Originally Posted at Investing Daily

With Research in Motion (NDSQ: RIMM) taking the name of its marquee product, the BlackBerry, in an attempt to revamp its image and revive is waning fortunes, you’d be right to think smartphones are a tough business.

If you need more evidence of that, just ask Stephen Elop, chief executive of Nokia Corp (NYSE: NOK), which has struggled for years to gain market share against Apple’s (NSDQ: AAPL) iPhone.

But just as some companies are fighting to avoid making an ungraceful exit from the smart device market, others are coming in.

Just two years ago, Lenovo Group (Hong Kong: 0992, OTC: LNVGY) made its smartphone debut, launching its LePhone, its first touch-screen handset, in China. Since then, Lenovo has quickly become the second-largest vendor of smartphones in the Chinese market with 19 different devices, an impressive feat for a company that’s had an on-again-off-again relationship with mobile phones in general.

Back in 2008, Lenovo sold off its mobile phone division to focus its efforts on its personal computer business not long after it purchased IBM’s (NYSE: IBM) personal computer segment. But just over a year later, the company reacquired the same business for USD200 million as it realized that the real opportunity resided in smart devices.

Despite that change of heart, Lenovo has been slow to tackle the smartphone market, preferring to focus on devices like tablet computers. But over the past six months it has expanded its smartphone presence beyond China and pushed into the Philippines, Russia, India, Indonesia and Vietnam.

Many analysts have argued that Lenovo is spreading itself too thin, based on the markets it has chosen. Startup costs in those markets are higher, because there’s little existing infrastructure. But so far, the company is proving its detractors wrong.

The company just reported record fourth-quarter 2012 earnings, thanks to its smartphone operations as that division locked in its first profit.

Take that, BlackBerry and Nokia!

So how has Lenovo gone from less than two percent market share in China less than two years ago to nearly 15 percent today?

For starters, it enjoys strong name recognition in China and among its distributors. Lenovo has invested heavily in advertising in China and across much of Asia over the past several years, playing up the cachet it gained by purchasing the IBM business.

Lenovo has also become the largest supplier of smartphones to China Mobile (NYSE: CHL) and China Unicom (NYSE: CHU), both of which also happen to be among the largest and best known providers of cellular and data service in the country.

On top of that, Lenovo’s devices have a clear cost advantage at just half of the cost—or less—than most competing devices. That’s largely thanks to the fact that it has been able to leverage generally lower Chinese labor costs on both the design and manufacturing sides and it uses all domestic parts to make them.

Lenovo has also established relationships with a broad range of suppliers, allowing it to sidestep the occasional component bottlenecks that occasionally affect other device makers.

Those advantages alone have allowed Lenovo to quickly gobble up market share in China and, while it has had to accept razor-thin margins to do it, quickly become profitable.

Lenovo also has pursued huge expansion opportunities, particularly in other emerging markets that many smartphone makers largely ignore. The company already has a foot in the door with China.

As a Chinese company making products for the Chinese market, Lenovo “spec designs” its devices to operate on Chinese technology and standards. Not incidentally, the Chinese global telecom company Huawei Technologies (SHZ: 002502.SZ) has invested more than USD1.5 billion in building communication networks in Africa. As a result, Lenovo’s devices will already work across much of that continent without having to be adapted to new and different networks.

Given the company’s history of ambitious expansion into foreign markets for all of its products—it’s already a globally known brand—I don’t think it will take long for it to begin pushing into Africa.

While there’s not a huge market for smartphones yet in Africa, much beyond more developed areas in the north and in South Africa, Lenovo could quickly make inroads on the continent because of a lack of significant competition.

Needless to say, this won’t be Lenovo’s last quarter of smartphone profits even as other companies are struggling.

Our friends in Europe love a good party.

But who can blame them? Especially since they just endured a rotten couple years filled with near-meltdown conditions.

I’ve stumbled onto countless concerns about the speed with which domestic markets lifted off to start the year. But if you think the S&P climbed too quickly — check out Italy and Spain. After posting modest gains during the first week of the new year, both these markets exploded to the upside, quickly outpacing the S&P.

But as you can see, both Italian and Spanish shares are rolling over a bit. It looks like that Jan. 1 hangover showed up a little late this year…

Both pullbacks are abrupt — but completely necessary. Using the Italy iShares as a proxy, I’m seeing a retreat from the highest overbought levels since 2009. Ditto for Spain.

But before you put on your bear suit, I offer a quick word of warning:

Despite these sharp pullbacks, Italy and Spain have some very nice-looking charts. Big volume. Clear bottoms forming. They could end up having a fantastic year.

Right now, we’ll have to see when and where buyers step in and stop the bleeding. If the consolidation becomes more orderly, you could be looking at a couple of solid buying opportunities.

Greg Guenthner
for The Daily Reckoning

Originally Posted at Daily Reckoning: Reining in Europe’s Runaway Markets

Originally Posted at Street Authority

While the S&P 500 and Dow have rallied to five-year highs, the technology sector has lagged, and is currently sitting about 4% below the fall peak. The PowerShares QQQ Trust (Nasdaq: QQQ), anexchange-traded fund (ETF) that tracks the Nasdaq 100, could provide a diversified way for investors toprofit while this out-of-favor sector plays catch up.

One reason I like this fund is the exposure it offers to Apple (Nasdaq: AAPL), which accounts for a whopping 15% of the index weight. AAPL is more than 35% off its September highs, but when the stockstabilizes and snaps back, QQQ will rise with it.

The $71 target is about 6% higher than current prices, but investors who use a capital preserving, stock-substitution strategy could make more 50% on a move to that level.

One major advantage of using long call options rather than buying the stock outright is putting up much less to control 100 shares — that’s the power of leverage. But with all of the potential strike andexpiration combinations, choosing an option can be a daunting task.

Simply put, you want to buy a high-probability option that has enough time to be right, so there are two rules traders should follow:

Rule one: Choose an option with 70%-plus probability.

Delta is a measurement of how well an option follows the movement in the underlying security. It is important to buy options that pay off from a modest price move in the stock or ETF rather than those that only make money on the infrequent price explosion.

Any trade has a 50/50 chance of success. Buying in-the-money options increases that probability. Delta also approximates the odds that the option will be in the money at expiration. In-the-money options are more expensive, but they’re worth it, as your chances of success are mathematically superior to buying cheap, out-of-the-money options that rarely pay off.

For example, with QQQ trading at about $67 at the time of this writing, an in-the-money $64 strike call currently has $3 in real or intrinsic value. The remainder of any premium is the time value of the option.

Rule two: Buy more time until expiration than you may need — at least three to six months — for the trade to develop.

Time is an investor’s greatest asset when you have completely limited the exposure risks. Traders often do not buy enough time for the trade to achieve profitable results. Nothing is more frustrating than being right about a move only after the option has expired.

With these rules in mind, I would recommend the QQQ June 64 Calls at $4.50 or less.

A close below $64 in the stock on a weekly basis or the loss of half of the option premium would trigger an exit. If you do not use a stop, then the maximum loss is still limited to the $450 or less paid per option contract. The upside, on the other hand, is unlimited. And the June options give the bull trend almost five months to develop.

This trade breaks even at $68.50 ($64 strike plus $4.50 option premium). That is about $1.50 above QQQ’s current price. If shares hit the modest upside breakout target of $71, then the call options would have $7 of intrinsic value and deliver a gain of more than 50%.

Action to Take –> Buy QQQ June 64 Call at $4.50 or less. Set stop-loss at $2.25 and set an initial price target at $7 for a potential 56% gain in four and a half months.

This article originally appeared on ProfitableTrading.com:
“This Out-of-Favor Sector Could Make Traders 50%-Plus”

Originally Posted at Wall Street Daily

Break out the bubbly, because it’s Friday in the Wall Street Daily Nation!

For the newbies in the group, once a week I embrace the adage that a picture is worth a thousand words. And I select a handful of graphics to convey important economic or investment insights.

This week, I’m dishing on the most shocking GDP report in the world, the uncanny correlation between the stock market and joblessness, and the one statistic that points to another banner year for dividend stocks.

One thing before we get started…

If you haven’t done so already, make sure to reserve a seat for Tuesday’s Tech & Innovation Daily webinar. It’s called How to Corner the Tech Market by March 30, and it’s 100% free for Wall Street Daily subscribers.

During the webinar, I’ll provide specific and timely opportunities for attendees. Better yet, to make sure everyone can participate, we’re airing the webinar at two separate times – 2:30 PM and 7:00 PM EST on Tuesday, February 5.

Just go here to verify your interest. That way we can give you more information as the event approaches. Remember, this is completely free for members.

