Category: Stocks

Today, I'm going to let you in on a technique the world's greatest investors use to safely make 20%-plus returns for decades.
If you understand this simple idea, you'll know how to spot and buy stocks that do well in any market, at prices that'll help you make and keep a lot of money.
All you have to do is answer one question: What is a world-dominating company really worth?
I found the answer. The market has made it very clear to anyone who cares to look.
A world-dominating business is generally the largest, most powerful company in its industry – like Wal-Mart, the largest retailer, or ExxonMobil, the largest oil company.
Most world dominators can raise prices to stay ahead of inflation, like Coca-Cola or Procter & Gamble. Or, like Wal-Mart and Exxon, they can use their enormous size to keep costs lower than everyone else in the industry.
Raising prices or being the lowest-cost provider means these world dominators tend to crush the competition. So they often generate enormous amounts of cash. This free cash flow is the money left over after paying all the bills, taxes, and interest payments.
Using three corporate buyouts of world-dominating businesses over the last three years, I've arrived at a general ballpark valuation. Different world dominators will certainly be worth less, some more. But this benchmark is a highly useful tool, one that can give you a clear competitive advantage in the market for big, consistent returns on stocks. Take a look...
In 2005, Procter & Gamble bought Gillette for about 30 times trailing free cash flow. Gillette is a huge brand. It has a 90% market share by value in some countries. Schick is a good competitor... But it'll always be a distant No. 2 to Gillette. Every day, 2 billion men wake up and most of them shave. Most of them choose Gillette.
Earlier this year, the Mars Company offered William Wrigley & Co a price that was also right around 30 times trailing free cash flow. Wrigley is the world's biggest maker and seller of chewing gum, and one of the most well-known brands on Earth: a true world dominator.
A few months after the Wrigley deal was announced, InBev offered to buy Anheuser-Busch. Anheuser's ticker symbol says it all: BUD. Budweiser's U.S. market share is around 48%, nearly half the U.S. beer market. It also owns other popular brand names like Michelob, Bass, Beck's, Kirin, Rolling Rock, and Lowenbrau.
Guess how much InBev's $70-a-share offer for BUD turned out to be... 28.4 times free cash flow. A bit shy of 30 times, but close enough.
The valuation of stocks isn't a science. It's an art built on numbers. So the general ballpark of 30 times trailing free cash flow is as close as we need to get.
Why 30 times free cash flow? Why such a high price?
The answer is simple. These businesses aren't likely to look very different a decade or two from now, because they dominate their markets. And though they're very large businesses, the chances are excellent they'll deliver enough growth to make the seemingly exorbitant price of 30 times free cash flow worth paying. If you can pay just 15-20 times free cash flow for these businesses, you're setting yourself up for years of incredible returns.
You should avoid just about every stock on the market today. But not the world dominators. These are the greatest businesses in the world, the stocks Warren Buffett buys and holds forever. Buffett owned Gillette when Procter & Gamble bought it, and now he owns Procter & Gamble. He owned BUD when InBev bought it, and he's becoming a minority equity holder in the Wrigley deal.

Question asked on 08/23/2008 at 07:40 AM :: Comments to date: 0

Category: Stocks

Other than the credit crunch, nothing has done more to depress economic activity than soaring energy prices.
Now that oil prices are coming down sharply we should see the economy adjusting to a new level of energy costs. Strangely, the financial media is not talking about the beneficial impact that lower energy costs will have. Perhaps no one can quite believe that such good fortune could come our way. Whatever the reason, if it continues cheaper, oil will be a boon for the economy.
One of the biggest payoffs is consumers will have more money to spend on the goods and services that support over 70% of the economy. Manufacturers, transporters, importers, retailers, and all their aunts and uncles will get a share of the rewards. We aren't expecting anything you would mistake for a boom, but we might be able to work ourselves out of the current bust a bit earlier than expected.
In addition, the balance of payments deficit should come off life support. Soaring oil prices were creating the largest hemorrhage of wealth out of our country that has ever been seen. We may not have a reversal of the balance in our lifetimes, but just cutting it down will help the economy.
Lower prices for energy will also help keep inflation in check. This topic gives us a chuckle because the Fed took energy out of the inflation equation a few years ago in order to make the numbers look better. Now Ben is finding himself caught in his own trap. That's okay because you won't need official reports to see prices moderate.
The dollar is already starting to reflect the benefits of less expensive energy. The greenback is up a bit against the euro and other strong currencies. Although we remain convinced that the soaring federal debt will push the dollar back down again, it's nice to have at least a temporary reprieve.
The question now becomes, how low are oil prices likely to go? We can only say that oil has a long history of spiking and then dropping back 30% or more. If it happens again, we could see oil drop to $98 or so. Some analysts think the decline could be greater because the recent run-up was especially large and quick. Any price below $100 would be pure adrenalin for the economy.

Question asked on 08/13/2008 at 08:05 AM :: Comments to date: 0

Category: Stocks

Two weeks ago, this sector was paying out even more – nearly 18%. An 18% yield is about six times the yield on Treasury bonds. In fact, these stocks are by far the highest-yielding investments in the stock market.
These are business development companies (BDCs). And they have to pay out 90% of their taxable income every year.
BDCs invest in small businesses, either by owning equity stakes or by making loans. The government thinks that's an important job... So it entices investors to structure themselves as a BDC by letting them skip tax day – as long as the majority of their earnings are passed on to shareholders in the form of big dividend checks.
Lately, those checks have gotten even bigger. You see, like all companies related to finance, BDCs have taken a beating. In the last year, the sector has fallen 49%.
The stocks are down but the dividends haven't fallen... yet.
Many of these companies are like subprime lenders. They specialize in "mezzanine" lending to financially strapped businesses.
A mezzanine loan is junior to all other types of debt. In a bankruptcy, mezzanine debt holders are just about last to get paid. (Only common shareholders are farther back in line.) Since it is more risky, a mezzanine loan demands higher interest rates. So companies usually use this type of financing as a last resort.
If some of the small businesses that owe money to the BDCs fail to make their payments, the BDC dividends may fall. That's what's spooked the market into pricing these BDCs for Armageddon.
But several of the best BDCs have nothing to do with real estate, credit cards, or other consumer debts. They're simply doing business as usual. And I think they may be great bets over the long term.
The biggest BDC is American Capital (ACAS), which yields 20%. It's led the sector down... And it still hasn't built a solid bottom yet. When financials do recover, it should work out well.
Since the oil market is falling right now, these BDCs may decline in the short term. But when they bottom out, they should make extraordinary investments.

Question asked on 08/04/2008 at 12:43 PM :: Comments to date: 0

Category: Stocks

Cobalt is an interesting metal. It has a deep-blue pigment. It is also often found in combination with sulfur and arsenic. Miners of old, noting these things and also seeing as how it had bad effects on nearby silver ores, dubbed the metal cobalt. The word comes from “kobold,” a German word that translates as “goblin.” As the Brewer’s Dictionary of Phrase and Fable puts it: “[Miners] named it after the malicious mine demon who they believed had put it there.”
We know a lot more about cobalt today, of course, and it has all kinds of uses. As with many of these quirky metals I’ve written about recently -- molybdenum, vanadium -- they’ve been through years and years of neglect. Now demand for them is high, and since you can’t just flick a switch and make more, prices skyrocket.
Booming Cobalt Markets Look Here to Stay
In 2007, cobalt had its big year. It’s not as sexy as uranium or gold, but in 2007, cobalt prices rose 60%, to reach heights never seen since trading began in 1978. But it’s the same old story. The price was low as the U.S. and the Soviet Union unloaded their stockpiles of the metal. (Cobalt has an important role to play in defense, as it is used in jet engines and as an important alloy for many metals).
Meanwhile, the Chinese economy woke up and started devouring the stuff.
And cobalt became a favorite material for rechargeable batteries. In fact, over the past four years, cobalt use in rechargeable batteries has increased over 300%. The fastest growing use for cobalt is in hybrid cars. In a typical hybrid car battery, there is anywhere from 5-18 pounds of cobalt. As one metals analyst put it: “Even at 10 pounds per car, if the market did triple to 1.5 million units, that would make 15 million new pounds of cobalt needed annually -- a substantial increase in a small, 120 million pound market.”
So that’s a big potential market… but there is another market that eats up a lot of cobalt: aerospace.
Aluminum is the metal most widely used in aircraft. But cobalt is also as important, if less well-known, metal. Cobalt trades for about 30 times the price of aluminum. This from the Financial Times :
“In 2007, almost a quarter of the world's cobalt was used in materials known as 'superalloys' that are capable of withstanding temperatures of up to 1,100 degrees Celsius. Some 75% of these went into aircraft, according to figures from industry group the Cobalt Development Institute.
“Sustaining cobalt prices is the fear that as demand accelerates, supply may not be able to grow quickly enough to meet the world's needs. Though there are new mines scheduled to come onstream around the end of the decade, many in the market are uncertain they will reach production as quickly as their owners plan.”
Most of the cobalt on world markets comes from the Democratic Republic of the Congo, Australia and Canada. But power issues in the Congo hurt development. And in a story told a thousand times across the metals spectrum, the costs to bring new mines on is high. According to J. Scott Bending, president of Canadian metals explorer and refiner Formation Capital: "Very few entrants into the high-purity cobalt market within the next decade are anticipated."
The cobalt price took a dip recently because of growing stockpiles in China. But keep in mind the market for cobalt is still very tight. And the backdrop for demand looks quite good -- hybrid cars and fuel-efficient jets! Come on, it’s nearly a cinch that demand for those things will rise. And this brief decline in price may actually help, because if the price gets too high, users will start to push for substitutes. Even at 2007 levels, OM Group will make plenty of money.
I think investors also look at OM Group as a sort of flash in the pan, a company that was put together during two great years, but otherwise is mediocre.
OM Group has made big money really only in 2007 and 2008. It earned over $5 per share in 2007. It should earn around $7 per share this year. Before that, it had a couple of years in the wilderness when it didn’t earn much money at all.
But past comparisons are no good here. OM Group is a vastly different business than what it was even two years ago. The company sold its nickel business, instantly improving its financial condition. It also made two acquisitions, bolstering its portfolio of value-added chemicals.
The bottom line is that this is a very different business than what it was two years ago. OM Group today has a great balance sheet with no net debt. And it generates tremendous cash flow.
Another point in OM’s favor, given the fragile state of the U.S. economy, is that most of its sales come from overseas. About 43% of its sales come from booming Asia.
I think we have to take a shot at a company like this. The fundamentals seem firmly in place. The stock sell-off has been way overdone -- from $66 to under $30. The stock right now trades for only about five times this year’s earning guess. You have a lot of room for error when you buy stocks at those kinds of prices. It also trades for 90% of stated book value, which is $36 per share. Seems to me it ought to be worth at least book. Looks like a steal.
Recommendation: Buy OM Group (OMG:nyse) up to $36 per share.

Question asked on 07/22/2008 at 07:04 AM :: Comments to date: 0

Category: Stocks

Yesterday I said look at distressed financials.
I like to see what sectors have been punished to the point of being totally beaten down and distroyed.
There are 2 sectors right now in that category. Auto and financials.
I am not goiong to look at auto's now due to the economic cycle of personal spending habits. People are pulling in their spending habits due to the rise in gas prices and utilities, therefore they will not buy a new car as readily as they used to.
The fed has been saving the financials Since August of 2007 from a full blown panic so we don't create a depression like the 1929 crash. Since the Fed knows that they have to keep the market and the financials sound, so the depression doesn't happen, that is why I look to buy the best of the beaten up sector. A stand out in the crowd is ACAS.
They have increased their dividend every year (which is the critical part) and have old loans on the books that people will not default on due to the fact they have too much equity in the loans. This would allow the borrowers the ability to refinance to buy time if they had a tough time of paying the loan off.
The market is punishing this company because so many bank stocks have cut their dividends and the big buyers are anticipating that ACAS will do the same. Therefore they are pricing the stock as though it will cut the dividend by 40%. Right now the stock is yielding 16%.
Even if they cut the dividend in half the stock will yield 8%. So put your money here and wait long term to have the financials come back. While we wait I will be happy to collect 16% on my money.
If any of my readers know of other quality stocks like ACAS please write back to me so I can share it with the others.

Question asked on 07/03/2008 at 05:41 AM :: Comments to date: 0

Category: Stocks

The S&P 500 has dropped sharply throughout the month of June and this has resulted in the 10-month moving average crossing bearishly below the 20-month moving average. This type of crossover doesn’t happen all that often.
The last time the bearish crossover happened was in March 2001. Sure, the S&P had already dropped 400 points from its high, but it dropped another 400 points over the following year and a half. So we could have a long way to go before we see an end to the bear market.
we are likely to see rallies like we saw in the spring of ‘01 and fall of ’01. In fact, I look for one in the near future, given the number of stocks that are oversold after the last two weeks of selling. In fact, I ran a scan of stocks in the Nasdaq 100 and S&P 500 to see how many of them were oversold based on a 14-unit slow stochastic below the 30 level.
The results were astounding. In the NDX, 75 of the 100 met the criteria and in the S&P, 357 met this requirement. Just for kicks, I ran the opposite scan as well, stocks in the two indices that had slow stochastic readings above 70. There were a whopping total of four in the NDX and 26 in the SPX. These are incredibly one-sided ratios and suggest a bounce is due. But don’t get caught up in the bounce and think that the bear market is over.
If you haven’t heeded the warning yet, you should take steps to preserve capital. If you use options, look at buying some long-term puts on ETFs like the Spyders, Diamonds, or QQQQ. If you are averse to using options, look at some of the double inverse ETFs that are out there. Here is a quick list:
ProShares Ultrashort QQQQ-QID
ProShares Ultrashort Dow 30- DXD
ProShares Ultrashort S&P 500- SDS
ProShares Ultrashort Russell 2000- TWM
ProShares Ultrashort Semiconductors- SSG
ProShares Ultrashort Financials- SKF
ProShares Ultrashort Basic Materials- SMN
ProShares Ultrashort Technology- REW

These funds will rise in value as the associated ETF falls, and these ETFs are leveraged so the move is double the down move. In other words, if the QQQQ falls one percent, the QID will rise by two percent.
Now is not the time to sit idly by, now is the time to protect your assets.
Remember the market does not like INFLATION. Look at the market from the 70's which we are similar to since 2002.
We are similar to the 70's because the market did not improve it's top until after Volker stopped the inflationary trend in 1982. Will it take that long again? 2012. I believe it will. So pick the metals sector as the only bullish side and be selective at bottom picking the financials that pay big dividends.

Question asked on 07/02/2008 at 05:28 AM :: Comments to date: 0

Category: Stocks

. Use panic selling as an opportunity to position for profits. The bears may continue to shake out weaker longs, but I expect the bulls to begin bringing stocks back over the weeks ahead.” Mid week it looked like sellers weren’t quite finished shaking out the weaker longs. My observations could be considered an understatement, as subsequent stock market declines constituted a very healthy “shake out.”
Falling share prices hurts the bottom fishers and when they get their stops picked off the bottom will be in.
This past week, stocks moved still lower on record high oil prices, financial sector woes, Federal Reserve futility, and international tensions. The dollar was down and gold was rising. Fear is pushing stock indexes to the next levels of support. We’re on watch for a turn, as we look to stay a step ahead of the crowd.
So don't panic and sell now even a few stocks went up last week that were not oil and agricultural related.
Like CMED was up 9% in one week. This is one of Chinas strongest plays now and their economy is booming due to the preparations for the Olympics. But don't think that will stop the economy after the games are over. The Chineese will have had a taste of the better life due to the inteaction of the world and they will want more after beiing so repressed for so long.

Question asked on 06/30/2008 at 05:10 AM :: Comments to date: 0

Category: Stocks

Alexco Resource Corp. (AXU: AMEX) has received the mining and land use permit that it needs to start redeveloping the historic Bellekeno Mine in Yukon. By the end of this year, Alexco plans to pull out bulk samples from the silver/lead-rich southwest zone. Then Alexco will rehabilitate the workings in preparation for a production decision in early 2009.
The Bellekeno Mine contains an inferred resource of 537,000 tons containing 1,016 grams per ton of silver. That’s about 19.2 million ounces of silver. Plus, there’s an estimated 13.5% lead, and 10.7% zinc. Really, some of the ore is just astonishing in quality. From what I have seen of it, it’s like the “specimen ore” that we used to use in mineralogy class at Harvard. It’s what ore ought to look like.
The underground resource appears to continue “open” to the west and down plunge, far deeper than the existing mine works. In other words, there is more ore. We just don’t know how much more there is beyond the “safe” engineering estimates.
Alexco’s contractor is on site and has been performing prep work since April. Soon, Alexco will commence digging a 2,000-foot “decline” to access the former workings. This decline will take approximately four months to drive. It will intersect the former mine workings in the area between the southwest zone and the zinc/silver-rich east zone.
Alexco expects to perform underground definition and exploration drilling, beginning in fall 2008. The bulk samples of ore and other mineralization will confirm the
metallurgical properties of the ore, as well as general mining conditions. Alexco’s goal is to obtain results sufficient to make a commercial development decision on the Bellekeno Mine in early 2009.
And if things are as good as they appear at this stage, Alexco should instantly become takeover bait for a larger mining company that wants to beef up its reserve position with a high-grade deposit.
High-grade ores are good because they usually have lower costs of production. You have to process less ore to get the same recovery. This has become a critical issue in the mining business. We are now in an era in which capital and operating costs are soaring in the mining industry.

Question asked on 06/22/2008 at 02:37 PM :: Comments to date: 0

Category: Stocks

Alexei Miller, CEO of OAO Gazprom, the world's biggest natural-gas company, said oil would hit $250 in the "foreseeable future." Option traders are already making bets. At least 3,008 options contracts have been purchased giving owners the right to buy oil at $250 in December, according to Bloomberg.

From 2004 to 2006, the top 27 oil companies tracked by the Energy Information Administration saw their tax bills nearly double, from $48.4 billion to $90.4 billion. Check out ExxonMobil's 2007 tax bill: sales, excise, and income taxes totaled $102 billion on $390 billion in sales. Think that might affect gasoline prices a little?

Legendary oilman and billionaire T. Boone Pickens called our imports of foreign oil "the biggest transfer of wealth in the history of mankind" – from the U.S. to oil-exporting nations.

In an interview with Oil and Gas Investor, Pickens said we pay about $700 billion per year for imported oil, a figure he predicts will rise to $10 trillion within the next 10 years. America is increasingly at the mercy of oil-producing

Question asked on 06/21/2008 at 02:34 PM :: Comments to date: 0

Category: Stocks

The G8 finance ministers met in Japan last weekend, where they confirmed what we have been saying for some time: "Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressures." Forget about credit problems, housing, and the financial sector. Oil and other commodities are the big crisis now.
It seems clear that if oil were to rise much higher than $150 a barrel, its impact on the world economy would be severe. Probably, growth would short-circuit.
On the other hand, if oil prices fell back under $100 (as most drivers currently pray), everyone might breathe a sign of relief. But that relief would be short-lived.
Cheap oil now would only discourage new oil projects from coming online. It would put serious alternative energy development on hold. In the long run, energy would become even scarcer and more expensive.
Petrobras, as you should know by now, is a Brazilian oil producer. In fact, it is the fastest growing major oil producer in the world, and the 2nd largest after Exxon Mobil, in terms of market capitalization.
Petrobras made headlines in recent months when it announced potential production of tens of billions of barrels of oil from deposits located five miles under the ocean, and under a further mile or so of heavy salt that constitutes the ocean floor. Wall Street analysts were less optimistic. Some suggested Petrobras would be lucky to extract one billion barrels of oil. Bringing this oil to the surface represents an enormous challenge from an engineering and geological standpoint.
Even if the company is lucky enough to pump two billion barrels of oil, oil prices would have to be above $120 before Petrobras could cover its costs. Add a fair profit to that, and oil prices would probably need to be closer to $200.
Developers of this sort of project face a clear dilemma. If oil were to fall back to near $100 and remain there, deposits like this would not be profitable and will not be developed. The world would then be in greater danger from growing oil shortages.
On the other hand, if oil prices rose to $240, another set of risks takes over. When Petrobras' estimated it would cost a quarter trillion dollars to develop this oil field, it assumed oil prices would be closer to where they are today. But what everyone forgets is that oil prices add to the cost of producing all commodities. Oil at $240 would drive Petrobras' costs for materials and energy considerably higher, possibly making this project unaffordable.
Let's hope oil prices decline a little from their current heights in the mid $130s -- perhaps to $110 or $120 -- and stay there for a while. We would be less troubled by dreams of an immanent economic disaster.
At the same time, we don't want oil to remain stable so long that the world becomes even more complacent about the energy squeeze. Even at today's high prices, people aren't nearly worried enough about oil.
Much has been made over the fact that Americans have cut back a little on gasoline consumption. Sure, some people are driving less due to high gas prices, but not most people. What's more, while oil consumption is down year-over-year, so is supply. And, unfortunately, supply has fallen faster than demand. So we are less secure, rather than more. Besides, conservation alone will not ultimately solve the energy problem. It will take strong leadership and a vast amount of research and investment to do that.

Question asked on 06/18/2008 at 09:06 PM :: Comments to date: 0

Category: Stocks

If you study the chart patterns of the big shippers they are all following the same pattern. A sector of trades.
Dry bulk shippers have sold off dramatically in recent trading sessions, as shipping rates have come off their highs. Much of the reason behind the sell-off was speculation thatChina will start drawing down some of its raw material inventory as we approach the upcoming Olympics. Despite the recent weakness, we see demand for dry bulk shipping intact as the developing world continues to clamor for resources across oceans. Excel Maritime Carriers (EXM) I see recent weakness as a buying opportunity. While Excel Maritime will benefit from higher spot shipping rates, they are also hedged against near-term weakness by already having chartered out much of their fleet for the remainder of 2008. Look at EGLE and DRYS also for other buys.

Question asked on 06/17/2008 at 09:01 PM :: Comments to date: 0

Category: Stocks

Today, health care accounts for 15% of U.S. spending, about $2.2 trillion. That already staggering number is set to skyrocket in the next decade as the waves of the "silver tsunami" wash ashore.
You see, regardless of how healthy you are as you age, the majority of your lifetime medical expenses – approximately 80% – will come due in the final years of your life. As you would expect, a large portion of these dollars will flow to hospitals and assisted-living centers. So, as an investor, you might be tempted to buy the companies operating these medical centers and nursing homes. It's not a bad idea... But I've got a much better one...
The safest way to play this megatrend is to buy the landlords... the companies that own hospital buildings, medical offices, and other health care facilities. Here's why... REITs, by law, must pay 90% of their income to shareholders. In return, these companies pay little to no taxes. Health care REITs lease their buildings to medical-service providers or "operators," who sign 10- to 20-year leases and are responsible for all property taxes, utilities, and expenses.
So health care landlords are practically immune to rising energy costs. In addition, automatic rent escalators – about 2%-4% annually – protect landlords from inflation.
And people get sick and go to the doctor no matter what the economy is doing. That's why medical stocks like health care REITs are the ultimate "defensive" stocks... investments that perform well regardless of tumultuous economic cycles.
Of course, the words "real estate" now make the average investor cringe... Nearly every REIT started to tumble early last year, and health care REITs were no exception. But consider this: While REITs in general have fallen another 15% in the last 12 months, health care REITs are about flat. And that's not counting their 6% dividend yield, which is 50% higher than the general REIT industry.
So now is the time to investigate and buy long term income REIT's for yoour portfolio.

Question asked on 06/09/2008 at 07:19 AM :: Comments to date: 0

Category: Stocks

"Bank stocks are getting extremely cheap," my banker friend told me over breakfast yesterday.
"But the big banks are about to get a whole lot cheaper."
He should know. He's the CFO of a publicly traded bank. He knows how banks work... He's the one who decides what the bank does with its money. He explained how it's feast or famine now in the banking business... It's feast if you're a small bank, like his. And it's famine if you're a big bank.
This banker is so optimistic about small banks, he's just invested a chunk of his own savings in shares of tiny regional banks.
But he won't touch the big banks like Citibank.
He says beyond the problems you already know about, the big banks have two more crises ahead of them – commercial real estate loans and credit cards. Let's take a look at both...
When it comes to commercial real estate, banks are about to get hit with defaults. You see, when a big bank makes a huge construction loan, it gets two years worth of interest payments in advance. Well, for many of those loans made at the top of the market, those two years are coming up.
The big construction loan might have been made to build a shopping center to serve a new neighborhood... The problem is, that new neighborhood was either never built or it didn't sell well. Therefore the shopping center was either never built or it has no tenants. Now, there's a real chance the developer will walk away from the construction loan.
This next reason that big banks are in trouble is with their credit cards.
That's because homeowners got used to taking a line of credit out on their home – a home-equity line. But once the real estate market turned, instead of cutting back on spending, homeowners turned to their credit cards.
The banker told me the big banks moved too slowly here... It took 'em a while to realize what was happening. Now they've pulled in those lines of credit. But he thinks they were a few months too late.
So beyond the liquidity crisis... beyond the subprime crisis... beyond the housing crisis... the big banks have two more crises coming: commercial real estate loans and credit cards.
The opportunity here is in the tiny banks instead.
The big banks have tightened up their lending standards so much, they'll hardly make a loan, with this smaller banks, can make "slam dunk" loans all day... like jumbo loans to people with excellent credit and big down payments.
While it's a worst-of-all-worlds environment for the big banks, the high-quality small banks – ones that simply stick to taking deposits and making safe loans – are in an ideal situation...
The small banks have less competition (mortgage lenders have disappeared and big banks aren't taking their customers). Now they can charge higher interest rates – and make bigger profits.

So is it time to buy bank stocks?
According to my banking insider, it's time to avoid the big bank stocks... and back up the truck on the little ones that simply take deposits and make safe local loans. But be careful there are some small banks that are in a pickle too, so know who you are buying.

Question asked on 06/08/2008 at 07:10 AM :: Comments to date: 0

Category: Stocks

Earlier this week, a Chinese pharmaceutical play, American Oriental Bioengineering Inc. (AOB:NYSE) , announced that it will buy up to $75 million worth of its common stock.
This is great news for investors. AOB was sitting on some extra money. This left the company with a few options. It could have paid its shareholders a dividend, looked to buy out another company, reinvested it in R&D or simply bought back its own stock. AOB decided to repurchase its own stock.
That means only one thing. Management thinks its shares are cheap. That’s great news. No one knows a company better than its own management. This recent piece of news reaffirms putting your money where the inside management has decided to put their money.

Question asked on 06/07/2008 at 06:56 AM :: Comments to date: 0

Category: Stocks

After the market is done going down buy a breakout on the chart pattern of this next stock.

There is an ongoing war being waged inside every single computer sold in the world today. Until recently, the war involved two CPU (the brains of your computer) manufacturers, Intel (INTC) and Advanced Micro Devices (AMD). But both companies better watch their back, Nvidia (NVDA) is on the prowl.
And it couldn’t have come at a better time. You see, Intel’s biggest competitor is AMD. But AMD is bleeding money and can’t give Intel any real competition. Result? Intel dominates.
Before we declare Intel the winner of the war, graphic chipmaker Nvidia has something to say in the matter. They have the technology to go up against the big boys. Over the past few months, Nvidia’s CEO has even talked about how they have better technology than Intel!
People speculated what it all meant. Now we know – Nvidia is putting out a new CPU that combines a CPU with graphics processing power. In other words, anyone buying this chip wouldn’t need to buy a separate graphics card for their computer.
This is technology that Intel won’t have available until next year, and AMD has been struggling to release their first version for over a year now. It’s funny that a company that wasn’t even a competitor came out with a comparable product first.
These chips could be used inside laptops, miniature computers, future iPhones, and other products.
With AMD losing power in the CPU market, it seems that Nvidia could pick up their market share. And if their product is better than Intel’s future offering, then Nvidia could make plenty of money in the years ahead.

Question asked on 06/06/2008 at 07:14 AM :: Comments to date: 0

Category: Stocks

Last week, consumer confidence dropped to its lowest level in 16 years - and this drop took the current consumer confidence readings down to a level we've only seen only five other times since 1967. According to a study by JP Morgan, every time that consumer confidence has dropped to these low levels, we've seen a rally soon afterwards. For example, in every case over the last 41 years, the S&P 500 has averaged a 15% return over the next 6 months after hitting these lows.

That's quite a powerful statistic, especially when you consider a Dow chart that looks like the one we have now.
So my recomendation is to wait for a bottom in the next couple weeks and buy the QLD or the SSO or both for a potential 20 to 30% gain in the next six months.

Question asked on 06/04/2008 at 07:12 AM :: Comments to date: 0

Category: Stocks

"Markets often rise higher than you think is possible, and fall lower than you can possibly imagine" a quote from Jim Rogers . A very powerful market tool to remember.

Jim Rogers' quote has made me alot of money. But this year, my biggest mistake was forgetting the other half of the quote: Markets can fall lower than you can possibly imagine.
Banks and homebuilders – two things I believe are cheap and hated – have fallen lower than I could have possibly imagined. I bought in too early. I thought I saw a glimmer of an uptrend. So far I've been wrong. Jim's rule was right, as always. So right now, I'm watching my trailing stops closely on these.
If you want to make a whole lot of money investing, you have to stick to your rules. Jim Rogers' rule is one of the most difficult to stick with... but it is one of the most profitable.
Oil moving up 900% is a great example of the market rising higher than you think possible. And financial stocks and housing, unfortunately, are a good example on the downside.

Markets often rise higher than you think is possible, and fall lower than you can possibly imagine."
This rule will make you a lot of money. And both halves of the rule are equally important.

Question asked on 05/28/2008 at 07:50 AM :: Comments to date: 0

Category: Stocks

It's over. The bear-market rally of the past two months ended last week.
We knew it was going to happen. Heck, we had the canary in the coal mine, the volatility index, investor sentiment, and a host of other technical indicators all screaming it was time to get defensive. And the screams came just in time...
Last week, the Dow Jones Industrial Average, the Nasdaq Composite Index, and the S&P 500 all lost about 3.5%. The semiconductor index was down about 5%. Retail and financial stocks fell more than 6%. Brokers lost 7%. And homebuilders gave up 10%.
The bad news, of course, is it's going to get worse.
Of course, stocks don't go straight down. After such a nasty beating last week, stocks should enjoy a brief bounce higher early this week. In fact, the odds look pretty good that we may see the S&P rally back up and test the EMA at about 1,407.
At that point, though, traders ought to look at exiting long positions and adding on a few short sales

Question asked on 05/27/2008 at 09:44 AM :: Comments to date: 0

Category: Stocks

The rise in global oil prices from $20 a barrel in 2001 to over $100 has largely been the result of worldwide supply/demand fundamentals. Demand has increased substantially, supply is lagging, and new supplies are becoming increasingly more difficult to find and extract.
But the most recent rally that has shot skyward like a Texas gusher has moved too far from the fundamentals of supply and demand. Billions of dollars in speculative funds have poured into the sector, fueling much of the recent rally.
Even OPEC is now signaling that oil is overbought. The Middle East oil cartel recently suggested they see a significant decrease in global oil demand growth this year. OPEC states, “This year's summer driving season is not likely to show its normal annual growth due to the anticipated weaker gasoline demand in the US.”
You see, the markets always work. As prices rise, people may complain, but they use less. Americans alone drive millions of marginal miles – to places they really don’t really need to go, when they don’t really have to be there. At over $3.90 a gallon – they’ll drive less. Already, the Financial Times reports that US demand is falling more than expected.”
The “oil is going up” trade has become very crowded. Combine that with lower demand and some of those speculative dollars seeking a new home, and we should see a healthy correction in the coming weeks.
There is still momentum behind crude. So we might see higher prices in the near term. But the higher probability trade is for a move to the downside. I expect oil prices to pull back to the $115 level… and possibly closer to $100. This kind of correction is perfectly normal, and it certainly wouldn’t break the long-term uptrend.
What to Do?
If you’ve made good profits in oil and energy stocks, consider ringing the cash register on any positions that are extended to the upside. At least, consider tightening your stops. If you’re looking to enter the market, I suggest waiting for a pullback.
If you want to take the other side of the trade, consider buying the ProShares UltraShort Oil & Gas (AMEX: DUG). DUG is an exchange traded fund (ETF) that goes up 2% for every 1% drop in the Dow Jones U.S. Oil & Gas Index. If the index falls 10%, DUG will gain 20%.
If you’re experienced with options and want additional leverage, consider buying call options on DUG. Remember, as oil goes down, DUG goes up. Call options would magnify this potential move.
Another consideration is buying the refiners. The profit margins for the refiners get squeezed when the price of oil (their input) rises faster than the price of gasoline (their output). For months, the refiners have been getting crushed. But it looks very much like they are hammering out a bottom.
You might consider Frontier Oil (FTO), Tesoro (TSO), and Valero (VLO) or call options on these companies. Should the price of oil fall, the margins for these companies should improve dramatically, and investors will bid up these shares in a hurry.
Over the long-term I believe oil is going higher… probably much higher. But not without a healthy correction to bring the fundamentals of supply and demand back into equilibrium.

Question asked on 05/26/2008 at 06:48 AM :: Comments to date: 0

Category: Stocks

In 1914, Winston Churchill created a new type of corporate monster.
Twelve years earlier, a wealthy Englishman named William Knox D'Arcy had founded what would become the Anglo-Persian Oil Company. His drillers fought small pox, bandits, and scorching heat while looking for oil in Iran. After years of failure, the company made its first large oilfield discovery in the Middle East.
Anglo-Persian sold shares to the public in a speculation-charged atmosphere. People lined up to buy stock. Ownership of the company was heavily tilted to the Anglo side.
By then, Churchill had moved the Royal Navy toward burning oil for fuel instead of coal... and he needed Anglo-Persian's interest aligned with the state's fuel needs. The British government bought a 51% stake in the business... and the first state-owned oil company was born.
Six weeks later, Germany invaded France, kicking off World War I. Fighting wars requires lots of oil... and Anglo-Persian grew into one of Britain's biggest suppliers.
Nowadays, government-backed oil companies are the most dominant companies on the planet... and some of the best investments.
You think ExxonMobil, the world's largest public company, has a lot of oil? Saudi Arabia's government oil company, Saudi Aramco, has 10 times Exxon's reserves.
Exxon doesn't even place in the top 10 companies by reserves. The government-backed oil companies of Russia, Iran, Iraq, Algeria, Venezuela, and Mexico dominate the list.
Yet most politicians want to tax Exxon and its peers to death... all the while calling for cheap gasoline. Meanwhile, state-owned oil companies receive the most promising exploration licenses on their home turf. And they have government backing in trade negotiations.
Brazil and its state-owned oil company, Petrobras, demonstrated this power after the discovery of the enormous offshore Tupi field. After the oil giant made the discovery last year, Brazil pulled choice exploration blocks off the market. They'll go straight to Petrobras.
Trouble is, you can't invest in most government-backed oil companies. They're not for public investors.

Even if you could, you wouldn't want to touch some of them. Venezuela and Mexico are pictures of government bungling. Both countries are blessed with incredible oil resources. Both depend on outdated technology and have stifling bureaucracies. And both produce less oil than they did five years ago.
However, there is a short list of great government-backed oil companies out there with public shares...
If you're adventurous, you can own shares of Russian natural gas giant Gazprom. S&A Oil Report readers have gained 180% on our Petrobras shares. We're also up big in Norway-backed StatoilHydro.

