intend to jack us up on Friday and then zap us on Tuesday as Esther George releases something hawkish ahead of the 3-year and it’s no coincidence that Plosser, by far the biggest Hawk, is given the floor at 12:30 on Wednesday – just 30 minutes before the critical 10-year auction. Coincidence? Surely you cannot be that naive!

So that's how we've been playing the past 7 days and it culminated in pressing our bets into yesterdays expected morning pump, leaving our $25,000 portfolio so bearish that I had to warn Members that it would be ugly if our premise was wrong. We had to swim against the TA tide to hold onto our positions but, once again, Fundamentals triumph in the end. Tomorrow is the 30-year auction but "only" $13Bn and at least that one pays a semi-realistic 3% (for the optimists, that is) so we're not going to chance that and we'll be taking that bearish money and running into today's sell-off (mostly and see this morning's pre-market chat for more news that's keeping us bearish).
We weren't all bearish of course and, in fact, why don't we take the opportunity this morning to review the year's trade ideas as I won't want to do this again by next week but this should be interesting while we wait for the open. It's a good chance to see what's working and what's not in a very choppy market:
Tuesday (in order of posting):
Shorting Dow Futures (/YM) at 12,350 - now 12,350 (I'm ignoring the fact that we caught 12,250 in between)
Shorting Russell Futures (/TF) at 750 - now 760 (same for all of these, just reporting current price as we're in and out of these constantly)

Selling FCX 2013 $35 puts for $5.85, now $4.70 - up 20%
Buying FCX Feb $40 calls for $1.42, now $2.25 - up 58%
Shorting Oil Futures (/CL) at $102.50, now $101.50
Shorting S&P Futures (/ES) at 1,275, now 1,281
Shorting Dow Futures at 12,385, now 12,357
IMAX 2013 $17/15 buy/write at net $10.50/12.75, now $20.25 - too complicated to explain here but $6.50 upside potential (62%) very much on track - here's my comment to Members at the time (11:05 am):

As a new play, I like IMAX at $18 selling the 2013 $17 calls for $5 and the $15 puts for $2.50 for net $10.50/12.75, which is a LOVELY 29% discount if put to you and a ripping 62% profit if called away $1 LOWER than it is now.

SCO Jan $35/38 bull call spread at $1.35, now $1 - down 25% (yes, we do have losing trades!)
SCO Jan $34 puts sold for $1.10, now $.55 - up 50% (oops, I take it back, not yet!)
DIA Jan $121 puts at $1.05 ($25KP play), now .40 - down 62% (there it is)
GLL Jan $18 puts at $1.10 ($25KP play), now .50 - down 55%
SONC June $7.50 puts sold for $1.15, now $1.24 - down 8%
SONC June $7.50 calls at .55, now .45 - down 18%
3 MON April $70 calls at $5.80 ($25KP), now $11 - up 89%
1 MON Jan $70 call sold for $3.05 ($25KP), now $9.30 - down 204%
1 MON Jan $72.50 call sold for $1.68 ($25KP), now $6.80 - down 304%

Those downs sound bad but, if you kept that trade as is (we didn't), then the net $1,267 entry is now net $1,690 so up 33% in a week on an earnings ratio backspread and a very nice $577 profit in our virtual $25,000 Portfolio but we're working it to hopefully do a bit better than that.

DMND June $37/45 bull call spread at $2.10, now $2.20 - up 5%
DMND June $20 puts sold for $1.85, now $1.80 - up 3%
Shorting Oil Futures (/CL) at $103, now $101.50
AONE 2013 $2.50 puts sold for $1.20, now $1.10 - up 9%
AONE 2013 $2.50/5 bull call spread at .25, now .40 - up 60%

Wow, what a busy day! Of course, we were coming off a very cashy close to 2011 so we were just looking for things to trade. At the end of Tuesday's Member Chat, early Wednesday morning, we had a nice discussion about Futures trading techniques (always fun in a choppy market) and I had occasion to share my favorite market quote:

"The man who begins to speculate in stocks with the intention to make a fortune, usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes get rich." – Charles Dow

Wednesday (we did not like the Fed minutes and I posited my theory for the next week, as above):

DIA March $122 puts at $4.10, now $3.30 - down 18%
GLL Jan $18 calls at .80, now .50 - down 37%
FAS 1/6 $65 pus sold for .78 ($25KP), expired worthless - up 100%
TNA Jan $43 puts sold for $2, now .45 - up 77%
TNA Feb $43/49 bull call spread at $3, now $3.30 - up 10%
QQQ Jan $58 puts at $1.10 ($25KP), now .62 - down 43% (had a stop at .95)
NAK Aug $6 buy/write at $3.80/4.90, now $6.31 - on track for 58% gain
Dow (/YM) Futures short at 12,350 - still there.
Oil (/CL) Futures short at $103.75 - now $101.70