Now, on to this week’s Friday Charts…

The Mysterious GDP Miss

Boy, do I look stupid. Or do I?

It was only last week that I told you to expect an uptick in economic growth in the United States in 2013. And then Wednesday, the Commerce Department shocked the world, revealing that the economy contracted 0.1% in the fourth quarter – instead of growing 1.1%, as was widely expected.

But fear not. The unexpected drop can be blamed on a massive decline in military spending related to the drawdowns in Iraq and Afghanistan.

As you can see, spending plummeted $40 billion quarter-over-quarter.

The good news? The rest of the economy is humming along just fine.

For instance, personal consumption increased 2.2%. Durable goods spiked 13.9%. Equipment and software increased 12.4%. And real residential fixed investment jumped 15.3%. (Anyone still doubting that the real estate recovery is legit? Didn’t think so.)

The list of positive contributors goes on. So fear not. The U.S. economy isn’t on the precipice of another recession.

Stocks Follow Earnings… and Jobs!

It was certainly a January to remember. The S&P 500 kicked off the year with a strong rally, rising almost 3%. That’s the fastest start to the year since 1997.

Don’t kill the messenger. But a pullback could be on the horizon in the short term.

Am I saying that because I think stocks have risen too far, too fast? Nope. It’s because this week’s initial jobless claims jumped 38,000, to 368,000.

As I’ve noted before, an uncanny inverse correlation exists between initial jobless claims and stocks. As claims go down, stocks go up. And vice versa.

So if next week’s report includes another uptick in claims, don’t be surprised if stocks take a breather. Since the long-term trend remains bullish, though, we should treat any pullback as a buying opportunity.

Mo’ Money, Please!

After a record-setting year of payouts, you’d think companies couldn’t afford to keep doling out more and more dividends. But you’d be wrong!

The dividend payout ratio of 28% for S&P 500 companies remains freakishly below the long-term average. In fact, it’s resting at a 30-year low.

The end result? We should expect another year of record dividend payments. And I’m not the only one who thinks so.

Standard & Poor’s Howard Silverblatt does, too. What’s more, he expects companies in all industry sectors to spread the wealth. Giddy up!

If you’re not already signed up for our sister publication, Dividends & Income Daily, what are you waiting for? It’s 100% free and 100% guaranteed to provide you with timely dividend-investing ideas.

That’s it for today. Before you sign off, do us a favor. Let us know what you think about this weekly column – or any of our recent work at Wall Street Daily – by sending an email to feedback@wallstreetdaily.com, or leaving a comment on ourwebsite.

Ahead of the tape,

Louis Basenese

American are getting older but looking younger. According to recent data at the United States Census, persons over 55 years old now make up 25% of the population. According to an article published by Stony Brook University School of Medicine, 3.3 million Americans over the age of 55 underwent cosmetic procedures in 2010, and facelifts are up 14% just for men. The article emphasizes the fact that older Americans are turning to cosmetic surgery to compete in the job marketplace.

Innovative procedures in cosmetic surgery, and especially liposuction, have made huge advances recently. The procedure is now much quicker, safer, and with a much faster recovery period. Casey Research has published an outstanding report on the history of cosmetic surgery and the the latest technology in the field.

Will this industry be the next hot industry? Will the stocks in this field rise by 200% in a year like the 3D printing stocks? It is hard to know when revenues will start to skyrocket and investors will jump on the stocks in a narrow niche. There are about a half a dozen cosmetic surgery product companies in this business according to WallStreetNewsNetwork.com, and surprisingly, many of these companies are debt free with a lot of cash on a per share basis.

One of the leaders in the field is Cynosure (CYNO), which produces Smartlipo® LaserBodySculpting™ Workstations used for treating localized fat deposits using a minimally invasive technique, and makes three laser options that take different approaches to treat cellulite: Cellulaze, SmoothShapes XV, and Triactive. The company just released PicoSure, the first picosecond device to remove tattoos. The stock trades at 43 times trailing earnings and 30 times forward earnings. The company has $807,000 in debt, with $5.97 in cash per share. Revenues for the latest reported quarter ending September 30 were up 31.1%. The company reports year-end earnings on February 12 before the market opens.

Solta Medical (SLTM) produces the Thermage CPT non-invasive treatment for skin tightening, and the Liposonix system to destroy unwanted fat cells resulting in waist circumference reduction. The stock trades at 29 times forward earnings, has $27.8 million in debt, and $0.56 in cash per share, amounting to about 22% of the stock price. Revenue for the latest quarter rose by 27.8%. The company reports on February 19.

There are other companies that participate on a peripheral basis of the look-good, look-younger industry. For example, Align Technology (ALGN) makes the Invisilign systems, an invisible orthodontics process for straightening teeth. The stock has a trailing price to earnings ratio of 35 and a forward PE of 24. The company has no debt with $4.03 in cash per share.

PhotoMedex (PHMD) makes XTRAC laser products for psoriasis and vitiligo, NEOVA for premature skin aging, and Omnilux Light-emitting diode for wrinkles and acne. The stock has a PE of 19 and a forward PE of 10. It has $17,000 in debt, with $2.55 in cash per share.

To access a free list of of the cosmetic surgery stocks, and stocks in related industries, go to WallStreetNewsNetwork.com.The list includes the trailing PE, the forward PE, the total debt, the cash per share and the business.

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

By Stockerblog.com

By StockBee (Original Link)

Stock markets have different kind of winners. Some stocks can make big move in 5 days and after that end up all the gains. Similarly some move only for a month. But there are some special kind of stocks that make longer term multi year or multi year moves.

The multi cycle winners are stock with longer term momentum. These stocks make a move for few months or quarters and then correct but do not breakdown. They recover from their correction and go on to make another move.

The best one are the ones which do not correct more than 30% from their high. They have extremely powerful momentum. Such stocks are rare breed that have something going for them. The reason they do not correct much is because the holders do not sell and new buyers continuously buy at dip.

If you are looking for a position trading ideas or swing trades of longer duration and magnitude than few days or weeks this is where you need to focus.

In order to find such stocks look for top 100 to 300 stocks with one year momentum that have not had more than 30% correction during their move from beginning of the trend. There will be very few stocks like that in current market. In different market circumstances where growth stocks dominate, you can find many.

Some examples of these kind of stocks are:

If in next correction cycle such stocks again refuse to dip below 30% from high and go sideways for few months, then they offer powerful breakout setups. Most long running stocks with growth story will show you this kind of pattern. They continue to grow for multiple cycles as against other flash in the pan growth stocks which can just grow for few quarters.

For working people and part time traders such stocks can allow you to identify buying opportunity well in advance and you can do your work over weekend.

To do so start with a Top 200 stocks by one year momentum list like below band set it up in a software like Telechart and then look for stocks that do not dip more than 30% during duration of the move.

Top 200 Stocks with one year momentum:

ACAD
ACAS
ACHC
ACRX
AEG
AEGR
AHS
AHT
ALJ
ALNY
AOS
APO
APOG
ARMH
ASGN
ASTX
AXLL
AZZ
BANR
BC
BCEI
BDBD
BDC
BECN
BIOS
BKD
BLDR
BMRN
BRP
CAR
CAS
CFNL
CHMT
COG
CONN
CP
CPA
CRAY
CSOD
CSU
CTB
CVD
CVI
CVLT
CX
CYH
CYMI
DAL
DGI
DIN
DK
DLPH
DLX
DORM
DPZ
EEFT
EMN
EPL
EQIX
ESC
EXP
EXPE
FBHS
FLT
FNF
FNGN
GEO
GIL
GILD
GLDD
GNRC
GPOR
GRFS
GTN
GVA
GWR
GY
HAFC
HEES
HERO
HFC
HMA
HSNI
ICA
ICON
INFI
INXN
KBH
KCAP
KEP
KERX
KKD
LAD
LCC
LEDR
LEN
LL
LNDC
LNG
LNN
LPX
LYB
MCO
MDSO
MHK
MHO
MIC
MMS
MPC
MPEL
MTZ
MWA
MX
N
NCT
NLS
NRF
NXST
OCN
OSK
PCRX
PCYC
PDFS
PHG
PHH
PHM
PJC
PMT
POL
PPG
PVH
QIHU
QUAD
RAX
REGN
RJET
RMD
RNF
ROCK
RSE
RTEC
RTK
RWT
RYL
SAH
SBRA
SCS
SEAC
SFUN
SGMO
SHLM
SIRI
SIRO
SMA
SMP
SNFCA
SNTA
SNTS
SODA
SPB
SPF
STAG
STRZA
STZ
SXL
SYRG
TASR
TCX
TEX
THC
TISI
TMH
TREX
TRS
TRW
TSO
TUES
TVL
TXI
UBS
URBN
URI
USG
VAC
VLO
VMC
VMED
VVI
WD
WGO
WHR
WLK
WNR
WOR
WY
XIN
XXIA
ZQK

By Louis Basenese (Wall Street Daily  | Original Link)

In yesterday’s column, I explained how traditional venture capital (VC) investors have become apathetic. They’re not plowing capital into private VC funds with enthusiasm anymore.