Like Petrobras, StatoilHydro's ability to find offshore oil is legendary. It cut its drilling teeth in the brutal conditions of the North Sea.

It's nearly twice as large as the next-largest offshore operator – Shell. It has operations in 40 countries... And it's a leader in cutting-edge offshore technology and innovation. Its profit per barrel of oil sold is staggering... in part because it doesn't have to pay huge royalties and taxes.
As the "No Easy Barrels Left" story plays out, offshore masters like StatoilHydro and Petrobras will produce the biggest returns. They've got the expertise, they've got the money, and they've got the backing to usher in the new age of the national supermajor.
One piece of oil trivia... The original government-backed oil company, Anglo-Persian, became "British Petroleum" in 1954. It's come a long way from the Iranian desert. Due to its willingness to go into difficult locations – like the North Slope of Alaska – it's the largest producer of oil and gas in the U.S.

Question asked on 05/24/2008 at 06:59 AM :: Comments to date: 0

Category: Stocks

Three years ago, ethanol producers were the darlings of the stock market. They were selling for 100 times earnings and their stock prices were doubling and tripling every few weeks. I remember playing golf with two high school basketball coaches at the time. One of them asked me how to invest in ethanol.

Now the ethanol industry is struggling. The American public thinks ethanol caused food prices to rise. Politicians are attacking the ethanol industry to win votes. The press hates ethanol. Even Charlie Munger (Warren Buffett's investment partner) hates ethanol. He says, "Running cars on corn is about the stupidest thing I ever heard of."

VeraSun Energy, the largest ethanol stock, trades below book value. In other words, you can buy this company for less than the cash invested in it. VeraSun Energy's stock price is down 68% in the last six months. Pacific Ethanol – another large ethanol stock – has fallen from $45 a share to $3 a share in the last two years.

The manager at the ethanol plant was mad about what has happened. He said the Cattlemen's Association and Big Oil have used their marketing power to smear the ethanol industry. And the ethanol industry is too small to fight back.

You see, cattlemen hate ethanol because corn is more expensive and they make less profit selling meat. Oil companies hate ethanol because they sell less gasoline with so much ethanol in the system.

The plant manager said the public is wrong about ethanol and food prices. He said oil is probably the biggest factor in the soaring cost of food. And the cheap dollar is probably the second biggest factor. High oil prices make transportation and packaging costs go up. The cheap dollar makes foreigners less sensitive to the rising prices of American crops.

He also said no one realizes ethanol has reduced the cost of gas by 15%. Without ethanol, gas prices would be even higher now.

I'm trying to figure out if ethanol's a good investment. Frankly, I haven't made up my mind yet. The fortunes of the ethanol industry depend on the government. Without the government's support, the ethanol industry wouldn't exist in America. So to invest in ethanol, you have to know what the government's going to do.

John McCain hates ethanol. If he wins the election, he'll remove all the ethanol subsidies and hurt the farm economy. If the Democrats win, they'll keep the subsidies in place, and ethanol stocks will probably take off...

Question asked on 05/21/2008 at 07:41 AM :: Comments to date: 0

Category: Stocks

Real estate prices set to fall farther... Houses, then cars, then credit cards... The latest data on housing is very unpleasant... At the end of the first quarter, nearly 4.4% of the mortgages in the United States were in default, up from less than 4% at the end of last year and up from 2.9% a year ago. Worse, these defaults are concentrated in a few markets, including Puerto Rico (8%), Florida (7%), and Nevada (6.5%).
Defaults are the first stage of the foreclosure process. Rising defaults indicate that foreclosure rates will continue to increase. (The foreclosure rate jumped to 1.39% from 0.58% a year ago.) There is a strong negative correlation between foreclosure rates and recovery values. The more property that must be auctioned, the lower the prices.

According to Moody's, 8.8 million borrowers have mortgages that exceed the value of their homes. As real estate prices fall, the number of these "upside down" borrowers will increase to more than 10 million by the end of next quarter. More and more of these people will simply walk away from their homes, which will continue the cascade of falling home prices.

I wouldn't be surprised to see the average price of a home in the United States fall by 20%-40% before we hit bottom. Most people consider this outcome impossible, but prices have already fallen that much in the worst-hit markets.

Looking at the credit data, it seems people have begun to stop paying their bills in order, from most expensive to least. Houses came first – that's the most expensive bill. Autos came second. (The largest independent auto-finance company lost $300 million last year on its $25 billion auto loan portfolio as defaults rose higher than 7%). What will be next? Credit cards.

Even though the interest rates are sky high on credit-card debt, the minimum payments are small, which is allowing people to keep borrowing. At least for now.

Equifax (a leading credit bureau) reports total credit-card balances increased 8.1% in the first quarter of this year – more than double the previous average rate of growth. Naturally, the steepest increases in credit-card borrowing occurred in the same states where the mortgage crisis is the worst. Credit-card balances rose nearly 15% in the first quarter in California and Florida and more than 20% in Nevada.

Like drug addicts, consumers cannot survive without more and more credit, and they're now turning to the most expensive and unreliable source. They will soon hit bottom.

Now remember the Market antisipates these events 6 months early and the Fed has been doing everything it can to tsave the economy from going into a deep recession or depression. But if a person can't pay his credit cards or mortgage they go bankrupt and the hoouses go up for auction. The Fed is just making sure the banks don't collapse like they did iin 1930 which caused the great depression.

So start looking for bargains as the homebuilders and mortgage companies start to go bankrupt.
The best way is buy KRE and get a 10% yield on your money as you wait for the bottom to be processed. Or if you don't want to loss any money put it in cash at 2.5% and wait for the risks to pass buy then buy KRE. You will pay a higher price then but won't have the risk either.

Question asked on 04/17/2008 at 07:45 AM :: Comments to date: 0

Category: Stocks

I AM SURE GLAD TO SEE THE FIRST QUARTER of 2008 behind us. It seemed as if every couple of days there was more bad economic news. Each announcement was worse than the last. The banks, investment houses, hedge funds, etc. just pumped out the bilges with their financial gray, brown and black water. It didn't matter if the tide was coming in or going out. The whole economic bay seemed to be polluted.
As the quarter unfolded, it became clear that the world's credit system was drifting aimlessly, like a ship sailing with no wind. A lot of business that should have gotten done just did not happen, for lack of funding. Funding went away because risk aversion kicked in with a vengeance, and for a very real reason.
Now GE nad Alcoa report lower than expected earnings and Wall Street is surprised so they take the market down.
Duh!!!!! Things are going to be down because they are reporting earnings from the first quater.
So now is the time to be picking up bargains.
Buy low and sell high. How many of you can do that?

Question asked on 04/11/2008 at 11:33 AM :: Comments to date: 0

Category: Stocks

The opposing forces of inflation and deflation are in the spotlight this spring. Inflation occurs when the government spends more money than it takes in. The economy heats up and prices begin to rise. Deflation becomes dominant when the economy weakens and many businesses fail. Money becomes more valuable and prices begin to fall.
Until recently, rising inflation was the stronger of the two trends. But when the credit crisis started, deflation started to gain the upper hand. Economists are now divided about which monetary situation will prevail over the next few months.
The inflation/deflation question is important because it creates different winners and losers. With inflation, investors can make money if they buy precious metals, commodity stocks, foreign currencies, and other solid assets that go up in price. At the same time, cash slowly loses value.
During deflation, however, prices of most hard assets go down and the value of cash rises. The way to make money is to use increasingly valuable cash to buy high quality assets at steep discounts, and sell them for a profit when prices eventually recover. Some investors are beginning to do just that in a few real estate markets that appear to be oversold.
Longer term, we think inflation will prevail and the price of gold, commodities, and so on, will resume their upward courses. Nearer term, however, we think deflation may create more opportunities for gains. If we are correct, you should have more cash available than you would ordinarily want to hold when interest rates are very low.

Question asked on 04/07/2008 at 06:49 AM :: Comments to date: 0

Category: Stocks

We mentioned on several occasions that investors usually look six to nine months into the future when they are deciding how much to pay for stocks. The higher prices we are seeing now indicate that many investors believe the end of the bear market is coming into view.
As much as we would like to agree with the optimists, we think the credit crunch probably has further to run before the turnaround begins. It is possible that another bank might follow Bear Stearns into the dustbin of history. Some analysts think the whole financial service industry is a house of cards that may fall apart.
We don't agree with the house of cards outlook, but we do think you should stay out of the bidding race that is occurring for most banks and money centers. There is more than a touch of overconfidence creeping into the market now that isn't likely to last. I think the Market will give patient investors better prices in a few weeks.

Question asked on 04/05/2008 at 06:39 AM :: Comments to date: 0

Category: Stocks

A few hopeful stock gains and welcome company announcements don't add up to a credit turnaround. Nevertheless, there are reasons to think the problem is closer to its end than to its beginning.
The key to understanding how the credit crunch might fade away is to ignore the confusing morass of information about subprime mortgages and creative financing. It will just give you a headache.
It's enough to know that when the subprime mess started to come apart, lenders could no longer tell what their loans were worth. Companies that bought the loans were in the same boat. Nor did anybody know how many of the loans they had would be repaid.
Lenders and buyers reacted by saying, 'Nobody will get more money until the uncertainties end.' Bank vaults slammed shut, and everybody from mom & pop contractors to multinational corporations couldn't get the funds they needed. Naturally, the economy started to weaken and the stock market sank.
Now, here's the good news. Despite the losses, most lenders have plenty of cash available. In addition, the Fed will loan banks all the money they need, and at very attractive rates. Once lenders feel confident enough to lend money again, we will see capital move back into the economy. It's another reason we feel that a rebound –when it comes— may be stronger than expected.

Question asked on 04/04/2008 at 06:38 AM :: Comments to date: 0

Category: Stocks

I am blind to the fact that CDE has done nothing. I like the fundamentals of this company.
Most mining companies don't make money. CDE does.
The gold-to-silver price ratio is a tool that every precious metal expert on Earth uses, and for good reason. It currently costs 52 ounces of silver to buy 1 ounce of gold. At the end of the 1978-1980 rally, it took only 17. The average over the past century is around 16, but let's just take 32 as a goal.
What this basically means is silver is lagging gold big time. If the $2,000-plus gold pundits are right, silver should end up at $62 per ounce. That would be a 350% gain…
Now, that’s a pretty bold prediction.We can sure think of how that would affect the Coeur d’Alene (CDE:NYSE) position. This silver miner, as you know, will be the world’s largest in just 12 months. If the numbers above tell you anything, it should be to buy now.
Coeur has taken its own correction lately. It shed 30% since the start of March.
When a correction occurs, there are two kinds of investors: Smart investors who wait it out and, if anything, buy more shares at the bottom…and not-so-smart investors, who buy the whole way up and sell as prices retract. You can imagine which one of these investors makes more money…
Buy on dips CDE and hold on for the big rally this fall.

Question asked on 04/03/2008 at 04:27 PM :: Comments to date: 0

Category: Stocks

(IMOS:NASDAQ) released its fourth-quarter and year-end earnings. Revenue was up 15.8% for 2007 compared with 2006. I am happy to see that the company is still growing its revenue despite pricing pressure in the industry.
More importantly, ChipMOS spent significant money in the fourth quarter to lower its debt, helping to increase shareholder equity in the process. But even with this spending, the company increased its cash situation compared with the third quarter last year.
Shares seem to have put in a bottom and the book value is greater than the market price. I believe the company is on the right track with shareholders in mind.
We can expect to see even larger numbers this year as electronics continue to flood the global economy, which should wake Wall Street from its slumber. Nibble away at IMOS.

Question asked on 03/29/2008 at 04:07 AM :: Comments to date: 0

Category: Stocks

. One or two weeks of weak commodity action is a common occurrence in a bull market shake-out. But as long as the underlying economic fundamentals remain unchanged, you can expect the long-term commodities bull to continue.
The only fundamental change that could possibly end the commodity boom would be a sudden drying up of demand. And the only way that could occur is if a major economic catastrophe arises in the U.S.
I don't see that happening. Rather, last week's action suggests to us the approach of a trough in economic activity (i.e. growth should resume nicely).
That doesn't mean Mr. Bernanke will start raising interest rates soon. Far from it. He still has much work to do to keep the pumps going and prevent our economic ship from sinking below the waves. The difference is that, a few weeks ago, the market seemed to feel that Bernanke's actions would not be enough, and that the economy might soon start to look like the Titanic, post-iceberg.
Now however, the market knows Bernanke is taking his job seriously. We're still sitting low in the water, but the crew is working hard. The pumps are chugging along and the repair effort is certain to succeed.
Buy gold and silver stocks on this correction.

Question asked on 03/27/2008 at 07:05 AM :: Comments to date: 0

Category: Stocks

Dollar holders beware.
Speaking of dollar holders, we read last week that Saudi Arabia’s inflation rate reached a 27-year high of 8.7%. The riyal’s peg to the U.S. dollar is heating up. How can Saudi inflation outpace American inflation (U.S. core rate excluding food and energy at 2.3%) by so much when the currencies remain pegged?
Inflation rates are the outputs of complicated equations. The devastation at Long-Term Capital Management should have taught us that equations, like humans, are often flawed. That was yesterday. Today, we make the structured products. We use increasingly complex financial instruments whose tangible value often depends on the merits of yet another untested equation. Consequently, we have a “credit crisis.”
If we measured the CPI (consumer price index) by 1970s standards, today’s inflation rate would soar from its current levels. Let’s focus on the fact that inflation benefits debtors at the expense of creditors, since debtors can pay back their borrowing in a less valuable currency. And America has plenty of debtors…the U.S. government and homeowners come to mind.
Faced with debilitating recession or destructive inflation, the Fed foists inflation upon us. So we must brace for crippling effects of loose monetary policy. Beware: They often crop up long after the seeds have been planted. We can’t stress this enough.
According to Nathan Lewis, author of Gold: The Once and Future Money :
“Prices in the devaluing country would eventually adjust to the devalued currency. In other words, something that cost $100 (equivalent in value to one ounce of gold) before the devaluation will tend to cost $200 (equivalent to one ounce of gold) afterward. However, the price adjustment process, in practice, can take a very long time to fully play out. Prices for internationally traded commodities will tend to adjust first, typically within a year or so of devaluation. Other prices (medical expenses, rent, education expenses, etc.) can take up to two or three decades to fully adjust. The slowness of adjustment is due in large part to the existence of long-term contracts.”
This “lag effect” should bear some rather harsh long-term consequences. For now, owners of tangible assets (gold, oil and other natural resources) should continue to prosper. Foreign companies with dollar-denominated debt should benefit as well. Votorantim Cellulose (VCP:NYSE) and Cemex (CX:NYSE) come to mind.
But I want to focus on Lundin Mining (LMC:NYSE) . Last Wednesday’s news of a $491.9 million impairment charge related to recent acquisitions sent the share price plummeting. The rise of the euro on world currency markets certainly isn’t helping matters. I still don't worry so much about this charge after a merger if other fundamentals are firmly in place. This company produces good margins and doesn't carry long-term debt (to me, this is key). It has assets that others would most likely gobble up if sold. If this accounting debacle persists, then that's another story. The Lundin family has a real stake. It threw in another $8 million or so of its own cash last year. So I don't see where anyone's interests would be aligned to a major accounting meltdown.
The absence of LT debt is what really puts me at ease over the long term. We’re long-term holders here. The write-down… it's a hit to assets and a hit to equity, no question. But the fundamental business didn’t change. Barring another write-down, the price-to-book today is 0.75.
Quarterly results should mean little to long-term investors. We’re still believers in this company.
About this time in 2002, the rebirth of the tangible assets sector really began. Much of that growth can be directly attributed to the insatiable demand for raw materials that the developing giants -- China and India -- are now experiencing.
These countries are still in the early stages of development. It takes about 30 years to go from an agrarian to an industrial society. China is only one-third of the way. China will continue to import commodities to sustain this enormous transition. India will do the same.
Furthermore, the golden era of stocks (1982-2000) directed capital in about every investing avenue except natural resources and raw materials. Hence, limited demand caused a decrease in available supply.
Today, the entire world can’t get enough copper, zinc, lumber and oil. But bringing on new production takes time. Supply can’t catch up with demand overnight. In fact, it’s going to take quite some time, especially when you throw the consumption potential of India and China (37% of the world’s population) into the mix. Consequently, commodities, the market for the essentials, will remain tight for the foreseeable future.
That bodes well for commodity producers like Lundin.

Question asked on 03/26/2008 at 06:57 AM :: Comments to date: 0

Category: Stocks

What a week in the metals market. On 3/16/08 I said the metals market was gettiing too high and whatch out for a consolidation. Monday the 17th the top of GLD was 100.44 which is gold at 1004.40. Then it fell apart from there.
Thursday it closed at 89.91. Silver dropped even more. The metal stocks are getting sold because they think the top is in the market. It is on a short term basis. So let's start watching for metal stock bargains to load up on for the future.
One such stock to watch is LMC.
Lundin (LMC:nyse) disappointed with a big write-off of its own, sending its shares down 11% on Wednesday. The shares are down 29% for us in a short amount of time. It’s frustrating, because I was right about a rally in base metals -- as copper hit fresh all-time highs recently -- but you wouldn’t know it, owning Lundin.
So what do we do? Do we keep it? Buy more? Or sell it? Let’s think it out…
First, we have to realize the environment we are in. The market took another beating on Wednesday, when Lundin made its announcement. Freeport, the big copper concern, also fell 11%. It was a tough week all around for commodity names. Shares of Canadian Natural (CNQ:nyse) lost 13% for the week. So let’s keep some perspective.
Secondly, the write-off is noncash. It’s not a real loss in the usual sense, because Lundin is actually profitable and generates cash flow. Basically, Lundin paid too much to acquire EuroZinc Mining and Rio Narcea Gold. Management wrote down the value of those assets on its books and took a bath of $492 million. Before those charges, Lundin actually made $55 million in the quarter, which was ahead of the consensus guess. Also for perspective, Lundin’s market cap is about $2.5 billion. Management warned about the write-down early in the year, so it’s not a total surprise, though I think the magnitude is greater than what people thought it would be.
We also have a new CEO in Phil Wright, who wants to clean up everything as quickly as possible and start with a clean slate. We still have an excellent financial condition with no net debt. We still have owner-operators, though they have to step it up and start delivering the goods. Yes, the Lundins have shown a magic touch. I don’t think they suddenly turned stupid. And they are in deep with their own money. So we know they are motivated to get it right.
It doesn’t feel right to sell Lundin here. I’m as upset about the stock as you are. But my rational brain says there is value here. My cooler head says give it some time. If copper prices stay up, Lundin will make a lot of money this year and its self-inflicted wounds won’t matter much. But Lundin has to execute.
I’m going to say pick at it as it bottoms. If you own it, I’d just hold onto what you got. If you don’t own it, you might want to think about taking a shot at it here. It looks like you’re getting a good price. Book value is $10.45.
Lundin should earn $1 per share this year. Estimates have come down based on Lundin’s own guidance on production and because the Street doesn’t believe high copper prices will stick. So the stock trades for only seven times that depressed estimate. Only a few months ago, people thought Lundin would earn $1.25. There is potential for upside surprises. All the bad news seems baked in.
It was also not long ago that the stock was nearly $15. It’s been more than cut in half from its high. I think the Lundins will figure it out and right the ship. But it’s going to take a few quarters for them to earn some credibility again with the Street. They need to start hitting their numbers. I’m betting they will.

Question asked on 03/22/2008 at 06:25 AM :: Comments to date: 0

Category: Stocks

On March 6, banks dragged stocks down to an 18-month low. Industry reports showed foreclosures and late payments rose to the highest level in more than two decades. This helped nudge financial stocks down for the sixth straight day.
No bank was safe from the cold, hard facts. Write-downs at Merrill Lynch, Morgan Stanley and Bear Sterns reached epic proportions. Citigroup, the largest financial name in the United States, led its brethren to lows not seen since almost five years ago.
Much as a rising tide lifts all boats, a fierce riptide can claim many innocent victims. That’s exactly what’s been happening lately. Stocks across the board get smashed right along with the financial sector — even securities that have little or nothing to do with the high-risk exposure linked to subprime loans and other shoddy investment vehicles…
Sure, a meltdown like this can be a bit frightening. But it can also point you in the direction of some amazing opportunities…
There are two sectors that have suffered greatly during the market’s recent throes. Stocks in these sectors have been practically beaten down and left for dead on the side of the road. The average investor — and Wall Street, for that matter — wants little to do with a company involved in both the tech and financial sectors.
But there is one company prepared to break free from the powerful currents of the financial meltdown riptides and swim back safely to shore. This company has grown revenue, profits and profit margins steadily for the past three fiscal years. The banking crisis has dragged this company down to new 52-week lows as the economic outlook for 2008 becomes unclear…
However, you can’t keep a great company down forever. Even with its strong ties to out-of-favor sectors, this stock is ready to make up the 50% it has dropped since November. And it will do it by being the best at providing the essential services that every smart business needs to succeed…
Techs are going to be the new bull start searching.

Question asked on 03/17/2008 at 06:09 AM :: Comments to date: 0

Category: Stocks

The market is in a transition. It has been in a bear since 11/1/07. The top was in that time period.
Remember the decade of 7's, that is the years of the decade that end in seven when the decades year of 2 was a bottom. So this is a long term force of events that make the market behave the way it is. Now the metals are making new highs. They are a result of inflation. That means people buy gold and silver because they finally realize that inflation is here and they want to protect their money. Gold and silver are a store of value.
The fed is doing everything it can since August 16, 2007 to pump up the economy. They don't tell you why but you hear about why in the news eventually. (Subprime mess, Credit ratings, Financial mess, Housing bust etc.)
Money usually takes 6 months to work its way through the economy. Six months from 8/16/07 is Feb 16th, 2008.
But wait the market didn't bottom then. True, there was a double whammy. First the sub-prime mess then the bank fallout. So the bear is being extended and the Fed has been aggressively fueling the fire of inflation trying to get the economy kick started. But by doing that they are pouring more created money after the bad money which is inflatiionary. Gold and silver react to the inflationary forces not predict. The Market does not like inflation therefore down it has gone.
Now what to expect. Gold and silver and even platinum have gone up so quick that they need to rest. The market needs to digest the rise. Consolidation, is the metals market adjusting to the new higher levels. As this happens the stock market thinks that the inflationary forces are stopping and it will start to rise. The stock market will rise here soon but not make new highs. Why because inflation is still here. The metals are setting themselves up for the last big push this fall to start the journey to $2000 gold. So if you are a long term investor hang onto your gold stocks and in 2 years you will be rewarded beyond your beliefs.
Copper was the first metal to make new highs. Platinum was the next to make new highs and it isn't done. Now gold just made new highs this year and silver is way behind. Silver right now is the weakest of the metals.
But right now is they are the cheapest of the metal stocks. For a long term investment silver stocks are the best buy now.

Just look at the patterns of ROY, CDE, AXU which are all sideways patterns, compared to GG.
Remember the pleading I did for you all to buy into gold stocks this last fall. I hope you bought then.
Buy on dips now because the final inflationary blowoff is coming in the next 2 years.

Question asked on 03/16/2008 at 07:39 AM :: Comments to date: 0

Category: Stocks

The Bull market has started. Or has the Bear ended?
Either way the Fed doesn't want to see anymore pain by the American people in the financial area.
So what does that mean. Metal stocks are up even though metals are down.
The metals have to digest the rapid rise before moving on to higher grounds.
Don't lose faith on the metals they will prevail while the financials have to work out their difficulties.

Question asked on 03/11/2008 at 03:33 PM :: Comments to date: 1

Category: precious metals

The US Mint sold 2,170,00 silver eagles and only 26,000 gold eagles in the month of January 2008.
That is 83 times more ounces of silver than Gold.
Silver used to be more plentiful than gold. There were more above ground supplies in silveer than gold.
Today gold is still the demanded currency of the very rich, because look at what the dollar has done lately.
Silver has been used up through modern technology (circuuit boards and computer chips).
Gold jewelry and silver jewelry are still being made and that is still considered above ground supplies as scrap.
Now why do I keep promoting silver over the long term.
Today in round numbers of world inventories of the two metals.
Gold has 5 billion oz of inventory above ground and there is a net increase of 100 million oz a year due to mining and consumption.
Silver has 2 billion oz of inventory above ground and there is a net decrease of 50 million oz a year due to mining and consumption over the last 50 years average.
Now the most industrial metal of the two is silver. There are physical properties to silver that industry can not find a substitute for.
The law of supply and demand will win out eventually and some day the ratiio of gold to silver pricing will continue to narrow. (48 to 1 now)
Back in the old days gold/silver ratio was 32 to one. Therfore if gold stays at 960 per oz then silver will be $30 per oz. But if the silver consumers in industry need to buy the metal to keep printing computer chips and circuuit boards then they don't care what price they pay because they will pass it on to you the consumer.
This is why I am and have been bullish on silver and silver stocks.
Buy CDE, AUY, PAAS, AXU, SLV, SIL. Pick one or all they will go up in time.

Question asked on 03/10/2008 at 07:33 AM :: Comments to date: 0

Category: Stocks

Coeur d’Alene Mines (CDE:NYSE) released its fourth-quarter and year-end earnings numbers last Friday. The company hit its targets of 5 cents per share for the quarter and 15 cents for the year.
Updates are as follows:
 San Bartolome will begin producing at full plant capacity in the next few months
 The 5 new veins at Cerro Bayo will start producing much more as 2008 continues
 The Palmarejo mine in Mexico is still on track for a first-quarter 2009 startup.
The one thing new about the Kensington mine was that the mine has a six-month turnaround time to open.
That would give the company significant exposure to gold by the end of this year, which no one expected. Gold is close to $1,000 per ounce for the first time ever. In the past, CDE’s gold assets were considered too “high cost” to develop. But with prices so high and looking as if they will stay high, the value of CDE’s assets are being rerated by the market…and the fact that silver has broken the $20 per ounce level is not causing any pains, either.
News about Kensington is a huge boost to the potential of the company’s share price.
But Wall Street is in a bear mood so good news will be overlooked for awhile. Hang on for a big move in CDE later on.

Question asked on 03/08/2008 at 07:20 AM :: Comments to date: 0

Category: Stocks

You can calculate investors' buying power easily. The New York Stock Exchange reports the total balance of margin debt and free credit for its member organizations (which are basically the organizations that trade on the NYSE floor). You can calculate buying power by subtracting the total margin of debt on the exchange from the total free credit that is in cash accounts and margin accounts.
Investors are sitting on more buying power than any other time in the history of the data set for the past 16 years.
This is one of the reasons I feel the market will bootom soon.

On the metals front how do you all like your metal stocks now?
There is a blow off but it is only the second wave. That means for the long term hang on to your metals for at least another year and a half.

Question asked on 03/07/2008 at 06:16 AM :: Comments to date: 0

Category: Stocks

Joel Greenblatt wrote a book called The Little Book that Beats the Market. In it, he divulges his "magic formula" – a strategy that, over the last 17 years, has returned 30.8% versus only 12.4% for the S&P 500.
The companies the Magic Formula turns up "are not popular names, and indeed many of them have short-term clouds hanging over their heads. This makes sense, since it explains why they are so cheap."
Greenblatt's website, magicformulainvesting.com, it couldn't be easier to get a list of stocks that meet his Magic Formula criteria. And it's free as well. Finding great investment opportunities is tough... so you want to at least start with a narrowed-down list of possibilities.

Question asked on 03/05/2008 at 03:29 AM :: Comments to date: 0

Category: Stocks

The economy has now been pronounced by the Guru Warren Buffet that we are iin a recession.
Really the economy has been in a recession since August.
The gov't statistics don't show that until now. Data is always a sum of history.
The fed has been working hard to keep this recession from getting bad. It has been pumping money into the system to take care of the credit problems and lowering interest rates to stimulate investments. This is still all causing inflation except in the housing sector.
I said before don't buy until March. Well now is the time to look into buying selected picks as the market goes south.

Wait for the correction to run its course then buy.
Hold onto your metal stocks at least until April.

Question asked on 03/04/2008 at 08:17 AM :: Comments to date: 0

Category: Stocks

"What the greats are doing is easily my all-time favorite hunting ground, and the source of countless good ideas over the years."
Thanks to the Internet, it's relatively easy to find out what the best investors in the world are putting their money into... and it doesn't cost you a thing. Try a site like GuruFocus for example.

Question asked on 03/03/2008 at 03:25 AM :: Comments to date: 0

Category: Stocks

Reread the blog from 2/21/08. The market I thought would crash quuicker but Friday is still a tough day to swallow.
I would not buy anything until the qqqq trade above 44.50.

Question asked on 03/02/2008 at 01:09 PM :: Comments to date: 0

Category: Stocks

The Dow enjoyed a triple-digit gain for most of Tuesday's trading session, only to see that entire gain wiped out in the final hour of trading. This Wednesday formation set a lower high and this is an ominous technical signal. It indicates to me that the Dow will soon be trading below the 12,000 level - and possibly re-testing the January low under 11,750. If this plays out, then we have more than 600 points of downside before re-testing the 2008 lows.
As I have said before this should all take place before March 1st.

Question asked on 02/21/2008 at 04:35 AM :: Comments to date: 0

Category: Stocks

Remember how I wrote about the 7th year cycle top. Well it occurred.
Hope alot of you took my advice and hedged or got out of the market. I know better though. Let me know if you did because you are better off now than alot of other people. I hope you long the metals too.
Now lets look at how long of a correction the market will have.Seasonally the bottom for a 7th-year decline extending into a decade’s 8th year is as follows, the others established final lows on April 2, 1888, March 25, 1898, March 31, 1938, February 14, 1948, March 5, 1968 and March 1, 1978, respectively.
But now an ensuing leg up may have trouble taking off in earnest through much, if not all of the first quarter.
Since the Fed did kick start the interest rate declilne the market respects that and will probably make the Jan 22 low a turning point. But I feel that there is more backing and filling to be done. The bottoms may even be tested but this is an election year and it's not good to have the market tanking in an electiion year.
I predict that the general market will have a turning point in March, almost like 1978.
Inflatiion was strong, the middle east was in turmoil, oil was a precious commodity, it was an election year. There are too many similarities to the history of 1978 that will cause 2008 to be about the same.
Even a Democratic President was elected in 2008. So be careful. Buy Silver and gold stocks.
I like AUY again because it is starting to get some press. Therefore its already in the 2nd major up wave headed for $30 in the next 2 years. Also buy LMC, AXU, CDE, SSRI, GG.

Question asked on 02/12/2008 at 06:30 AM :: Comments to date: 0

Category: Stocks

I know, CDE has done nothing for a year while the rest of the metal stocks are moving higher.
Patience is a virtue but CDE is still a buy. It is the second largest silver miner out there.
Coeur d’Alene Mining Corp. (CDE:NYSE) said it would put its Rochester, Nev., mine up for sale. Even though this may sound like bad news, it actually is good because we find out that Rochester was the major black cloud that hurt the company’s share price.
The company halted its production at this silver- and gold-producing mine because of dwindling reserves. The relatively cheap costs associated with Rochester made it the largest and most important mine for the company over the past few years -- which is why news of the mine’s termination didn’t sit well with shareholders.
However, it’s one of the biggest reasons I jumped on this stock. Rochester historically produced around 5.5 million ounces of silver and 70,000 ounces of gold per year for Coeur. In 2006, that was about 40% of the company's production. That's why investors fled this stock in droves.
What people failed to take into account was that the company has three important mines about to come online in the next year and a half. And after those start producing, no one will even remember Rochester.
Selling the mine would be a huge relief for shareholders. I just had to wait to see if the company would fulfill its goals, and so far, it has.
The recent merger went off without a hitch, and both the Kensington and San Bartolome projects are set to begin producing shortly.
Action to take: Coeur d’Alene Mining Corp. (CDE:NYSE) remains a buy at $4.50 or better .

Question asked on 02/10/2008 at 07:03 AM :: Comments to date: 0

Category: Stocks

Connecticut's Department of Public Utility Control issued final approval to the 16.2 megawatt FuelCell Energy Inc. (FCEL:NASDAQ) project. The project will help Connecticut fulfill the state’s renewable portfolio standards for 800 megawatts of clean power generation by 2020.
Remember, FuelCell shares were riding high until the company initially announced its Connecticut utility contract. The utility commission initially approved 16.2 megawatts for six of the company's fuel cells. But investors were hoping for a bigger contract. The stock took a 22% hit in one day, dropping shares close to $10. Shares are now trading for only $8.44
The Connecticut project will mean an estimated $43 million in potential sales for FuelCell. It also increases the company's backlog by more than 50%. Bottom line: This is an important project, and it will provide important publicity for a potentially industry-changing company.
This is a long term investment.

Question asked on 02/09/2008 at 07:09 AM :: Comments to date: 0

Category: Stocks

“Buy low. Sell high,” is not just an ancient Wall Street saying, it is also the formula that made Henry E. Singleton a fabulously wealthy individual.
Henry Singleton was the co-founder of Teledyne. It was, like Buffett’s Berkshire Hathaway, a conglomerate of many kinds of businesses. Singleton ran the company for many years, from its founding in 1960 through 1986. His story is rich in wisdom on markets and how to beat them.
Warren Buffett says Harry E. Singleton had the best track record of any industrialist in the history of American business. That’s very high praise from a guy who may be the greatest investor of all time.
In his book, Money Masters of Our Time, John Train writes: “The failure of business schools to study men like Singleton is a crime, [Buffett] says. Instead, they hold up as models executives cut from a McKinsey & Co. cookie cutter.”
First, let’s take a quick look at that track record, and then we’ll look at one of the keys to his success — what I call “Singleton’s secret” — and how we can use that insight in our own investing. Teledyne went from $100,000 in profits in 1960 to $238 million in 1986. Shareholders’ equity grew from $2.5 million to over $1.6 billion. Those returns, needless to say, crushed the market over time — by a multiple of nearly four.
But what became Singleton’s signature mark was his pioneering use of the stock buyback. A stock buyback is when a company buys back its own shares.
The wisdom of buybacks is pretty simple…assuming the stock is cheap. As Warren Buffett wrote in his 1980 annual letter, “If a fine business is selling in the marketplace for far less than its intrinsic value, what more certain or more profitable utilization of capital can there be than significant enlargement of the interest of all owners at that bargain price?”
Singleton did this more than anybody. When his stock was high, he used it to buy other businesses. In fact, he bought hundreds of businesses over the years. When his stock was low, he bought stock back.
Today’s CEOs don’t always get the playbook, though. They think regularly buying back stock is a good thing, like paying a regular dividend. They don’t seem to get that it works only if you buy back the stock at cheap prices. Otherwise, you’re just throwing money away. Better to just pay your shareholders a dividend.
During the binge of buybacks we’ve seen in the past few years, companies have often made that mistake. First, look at the chart below and you’ll see the surge in buybacks. It’s pretty clear that corporate chiefs preferred buybacks to dividends in recent years:
Leon Cooperman, an exceptional investor and founder of Omega Advisors, delivered a presentation on Singleton and buybacks at the Value Investing Congress in New York. Cooperman is a real enthusiast of Singleton’s career — a “Singleton junkie,” in his own words. He’s spent a lot of time studying the man and his methods.
Cooperman cited many examples of companies that routinely spend billions buying back their own stock. Unfortunately for those shareholders, the stock prices have subsequently gone down, flushing billions down the proverbial toilet bowl.
The offenders make up a roll call of blue-chip companies: Microsoft, Intel, Lexmark, Masco, Pulte Homes, Circuit City, Chico’s and many more. Countrywide is one of the most egregious recent examples. It spent nearly $2 billion on stock buybacks in the last two years. Countrywide’s stock price has since lost 75% of its value.
James Grant, writing in his newsletter Grant’s Interest Rate Observer, recently wrote about boneheaded buybacks in today’s marketplace. Grant then paid tribute to Singleton when he wrote: “Henry E. Singleton, visionary builder of Teledyne Corp., set establishment tongues wagging by issuing stock at high prices and repurchasing it at low prices. People wondered what he was thinking about. Our postmillennial captains of industry seem not to understand, either.”
But just because most everyone seems to act like they don’t know what they’re doing, it doesn’t mean that there aren’t some companies who get it and wisely buy back stock.
There are a couple of stock buy back companies that know what they are doing.
Two long term investor type stocks are ACAS and LTR.