Those last two Futures shorts were from the end of Wednesday's chat/Thursday morning and I did a nice play-by-play call of the trades between 2:59 am and 3:52, where we caught the Dow down to 12,300 and oil down to 102.85 - enough to pay for the old Egg McMuffins.
Thursday: In the main post, I called BAC my "One Trade" for 2012 - saying if you want to be bullish, you can just buy my BAC spread and walk away. This was a rare case of initiating a trade in the main post and not in Member Chat but we don't mind giving out samples once in a while...

BAC 2013 $5 buy/write (see post for all details) at $3.20/4.10, now $6.58 - on track for 56% gain
FAZ 2013 $40/60 bull call spread (small hedge to BAC) at $3.10, now $2.45 - down 20%
FAZ 2013 $20 puts sold for $3, now $3.20 - down 7%
BKS Feb $10 puts sold for $1.20 ($25KP), now .60 - up 50%
BKS at $10.50, now $11.70 - up 11%
BKS 2013 $10 puts sold for $3, now $2.50 - up 17%
VLO June $18 puts sold for $1.75, now $1.40 - up 20%
BBY 2014 $18/27 bull call spread at $4, now $4.60 - up 15%
BBY 2014 $18 puts sold for $3.10, now $2.65 - up 14%
Shorting Oil Futures at $102.40, now $101.50
Shorting Oil Futures again at $103, now $101.50
QQQ 1/13 $58 puts at $1.05 ($25KP), now .62 - down 41%

Notice that, in our $25KP, we are taking a beating (so far) compared to our more balanced general picks. That's because it's a short-term, VERY AGGRESSIVE virtual portfolio where we're aiming to hit $100,000 by the year's end (otherwise we underperform last year by a mile) and you don't make 300% a year by sitting on the fence! So, as I mentioned above, we went short to the point of getting nervous yesterday morning - hopefully our theory will be right and we'll be off to a good start for the year.

Friday - I strongly reiterate my CASH call for the majority of our Portfolios, markets too dangerous to call:

Shorting Dow (/YM) Futures at 12,350, still 12,350
QQQ 1/13 $58 puts at $1, now .60 - down 40%
CASH!!!!
DIA 3/31 $120 puts at $3.35, still $3.35 - even
2 SQQQ Jan $19 puts at $1.45 ($25KP), now $1.70 - down 18%
6 SQQQ Jan $17/18 bull call spreads at .55 ($25KP), now .50 - down 9%
CASSSSSSSSSSSH!!!!!! (from the Morning Alert to Members)
HOV at $1.65, now $2.05 - up 24%
HOV 2014 $1 puts sold for .50, now .45 - up 10%
HOV 2013 $1/2 bull call spread at .35, now .45 - up 29%
GLL Jan $18 calls at .65 ($25KP), now .50 - down 23%
VXX 1/13 $32/33 bull call spread at .30, now .13 - down 56%
VXX 1/13 $30 put sold for .35, now .39 - down 11%
5 NFLX Jan $90 calls sold for $3.50 ($1.750), now $8.20 - down 134%
3 NFLX March $100 calls at $6.60 ($1,980), now $11.20 - up 70%
GLW at $13.50, now $14 - up 4%
GLW 2014 $12 puts sold for $2.35, now 2.10 - up 11%
GLW 2013 $10/15 bull call spread at $2.85, now $3.50 - up 23%

Here's a good lesson about options. We had 3 ways to play GLW and you could just buy the stock to be bullish and made 4% or you could commit far less that $13.50 to short the $12 puts for a net $9.65 entry, worst case and you make 11% or you can hedge your bet and commit just $2.85 and you not only make 23% in less than a week but you make .65, which is more than you would have made committing 5x more to owning the stock. Silly, silly stock traders - when will you learn?