We can blame the high fees, decades-long holding periods, or terrible investing results. Take your pick. But pushing the blame around doesn’t change the fact that the VC model is broken.

On the other hand, through crowdfunding platforms like Kickstarter, individual investors can’t make it rain enough for all sorts of zany projects.

For instance, an art project commenting on the ancient origins of modern Japanese game culture recently raised over $300,000 in financing. (No joke.) And a REM sleep-enhancing mask raised almost $600,000. (Again, not a joke.)

If only venture capital firms could tap into the public’s fervent appetite to fund startups, the industry might be revitalized.

And wouldn’t you know it? That’s precisely what’s about to start happening. Wall Street is about to be ground zero for a trillion-dollar transfer of wealth from private venture capital deals to public VC.

The shift could prove to be one of the greatest equalizers in history, providing everyday investors with access to previously unheard-of profit opportunities, particularly in the technology sector.

On such merits, it’s imperative that we start preparing for it.

Before I share how we do that, though, let me first reveal the most critical market condition that’s about to come to pass and, in turn, usher in this massive wealth shift.

Believe it or not, we have the government to thank for it.

For Once, the Government is Helping (Not Hurting) Investors

Historically, new government regulations precede booms in VC funding.

In 1958, the Small Business Investment Act allowed the Small Business Administration (SBA) to start licensing private investment firms to help finance and manage small companies in the United States. Lo and behold, the very next year, the first venture-backed startup, Fairchild Semiconductor, was funded.

Then, in 1978, the U.S. Labor Department relaxed restrictions in the Employee Retirement Income Security Act (ERISA), allowing corporate pension funds to invest in privately held companies. And that year, the VC industry raised a record $750 million. Coincidence? I think not.

And I’m convinced we’re about to experience another government-induced capital influx, courtesy of the Jumpstart Our Business Startups (JOBS) Act.

Signed into law in April 2012, the JOBS Act contains many changes that impact financial markets.

I already told you about the provision allowing “emerging growth companies” – startups with less than $1 billion in annual revenue – to file secret S-1 forms with the SEC.

Well, another significant provision of the legislation involves the restrictions regarding how private companies can seek funding. No longer will they be forced to rely solely on “accredited investors” (i.e. – the 1%).

Instead, they’ll soon be able to solicit funds from the 99%. So those making less than $100,000 per year can invest up to 5% of their income, and those making more than $100,000 can invest up to 10%.

Simply put, private companies (and VC funds, for that matter) are about to have much more access to individual investors and their bank accounts.

The only thing holding back the floodwaters is the SEC.

Per Congress’ instruction, before the new changes for equity crowdfunding in the JOBS Act can go into effect, the SEC needs to set up regulations to protect the public when investing in small businesses.

The SEC’s deadline was supposed to be January 2013, which has obviously passed. But they’ll act soon enough. So it’s only a matter of time before crowdfunding enters the mainstream.

It’s a Re-Birth, Not a Death

Let me be clear. I’m not suggesting that venture capital is a goner. Or that traditional VC funds are about to be replaced by a younger, fitter, more agile generation of financiers.

I’m merely predicting that venture capital is about to be reborn.

Here’s why…

While crowdfunding platforms provide unparalleled access to public funding, they possess major drawbacks. Namely, they’re too successful and none of the projects are vetted.

Projects on Kickstarter routinely raise way more than they originally requested. The two examples I shared above raised 3,012% and 1,636% more money than they requested, respectively.

Throwing too much capital at a business owner is never a good investment strategy. In some cases, it creates more problems than it solves.

Take Tigere Chiriga, for example. He set out to raise $15,000 to bankroll his invention – a coffee mug that doesn’t leave moisture rings on tables. AsEntrepreneur magazine notes, he ended up raising $40,000, and suddenly “his one-man operation needed a manufacturer and logistics house that could handle shipping.”

In Chiriga’s own words, “I had 30 days to become proficient in manufacturing, warehousing, packaging, fulfillment, retail, e-commerce, customer service and marketing.”

Can you say mission impossible?

I’m sorry, but as an investor, I don’t want my hard-earned capital being spent on training an executive. I want it to be used by seasoned professionals to execute on an unprecedented opportunity. And that brings us to another drawback of popular crowdfunding platforms…

Many of the “executives” behind the most popular crowdfunded projects couldn’t operate a pay toilet, let alone run a publicly traded company with thousands of shareholders. So, ultimately, Kickstarter amounts to nothing more than a dating platform, matching cash-starved projects with cash-flush suckers.

So forget about crowdfunding replacing VC firms. These drawbacks actually underscore why we desperately need VC firms to lead the public venture transfer.

You see, VC firms don’t just fund a project and pray that it works out. Heck no! They get dirty and do a lot of heavy lifting for investors.

They vet opportunities before even considering investing a single penny. They insist on getting seats on the board. They actively engage management. They’ll even recruit key talent, which proves vital to a company’s (and investors’) long-term profitability.

I’d much rather entrust my capital to their model, as opposed to an offshoot of Kickstarter. Wouldn’t you?

Bottom line: Public venture promises to be the next big thing. It’s the only way to fix the broken venture capital model. Even the Kauffman Foundation, with $2 billion in assets, admits that it needs to start moving “a portion of capital invested in VC into the public markets.”

In addition to the institutional demand, the public has obviously demonstrated a rabid appetite to fund startups, too. And once the SEC gets off its duff and passes the necessary regulations, it’s going to open up the possibility to tap individual investors to fund legitimate opportunities.

And if we want to be on the right side of this wealth transfer, we need to be on the lookout for Wall Street firms pioneering the change. They’ll be the ones bringing public venture opportunities to market via reverse mergers and IPOs.

MDB Capital Group is certainly leading the charge in this respect. In fact, its latest company presentation speaks directly to a public venture model.

Canaccord Wealth Management also appears to offer public venture capital opportunities to select clients.

I guarantee many more firms are going to swarm the opportunity, once the SEC announces its regulations. I’ll be on the lookout for them and promise to alert you to specific opportunities along the way.

Speaking of which, don’t forget to sign up for my upcoming webinar, How to Corner the Tech Market by March 30.

It’s 100% free for Wall Street Daily subscribers. And I plan on providing specific and timely opportunities for attendees. To make sure everyone can participate, we’re airing the webinar at two separate times – 2:30 PM and 7:00 PM EST on Tuesday, February 5. So don’t miss out!

Remember, this is completely free for members.

Ahead of the tape,

Louis Basenese

By David Sterman (StreetAuthority | Original Link)

At the end of World War II, G.Is. had a little time to linger in Europe before heading home, so they embarked on the all-American pastime: shopping.

The U.S. dollar was so strong, these soldiers could buy small items like boxes of chocolate — and big items like British motorcycles — at shockingly low prices.

Fifty years later, U.S. consumers found out what happens when a super-strong currency loses its luster. The U.S. dollar no longer buys as much abroad as it once did, and a shopping spree in Paris or London will cost a lot of dough.

Of course, the investment world has been feeling similar effects as well. The long-term fall in the dollar means U.S. companies can no longer snap up foreign rivals for a cheap price. But a falling dollar also means that any foreign assets that companies and investors own have risen in value. (Note that since the Great Recession of 2008, the greenback has firmed up a bit in what’s known as a “Flight to Quality,” but economists expect the dollar to weaken anew in the long-term.)

The question for many investors: How can I properly position my investment portfolio?

The prospect of a further fall in the U.S. dollar means it’s crucial to ensure your portfolio has stakes in other economies. U.S. investors have hundreds of global investment options, so you should make sure that your portfolio has exposure to them.

For example, it’s quite easy to buy shares of many foreign companies through what’s known as American depositary receipts (ADRs). These are U.S.-listed stocks that move in tandem with their equivalent shares in foreign markets. For example, shares of Germany’s Daimler (Nasdaq: DDAIF), the parent company of Mercedes-Benz, trade here in the United States as well. There are now hundreds of ADRs available, and you can read more about them at ADR.com. If you want to get a better understanding of the pros and cons of foreign investing, then the Securities & Exchange Commissionhas a thorough discussion, which you can read about here.