Question asked on 02/06/2008 at 07:32 AM :: Comments to date: 0

Category: Stocks

There are 2.18 million homes that were vacant and for sale in the 4th quarter. That's 2.8% of all homes. We are edging ever closer to a national average of 12 months supply of homes for sale this spring, with many more home owners who would like to sell simply not bothering to list their home. The good news is that if you want to buy a home, you are likely to find a very willing seller at a very good price. As long as you don't have to sell your home to move on and buy a house.
We are in a recession due to the slowing consumer spending. One caveat. The Bush/congressional plan to air drop $150 billion into the economy should add about 1% of GDP into the economy over the last half of the year, and maybe even this spring if they can get it done fast enough, and that will be a boost to consumer spending.
How many of you have to spend more money on gas and utilities so you have less to spend on consumer items.
So when the government takes the dollars that they take from you and give it back what are you going to buy?
Not much more because the cost of goods keep going up and the debt keeps getting higher. Maybe those that are having trouble will be able to put a dent into a debt collectors demands. The recession must work it's time and pain to get people to be more responsible with their money. Then the economy will start to roll because then people will have money to spend.
The recession started in August of 2007. The Feds have been lowering rates and pumping money. Six months later the economy will be at the bottom of the cycle and in March the economy will start to pick up.
The market still will struggle because it does not like inflation. But inflation is the only way the government can repay the debt with cheaper dollars. If you had a printing press wouldn't you print dollars and spend more?
That's what the politicians do with your money.
We will come out of this recession this spring but the market will stay in a sideways pattern with violent swings up and down for quite awhile.
With inflation buy the hard asset companies and gold and silver stocks on dips.

Question asked on 02/04/2008 at 06:07 AM :: Comments to date: 0

Category: Stocks

With all of this banking mess that will sort itself out eventually the banks have all been painted with the same brush.
If they have exposure to real estate then they were taken to the wood shed and given a good beating.
I found one little bank in Florida that is such a buy I say it is a baby that was thrown out with the bath water.
That Bank is trading at a PE of 2.1 and a book value of $22. The stock on Friday closed at 5.39. Now even if 1/3 of their loans went bad they would still foreclose on the realestate or make other arrangements to salvage their collatoral. This is a long process and will work out. Therefore a value play is at hand so buy a few shares and look for a double in a year.
Oh that bank is BKUNA. Good Luck and spread the word on this baby. You should cash in when it hits $10 in the next 2 months.

Question asked on 01/28/2008 at 06:53 AM :: Comments to date: 0

Category: Stocks

2007 proved to be the worst year for housing in decades, perhaps since the Great Depression, the National Association of Realtors finally admitted Thursday morning.
Existing home sales fell again in December, this time by a more-than-expected 2.2%. Thus, for the whole year, home sales dropped 13% -- the largest annual fall since 1982. What’s more, the median price for a single family home fell 1.8% for the year, to $217,000 -- the first annual decline since the NAR began keeping track in 1968.
Lawrence Yun, the NAR’s chief economist, went on to tell CNN that 2007 was likely the first decline in housing prices for an entire year since the Great Depression.
This is why I say the market will be sideways for awhile.

Question asked on 01/25/2008 at 07:03 AM :: Comments to date: 0

Category: Stocks

The Market has been stimulated by the Fed, the President, and outside foreign investors, mainly oil money.
The market still has problems and will take awhile to digest the down move.
Expect wild swinging days in both directions with a sideways pattern for the next 6 weeks.
Pick up bargains if you want for a long term ride.
Some metal stocks are bargains because what the Fed has done is still inflatiionary and will show up in six months.
LMC, AXU, IAF, CDE, GG, AUY, ROY, SSRI, PAAS, IAG, NG, SWC, are all still good long term buys.

Question asked on 01/24/2008 at 12:51 PM :: Comments to date: 0

Category: Stocks

I want to use football betting as an analogy to the market.

New England is the best team in the National Football League. They were undefeated this season. They may be the best football team of all time.
The Jets are the second worst team in the NFL. They won four games and lost 12. Two of their victories were against Miami, the worst team in the league.
On December 16, the Jets played New England. New England won the game 20-10. But if you'd bet on the Jets, you would have won the bet.
One week later, Miami played against New England. Miami is the worst team in the National Football League. They won one game this season... and lost 15. New England won the game 21-0. But if you'd bet on Miami, you would have won the bet.
The Giants are an average team this year. They won 10 games and lost six in the regular season. On December 29, the Giants played New England. New England won the game 38-35. If you'd bet on the Giants, you would have won that bet, too.
How is it possible that New England won all three games, yet a gambler would have lost his money three times by betting on them?
Here's the explanation:
Leading up to the end of the season, everyone expected New England to have a perfect record. They were the strongest team in the league and were aiming for an undefeated season. So gamblers bet New England would thrash their opponents.
With the public betting so heavily on New England, the bookies had to adjust their lines in favor of the underdogs to balance their books. They gave New England a 20-point handicap against the Jets... a 22-point handicap against Miami... and a 13-point handicap against the Giants.
These handicaps were among the largest I've ever seen in the NFL football markets. Even though they won the games, New England couldn't match these high expectations.
This principle of expectations is the single-most important concept to understand if you're going to profit in the investment markets.
Right now, everyone expects the United States residential property market to perform badly and I will add the banking sector too.
The public sees entire tracts of brand new homes unable to sell. They wonder how they'll ever be able to sell their old house when new ones can't sell at the same price. They see realtors losing their jobs. They see predictions of recession, unemployment, and bankruptcy on television.
The thing is, the stock market bookmakers have already adjusted their handicaps to reflect these expectations...
The iShares Dow Jones US Home Construction ETF is a fund of the companies that build homes and the companies that provide construction materials to the homebuilding industry. Its symbol is ITB.
ITB closed its first day of trading at $50.10 on May 5, 2006. Today, it's at $14.34. That's a 71% decline in less than two years. Another ETF is XHB which has the same pattern.
So the question is, will the future prove to be better or worse than the public expects right now?
I believe the public has overreacted... just like they did with the New England Patriots in the last three weeks of the season. The Feds are injecting liquidity into the system, the politicians are making laws to bail out bankrupt borrowers, and the price of homebuilders now reflects the worst-case scenario in the home-construction industry.
You might think about making a bet on the underdog here. The underdog may still have a terrible season, but I expect you'll profit anyway.
Now let's take the fact as a betting person you bet on New England every game. You wouold have still won 13 out of 16 times. So bottom fishing is a risky bet. The housing industry will rebound but slowly due to the tide is still goiong out with the repercushions in the market from the financial sectors. So wait for another month before you start betting again for a bottom.

Question asked on 01/20/2008 at 07:43 AM :: Comments to date: 0

Category: Stocks

Benjamin Franklin was born in Boston on Jan. 17, 1706.
He was one of the great Father's of our country. He wrote A penny saved is a penny earned. The idea here is to protect your wealth in an era of inflation and resource scarcity.
Early in his life, Benjamin Franklin spent a bitter period of time as an indentured servant. He became well acquainted with scarcity and privation in a colonial economy at the frontier of the British Empire. After gaining his freedom, Franklin went on to become a printer, editor and merchant. (At one point, Franklin had a government contract to print the paper currency of Pennsylvania.) Franklin was also a natural scientist, scholar, writer and inventor -- coming up with an array of things ranging from the lightning rod to the glass harmonica. It was Ben Franklin who came up with many social innovations that we take for granted, such as America’s first lending library and the first volunteer fire department.
And Franklin was a politician, diplomat, philosopher, ambassador and Founding Father of the United States of America. It was Franklin who famously summed up the form of U.S. federal government -- if not its ultimate fate -- as he walked out of the proceedings of the Constitutional Convention of 1787. When asked what sort of government had been established, Franklin replied, “A republic, if you can keep it.” More than two centuries after his death, Franklin is among the most revered and respected figures in American history.
Indeed, Franklin is among the best-known Americans throughout the world. Certainly, Franklin’s intellect and accomplishments are the foundation of his fame. But one aspect of Franklin’s worldwide fame comes from the fact that his image is printed on the U.S. $100 bill. Thus, Ben Franklin is ubiquitous in international trade and commerce.

This monetary aspect of Franklin’s fame is worth bearing in mind. Because it now takes about one of those Franklin $100 bills to purchase one barrel of oil.

And it takes nine of those Franklin $100 bills to purchase an ounce of gold.

Just a year ago, a Ben Franklin $100 bill would buy nearly two barrels of oil, not one. And it took just a bit more than six Ben Franklins to buy that gold coin illustrated above. While we are thinking about it, how much food can you buy this year at the grocery store for the amount indicated on one Ben Franklin? Less than you could last year, right?
What a difference a year makes. Things are changing fast in the world of money. That is, the value of your U.S. currency is declining, while the costs for the things you buy are rising. In a fundamental and philosophical way, it gets back to Ben Franklin’s comment about living in “a republic, if you can keep it.” If your currency is declining in value and the things you want in life are becoming more and more expensive, what can you really do? What does the future hold? At the end of the day, can we maintain that republic?
Gold and Energy
I think it is fair to say that Ben Franklin knew how to adapt to changing times. And you have to have that ability, as well. So let’s discuss a couple of defensive investments in a time of rising prices and declining value of the currency.
Most recently, I recomended NovaGold Resources Inc. (NG: AMEX). NovaGold recently won an important court case in the Ninth Circuit Court of Appeals, (which is why it was knocked down so hard before) upholding its mining permits for a new project near Nome, Alaska. NovaGold is still running final tests on its Nome processing mill, but the company is already mining and stockpiling ore. So NovaGold will be processing and selling gold within a couple of months. Plus, NovaGold is making steady progress on another project at Donlin Creek, Alaska. Donlin Creek is one of the largest undeveloped gold deposits in the world, with nearly 33 million ounces of gold resources measured, indicated and inferred. My view is that in the long term, NovaGold is one of the greatest gold mining stocks you can own. Don’t chase the stock, but build a position.
Action to take: Accumulate shares in NovaGold Resources Inc. (NG: AMEX) up to $11.50 per share. Expect this stock to appreciate significantly in 2008.

Kinross Gold Corp. (KGC: NYSE) Kinross is just now ramping up production from new mine facilities. It will be selling increased gold output into a higher-priced gold market. The profits will flow straight to the bottom line. And this is reflected in the higher stock price. Do you have a position in Kinross? It is not too late. Kinross is selling at over $21 per share, The price-to-earnings ratio is high, but not relative to other well-run gold miners. Kinross is growing its earnings rapidly, so I am raising the “buy” price up to $22 per share.
Action to take: Accumulate Kinross Gold Corp. (KGC: NYSE) up to $22 per share. Use any pullback in the gold price to accumulate shares of this great gold miner.
Now let’s think about the world of energy. You surely know that oil prices have been rising, with oil crossing the $100-per-barrel mark and then retreating. Natural gas has also had a slow, but steady climb in recent weeks, although the vaporous energy source has not climbed in price as dramatically as the rising price for oil.

Chesapeake Energy Corp. (CHK: NYSE) , which is rapidly increasing its output from the Barnett Shale play. Chesapeake has given us a return of almost 40% in just over two years since we added it to the portfolio. Keep in mind that this was during a time of, essentially, stable natural gas prices. So Chesapeake does engage in some element of hedging, but the company must be doing something “right” to be rising in value while its product is selling at a level price. What is that?
First, Chesapeake may be one of the best-run energy companies you can own. The past couple of years were good to Chesapeake, with a phenomenally successful drilling and production program within the heart of the U.S. And the future appears even brighter for this Oklahoma City-based company. Using between 38-40 drilling rigs that it either owns outright or operates under contract, Chesapeake expects to complete -- on average -- a gas well in the Barnett Shale play about every 15 hours through at least 2010 !
Aubrey McClendon, Cheasapeake’s CEO, recently stated that the company plans to continue acquiring leaseholds in Tarrant, Johnson and Dallas counties in Texas. So Chesapeake will be drilling its additional acreage in due course. In 2007, Chesapeake’s gross production from the Barnett Shale was 600 million cubic feet of gas equivalent (400 million cubic feet per day net), compared with 2006 gross production of 250 million cubic feet per day. According to CEO McClendon, “We now will focus on achieving our 2008 gross production exit rate target of 900-1,000 million cubic feet per day.” This is an output increase of over 60%.
Thus, Chesapeake will be increasing gas output, in all likelihood in an environment of rising energy and natural gas prices. Chesapeake stock is currently selling at about $37.00 per share, with a price-to-earnings ratio of about 12. My expectation in 2008 is for Chesapeake to increase gas output and sell it at higher prices. So I am raising the “buy” price for Chesapeake to $38 per share. I believe that this stock could rise to $50 and more during 2008, for a 25% gain.
Action to take: Accumulate Chesapeake Energy Corp. (CHK: NYSE) up to $38 per share. Use any pullback in the price of natural gas to accumulate shares of this great energy company.

Question asked on 01/19/2008 at 06:34 AM :: Comments to date: 0

Category: Stocks

Think of History and what has happened in the markets. Today the fear of a bear market is as it was in any other bear market with problems financially flowing in the press all the time. First it was housing then the ripple to the mortgage and bank industry then to the consumers. All bad news.
After the storm there will be sunshine so what do you do during the bad times hunker down and wait.
I was predicting a top in the market in the year of 7's and it came to pass. A top on 10/31/07.
Now the markets have to digest the problems and get on with life. Wait and save your money to buy later.
The following is an excerpt from Jeff Clark who writes now about whether we are in a bear. A bear is measured from a peak to a bottom. The peak was and we are waiting for the bottom.

"Right now, investors would do well to play dead. Or better yet, avoid the market altogether.
Yes, there are plenty of bargains out there. Lots of good quality companies are trading at single-digit price/earnings ratios. Lots of debt-free stocks are trading just above the cash per share on their balance sheets.

But if we are entering a bear market – I am not yet convinced we are, but it is growing more likely – then cheap stocks will get cheaper. Investors should focus less on finding good, cheap stocks, and focus more on preserving capital.
I'm not suggesting that you can't find stocks that go up in a bear market. You can, and we will. But in the early stages of a bear attack, everything gets hit. Investors are better off playing dead until the bear tires out and wanders away.
Bear markets typically last between six and 18 months. Most of the damage, however, occurs early on. Exercising a little patience right now could be the difference between buying stocks on October 16, 1987 – the trading day before the big crash - and buying them on October 20." By Jeff Clark

I say the long term true bear started in Jan of 2000 and the first major bottom was in October of 2002. Everything else will be sideways until 2012 which will be another major bottom.
After 10/2/02 we have gone upward until 10/31/07. Five years of a Bull, that's a long Bull.
Now we are in a minor bear.

Question asked on 01/17/2008 at 03:48 AM :: Comments to date: 0

Category: Stocks

The big news in financial markets last week was Bank of America’s proposed $4 billion acquisition of Countrywide Financial. Let's call it the pied piper of reckless mortgage-lending practices. It encouraged brokers to push the limits on subprime, interest-only, and negative amortization mortgages. It provided the raw materials for Wall Street’s mortgage-backed security machine. And it now faces a choice between bailout and bankruptcy. Countrywide shareholders are lucky Bank of America is bailing them out.
The same can’t be said for Bank of America. I expect B. of A. shareholders will regret this investment. Rather than buying just a division of Countrywide, or waiting to scrounge through the post-bankruptcy rubble, B. of A. is acquiring it outright. This package includes Countrywide’s assets and liabilities. B. of A. executives believe the low purchase price -- about one-third of Countrywide’s book value -- will compensate them for the risk.
I don’t agree that book value is an accurate gauge of Countrywide’s intrinsic value; a mere 7% drop in Countrywide’s fishy assets would wipe it out completely. Countrywide’s assets ballooned during the housing bubble, having doubled since December 2003.
B. of A. is taking a huge leap of faith that this mortgage portfolio is worth anything close to $80 billion. This portfolio may be hard to value, but if the housing market remains stubbornly weak, it won’t be worth $80 billion much longer.
“Bankruptcy litigation is among a list of potential legal liabilities Bank of America may inherit,” notes today’s Wall Street Journal . “These include inquiries from the Securities and Exchange Commission and several state attorneys general, as well as shareholder lawsuits tied to Countrywide’s financial decline and other class action and individual suits brought by borrowers for alleged abuses by the company.”
Countrywide CEO Angelo Mozilo, already under investigation for his suspiciously well-timed stock sales, has already grabbed his golden parachute. In yet another example of poor oversight by the board of a publicly traded company, Mozilo is expected to receive a severance package measured in the tens of millions of dollars.
On last week’s conference call, Lewis mentioned that he wants Mozilo to stay on until the deal closes. Mozilo, long regarded as a mortgage industry “expert,” should have spent less time working on his famous tan and more time in the office thinking about Countrywide’s balance sheet risk. He squandered shareholder capital on hefty share repurchases when the stock was multiples of its current price -- capital that would have come in handy to survive the current financial hurricane.

The Bank of America/Countrywide deal doesn’t mark a bottom in mortgage finance -- just another gamble with other people’s (i.e., shareholders’) money that it has, or has not.

When it does bottom buy KRE for a long term buy.

Question asked on 01/15/2008 at 06:35 AM :: Comments to date: 0

Category: Stocks

After watching The Final Trade on Friday night I started to recall what is their overall record.
This panel of expert traders are very inteligent and in touch with the market. In fact they are some of the big time money movers of the market. So when they say go defensive because the market is going down they mean get out of small caps and go into large caps with alot of cash so that if there is a major recession the large companies have staying power. It all makes sense.
Last year they were all made to pick their favorite stocks to be in for the year. Not one said gold or silver stocks.
If you had bought just the XAU you would be up 50%, GG up 46%,
I personally don't like to change my investments around just because it is the New year. In fact coming up in the next 4 weeks is the near term bottom of the market. Why do I say that.
First of all on August 16th 2007 there was a bottom in the market. The sub-prime mess hit and something had to be done with that. The general banking giants couldn't contain it anymore so the Fed came to the rescue. The Fed started to help save the day by pumping more money into the economy and lowering the interest rates and we had a rise to new highs in the SPX in October. But the problems were still there. The ripple effect was going to take its toll. Now all the ripples are comiing out and the market is reacting to the negative news. November and December and Jan were negative news months. Everyone was waiting for the Santa rally. Then everyone was wainting for the New Years rally. Thus the intervention by the fed prolonged the market upward bias for about 3 months. Otherwise the market would have bottomed in a bear market scenario just in time of November just like 1987. Greenspan in 1987 waited until there was so much damage that he finally poured the money into the economy and saved the day duriing that month of Nov 87. Today the Fed did it 3 months quicker but the casualties have not been wrung out of the market yet. The spiral down will not be as brutal as 1987 because the fed came iin earliear to give it a boost. But the Fed can not change the markets overall bear and bull direction completely. Only the mass of people can do that.
We have been in a recession since August. Just ask your local business people how business has been. The government collects data and when certain indicators hit certain levels then (the economists) they declare we are in a recession. Then its too late to do anything about your investments because the market is down.
So what to do now. Save your money and wait for Feb to start buying areas of beaten down and value plays with good solid dividends.
The market will start to react with bottoming formations during Feb. On the average the market corrects 25% in a bear market. lasting an average of 4 months.
I feel the market will go to 1320 area and give us a rally from there. This doesn't mean we are screaming to new highs. This means you will hear how terrible the market is and everyone is losing their shirt in the market and then you start to buy some of youor favorite stocks. (Buy low sell High)
Happy timing of your trades. Otherwise wait to buy your long term investments. Hang onto your gold and silver stocks.

Question asked on 01/13/2008 at 07:05 AM :: Comments to date: 0

Category: Stocks

The Market is punishing the banks and all financials unless they are not in the sub-prime mess.
Two stocks that I feel worth watching and buying when you are ready to pull the trigger.
This is the time to pick up bargains.
Think about it. You can put your money in a bank and get 4% for a CD. It's safe and secure until it goes bankrupt.
The government will secure up to $100,000.
Well there is an ETF out there that has about 20 regiional banks in it and yields about 12%.
That ETF is KRE and sells around the $32.00 mark. Buy it and it's like putting your money in the bank. There is no guaranttee but 20 banks are not going to go bankrupt. This is a long term buy and hold. While you hold you will collect 12% plus the chance for appreciation.

Another specific bank is Wachocvia (WB) where you get a 7.5% yield and a great bank giving you 7.5%.

Buy the above 2 and you will make money when it starts to go up along with 12% dividend.

Question asked on 01/11/2008 at 04:02 AM :: Comments to date: 0

Category: Stocks

Reread the 10/25/07 article I wrote.
I made a cardinal sin of trying to bottom fish.
Today I feel this is still a great company to own and I still own it.
I am going to do another double cardinal sin and buy some more at the $11.00 range.
This is a long term value play and when the housing market bottoms this stock will take off.

Question asked on 01/09/2008 at 07:38 AM :: Comments to date: 0

Category: Stocks

There is a beaten-down stock of a great mining firm with unbelievable ore wealth in the ground. And that’s not all. At the end of the day in the mining business, you invest in management. And (NG) - NovaGold’s management is second to none, with Rick Van Nieuwenhuyse at the helm. Now you can buy both the resources and the management, and Rick’s outstanding vision for his company, at a 50% discount. What a deal! Unlike in horseracing, in mining, you should bet on the rider, not the pony. NovaGold is a long-term call on great management and a company that controls world-class resources of copper and gold in Alaska and Canada.
Action to take: Buy NovaGold Resources Inc. (NG: AMEX) up to $11.00 per share. Use any pullbacks to accumulate shares. This stock should double in 2008.

Question asked on 01/08/2008 at 06:30 AM :: Comments to date: 0

Category: agricluture

Investing Safely in this Bull Market Mega-Trend
Well, fortunately it is much easier to invest in agricultural commodities and agricultural companies than it once was. Here are two ways to do it:
Market Vectors Global Agribusiness ETF (MOO) – If you want to achieve wide global diversification among agriculture-related companies, there is no better way to do it than this ETF, with the appropriately named ticker. MOO tracks the DAXglobal Agribusiness Index and holds positions in 40 companies trading on 13 global exchanges.
These companies run the gamut from equipment makers Komatsu and Deere, to seed and fertilizer companies such as Monsanto and Potash, to firms involved in agricultural chemicals, irrigation, food and livestock operations, ethanol and biodiesel, and food distribution.

Buy on any pullbacks
This ETF began trading in September 2007 and gained 39 percent by the end of December. Considering the long-term fundamentals of the agribusiness sector, this is just the beginning of greater gains ahead. But keep in mind that this ETF is stretched to the upside, so it might be a good idea to accumulate on weakness.
PowerShares DB Agriculture (DBA) – There are few ways to invest directly in agricultural commodities without going into the futures markets. But the PowerShares DB Agriculture ETF is one of the best. This ETF provides equally weighted exposure to the four most widely traded “soft” commodities: corn, soybeans, sugar, and wheat.
DBA gained 34 percent in 2007, and with the supplies of these four commodities under long-term pressure from rapidly rising demand, this upward trend should continue in the years to come.
The Train is Leaving the Station ... Are You on Board?
No matter how strong the fundamentals, bull markets don’t move up in a straight line. This one will be no different. There will be certainly be volatility and corrections along the way. But the fundamentals of the supply and demand equation foretell a long-term uptrend.
Do you expect the price of energy to go down in the long run? Do you believe that governments will stop encouraging biofuels? Do you think that the two billion people in China and India will stop eating anytime soon?
If you answered no to these questions, then it is time to build a long-term position in agribusiness companies and food commodities. This mega-trend is on solid ground and the bull market is just beginning.

Question asked on 01/06/2008 at 06:11 AM :: Comments to date: 0

Category: commodities

Most investors are well aware of the existing bull market in precious metals, raw materials, and energy. But there is another aspect of the natural resources bull market that has just begun ... and has gone virtually unnoticed.
I’m talking about the bull market in food and agriculture. This bull market is being driven by the most fundamental concept of economics: supply and demand. Quite simply, the demand for agricultural products is overwhelming the supply. And this imbalance should continue for years to come, regardless of what happens in the broader economy.
For decades, food prices have been declining as scientists developed high-yield plant varieties and farmers implemented the latest improvements in equipment, pest management, and growth-promoting fertilizers. But the days of declining food prices appear to be over.
According to the International Food Policy Research Institute, the world has consumed more grain than we have harvested in seven of the last eight years. Currently, there is only 12 weeks worth of the world’s consumption of wheat and only eight weeks of corn remaining in stockpiles. And demand for these grains is rising by more than 30 million tons per year!
Predictably, this has had an impact on prices. In the past 12 months, corn and wheat prices are both up more than 50 percent, while soybeans, dairy, meat, and poultry are also on the rise. For the three months ending in October 2007, the price of food rose at roughly three times the rate of overall inflation.
Why Demand is Outstripping Supply
There are several key reasons why the demand for food and agricultural products is soaring.
First, the world’s population is exploding. There are simply more mouths to feed. It is estimated that the world’s daily caloric intake will increase from 17 trillion calories per day today to nearly 25 trillion in the next two decades.
But it is not just the number of people that counts. Even more important is what people are eating. As the economies of developing countries grow, the personal wealth of billions of people is also growing. In China, for example, the middle class is expected to grow from 100 million to 700 million people by 2020.
And as living standards improve, one of the first things to change is diet. With the money to buy more than just a plate of rice and cabbage, the populations in developing countries are putting more eggs, dairy, poultry and meat on the table.
So not only is the demand for protein going up, but so is the demand for grain, because more protein consumption requires more grains to feed the animals. In fact, it takes five to seven pounds of grain to produce just one pound of beef or pork.
The World Bank estimates that global grain production will have to climb by 50 percent and meat production by 85 percent to meet the projected global demand in the next 20 years.
Food vs. Fuel
But the increased demand for agricultural products does not just come from the dinner table. The emergence of biofuels has also caused a significant boom in demand.
In the U.S., there are currently more than 130 ethanol refineries that consume 27 percent of the U.S. corn crop, according to the USDA. An additional 80 plants are currently under construction. When all of these facilities are operating, ethanol will account for half of the U.S. corn harvest!
Now combine that number with the 43 percent of the crop that goes to feed livestock. That leaves just seven percent for food products. Talk about a squeeze play.
To add to the supply and demand imbalance, consider that changes in climate and inclement weather have severely decreased crop yields in crucial places. Drought in Canada, China, Europe, and Australia (suffering the worst drought in 1,000 years!) has also put significant pressure on world food supplies.

So what does this all mean?
Well, it means that over the long term, food prices are going up, up, up. That presents an investment opportunity and inflation hedge in itself. But it also means that any companies that help farmers produce more food, and do so more efficiently, will be very profitable investments in the coming decades.
And that will stand, no matter what happens to the global economy. After all, people may cut back on clothes and cars and gadgets, but they won’t stop eating.
And in most countries, with declines in soil fertility, dropping water tables, and competition from urban development, it is proving difficult to increase the amount of land suitable for farming. That means the best solution to the coming food crisis is for farmers to increase the yield they get from their existing land.
All of this translates into substantial long-term opportunities for the companies that grow, harvest, distribute; and service the global food supply.
Continued Tomorrow

Question asked on 01/05/2008 at 02:08 AM :: Comments to date: 0

Category: Stocks

Be careful of bottom picking stocks that are affected by the subprime mess.
As we begin the New Year, remember that much of the fallout from the subprime debacle is scheduled to happen this year. The FDIC estimates that about 1.7 million ARM-type mortgage loans worth $367 billion are scheduled to reset during 2008 and 2009, increasing payments and likely leading to higher foreclosures, bankruptcies and housing-related economic woes.
The Bush Administration, Federal Reserve and major mortgage lenders teamed up together to develop a way to help those who cannot afford the higher payments scheduled for 2008. However, it's not clear that this plan will make much of a dent, and we all know about the law of unintended consequences that may pop up long after the bailout is history.
The FDIC predicts that the subprime bailout will also benefit investors who bought investments secured by subprime mortgages. However, it doesn't seem to do much about the related problem of institutional investors that cannot accurately value these investments because of the uncertainty of eventual repayment. In fact, one expert said that, "Modifying loans too aggressively may harm mortgage-bond investors more than it helps them..." I guess we'll just have to wait and see what happens.
As for the continued effects of the subprime mortgage debacle on the stock markets, the efficient market folks would have us believe that much of this news has already been priced into the market. However, just watch what happens as bad news about subprime loans hits the airwaves, even though the news may consist only of the confirmation of what was predicted to occur. As a result, I expect the subprime debacle to trigger just as much emotional trading in 2008 as it did in 2007.

Question asked on 01/03/2008 at 06:37 AM :: Comments to date: 0

Category: Stocks

I opened an account in December in Option Express.
I haven't been able to explore all of the tools that they give you but right now I would recommend anybody who uses an online broker to look at OXPS.
They are going to give online brokers a headache. They have their act together. With that said I even bought some of their stock at 30.50. I think this stock could go to 45 next year. It is still a new and young growing company.
Get in on the ground floor now.

Question asked on 12/28/2007 at 07:01 AM :: Comments to date: 0

Category: Stocks

The first obvious theme is that the U.S. economy has now passed a major inflexion point. It is becoming increasingly clear that there are severe tradeoffs between economic growth and inflation. Namely, we cannot have one without the other. Inflation will be the penalty for continued growth, and that penalty is now beginning to be felt. It looks like 2008 will end with many fixed income investments showing a negative real return (interest minus inflation). This is a situation we have not seen in more than a generation.
Among the many implications of negative real rates is that real assets now have real advantages, and are likely to really outperform. By definition, real assets are assets whose values rise with inflation. If inflation is defined as cash becoming less valuable, then real assets are the things you will be spending your cash on -- things like food, fuel, and anything made from real materials like metal, timber, and hides.
As an investor, you now have a simple and obvious choice. You can either put your money in interest-bearing cash, such as bank accounts, bonds, or T-bills, in which case you will watch it steadily lose value. Or you can buy real assets which will maintain their value in the face of inflation. In the 1970s, the last time real returns on cash turned negative, we saw bull markets in almost all commodities, just like we have today.
Of course, no discussion of real assets would be complete without gold, an asset we highly recommend for next year and beyond. Many analysts assume that gold simply moves in an inverse relationship to the U.S. dollar, however there is more to it than that. We must point out that, so far this year, gold prices have risen 20%, while the dollar has fallen by only 5-7% against the euro and other currencies (versus some currencies, the dollar has actually risen). So the gains in gold reflect not just the downtrend in the dollar, but also an emerging worldwide inflation. These gains show that investors increasingly feel the need to protect their savings against inflation.
As the current price of oil (over $90 a barrel) indicates, we all need to worry about inflation. The signs continue to appear that OPEC's spare production capacity is little to none. Even if growth slows in 2008, which is likely, it will continue to raise demand for oil, putting higher pressure on supplies. That is clear recipe for inflation. Remember that when oil jumped from $20 to $35, fuel prices were not affected very much, because oil and energy costs as a percentage of the overall economy were very low. Now, however, energy costs are approaching or perhaps past the key point where they equal 10% of the overall economy. That means that from now on, further gains in energy costs will increasingly affect the price of everything.

Question asked on 12/27/2007 at 06:51 AM :: Comments to date: 0

Category: Stocks

As faithful readers will recall my favorite stock in silver was CDE. For some reason my timing is early because I see fundamentals that have influence on the cause and effect of a company's future. Thus I liked CDE. Finally Coeur d’Alene Mines Corp. (CDE) is in the news. CDE officially approved its acquisition with Bolnisi Gold NL and Palmarejo Silver and Gold Corp. This deal makes CDE the largest silver miner in the world. As we wait for that transaction to be completed CDE has released even more good news…
The company announced the commissioning of a new 240 ton-per-day flotation mill. It’s located at the company’s high-grade Martha silver mine in Argentina. To date, the company has produced over 11.5 million ounces of silver from its Martha mine, and this addition will allow the company to process its silver more efficiently. Without a doubt, in our opinion, Coeur is the most undervalued silver play in the market today, and that’s why we are pounding the table about it.
This move will cut its already industry-low cash costs on its silver production. Before this mill, the company had to ship all of its ore from the Martha mine 270 miles to its Chilean mine outside of Cerro Bayo. Talk about increasing fuel-efficiency!
Notice the Big move up in CDE yesterday. This is just the beginning. Take every dime you have set aside for the metals and buy CDE for a 3 year play of tripling your money

Question asked on 12/21/2007 at 07:47 AM :: Comments to date: 0

Category: Stocks

In recent testimony before Congress, Fed Chairman Ben Bernanke implicitly recognized that he’s in that most uncomfortableof spots: between a rock and a hard place. On the one hand, he noted, growth in the current quarter will slow sharply, perhaps to1.5 percent or less. That’s more like stagnation than growth. At the same time, inflation
remains a risk, as a look at a chart of oil, copper, or any other commodity makes plain.
For even more evidence of the inflationary threat, consider the sliding dollar.
There’s a strong relationship between rising commodities and a falling greenback. They spur each other on in a vicious circle that is now starting to gather speed.Under the influence of all these factors, inflation already has started to pick up, and it’s likely to continue to accelerate. While we hope the rise will be gradual, there are no
guarantees.
The one potential remedy would be the kind of medicine Paul Volcker applied so diligently in the late 1970s-early 1980s. That means deliberately engineering a recession. This time, though, the repercussions of a recession could be dire, bringing down the entire world economy. Keep in mind that right now only about $200 billion in bad debts lie behind the current threat to the $13 trillion U.S. economy. If the Fed applied the monetary brakes, that $200 billion would balloon exponentially. We continue to think the risks of stopping inflation far outweigh the risks of tolerating it, and we think the Fed will come to the same conclusion.
In the absence of a recession, the market will likely muddle along even as inflation accelerates. It might even make new highs. But it will continue to be led by real assets such as gold, energy.