5 AAPL March $425/450 bull call spreads at $10 ($5,000), now $10.10 - up 1%

1 AAPL July $350 put sold for $12.50 ($1,250), now $11.25 - up 10%

2 AAPL Feb $450 calls sold for $6.25 ($1,350), now $6.10 - up 2%

That last one is another bit of options fun as we're taking advantage of high earnings premiums to commit very little cash ($2,400) towards a potential cash out at $12,500 if all goes well (AAPL under $450 in Feb but over in March) with lots of ways to win in between. That one is still close enough to play from scratch.
Well, that was last week but now I'm out of time, maybe I'll do this week over the weekend as it's a nice review for newer Members to go over what is working and what is not as we head into full-blown earnings season next week. Overall, in our first week of 2012, we had 35 winning trade ideas and 19 that we haven't turned around yet (and I'm only kind of joking as turning around those losing trades is how we make our money in the $25KP).
We'll see how things go into the 10-year auction. If it goes well, they can afford to use the Beige Book (2pm) to flip the markets back up as the 30-year note auction of $13Bn tomorrow is a rounding error to the Fed!
And wheeeeeeeeeee!

Tobin Tax, Another European Complication.

2012-01-08T14:12:00.005-05:00

As if Europe did not have enough problems, French president Sarkozy intends to raise the level of animosity with his insistence on introduction of the so-called Tobin tax. Its objective is to tax financial transaction within EU. Needless to say, not everybody is thrilled with this prospect and while France claims to have support of Germany, that is not enough to introduce a new EU-wide tax. Even the recent coercion of Italy’s Monti to come on board does not guarantee passage. UK and Sweden are opposed to this idea and can veto it. Timing of this proposal also raises eyebrows. New taxes do not increase growth and competitiveness, something that Europe needs more now. In addition, this new bone of contention cannot possibly unify EU members in a fight with the debt crisis.

Chances are that the summit in Brussels on January 30 will not produce agreement on this issue. In such case, Mr. Sarkozy will try to impose the Tobin tax unilaterally before the April presidential election in France. French business was quick to distance itself from the idea. Paris Europlace, a financial markets association, warned that unilateral application of this tax would drive banking, insurance and asset management business out of Paris, and benefit of other large financial centers. It could even hurt Sarkozy’s reelection bid. Ultimately, though, it will further sour European unity at a time when it is most needed.

The USD showed strong gains on Friday, especially against the Canadian Dollar, which fell of confusing employment numbers. While the Net Change in Employment improved with 17.5K new jobs, even higher than the projected 15 K, the Unemployment Rate somehow increased during this time to 7.5% from 7.4%. How is it possible? Beats me, but the USD-CAD had a nice rally and closed at 1.0283 just shy of the daily high. This, it turn, sets up a short-term reversal trade, a sell in this case. I want to see a bearish reversal candlestick pattern on hourly chart, looking for a 40 pips correction.

After a bullish spike on the first trading day of the year, the Euro fell for the rest of the week. Fundamentally, there are few, if any reasons to by the common currency, but it could be getting oversold for now. Such is the case in the EUR-NZD. At 1.6287, the price is approaching the previous low of 1.6201, creating a possible MACD divergence on the weekly chart. It is a chart to watch for me, in case the divergence actually develops. That would be confirmed by a strong bullish reversal pattern. Because this is a weekly chart, we have to wait at least a week for the next candle to form, maybe even longer. If it does, the price could easily recover to 1.70 or so.

Mike K.
www.fxmadness.com

What Do Ron Paul, Amazon, and Kelly Clarkson Have in Common

2012-01-07T13:19:00.001-05:00

Apparently, if a celebrity supports the right political candidate, the celebrity's popularity will skyrocket. Last Thursday, pop singer Kelly Clarkson tweeted that she supports libertarian/Republican candidate Ron Paul. Back in 2007, Paul was the second most searched person on the Internet, after Paris Hilton.

Although many tweeters criticized her at the time, she apparently garnered a lot of new fans. Clarkson's album sales skyrocketed by 442% on Amazon (AMZN) in just one day, causing the Stronger album to move to seventh place, up from #38. Many new buyers said that they had never heard of her until her Ron Paul support became publicized.

In case you haven't heard of Clarkson, she was the winner of the first season of the American Idol television series in 2002 and later, the runner-up in World Idol in 2003, and is now considered the most successful Idol contestant worldwide. Her first single, "A Moment Like This", broke The Beatles' record for the biggest jump to the number one position, from 52, in the history of the Billboard Hot 100 Chart.

Now let's think this through. If Charlie Sheen supports Ron Paul, will he get a career boost and be asked back to Two and a Half Men?

Copyright-free image courtesy of Wikipedia. No celebrity endorsement is expressed or implied.
Author owns AMZN.

Thursday Foolishness - More of the Same with One Trade

2012-01-05T09:35:00.001-05:00

Our day is done, how's yours?
That's right, we already did our 3am trade where we caught the dead top of oil (and the dead bottom of the Dollar), where my 2:59 am comment to Members in Chat was:

Dollar at session low of 80.40 at 3am and oil back at yesterday’s high at $103.70 so oil (/CL) makes a nice short below $103.75 here but DANGEROUS pre-market trading as Iran could spout off at any moment and the trading is VERY THIN.