In addition, an increasing number of U.S. investors are seeking to gain exposure to entire countries or regions through the use of exchange-traded funds (ETFs). There are many country-specific ETFs offered by Barclays as part of its iShares program, which you can read about here.

There are also international ETFs offered by firms like Global X Funds and Wisdom Tree. These firms tend to take a thematic approach, offering ETFs that provide exposure to certain types of companies (such as dividend-producing industrial stocks in Asia).  If the U.S. dollar is indeed set to weaken anew, then you’ll benefit by owning foreign investments as they will rise in value to the extent that the dollar loses value.

Why do economists say the dollar will weaken? There are several factors, but the most important one affecting currency moves is a country’s trade balance.

Whenever a country runs a trade surplus (i.e. it exports more goods and services than it imports), its currency will strengthen as each country in a trade arrangement must buy or sell each other’s currency to buy (or sell) goods. This helps explain why Japan’s currency, the yen, has gained a great deal of value in the past few decades as the Japanese economy has consistently run trade surpluses. What’s the net result of Japan’s surging currency? The yen is now so strong, Japan’s trade surpluses have vanished as its goods have become unaffordable to its trading partners. Simply put, Japan is no longer an export powerhouse precisely because its currency is now so much stronger.

The United States, in contrast, has been running massive trade deficits (importing a much greater value of goods and services than it exports), which is why economists say the dollar will have to fall in value until the cost of doing business falls in the Unitd States and rises higher for countries that are running trade surpluses with us. In the short-term, other factors can prevent that from happening, but a look at currency trends over several centuries confirms the notion that trade balances are deeply interconnected with a country’s currency.

Indeed, a weakening dollar could trigger a renaissance in U.S. manufacturing as the relative labor andoverhead costs fall relative to other economies, which means that U.S. companies will eventually be a lot more competitive in foreign markets, while their foreign rivals will be less competitive in our markets.

Action to Take –> Although the United States continues to rely heavily on imports, exports are also rising at a solid clip. If current export growth rates continue, then the we could eventually wipe out our trade imbalance. Until then, the dollar is likely to weaken.

In response, you should hedge your portfolio by increasing your exposure to foreign companies and funds that are likely to increase in value as other countries’ currencies strengthen. With so many new ways to invest abroad (thanks in large part to the increasing popularity of ETFs), you can easily find the right mix of assets to buy.

This article originally appeared on InvestAnswers.com:
“The Dollar Is Getting Weaker — Here’s What Investors Should Do Now”

By Louis Basenese (Wall Street Daily | Original Link)

A $1-trillion wealth transfer is about to hit Wall Street.

Private venture capital (VC), the go-to funding source for decades’ worth of technology-based startups – including Google (GOOG), Medtronic (MDT), Intel(INTC) and even Apple (AAPL) – is about to be supplanted by public venture capital.

What does that mean for everyday investors like us?

It means that scooping up early profits from the most compelling (and potentially disruptive) technology companies will no longer be exclusive to well-heeled insiders and institutions.

We won’t have to wait for venture capital firms to flip these companies onto the public market via IPOs for our chance to profit. Which, I might add, they’ve done to the tune of $824 billion since 1985, according to data from the National Venture Capital Association (NVCA).

We’re still in the embryonic stage of this transformation. But once it kicks in, we’ll finally be able to grab a piece of the action. From the very start.

Public Venture: The Next Big Thing

How can I be so sure that public venture is the next big thing? It’s simple, really…

Insiders already concede that the traditional VC model is broken.

A May 2012 report by a major VC investor, the Ewing Marion Kauffman Foundation, leaves no room for misinterpretation.

After analyzing its 20-year history of VC investing, it found that its returns “haven’t significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested in VC.”

Or, more specifically, after accounting for fees, the majority of its funds (62 out of 100) failed to outperform investing in the stock market.

And those that did outperform (20 out of 100 funds) didn’t exactly impress. The threshold to qualify as an “outperformer” was just three percentage points more per year than the returns of the stock market.

I’m sorry. But three percentage points hardly seem like fair compensation for giving up liquidity for more than a decade, in some cases.

The foundation’s ultimate conclusion? Again, the “model is broken.”

I’ll say so. And other hard evidence confirms it, too.

For example, the number of VC funds raising capital each year is declining – down 3% in the last year and 18% since 2008.

The amount of money raised by VC firms has been on a downward slope lately, too. As NVCA President, Mark Heesen, says, the industry has been “below $25 billion each year since 2009, a size that many believe to be optimal for successful investing and maximizing returns.”

So longtime VC investors aren’t just saying the model is broken. They’re acting like it’s broken, as well, by investing considerably less.

Feed Me, Seymour!

On the other hand, while institutions are becoming increasingly reluctant to fund startups, everyday investors can’t get enough. Case in point: the success of crowdfunding companies like Kickstarter.

In you’re unfamiliar with the concept, crowdfunding involves everyday individuals banding together to financially support people, startups, organizations, or movements.

Kickstarter’s platform alone has raised more than $450 million – from about three million people funding over 35,000 projects – since its launch less than five years ago.

And the total crowdfunding market size almost doubled last year, to $2.8 billion, according to research firm, Massolution.

Clearly, the public possesses an appetite for providing capital to support the right ideas.

And they’re about to gain access to many more opportunities. In fact, it’s literally guaranteed, thanks to recent changes in regulations.

In tomorrow’s column, I’ll provide all the details and, more importantly, how we can start positioning ourselves to profit from the coming public venture boom.

So stay tuned.

Ahead of the tape,

Louis Basenese

I think his short-term market predictions are a bit of crazy talk, but he certainly does have a nose for value. I much prefer Buffett’s willingness to admit that he has no idea where stocks are going to go in the short term.

Nevertheless, Faber does see some places that aren’t so bad to invest. These places include:

- Chinese, Vietnamese and Ukrainian equities
- Gold

He points out political risk in the Middle East as being a potential trigger to cause a stock selloff.

By David Sterman (StreetAuthority | Original Link)

Each week, one of our investing experts answers a reader’s question in the Q&A column from our sister site, InvestingAnswers.com. It’s all part of our mission to help consumers build and protect their wealth through education. If you’d like us to answer one of your questions, then please email us. (Note: We willnot respond to requests for stock picks.)

Q: How do you pick the right broker? I know I should invest, but I just really don’t trust myself to do it right. There’s just so much to think about, so I think I’d like to go with a broker. But I’m not sure how to pick one of those either. Help!!

– Todd, Akron, Ohio

A. Hi, Todd. By the nature of your question, it’s clear that you are just starting out as an investor. So you should be spending time learning as much as you can about investing before deciding alone which stocks and funds are best for you. In fact, you may never have the time and energy to do all the homework necessary to stay informed about investing moves.

That’s why a full-service broker is surely a goodoption for you. Note these are different brokersthan the “online brokers” such as E-Trade (Nasdaq: ETFC) or TD Ameritrade (NYSE:AMTD), which allow you to trade stocks for rock-bottom fees, but offer minimal investing advice or counsel.

You’ve probably heard of all of the leading full-service brokers, as they likely have a branch office right in your town. The top six full-service brokers (ordered by the number of brokers they employ) are:

• Morgan Stanley
• Merrill Lynch
• Wells Fargo Advisors
• Edward Jones
• UBS
• Raymond James

There are many other good options, though some firms don’t have the same armada of brokers operating out of retail offices and instead rely on telephone and Web-based customer support. For example, Fidelity Investments (NYSE: FNF) and Charles Schwab (NYSE: SCHW) handle as many accounts as the firms noted above, but they may not have an office near you.

Another distinction: The full-service brokers noted above, such as Morgan Stanley (NYSE: MS) and Merrill Lynch, offer a suite of financial planning services — which can include estate planning and long-term wealth management strategies that may be better tailored to your needs.

If you think that sounds like what a financial planner can do, you’re right. Today’s full-service broker is expected to know much more than just investments. They should be reasonably knowledgeable abouttaxes, insurance, family trusts and other topics, and will advise you on how to structure your portfolio in the context of your long-term financial goals.

Every year, ratings firm J.D. Power & Associates polls several thousand investors to see which firms deserve high marks and which ones are to be avoided. You can read about the 2012 rankings here.

Advice Doesn’t Come Cheap
Since these brokers are expected to take a good deal of time to get to know your financial needs, they won’t work with just anyone. They aim to charge hundreds of dollars a year — in fees and/or commissions — which is obviously not a realistic expense burden if you only have $5,000 or $10,000 to invest. If you are thinking about starting off with just a few stocks, and have less than $50,000 to invest, then you may be steered to an online customer service agent who can do little more than open an account for you.