Question asked on 12/20/2007 at 04:31 PM :: Comments to date: 0

Category: Stocks

There is an old technology called windmills. But the new technology is large wind mills for electrical generation.
Ther are 2 companies that manufacture the carbon fiber that is used in the blades.
HXL and Zolt make over 80% of the market. HXL supplies the high end market for aero and medical thus they are higher priced. Zolt supplies the lower industrial grade product thus cheaper.
They both can service the middle tier quality applications and that is where the future lies. Energy generation from large wind turbines.
But there is a catch.
Britain wants to build 7,000 wind turbines off its shore. That’s one for every half-mile of shoreline. It would provide enough electricity for all of Britain’s homes. Is it possible? Yes, it is. But there are practical challenges. The supply of wind turbines already can’t keep up with demand. If carried out, Britain’s wind energy program could quickly overwhelm supply, pushing prices higher and no doubt leading to cost overruns.
Then there’s the matter of supplying the critical material for wind turbines. It’s carbon fiber. Some big carbon fiber manufacturers are supplying Boeing and Airbus with this super-strong lightweight material to build their new generation of jets.
But Britain should absolutely not tap into this supply. Aerospace-quality carbon fiber is pricey. Britain wants to use industry-grade, which is much cheaper.
The only problem is that industry-grade carbon fiber is dominated by small manufacturers. It would be a nightmare for Britain to parcel out the supply to a dozen manufacturers with different production schedules, quality standards, and customer support protocols.
There is, however, one manufacturer of industrial-grade carbon fiber that is rapidly expanding manufacturing capacity. Its name is Zoltek (ZOLT), and it’s really the only game in town. ZOLT really is the leader in this area of supply. It's a small cap special situation and has had a good run. Wait for a pull back and buyu it.

Question asked on 12/19/2007 at 05:39 AM :: Comments to date: 0

Category: Stocks

Even though the S&P and the Dow are not even 10% from their highs everyone I talk too have had more than a 10% drop in their portfolio. Maybe a new rotation of stocks are developing. Maybe the money has been flowing out of all the lesser stocks and flowing into the big boys. This is a sign of distribution and is a change of trend. The market is going into the second phase of the major bear market. The first phase started in Mar of 2000 the peak.
Now the big trend has made a second peak and will start to erode each sector as their problems arise.
Inflation is coming harder so the gold and silver markets are the safe haven now.
Watch your favorite metal stock for a bottom and buy some more.

Question asked on 12/18/2007 at 06:44 AM :: Comments to date: 0

Category: Stocks

Whenever there is great volatility and indecisiveness in the directiion there tends to be a change to the trend.
Which way is the market going to go?
I will be funny here and say that I will gaurantee it will go down and it will go up. By the time you have lived another 30 years the market will be at the 100,000 mark on the Dow.
So how do you keep from getting burned. Invest in world corporations that have sound business principles on 95% of your portfolio. Add 5% of your incomoe every year to this portfolio and compound it. When you retire you will have your nest egg.
Now if you are greedy and ambitious you will take risks and win a few and lose a few. Money management is the key to success. Picking the right stocks is luck and skill.
The more you know and the harder you work at productive outcomings the more you will be successful and the ones that are not as successful as you you will call you lucky.
Back to the market, Bernanke is between a rock and a hard place. He can't lower the interest rates anymore because it will cause more inflation. Inflation is finally working it's way into the government statistics. Before you and I felt it but the gov't didn't have the statistics reported proberly to everyday life. They have skewed the stats to keep the Cost of Living down because then they have to pay more out in Social Security payments.
A recession is here but statistics report history so the recession will show up in the stats later. Then thats when the market will bottom just like 2002.
I personally don't think the S&P will make a significant bull run for at least 6 months or even longer so you can keep dollar averaging and know that some day the market will be coming back strong.

Question asked on 12/15/2007 at 10:06 AM :: Comments to date: 0

Category: Stocks

As China urbanizes, its diet improves. This fact might seem counter-intuitive, especially given the romantic notion Westerners have of country living. For example, Farmer Ping leaves the fresh air and pure water of the country for the pollution and crowding of the city in order to make more money. You would think that the big city diet of frozen dinners and ready-to-eat foods could never match the nutritional value of the farm-fresh victuals associated with country living. The facts, however, tell a different story. The Chinese urbanite now gets two-thirds of his nutrition from meat proteins and vegetables. Ping’s cousin back on the farm still gets two-thirds of his calories from grains.
The Chinese are eating more meat and other proteins as their wealth increases. United Nations data indicate that annual per capita meat consumption in China grew from 20 kilograms in 1985 to over 50 kilograms in 2000. Per capita chicken consumption has more than tripled between 1990-2005, but is still at only about half the average of all Asian nations and only one-third of the amount consumed daily in the developed world. Per capita beef consumption is up nearly 10-fold from 1990-2005, but still below the Asia average and less than half that of the developed world. As beef and chicken gain in popularity, pork intake has declined in relative terms; yet per capita pork consumption has nearly doubled since 1990.
Farms or Factories
In recent years, China has done a decent job of feeding 20% of the world’s population with only 10% of the world’s farmland. This may no longer be the case, as protein demands continue to grow. A recent report from JPMorgan highlights some of the challenges facing China’s self-sufficiency regarding grain and protein production.
To create meat protein, you need grain. Demand for livestock feed exerts constant pressure on China’s grain supply as an increasingly affluent population consumes more meat, eggs and dairy products. It takes 7 kilograms (kg.) of grain to produce 1 kg. of beef and about 2 kg. of grain to produce 1 kg. of chicken. Recent biofuel initiatives are another incremental source of demand. Combined, these factors are straining China’s ability to remain self-sufficient in grain production.
While grain demand rises, China’s supply of farmland shrinks. An expanding industrial base continues to encroach on tillable acres. Available arable land has receded from 130 million hectares in 1996 to 122 million hectares in 2006. Excessive use of chemical fertilizers and pesticides has contaminated nearly 25% of the country's arable land.
China must also contend with a very limited water supply. The country’s per capita water supply is just a quarter of the global average. To that limited supply of water, add the relative inefficiency of irrigation practices. China requires two tons of water to produce one kilogram of grain. This is three times the water Western countries use to produce a kilogram.
Finally, Chinese agricultural interests need to contend with one hard economic fact: A thousand tons of water can produce one ton of wheat with a market value of roughly $250. Chinese factories can create, on average, $14,000 of goods with the same amount of water. If you owned the water, whom would you want as a customer?
Bring Home the Bacon, and Be Quick About It
With ever larger cities encroaching on cropland and increasingly scarce supplies of potable water for irrigation, China will need to make some hard decisions about how to best meet consumers’ demands for more protein. One logical solution would be to import more feedstock grain. Farmers could then switch agricultural production from grains to more labor-intensive cash crops such as fruits and vegetables. Another solution would be to import more meat. As recently as 2003, imported meats accounted for only 3.5% of consumption.
As Chinese policymakers wrangle with the macro issues of how best to acquire more meat proteins for their 1.3 billion constituents, Chinese corporations will have to figure out how best to deliver the goods. Not only are the Chinese (as well as the rest of the Asian world) eating better, they are also in a hurry to do so. According to a recent ACNielsen study, the Chinese are the second most frequent buyers of ready-to-eat meals in the world, behind only Thais and slightly ahead of Taiwanese and Malaysians. Quality control and branding will be more important to consumers should this trend continue.
When analyzing this phenomenon you can see that there are many direct and indirect ways to invest in the Asian protein demand surge. Whether it is commodity futures, stocks of companies involved, or the Chinese meat industry itself, there is money to be made.

Question asked on 12/06/2007 at 04:28 AM :: Comments to date: 0

Category: Stocks

A long term play for the Energy market, for the raw materials market, for the technical side and for your well being for financial success is CCJ.
Everyone can read the fundamentals on this so read them if you are not familiar with the company.
But from a technical stand point we are in a correction phase of the energy market and the stock market.
Look at a 5 year chart on CCJ. It has had a correction from this spring and is being consolidated around the 40 level. Old highs make new lows. The 100 week moving average is a support lilne for the stock.
You have time to cherry pick this stock because the oil market (energy) is correcting now.
You can buy now and hold. You can wait to pick it up at 40.75. If there is a quick dip buy it at 39.5.
The best way to buy it is to buy some at 42.5 then some at 43.5 then at 45 so you can sit on it as it goes to 60 in the next 2 years.

Question asked on 12/05/2007 at 06:44 AM :: Comments to date: 0

Category: Stocks

The market has bottomed on the day before Thanksgiving.
The fed has decided to lower the discount rate again to keep the economy going.
The dollar has tanked to help keep the exports going.
Bush has signed an appropriations bill to expand the budget for the military which will stimulate the economy.
All the above are bullish for the future. The Market predicts the future and people invest in what they bellieve will be good. They sell on history when news breaks about somethiing negative. The sub-prime mess with the housing market has all been historical, people have been selling and now the economy is hurting. This means the bottom is in and you should wait for another correction to start jumping in to the market. Use the low of November as a stopping point in case my crystal ball is wrong.

The metals will make a correction too due to the change of heart on the market. This change could be a 50% correction then the forces of inflation will push the metals right back up. In fact GG has almmost had a 50% correction. Buy more GG on another beginniing of a rally in the metals.

Question asked on 12/03/2007 at 06:07 AM :: Comments to date: 0

Category: Stocks

The market is at one of the most critical junctures of the year, as the threat of a bear market is looming larger than in the past. From a technical perspective, the S&P 500 index (SPX) is trying to break below its 20-month moving average, currently at 1,410. This is the technical line of demarcation between a bull and bear market.

Fueling the weakness behind the potential move into bear territory are more fundamental breakdowns than the market has had to face in years. Inflation is colliding with a slowdown in growth (that’s called stagflation), there’s continued turmoil in arguably the most important sector (financials), the housing market continues to implode, and consumer strength remains in doubt.
There are four stages to any rally, whether it’s in a stock, sector, or the market. A rally starts with the first stage - despair. That’s right, something as gloomy as despair kicks off a rally. We’ve all heard the term “the market climbs a wall of worry.” Well, the wall is tallest when there appears to be no light at the end of the tunnel. When investors have thrown in the towel. When you can almost hear a collective groan as investors look at a chart. This is “Stage One Despair.”
Why does this mark the point at which a rally will kick in? Well, if investors hate stocks, it’s likely that they’ve sold them. Most are familiar with the term “oversold,” or a point where a stock is technically due for a bounce. The same theory applies to investor behavior.
When despair has reached a climactic level, it signals that investors have likely exhausted all of their potential selling pressure. This means that the risk/reward balance has shifted away from risk, as there are fewer participants left to sell. Put simply, just as you can get the best seats in a theater when it’s empty, you can find the best deals on stocks when investors have left the market due to their despair.
We gauge whether despair has set in by monitoring sentiment indicators such as investor polls, options activity, analyst recommendations, short interest, and media buzz, among others.
Right now, pessimism is not at the climactic levels we’ve seen at past market bottom. Specifically, most indicators are not as negative as what we saw at the August bottom. The CBOE Volatility Index (VIX) monitors the Street’s behavior toward stocks which will provide you with what is likely to be the best buying signal you’ll see in the next six months. It’s not quite there yet. So you’ll just have to be patient.

Gold and silver are correcting now. Remember the economy is being rescued by Bernake. So that means demand for raw goods will continue and the inflation fires will start up again after the first of the year.

Question asked on 12/02/2007 at 06:20 AM :: Comments to date: 0

Category: Stocks

The Market is digesting the sub prime mess with the banks. This mess is what caused the market to bottom in August . Now the banks are starting to write off the loan mess and it is starting to work itself out iin the market. This will take more time a small Santa Claus rally will try to move the market upward but the inflatiion factor will keep a lid on it. Do not get suckered in thinking this is the bootom.
Now in special situations we may trade ( versus invest) a bounce of the banking sector. Since the whole banking sector is being dumped due to the big banks getting to deep into the sub prime mess there are potential buys out there for good trades. One of these situations is WB.
The Bullish Percent Index is a great means of gauging whether a sector is overbought or oversold. Historically, anytime this indicator nears 35 for a given sector, it's oversold and ready to rally.
The S&P Financial Sector is under extreme selling pressure at the moment. In the past, anytime the Bullish Percent Index has neared these levels, finance has rallied strongly soon after.
Now is the time to bet on a rally in finance. We've seen several CEOs step down, major analyst downgrades, and billions in write-offs. The worst-case scenario is already discounted into these stocks: The sector is so oversold that even bad news is not pushing it any further. In Bank of America's case, the stock even rallied on terrible news.

Top 5 Insider Buys:
1.Wachovia (NYSE: WB)
2.Priceline (Nasdaq: PCLN)
3.Inventiv Health (Nasdaq: VTIV)
4.American International Group (NYSE: AIG)
5.American Express (NYSE: AXP)

Top 5 Insider Sells:
1.Intel (Nasdaq: INTC)
2.Hologic (Nasdaq: HOLX)
3.CME Group (NYSE: CME)
4.Hess (NYSE: HES)
5.Oracle (Nasdaq: ORCL)

This bank has already disclosed the full damage it took on the mortgage meltdown: $2.7 billion and an additional $500 million to $600 million related to bad loans in its mortgage loan portfolio. To be clear, this total amount is smaller than what Bank of America and Citigroup recently marked down in the last quarter alone.
Like the other major banks, this company's shares have bottomed out: The day it disclosed the full losses – November 9 – shares didn't budge. In fact, they rallied almost 10% in the next two days.
Everyone's already discounted the worst in this bank's stock. It's received six analyst downgrades in the last month and a half.
It's the cheapest of the major banks. At current prices, you've got the once-in-a-decade opportunity to safely lock in a 6.4% yield.
And it's the only major bank with insider buying. In the last week, insiders have bought $9.8 billion worth of stock.
On November 13, independent director Lanty Smith bought $3.8 million worth of stock. Lanty's been with the company since 1987. He bought on the cheap – the exact day shares hit a four-year low. That same day, the bank's chief risk officer Donald Truslow bought $542,000 worth of stock.
Two days later, Smith was back buying another $1.5 million worth of stock. In two purchases, Smith bought more stock than he had in the preceding three years.
On Monday of this past week, CEO and board chairman Ken Thompson bought $3.9 million worth of stock.
Among these three, you've got a combined 78 years worth of experience at the company buying nearly $10 million in stock in one week. These guys know this business. And they're loading up big time.
I'm talking about Wachovia Corp. (NYSE: WB).
I'm sure you're familiar with Wachovia's business. The bank engages in everything you associate with big banks: lending, deposits, etc. Rather than going into all of these business segments, I want to focus on the roles of two of the insiders who bought Wachovia's stock. Each of them and their respective purchases present a particular insight to Wachovia's situation.
The Least Subprime Exposure of Any Major Bank
Don Truslow's been with Wachovia since 1980. He's been chief risk officer since 2001. The means that Truslow's head should roll given Wachovia's involvement in the subprime debacle… or should it?
At 0.19%, Wachovia's net charge-off ratio – the percentage of loans that have been written off as bad debt in relation to total loans – is the lowest of the big five U.S. banks.
BankNet Charge-Off Ratio
Wachovia 0.19%
Bank of America 0.80%
Wells Fargo 1.01%
JPMorgan 1.07%
Citigroup 1.36%

And except for Bank of America, Wachovia has the least amount of nonperforming assets as a percent of total loans. "Nonperforming assets" is a technical term Wall Street uses to say that an asset is doubtful and likely to need writing off. You can think of nonperforming assets as "potential junk." The fact that Wachovia has little of these relative to its total loan portfolio says essentially, "We don't own much junk."
All of this adds up to one thing: Wachovia is a bank that minimized its risk regarding bad loans and mortgages. This aversion to risk is explicit in the bank's adjustable-rate mortgage (ARM) lending segment, the business segment that has come back to haunt mortgage lenders the most.
Wachovia is the only major bank to do all of its ARM underwriting in house. When the bank made an ARM mortgage, collateral was always involved. In other words, Wachovia avoided the no-income no-asset verification (NINA) loans that lend borrowers money without requiring collateral. With NINA loans, banks didn't even have to verify the income or net worth of borrowers. For these reasons, NINA loans are commonly called "liar loans."
Wachovia avoided the risk that many other banks took on by staying away from NINA loans entirely.
And the loan-to-value ratio – basically the percent of the mortgage that is covered by the bank – is 71%. Put another way, Wachovia's ARM borrowers put a 29% down payment on their mortgages. This beats Citigroup's average loan to value of 79% (its borrowers only own 21%).
Finally, Wachovia has the smallest subprime-related exposure of the big banks. As of October 31, the bank had $2.7 billion in net exposure to the subprime mess. Add in $763 million in exposure to other portions of the credit market, and you've got a total potential write-down of $3.4 billion. This is nothing to celebrate, but it's drastically smaller than Citigroup's $15 billion and Bank of America's $11 billion. Wachovia's subprime exposure relative to market cap is 4%. Bank of America's is 5%. Citigroup's is 10%.
Wachovia is the least at risk of the big banks. So it's not surprising that its chief risk officer, Don Truslow, has put $542,000 of his own money into Wachovia's stock.
The Biggest Dividends of Any Major U.S. Bank
Like Truslow, Wachovia CEO Ken Thompson has been with the company a long time, 31 years to be exact. He's been CEO since 2000. He oversaw Wachovia's merger with First Union bank. That move established Wachovia as one of the largest banks in the U.S., with 13 million households and businesses as customers.
Thompson took over as CEO in 2000. The American Customer Satisfaction Index has ranked Wachovia No. 1 in customer satisfaction among banks every year since 2001. Under Thompson's watch, Wachovia has more than doubled its revenues. More significantly, the bank has undergone a massive increase in profitability. Earnings have grown nearly fivefold. Both operating and net margins have doubled.
Of course, 2000-2007 were great years for finance stocks in general. Banks make money on the spread between the interest they pay on deposits and the interest they make on loans. Easy money flowed from the Federal Reserve's spigot starting in 2001. Banks were paying out low interest rates… and making a killing.

George Soros is betting on a recovery in distressed mortgage lender Countrywide Financial (NYSE: CFC). Soros established a new position worth $44 million in the company last quarter. Soros joins Arnold Schneider, Tom Gayner, Richard Pzena, and Wally Weitz – a veritable who's who of investing – in establishing a position in CFC.

However, Wachovia grew at a spectacular rate, even in the context of the largest financial boom of the last 15 years. From 2001-2007, Wachovia increased its number of household customers at an annual rate of 350,000 per year. It's also seen the highest amount of deposits per new branch per month of the major banks: $1,493. Bank of America – the second best – pulls in $1,267.
Much of these profits have been returned to shareholders via Wachovia's massive dividends. From 2001-2007, the bank's dividend has increased 167%. And unlike Citigroup, there are no rumors of Wachovia lowering its dividend. In fact, Wachovia raised its dividend 14% in August. It maintained this payout in October.
Currently, Wachovia yields 6.4%. And Ken Thompson is buying big. On November 17, he bought 100,000 shares of Wachovia's stock valued at $3.9 million. The purchase represents an 11% increase in Thompson's holdings.
Besides Truslow and Thompson, Wachovia's lead independent director, Lanty Smith, has bought $5.3 million worth of Wachovia's stock in the last two weeks. Smith has served on Wachovia's board since 1987. Like Thompson and Truslow, he's a career executive at the bank. And he's bought more Wachovia stock in the last two weeks than he has in the last three years.
Wachovia currently trades at eight times earnings. It's the cheapest of the major banks. It also has the least exposure to subprime risk. And it's the only major bank with insider buying.
Best of all, the worst-case scenario is already discounted into its stock. The recent write-downs didn't even phase Wachovia shares. If we buy Wachovia now, I expect we'll see a quick 10%-15% pop in share price in the next month and a half. Again, the entire finance sector is way oversold. The Bullish Percent Index is at historic lows – a sign that has preceded strong rallies in the past.
Action to take: Buy Wachovia Corp. (NYSE: WB)
Action to take: Buy the WB December 42.5 calls (WBLV)

Question asked on 11/25/2007 at 07:05 AM :: Comments to date: 0

Category: Stocks

On average for each of the dozen crises [going back to World War II], the market was up 36%
one year after the low point, and 44% after two years.” So if the market bottoms on the sub-prime crisis then the market will do well once the bottom is in.
Right now though we are in the downside of the market and we must be patient for the bottom to be made.

Question asked on 11/23/2007 at 06:26 AM :: Comments to date: 0

Category: Stocks

On average for each of the dozen crises [going back to World War II], the market was up 36%
one year after the low point, and 44% after two years.” So if the market bottoms on the sub-prime crisis then the market will do well once the bottom is in.
Right now though we are in the downside of the market and we must be patient for the bottom to be made.

Question asked on 11/23/2007 at 06:26 AM :: Comments to date: 0

Category: Stocks

If you are investing or trading or both the best rules to guide you are the simplest.
Just like the popular book that came out "All I Needed to Know to Get Along I learned in Kindergarten"
So the best rule I learned was to be a lover not a fighter.
Keep it simple and sweet. The KISS syndrome.
Now for an example of this. The saying "Buy Low sell High". How simple of a statement is that?
How many people put that down as a rule of trading? It is too simple of a rule to write down.
I remember Einstein had a law of relativity, which I really don't understand other than someone explained it to me as everything in this universe has a measure of something relative to something else. So this is a profound statement that is very applicable to the market.
What is low compared to what. Take Enron. When it was going down hill everyone thought it was a better bargain until it went bankrupt. The latest on the reverse side as an example is ISRG. When it was at $100 everyone thought it was expensive, but it hit over $300 in less than a year.
So whenever you want to trade make sure you trade with the flow or the trend, don't fight the tape, go with the flow, etc.
All the Rules I use have the fundamental approach of KISS.

Today's obvious rule is Buy Low, Sell High. or Sell Higher and Buy Lower.

Now there are methods of allowing you to determine this action.
Trend following.
Breakouts.
Reversals.
Penat formation breakoouts.
Double and triple tops and bottoms.
Head and Shoulders
These are just a few of the technical analysis tools for traders to use but the fundamental rule is buy lower than you are going to sell it for.
Happy Thanksgiving week to all of yoou and your families.

A

Question asked on 11/20/2007 at 07:33 AM :: Comments to date: 0

Category: Stocks

Geothermal Energy — The New Way to Invest in Heat
Geothermal energy is heat (the "thermal" part of the word) derived from the Earth (the "geo" part). It is the energy contained in the hot rocks, and the hot fluids that fill the fractures and pores within the rocks, of the Earth's crust. Under the right conditions, geothermal energy can be utilized to generate electricity, and this is why we are interested.
According to thermodynamic calculations performed by many bleary-eyed graduate students over the decades, if the Earth had simply "cooled" from a molten state, it would have become a completely solid mass of iron and rock within a few hundred million years of its formation. But the Earth has been an active, dynamic planet for nearly 4.5 billion years, so something must be going on deep inside to keep the planet hot. The current belief is that the source of heat energy within the Earth is long-term radioactive decay occurring within the crust and mantle.
The uses to which these geothermal resources can be put are controlled by temperature. The highest-temperature resources are generally used only for electric power generation. Current U.S. geothermal electric power generation totals approximately 2,800 megawatts (MW), or about the same as five large nuclear power plants. Uses for low- and moderate- temperature resources can be divided into two categories: Direct use and ground-source heat pumps. I am not going to say that geothermal energy is infinite in scale, but the heat sources within the Earth are immense, and a well-managed program has the potential to be operational for many decades, if not centuries.
The Pros and Cons of Geothermal Power
Now that we have looked at the basic engineering of geothermal power, let's look at the business and policy side of things. First, you should understand that extracting the Earth's heat and selling geothermal power is subject to the same regulatory structures as almost all other energy-generation and transmission entities in the country.
Also, geothermal energy is capital-intensive; hence, it takes time to pay off any major investment. At the same time, geothermal power competes against the rest of the electrical grid. This means that the cost basis for a geothermal power plant has to be competitive against plants that produce electricity by burning coal, natural gas, or even oil, as well as the recently growing solar thermal energy industry.
There is plenty of good news for geothermal energy, though. Once a plant is up and running, geothermal power is quite reliable. Geothermal plants offer a continuously available (24/7) power source, with historic reliabilities in excess of 90%, which is comparable to the reliability of many nuclear plants. Compare this with wind-generated power at 25-40% reliability (the wind does not always blow when you need it), or solar-generated power at 22-35% reliability (the sun sets each night, among other drawbacks). Reliability is a critical issue in terms of operations, because plant owners usually bear the risk of getting charged back by utility customers for what is called shortfall energy. This means the power that a utility purchases on the market if the main source is not operating up to capacity.
There is more good news for geothermal, in the form of policy support. Geothermal energy does not deplete like an oil or natural gas deposit. Many hot springs of the world have been bubbling warm water or steam since prehistoric times. So geothermal power is considered a renewable form of energy production, and in our own era, it benefits from the renewable energy "production tax credit." The production tax credit, plus five-year depreciation schedules, means that there is an effective U.S. government subsidy of over 63% of the capital cost of renewable energy projects. (Think of it as spending dollars that cost only 37 cents.) So right away, renewable energy projects, and geothermal projects in particular, are beneficiaries of significant investment tax breaks that would make any oilman jealous.
If you scan the market, you’ll be hard pressed to find pure-play geothermal companies. But as the technology takes hold, more and more of the companies will pop up on your radar.

Question asked on 11/18/2007 at 06:26 AM :: Comments to date: 0

Category: Stocks

AXU is a small silver mining and remediation company in Canada.
They have a great potential that is being developed.
It will take 4 to 6 years for this company to get a profit revenue stream from it's latest findings.
People will start to buy this ahead of the great anticapation of growth.
Scale in buy on this specuative buy at 5.60 then at 6,10 then at 6.50 then at $7.00 In 5 years you could see a $50.00 stock.

Question asked on 11/14/2007 at 06:33 AM :: Comments to date: 0

Category: Stocks

We had plenty of time to buy gold and silver stocks this summer.
Hopefully you did.
Even with the correction in the market this past week you should be way up in your portfolio holding your mining stocks. Don't panic add to them as the price dips.
You will see $2000 gold before the turn of the decade. The Feds are pumping money into the system at an alarming rate to keep oour economy afloat. This is good for the economy bad for inflatiion. The dollar also is very depressed so the gold price in relation to the dollar will rise, All currencies except the Swiss Franc are backed by nothing therefore they can ratio the currencies against each other to play the export game, but they can't stop the fundamental law of supply and demand. That is the more supply of money coming into the system the more the price of hard assets will go up in price.
As far as your other holding, did you lighten up on your stocks this past summer as the market was consolidating at the top in the year of 7. We are now iin a correction and could go into a bear market.
The sectors to watch now are the financials and the home builders sector.
They will bottom before the market does in anticipation of the spring season which should be stronger due to the lowering of the interest rates.
Save your money and be prepared to buy HW now and KRE after it bottoms. XHB is another one to watch for a bottoming pattern.
Timing is everything, buy when there is blood in the streets with the financials and the homebuilders.

Question asked on 11/13/2007 at 05:33 AM :: Comments to date: 0

Category: Stocks

Tsingtao Brewery's shares were suspended from trading in Hong Kong 11/9/07, pending a major announcement. We suspect the announcement is good news – possibly a major expansion into Thailand. Tsingtao, is the best-known premium beer in China. What you might not know is that Anheuser-Busch is Tsingtao's largest shareholder with a 27% stake. In 2004, Anheuser-Busch bought 100% of the fourth-largest brewer in China – Harbin – for $700 million. Harbin now produces Budweiser-branded beer.

Bud owns both 27% of the most popular premium beer brand in China (Tsingtao) and 100% of Tsingtao's most important foreign rival (Budweiser). That's the king of beers. Investing in China via exceptionally well-managed U.S. companies will prove to be more rewarding than trying to figure out which Chinese-managed firm will be around in 10 years.

Question asked on 11/11/2007 at 05:47 AM :: Comments to date: 0

Category: Stocks

I have a hard time being a bear and yet I have been pushing to be out of the market for the past 5 months.
With the rate of inflation and the weakening of the dollar I don't understand why the market held up so well.
A technician would say that distribution was taking place during the past 5 months. The fed has been trying to keep the economy going with fine tuning and money pumping. But the banking sector and the financials have been in trouble for the past 5 months. Yes the sub-prime issues are working through the market.
Cramer says bulls make money bears make money and pigs get slaughtered.
So how can I make money in a bear market. In the old days you would short the market in the down periiods. I had a hard time timing this because I am better at trying to buy low and selling high. In a bear market buying low means you are bottom fishing. It doesn't matter what you do as you buy low the price will go lower therefore you get discouraged. It is very difficult to play both sides of the market is what I am saying.
Finally I can be long and let the market go down and make money. This is an oxymoron in a down market.
So let's do a play on words here. I want to buy a call on a stock hoping the stock goes up in value when the market goes down. This takes care of my psychological bent of being a bull because I am buying something to go up even though the market is going down.
Now youo ask how do you do this? There are ETF's now that short the market. One in particular is SDS. This rises in value 2 times the value of the decline. So if the SPX goes down 10% this will go up 20%. Pretty sweet.
Consider this vehicle for the down market.

Question asked on 11/09/2007 at 05:30 AM :: Comments to date: 0

Category: Stocks

FreightCar America (RAIL:nasdaq)
I have to admit that I was starting to question my analysis on RAIL, as it seemed to drop every
day relentlessly for days on end, or so it seemed. It gets hard to watch something I thought was super cheap just get significantly cheaper.
So I read over RAIL’s earnings announcement with some sense of redemption. RAIL smoked
Wall Street’s earnings estimates. RAIL came in at 73 cents for the quarter, compared with the
consensus guess of 53 cents. That’s a huge beat.
RAIL as a business faces a lot of short-term uncertainty. But the long term looks good. The
railroads should see good growth over the years due to the rising demand for consumer goods,
coal and other commodities such as ethanol. Then you have the inevitable replacement cycle,
which looks like it’s going to be a real strong one, given the increasing age of the majority of
North America’s rail car fleet.
It’s one thing to bet on an industry that is down in the dumps. It’s another thing to find a
company that can withstand the adversity without having its existence threatened. RAIL has a
debt-free balance sheet and loads of cash. It is, as the most recent earnings report shows yet
again, a highly profitable business. It also has the lion’s share of its biggest market. RAIL has
80% of the market for coal-carrying rail cars. So I feel pretty good that RAIL is going to be
around.
Buy RAIL as an investment for the long term.

Question asked on 11/07/2007 at 07:54 AM :: Comments to date: 0

Category: Stocks

The credit crisis this summer ended up with the Fed and central banks worldwide adding massive amounts of liquidity into the system. This last two weeks have seen one bank after another make large write-downs of subprime debt on their books. Merrill found a few billion dollars more in losses than they had only a few weeks ago. My bet is that Citi will find a lot more as well.

The problem is that more and more CDOs and other forms of mortgage debts are being downgraded. It is highly doubtful that banks have written down assets in anticipation of future downgrades. As Dennis Gartman says, there is never just one cockroach. The Fed injected $42 billion into the system in the last few days. I believe that is the largest injection that has ever been made.

Take this to the bank: There are going to be more write-downs as more and more mortgages go into foreclosure, forcing more downgrades of mortgage asset-backed paper. Foreclosures are up over 200% in a number of states, and 800-900-1000% in some. Scary. Look at this list of the rise in foreclosures over the last year.
Arizona up + 201.7%, Arkansas up + 254.2%, Connecticut up + 920.7%, Delaware up + 389.4%, Florida up + 130.6%, Iowa up + 180.5%, Maryland up + 491.0%, Massachusetts up + 1,127.7%, Minnesota up + 124.9%, Nevada up + 212.2%, Ohio up + 136.0%, Vermont up + 400.0%, Virginia up + 516.4%, Wisconsin up +155.6%, Georgia up +84.5%, Michigan up + 78.6%, New Jersey up + 56.7%, New York up + 66.7%, North Carolina up + 99.0%, North Dakota up + 85.7%, Tennessee up + 57.3%. And on and on.

A Congressional report suggests that over 2,000,000 homes financed by subprime loans will go into foreclosure in the next 18 months. This means that more and more of the mortgage-backed assets on the books of banks, CDOs, and SIVs are going to become losses.

I think we should be getting ready for a second round of the credit crisis. And I would certainly be uncomfortable with owning any financial stock with exposure to the mortgage markets. We may not know the full exposure of many banks until the middle of next year.

The asset-backed commercial paper market declined another $9 billion last week, down for the 12th straight week. It has dropped 26% since August 8, and there is no reason to think that trend will not continue for several months, as commercial paper linked to mortgage assets is simply not being rolled over. The Financial Times talks of one banker who is bartering his mortgage assets to avoid setting a price.

Bottom line? With rising unemployment, a credit crisis, and a housing bubble imploding, this is not a market or an economy where the Fed will be able to sit tight. We are going to see a Fed funds rate below 4% in two more meetings, at a minimum.

And yes, I did notice that gold went over $800 and oil hit $96 last week. Neither are good signals. With oil jumping $2-3 up and down almost every day, the chiropractors must be doing good business with oil traders suffering from the whiplash they get almost every day.

And the dollar? It hit $1.45 on the Euro. I actually have a regulated financial entity in Canada for which I have to pay fees about this time each year, and they are of course denominated in Canadian dollars. This year the fee was 40% higher in US dollar terms than it was a few years ago. But then, my income from European-based funds is rising as well. My belief is that markets of all types are going to get ever more volatile.

Question asked on 11/05/2007 at 07:48 AM :: Comments to date: 0

Category: Stocks

In 1965, a small business got going in Birmingham, Alabama. After a few decades of local success, the company went public in the mid-1990s, raising $13 million.
John Holcomb became the public face of this company – the chairman and CEO – in 1996. Since he took control, the market value has grown to $1.6 billion. Specifically, the company has grown its earnings and book value at roughly 25% per year... an extraordinary compound annual rate of growth.
You might think that growing his business at a 25% compound annual growth rate for a decade would take some sort of extraordinary product or some exceptional management wizardry from John Holcolmb. It didn't.
In his latest annual report, John Holcomb outlined his dazzling, highly technical strategy:
"We believe we should be able to lend money, and get paid back all of the principal with interest."
Wait a minute... What's so dazzling and technical about that?
John, as you might have guessed, runs a bank. The name of the bank isn't dazzling either: It's Alabama National. And John's not-so-technical strategy is to lend money and not lose it. Complicated, eh? It obviously works... Alabama National is a moneymaking machine, and it only gives out a tiny number of bad loans each year.
Alabama National earns close to a 4% interest margin. The interest margin is the difference between what it earns on loans and what it pays out on deposits. The 4% "spread" and John's simple strategy have helped the business grow like a weed with remarkable consistency.
You'd think that a company putting up these extraordinary numbers, with this kind of consistency, would be overpriced. Instead, thanks to the credit crunch, shares of Alabama National recently fell to just about their lowest value in history. As recently as two months ago, shares of Alabama National traded at just 1.2 times book value.
Looking back, that was a tremendous bargain. We're talking about a family business really – with the same guys behind it for decades. It makes simple loans. This business was not at risk in the credit crunch.
Two months ago, Alabama National was your typical regional bank. It was trading at 13 times earnings and paying a 3% dividend. That was quite a decent value for a regional bank...
Then, boom! The Royal Bank of Canada jumped in and bought Alabama National. RBC paid 45% more per share than the stock price was the day before RBC bought it. That means that RBC paid about 20 times earnings and about two times book value. Shareholders of Alabama National walked away with a one-day windfall of 45%.
I would love to own a pile of Alabama Nationals... at pre-takeover values, of course. The great thing is, after this summer's credit crunch, plenty of 'em are out there...
So we will start to look for these bargains.