So that brings us back to the good old Dow (/YM) futures at 12,350 and they are just over that line at 12,351 but that’s the short of the moment as long as the Dollar is over 80.40 .

For the next hour, I did a blow by blow on the oil trade in Member Chat on the way down to $102.70 - a nice $1,000 per contract worm gotten by the early birds, where we took the money and ran ahead of likely morning manipulation back up to $103.50, where we can short it again on inventories (11am). The Dow slipped to 12,300 and paid a solid $250 per contract as well, paying for over 100 Egg Mcmuffins this morning by itself. If you want to see how we make decisions along the way down - it's well worth going over this morning's comments - there was also some good discussion of other topics this morning, including my pick for the best wide-screen TV.
We're still just messing around with hit and run plays, waiting to see how the week pans out and next week we'll be waiting to see how earnings pan out as well as what we expect will be a pretty major market pullback leading into the 10-year auctions next Wednesday at 1pm. Clearly the Fed freaked out and jumped in yesterday when TLT hit $118 so we are fairly comfortable with our prediction of a slide into the 1pm 3-year note auction on Tuesday that culminates in panicking people into 10-year notes the next day. AFTER that, we can start looking at earnings to drive the market.
Driving the gloom this morning is a story we picked up yesterday but it seems to be surprising people today that Unicredit's failure to raise capital yesterday is causing their stock to drop today. Italy's second largest bank is now trading well below it's 2009 crisis lows and is back at levels not seen since the early 90s and the whole Italian market is down 3.3% this morning - led down by Financials. Italian 2-year notes are already back up to 4.72% while Spain is creeping up to 3.63%.
The Euro is down to $1.283 and the Pound is testing that $1.55 line that would spell catastrophic failure if they don't hold it. The good news for Japan is that the Yen is almost back to 77 (76.82) - so they have that to hang their hat on.
So Europe is still a mess - not a surprise really. We're patiently waiting for next week's earnings data so we can get a feel for what's real in the market and what is not. Some early reports are mixed with HELE, MON (got 'em) and MSM beating this morning but RPM, WOR and STZ missed and PLCE slashed guidance by 30% with "margins hit by discounts and record high apparel costs."
THAT doesn't sound good, does it? And STZ is a pretty diversified company with revenues down 27% year over year and they STILL missed those lousy expectations. Even LLY cut guidance this morning as Zyprexa goes off-patent. What is this World coming to if we can't make insane profits on anti-psychotic drugs?
BKS is down about 30% pre-market after announcing plans to spin off its digital business - which is the only part people like! Still, I don't think investors understand what spin-off means so I'm going to be liking a play on them under $10 this morning, perhaps selling puts into the initial drop.
We "only" lost 372,000 jobs last week and the ADP report came in hugely strong at +325,000 vs expectations of 150,000. This is the largest monthly increase for ADP since the same December report last year and the market rallied all the way up to 1,344 on the S&P by the end of the month before dropping back to 1,250 so anything less than a big pop off this news and we know there is other stuff that's much worse than it was last year without even checking.
As you can see from David Fry's XRT chart, we're pretty high in the range on high expectations that are simply not likely to be met. I was hoping for a test of $55 to go short again (we hit them last summer for a good ride down) but this morning's data doesn't make that likely and woe unto the markets if they can't hold 50 through earnings.
Of course, what really matters is, as usual, the financials. Dave has a nice chart from MS showing that the top 6 financials: BAC, GS, GE, WFC, ALL and JPM are EXPECTED to contribute 26.3% of the S&P 500's TOTAL earnings growth for 2012 - that's a heck of a lot of responsibility heaped on what have recently been very narrow shoulders. We're in BAC, JPM, GE and ALL and are generally bullish on the Financials but I'll bet many people are going to be surprised that it's BAC who are expected to lead the S&P's earnings thrust in 2012 with a 12.25Bn turn around in profits.

That's right, when you see all the clever analysts on TV telling you that they are targeting 1,350 on the S&P - keep in mind that, if you don't believe in BAC - then that whole premise is right out the window. So, I guess we should put BAC in our One Stock Portfolio - the portfolio for lazy people who can't be bothered to play the market every day (or maybe just have a life) and just want to pick just one stock that they can put everything in on a make or break trade.