If you do have enough assets to justify the use of a full-service broker, note this is a very competitive industry, so you are likely to pay similar amounts for the various fees that these firms charge. You can often choose between commission accounts, where you pay by the transaction, or a “wrap account,” where you pay a prearranged quarterly fee, which is usually a percentage of the assets that the firm is managing for you.

So, now that you know the different kinds of brokers, what they are supposed to do for you and where to find the right one, what do you do?

The answer is simple. You need to identify the various retail branches of the major brokerage firms in your area, and then set up a time to meet with each one.

You’ll be paired up with an investment advisor who can walk you through the firm’s approach, the services offered and the various expenses you’ll incur. The single most important factor in this assessment is your comfort level. You may be dealing with this advisor for many years to come, and it’s crucial that you like and trust her. How they communicate with you now will indicate future responsiveness.

Suffice it to say, the more assets you have, the greater the attention you’ll receive.

Worried about ending up with a fraudulent broker who will abscond with your funds? You shouldn’t be. This is a heavily regulated industry, and the major firms must continually certify the integrity of their staff. The bad brokers are quickly weeded out, so it’s likely safe to go with an advisor who has been in the business for at least five or 10 years.

Action to Take –> Full-service brokers are a great choice for investors with a considerable asset base and a complex set of long-term financial goals. Still, thousands of investors prefer the simple, low-cost route of an online broker. You really don’t need to have a deep understanding of investments. Simply look into a handful of rock-solid funds such as the Vanguard S&P 500 ETF (NYSE: VOO), or high-quality companies with proven track records. Buy them and hold them, and if history is any guide, they’ll steadily rise in value over the coming decades.

This article originally appeared on InvestingAnswers.com:
Finding The Best Broker For You: What Every Investor Must Know

Does a shadowy group of obscenely wealthy elitists control the world?  Do men and women with enormous amounts of money really run the world from behind the scenes?  The answer might surprise you.  Most of us tend to think of money as a convenient way to conduct transactions, but the truth is that it also represents power and control.  And today we live in a neo-fuedalist system in which the super rich pull all the strings.  When I am talking about the ultra-wealthy, I am not just talking about people that have a few million dollars.  As you will see later in this article, the ultra-wealthy have enough money sitting in offshore banks to buy all of the goods and services produced in the United States during the course of an entire year and still be able to pay off the entire U.S. national debt.  That is an amount of money so large that it is almost incomprehensible.  Under this ne0-feudalist system, all the rest of us are debt slaves, including our own governments.  Just look around – everyone is drowning in debt, and all of that debt is making the ultra-wealthy even wealthier.  But the ultra-wealthy don’t just sit on all of that wealth.  They use some of it to dominate the affairs of the nations.  The ultra-wealthy own virtually every major bank and every major corporation on the planet.  They use a vast network of secret societies, think tanks and charitable organizations to advance their agendas and to keep their members in line.  They control how we view the world through their ownership of the media and their dominance over our education system.  They fund the campaigns of most of our politicians and they exert a tremendous amount of influence over international organizations such as the United Nations, the IMF, the World Bank and the WTO.  When you step back and take a look at the big picture, there is little doubt about who runs the world.  It is just that most people don’t want to admit the truth.

The ultra-wealthy don’t run down and put their money in the local bank like you and I do.  Instead, they tend to stash their assets in places where they won’t be taxed such as the Cayman Islands.  According to a report that was released last summer, the global elite have up to 32 TRILLION dollars stashed in offshore banks around the globe.

U.S. GDP for 2011 was about 15 trillion dollars, and the U.S. national debt is sitting at about 16 trillion dollars, so you could add them both together and you still wouldn’t hit 32 trillion dollars.

And of course that does not even count the money that is stashed in other locations that the study did not account for, and it does not count all of the wealth that the global elite have in hard assets such as real estate, precious metals, art, yachts, etc.

The global elite have really hoarded an incredible amount of wealth in these troubled times.  The following is from an article on the Huffington Post website…

Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion in lost income tax revenues, according to research published on Sunday.

The study estimating the extent of global private financial wealth held in offshore accounts – excluding non-financial assets such as real estate, gold, yachts and racehorses – puts the sum at between $21 and $32 trillion.

The research was carried out for pressure group Tax Justice Network, which campaigns against tax havens, by James Henry, former chief economist at consultants McKinsey & Co.

He used data from the World Bank, International Monetary Fund, United Nations and central banks.

But as I mentioned previously, the global elite just don’t have a lot of money.  They also basically own just about every major bank and every major corporation on the entire planet.

According to an outstanding NewScientist article, a study of more than 40,000 transnational corporations conducted by the Swiss Federal Institute of Technology in Zurich discovered that a very small core group of huge banks and giant predator corporations dominate the entire global economic system…

An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The researchers found that this core group consists of just 147 very tightly knit companies…

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

The following are the top 25 banks and corporations at the heart of this “super-entity”.  You will recognize many of the names on the list…

1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation

The ultra-wealthy elite often hide behind layers and layers of ownership, but the truth is that thanks to interlocking corporate relationships, the elite basically control almost every Fortune 500 corporation.

The amount of power and control that this gives them is hard to describe.

Unfortunately, this same group of people have been running things for a very long time.  For example, New York City Mayor John F. Hylan said the following during a speech all the way back in 1922…

The real menace of our Republic is the invisible government, which like a giant octopus sprawls its slimy legs over our cities, states and nation. To depart from mere generalizations, let me say that at the head of this octopus are the Rockefeller-Standard Oil interests and a small group of powerful banking houses generally referred to as the international bankers. The little coterie of powerful international bankers virtually run the United States government for their own selfish purposes.

They practically control both parties, write political platforms, make catspaws of party leaders, use the leading men of private organizations, and resort to every device to place in nomination for high public office only such candidates as will be amenable to the dictates of corrupt big business.

These international bankers and Rockefeller-Standard Oil interests control the majority of the newspapers and magazines in this country. They use the columns of these papers to club into submission or drive out of office public officials who refuse to do the bidding of the powerful corrupt cliques which compose the invisible government. It operates under cover of a self-created screen [and] seizes our executive officers, legislative bodies, schools, courts, newspapers and every agency created for the public protection.

These international bankers created the central banks of the world (including the Federal Reserve), and they use those central banks to get the governments of the world ensnared in endless cycles of debtfrom which there is no escape.  Government debt is a way to “legitimately” take money from all of us, transfer it to the government, and then transfer it into the pockets of the ultra-wealthy.

Today, Barack Obama and almost all members of Congress absolutely refuse to criticize the Fed, but in the past there have been some brave members of Congress that have been willing to take a stand.  For example, the following quote is from a speech that Congressman Louis T. McFadden delivered to the U.S. House of Representatives on June 10, 1932…

Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks. The Federal Reserve Board, a Government board, has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt. The depredations and iniquities of the Federal Reserve Board has cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it.

Sadly, most Americans still believe that the Federal Reserve is a “federal agency”, but that is simply not correct.  The following comes from factcheck.org…

The stockholders in the 12 regional Federal Reserve Banks are the privately owned banks that fall under the Federal Reserve System. These include all national banks (chartered by the federal government) and those state-chartered banks that wish to join and meet certain requirements. About 38 percent of the nation’s more than 8,000 banks are members of the system, and thus own the Fed banks.

According to researchers that have looked into the ownership of the big Wall Street banks that dominate the Fed, the same names keep coming up over and over: the Rockefellers, the Rothschilds, the Warburgs, the Lazards, the Schiffs and the royal families of Europe.

But ultra-wealthy international bankers have not just done this kind of thing in the United States.  Their goal was to create a global financial system that they would dominate and control.  Just check out what Georgetown University history professor Carroll Quigley once wrote…

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

Sadly, most Americans have never even heard of the Bank for International Settlements, but it is at the very heart of the global financial system.  The following is from Wikipedia…

As an organization of central banks, the BIS seeks to make monetary policy more predictable and transparent among its 58 member central banks. While monetary policy is determined by each sovereign nation, it is subject to central and private banking scrutiny and potentially to speculation that affects foreign exchange rates and especially the fate of export economies. Failures to keep monetary policy in line with reality and make monetary reforms in time, preferably as a simultaneous policy among all 58 member banks and also involving the International Monetary Fund, have historically led to losses in the billions as banks try to maintain a policy using open market methods that have proven to be based on unrealistic assumptions.

The ultra-wealthy have also played a major role in establishing other important international institutions such as the United Nations, the IMF, the World Bank and the WTO.  In fact, the land for the United Nations headquarters in New York City was purchased and donated by John D. Rockefeller.