Question asked on 10/26/2007 at 06:01 AM :: Comments to date: 0

Category: Stocks

I feel that HW has bottomed and is a good time to buy for a good value play.
Buy and tell your friends to buy.
$15.00 and better because its book value is $21.00 per share.
They have a great PE.
They are very profitable.
They have started to buy back their own shares.
They have better costs than any of their competitors.
They will benefit when the housing sector recovers and before because their competitors will start dropping like flies when they can't compete against HW.
I feel a 30% appreciation factor every year for the next 3 years will be sustainable. That is it could double in 3 years time.

Question asked on 10/25/2007 at 05:10 AM :: Comments to date: 0

Category: Stocks

Let's look at the growth of Asian financial institutions. There is no better time than right now to start paying serious attention.
Here's why.
The Chinese financial sector recently opened under the provisions set with China's entry into the World Trade Organization. Major banks will jockey for prime positions in the Chinese market. They'll begin by establishing retail-banking outlets in major cities including Beijing, Shanghai, Guangzhou and Shenzhen.

The Chinese market looks extremely attractive for commercial bankers. Unlike Americans, who spend well beyond their means, the Chinese save. In fact, personal savings rates are estimated to be upward of 40% of an individual's annual income. That's great for a business dependent on low-cost funds for loans - one of a bank's most profitable businesses.

These banks are also primed to tap the mainland's massive market for insurance products and other renminbi services. (The renminbi is the currency of the People's Republic of China.)

The Oldest of Old School Ways of Making Money

There's no better mainstay for both creating and preserving wealth than owning a great growing bank. Most investors shy away from this sector for various reasons… The financial statements are hard to read, the products certainly don't arouse the excitement you feel when the management of your highflying Apple stock dramatically announces the launch of its latest GlactoPod.

But as famed value investor Christopher Browne points out: "Banks are the one growth stock I'd love to own… The average person views banks as stodgy, old economy relics… but what would we do without ATMs, debit cards or credit cards?"

And what banks have a chance to grow?

Think of it this way… Do you think people in China want to stow their money in a place called Bank of America? That's like asking an Iowa corn farmer to hand his assets over to the Bank of China.

The World's Greatest Bank…

A very wise man once said a good reputation is more valuable than money.
I would argue no other multi-national bank holds a higher reputation than HSBC (HBC:NYSE).
In banking… A good reputation is more valuable than money.
We're in the age of a new generation… an era when corporate misdeeds and reprobate CEOs have tarnished the very concept of the responsible corporate citizen… Yesterday's disgraces - the Internet stock bust, the Enron and WorldCom debacles, numerous instances of accounting fraud - barely began to fade away before they were replaced by a fresh set of scandals, including last year's disclosure that Hewlett-Packard had spied on its directors. And before we could put those skeletons to rest, backdating options took center stage. Now I'm afraid we're primed for some more unscrupulous activity with the most recent housing calamity.

You want to invest your hard-earned money in safety beyond a single-digit P/E ratio! I mean, what good is a company trading at six times earnings if the earnings are nothing more than a paper trail of one-time depreciation expenses or booked assets whose proof of solvency never required even a credit check or a Social Security number?
Great reputations are like great companies… They aren't built overnight. And great companies are where you want your money.
Now, it's no secret that many of us maintain a general distaste for large financial companies, especially the larger institutions. They're viewed as power-hungry, money-hoarding machines. They're the ones who own your house. They're the masters who sit in leather chairs behind large oak doors and pull the strings. And they've been doing it ever since man has desired to trade.

Well, as the saying goes… when you can't beat them… And you might as well join the best.

The Hong Kong Shanghai Banking Corp. (HSBC) is not only the world's most respected bank, it's also the self-proclaimed "world's local bank," truly reaping the rewards from continued global growth, having operations in roughly 76 countries.

HSBC possesses the traits we want in an elite global bank: It has a corporate culture that is obsessed with providing superior service, determined to cut unnecessary costs and focused on economic profits and total shareholder returns.

HSBC's competitive advantage stems from its unique geographic footprint, diversity of business and corporate culture. While the banking industry is rapidly consolidating worldwide, few global banks operate in all the areas that HSBC does, such as Hong Kong, the United Kingdom, the United States, Latin America and Asia.

This geographic spread enables the bank to offer cheaper and better service to multinational corporations operating in rapidly growing Asian and Latin American economies. The diversity has fetched the bank more than 120 million retail customers and 2.5 million business clients, giving it considerable scale advantages over competitors.

Nurturing the Emerging Markets
Credit card issuing and management, wealth management and insurance products will deliver a diverse, long-term income stream. The company's proud past of implementing these services isn't some fluff Madison Avenue marketing tool. It's like paying coach to fly first-class. There's not a bank in the world that comes close to matching the service, convenience and steadfast reliability that HSBC has to offer.

Analysts suggest that HSBC's largest asset is also, ironically, its largest risk… that risk being the bank's exposure to Hong Kong and China. It derives 15% of its operating profits from Hong Kong and has stakes ranging from 15-20% in three banks in China. Any macroeconomic or political turbulence in China or China's policies toward Hong Kong could affect HSBC's results and share price.

The other risk… the one that's tangibly hampered the share price as of late has been HSBC's exposure to the American subprime mortgage market. The U.S. problems caused HSBC's bad debts to jump by $2.4 billion, to $6.3 billion in the first half of 2007.

Despite facing legitimate exposure to one of our country's greatest periods of mortgage defaults, the company still posted a 13% growth in pretax profits. This success can be attributed primarily to its growing success in emerging markets. Earnings from the Asia-Pacific region alone were more than one-third higher than this time last year.
We also want to note that HSBC indicates that the problems in subprime mortgage lending here in the U.S. have been stabilized.
Subprime woes have hampered the bank's share price. Like all financial institutions, we never want to pay more than 2 times book. Right now, we can grab shares of HSBC for 1.74 times book. That's exactly what I believe we should do.

Buy HSBC (HBC:NYSE) up to $100 a share.

The Bank of the Future

We expect HSBC's success in both Southeast Asia and Latin America to continue. This exposure to the fastest-growing economies in the world should ensure growth well beyond other major financial institutions with names you're probably more familiar with.

Management has made it clear that it's willing to spend on acquisitions to accelerate growth in Asia. We wouldn't be surprised to see similar actions in places like the Middle East or Latin America.

The day of the small-town bank has come and gone. The future in banking will rest on international institutions that can successfully offer their customers global products at a local price. Brand recognition will play a major role in achieving this. And you'll be hard-pressed to find a more recognizable banking brand than HSBC.

Question asked on 10/14/2007 at 06:07 AM :: Comments to date: 0

Category: Stocks

This month, I am highlighting the Guoco Group (0053:HKG).

The Guoco Group is an investment and holding company providing four core business services: proprietary asset management (headquartered in Hong Kong), property investment and development, hospitality and leisure business and financial services.
Its financial services division includes banking, insurance, fund management, stock and commodity brokering and investment advisory. And let's not dismiss Guoco's asset management.
In a recent filing, management noted that equity prices generally were at high levels with stretched valuations. "As a value investor," it said, "it had become increasingly more challenging to find attractively priced investments in the past few months. As a result, we adopted a more defensive stance in managing the portfolio. We reduced the size of our investment that was trading oriented and spent more effort in identifying stocks with longer-term growth potential that were reasonably valued."

I've said time and time again, there's not much value floating around world markets these days.
Principal development operations take place in Hong Kong, China, Singapore, Malaysia and the United Kingdom.
Since its inception in 1976, the property development group has established a presence in Singapore, mainland China, Malaysia, India and Vietnam.
Its exposure in mainland China remains focused on the northeast section of the country that includes cities like Beijing, Nanjing, Shanghai and Tianjin.
The principal operations of both Cheung Kong (0001:HKG) and Henderson Land are focused on Hong Kong and the greater Guangdong province. Guoco's presence on the northeastern part of mainland China diversifies our property development portfolio nicely.
However, the principal bulk of the company's $5.66 billion annual turnover stems from its Hong Kong and London operations. You may be saying, "What about the People's Republic of China?"
It's true the Chinese economy grew by an estimated 10.7% in 2006. The central government set a more modest growth target for 2007, but despite best intentions, the economy is likely to enjoy a fifth straight year of double-digit growth.
Guoco's management notes Beijing's intentions to cool the property sector. Property speculation in China has taken off in the latter half of this decade much like dot-coms did in the latter half of the last decade. Guoco's management seems to be stepping into the PRC with prudent caution. We laud this strategy. China's long-term development needs won't be met overnight. We firmly believe it's best to stay the course. Establish contacts, develop a track record and proceed slowly. That's the Chinese way.
The group appears to be instigating a similar strategy in both Malaysia and Vietnam.
Some Financial Highlights
Guoco Group has produced an average annual EPS growth of 69% over the past 4 years
The company produces average net margins of 20%
The balance sheet carries roughly twice as much cash as total liabilities
The share price trades below book.
You can buy the stock for 90 cents on the dollar and less than 7 times TTM earnings. That's not bad considering the stock offers a 16.2% earnings yield on a company that carries nearly twice as much cash as total liabilities.
Property development stocks are a little different. Their main asset is real estate. They typically don't produce income streams like your typical industrial stocks.
We don't want to pay more than 1.5 times net asset value (book value) for these types of securities. So that metric gives us a buy-up-to price of $169.

A wise man once said…"Obvious prospects for physical growth in a business do not translate into obvious profits for investors."
The author of this quote is Benjamin Graham, mentor to Warren Buffett, and undeniably one of the greatest investors who ever lived. Graham emphasized the importance of understanding the underlying value supporting a company's stock.
He recognized the fundamental mischaracterization of the term "investor." For Graham, many so-called "investors" were truly nothing more than speculators, individuals looking for a "shortcuts" to superior returns. Graham uderstood that the majority of individuals lacked the patience and discipline required to succeed in the world of investing.
As an investor, you need to recognize that emotion should yield to reason. But more often than not, we confuse emotion (i.e., greed) for logic.
Graham calls attention to the demand for air transport stocks in the '40s and '50s. Everyone knew (and rightly so) that air transportation was here to stay. It didn't take an expert to forecast the enormous long-term growth rates for air travel in the second half ofthe 20th century. Consequently, air transport stocks were the hot investment.
But as you know, passenger growth certainly isn't the only denominator driving an airline's profit. The airline business has horrible margins. Fuel costs, fierce competition and labor disputes have hindered the industry since its very inception. Even though predictions on passenger growth rates proved true, the business itself never offered significant returns. "In the year 1970, despite a new high in traffic figures, the airlines sustained a loss of some $200 million for their shareholders," wrote Graham.

And that's the point of the opening quote.
A great growth story does not necessarily equate to a great business.
What was it that English entrepreneur Sir Richard Branson said? "If I was a businessman, or saw myself as a businessman, I would have never gone into the airline business."
But recognizing a story where growth and value intercede doesn't happen all that often. But when they believe, that's the moment you can substitute "speculator" for "investor."
And when they don't, it's time to reform the art of positive non-intervention…

It's time to practice the virtue of doing nothing.

Question asked on 10/13/2007 at 07:54 AM :: Comments to date: 0

Category: Stocks

The finest economic leader the 20th century ever produced is why Hong Kong is so prosperous. His greatest quality: He didn't intervene. He called his approach "positive nonintervention."

It's the story of a man whose legacy legitimized the laissez-faire economic policies of Milton Friedman and the boys at the University of Chicago. According to the Chicago approach, intervention almost always does more good than harm.

Our hero set the bar as Hong Kong's financial secretary throughout the 1960s.

The Cowperthwaite Approach

Sir John James Cowperthwaite was born on April 25, 1915. Before joining the Colonial Administrative Service in Hong Kong in 1941, Cowperthwaite studied economics at St. Andrews University and Christ's College, Cambridge.

Cowperthwaite arrived in Hong Kong immediately following the war. That was
a good thing. Roughly four years of Japanese occupation had taken its toll.

Manufacturing ceased. Inflation soared. Tens of thousands were cast in the streets. Many more were deported to the mainland.

By war's end, only 600,000 of the original 1.6 million citizens remained.

Unlike most British colonies at the time, Hong Kong didn't receive its freedom immediately following the war. The reason was simple. Hong Kong sat right next door to Mao's communist China. Dominos couldn't fall…Or so they said.

So while the Brits sat at home channeling their energy around their newly enlightened welfare state, Cowperthwaite stepped back. He removed his hands. He released the Hong Kong economy. He let man determine his fate.

Personal taxes were kept at a maximum 15%; government borrowing became an oxymoron; there were no tariffs or subsidies. Cowperthwaite reduced the red tape required to launch a new company to a single one-page form.

Cowperthwaite's intrinsic distrust for government enabled him from preventing even the highest bureaucrats from keeping figures on the rate of economic growth or the size of GDP. His reason…"If I let them compute those statistics, they'll want to use them for planning."

In his very first budget speech, he said, "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do more harm than the centralized decisions of a government; and certainly, the harm is likely to be counteracted faster."

During his "do nothing" tenure, the island only six times the size of Washington, D.C., witnessed a 50% rise in real wages and a two-thirds fall in the number of households in acute poverty. Exports grew by an average of 13.8% a year.

All this from a country forced to import all its raw materials, water and oil. All this from a country excluded from the do-gooder benevolence of the World Bank or IMF.

From 1960-1996, Hong Kong's per capita income rose from about one-quarter of Britain's to more than one-third larger.

As Friedman himself pointed out, "Compare Britain - the birthplace of the Industrial Revolution, the 19th-century economic superpower on whose empire the sun never set - with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades, the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country."

This is why Pesident Reagan wanted free trade because it gives you a free market without government intervention. This is why Hong Kong to this day is very prosperous and even though China now owns Hong Kong since 2000 they haven't messed with success yet.

All of this background is leading up to a recommendation.

Question asked on 10/12/2007 at 07:15 AM :: Comments to date: 0

Category: Stocks

The Hang Seng index jumped 26% in just over 26 days. The reason: Beijing now grants Chinese citizens access to the Hong Kong stock market. Twenty-six percent in just over a month… They call this move the "train to HK stocks."
This market has room to run. Here's why.
1) The Federal Reserve: The Fed cut the interest rate 50 basis points. Remember, the Hong Kong dollar remains pegged to the greenback. This means Hong Kong dollar interest rates are closely tied to U.S. rates. A rate cut here should bode well for Hong Kong property stocks.
2) Asian Development: The bank reports that Asia can now weather a slowdown in the U.S. A U.S. recession coupled with a 10% slide in the dollar would cut growth by only 2 percentage points.
3) Americans Are Broke: Here's a clip from the front-page article "World Economy in Flux as America Downshifts" in the Wall Street Journal. I strongly suggest you give this a look. It's insightful, well written and to the point.
"The forces that had been supportive to excess consumption for a decade are now headed
the other way, and the U.S. consumer just can't keep driving…America's current account deficit to higher highs," says Morgan Stanley's Stephen Roach. The U.S. share of global imports has fallen to14.3%, the lowest since the recession of 1991-1992, according to IMF data. In 2000, the U.S. soaked up 18% of U.S. imports. By contrast, Brazil, South America, India and other developing countries now account for 40.1% of global imports,
up from 28.4% in 1994 "Meaning we're not the sole market of last resort."
Economic independence from the American consumer… Check.
4) Evading the Estate Tax: Money will flow where it's treated best. You won't find any other place that treats money better than Hong Kong. The highest tax bracket comes in at 17%. Individuals are assessed only on annual
employment income. Dividends and capital gains are not taxed. And like many progressive tax systems, Hong Kong grants allowances for certain deductions like charitable contributions. When you consider Hong Kong provides arguably the world's greatest municipal services in a relatively crime-free environment, you'll be hard-pressed to find a more favorable tax policy anywhere in the world. In a similar fashion to low personal tax rates, Hong Kong's estate tax holds a maximum rate of 15% on assets exceeding US$1,350,000. So when Li Ka-shing, the
world's 10th richest man, looks to pass his $18.8 billion and growing, he'll do so under
very favorable circumstances. And here's the kicker. Hong Kong recently repealed its inheritance tax on property.
Consequently, many Hong Kong property owners are now able to pass down real estate assets without any tax liability whatsoever. (Unfortunately, U.S. citizens who own Hong Kong property are still taxed under inheritance laws.) Real estate assets may be passed down generations without any tax liability whatsoever.
It's no wonder 21 billionaires call Hong Kong home. I would venture to guess that it won't be long before many more do the same.
Hong Kong will become a tax haven for the new class of super rich. Its skyline competes with Manhattan's, its weather compares with Miami's, its public safety and infrastructure outclass anything you'll see here in the United States. Disney has just moved in across the harbor on Lantau Island, and Macau, the Las Vegas of Asia, is just a 45-minute boat ride away. What's not to love?Prime locations in Central, Admiralty and Causeway Bay, the heart of Hong Kong, will only continue to command premium prices for years to come. And that's just one of the reasons we're so bullish on Hong Kong property development stocks over the long term.
5) Too Much, Too Fast: Beijing announced that it would place a quota on the total amount of money that could flow from China to the Hong Kong stock market. It seems money has been pouring in. The move intended to drain liquidity from the Chinese economy has worked well. It's worked too well. Chinese securities regulators want to ensure the stability of domestic markets. So they capped the total amount. It's encouraging that Chinese investors reacted so strongly.
We're encouraged Beijing actively supports Hong Kong.

More Tomorrow.

Question asked on 10/11/2007 at 07:03 AM :: Comments to date: 0

Category: Stocks

If you haven't accumulated any gold and silver mining stocks yet look what the CEO of GG has to say because the plateau in overall gold reserve growth is serious.

Goldcorp's CEO Kevin McArthur says. “I believe that is one of the reasons the price of gold has to go up. We just aren’t replacing the reserves year after year in the industry that we should. We’re not building new mines, the growth is a train wreck.”
For the long term at least for the next 2 years buy gold and silver stocks.
Action to take: Continue to accumulate gold and precious metals mining stocks. Accumulate on any pullback in the price of gold or silver. Don’t chase the stocks, but buy Kinross (KGC: NYSE) up to $18 per share in the near term. Buy Goldcorp (GG: NYSE) up to $35 per share.

Question asked on 10/09/2007 at 07:18 AM :: Comments to date: 0

Category: Stocks

It's time to remind you to avoid owning bonds for the next few years, with the one exception, and that is zero coupon bonds which you should certainly have as insurance.

I dislike bonds in general is that today's climate reminds me of the past. As the saying goes, while history seldom repeats, it often rhymes. Looking back through history I see a resemblance between now and 1965. Observe that in 1965, bond yields were at around 4.5% while headline inflation was close to 2% year-over-year. The fifteen years that followed, until 1980, were catastrophic for bonds, and very good for the investments of gold, silver, commodities, and oil.

Because this is not 1965, we also recommend you own securities that are leveraged to growth in the developing world. China and India and other developing nations are carrying the economic ball today and that will be what keeps growth strong. The price for that growth, however, will be much higher inflation due to the demand they need for commodities for the next several years and well beyond that.

The Dow Industrials hit an all-time high. Transports, on the other hand, are still a long way below their last high. Before we can be confident that a bull market is in place, Dow Theory says it's important to have a confirmation in Transports, especially since the Transports are a far better indicator of the domestic economy than the Dow Industrials. Transports reflect goods being shipped. And while they used to be a segment of the U.S. economy, they now indicate how the U.S. is doing compared to the rest of the world.

I feel the Transports will perk up a little in the weeks ahead, and with that in mind I like Burlington Northern (BNI), and UNP Union Pacific railway companies which could do very well in today's market.

Question asked on 10/06/2007 at 07:14 AM :: Comments to date: 0

Category: Stocks

Last week two important numbers caught my eye. The first was a new high in industrial commodity prices. Industrial commodities are the raw materials used by manufacturers, so as their prices rise they indicate both strong business activity and inflationary pressure. They differ from gold because, while gold can remain strong in the face of a very weak economy, commodities like tallow, rubber, and copper cannot. They are strong only when the economy is growing.
Also the high in industrial commodities cannot be attributed to the Fed's recent cut in interest rates. It generally takes months for the Fed's actions to affect industrial commodities, so this high predates the rate cut.

The other important number was that of unemployment insurance claims, which came in at less than 300,000. UIC claims are an important indicator for a couple of reasons. First, this statistic is not subject to major revisions down the road, as are the unemployment figures. Second, no recession has ever begun without UIC claims rising sharply. So not only is this not recessionary, it too suggests strong economic growth.

The combination of strong commodity prices and low UIC claims says the economy is on a solid footing -- more solid than the press would have had you believe prior to the Fed's interest rate cut. The cut wasn't entirely necessary, except to keep the pyschology of the masses from spiraling down, but the numbers suggest that it was good for inflation and gold.

And the threat of inflation leads us to our big investment caution for this week...

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ANOTHER BAD DECADE FOR BONDS?

It's time to remind you to avoid owning bonds for the next few years, with the one exception, and that is zero coupon bonds which you should certainly have as insurance.

The reason we dislike bonds in general is that today's climate reminds us of the past. As the saying goes, while history seldom repeats, it often rhymes. Looking back through the data, we see a poetic resemblance between now and 1965. We'll have more to say on this subject in an upcoming issue of TCI. For now, we'll simply observe that in 1965, bond yields were at around 4.5% while headline inflation was close to 2% year-over-year. The fifteen years that followed, until 1980, were catastrophic for bonds, and very good for the kind of investments we currently suggest you overweight -- gold, commodities, and oil.

Because this is not 1965, we also recommend you own securities that are leveraged to growth in the developing world. Chindia and other developing nations are carrying the economic ball today and that will be what keeps growth strong. The price of that growth, however, will be much higher inflation for the next several years and well beyond that.

We hope we're wrong about this. The last few inflation numbers have been more benign than we expected -- a little under 4% -- leading many to conclude that the inflation outlook is not so bad. But so far as we can tell, these recent figures were anomalies. We expect the next few reports will show inflation closing in on the 4.5% level.

That's still a far cry from the double-digit inflation we saw in the 1970s, but it's also considerably higher than anything experienced since the start of the 1990s bull market.

As for the stock market, our technical indicators remain fairly positive. The Dow Industrials sit within striking distance of an all-time high. Transports, on the other hand, are still a long way below their last high. Before we can be confident that a bull market is in place, we think it's important to have a confirmation in Transports, especially since the Transports are a far better indicator of the domestic economy than the Dow Industrials. Even though worldwide growth is strong, we can't imagine theU.S. stock markets making a broad-based advance unless they are in line with the world, or leading the world. Transports reflect goods being shipped. And while they used to be a segment of the U.S. economy, they now indicate how the U.S. is doing compared to the rest of the world.

Our bet is that Transports will perk up a little in the weeks ahead, and with that in mind we are looking more at stocks like Burlington Northern (BNI), a railway company which could do very well in today's market.

Until next week,

Stephen Leeb
Editor,
The Complete Investor

Red Alert:
October 2007 Portfolio Changes

Growth Portfolio:

Buy: Agnico-Eagle (AEM)

Kinross Gold (KGC)

* Both bought 9/10/07 via Instant Alert

Sell: CACI International (CAI)

Halliburton (HAL)

* Both sold 9/10/07 via Instant Alert

FundFinds Portfolio:

Sell: Ambac Financial Group (ABK)

TETRA Technologies (TTI)

Fast Track Portfolio:

Buy: Lihir Gold (LIHR)

* Bought 9/24/07 via Instant Alert

Sell: iShares Silver Trust (SLV)

International Rectifier (IRF)

* Sold 8/30/07 via Instant Alert

Editor's Note: Due to an irregular dividend, the Income Portfolio table lists an overstated indicated yield for Vanguard Inflation-Protected Securities Fund (VIPSX). The correct anticipated yield for the fund is 4.7%.

--------------------------------------------------------------------------------

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Question asked on 10/05/2007 at 07:06 AM :: Comments to date: 0

Category: Stocks

Follow through from yesterday.

Credit crunch status – The Fed, ECB and BOE have tamed the worst of the financial crisis for now, but problems are still lurking below the surface. The markets continue to watch for news of losses by big financial institutions, any new investor or depositor runs on financial institutions, or any funding problems by financial institutions or corporations tied to tighter lending conditions and tight conditions in the commercial paper market. The markets are also watching the US housing market carefully to see how much farther the industry may sink and how much spill-over there may be into the general US economy.

Question asked on 10/03/2007 at 06:49 AM :: Comments to date: 0

Category: Stocks

Bank runs have always been a problem.
In August 2007 a bank in England (Northern Rock) had a run on its bank due to rumors in the press. They were a bank that had done a lot of sub-prime mortgage lending.
In October 1907 a bank in New York City had a run on it due to speculation by its directors where it went bankrupt and the depositors lost their monies.
History repeats itself (but not quite the same) today there are government safety nets in place.
People though still get worried about their money and will sell things off to be safe. (Panic)
That's what happened up to 8/16/07. The Fed then stepped in to build public confidence and the sell off of all markets readjusted themselves. The cause of the problems are still in the system but the panic has been subdued.
The Fed has stopped the panic. The Piper will be paid but not in a panic.
The market looks forward therfore it will revive itself with one more try at going to new highs and it will probably make it. As I said before though the Piper must be paid. Therefore when people forget about this problem and the market runs up the aftermath will cut the market down. Then it will bounce back and take off to new highs again maybe similar to 1987. Notice the 1907, 1987, 2007, years all end in 07. Coincidence, numerology, whatever, its good to know what causes and effects do from history.

Question asked on 10/02/2007 at 06:08 AM :: Comments to date: 0

Category: Stocks

Long Term the market is topping. Short Term the market is bullish from the Fed's stimulation of lowering interest rates. I believe the market has to prove itself like Russell says in the following. Also the market doesn't like inflation and what the Fed did was inflationary.
The following is an excerpt from the Complete Investor.

SHORT-TERM, LONG-TERM, AT LEAST IT'S STILL A BULL

Over the next three to five years, the world economy and the markets promise to be very turbulent. While we still expect most averages to hit all-time highs, we are not yet certain whether that will begin a new broad-based bull market. It's possible. But far from clear.

More than the Dow or the S&P, the index we are watching right now is the Transports. Richard Russell, one of the few investment advisors we respect, has served investors well for more decades than most of us have been around. He has a history of using Dow Theory to accurately predict major turning points in the market. And Dow Theory has served us well for the past few years as well. According to Dow Theory, Transports must confirm highs in the Industrials and major indices in order for a major bull market to exist. So far, they haven't.

However, the market looks positive for now. Last week, we saw the S&P rise 2.8%, erasing much of the summer's losses. Sure, there will be setbacks, but we expect to enjoy at least a short-term bull. We just can't say yet how long or how broad this rally will be.

Question asked on 09/25/2007 at 06:27 AM :: Comments to date: 0

Category: Stocks

The shift in the Fed internally started on 8/16/07.
They have finally made the cut to change their inflation stopping policy to let's not let the economy go into a recession or depression. That is why the gold market made a turn on 8/16/07 and started to divert from the stock market until the Fed lowered rates last Tuesday 9/18/07.
A further economic discussion follows by a newsletter from the economists John Mauldin.

The term "sea change" has come to mean a profound transformation ever since Will Shakespeare used it in The Tempest. I think this week we witnessed a true sea change in central bank policy, on both sides of the Atlantic. The stock market rejoiced over a 50 basis point cut from the Fed, assuming that it will stimulate growth and avoid anything more than a slowdown.
We ponder several questions. Why did the Fed decide to cut now when the rhetoric of just a few weeks ago was that of inflation fighting? What do they see? Are more rate cuts coming? Will they make any difference? And who is Frederic (Rick) Mishkin and why is he maybe the most important Fed governor you haven't heard of? There's a lot of ground to cover.

Continued:

The answer to: "Why the Fed Lowered Rate? (9/23/07)"

Question asked on 09/23/2007 at 03:12 AM :: Comments to date: 0

Category: Stocks

I can't stress enough that now is the time to own gold and silver stocks.
Please look back at all the articles I have written about the precioius metals.
Gold has made new highs for this move and the gold stocks are just breaking out from their consolidation.
I am going to list the dates of past articles that push for you all to buy metals.
Reread 9/13, 9/10, 8/23, 8/16, 8/15,(especially these timed postings. This time frame was the bottom of the gold and silver market.
GG is the best of buys now due to the break out in gold and its chart pattern. It doesn't matter what the events are now the momentum of the move is taking over and the flow of cash is going into these stocks.
Any other gold companies you want to own are good to buy now too.
Next the silver stocks will move too.
This is the last chance to buy because later on you will be afraid to buy because you want to wait for a correction.
Psycologically the markets will not give you a chance. But wait later on after about a year you will say why didn't I do that back then? Then you will throw in the towel and buy at a much higher price and the market will be peaking in 2 years and then you will be on the downside where you be unhappy with the results.

Buy now jump on the train and go for a ride. Let the wind blow in your face and feel the breeze you will be glad you did.

Question asked on 09/19/2007 at 07:35 AM :: Comments to date: 0

Category: Stocks

One stock that I have owned for about a year I sold 2 weeks ago was China Medical.
I wanted to raise cash. I had bought it around $22 and sold it at $35.50.
I wanted to hang on to it for a long term investment but I needed to raise cash and sold it for a long term gain 13 months for a 60% profit.
Now everyone wants to be able to buy at the bottom and sell at the top. They say they don't ring a bell to tell you when that happens like a dinner bell. Don't you wish they did?
But just like a child you wish. Reality is don't wish just do it.
Psychologically one must be happy with a 60% profit in 13 months and don't look back.
You can kick yourself all day long about missed opportunities but today and tomorrow another opportunity is going to be available to you. All you have to do is find it.
Just because I sold CMED doesn't mean it was time to get out because I had other issues driving my decision.
Today I am recomending buying CMED becasue the public is starting to buy it more. It is a good momentum stock and has a great growth story. Buy at $39.00 or better after Bernake speaks at 2:00 PM.

Question asked on 09/18/2007 at 07:46 AM :: Comments to date: 0

Category: Stocks

I feel the market is in a bear market now. But there are special stocks that are value and growth stocks to be watching so that when the market bottoms we can be ready for a buy. Thus I am creating a few stocks that are stocks to watch.
One such stock is TRN Trinity Ind. I feel this is a good value and growth stock because Trinity Industries, Inc. (TRN) exceeded analysts' earnings expectations in 10 consecutive quarters. Consensus earnings estimates for both this year and next have risen over the past two months. Earnings per share are projected to grow 22% over the next 3-5 years. On Sep 10, the Board of Directors boosted its quarterly cash dividend by 16% to seven cents a share.
Another way to play this is to sell the put for Oct at $35 for $1.60. This way if the stock goes down you pick up some insurance to help your purchase. Now here is the key to this strategy is that little 1.60 premium annualized
if the stock stays at 35 will give you a yield of 50.4%. Not bad for waiting. The only caveat is if the stock goes below 33.40 which means you start to lose from there vs the 35.25 you start to lose.
Food for thought.

Question asked on 09/15/2007 at 06:35 AM :: Comments to date: 0

Category: Stocks

The second wave of the gold and silver bull market has officially started on Sept 6 2007.
If you study the charts for the summer and noticed the SPX and the XAU moved in tandem for the most part until 9/6/07.
Now there is a change in the pattern. Gold and silver stocks took off and the SPX went down.
The psychology of the market took hold for a change due to the fear of inflation and the economy and the dollar etc.
Now is the time to load the boat with the metal stocks. Pick your favorites and let them ride for the next 3 years.

GG, AUY, SSRI, PAAS, ABX, IAG, KGC, CDE,

Question asked on 09/10/2007 at 06:27 AM :: Comments to date: 0

Category: Stocks

An amazing new use of nanotechnology will soon be deployed on the battlefield to save lives. It should also have police and security applications, not to mention a variety of consumer possibilities.

ScienCentral News reports that two research teams — one at the University of Delaware, the other at the U.S. Army Research Lab — have perfected this unique material.

It combines nanoparticles and a special liquid. Under normal conditions, it’s flexible and soft. It’s lightweight and basically unnoticeable when worn.

However, under sudden impact it momentarily becomes solid. This happens almost instantly, about a millisecond following impact.

Not only that, but the scientists have figured out how to impregnate materials such as Kevlar with it, vastly improving the protective properties. Currently, Kevlar is reasonably effective against bullets but useless against something such as a knife — or shrapnel from a roadside bomb.

The new material gives resistance to projectiles and defends against sharp weapons. The key benefit of the special liquid is that it spreads the force over a much wider area, thereby dispersing it.

It only adds 20% to the weight of a garment, thereby addressing the critical need to have body armor that's both effective and lightweight.

I foresee this technology having multiple civilian applications, including a possible additional layer of protection during car crashes. It may also be used to strengthen tires, perhaps helping to prevent blowouts.

Especially exciting is the possibility of finally having suitable bodily protection for motorcycle riders and bicyclists who are presently at the mercy of the least competent car driver on the road.

A company named Armor Holdings (formerly AH: NYSE), a subsidiary of BAE Systems (LSE: BA.L)(UK:BA), has acquired rights to the technology. It will release the first products sometime this year.

Question asked on 09/06/2007 at 06:15 AM :: Comments to date: 0

Category: Stocks

Silicon Image Inc. (SIMG: NASDAQ) is a “little giant” in the high definition game. Silicon Image makes the semiconductors that help deliver high-definition content to HDTVs and video game systems. HD television sets are insanely popular right now, and this demand is expected to grow by leaps and bounds.

Just look at these numbers: At the end of 2006, there were 85 million installed High Definition Multimedia Interfaces. By the end of 2010, industry experts are predicting more than 1 billion installed HDMI’s. High Definition Multimedia Interface-- the newest technology for video and audio transfer-- is only one of the areas where Silicon Image has made its mark.

The company is also involved in Digital Visual Interface specification (DVI), a standard to maximize the video quality of digital displays, including PCs and TVs, and Serial Advanced Technology Attachment specification (SATA), a technology for connecting hard drive disks and other storage devices. This allows for a faster transfer than either Parallel Advance Technology Attachment specification (PATA) or USB connectors.

Silicon Image works with all of the heavy hitters in Hollywood, including Universal, Warner Brothers, Disney, and Fox, not to mention consumer electronic giants like Sony, Hitachi, Toshiba, and Philips.

In the beginning of August, Silicon Image shares were hit hard. The company reported second quarter earnings of $0.05 a share, compared to $0.07 a year prior. Analysts and investors were looking for $0.07. Revenue was up 13% to $79.77 million from $70.58 million a year earlier, spanking analyst estimates of $77.00 million. But it wasn’t enough. The company also lowered quarterly and full-year guidance, and investors couldn’t sell fast enough.

The stock tanked. It went from more than $7 on Aug. 2 to close at $5.26 the very next day. For some investors, this is the end of the story. But we can see tremendous value in Silicon Image shares, even after the guidance has been lowered.

First, the company’s P/E is clocking in at a very low 12.1 (that’s about half the industry average). Its price to sales comes in at about 1.5, which is less than half what other stocks in this sector trade near. That’s an absurd valuation for a small, growing company-- even one that’s hit a few bumps in the road. The stock price could double and it wouldn’t be anywhere near overvalued.