BAC is still $5.75 and you can buy the stock and sell the Jan 2013 $5 puts and calls for $2.55 for a net entry of $3.20/4.10. So putting $32,000 into 10,000 shares of BAC and selling 100 puts and calls can make a profit of $18,000 (56%) in 12 months if BAC holds $5 (13% down from here) through next January's expiration. It's very likely that this trade would outperform the S&P if successful and it can be hedged with 5 FAS Jan 2013 $40/60 bull call spreads at $3.10, selling the $20 puts for $3 for net .10 on the $20 spread so 5 contracts pay $10,000 if FAZ shoots up, which is what we expect to happen if BAC fails to hold $5. On the downside, BAC should be well in the money long before you are forced to buy 500 shares of FAZ for $20.10 net ($10,050) and even if FAZ is zero, if you make $18,000 on the BAC spread - you still net $8,000 (25%) for the year.

So that's it then - have a lovely 2012 - I'll check back with you next January and we'll see how this goes.

What Does Warren Buffett have in Common with Vice?

2012-01-04T01:42:00.000-05:00

There is a mutual fund called the Vice Fund (VICEX), which invests in what it calls 'vice' oriented company that are in the business of either aerospace and defense, gambling, tobacco and alcoholic beverages. According to the company's web site, the fund says that "these industries tend to thrive regardless of the economy as a whole. In fact, they may have the potential to perform better when times are uncertain, leading many to view investment in 'Vice' industries as a solid strategy during recessionary periods." As of the end of November, the fund was up an amazing 9.62% year-to-date, while the S&P 500 generated a slightly above break-even return of only 1.08% during the same period.

It is interesting to note that many of the stocks in the Vice Fund have high yields, partially due to what I call the 'bad company discount'. Since many institutions and individual investors avoid these types of stocks, the buying arena is smaller than other stocks, causing the discount in price compared to other income stocks. This is especially true with tobacco and cigarette stocks, such as Altria Group Inc. (MO) which yields 5.5%, Lorillard, Inc. (LO) yielding 4.5%, and Philip Morris International, Inc. (PM) at a 3.9% yield, all of which are owned by Vice.

The alcohol stocks have yields but not as high as tobacco. Brown-Forman Corporation (BF-B), producer of Jack Daniel's and Southern Comfort, provides investors with a yield of 1.7%. Anheuser-Busch InBev (BUD), maker of Budweiser, yields 1.6%.

So getting back to the big question, what is the 'vice' stock that Warren Buffett's Berkshire Hathaway (BRK-A) (BRK-B) owns? The stock is General Dynamics Corp. (GD), which makes combat vehicles, weapons systems, munitions, and military ships. The stock trades at nine times forward earnings, and yields 2.8%. The company generated a very slight profit increase of 0.30% for the latest quarter, on a 2% revenue increase.

To see free lists of these stocks, WallStreetNewsNetwork.com has lists of Beer Stocks, Wine and Liquor Stocks, and Warren Buffett Berkshire Hathaway Stocks, which can be downloaded, sorted, and updated.

Disclosure: Author didn't own any of the above at the time the article was written.
By Stockerblog.com

Tempting Tuesday - Starting the New Year off with a Bang

2012-01-03T09:26:00.001-05:00

Wheee, what fun!
The futures are up 200 points on the Dow (/YM) on a massive gap up after being closed since Friday at 6. The Dollar was smacked down all the way to 79.97 at 6:30 and oil rocketed to the magic $101.50 mark and just because it's a new year doesn't mean we got stupider so my comment to Members in this morning's Chat was:

Futures finally opened with massive gap up of 200 on Dow (1.6%). Dollar dove to 80.045 – total joke and my knee-jerk reaction is to short the Dow (/YM) futures below the 12,350 line (12,352 now) and the RUT (/TF) if they cross back below 750 (now 754). Iran oil may have some legs so we may have to wait for inventories (Thursday) to short but we’ll see.