The international bankers are “internationalists” and they are very proud of that fact.

The elite also dominate the education system in the United States.  Over the years, the Rockefeller Foundation and other elitist organizations have poured massive amounts of money into Ivy League schools.  Today, Ivy League schools are considered to be the standard against which all other colleges and universities in America are measured, and the last four U.S. presidents were educated at Ivy League schools.

The elite also exert a tremendous amount of influence through various secret societies (Skull and Bones, the Freemasons, etc.), through some very powerful think tanks and social clubs (the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, the Bohemian Grove, Chatham House, etc.), and through a vast network of charities and non-governmental organizations (the Rockefeller Foundation, the Ford Foundation, the World Wildlife Fund, etc.).

But for a moment, I want to focus on the power the elite have over the media.  In a previous article, I detailed how just six monolithic corporate giants control most of what we watch, hear and read every single day.  These giant corporations own television networks, cable channels, movie studios, newspapers, magazines, publishing houses, music labels and even many of our favorite websites.

Considering the fact that the average American watches 153 hours of television a month, the influence of these six giant corporations should not be underestimated.  The following are just some of the media companies that these corporate giants own…

Time Warner

Home Box Office (HBO)
Time Inc.
Turner Broadcasting System, Inc.
Warner Bros. Entertainment Inc.
CW Network (partial ownership)
TMZ
New Line Cinema
Time Warner Cable
Cinemax
Cartoon Network
TBS
TNT
America Online
MapQuest
Moviefone
Castle Rock
Sports Illustrated
Fortune
Marie Claire
People Magazine

Walt Disney

ABC Television Network
Disney Publishing
ESPN Inc.
Disney Channel
SOAPnet
A&E
Lifetime
Buena Vista Home Entertainment
Buena Vista Theatrical Productions
Buena Vista Records
Disney Records
Hollywood Records
Miramax Films
Touchstone Pictures
Walt Disney Pictures
Pixar Animation Studios
Buena Vista Games
Hyperion Books

Viacom

Paramount Pictures
Paramount Home Entertainment
Black Entertainment Television (BET)
Comedy Central
Country Music Television (CMT)
Logo
MTV
MTV Canada
MTV2
Nick Magazine
Nick at Nite
Nick Jr.
Nickelodeon
Noggin
Spike TV
The Movie Channel
TV Land
VH1

News Corporation

Dow Jones & Company, Inc.
Fox Television Stations
The New York Post
Fox Searchlight Pictures
Beliefnet
Fox Business Network
Fox Kids Europe
Fox News Channel
Fox Sports Net
Fox Television Network
FX
My Network TV
MySpace
News Limited News
Phoenix InfoNews Channel
Phoenix Movies Channel
Sky PerfecTV
Speed Channel
STAR TV India
STAR TV Taiwan
STAR World
Times Higher Education Supplement Magazine
Times Literary Supplement Magazine
Times of London
20th Century Fox Home Entertainment
20th Century Fox International
20th Century Fox Studios
20th Century Fox Television
BSkyB
DIRECTV
The Wall Street Journal
Fox Broadcasting Company
Fox Interactive Media
FOXTEL
HarperCollins Publishers
The National Geographic Channel
National Rugby League
News Interactive
News Outdoor
Radio Veronica
ReganBooks
Sky Italia
Sky Radio Denmark
Sky Radio Germany
Sky Radio Netherlands
STAR
Zondervan

CBS Corporation

CBS News
CBS Sports
CBS Television Network
CNET
Showtime
TV.com
CBS Radio Inc. (130 stations)
CBS Consumer Products
CBS Outdoor
CW Network (50% ownership)
Infinity Broadcasting
Simon & Schuster (Pocket Books, Scribner)
Westwood One Radio Network

NBC Universal

Bravo
CNBC
NBC News
MSNBC
NBC Sports
NBC Television Network
Oxygen
SciFi Magazine
Syfy (Sci Fi Channel)
Telemundo
USA Network
Weather Channel
Focus Features
NBC Universal Television Distribution
NBC Universal Television Studio
Paxson Communications (partial ownership)
Trio
Universal Parks & Resorts
Universal Pictures
Universal Studio Home Video

And of course the elite own most of our politicians as well.  The following is a quote from journalist Lewis Lapham…

“The shaping of the will of Congress and the choosing of the American president has become a privilege reserved to the country’s equestrian classes, a.k.a. the 20% of the population that holds 93% of the wealth, the happy few who run the corporations and the banks, own and operate the news and entertainment media, compose the laws and govern the universities, control the philanthropic foundations, the policy institutes, the casinos, and the sports arenas.”

Have you ever wondered why things never seem to change in Washington D.C. no matter who we vote for?

Well, it is because both parties are owned by the establishment.

It would be nice to think that the American people are in control of who runs things in the U.S., but that is not how it works in the real world.

In the real world, the politician that raises more money wins more than 80 percent of the time in national races.

Our politicians are not stupid – they are going to be very good to the people that can give them the giant piles of money that they need for their campaigns.  And the people that can do that are the ultra-wealthy and the giant corporations that the ultra-wealthy control.

Are you starting to get the picture?

There is a reason why the ultra-wealthy are referred to as “the establishment”.  They have set up a system that greatly benefits them and that allows them to pull the strings.

So who runs the world?

They do.  In fact, they even admit as much.

David Rockefeller wrote the following in his 2003 book entitled “Memoirs”…

“For more than a century, ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure — one world, if you will. If that is the charge, I stand guilty, and I am proud of it.”

There is so much more that could be said about all of this.  In fact, an entire library of books could be written about the power and the influence of the ultra-wealthy international bankers that run the world.

But hopefully this is enough to at least get some conversations started.

So what do you think about all of this?  Please feel free to post a comment with your thoughts below…

If there is one country in the world that you would not want to live in, it would be North Korea.  Unfortunately, the United States of America is becoming more like North Korea with each passing day.  North Korea is a totalitarian police state hellhole where the state rules supreme, the “leader” is lavishly worshipped, no dissent is tolerated, and the government micromanages everything.  America is supposed to be the opposite of that, but now Barack Obama is implementing his version of “change” and he has promised to engage in the “remaking” of this nation and to transform it “brick by brick“.  A tremendous “cult of personality” has been built up around Obama, and under his leadership the U.S. government has become larger and more repressive than ever before.  But do we really want to “change” America so that it more closely resembles totalitarian regimes such as North Korea, communist China, the Soviet Union and Nazi Germany?  After all, all of those regimes have a nightmarish history of brutality and death.  Even today, there are starving North Koreans that are eating their own children.  Is that really where we want to end up as a nation?

The truth is that we desperately need to take America in the opposite direction of where Barack Obama is trying to take us.  We need a much smaller federal government, a much greater emphasis on freedom and liberty, a return to true free market capitalism, and politicians that are willing to take a low profile and that are actually there to serve the American people.

But what we need and what we are getting are two very different things.

The following are 22 signs that Barack Obama is transforming America into a larger version of North Korea…

#1 Obama has appointed numerous socialists and communists to important positions in his administration.  The following are just a few examples that were highlighted in a recent article by John Perazzo…

• Obama named Van Jones, a longtime revolutionary communist who famously declared that “we [are] gonna change the whole [economic] system,” as his “green jobs czar” in 2009;
• he appointed Carol Browner, a former “commissioner” of the Socialist International, as his “environment czar”;
• he appointed John Holdren, who not only views capitalism as a system that is inherently destructive of the environment, but strongly favors the redistribution of wealth, both within the U.S. and across international borders, as his “science czar”;
• he named Hilda Solis, a former officer of the Congressional Progressive Caucus (the socialist wing of the House of Representatives), as his labor secretary;
• and he chose Anita Dunn, a woman who has cited Mao Zedong as one of her “favorite political philosophers,” to serve as White House communications director.

#2 As Paul Roderick Gregory demonstrated in an outstanding article for Forbes, Barack Obama’s economic agenda matches the November 2011 Declaration of Principles of the Party of European Socialists almost point for point.

#3 If a totalitarian regime is going to be successful, it needs a massive government bureaucracy to run things.  Today, the number of employees of the federal government is roughly equivalent to the entire population of the United States in 1776.

#4 In North Korea, dissent is brutally repressed.  In the United States, we have continued to move rapidly in that direction under Barack Obama.  In a recent article entitled “Obama’s War On Whistleblowers“, author Stephen Lendman wrote the following…

He said one thing. He did another. As president, he usurped diktat powers. He wages war on truth. He targets whistleblowers. He prioritizes surveillance powers.