Then there’s Silicon Image’s stock repurchase plan. In February, the company began a 36-month stock repurchase program of up to $100 million. The company’s already bought back $31.1 million through June. Buying back shares not only shows that the company has faith in its operations, but also that it is dedicated to increasing shareholder value.

The third bullish indicator is Silicon Image CEO Steve Tirado buying 20,000 shares on August 20 for $5.30. That’s Tirado’s first buy since Spring 2006, whjen he picked up 10,000 shares for $9.

How Silicon Image Can Beat the Street

At the beginning of 2007, Silicon Image made two important acquisitions to expand its portfolio. First, it acquired Sci-worx for $15.8 million. With this purchase, the company received intellectual properties associated with the development of system-on-a-chip (SoC) for storage, distribution, and presentation of HD content.

Then in February, Silicon Image signed a license agreement where it exchanged technologies with Sunplus Techonologies for $40million. Shipping for these related products would start in 2008.

In the more immediate future, Silicon Image has a new category of analog products that are to be released during the next two quarters. If these are successful, Silicon Image could bounce back and surpass estimates.

Buy Silicon Image.

Question asked on 08/30/2007 at 08:21 PM :: Comments to date: 0

Category: Stocks

Another takeover candidate is Epicor Software.
This company would make a great addition to Oracle.
Oracle has added 30 companies worth 20 Billion in the past 3 years.
They have $5 Billion in cash waiting to buy good companies.
Epicors market cap is $850 Million.
Epicor has traded sideways for 4 years. This years high $15.58 its low recently is $12.00 and trading around th $13.40 range. Its like watching paint dry for this one until the takeover gets announced.

Question asked on 08/21/2007 at 06:09 AM :: Comments to date: 0

Category: Stocks

After the route of some stocks now is the time to speculate short term trade and or buy for the long term.
Companies that are in the high light for take over targets are very under valued now and any large company that has cash will come in and try to pick them up for the cheap.
One such company is Monster Worldwide (MNST). They are one of the best performing companies in the online line businesses - jobs. They are the largest and best but its a niche. Therefore a large conglomerate will come and pick them up someday. The stock traded as high as $54.79 and now is $35.80
Buy some now and wait for the move. Put a stop at $32.00.

Question asked on 08/20/2007 at 06:24 AM :: Comments to date: 0

Category: Stocks

After this week of turmoil the market appears to have put in a bottom. The fed came in and lowered the discount rate .5 which is a big factor to give confidence to the market.
What we have to watch is the effects of this. Greenspan did this in 1987 after a 50% correction. He turned the market. Today it may be a little early. This could cause the dollar to weaken again after alittle time.
Now how many people suffered this past month?
What stocks survived without much pain?
One such stock was XRAY - Dentsply International.
This is a long term buy with a great internayional exposure.
I like it at $37.00 range or better.

Question asked on 08/19/2007 at 11:12 AM :: Comments to date: 0

Category: Stocks

We are in a new era of agriculture and food production. There was a great quote in
The Wall Street Journal today from Stefan Tangermann, director of food,
agriculture and fisheries at the Organization for Economic Cooperation and
Development. "Suddenly, there's a factor that was never visible in the domestic
market," he says. "That is: What do the Chinese eat?"

We're seeing price increases in food across the board. The Journal had an
interesting piece covering the European perspective today ("Higher Food Prices to
Hit Europe"). In Europe, the strong euro absorbed some of the increases. But that's
changing. Italy's pasta makers will increase domestic prices by 20%, for example. I
imagine that's a big deal over there. In Germany, milk-based products could rise
50% this year, according to Germany's Dairy Industry Association. The price of
mayonnaise was up 10% in June.

This is the real price inflation people deal with every day. It's a picture you don't
find reading official government reports on inflation -- because they don't capture
these changes at all, or, to the extent they do, they are ignored. How many times
have you read the line "excluding food and energy" when reading a release or news
story on the consumer price index?

Anyway, at work are the usual suspects… the push for biofuels and the
consumption of more meat and cheese by developing countries. Another factor is
the weather. The drought in Australia has hurt agricultural production there.

In any event, the food production dynamics favor certain industries.

American Vanguard (AVD:nyse), for one, is in a good position.
The second-quarter report was good, with earnings coming in a shade better than
expected. What was more important, was how management continued to
emphasize the opportunities the company has ahead of it. On the conference call,
management maintained that the company would generate "significant free cash
flow" in the fourth quarter, most of which would pile up on the balance sheet. The
company could then use the cash to pay down debt -- of which there is only $65
million -- or use it to enhance the value of the company some other way.

International sales were 20% of the total. The company has "great opportunities
abroad," mostly in Central and South America.

AVD also picked up an institutional follower. Soleil Securities initiated coverage
with a buy and a target of $21.

AVD is a buy under $15.00.

Question asked on 08/17/2007 at 06:40 AM :: Comments to date: 0

Category: Stocks

Last week stocks saw a rally attempt reverse and prices settled with an
up-close view of important support. Interest rates are falling, as bonds
benefit from a panic-driven flight to quality. With fear running rampant,
you can sense we are near a bounce; but the strength of the recent stock
market move to the downside gives bears the edge and sets resistance for
any snapback. If nearby support breaks, we could see a freefall. If it
holds, then rally it is. Time will tell.

Question asked on 08/05/2007 at 07:30 AM :: Comments to date: 0

Category: Stocks

Voice-automated solutions company Intervoice Inc. (INTV:NASDAQ) would not let the weak market keep it down. The company recently announced it has signed a multimillion-dollar contract with an unnamed African wireless service provider.

We don’t have all the details yet, but the company did announce the contract would be worth $4.2 million. And while this money will not materialize on the income statement until early next year, it continues to build on the company’s positive momentum.

The Street has turned its attention to this stock, and its price continues to head higher.

Question asked on 08/03/2007 at 06:13 AM :: Comments to date: 0

Category: Life

Nassim Taleb's new book, The Black Swan is a remarkable work and suggest that any serious student of the market read this book.

A few thoughts on this book follow.

"The inability to predict outliers implies the inability to predict the course of history, given the share of these events in the dynamics of events."

"But we act as though we are able to predict historical events, or, even worse, as if we are able to change the course of history. We produce thirty-year projections of social security deficits and oil prices without realizing that we cannot even predict these for next summer - our cumulative prediction errors for political and economic events are so monstrous that every time I look at the empirical record I have to pinch myself to verify that I am not dreaming. What is surprising is not the magnitude of our forecasts errors, but our absence of awareness of it. This is all the more worrisome when we engage in deadly conflicts: wars are fundamentally unpredictable (and we do not know it). Owing to this misunderstanding of the casual chains between policy and actions, we can easily trigger Black Swans thanks to aggressive ignorance-like a child playing with a chemistry kit.

"...To summarize: in this (personal) essay, I stick my neck out and make a claim, against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according our current knowledge) - and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. I also make the bolder (and more annoying) claim that in spite of our progress and growth, the future will be increasingly less predictable, while both human nature and social "science" seem to conspire to hide the idea from us."

So, the above quotes will help put the later predictions into context. By definition, we cannot know the future. Yet we go through the exercise. And even though we should know that we will probably be wrong, there is a value on the process if done with the proper amount of cautious optimism tempered by reality.

I think about the future not just to look for opportunities to invest but primarily as a thought process to assess wherein lies the risk. The first task of an investor is to manage risk and only then to seek attractive returns. We make predictions about the future so as to think about risk and to seek places for opportunity. And then every so often, we re-assess our predictions in the light of new information and adjust our risk controls and objectives.

So as you read my predictions they are nothing but a gathering of historical data analyzing the data for a best fit scenario for historical repeatability. This is known as experience with knowledge.
Therefore with knowledge you use it for the experience and with experience you gain wisdom about all that you been through. The more you read and learn about other peoples experiences the better you can make judgements about what to do.

My favorite Quote is ;

"That which has been is that which will be. And that which had been done is that which will be done. So there is nothing new under the sun...." Solomon.

Question asked on 08/01/2007 at 06:56 AM :: Comments to date: 0

Category: Stocks

I feel that the market will be down but the metals will run their own way.
If you have sold most of your stocks and the market starts to rally don't worry it will correct again and again and again.
A silver stock that I have worked with in the past was Helca Mines. The symbol is HL.
It has gone down in sympathy with the market and the correction in the metals.
Now is the tinme to accumulate this stock. Anywhere below $8.00 buy on the way down.
This is contrary to my normal buying procedure but with the market in a dumping mode pick up bargains as people are willing to sell them cheaper.
Good luck and hold on tight to this stock.
I also recomend GG in the gold sector too keep buying this every $1.00 up in increments. Keep adding to your position on this stock too.

Question asked on 07/31/2007 at 07:44 AM :: Comments to date: 0

Category: commodities

The Stock Market has peaked for now, and the tendencyfor the stock market to top in the 6th and 7th years is so strong historically, the 7th year of the decade is called the "Death-Zone."
The first Phase of commodity inflation was right on schedulewith its 30-year cycle counterpart, the 1970's advance with about a 335% average gain in individual commodities.
The 1970's commodity inflationary advance took place in2 phases (1971-1974 and 1977-1980). And the 30 year cycle has been a strong ally in forecasting.
No Commodity Inflationary period since 1730, has everlasted less than 9 years, and the average inflationary advance has been around 20 years. Ours is a mere 6 years old.
Phase 2 appears to be starting with a number of markets demonstrating "bull-market" type strength.
* Soybeans are in the midst of a 2nd leg up in a bull market*
Gold and Silver are correcting now ready to move and break out of their bull market highs*
Platinum is close to new All-Time highs*
Crude Oil has potentially launched a NEW bull market*
The CCI Commodity Index made new all time highs in July*
The Goldman Sachs commodity index has come within 0.4% of an all time record*
Cotton recently broke out to the upside after a 3 year basing pattern*
12 year lows in the Dollar index and all-time lows vs. Euro is good news for rising commodity prices

We appear to be starting a fresh or the 2nd leg of commodity inflation.
Buy physical silver and gold now in your IRA's and long term investment allocations.
GG, GLD, SLV, at least 10% of your investments should be in there now.

Remember this the stock market does not like inflation, that is why the market will trend downward for some time.
The leader of the inflation is oil and it is at an all time high at $76.00 a barrel.
Oil in 2000 was $11.00 a barrel. That is almost a 700% increase in 7 years.
Now if that isn't inflation I don't know what is.

Question asked on 07/30/2007 at 06:46 AM :: Comments to date: 0

Category: Stocks

M3 is the inconvenient truth that the Labor Department no longer reports. It is the fullest measure of the U.S. money supply… and it is going up three-four times faster than GDP itself.
Mr. Bernanke assures us inflation is under control. Excluding food and energy, he says, the cost of living isn’t going up too much. Hogwash.
I am a consumer thusly I am a little concerned that monetary officials keep dismissing the “food and energy” effect.

I certainly understand their motivation.

Our friends at the Cleveland Fed just reported that energy prices have risen at an average annualized monthly rate of roughly 30% during the first four months of the year and soared nearly 90% in May.
To make matters worse, the World Food Program reports that purchasing costs have risen roughly 50% in the last five years. Corn prices alone have jumped 120% in the last six months…

But the Fed assures us there’s nothing to fear. The CPI excluding food and energy was up a modest 1.8% (annualized) in May, and the median CPI fell to 1%, its slowest monthly growth rate in over four years.
If the CPI (consumer price index) were measured by the same standards used in the 1970s, today’s inflation rate would soar well above the 2.69% stated rate.

How can this happen?

Well, for one, the Bureau of Labor Statistics (BLS) has significantly modified the way we calculate the number. Take a look at this one adjustment.

In 1983, the BLS dramatically changed the way we account for rising house prices, a figure that makes up 28.4% of the CPI . It no longer measures the actual price change of the tangible asset itself (in this case, the house). Instead, it measures rising house prices through a method called “owners’ equivalent rent.”

According to the BLS, “Rental equivalence measures the change in the implicit rent, which is the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market.”

Well, it doesn’t take a Ph.D. to notice that six years of extremely low interest rates have prompted most Americans to buy, instead of rent. Consequently, the demand for rentals has dropped significantly. So when demand for rental properties drops, so does the price a homeowner could earn from renting.

We believe this approach dramatically understates housing price inflation.

So when you exclude energy, food and housing, Mr. Bernanke may have a point: The cost of living isn’t going up too much.
American lawyer, lecturer and author Rene A. Wormser once wrote: “No government can operate with a monetary system consisting only of fiat money without sustaining gross economic turmoil and eventually facing a tragic day of reckoning. A fiat money system prompts legislative profligacy and inevitably produces inflation.”

He has a point. Deficit financing and government intervention have taken their toll. A 1940 dollar is worth only roughly 5 cents today.

Meanwhile, for the second consecutive month, China has been a net seller of U.S. securities. If this move proves to be more than a passing trend, this could put further pressure on the downward slide of the U.S. dollar.

China sold a net $6.6 billion of U.S. securities in May, following net sales of $5.8 billion in April. The last time China sold U.S. securities for two consecutive months was in January and February 2004.

This may have a lot to do with the major slide in the U.S. dollar in recent weeks.

Eventually, the consequence of eternal credit expansion will rear its ugly head. Maybe not today… maybe not tomorrow, but someday the gentle breeze of a butterfly’s wings will shake the thin-veiled foundations on which this fragile house of cards auspiciously rests.

The question is… Will you be the one left holding the mighty greenback?

Moral of the story even if your resource stocks are down this week hang on for the inflationary trend to follow.
Remember the market does not like inflation. That's why the market went nowhere in the 1970's until 1982 when Volcker killed inflation.

Since 2000 the majority of the stocks on the average have gone nowhere due to the inflation of resources.

Question asked on 07/28/2007 at 07:02 AM :: Comments to date: 0

Category: Stocks

On 7/19/07 I wrote.

Most analysts remain bullish on US equities for a variety of reasons. but the easy money in stocks has already been made, and that risk and volatility will continue to increase in the months ahead.
So the professionals are still looking at things with the bent to be cautious. It is still climbing the wall of worry.

Yes I know that I am predicting a correction and it will come so quick that you will be afraid to sell when it is going down.
Maybe now you should tighten up your stops to protect your profits.

What happened on 7/24/07?
This is distribution and volitility which happens before the market changes direction.

This is an update to 6/24/07 posting.
History repeats itself, but not exactly the same. It has cycles but not always predicable. If you are prepared for them and it happens you are OK. If not then you will be lucky or hurt.
Let's start with dates. In chronological order.
Nov 9 1903 Bottom at 30.88 Top on Jan 19 1906 75.45 144% Rise 2 years and 2 months
Jul 30 1914 Bottom at 55.32 Top on Nov 21 1916 110.15 111% Rise 2 years and 3 months
Jun 1 1932 Bottom at 4.4 Top on Mar 6 1937 18.68 325% Rise 4 years and 9 months
Apr 28 1942 Bottom at 7.47 Top on may 29 1946 19.25 158% Rise 4 years and 1 month
Jun 26 1962 Bottom at 52.32 Top on Feb 9 1966 94.06 80% Rise 3 years and 7 months
Aug 9 1982 Bottom at 101.44 Top on Aug 25 1987 337.89 233% Rise 5 years
and now
Oct 10 2002 Bottom at 768.63 Potential top on July 17 2007 100% Rise 5 years and 8 months.

Now study the dates and look for the pattern.
They all start in the beginning of the decade and stop in the year 6 or 7. Coincidence?
We are in the weakest and longest bull market in the history of the stock market.
Really the Dow has made it to new highs which is what happened in the late 60's but the Nasdaq hasn't come close. We will flirt with the highs and then another event will happen that accentuates the negative sentiment of the people which will cause a bear market to be officially declared. I hope you are protecting yourself by writing calls, and usiing close trailing stops. Go into short term money markets and wait to buy when there is blood in the streets.
The subprime issues are starting to wear down the market. Close up your stops and wait to buy anything for October to November.

Question asked on 07/25/2007 at 08:45 AM :: Comments to date: 0

Category: Stocks

For those of you in the stock CCJ the following is an update.

A recommendation was Cameco (CCJ: NYSE), the world’s largest uranium producer. Cameco accounts for about 20% of world production from its mines in Canada and the U.S. Cameco claims to hold 500 million pounds of proven and probable reserves, and extensive uranium resources.

Cameco also holds land positions in some of the world’s most promising areas for new uranium discoveries in Canada and Australia, the product of an intensive global exploration program. Additionally, Cameco is a leading provider of processing services required to produce fuel for nuclear power plants, and generates 1,000 MW of nuclear electricity through a partnership in North America’s largest nuclear-generating station, located in Ontario, Canada.

Worldwide, there is a growing demand for electricity, but it is coupled with concern over emissions of greenhouse gases such as CO2. This is causing a renewal of interest in using nuclear power as a clean, reliable and affordable source of base-load electricity. Yet with this growing interest in nuclear energy, it is also a fact that existing uranium supply is falling short of demand. Much of the uranium currently being used or staged to fuel or refuel reactors is a legacy of the Cold War, as thousands of ex-U.S. and Soviet nuclear warheads are dismantled and the nuclear material is reprocessed to use for power generation. Once the bombs are used up, there will be an instant shortage of uranium for fuel.

Cameco is positioned to benefit from this uranium shortfall due to its low-cost operations, extensive reserves and control of more than 45% of identified new uranium production that may come to the market over the next 10 years. However, Cameco suffered a major setback in October 2006 when its mine at Cigar Lake, Saskatchewan flooded. The Cigar Lake project is a joint venture owned by Cameco Corp. (50%), AREVA Resources Canada Inc. (37%), Idemitsu Canada Resources Ltd. (8%) and TEPCO Resources Inc. (5%).

According to both Cameco’s and other independent geologic assessments, Cigar Lake is a challenging deposit to develop and mine. The major challenges include controlling groundwater, digging within weak ground formations and radiation protection for workers.

Since the flooding last year, Cameco has spent the past many months and budgeted nearly $500 million to remediate the mine. Cameco recently released an update on the progress. The first phase of the Cigar Lake remediation plan involves drilling holes down to the source of the inflow and to a nearby tunnel where reinforcement is needed. Cameco will then pump concrete through the drill holes, seal off the inflow with grout and drill dewatering holes.
Subsequent phases for remediation include pumping and dewatering the mine, freezing the ground in the area of the inflow, restoring underground areas and resuming mine development. There is nothing easy about this effort.

The sandstone overlying the basement rocks at Cigar Lake contains significant water under conditions of hydrostatic pressure. Freezing the ground is expected to result in several improvements to the ground conditions, including: (1) minimizing the risk of water inflows from saturated rock, (2) reducing radiation exposure from radon dissolved in the ground water and (3) increasing rock stability. However, freezing will only reduce, not eliminate, these challenges. There is also the possibility of a water inflow during the drilling of holes to freeze the ground. Therefore, the risk of water inflows at Cigar Lake remains.

Canadian regulatory agencies have looked at Cameco’s operations, and not liked what they have seen. “In response to the third-party investigations into the water inflow events at Cigar Lake, the regulators have made it clear that we need to demonstrate improvements in our quality culture. We agree and are taking concrete steps to address the underlying issues,” said Tim Gitzel, chief operating officer of Cameco. “The remediation work at Cigar Lake is technically challenging and our approach has been cautious and prudent. However, we are making steady progress in moving this valuable project toward production.”

So far, the regulatory agencies have approved plans to flush sand and fine material away from the inflow area and to pour the initial stage of concrete plugs. Cameco is now working to provide regulators with the information needed to secure approval for installation of dewatering pumps and infrastructure, and ongoing operation of water treatment facilities required for dewatering. Cameco is also seeking regulatory approval to dewater the underground development, initiate the installation of the surface freezing infrastructure and do any additional remedial work identified in phases two and three, such as determining if additional reinforcement is required in higher-risk areas. Finally, Cameco is preparing to submit an application to the Canadian Nuclear Safety Commission for extension of the Cigar Lake construction license, which expires at the end of 2007.

Previously, Cameco expected that it would complete the second phase of remediation by the end of the third quarter of 2007. However, Cameco now expects it will require a number of additional months to seal the inflow and dewater the mine. It may also be necessary to construct a second shaft in the mine workings. Completing the second shaft, and the associated delay in completing phase two, would set back the planned production startup date from late 2010 to 2011.

So Cameco has its work cut out for it. But we are still very bullish on uranium, and we believe that Cameco is still a good long-term buy for the Outstanding Investments portfolio. But you need to understand that there is an additional element of geologic, regulatory and financial risk in buying or holding shares in this company.

Question asked on 07/20/2007 at 05:24 AM :: Comments to date: 0

Category: Stocks

Summary of the Stock Market.

1. Valuations are reasonable with the S&P 500 trading at 15 times 12-month forward earnings.
2. Earnings growth has peaked but it continues to outperform expectations.
3. The benign inflation outlook means that interest rates will not rise to punitive levels.
4. The re-leveraging of corporate balance sheets favors equity holders over bond holders.

Most analysts remain bullish on US equities for a variety of reasons. but the easy money in stocks has already been made, and that risk and volatility will continue to increase in the months ahead.
So the professionals are still looking at things with the bent to be cautious. It is still climbing the wall of worry.

Yes I know that I am predicting a correction and it will come so quick that you will be afraid to sell when it is going down.
Maybe now you should tighten up your stops to protect your profits.

Question asked on 07/19/2007 at 07:19 AM :: Comments to date: 0

Category: Stocks

The Raytheon Company recently unveiled its new “ray gun.” The gun emits tiny waves that penetrate human skin a fraction of an inch… just enough to make enemy combatants or rock concert attendees feel like they’re on fire.

“This is one example in a relatively new military trend of nonlethal weaponry,” reports Craig Walters. “Military officials at a recent test of Raytheon’s weapon said that it would be of great use in Iraq right now, but production isn’t slated until the end of the decade.”

Question asked on 06/25/2007 at 07:36 AM :: Comments to date: 0

Category: Stocks

I am revisting the 6/9/07 posting and every day and every week that the top of 6/4/07 is not broken creates more of a case that the top is in. But there is still too much bearishness in the market. You must be prepared going into July for a downturn.

I am going to give some interesting points of time and history.
History repeats itself, but not exactly the same. It has cycles but not always predicable. If you are prepared for them and it happens you are OK. If not then you will be lucky or hurt.
Let's start with dates. In chronological order.
Nov 9 1903 Bottom at 30.88 Top on Jan 19 1906 75.45 144% Rise 2 years and 2 months
Jul 30 1914 Bottom at 55.32 Top on Nov 21 1916 110.15 111% Rise 2 years and 3 months
Jun 1 1932 Bottom at 4.4 Top on Mar 6 1937 18.68 325% Rise 4 years and 9 months
Apr 28 1942 Bottom at 7.47 Top on may 29 1946 19.25 158% Rise 4 years and 1 month
Jun 26 1962 Bottom at 52.32 Top on Feb 9 1966 94.06 80% Rise 3 years and 7 months
Aug 9 1982 Bottom at 101.44 Top on Aug 25 1987 337.89 233% Rise 5 years
and now
Oct 10 2002 Bottom at 768.63 Potential top om June 4 2007 100% Rise 5 years and 7 months.

Now study the dates and look for the pattern.
They all start in the beginning of the decade and stop in the year 6 or 7. Coincidence?
We are in the weakest and longest bull market in the history of the stock market.
Really the Dow has made it to new highs which is what happened in the late 60's but the Nasdaq hasn't come close. We will flirt with the highs and then another event will happen that accentuates the negative sentiment of the people which will cause a bear market to be officially declared. I hope you are protecting yourself by writing calls, and usiing close trailing stops. Go into short term money markets and wait to buy when there is blood in the streets.
Hopefully Bernake doesn't raise rates as it has been implied because it can be the nail in the coffin.

Question asked on 06/24/2007 at 06:46 AM :: Comments to date: 0

Category: Stocks

Recent statistics reveal Wall Street analysts are more bearish than ever. From Bloomberg.com:

“Short” interest rose to 3.1% of shares listed on the New York Stock Exchange in May -- higher than any level since the Great Depression.
“Sells” in the total market have increased to 6.9%, compared with 1.9% in March 2000, moments before the tech wreck.
“Buy” recommendations fell below “hold” calls as a percentage of total U.S. stock picks for the first time since Bloomberg began tracking in 1997.
A bull market climbs a wall of worry, the old-timers say. Perhaps there is still room for new record closes on the Dow and S&P after all.

I keep looking for the top, it will come because these shorts will be driven out as the market makes new highs. This will be the exhuastion point then the market will head south. Another Wall Street saying is that they never ring a bell to tell you when the top is and or the bottom.

Question asked on 06/23/2007 at 06:44 AM :: Comments to date: 0

Category: Stocks

The percentage of U.S. mortgages entering foreclosure is the highest in more than 50 years, the Mortgage Bankers Association reported on Friday.

The biggest jumps came in bubble states like California, Florida, Nevada and Arizona. But mortgage defaults were also high in states hit with the loss of manufacturing jobs -- Ohio, Michigan and Indiana.

“It is tempting to call the bottom,” “But the nature of bubbles is that they reach ridiculously absurd heights that few thought possible. Then when the bubble deflates, things usually reach an absurd low that few thought possible. They also tend to take some time to unwind. It would be an odd historical anomaly to have a five- or six-year housing bull market and then have the thing unwind in a one-year bear market.

“This is going to take some time to play out. At least a few years, I’d say. Therefore, as a generalization, don’t be tempted by housing stocks or mortgage lenders just yet.”

Question asked on 06/21/2007 at 06:40 AM :: Comments to date: 0

Category: Stocks

There is a boom in water exchange-traded funds, or ETFs (which are like mutual funds that you can buy and sell just like stocks). A Barron’s piece over the weekend reported on the growing list of water-themed ETFs. But before buying water ETFs, investors should know a little about how they work.

The newest one is PowerShares Global Water Portfolio, which trades under the ticker PIO. It contains 41 companies in the business of doing something with water -- providing it, treating it, etc.

Before that, we had the Claymore S&P Global Fund (CGW), which hit the market in May. It has a 50-stock list. First Trust ISE Water Index Fund (FIW) also went public in May. The granddaddy of these water ETFs is the PowerShares Water Resources Portfolio (PHO), which came out in late 2005.

I’ve never been a big fan of ETFs, because I prefer to pick stocks individually. I also don’t like the rebalancing aspect of ETFs. They tend to sell their winners each quarter, or each year, so no one stock dominates the index. Yet in my own investing experience and research, I find that it is precisely those big winners that really make the difference between doing OK and doing great in the stock market.

Even so, if you can’t buy a spread of water stocks, these could be your proxy for the water idea. You won’t make a ton of money, but you could still do better than the market as a whole.

Regardless of whether or not I invest in them, it can be useful to pay attention to the ETFs, because as their assets grow, they become steady buyers of the stocks in their indexes. Some of the water companies have relatively small market caps. And some of these ETFS are getting large. The PHO has nearly $2 billion in assets. One of its top holding is Layne Christensen, which has a market cap of only $700 million and change.

The end result of a booming water ETF sector could be relatively high multiples on a number of water stocks. It will be interesting to follow these developments. But again, a little digging here gives us a couple of useful insights. The first is that ETFs exhibit bad investing habits (selling off those winners). And the second is that the most important impact of ETFs may be the effect their increasing popularity has on the stock prices of the stocks they must buy.

Question asked on 06/20/2007 at 06:37 AM :: Comments to date: 0

Category: Stocks

I believe its time to be defensive but still do long term investing in world leaders in the stock market.
Even if the market goes down theses stocks are a good cross section of the stocks that will do well for the next 2 years.
NBR
ABB
CNQ
Review them and watch for a buying opportunity.

Question asked on 06/18/2007 at 06:47 AM :: Comments to date: 0

Category: Stocks

The world consumes about two barrels of oil for every new barrel it finds.

There is no amount of rationalization that can convince a sober mind that one plus one equals three.
No other commodity on Earth grips the scales of a country’s economic welfare like crude oil. In oil, countries find safety and certainty. It’s undeniably the main driver shaping policies today.

Make no mistake…the world is fighting for its limited supply. But to some degree, that must change.
And here’s the potential solution…

Light sweet crude isn’t the only commodity we can use to generate unleaded gasoline.
There’s another natural resource perfectly able to produce any of the following fuels: diesel, gasoline, heating fuel, plastics, fertilizer or pure hydrogen.
And the United States holds more than a quarter of the world’s supply.
We haven’t been utilizing this proven technology for one specific reason: Oil had been cheap! But as you know, that’s no longer the case.
As we all know, we’re in a new era where oil supplies are constantly challenged. Oil producing countries in the Middle East and Latin America are fully aware of this. OPEC ministers have been signaling support for a price floor around $60 a barrel.

They call the process CTL, or coal-to-liquid technology. It’s more commonly known as coal-to-oil technology. That’s right: Known as the Fischer-Tropsch process that Germany used during World War II to get oil from its massive coal reserves, CTL technology works by first converting coal to gas (carbon monoxide and hydrogen).
It’s then possible to convert those two gasses into diesel, gasoline, or any of the other products mentioned above.
Depending on who you ask, the break-even point with Fischer-Tropsch technology is somewhere between $30 and $40 a barrel. In China, it may be much lower! When the price of oil costs more than that figure, it’s cheaper to make these fuels (diesel, gasoline, heating fuel) from coal!

But the real argument is securing a stable supply. That’s why both the U.S. Air Force and the American commercial airline business have jumped on board.
The Pentagon estimates the United States has 22 billion barrels of oil, but enough coal to produce 964 billion barrels. The Middle East has about 685 billion barrels of oil.

And if that weren’t enough, Washington seems to be jumping on the CTL bandwagon as well.

Representative Geoff Davis {R-KY} and House Natural Resources Chairman Nick Rahall {D-WV} introduced the Coal-to-Liquids Fuel Promotion Act of 2007. This act is the House version of a bill introduced in the Senate by Jim Bunning {R-KY} and presidential candidate Barack Obama {D-IL}.

The bill offers tax incentives for investment and production of CTL technology.

There’s not a coal producing state in the nation that wouldn’t embrace this idea…Democrat or Republican. And it just so happens that coal-producing states produce some pretty powerful names on Capitol Hill…names like Rockefeller, Specter, Byrd and Obama.

Speaking of Barack Obama, he fully supports the idea. In a recent speech he proclaimed: “The people I meet in town hall meetings back home would rather fill their cars with fuel made from coal reserves in Southern Illinois than with fuel made from crude reserves in Saudi Arabia.”

The Senator continued: “We already have the technology to do this in a way that’s both clean and efficient. What we’ve been lacking is the political will. This is common sense. Bipartisan legislation will greatly increase investment in coal-to-liquid fuel technology, which will create jobs and lessen our dependence on foreign oil.”

Now what American politician in their right mind has the courage to stand up against a policy that promises to do that?

Question asked on 06/17/2007 at 06:26 AM :: Comments to date: 0

Category: Stocks

Last year XOM Exxon the world's largest integrated oil company in the world - increased its capital expenditures by 11.7% to $15.5 BILLION which is the largest capital expenditure budget in the world. But there is still not enough refinery capacity in the US to meet the demand of the nation. Does XOM care yes and no. Their main purpose is to stay in business and make money thus increasing the shareholders value in the stock. So what else did they do?
They spent $29.6 Billion in stock buybacks so that there was less stock in the market thus creating a demand for their stock which drove their price up more. So is this good for the country. Yes and no.
There hasn't been a new refinery built in the US since 1976. Why? EPA. People don't want it in their backyard.
Too high of cost. Build it overseas and ship it in cheaper. Many reasons.
Business is business and XOM iw a world company not a US company anymore.

Question asked on 06/16/2007 at 05:16 AM :: Comments to date: 0

Category: Stocks

In a conservative mood for the pending top in the market I want to through a value play and income producer at you.
Centerline Holdings is a high yield investment that invests in tax-exempt state and local mortgage bonds that finance low income housing around the country. I don't like bonds as an investment but they are hedged for the downside in their porfolio. This is a good place to earn income while the market goes through it's consolidation. There is currently huge insider buying which says something good is about to happen in the next 6 months. Buy at $19.00 or better.

Question asked on 06/14/2007 at 07:47 AM :: Comments to date: 0

Category: Stocks

I feel that HW is being punished for being in the housing market which is on the down slope but they are well positioned to stay around.
Even in bad times they have made money. Their book value is 20 and the stock is in at 18 so what is going on.
If anyone knows why it is depressed let me know.
Otherwise it is a good value investment.

Question asked on 06/11/2007 at 05:00 AM :: Comments to date: 0

Category: Stocks

Look at RAIL it has a PE of 5 and a strong trend up.
They build rail road cars for the coal industry and are starting to do it for the foreign markets.
Another old infrastructure stock that is hot like CAT nad DE and BHP etc.
This is a long term play for solid growth.

Question asked on 06/10/2007 at 02:58 PM :: Comments to date: 0

Category: Stocks

I am going to give some interesting points of time and history.
History repeats itself, but not exactly the same. It has cycles but not always predicable. If you are prepared for them and it happens you are OK. If not then you will be lucky or hurt.
Let's start with dates. In chronological order.
Nov 9 1903 Bottom at 30.88 Top on Jan 19 1906 75.45 144% Rise 2 years and 2 months
Jul 30 1914 Bottom at 55.32 Top on Nov 21 1916 110.15 111% Rise 2 years and 3 months
Jun 1 1932 Bottom at 4.4 Top on Mar 6 1937 18.68 325% Rise 4 years and 9 months
Apr 28 1942 Bottom at 7.47 Top on may 29 1946 19.25 158% Rise 4 years and 1 month
Jun 26 1962 Bottom at 52.32 Top on Feb 9 1966 94.06 80% Rise 3 years and 7 months
Aug 9 1982 Bottom at 101.44 Top on Aug 25 1987 337.89 233% Rise 5 years
and now
Oct 10 2002 Bottom at 768.63 Potential top om June 4 2007 100% Rise 5 years and 7 months.

Now study the dates and look for the pattern.
They all start in the beginning of the decade and stop in the year 6 or 7. Coincidence?
We are in the weakest and longest bull market in the history of the stock market.
Really the Dow has made it to new highs which is what happened in the late 60's but the Nasdaq hasn't come close. We will flirt with the highs and then another event will happen that accentuates the negative sentiment of the people which will cause a bear market to be officially declared. I hope you are protecting yourself by writing calls, and usiing close trailing stops. Go into short term money markets and wait to buy when there is blood in the streets.
Hopefully Bernake doesn't raise rates as it has been implied because it can be the nail in the coffin.

Question asked on 06/09/2007 at 06:50 AM :: Comments to date: 0

Category: Stocks

Stocks are not bonds, so they shouldn’t be compared on an apples-to-apples basis. But that hasn’t stopped Wall Street strategists from promoting the idea that somehow, low interest rates will forever support the value of the stock market.

This idea shouldn’t be the reason why you hold stocks. You should hold a stock because you judge that its current market price greatly underestimates the underlying company’s cash-generating power -- the amount of cash that can be delivered to shareholders throughout its entire future life. Current interest rates are only one small factor in this judgment process.