Yep, new year - same BS is the story of 2012. I made my market prediction yesterday and already today it's panning out as we have the opportunity to sell to the suckers who think that China's official PMI coming in over 50 for the first time in 3 months trumps the independent HSBC PMI of 48.7. We have discussed the very flaky nature of PMI data in the past so I won't get into it here but the key takeaway from that report is "The “festival effects” of western and Chinese New Year celebrations helped to boost the PMI reading."
So these are the BOOSTED numbers?!? Oh dear. “Europe’s debt woes, the austerity measures the European countries are taking and the sluggish U.S. recovery mean demand for Asian goods this year is likely to be weak, posing a downside risk,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA. Thank goodness investors don't read the actual reports or check the analysis or we wouldn't be able to make money betting against the reactions to headline numbers.
In the Chinese PMI data, an index of export orders was at 48.6 from 45.6 in November, still below 50, the dividing line between contraction and expansion. The rebound in the PMI “does not signal that the economy has turned around,” said Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc. who previously worked for the International Monetary Fund. “Growth momentum will continue to wane this quarter, as the European crisis will hurt China’s exports and a cooling property market will drag down domestic demand.”
CHINA is the story of 2012. Europe is a mess, Japan has been a mess for 20 years and is still a mess, America has been a mess we've all ignored for a decade and will remain so for the next decade so we're worrying about the day when people stop ignoring what a mess America is (and, in election season, you may see some of the candidates bring it up) and, if America manages to somehow kick the can into 2013 - it will all be up to China, who will make or break the global economy this year.
Which way will it go? Who knows? Even if we get data from China, the chance of it being an accurate reflection of their economy is very slim. Predicting what will happen is pure nonsense. As Barry Ritholtz points out in his excellent Washington Post Article this weekend:

Do a quick Google search for “where to invest in 2011.” I read through the first dozen or so. For the most part, the performance was pretty awful.
Whenever I see one of those “Buy this now for the new year” columns, I diary them in my calendar or use the free Web siteFollowupthen.com. A year later, I look back at these recommendations and forecasts, and, for the most part, they’re terrible.

Interestingly, China is not on Barry's top 10 list of things people are predicting this year (although he does mention the "Buy Emerging Markets" camp, which we are on the other side of due to China) but the WaPo also carried an interesting list of the best performing S&P stocks of 2011. Which analyst called COG (up 101%) as the year's winner last January? We had ISRG (up 77%) and BIIB (64%) but we didn't like CMG (60%) and we gave up on MA way too early as they finished the year near their highs, up 67%.
7 of the top 10 performers were things consumers HAD to buy - Energy and Health Care while MA, CMG and ROST all benefited from strong consumer demand. MA, to some extent, reflects higher prices for gas and food, which most people charge and ROST is a discounter that found its groove but CMG is baffling to me - who buys an $8 burrito in this economy? Barry had this nice, clickable graphic this morning with fun holiday statistics:

It's very nice but the statistics that matter to us begin tomorrow with earnings from MOS and TXI, followed by STZ, HELE, MON, APOL, DMND and FDO on Thursday. Next week "officially" begins earnings season with (partial list) PTSM, SCHN, AA, OCZ and WDFC on Monday, just SNX on Tues, LEN and SVU Wednesday, INFY and ZZ Thursday and - hold your breath - JPM on Friday morning and then we are off to the races with C, CBSH, WFC, PNFP, GS, BAC, BK, PBCT, SIVB, PRSP, STI and GE all reporting from the Financial Sector next week. If the World doesn't end when BAC reports that Thursday morning (19th) - I might be inclined to get a bit more bullish!
That is going to be a VERY exciting options expiration week so it's a good thing we are kicking off our virtual 2012 $25,000 Portfolio with a cash balance after our White Christmas Portfolio finished up over $30,000 (200%) last week. These are our aggressive, "fun" virtual portfolios, which are meant to be the aggressive carve-out of a larger, more sensibly balanced portfolio, like our Income Portfolio, which is going to have a busy month finally as we make our January adjustments.
Meanwhile, after a dip down to 12,327, the Dow is back at 12,350 and we can short it all over again if it breaks below that line but the first Egg McMuffin of 2012 is paid for and there will more likely be a bullish squeeze at the open as those who took their money off the table last week in case of terrorist shenanigans over the holiday weekend (like us) rush to get back in today (not like us at all).
Our job is to wait PATIENTLY and see what happens next. The Euro needs to be over $1.30 (now $1.3042) and the Pound over $1.55 (now $1.558) and the Dollar needs to be below 80 (now 80.09) for us to get interested in making long plays.
Tomorrow, we'll discuss our levels after we get a chance to see where today settles out. 1,297 is where the S&P needs to be to impress up (+5%) but the Russell is likely to hit 774 (Must Hold) before that happens and the NYSE, our broadest index, is still a drag on the rest and needs nearly 400 points to make their Must Hold at 7,866. This morning's ridiculous Futures rally should get them halfway there, what matters then is what they do with it into the close.
Happy 2012 - same as it ever was:

Few Thoughts About the US Dollar.