They include warrantless wiretapping, accessing personal records, monitoring financial transactions, and tracking emails, Internet and cell phone use. It’s done lawlessly to gather secret evidence for prosecutions.

In his book “Necessary Secrets,” Gabriel Schoenfeld said he “presided over the most draconian crackdown on leaks in our history – even more so than Nixon.”

Rhetorically he supports civil liberties and transparency. “Such acts of courage and patriotism….should be encouraged rather than stifled,” he said.

At the same time, he betrayed the public trust. He targets free expression and dissent. He pursues police state prosecutions and intimidation.

He claims Justice Department immunity from illegal spying suits. He exceeds the worst of all previous administrations.

His national security state targets activists, political dissidents, anti-war protestors, Muslims, Latino immigrants, lawyers who defend them, whistleblowers, and investigative journalists.

Law Professor Jack Balkin expressed alarm, saying:

“We are witnessing the bipartisan normalization and legitimation of a national surveillance state.” Obama exceeded the worst of George Bush.

#5 Under Obama, the United States has been developing “Big Brother” surveillance technologies that dictators of the past never even dreamed were possible.  For example, a very highly sophisticated surveillance grid known as “Trapwire” is being installed in major cities and at “high value targets” all over the country.  Sadly, the mainstream media has not covered this at all, and most Americans still do not even realize that it exists.

#6 Under Obama, unmanned aerial vehicles are not just used for war anymore.  Police departments are now starting to deploy surveillance drones in the skies over their cities all over the nation.  In fact, this is something that the federal government is greatly encouraging.

#7 It was the Obama administration that came up with the “See Something, Say Something” campaign.  Now the federal government has even created an iPhone app that is designed to encourage all of us to take photos of “suspicious activity” and report our neighbors to the authorities.

#8 It was the Obama administration that first instituted “enhanced pat-downs” by TSA thugs at our airports.  As a result, countless numbers of men, women and children have had horrific experiences that they will remember for the rest of their lives.  You can read some of their horror stories right here.

#9 The U.S. military now has the authority to arrest American citizens and hold them indefinitely without trial.  The Obama administration has no problem with this horrible abuse of power.

#10 A key Obama ally in the U.S House of Representatives, Congressman José Serrano of New York, has introduced a measure that would repeal the 22nd Amendment of the U.S. Constitution so that Barack Obama can continue to run for additional terms as president after his second term ends.

#11 The “cult of personality” that has built up around Barack Obama is getting quite ridiculous.  Shortly after he won the recent election, actor Jamie Foxx referred to Barack Obama as “our Lord and Savior Barack Obama” during a television broadcast of the 2012 Soul Train Awards in Las Vegas, Nevada.  Such “leader worship” would fit in very well in North Korea.

#12 Since Obama won in November, there has been an increasing number of incidences in which Obama has been referred to in religious terms.  For example, a recent Newsweek article referred to Barack Obama’s second term as “The Second Coming“.

#13 A painting by artist Michael D’Antuono that is now on display at Boston’s Bunker Hill Community College Art Gallery recently made headlines all over the United States.  In the painting, Barack Obama is wearing a crown of thorns on his head and his arms are stretched out as if he was being crucified.  In the background of the painting is the presidential seal…

#14 Relentless praise from the mainstream media played a huge role in each of Obama’s election victories.  The mainstream media is supposed to be objective, but there have been reports of members of the media “swooning” in his presence, and most mainstream news broadcasts leave little doubt that Obama is the “good guy” and anyone opposed to him is the “bad guy”.

#15 The Obama organization has tirelessly gathered data on potential voters.  At this point, the amount of information that the Obama campaign has compiled on the American people is absolutely frightening…

If you voted this election season, President Obama almost certainly has a file on you. His vast campaign database includes information on voters’ magazine subscriptions, car registrations, housing values and hunting licenses, along with scores estimating how likely they were to cast ballots for his reelection.

#16 The Communist Party USA is cheering on Barack Obama’s efforts to disarm the American people.  According to one of their official publications, “the ability to live free from the fear or threat of gun violence is a fundamental democratic right — one that far supercedes any so-called personal gun rights allegedly contained in the Second Amendment.”

#17 Under Obama, the federal government is intruding in our personal lives like never before.  The following example is from a recent RT article…

Smokers, beware: tobacco penalties under President Obama’s Affordable Care Act could subject millions of smokers to fees costing thousands of dollars, making healthcare more expensive for them than Americans with other unhealthy habits.

The Affordable Care Act, which critics have also called “Obamacare”, could subject smokers to premiums that are 50 percent higher than usual, starting next Jan 1. Health insurers will be allowed to charge smokers penalties that overweight Americans or those with other health conditions would not be subjected to.

A 60-year-old smoker could pay penalties as high as $5,100, in addition to the premiums, the Associated Press reports. A 55-year-old smoker’s penalty could reach $4,250. The older a smoker is, the higher the penalty will be.

#18 Just as in North Korea, our lives are being increasingly micromanaged by a government that is packed with control freaks.  At this point they even are telling us what kind of light bulbs we are allowed to buy.

#19 Federal agencies have become increasingly brutal under Obama.  For example, if you milk your cow and sell some of that milk to your neighbor next door, you could end up having your home raided by federal agents.

#20 Obama has gone to great lengths to demonize his opposition.  Since he has been president, numerous government papers, studies and reports have been released that identify groups of people that are opposed to Obama as “potential terrorists”.  Some of the groups targeted as “potential terrorists” include those that “revere individual liberty”, “conspiracy theorists”, “returning veterans”, anti-abortion activists, those that visit “extremist websites”, those that are “fiercely nationalistic”, those that “believe in the right to bear arms”, anyone that is opposed to illegal immigration, anyone that is anti-UN, and anyone that is “suspicious of centralized federal authority”.  For much more on this, please seethis article.

#21 Obama’s abuse of power is not just limited to the United States.  The truth is that he has increasingly been acting like some type of imperial ruler that gets to tell everyone else in the world what they are supposed to do.  For example, according to a recent WND article Obama has actually promised to give eastern Jerusalem to the Palestinians even though Israel has already said that they will agree to no such thing…

Now that he has secured his second term, President Barack Obama has already secretly pledged to the Palestinians he will press Israel into a new round of so-called land-for-peace negotiations, a top Palestinian Authority negotiator told WND.

The negotiator said top members of the Obama administration told the Palestinians the U.S. president will renew talks aimed at creating a Palestinian state in the so-called 1967 borders – meaning in the West Bank, Gaza Strip and, notably, eastern Jerusalem.

#22 Many Obama supporters are becoming enamored with the idea that we should either start ignoring the Constitution or that we should get rid of it entirely.  For example, Georgetown law professor Louis Michael Seidmanrecently appeared on CBS and said the following to the American people…

“I’ve got a simple idea: Let’s give up on the Constitution. I know, it sounds radical, but it’s really not.”

Hey, if we got rid of the pesky Constitution, we could have a dictatorship just like North Korea does!

Barack Obama could be our king, our lord and our savior for decades!

Of course I am being sarcastic, but this is the kind of dangerous thinking that leads to tyranny.

Let us learn the hard lessons that history has tried to teach us.  We don’t want to go down the same path that North Korea, Nazi Germany, the Soviet Union, and communist China have traveled.

There is an absolutely amazing National Geographic documentary that shows what life is like inside North Korea.  You can view it on YouTube right here.  We don’t want our children and our grandchildren to someday live in a nation like that.

Freedom and liberty are precious things.  They are very hard to win, and they are very easy to lose.

Let us not be the generation that loses everything that our forefathers worked so hard to build.

By John Persinos (Investing Daily | Original Link)

Considered by posterity as the quintessential “oil baron,” John D. Rockefeller had amassed a fortune in today’s dollars of nearly $210 billion when he died in 1937. He holds the record as the richest American ever and certainly one of recorded history’s richest persons this side of Croesus.

For generations, the Rockefeller surname has been synonymous with vast wealth. How did he reach the pinnacle of capitalist success? By accumulating undervalued energy investments that exponentially appreciated in price as they went on to dominate their markets.

Despite the continual search for alternative fuels, we still live in the Hydrocarbon Era and oil remains the lifeblood of modern industrial society. It’s the prize coveted by nations and businesses, ever since Rockefeller and his Standard Oil Company mastered the art of exploiting black gold at the turn of the last century.

Global oil demand is exploding around the world, making the energy sector a huge investment opportunity this year and beyond. According to the BP Statistical Review of World Energy, global oil consumption reached 88 million barrels per day (bpd) in 2012.