The level of interest rates may flash useful “buy” or “sell” signals at market extremes, but it fails as a reliable indicator for long-term stock market returns. Nevertheless, this idea is mutating into a popular fantasy. This fantasy has convinced many investors that a stock is cheap if its “earnings yield” exceeds Treasury bond yields. An earnings yield is simply the inverse of a price-to-earnings ratio; a P/E of 20 equates to an earnings yield of 5%.

Using earnings yields to justify stock values ignores the simplest definition of earnings: revenues minus total costs. Dozens of factors determine earnings, and they fluctuate wildly throughout economic cycles. Bond coupon payments are fixed streams of cash that will be delivered to shareholders over, say, the next 20 years. Why are the two being confused?

A popular title of the earnings yield argument is called the “Fed Model.” This model says that stocks are a good buy when earnings yields exceed Treasury note yields. But it ignores market history prior to the epic 1982-2000 bull market. Using rigorous statistical analysis, John Hussman, portfolio manager of the Hussman Funds, proves that the Fed Model is not a reliable market indicator.

In “How Much Do Interest Rates Affect the Fair Value of Stocks?” Hussman writes:

“The Fed Model looks at the decline in earnings yields since 1980, and loads the entire explanation on the decline in interest rates. What actually happened is that you had a second factor -- the move from extreme undervaluation (abnormally high earnings yields) to extreme overvaluation (abnormally low earnings yields). The true ‘fair value’ relationship between earnings yields and interest rates is nothing close to 1-for-1.”

While the level of interest rates isn’t a reliable indicator, the long-term direction of interest rates certainly is. Falling interest rates tend to excite the stock market and rising rates tend to depress it. So if the recent spike in long-term Treasury yields continues, stock investors should start looking for the nearest exit.

This weekend’s issue of Barron’s featured an interview with Steve Leuthold, chief investment strategist of Leuthold Group. The company advises big money managers about key long-term trends that influence stock market returns. The current environment reminds Leuthold of summer 1987:

“The two things Wall Street was talking about to support the market before the terrible October [1987] decline was the huge amount of liquidity and the big shrink in equities. Then liquidity was coming from Japan, because Japanese brokers had started selling U.S. stocks. The big equity shrink was partly the result of LBOs, but mostly from companies buying back their own stock. There were other parallels. Breadth was deteriorating and investors were gravitating to big-cap stocks from small-cap stocks. There was an acceleration of inflation, which we are seeing now. There was an acceleration of interest rates, and the market kept going up in the face of higher rates, although, back then, the rise in rates was greater. There were a lot of similarities.”

Compare the S&P 500 and the long-term Treasury yield in the year leading up to June 1, 1987, and June 1, 2007, respectively. While long-term yields had spiked to a much-higher 9.1% by June 1987 -- compared with the recent 5% -- the parallel trends are clear. As Leuthold says, thus far in 2007, the market is “going up in the face of higher rates”. History never repeats exactly, but it often rhymes.

Harvey Sawikin from Firebird Management, noted that most of his hedge fund peers had become very cautious about the stock market by late 2006. Values had become harder and harder to find. But this year’s first half “melt-up” (minus the Feb. 27 hiccup) indicates that most money managers have been buying stocks aggressively since then. Leuthold addresses this phenomenon:

“At the end of 1986, institutions thought the market was overvalued and they became cautious. Then the market had a big move up in January 1987 and people were sitting there with defensive positions and thought, ‘Uh-oh, the market is going up.’ And it kept going up. Finally, there was a point of capitulation as managers who were lagging behind the S&P 500 and their peers threw in the towel and bought stocks. We haven’t seen that happen yet this time around. We could see it happen pretty soon. We’ve already seen it happen with the hedge funds, which, if you look at the [International Strategy & Investment Group’s] numbers, are about as long as they could get.”

The real factor behind the wave of private equity deals is bond investors’ insatiable appetite for income and their complete disregard for default risk. I agree with Leuthold’s expectations about most private equity firms’ motives: “The negative stuff is going to come when two years or three years or four years down the road, private capital attempts to regurgitate these companies and sell them back to the public after they have stripped all the assets out of them or taken their big dividends.”

Be prepared for a market correction this late summer. Last year was sell in May and go away. Now the market is being fed by the increasing money supply. But eventually the momentum will stop when the consumer is done spending. With inflation raising it's ugly head again the market will take notice.

Question asked on 06/06/2007 at 07:17 AM :: Comments to date: 0

Category: Stocks

There are a few oil service companies that have really done well lately.
If you study their chart patterns they basically look the same. This means most all the mutual funds and hedge funds are investing in them. Look at the OIX. Then look at NTG, SLB, HAL, and NBR. They all have a bright future.
Back in the 1970's oil companies kept giving these companies more work to explore for more oil. Rigs and support to the oil industry. They will always be in demand and will make a good profit. Look at the above companies and buy the ones you are able to be a piece with. Hold for at least 3 years because they will double in price by then.

Question asked on 06/05/2007 at 07:12 AM :: Comments to date: 0

Category: Stocks

A great new story for a new and upcoming stock.

Terremark Worldwide (TMRK:NASDAQ) was getting settled into its new life on the Nasdaq, then the company made a major announcement. The network access provider announced it would purchase managed access rival Data Return from the private equity group Saratoga Partners.

Saratoga Partners bought Data Return in June 2003 from Divine Inc. in a bankruptcy auction for $28 million. According to a company release, one of Saratoga’s managing directors said at the time that Data Return was “clearly one of Divine's most valuable assets.”

Terremark purchased Data Return for $85 million. That’s $70 million in cash and $15 million of the company’s common stock, to be precise.

The purchase is big news for Terremark’s customer base. Data Return’s portfolio of major clients will help Terremark expand to a fuller presence in the private sector. Data Return has more than 250 customers, including the likes of H&R Block and Hewlett-Packard.

This acquisition will help fuel further growth from this network access manager and provider.

Terremark already has its government clients on lockdown, thanks to its sole-source contracts -- Terremark is simply the only choice for these firms when it comes to secure, managed network access. By combining forces with Data Return, Terremark has eliminated potential competition and secured important new customers, to boot.

The only thing that is a concern Terremark’s purchase of Data Return is its debt. According to the company’s most recent filing, it has more than $150 million in long-term debt. We’ll find out soon enough how this $85 million purchase will play into the matter…

Terremark’s fourth-quarter earnings call is scheduled for 5 p.m. EST on Thursday, June 14. This will be a big day for Terremark, since the company is also discussing the Data Return acquisition and revised outlook for the upcoming fiscal year.

Action to take: Terremark Worldwide (TMRK:NASDAQ) is a small speculative buy. If you have not yet picked up shares, now would be a good time to get in while the stock is consolidating waiting for the news.

Question asked on 05/27/2007 at 05:30 AM :: Comments to date: 0

Category: Stocks

Yamana Gold is a Canadian company that engages in the acquisition, financing, exploration, development and operation of precious metal mining properties in Brazil, Argentina, Honduras and Nicaragua. It primarily produces gold from both gold and copper mines. It owns five operating mines in Brazil, as well as gold development-stage properties, exploration properties and land positions in all three major mineral areas in Brazil. Yamana also owns an operating mine in Honduras, a development-stage project in Argentina and significant exploration concessions in Nicaragua.

AUY stock currently trades at about $13.33 per share, and has generally moved upward in the past year, along with the price of gold. Yamana has a market capitalization of $5 billion, and in the past year reported losses of 25 cents per share, with a number of earnings “surprises” on the downside. Hence, Yamana has no P/E ratio, but it does pay a small dividend equal to about 0.3% of its share value. Of interest, about 36% of Yamana’s stock is held by institutions.

In terms of market capitalization, at $5 billion, Yamana is in the same range as other large gold miners like Agnico-Eagle Mines ($4 billion market cap), Harmony Gold ($6 billion market cap) and Kinross Gold ($8 billion market cap). Unlike these other stocks, however, Yamana has demonstrated poor earnings growth and is losing money.

My first reaction is that I don’t like gold mining companies that lose money in a market where the price of gold is going up. It is like not being able to sell beer on a troop ship. Is something wrong? Still, Yamana has no reported long-term debt. And Yamana is exploring and developing its prospects. Company management says that they need some time. So the lure of Yamana is that it is producing gold at intermediate company production levels and is targeting 1 million ounces of gold production by 2008, a mere seven months away. Thus, the attractive investment potential of Yamana is that it holds a significant exploration portfolio in Brazil and Central America, with a respectable budget to uncover reserves and additional resources.
This being a newer mining company we want to give it more time to evolve into a well oiled machine because it's price is cheap.

Question asked on 05/26/2007 at 03:26 AM :: Comments to date: 0

Category: Stocks

Silver Standard Resources engages in the acquisition, exploration and development of silver mineral properties in Argentina, Australia, Canada, Chile, Mexico, Peru and the United States. Silver Standard controls the world's largest published in-ground silver resources of any publicly traded silver company.
SSRI currently trades at about $38.80 per share, and has had a good year, rising from less than $16 to its current price, just off its yearly high of over $40. Silver Standard has a market capitalization of $2 billion, and earns 28 cents per share. Its price-to-earnings (P/E) ratio is a lofty 137. It pays no dividend.

Silver prices are as high as they have been in more than 25 years, and mining companies are riding a boom in demand for the white metal. Silver is used in computers, cell phones and other electronics, medical, plus jewelry and photography, and is one of the hottest commodities in the world. The worldwide price for silver is more than $13 an ounce, the highest since the metal reached $20 in 1980. Before last year, silver hadn't been in double digits since 1983. So the pricing environment is good. Absent a major worldwide economic contraction, silver pricing should remain strong.
Thus, owning shares in Silver Standard offers investors a high leverage to silver price increases, with additional exploration upside. This is a pure silver play.

Question asked on 05/24/2007 at 03:20 AM :: Comments to date: 0

Category: Stocks

SJW Corp.’s stock price sold off hard enough to attract some new interest. The stock received an upgrade from Brean Murray, an investment banking firm, which noted: “Falling from a recent high of $43 set in March 2007, the shares now stand almost 30% below that level. Volatility is nothing new to SJW Corp. shares, but the recent swing downward on an absence of negative news beyond weather is surprising. I consider SJW Corp. a solid and well-run business model…”

Dry weather forces SJW Corp. to purchase more water, instead of relying on its own supply in the Santa Cruz Mountains and elsewhere, which is more expensive. Still, SJW Corp. is not just an ordinary water utility. It has significant real estate operations, which add greatly to the value created in the business over time.

It is close to the 300 day moving average so if this is a good company then everytime it gets near the 300 DMA then buuy it for the long haul.

Question asked on 05/23/2007 at 06:25 AM :: Comments to date: 0

Category: Stocks

The street has taken the gold stocks to the wood shed.
Gold is still higher than it was 2 years ago. In 2 more years gold will be higher than today.
Nem has been beaten up and was the premier gold company.
They have some future problems of gold reserves but their proven reserves are equivalent to $200 per oz.
Therefore their stock is 1/3 the value of what it could be. Now when hedge fund managers and mutual fund managers don't buy and even sell their positions then the supply of stock is on the market driving the price down. That is when you need to buy.
Even the prime candidate of gold companies has been out of favor lately. That is GG. Keep accumulating GG and start to dabble in NEM. All for the long term.

Question asked on 05/22/2007 at 05:14 AM :: Comments to date: 0

Category: Stocks

I do believe a correction in Chinese equity markets looms right around the corner. The Chineese government is starting to tighten the interest rates to try and stop the ever increasing expansion from getting out of control. We saw the china market sneeze a few months ago and the effect it had on the world markets.
When a correction occurs occurs, many solid, fairly valued companies in China and the US will get swept up in an aggressive sell-off. My gut tells me that it may be a great time to pick up some great companies at some very good prices. Be ready to buy the bargains sometime this summer.
In the mean time I will continue to recommend some stocks to wait for and buy when they start to go up.

Question asked on 05/20/2007 at 08:51 AM :: Comments to date: 0

Category: Stocks

China’s farmland has been scaled back by almost 200%. A study released by Bloomberg yesterday shows that China had 793 million acres of farmland in 1996. And today? About 299 million acres.
So China will be buying grains to feed their people. We are gearing up for ethonal. So what does this mean long term.
ADM is one of the largest benefactors to the grain markets.
Buy ADM with a $35.00 stop.

Question asked on 05/17/2007 at 06:07 AM :: Comments to date: 0

Category: Stocks

When it comes to judging a stock’s potential, there are really just two schools of thought. They’re called fundamental analysis and technical analysis. And while successful traders often use both types of analysis, the most successful traders master one or the other.

In general, fundamental analysts concern themselves with a company itself. They dig into financial statements and balance sheets. They calculate assets vs. liabilities, sales vs. profits -- all the nitty-gritty details to find out what a company is really worth.

Fundamental analysis can be a great way to find stocks for your portfolio that you plan on holding for a long time. But just because a company looks great on paper doesn’t mean the stock market will agree. In the short term, anything can happen. And that’s where technical analysis can help. Therfore use fundamentals for long term investing not trading.

Technical analysts rarely worry about companies themselves. They’re more concerned with the company’s stock price. Using charts or other systems, a technical analyst tries to decide where a stock price is going next. Therefore once you have decided what companies are sound investments use technical indicators for entry signals.
This is a patience trying experience because when someone decides they want to buy something they want to buy it now. Buy after the market has put it on the bargain table even though the fundamentals are strong.

Question asked on 05/16/2007 at 03:33 AM :: Comments to date: 0

Category: Stocks

NYX is the worlds largest money machine.
Today I will keep it short.
They have a monopoly on the stock market especially since they just merged with the Euronext. They are also a part owner of the Japaneese market.
The trend is to go electronic trading. What cost to them is it once they have the computers in place to make your trade. The volume of trades generate the income. Trading volume is increasing every year and eventually they will start to raise their fees once they have the market consolidated.
This is a long term play and the market is consolidating NYX at the present time.
Put 10% of your portfolio into this stock. Remember scale in buy at a $2.00 level of scaling.
Even Jim Cramer has been very bullish on this stock but his timing has been wrong. He sees so much in this stock he even picked it as the pick of the year when it was trading around the $100.00 mark. See it is down now 20% and he is still bullish due to the fundamentals of the stock.
I say it is a better buy today than it was 5 months ago when Jim was pushing it at $100.00
Good Luck
Tomorrow another stock.

Question asked on 05/15/2007 at 06:00 AM :: Comments to date: 0

Category: Stocks

I am very happy that USU and HRZ have been on a tear lately.
What do you think about now that they have moved so quick and so high?
Do I sell?
Do I put a stop in?
Do I hold long term?
What do I do?
Every investor and trader ask these same questions of every trade and the mechanics are what you develop to create and learn your own style.
Investing and trading are not a mechanical computer traded system and yet there are alot of systems out there.
What everyone must do is to experiment and record what works for them. Then learn from that experience which develops your style.
Lets take an example.
HTE has been bullish lately. Do you think its chart pattern is going to keep going like USU?
Bring out your crystal ball because nobody can predict the future exactly but I can use reason and knowledge to find out a path or scenario that it could take.
HTE is a Canadian OIl Trust stock that was beaten up by the new law that passed by the Canadian government to tax the foreign holders a 45% income tax versus 15% tax. That kicked the stock iin the teeth and knocked it down.
Now this was not Enron but a government action. The government is starting to rethink their position because no one is investing in their country again.They government is now rethinking this law thus the rise. But this was a great investment back in December because it was yielding 18% and was backed by oil. So this is a solid income play that would give a yield net to the foreign investor a 10% return with the possiblility of oil going higher therefore giving higher yields. This is a pure income play not a growth play. So if your need is income or you need an income play in your portfolio then this was a stock to have picked up. In fact I recomended this same play on 1/27/07 when it was tradiing at $21.00. Now it is trading a Around the $28.00 mark. This would have given you a 33% increase in growth and a 19% yield as of today. Now there was no way I could have predicted that in January with my crystal ball but my my experience and and developed intuition said this is a good buy.
Now onto the next comparison.
Gold is still the world currency. Governments are getting more socialistic every year therefore they spend more than they take in to help take care of their people. They like to see an inflation rate of 2 to 3 % now so they can pay their debt off with long term inflated currency. This is a historical fact until that inflated currencey is re-structured.
Gold is the only common denominator between all the currencies of the world.
Therefore I am recomendiing GG.
It has been beaten down and gold has a higher relative strength than GG has had therefore GG is a bargain.
GG is the up and coming gold mining company which has the lowest cost production of all mines.
This is a long term investment which you should hold onto for a minimum of 4 more years. We re-evaluate this in 3 years on how we play this stock.
The following is a reason I chose to scale in. This is written by a professional trader and is looking for a short term trade and is bearish.

"If a boat is not being kept afloat by the water, it's probably one you want to avoid. That's what I'm seeing in Goldcorp now.
The weekly chart below shows a stock that has been cut in half since mid-2006. The stock peaked in a rush of enthusiasm and promptly sold off to establish support. Let's take a look at the chart.
A year ago, the bulls pushed the stock up above $40 on heavy volume. But a couple of weeks later, the sails became tattered, and Goldcorp wound up dropping to $20 a share.
After that selloff, the bulls pushed the stock back up to around $30, which marked a 50% advance in price and a 50% retracement of the decline. Pretty symmetrical, huh?
A Fibonacci retracement comes to mind, but that's a bit outside the scope of this trade idea. But since the stock's retracement to $30, Goldcorp has been gradually moving lower and the advantage is with the bears.
I like the risk/reward profile on this stock because the short interest is quite low, with less than two days to cover. (Days to cover equals the number of shares sold short divided by average daily trading volume.)

This trader is looking to short the stock for a move to $20.00 fromt he $24.50 mark.
I am looking to buy this stock with a double.
Don't buy it all now, buy some now and buy some more $.50 lower and $.50 higher.
This is called scaling in which doesn't sink you when the market takes a hit. Keep scaling in every $.50 until you have 10% of your portfolio covered.
Tomorrow we continue.

Question asked on 05/14/2007 at 06:09 AM :: Comments to date: 0

Category: Stocks

We are at the beginning of a new American reurgence of the economy.
How does that fit with what people are seeing today, all negative in the newspapers.
Stock market starting to crash, record trade deficits, high gas and oil prices, war, and political uneasiness.
The news media makes money by selling catastrophies not good news, therefore they only broadcast the worst and when there is no castrophies they go to the next level of bad news and try to make it look real bad.

Now don't pay attention to bad news, look for the trends of what is good so you can make money.
The last 5 years the way to make money is to own natural resource and infrastructure stocks.
That is the beginning of the next wave or cycle of growth.
Sure there will be dips on the way but America is redefining itself in the world of economics and leadership to become part of the flat world.
I will continue this Monday.

Question asked on 05/11/2007 at 06:39 AM :: Comments to date: 0

Category: Stocks

I like WTM it has great value and is for the big money.

Question asked on 05/09/2007 at 01:47 PM :: Comments to date: 0

Category: Stocks

I like drilling stocks. Buy on dips BRNC. Today is a good dip. Still a long term value play.

Question asked on 05/08/2007 at 06:40 AM :: Comments to date: 0

Category: Stocks

I really like that USU, Buy on pull backs.

Question asked on 05/07/2007 at 04:38 PM :: Comments to date: 0

Category: Stocks

People fear what they don't understand...and most people living in foreign lands fear what we bring to the table.
So do you think one person in Asia feels comfortable placing their money in an institution called “Bank of America?”
The same logic can be used for most Americans. Do you think Johnny Smith from Topeka, Kansas would ever place the proceeds of his latest corn crop in the Bank of China?
Asia is creating personal wealth on a level that the world has never seen, and that money has to go somewhere. It will go into the banks of which 99% of Americans have never heard…names like HSBC, Standard Chartered and DBS.
Big American names like Citigroup, JP Morgan and Wachovia know this. Their strategy will be to take large equity stakes in their Southeast Asian counterparts. I think that’s a good strategy.

And over the long-term, you’ll probably see the Asian banking community consolidate in a similar manner that the U.S. commercial banks did.

I think there are alot of Southeast Asian banks poised for real long-term growth. As Christopher Browne points out: “The average person views banks as stodgy, old economy relics…but what would we do without ATMs, debit cards or credit cards?”

Question asked on 05/06/2007 at 06:08 AM :: Comments to date: 0

Category: Stocks

As I’ve often written, whenever you hear another ridiculous argument for why “it’s different this time,” it pays to listen to voices like those of Dr. John Hussman, portfolio manager of the Hussman Funds. Rather than just making up whatever case conveniently justifies a happy conclusion, he frames the debate from his unique, statistically rigorous perspective.

In today’s weekly market comment, Hussman shreds the laughable arguments that attempt to justify a continued, broad-based bull run. He concludes:

“This will end badly. In recent weeks, we’ve started to observe what people used to call ‘shooters’ back in the ’60s and ’70s -- stocks that rise by 30-40% or more in a single day. That sort of action is characteristic of a speculative blowoff. The difficulty is that such blowoffs can continue over the short term, but also tend to end abruptly. I have no strong view about the very short term, except that we’re observing an instance of fairly extreme overvalued, overbought, overbullish conditions, which have typically been followed by deep and abrupt losses (but usually only after some period of short-term continuation in the range of 1-3%).”

In my favorite section of Hussman’s piece, he deals with the common misperception that earnings equal dividends. Remain cautious and very picky about the stocks you own.

Question asked on 05/05/2007 at 06:46 AM :: Comments to date: 0

Category: Stocks

I lookrd at the blog site and the numbers didn't come out in a good orderly faashion for anyone to make heads or tails. Therefore I am listing the results again for clarity.

4/12/2007 Profit
Date Rec Symbol Price Rec'd Current $ % Increase
10/29/2006 AOB China Pharm $7.20 $9.69 34.6%
6/26/2006 STKL Energy $9.07 $12.46 37.4%
11/13/2006 PICO Water $32.02 $44.32 38.4%
10/29/2006 TALX Tech $24.26 $33.74 39.1%
1/6/2007 CNX Gas $30.12 $42.53 41.2%
1/23/2007 NOV Oil Drillers $58.63 $83.06 41.7%
1/23/2007 GRP Oil Drillers $37.22 $54.22 45.7%
12/7/2006 LPSN Tech $4.65 $7.38 58.7%
10/3/2006 USU Uranium $9.50 $18.90 98.9%
6/12/2006 HRZ Shipping $14.50 $33.19 128.9%
Average Increase 56.5%

164.5 average days held to the 12th
4/18/2007
3/26/2007 CDE Silver 4.3 4.15 -3.5%
3/26/2007 SSRI Silver 34.5 39.06 13.2%
3/26/2007 PAAS Silver 30.02 31.62 5.3%
3/26/2007 SIL Silver 13.9 14.79 6.4%

If you had purchased 100 shares of each from above you would have had a 56.5% profit as of the 4/12/07 date.
This is on an average holding periiod of 1/2 of a year. Now we have had a favorable market. Also notice the type of stocks that made it big. All but 2 were in the arena that is suppling China and the expanding countries, with natural resources. The 2 tech stocks were niche and small. No large cap like a dow or S&P stock are listed.
In fact the most numerous of gainers are still in energy related industries. This is even after Oil supposedly has peaked.
You now say its easy to list your winners how have your total recommendations done? Tallying all of them on an annualized basis they are up 38.5% vs the S&P which is up about 12% for the year.
My hypothesis is that natural resource stocks have been in such a funk since 1980 that they will last in a bull untill 2010. Selectively we must be ready for the next wave up for the hard asset stocks to move.
I still say that Silver and gold have the greatest potential. Which brings me up to my greatest dissappointment of recomendations.
Look at the last table I have posted and from my 3/26.07 blog I stated that CDE was a disappointment and how I would handle it. Right now If you haven't exited CDE hang on to it with a $4.00 stop. I still believe silver will be the largest mover of all metals over the next 3 years and CDE will benefit.
I also would recomend entering one of the 3 stocks above which since 3/26/07 have gone up nicely. The promise of silver going up is true I just hung my hat on the wrong stock. Add to your positions in silver and gold.
A double play on that is GG - Goldcorp. They have alot of Gold and also mine silver.
GG has not started to climb yet but is the premier mining stock or the best of the breed.
Buy GG Today at $24 range and watch it double next year.

Question asked on 05/03/2007 at 06:20 AM :: Comments to date: 0

Category: Stocks

Dr. Bakhtiari continues on a profound pathway.
“In 'Post Peak,’ all of our systems of habits are in mortal danger. Due to the relative cheapness of crude oil (in relation to other, more expensive daily needs), people don't exactly realize the pivotal role played by its products in their daily routines -- as these products have invaded every nook and cranny of our modern life. It is only when the brakes will be pulled (as they inevitably will have to be) that the general public will come to gradually realize the critical importance of 'black gold’ -- which currently provides no less than two-fifths of world energy -- and of ‘energy’ in general in their living habits.

“Thus, at present, the global masses seem totally unprepared for the two shocks which will inevitably occur in 'Post Peak.’ On the one hand, no major institution or medium is willing to inform them seriously on the not-so-palatable consequences of 'Post Peak’; and, on other hand, specialized institutions (such as the International Energy Agency [IEA], the Energy Information Administration [EIA] and OPEC) as well as some major energy consultancies (e.g., the Cambridge Energy Research Associates and the Edinburgh-based Wood Mackenzie research outfit) will go on denying 'Peak Oil’ by issuing rosy future oil output predictions.

“So that the twin shocks are now inevitable on a global scale, as there is no time left to prepare public opinion for 'Post Peak’ sequels. The shocks will first surprise, then jilt, and finally entangle swaths of people worldwide. Those better prepared will be less inclined to react in a disorderly way and panic when the shocking truth will be unveiled.”

Question asked on 04/30/2007 at 04:38 AM :: Comments to date: 0

Category: Stocks

Dr. Bakhtiari delves into the state of preparation of major nations and populations for what is about to ensue and concludes as follows:

“In the large majority of countries, no one has prepared (or wanted to prepare) the general public to the historical 'Peak Oil’ event and to its momentous consequence in their daily lives. Thus, most probably, the popular masses will be directly exposed to two main types of shock:

A material shock;
A psychological shock.
“Due to the benign decline gradient in crude oil production during the early 'Post Peak’ period -- only 3 mb/d over the first transition period spanning 2007-2010 -- the material shock will not pose insoluble problems and accommodation will prove possible with minimal gradual pain. Moreover, sizeable amounts of wastage in most developed societies will provide a welcome cushion for the initial cuts to be made.

“Not so for the psychological shock. This shock, in stark contrast, will be electric and abrupt. Stress, fear, depression, despairs, and nightmares will be the order of the day -- as people come to face the not-so-palatable facets of 'Post Peak.’ When confronted with this series of unknowns, with the trauma of change, people will try to protect themselves by automatically reverting to their past, to the known, to what they believe to be "real and true" -- in a word, to their reassuring 'roots'”

Question asked on 04/29/2007 at 04:34 AM :: Comments to date: 0

Category: commodities

Dr. Bakhtiari has this to say about both the future, as well as the nature of mankind:

“Peak Oil', however, is now in the past, and we are presently left facing the 'Post Peak’ era. There is little doubt that in this brand-new period, massive changes are bound to occur. The usage of relatively cheap crude oil has invaded every nook and cranny of our modern world economy -- sometimes without the wasteful invasion being fully realized. Moreover, the ubiquitous oil products have created addictions (especially in the transport sector) which will be extremely difficult to uproot. And not only is the addiction to motorcars common throughout the developed world, it has also begun making deep inroads in China, Russia, and even India: a very dangerous development, indeed, because as American physician and poet Oliver Wendell Holmes [1809-1894] judiciously remarked:

‘Man's mind, once stretched by a new idea, never regains its original dimensions’”

Question asked on 04/28/2007 at 04:32 AM :: Comments to date: 0

Category: Stocks

I have a hard time distinguishing with my readers what they are really trying to accomplish.
Invest or trade. Nobody likes to lose mmoney. Therefore you have to trade or invest to suit your make-up. What can you live with and go to sleep at night without losing sleep if something happens on a bad day.
A bad day, week, month or year will always happen to someone somewhere.
I like to say invest for the long term and wait for the smoke to clear and you will be on the train to profits.
Then you have to protect your profits. So use trailing stops so that you can ride the train as far as you can.

Question asked on 04/26/2007 at 04:22 AM :: Comments to date: 0

Category: commodities

According to Dr. Bakhtiari, the world has now reached and passed the point of Peak Oil. Bakhtiari has recently published an essay entitled “The Century of Roots.” Bakhtiari has reviewed the available evidence on world oil production and believes that world output peaked absolutely in 2006. Here is what he is saying:

“After some 147 years of almost uninterrupted supply growth to a record output of some 81-82 million barrels/day [mb/d] in the summer of 2006, crude oil production has since entered its irreversible decline. This exceptional reversal alters the energy supply equation upon which life on our planet is based. It will come to place pressure upon the use of all other sources of energy -- be it natural gas, coal, nuclear power, and all types of sundry renewables, especially biofuels. It will eventually come to affect everything else under the sun.”

“Everything else under the sun”? That sounds like quite a lot, but Dr. Bakhtiari has done his background work, to include reviewing numerous models for oil extraction on a worldwide basis. In a paper delivered to an oil conference in Italy in March 2007, he concluded that in 2006, overall depletion subtracted about 3.5 mb/d of oil extraction from the daily global total of oil output (plus or minus 10%), and that a maximum of 2.5 mb/d of “new” oil production came on line, which includes new and expanded oil fields, as well as new projects in the Canadian tar sands areas. Thus, according to Bakhtiari, in 2006, depletion was greater, by more than 1 mb/d, than new discoveries and reserve growth, including oil produced from unconventional sources such as the tar sands.

Dr. Bakhtiari’s conclusion, presented to the Italian conference in March, was that “the peak of global oil production has been reached.” Bakhtiari now sees the world entering a phase of irreversible decline in daily oil output, moving down from the current 82mb/d toward daily oil extraction of only 55 mb/d by the year 2020.

If any of you have seen Al Gores global warming he presented data that showed exponential populatiion growth where all natural resources are now in the midst of being consumed by the populations of the earth. I am not predicting doomsday I am showing what the laws of supply and demand are going to do in the future long term in the markets.
Even oil companies are going to have a hard time because there won't be as much new oil coming on stream to replenish what is beiing consumed.

Question asked on 04/25/2007 at 04:14 AM :: Comments to date: 0

Category: Stocks

Since so many investors look to investment advisers, whom they often call “gurus”, for guidance on the future of the markets, I think it is appropriate to remind my readers of these words of Lao Tzu (the sixth-century Chinese sage):
“Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”
I try to get a feel on a historical basis and try to set a game plan for the direction of the market.
If the market goes differently from my predictions I have to change my game plan to get the feel of the market.
The object is to get in a rythym or get to feel the beat of the market.
Is that predicting? Its like hearing a song and knowing what the next words are, or the next notes are.
History repeats itself but not always exactly. So getting the feel is important.

Continued:

The answer to: "Market Predictions (4/21/07)"

Question asked on 04/21/2007 at 04:38 AM :: Comments to date: 0

Category: Stocks

I am going to try to show some of the trades we have talked about and show how you can do this by just reading and doing. The mutual fund industry is there to collect fees and try to beat the S&P.
95% of all Mutual Funds do not beat the S&P. Maybe you are in some of those funds.
No one cares about your money more than you do so why not win or lose it by your own management of your own money.
The internet supplies enough resources and cheap commissions that you can save your self some money.
I am listing the best of my recommendations and then my biggest disappointment and how I am handling the disappointment.

4/12/2007 Profit 100 Shares
Date Rec Symbol Price Rec'd Current $ % Increase If Bought Current Value
10/29/2006 AOB China Pharm $7.20 $9.69 34.6% $720 $969
6/26/2006 STKL Energy $9.07 $12.46 37.4% $907 $1,246
11/13/2006 PICO Water $32.02 $44.32 38.4% $3,202 $4,432
10/29/2006 TALX Tech $24.26 $33.74 39.1% $2,426 $3,374
1/6/2007 CNX Gas $30.12 $42.53 41.2% $3,012 $4,253
1/23/2007 NOV Oil Drillers $58.63 $83.06 41.7% $5,863 $8,306
1/23/2007 GRP Oil Drillers $37.22 $54.22 45.7% $3,722 $5,422
12/7/2006 LPSN Tech $4.65 $7.38 58.7% $465 $738
10/3/2006 USU Uranium $9.50 $18.90 98.9% $950 $1,890
6/12/2006 HRZ Shipping $14.50 $33.19 128.9% $1,450 $3,319
Average Increase 56.5% $22,717 $33,949
Profit $11,232
164.5 average days held to the 12th
4/18/2007
3/26/2007 CDE Silver 4.3 4.15 -3.5%
3/26/2007 SSRI Silver 34.5 39.06 13.2%
3/26/2007 PAAS Silver 30.02 31.62 5.3%
3/26/2007 SIL Silver 13.9 14.79 6.4%

If you had purchased 100 shares of each shares above you would have had a 56.5% profit as of the 4/12/07 date.
This is on an average holding periiod of 1/2 of a year. Now we have had a favorable market. Also notice the type of stocks that made it big. All but 2 were in the arena that is suppling China and the expanding countries, with natural resources. The 2 tech stocks were niche and small. No large cap like a dow or S&P stock are listed.
In fact the most numerous of gainers are still in energy related industries. This is even after Oil supposedly has peaked.
You now say its easy to list your winners how have your total recommendations done? Tallying all of them on an annualized basis they are up 38.5% vs the S&P which is up about 12% for the year.
My hypothesis is that natural resource stocks have been in such a funk since 1980 that they will last in a bull untill 2010. Selectively we must be ready for the next wave up for the hard asset stocks to move.
I still say that it is Silver and gold which brings me up to my greatest dissappointment of recomendations.
Look at the last table I have posted and from my 3/26.07 blog I stated that CDE was a disappointment and how I would handle it. Right now If you haven't exited CDE hang on to it with a $4.00 stop. I still belive silver will be the largest mover of all metals over the next 3 years and CDE will benefit.
I also would recomend entering one of the 3 stocks above which since 3/26/07 have gone up nicely. The promise of silver going up is true I just hung my hat on the wrong stock. Add to your positions in silver and gold.
A double play on that is GG - Goldcorp. They have alot of Gold and also mine silver.
GG has not started to climb yet but is the premier mining stock or the best of the breed.
Buy GG Today at $26.60 and watch it double next year.
I also recommended at 25.80 on the 4/8/07 blog.

Question asked on 04/19/2007 at 02:46 AM :: Comments to date: 0

Category: Stocks

On Sunday I showed you how Warren Buffet has started to buy into the Railroads because he feels that it is time to invest in the system. He buys value and the mundane and the railroads have consolidated to the point of no more consolidation but potential expansion due to the amount of goods being exported and imported. Even trucking is using railroads more.
Now I promised that I would share the next level to start thinking about.
Railroads are one way ships and trucks are another.
We have recomended HRZ last year and have over a 100% return now.
I feel that a consolidation phase in one of the best run trucking companies is about over and transportation has been the new area of investment.
Landstar is LSTR is almost in a breakout to new highs after trading sideways for a year. I feel it is time to buy into this stock for the long Haul at $48.00 and in 3 years you should see $90.00.