2012-01-01T15:25:00.003-05:00

Last year was difficult for the US Dollar. Many major currencies made all time highs against the USD, including the Australian Dollar, Japanese Yen, New Zealand Dollar and the Swiss Franc. This weakness was also demonstrated by commodities, which also either made historical moves in 2011, as gold, silver and copper did, or returned to elevated levels, like the oil. To make matters worse, the S&P downgraded creditworthiness of the USA, while the budget deficit continues to grow, with no end in sight. Failure of the “supper committee” to agree on cuts does not paint a bright picture for the future. Many have been predicting the end of the Dollar as the reserve currency.

In spite of all that, the US Dollar continues to be a safe haven. The ongoing Euro debt crisis virtually eliminated the Euro as a replacement for the USD in that role, at least for now. This unresolved issue will continue in 2012, shifting attention from problems in the US. In addition, many central banks have been, and likely will continue, to intervene in the markets in order to weaken their domestic currencies. Others are in the process of forming potential reversal patterns, which include the commodity currencies. They are starting to feel the slowing growth in China, a process that will probably only get more pronounced. Even the much-vaunted downgrade by the S&P had the opposite effect. In response, money started to flow into US Treasuries indicating which market is perceived as safe haven by markets. Finally, even the Dollar Index started to recover, after falling to 73.51. In spite of its flaws and own undeniable problems, the USD could be the biggest mover in 2012.

The EUR-USD will probably remain a proxy of general Dollar weakness/strength. On the monthly chart of this pair, we can see mounting weakness, which suggests more downside. Of particular importance is the 1.2850 support. If broken, the objective for the price will be 1.1850. Due to huge scale of this chart, this might not happen for month, the EUR-USD could even spend a big part of the year above the 1.2850 support. However, chances are good for the downward pressure to prevail and the price to continue lower.

Gold should be another good indication about Dollar’s health. Here the price has already fallen sharply from the all time high of 1920, by about 400 points. One would hardly notice it on the monthly chart, because here it only looks like a minor correction. At the same time, this chart shows an ominous development. The price formed a “falling three method”, or its “falling two” variation, which is very bearish indeed and suggests more downside. It is difficult to find logical objectives for this pullback, because of the preceding parabolic price advance. That said, two possibilities stand out. One is at 1225, and the other one is the 1000 level, as hard as it may be to imagine now. The low from last week, at 1522, is the level to watch for signs of bearish breakout.

Since the January 1 came on Sunday this year, post New Year trading could be a little different than in years past. Normally this day is very quiet, producing tight ranges, which are suitable for simple breakout trading the day after. That is not really applicable in 2013, due to lively action on Friday. At the same, typical opening strategies are not necessarily suitable either. The economic calendar is almost empty, with the exception for couple of PMI reports from Europe. Hard to say if trading on Monday is going to be worthwhile. At this point, potential gaps, if they form, are the only possible developments that could trigger traditional trades. After that, we have to see what happens. Wishing everybody great trading in 2012!

Mike K.
www.fxmadness.com

Stocks Liked by both Warren Buffett and Renaissance Technologies

2012-01-01T14:44:00.000-05:00

Everyone knows who Warren Buffett is, top investor and trader and either the richest, second richest, or third richest man in the world, depending on what day of the year it is. One technique that investors use is piggybacking on Warren Buffett's Berkshire Hathaway (BRK-A) (BRK-B) portfolio. Yet Buffett owns over thirty stocks in the portfolio of Berkshire Hathaway, according to WallStreetNewsNetwork.com. So what is an investor to do?

Investors can look at what top hedge funds are investing in, and compare that list to Buffett's stocks. One of the top hedge funds is Renaissance Technologies, founded in 1982 and run by James Simons. Renaissance's Medallion fund was the most profitable hedge fund with profits of over $1 billion in 2009. Also, the Medallion Fund has had an average annual return after fees of 35% since 1989. Renaissance charges the highest fees in the industry with a management fee of 5% and a profit participation of 44%.

Now lets look at the stocks that are preferred by both Berkshire Hathaway and Renaissance Technologies. Both own Intel (INTC), the world's largest semiconductor chip maker by revenues. The stock trades at ten times forward earnings and pays a decent yield of 3.5%. Latest quarterly earnings were up 17.4% on a 28.2% rise in revenues.

Another stock in common is Procter & Gamble Co. (PG), known for such brands as Head & Shoulders, Olay, Gillette, Mach3, Crest, Oral-B, Iams, Pringles, Dawn, Downy, Duracell, Gain, Tide, Bounty, Charmin, and Pampers. The stock has a forward price to earnings ratio of 14.6 and provides investors with a yield of 3.2%. Revenues for the latest quarter were up 8.9%, but earnings were down 1.9%.

Buffett and Simons also own Costco (COST), the third largest retailer in the United States. The stock trades at 19 times forward earnings and yields 1.1%. Latest quarterly earnings were up 2.6% on a 12.4% increase.

One more stock owned by both: General Dynamics Corp. (GD). The stock has a favorable forward PE of 9 and pays a yield of 2.9%.

And of course, Renaissance Technologies owns shares of Berkshire Hathaway (BRK-A) (BRK-B).

If you want to see a free list of the stocks owned by Warren Buffett's Berkshire Hathaway, go to WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

The Water Business is an Old Business: Water Stocks with Long Histories

2012-01-01T14:43:00.001-05:00

American Water (AWK) is celebrating its 125th anniversary this year. Actually, the transportation of water is an extremely old business. The Assyrians built a 50 mile long limestone aqueduct in the 7th century BC, which carried water through a valley to Nineveh, their capital. It measured about 30 feet high and almost 1000 feet wide.

American Water is a New Jersey based company that provides drinking water and wastewater services to 30 states and 2 Canadian provinces. The stock trades at 17 times forward earnings and pays a yield of about 3%. The current annual dividend rate is 92 cents per share, up from 68 cents per share for the previous year, a 35% increase. Earnings for the latest quarter were up 10.7% on a 2.3% increase in revenues.

Middlesex Water Co. (MSEX) is another water utility that has been around for over a century, as it was founded in 1897. The company primarily serves New Jersey, Delaware, and Pennsylvania. The stock has a forward price to earnings ratio of 19, which is a bit on the high side, however, it pays a generous yield of 4%. The company just raised its dividend on November 10. Earnings were down over 10% for the latest quarter.

WallStreetNewsNetwork.com just updated its free list of dividend paying water utility stocks, which shows the PE, the forward PE, the price to earnings growth ratio, and the yield.

Disclosure: Author didn't own any of the above at the time the article was written.
By Stockerblog.com

Natural Gas Fueling Stations Popping Up Around the Country: Check Out Gas Stocks

2012-01-01T14:41:00.000-05:00

It had to happen sooner or later. Natural gas is considered a much cleaner fuel than petroleum. Now a company called NCI is building natural gas fueling stations in Lee County, Florida for the general public and businesses. The fist will be a service station near Southwest Florida International Airport. Earlier this year, the city of North Little Rock built its first condensed natural gas fueling station, which is open to the public. Consumers, businesses, and governments are gradually making the shift, which should increase demand for natural gas.

There are many publicly traded companies involved in the distribution of natural gas, to both homes and businesses, and over 15 over them have yields in excess of 3%. For example, Atmos Energy Corporation (ATO) is involved in the distribution, transmission, and storage of natural gas. This Dallas, Texas based company, which was founded in 1906, trades at 13 times forward earnings and pays out a very favorable yield of 4.2%. Dividends on an annual basis increased from 1.37 to 1.38 per share. Earnings for the latest quarter were up an incredible 27.6% on a 1.4% revenue increase.

Another high yielder is Spectra Energy (SE) transports and stores natural gas for customers in various regions of the northeastern and southeastern United States, plus the Maritime Provinces and the Western Provinces in Canada. The company, based in Houston, trades at 16 times forward earnings and boasts a yield of 3.8%. Latest quarterly earnings were up an amazing 28.9% on a 10.2% rise in sales.

Other natural gas companies worth taking a closer look at include Northwest Natural Gas (NWN) at a 3.8% yield, WGL Holdings Inc (WGL) paying 3.7%, and Sempra Energy (SRE) at 3.6%. You can access a free list of over 25 natural gas companies, along with their financial data, at WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

Charlotte in 2012: This is YOUR Moment [del.icio.us]

2011-09-13T01:32:06-07:00

Short Selling of Banks Accelerates as New Financial Stress Test [del.icio.us]

2011-09-13T01:31:58-07:00

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Free Educational Stock Market Videos - Hamzei Analytics [del.icio.us]

2011-09-13T01:31:55-07:00

Loss of Biodiversity and Extinctions — Global Issues [del.icio.us]

2011-09-13T01:31:54-07:00

The man who planted trees [del.icio.us]

2011-09-13T01:31:52-07:00

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2011-09-13T01:31:50-07:00

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2011-09-13T01:31:49-07:00

World Consumption [del.icio.us]

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The Geography of Jobs [del.icio.us]

2011-09-13T01:31:45-07:00

This animated map provides a striking visual of employment trends over the last business cycle using net change in jobs from the U.S. Bureau of Labor Statistics on a rolling 12-month basis.