Question asked on 04/18/2007 at 07:26 AM :: Comments to date: 0

Category: Stocks

On Monday, Berkshire Hathaway Inc. disclosed its 10.9% stake in Burlington Northern Santa Fe (BNI: NYSE) worth $3.4 billion. To no one’s surprise, investors around the globe jumped on the Buffett express. Burlington’s share price rose 6.5% on the announcement.

And Buffett didn’t stop there. Berkshire confirmed it has also acquired stakes in two of the three remaining North American railroads: Union Pacific (UNP: NYSE), CSX (CSX: NYSE) and Norfolk Southern (NSC: NYSE).
No one really knows why Buffett fell in love with railroads all of the sudden. Burlington certainly carries Buffett-like characteristics: Consistent earnings growth (22% annualized over 5 years), impressive margins and limited competition.

But none of the railroads typify your typical Benjamin Graham value play. The stock trades for more than three times book with limited liquidity and tangible debt.

So what was Buffett thinking? It’s anyone’s guess. But the prevailing consensus believes globalization…specifically, moving the major staples of trade -- things like coal, oil, cars, and clothes…in other words, basic commodities and finished goods -- from producer to consumer is the long-term trend at play here.

It was about this time in 2002 that a rebirth in the tangible assets sector really began. Much of that growth can be directly attributed to the insatiable demand for raw materials that the developing giants known as China and India are now consuming.

These countries are still in the early stages of development. It takes about 30 years to go from an agrarian society to an industrial one. China is about one-third of the way there. China will continue to import commodities to sustain this enormous transition. India will do the same.

Furthermore, the golden era of stocks (1982-2000) directed capital in about every investing avenue except natural resources and raw materials. Hence, limited demand caused a decrease in available supply.

Now the entire world can’t get enough copper, zinc, lumber and oil. But bringing on new production takes time. Supply can’t catch up with demand overnight. In fact, it’s going to take quite some time, especially when you throw in the consumption potential of India and China (37% of the world’s population) to the mix. Consequently, commodities (the market for the essentials) will remain tight for the foreseeable future.

And commodity consumption won’t be limited to emerging markets alone. Let’s not forget… The United States has begun to embrace alternative energy. And the two greatest oil alternatives, coal and corn, are shipped by train.

So transport stocks like Burlington certainly play into this long-term trend. And considering rising fuel prices affect trucks more than trains, this idea begins to make more and more sense.

But many feel it’s too late. Many believe the upside is already priced in. Well, that may be true, but ride Warren's coattails if you like.

Wednesday I will take you to the undiscovered next area of Investment that Warren will go into next. You can get in before the crowd makes it too crowded.

Question asked on 04/15/2007 at 01:51 AM :: Comments to date: 0

Category: Stocks

Statistics and information is everywhere. You can find anything to justify your opinion on the market.
What you have to do is get the feel of the trend or find the stock that is good for a ride and jump on board.
I am going to list a few stats for the bear case but the market is near its peak again. So you tell me what is the market going to do now.

In spite of Bernanke's claims that problems in housing are "well contained," most of the evidence appears to be contrary.

State Tax Revenues Slump
In “Housing Slump Pinches States in Pocketbook,” The New York Times is reporting on tax shortfalls:
In Florida, tax revenue is “projected to drop this year for the first time since the energy crisis of the 1970s”
“New Jersey could face a $2.5 billion shortfall by mid-2008,” according to Gov. Jon S. Corzine, and “may lease its turnpike or its lottery to a private company to raise money”
In California, “income tax receipts in January were $1 billion less than forecast”
“Maryland’s real estate transfer tax revenue has tumbled by 22% this fiscal year”
“Connecticut’s real estate transfer tax revenue, which state budget analysts predicted would fall by 3.6%, is down by 13.3% so far.”
“‘It’s the year of the housing hangover,’ said Sean M. Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.”
MarketWatch is reporting, “Lower earnings could cut into capital spending, hiring”:

“U.S. corporate profits fell in the fourth quarter of 2006, signaling the end of one of the greatest profit cycles in postwar era, economists say.

“Economic growth is slowing, hurting corporations' top line. Meanwhile, costs are rising, squeezing profit margins.

“‘Profits growth has turned decisively down, and the end is not yet in sight,’ wrote Gabriel Stein, an economist for Lombard Street Research.

“‘As the expansion matures and unit labor costs rise, profit margins will be under pressure,’ said Stephen Stanley, chief economist for RBS Greenwich Capital…

“‘The deceleration of profits may be dramatic,’ wrote Mickey Levy, chief economist for Bank of America, in a research note. ‘If so, weaker profit growth may affect business hiring and capital spending decisions, and will likely influence financial markets.’

“‘Weaker profits may undercut any rebound in capital spending,’ Levy said.”

Pink Slips Litter Loan Industry

The Chicago Tribune is reporting, “Turmoil in the subprime mortgage sector hits some workers as hard as borrowers”:

“The tumult in the subprime mortgage sector has hit some of the industry's employees as hard as its borrowers.

“Nationwide, job losses in the category that includes mortgage lending, real estate, and construction climbed 346% in the first quarter, to 21,245 from 4,764 in the same period last year, according to outplacement firm Challenger, Gray & Christmas Inc.

“‘It's a whole sector of the economy that's leaking,’ Chief Executive John A. Challenger said.

“In California, the 3,679 mortgage industry jobs lost in the quarter pales compared with the 70,000 construction jobs that economists figure could disappear over the next two years. When considered individually, though, the loss of a higher-paying white-collar position can be more significant for the economy.

“‘Each one of these finance jobs is worth at least two construction jobs,’ said Ryan Ratcliff, an economist with UCLA's Anderson School of Business.

“Added Esmael Adibi, director of the Center for Economic Research at Chapman University in Orange: ‘The ripple effect is significant.’

“The layoff wave began about a year ago, when Ameriquest Mortgage Co. fired one-third of its employees. In December, Ownit unloaded 800 workers. Last month, the Orange-based parent of Ameriquest Mortgage and Argent Mortgage Co. announced major layoffs, as did Fremont General Corp. of Santa Monica. General Electric Co.'s WMC mortgage unit, a major player in the subprime business, said it would snip 20% of its payroll.

“‘We went on a big real estate bender,’ Ratcliff said. ‘And this is sort of the beginning of the hangover.’

“Shelly Dusing of Aliso Viejo, who lost her $48,000-a-year job at Ameriquest last month, said she would not return to the industry. In fact, she said she would work ‘anywhere but’ because mortgage lending was too volatile, ‘whether you're prime or subprime.’

“For Dusing, who's nearly eight months pregnant, the situation at Ameriquest became so tense that getting fired was a relief.

“‘You go to work every day and you don't know if you're going to have a job or not. You don't know if your badge is going to open the door,’ she said. ‘We knew bad things were coming and it was just a matter of time’”…

Continued:

The answer to: "Statistics for the Bear (4/12/07)"

Question asked on 04/12/2007 at 05:13 AM :: Comments to date: 0

Category: Stocks

I am posting 11/1/06 post and will update you today.

USU - Review 10/21/06 and 10/3/06 Blogs. It was trading $11.30 on Tuesday. We recomennded this at $9.50 0n 10/3/06. So far in one month you should have a 18% gain.
I found out that it eliminated its dividend back in the spring so that they could fund growth which means it is going to compound its growth factor for the future. They are building new factories which will help to meet the demand for the new power plants coming on stream in the world. This will also allow them to keep being the #1 supplier in the world. Now is the time to buy in on any dips. Keep accumulating on dips, in 3 to 5 years you will triple your money.

Now USU is trading at 17.53 on the 5th of April and that is a 84% increase in 7 months.
Above I stated it would triple in 3 to 5 years well I am getting more optomistic that you could get it sooner.
Hang in there it will come.

Today update at 12:45 PM it's trading at 18.63 what a surprise up 95% in 7 months keep hanging on to this stock.

Question asked on 04/09/2007 at 06:45 AM :: Comments to date: 0

Category: Stocks

GG- Goldcorp at 25.80 is one of the lowest cost producers of gold in the world and has increased it capacities in the last year by acquisitions.
Gold stocks have been in a sidways to down pattern for the past year and are digesting the initial run up in prices.
Gold itself has kept coming back but the stocks haven't. I belive the time is now to start reinvesting in metal stocks if you have been waitng.

Question asked on 04/08/2007 at 06:30 AM :: Comments to date: 0

Category: Stocks

(ANST:NASDAQ), Trading at $32.10 is a leader in electronic design automation (EDA) software.
This is a best of breed stock and is a keeper.

Ansoft has been growing its revenue at 13.1% on average annually for the last 10 years. And for the last 12 months, sales have reached record annual levels. This is a software company, so gross margins are stratospheric -- around 97.5%. More relevant, however, it’s been consistently free cash flow positive since 2003.

I think this record growth will continue.

Intel -- an Ansoft customer -- for example, has made a lot of its future agenda public. It forecasts that cutting-edge dual-core laptops will dominate its notebook sales in the near future. Not only that, they’ll do so using as much as 10 times less power. Desktop computers could be outmoded by laptops of equal or greater power. This is fertile ground for EDA software to be entrenched in this design and development.

In wireless communications, cell phones will continue to evolve rapidly to utilize the extra bandwidth afforded by third-generation networks. You’re seeing it already. Your last cell phone probably wasn’t able to play full-motion video, but the one you just bought can play cellular versions of Lost and 24. Innovation like this drives EDA sales.

Question asked on 04/07/2007 at 06:18 AM :: Comments to date: 0

Category: Stocks

People have asked me about pink sheet stocks.
In my day I used to take a flier on a couple of pink sheet stocks or penny stocks just to think I could find the next Microsoft. I still haven't found it. I haven't tried in the past 10 years because it is like hitting the lottery.
Lessons learned in life. People do make money in penny stocks but they specialize in this and are the ones selling the stocks.
A little education on penny stocks and something new where the pink sheets will have some credibility.

A major concern with investing in stocks listed on the Pink Sheets is accidentally stumbling onto an illegitimate company that could instantaneously drop 50%, 75% or even 100%.

It happens all the time on this thinly regulated exchange. The Pinks are crawling with pump-and-dump penny stocks and even sub-penny shell companies that do nothing more than issue periodic press releases and more shares of worthless stock. There are always new investors to scam, and new press releases with new business plans to push. Crooked companies flock to this exchange, all too eager to fleece unsuspecting investors of their hard-earned money.

And then there’s the scarcity of information available to investors on many of these companies. You see, the Pink Sheets is not an exchange like the NASDAQ or AMEX -- it’s only a quotation service. The only requirement a company faces on the Pinks is that it must have at least one market maker quoting its stock. Financials do not need to be disclosed. Even on the OTCBB, companies are required to keep current filings with the Securities and Exchange Commission.

These hurdles can make the information gathering process for Pink Sheet investors very frustrating. But there is a very small group of stocks on the Pink Sheets that every small-cap investor should know about. If you’re looking to invest in Pink Sheet securities instead of making quick trades on momentum, this is the place you should look.

It’s a new premium listing service on the Pinks called OTCQX. The new listing service includes three different levels, each with specific requirements for the companies.

The top tier is called PremierQX. These are securities that trade for a minimum of $1 and meet all of the requirements to be listed on a national stock exchange. This means the companies are required to post quarterly and annual reports, and also interim information that could affect share prices.

PrimeQX stocks must also meet the requirements to be listed on a major exchange. However, the stocks listed in this group do not have to trade for the $1 minimum. International OTCQX stocks must meet requirements of their foreign exchange and make their reports available in English.

All three groups require the companies to maintain ongoing operations (this helps keep those pesky shell companies out of the picture). Together, these three lists make up the safest investments on the Pinks. It’s a great place to start looking if you’ve never invested in these types of companies before.
Continued:

The answer to: "Pink Sheet Stocks (4/5/06)"

Question asked on 04/05/2007 at 06:31 AM :: Comments to date: 0

Category: Stocks

Value investing is a very slow and tedious wait.
Value stocks do not move fast unless someone buys them out.
That usually doesn't happen because it is a very dull capital intensive company that has a lot of capital equipment and is not glamourous. The company just plods along and keeps making money and people get tired of watching the paint dry.
That is a perfect type of stock to own because that stock you buy and put away and look at it's price once a year.

Monarch Cement is such a company and has been beaten up with the subprime lenders broom.
Look at the 5 year chart and see that the $30 level is the bottom support level.
Why not buy a few hundred shares and put them away and don't look at them untill you need the money?

Question asked on 04/02/2007 at 06:58 AM :: Comments to date: 0

Category: Stocks

A new stock on the market is Sprectra Energy. I feel the bottom has been set and is ready to be promoted.
SE is the symbol and is trading at $26.27. It is in the gas distribution category. I know I am in the bear mode right now but the only long term stocks to own now are the natural resource and energy stock. They will contininue in their own bull market untill 2010.
Now you ask how come there are different markets? Everyone remembers the dotcom high tech frenzy.
Did the resource stocks participate then, no.
So now the techs haven't participated but the resource stocks have and they will continue to grow.
The growing populations and the new economies of the world are building a new infrastructure that require emense capital involved in construction. The depleted resource stocks are just getting started in charging for the lack of supply.
This will cause inflation which the stock market does not like which is why I say the market has peaked for the second time, 2000 being the highest and 2007 being the second highest.

Question asked on 04/01/2007 at 06:05 AM :: Comments to date: 0

Category: Stocks

A new stock on the market is Sprectra Energy. I feel the bottom has been set and is ready to be promoted.
SE is the symbol and is trading at $26.27. It is in the gas distribution category. I know I am in the bear mode right now but the only long term stocks to own now are the natural resource and energy stock. They will contininue in their own bull market untill 2010.
Now you ask how come there are different markets? Everyone remembers the dotcom high tech frenzy.
Did the resource stocks participate then, no.
So now the techs haven't participated but the resource stocks have and they will continue to grow.
The growing populations and the new economies of the world are building a new infrastructure that require emense capital involved in construction. The depleted resource stocks are just getting started in charging for the lack of supply.
This will cause inflation which the stock market does not like which is why I say the market has peaked for the second time, 2000 being the highest and 2007 being the second highest.

Question asked on 04/01/2007 at 06:05 AM :: Comments to date: 0

Category: Business

Here’s a suggestion to Mr. Icahn: Why not consider targeting one of the many cheap offshore drillers? Most have already booked up their rigs for a few years under long-term contracts at very attractive dayrates. These contracts provide very visible cash flows, so perhaps a recapitalization is in order?

You have a business for which the underlying assets are increasing in value, not deflating. State-of-the-art drilling equipment has not yet succumbed to the global deflationary pressures we see in businesses like cell phone and chip manufacturing. Cell phone manufacturing capacity is overbuilt yet still receives more and more capital investment worldwide -- good for consumers, bad for producers. But offshore drillers emerged out of a 20-year recession just a few years ago.
Continued:
Furthermore, while earnings visibility is very low at most technology companies, several offshore drillers know the next few years of earnings with a fair degree of confidence. To top it off, they’ll have very valuable rig fleets at the end of the high-visibility period. Who knows what the cell phone industry will look like?

Technology businesses are not considered as “capital intensive” as drillers, but in my view, the ever-present challenge of technology obsolescence more than offsets this. Carl Icahn’s efforts may pay off for shareholders in 2007, but they will magnify, or leverage, the shrinking shareholder base (shrinking due to share buybacks) to the downside of technology’s creative destruction.

Examining the Effects of GlobalSantaFe’s Cash Flow on Its Balance Sheet

When you buy a stock, you are essentially buying a claim on the company’s assets and the cash that those assets generate when they are put to productive use. If you look at the assets on a balance sheet from the bottom up, you see that the least liquid assets are toward the bottom and the most liquid assets are closer to the top. Management’s top job is to extract as much value out of these assets as possible, gradually converting them to cash over long periods of time:

The answer to: "Private Equity V (3/28/07)"

Question asked on 03/28/2007 at 06:12 AM :: Comments to date: 0

Category: Business

Let's see what the capital structure of two well-known companies -- cell phone maker Motorola and offshore driller GlobalSantaFe -- and why private equity and merger activity is likely to continue bidding up drillers.

Most private equity deals seek to optimize the target company’s capital structure, or the appropriate mix of debt and equity claims.

Debt holders have a priority claim on the company’s assets, while equity holders have a residual claim. If things go wrong, debt holders are first in line at bankruptcy court, but their exposure to the good times is basically limited to a fixed stream of payments. Equity holders are left with nothing if the company a) goes bankrupt and b) there’s nothing left after creditors liquidate what’s left of the assets in an attempt to recoup as much of their principal as possible. But equity holders enjoy all the extra cash flow when business is booming.

When used appropriately, debt, or “leverage,” can greatly enhance shareholder returns. Private equity, aka “leveraged buyout,” funds generally look for businesses with solid competitive positions that consistently generate cash. Private equity deals are heating up into a craze because the supply of cheap credit appears to have no limit (until all of a sudden, everyone discovers that there is, in fact, a limit).

Continued;

The answer to: "Private Equity IV (3/27/07)"

Question asked on 03/27/2007 at 06:05 AM :: Comments to date: 0

Category: Stocks

I am a little disappointed in the CDE management.
I found out that they did not get their permits to operate renewed in Alaska which shut down one of their mines.
Now do they get their act together or not that is to be seen.
The damage has been done to the stock unless they never get the mines open again.
I am still Bullish on the metals.
Instead of selling the stock at these levels put a stop right at the lows of the move.
If it starts to move up take 50% of the move and create a trailing stop.
This is damage control.
Find another stock to move into either a junior or large.
Junoirs - HL , GSS, IAG, HMY
Gold - AUY, GG, AAUK, ABX, ASA, AU, AEM
Silver - SSRI, PAAS, SIL
Mixed - FCX, AA, NXG,

Question asked on 03/26/2007 at 09:01 AM :: Comments to date: 0

Category: Stocks

The U.S. electric power sector will require about $800 billion of new investment by 2020. By way of comparison, the current net book value of the U.S. power sector is about $700 billion. So right away, the analytical mind can figure out that it will require significant outside investment to keep the lights on in the U.S. over the next 15 years. Much of that new investment will probably come from PE.

Private Equity and Energy Investment

One large deal that is in the news is the proposed, $45 billion-plus takeover of the Texas utility TXU by a group composed of PE players KKR and Texas Pacific Group. The PE players want to take TXU private, and run the power houses and distribution channels themselves. The interesting angle of the takeover is an “environmental” play, as well as a financial offer for the stock. That is, the PE group is promising to cancel up to eight proposed pulverized-coal power plants that TXU has previously announced its intent to build. By changing TXU’s management and strategic direction, the proposed PE takeover will focus on using a mixture of conservation methods and new, more “green” generating capacity, to lower the impact of TXU power-generating activities on the environment in general and the atmosphere in particular. Will it work? I suppose that anything can work, if the management and funding are present. And anything can fail to work, where the will, ways, and means are lacking.

Energy Trends

The point to keep in mind is that PE is recognizing some ominous energy trends in the U.S., and beginning to do what smart money often does best, which is to take advantage of the situation. That is, some really big money is now stepping up to the plate. Here is a summary of what is going on.

Continued

The answer to: "Private Equity III (3/24/07)"

Question asked on 03/24/2007 at 06:19 AM :: Comments to date: 0

Category: Stocks

Lately drilling stocks have taken it on the chin.
But some drillers see their business as an oversold situation on wall street.
That's why Haliburton spun off KBR, and they still got punished in the price.
Another driller to look at is Hercules where the management is so confident that drilling stocks are a bargain that they’ve decided to take on a “Hercules”-sized risk. Management is heavily diluting existing shareholders and stretching its balance sheet in order to finance the deal. Hercules has only 32 million shares outstanding, yet it’s offering 57 million of it shares and $930 million in cash (via new debt) to acquire Todco, a company more than twice its size in terms of market value.

This deal is the last thing Hercules management would do if they were expecting a return to the 1990s’ drilling depression. They are essentially risking their jobs and a lot of their net worth that the drilling environment in the Gulf will remain somewhat robust. Hercules owns 64 lift boats and nine jackup rigs, so drilling is only a small part of its existing business, which mostly involves supporting drilling operations.

Todco is a second-tier driller and has been priced in the market as such. Its rig fleet is old and fairly obsolete. Yet its stock was so cheap that the entire company arguably traded for a discount to the liquidation value of its fleet.
This leads to who is the best in the business with the newest and best technology on rigs.

Ensco is the best, odds are good that another good buying opportunity will arrive in the coming months. The overall market has been in a jittery mood since late February, so the slightest increase in fear can result in the swift punishment of all stocks. Fears of a recession will impact all stocks, no matter how compelling the three-five year investment case.

This case is as strong as ever for Ensco. For example, in its latest fleet update report, Apache renewed its lease on Ensco 106, a vital part of its Australian exploration campaign. Apache is renowned for making shrewd, high-return-on-capital decisions. So it says a lot that the new contract is benchmarked at $265,000 per day through March 2008, up from the $185,000 per day that Apache was paying to use the same rig over the past 12 months. It had to pay up or risk losing Ensco 106 in a very tight international drilling market.

Ensco has been rumored to be a buyout target along with most other drillers. Today, Reuters reports on Norwegian shipping tycoon John Fredriksen’s plans to quickly expanding the size of his company, Seadrill, via acquisitions. “Last week, investment bank Lehman Brothers said Seadrill was in ongoing deal talks with U.S. drillers GlobalSantaFe Corp., Ensco International Inc., Noble Corp. and Transocean Inc. In a note to clients, Lehman said Seadrill, which operates mobile drilling fleets specializing in deep-water and harsh environments, is willing to pay cash and will pay a premium, but is not interested in a hostile deal.”

Maybe Seadrill has already approached Ensco with an offer and received a reply of “No thanks.” I wouldn’t be surprised. An enormous premium would be required if a friendly takeover bid is to be accepted by Ensco’s board. Otherwise, shareholders would be better off just continuing to allow management to run their company in a very profitable environment.

So as I look out now for good investments keep this one on your radar screen and get your powder dry for the year end tax season where people will be strapped for cash and won't buy stocks for awhile.
This will continue to pressure on the market along with the lower dollar and the slump in the economy.

Question asked on 03/23/2007 at 06:33 AM :: Comments to date: 0

Category: commodities

We have had the first wave of inflation starting in 2003 and to 2006.
The markets have settled back for about a year depending on which market you are in but the government data is finally showing the results of the trickle down effect inflation has on the economy with the latest CPI #'s.
Now all we have to have is a shortage of gasoline which is coming this summer. Then inflation will raise it's ugly head big time because the corporations are tired of taking it on the chin. They are being squezzed from both ends so prices will pop this time because their long term contracts are now market related.
The general results are metals will go higher, stock market will go lower.
Buy puts on the dow or S&P to protect your portfolio.

Question asked on 03/20/2007 at 05:33 AM :: Comments to date: 0

Category: Stocks

I usually don't buy into penny stocks but I am interested in new technology that has a niche.
The cost of entering those niches are so expensive and when someone comes up with a new way of solving problems then they become a buyout candidate.
Most penny stocks in this category do not make money. This stock does which is even more attractive.
I’ve been predicting for some time that we will begin to blur the lines between human and machine. It will be innocuous, as people will augment their bodies with computers and sensors. An artificial eye is coming soon.

PLC Medical Systems Inc. (PLC: AMEX) announced the enrollment of the first patients in its FDA-approved clinical trial for RenalGuard. RenalGuard is designed to reduce contrast-induced nephropathy (CIN) by managing real-time fluid balance during surgical and related procedures where contrast media are administered. Dr. Richard B. Zelman at Cape Cod Hospital in Hyannis, Mass., performed the tests.

"The use of Renal Guard Therapy maintained a high level of urine output, which is believed to reduce potential renal toxicity by protecting the kidney during interventional cardiac procedures requiring contrast media," said Dr. Zelman. "The system operated smoothly and did not change the flow of the catheterization procedure. The patients' procedures were completed successfully and the patients experienced no adverse renal complications."

CIN is a serious and little-recognized problem that is a side effect of the best new ways of diagnosing certain deadly conditions. By preventing this from causing kidney failure, PLC is making it possible for contrast media to be used not only more safely, but also more aggressively.

This is sure to lead to widespread adoption once safety is proven. These initial results are encouraging, but not surprising.

Action to take: As a special situation, buy PLC Medical Systems Inc. (PLC:
AMEX) at 60 cents or better. As always, plan to hold your shares for years, not months, and do not chase the price.

Question asked on 03/18/2007 at 07:17 AM :: Comments to date: 0

Category: Stocks

Since the current asset price increases got under way in 2002 — and contrary to the expectations of some of the perma-bulls on US equities — commodities, and emerging stock markets and economies, in which, fortunately, platform companies are largely absent, have performed substantially better than US asset prices. Since 2000, the Dow Jones has lost more than 50% of its value against gold and much more against industrial commodity prices. Moreover, since 2002, the Argentine and Russian stock markets, whose economies are perceived as “knowledge absent” when compared to the great “knowledge-based” American economy, are up ten-fold or more! The current “asset inflation may be far from over and that the end game in the current asset price increases is far from predictable, but, based on the experience of the previous four investment booms, it is likely that the significant diverging trends in the relative performance of asset classes (underperformance of US assets) will persist for far longer than is now expected.

Another common feature of the last stage of every asset boom was high trading volume, widespread public participation, high leverage, and money inflows into all kinds of money pools (Zaitech and Tokin funds, investment clubs, mutual funds, LBO funds, venture capital, private equity, emerging market, art and collectibles, and equity, commodity and index funds). In this respect, the current asset boom is no different than previous investment manias, except that it includes all asset classes and is taking place practically everywhere in the world.

In the four great investment booms we have described, and also in previous investment manias, once the boom came to an end, most, if not all, of the price gains that occurred during the mania were given back. In 1992, silver prices were lower than they had been in 1974. In 2003, the Nikkei was lower than at its high in 1981. In 2002, in dollar terms, most Latin American markets were no higher than in 1990 and most Asian markets had declined to their mid- or late 1980s level. By 1998, the Russian stock market had given back its entire advance since 1994; and in 2002, most high-tech and telecommunication stocks were no higher than they had been in 1996 or 1997. And in those manias where prices didn’t retreat in nominal terms to the level — or, as frequently happened, to below the level — from where the investment boom had begun (as was the case in 1932), prices retreated in inflation adjusted terms to those levels. Adjusted for inflation, in 2001 the CRB Index was far lower than it had been in 1971, while precious metals, oil, and grains were all either no higher, or lower, than they had been in the early 1970s.

Following all great investment booms, the leadership changed. The 1970s’ precious metal boom was followed by the boom in financial assets in the 1980s. The Japanese stock and real estate mania of the late 1980s and the emerging market boom of the early 1990s were followed by the parabolic rise of high-tech stocks in the late 1990s. Therefore, while it is possible that in a prolonged environment of “excess liquidity” all asset markets could continue to increase in nominal value, it is most unlikely that the leaders of the previous boom — the US stock market and, specifically, the Tech sector — will be the leaders of the current asset inflation. And whereas it may be premature to make a final judgment about this point, as the current asset inflation could last for much longer, so far the gross underperformance of US equities and especially of the Nasdaq (still down by over 50% from its 2000 high) compared to the emerging markets and commodities seems to confirm that the leadership has indeed changed.

Question asked on 03/15/2007 at 05:38 AM :: Comments to date: 0

Category: Stocks

In all the previous investment booms the bull market was interrupted by severe corrections. Gold corrected by more than 40% between December 1974 and August 1976, equity markets corrected violently in 1987 (Taiwan and Hong Kong dropped by 50%), and bonds corrected sharply in 1983–1984, in 1986–1987, and in 1994. In the high-tech mania, technology stocks corrected sharply in 1995–1996 and in 1998. Between its 1997 high and its 1998 low, the Russian stock market gave back almost all its previous gains.

In the current asset bull markets, we have, not had a concerted and strenuous correction phase à la 1987 and 1998 (and certainly not in US equities) excepti (copper, zinc, oil, and sugar) have had some corrections.

As the advance in previous investment manias matured, its leadership tended to narrow considerably. At the end of the 1970s’ commodities bull market, only oil, copper, precious metals, and energy and mining shares were still rising. In Japan, most of the listed equities peaked out in 1987–1988, but financial stocks, including insurance companies, banks, and brokers, drove the index up until the end of 1989. In the rolling emerging market bubbles of the 1990s, most markets peaked out between 1990 and 1994 but some markets such as Hong Kong still managed to make a final high in 1997. In the dotcom boom, the advance became extremely concentrated after 1999, with many tech issues only making marginal new highs in March 2000 or failing to better their 1999 peak prices.

In the current asset boom, we haven’t yet seen any significant narrowing of the asset markets’ advance (although Middle Eastern markets tumbled last year). Aside from a few commodities and US home prices and housing-related stocks, most asset prices are still rising, although admittedly with varying intensity.

A feature common to all great asset booms is that they were born from either an extremely low valuation in real terms, an extended base-building period, or from a lengthy and pronounced underperformance compared to other asset markets. In 1970, the gold price was no higher than in 1933, and down in real terms by 70% from its 1897 high. The Japanese asset boom, which had in fact begun back in the 1960s, led to the entire Japanese stock market having a stock market capitalization in 1970 lower than that of IBM. In other words, in 1970, Japanese equities were very inexpensive compared to the US stock market.

In 1982, US stocks had declined by more than 70% in real terms from their 1966 highs. And although, at the time, US equities were, adjusted for inflation, no higher than they had been in 1899, to be fair their total real return (including dividends) was far higher. Still, by 1982, including reinvested dividends, US equities were no higher than in 1961. Also extremely depressed were US bond prices, with bond yields at their highest level in the 200-year history of the US capital market. Taiwanese and Korean equities in 1984 were at about the same level they had been in the early 1970s and, adjusted for inflation, dirt cheap.

In the late 1980s, Latin American stock markets were, in US dollar terms, no higher than they had been in the late 1970s and far lower than in the early 1970s and early 1980s. In 1990, US high-tech stocks were selling for about the same prices they had reached at their 1973 peak and for around ten times earnings. Compared to the valuation of the Japanese stock market in 1990, US high-tech stocks were then extremely depressed.

The 2002 asset price increase in all asset classes also included some asset classes that started to rally from extremely low inflation-adjusted prices or low valuations compared to some other asset prices. Particularly low inflation-adjusted prices were evident for commodities (which bottomed out between 1999 and 2001). And whereas the Nikkei had massively underperformed US and European equities in the 1990s, and was therefore relatively inexpensive compared to these markets, emerging markets had both underperformed US assets since 1990 and were, adjusted for inflation, very depressed. However, not depressed (adjusted for inflation) or compared to other asset prices, were US equities. Moreover, following their 20-year bull market, US bonds — and especially Japanese bonds — were by no means depressed!

Every epic investment boom lifted prices far higher than anyone could have imagined. An example ( Japanese stocks sold for 70 times earnings in 1989, so as a predictor the US equities would also sell in future for 50 times earnings (2000). In 1970, no one dreamt that precious metals would increase by more than 20-fold. In the early 1980s, it would have been considered heresy to forecast that the Dow Jones would double and bond yields would decline to less than 4%! And investors certainly didn’t expect the Japanese stock market, which had already quadrupled in the 1970s, to rise by almost another six-fold between its low in 1982 and its high of 1989. In the late 1980s, few people expected the Latin American markets would ever recover; and in the early 1990s, no one (including myself) expected US high-tech stocks to become the best performing asset class in the 1990s.

So what is the asset class that will shine in the future that hasn't made a tremendous move yet.
You all know what I believe. Silver.
I am bold today.

Question asked on 03/14/2007 at 05:19 AM :: Comments to date: 0

Category: Stocks

COMMON FEATURES OF PREVIOUS INVESTMENT MANIAS AND THE DIFFERENCES TO THE CURRENT INVESTMENT ENVIRONMENT.
A bull market in one asset class was accompanied by a bear market in another important asset class.
Precious metals soared in the 1970s, but bonds collapsed. Equities and bonds rose in the 1980s, but commodities tumbled. In the 1990s, we had rolling bubbles in the emerging markets, but Japanese and Taiwanese equities were in bear markets while commodities continued to perform poorly.

Finally, the last phase of the global high-tech mania (1995–2000) was accompanied by a collapse of the Asian stock markets and Russia, as well as a continuation of the Japanese and commodities bear markets. By the late 1990s, most emerging markets (certainly in Asia) were far lower than they had been between 1990 and 1994. In the 1990s, emerging markets grossly underperformed the US stock market.

Currently, looking at the five most important asset classes — real estate, equities, bonds, commodities, and art (including collectibles) — I am not aware of any asset class that has declined in value since 2002! Maybe realestate has peaked from 2002 and has come down in most parts from 2005 but it is still higher than in 2002. Admittedly, some assets have performed better than others, but in general every sort of asset has risen in price, and this is true everywhere in the world.

In the early phases of all previous investment booms, investors failed to recognise that the “rules of the game” had changed and continued to play the asset class that had been the leader in the previous investment mania. In the 1980s, every increase in gold and silver prices was perceived to be the beginning of a new bull market in precious metals (after silver prices collapsed in January 1980, prices doubled three times between 1980 and 1990 — all within a downtrend), while investors maintained a very sceptical view of bonds. In the early 1990s, investors failed to recognise the emergence of a high-tech sector uptrend, although, as explained above, high-tech stocks were already performing extremely well between 1990 and 1995. Global investors continued to believe in the merits of Asian stocks right to the end and actually stepped up their buying in early 1997!

Similarly, in the current asset inflation, investors have continued to focus on the high-tech bull market and have largely missed out on the huge increase in price of commodities, and of Indian, Latin American, and Russian equities.

At the end of each investment mania, investors believed in some sort of “excess liquidity” that would drive the object of the speculation forever higher. At the end of the 1970s, the “excess liquidity” related to the OPEC surpluses; at the end of the Japanese stock and real estate bull markets, “excess liquidity” centred around the enormous Japanese current account surpluses; during the 1990s emerging markets mania, “excess liquidity” was perceived to come from foreign buying and the Yen carry trade; and at the end of the high-tech boom the investment community believed that “excess liquidity” would come from record mergers and acquisitions, a reallocation of funds from bonds to equities, and easy monetary policies by the Fed (a belief that was fostered by the Mexican and LTCM bailouts and money printing ahead of Y2K).

But as Albert Edwards so eloquently explained in a recent scathing report entitled “Lies, rhubarb, poppycock, bilge, utter nonsense, caravans and liquidity” (see Dresdner Kleinwort Global Strategy Report, January 16, 2007), “liquidity is the hocus pocus of the investment world. It means totally different things to different people but is often cited as being a major driver for buoyant markets”.

Most presciently, Edwards explains that with respect to investment manias, “when markets are rallying but seem expensive, when new issues fly out of the door and when fundamental analysis often appears to fail to explain events, the safe haven for the market commentator is often to rely on the explanation that there is lots of liquidity

What is peculiar to the current investment environment is that liquidity is supposed to come from not just one or two sources, but from everywhere! From OPEC surpluses, from the US Fed and other central banks, from the Asian current account surpluses (excess savings), from the Yen and Swiss Franc carry trade, from the large size of money market funds and bank deposits, from rising asset prices, leverage, and a tidal wave of private equity funds, and from artificially low interest rates. It’s no wonder that, given such beliefs, asset markets are all flying High.
Continued Tomorrow.