The International Energy Agency (IEA) projects that global oil demand will increase by another 7 million bpd by 2020. The IEA also estimates that by 2030 the oil reserve equivalent of four Saudi Arabias will need to be discovered and tapped, merely to keep pace with the world’s appetite for oil.

If you’re seeking the next “Rockefeller stock,” look in an unlikely place: the continent of South America. Colombia-based Ecopetrol SA (NYSE: EC, BVC: ECOPETROL) is an up-and-coming company that’s positioned to exert near-monopoly power amid booming, long-term demand.

In November 2007, Ecopetrol launched an initial public offering on the Colombian Stock Exchange (BVC), which raised 5.7 trillion Colombian Pesos (COP), or USD2.8 billion, from the sale of a 10.1 percent stake.

Ecopetrol has been on an upward trajectory ever since. The company temporarily dethroned Brazil’s Petrobras SA (NYSE: PBR, PBR A) last year to become the largest company by market cap in South America, according to Platt’s 2012 “Top 250 Global Energy Company Rankings.” (Petrobras has since resumed its dominant position with a market cap of $128 billion, compared to Ecopetrol’s $118 billion.) Ecopetrol also ranks as one of the top 50 oil companies in the world.

Despite Ecopetrol’s rapid ascent, Colombia is largely shunned by investors because of the country’s reputation as a socio-political basket case. Riven by a War on Drugs in tandem with a bloody civil conflict, the country has been symbolic of everything wrong with the Latin American region.

But that’s all changing. This beleaguered country is finally on the track to recovery, with an increasingly sophisticated economy and a government that has transitioned from “banana republic” to a parliamentary democracy that emphasizes human rights.

Colombia is now intent on leveraging its greatest economic strength: oil and gas. Colombia may be stained with a bloody history, but the country’s oil production growth over the past 30 years has been a regional success story.

Today, Colombia is the third-largest Latin American exporter of oil to the US, a statistic that would surprise many people. Considerable oil exploration in Colombia remains to be conducted offshore and in the dense Andean interior. Colombia’s energy officials last year determined that the country was home to about 2 billion barrels of proven crude oil reserves, up from an estimated 1.9 billion barrels in 2011.

According to the latest statistics from the US Energy Information Administration (EIA), Columbia produced about 940,000 bpd in 2011, compared to a little over 100,000 bpd in 1980 (see graph, below). Early EIA estimates peg the number at 1.2 million bpd in 2012.

Colombia’s Gushing Oil Production

Source: US Energy Information Administration

Partly government owned, Ecopetrol is by far Colombia’s largest oil company, with plans to double its output by 2020. The company now pumps an average of 780,000 bpd, accounting for 60 percent of Colombia’s total production.

Ecopetrol is expanding its exploration and production footprint in Peru, Brazil, and the US Gulf Coast. The company also owns the main refineries in Colombia, and the majority of the country’s oil pipelines and petrochemical plants.

The Peace Dividend

Ecopetrol is benefiting from newly initiated peace talks between Colombia’s government and the Revolutionary Armed Forces of Colombia, or FARC. The peace process is the first in more than a decade and aims to end 50 years of bloody internecine war.

In late 2012, Ecopetrol officials reported a major decline in attacks by Colombian rebel groups on oil pipelines and other infrastructure, which will enable the company to maintain pumping rates with scant disruption.

One of the company’s key impediments has been its inability to efficiently transfer oil from its fields in eastern and interior Colombia to transshipment points along the coast. As a remedy, Ecopetrol constructed a USD4 billion pipeline to carry oil from these remote areas of the country to its Caribbean ports.

The company also is creating the necessary infrastructure to ship across the Pacific, to supply the insatiable energy demands of developing markets such as China and India.

Ecopetrol reported that revenues, operating income, EBITDA and earnings in the nine-month period ended September 30, 2012, increased by 10.0 percent, 3.7 percent, 4.1 percent and 2.3 percent, respectively, compared to the first nine months of 2011.

The company reported that third-quarter 2012 revenue reached USD9 billion, up 1.2 percent compared to the same period a year ago. However, earnings came in at USD1.8 billion, a drop of 12 percent quarter-over-quarter and 22 percent year-over-year. It should be noted, though, that the earnings decline largely stemmed from investments that will hold the company in good stead in 2013.

In 2012, the company unveiled an ambitious investment plan for 2013, with total expenditures of USD9.5 billion, for a production target of one million clean barrels by 2015 and 1.3 million by 2020. Ecopetrol’s estimated average production for 2013, including interests in affiliates and subsidiaries, is 798,000 bpd.

With a trailing price-to-earnings (P/E) ratio of only about 14, the company’s stock is a bargain considering its growth prospects and virtually unassailable position in the increasingly prosperous and peaceful region.

This Latin oil stock may not make you as rich as the Rockefeller paterfamilias, but it’ll likely pump significant gains into your portfolio.

John Persinos is managing director of Investing Daily, parent web site for The Energy Strategist.

By Louis Basenese (Wall Street Daily | Original Link)

Last week, I encouraged you to embrace the possibility that the U.S. economy might actually be gaining momentum.

I know. It’s not exactly a popular stance.

But lo and behold, in the short time that’s passed since then, even more evidence emerged in support of such a contrarian viewpoint.

Let me share it with you – and explain why it matters.

Then, I’m singling out the two earnings reports to focus on this week. Each promises to provide critical intelligence regarding how much of a positive surprise we can expect for U.S. GDP growth in 2013.

Without further ado…

Out With the Old

I previously predicted that the economy is overdue for a boost, as consumers and businesses begin replacing old “stuff” like cars, appliances, heavy equipment and furniture.

Guess what? The latest data suggests that the replacement cycle is upon us!

On Monday, the Commerce Department reported that durable goods orders increased 4.6%. Once again, economists’ forecasts look sillier than weathermen’s. (The median forecast of 76 economists surveyed by Bloomberg called for a mere 2% increase.)

Lest you think the monthly uptick is an anomaly, the increase capped the first four-month gain in durable goods since 1992. So it’s legit.

Or as Barclays PLC (BCS) economist, Peter Newland, told Bloomberg, demand is “back on track.” I’d say so.

And the more it picks up, the more likely that U.S. GDP is going to come in higher than expected. (Remember, economists only expect 2% growth this year.)

No Lack of Earnings Surprises, Either

As you know, the earnings reporting season is in full swing. And the latest stats confirm that an uptick in demand is materializing across multiple sectors, not just durable goods.

Case in point: The earnings “beat rate” (the percentage of companies topping analysts’ earnings estimates) increased from 59% to 63.9% in the last week.

Even better, the revenue “beat rate” (the percentage of companies topping analysts’ sales estimates) now rests at 60.8%.

That’s a country mile higher than last quarter’s revenue beat rate of 48.2%, and the surest sign that demand is picking up across the board.

Keep An Eye on Pickups and Tablets

If the trend of better-than-expected reports continues, I bet you dollars to donuts that economists will be revising their GDP growth forecasts to the upside.

The two companies I’ll be watching closely this week are Ford (F), which reports before the opening bell today, and Amazon (AMZN), which reports after the bell today.

As I told you last week, small business owners account for the majority of pickup truck purchases. And small businesses are an undeniable driver of U.S. economic growth. So any further signs of strength from Ford bode well for the economy.

Meanwhile, Amazon’s status as the King of Online Retail makes its results a strong proxy for consumer spending habits, which is another key driver of economic growth.

Bottom line: Analysts and economists remain too downbeat on the economy. That’s no longer just a contrarian hunch. The latest data proves it, as more and more reports keep coming in well ahead of expectations.

I recommend tracking the situation in the coming weeks. Why? Because stronger GDP growth only increases the prospects for stock prices.

Ahead of the tape,

Louis Basenese

You can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.  When the Federal Reserve does more “quantitative easing”, it is the financial markets that benefit the most.  The Dow and the S&P 500 have both hit levels not seen since 2007 this month, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?  Of course not.  Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding.  So quantitative easing has definitely not made things better for the middle class.  But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs and luxury estates in the Hamptons are selling briskly.  Unfortunately, this is how things work in America these days.  Our “leaders” seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

When QE3 was announced, it was heralded as the grand solution to all of our economic problems.  But the truth is that those running things knew exactly what it would do.  Quantitative easing always pumps up the financial markets, and that overwhelmingly benefits those that are wealthy.  In fact, a while back a CNBC article discussed a very interesting study from the Bank of England which showed a clear correlation between quantitative easing and rising stock prices…

It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”

So should we be surprised that stocks are now the highest that they have been in more than 5 years?

Of course not.

And who benefits from this?

The wealthy do.  In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Unfortunately, all of this reckless money printing has a very negative impact on all the rest of us.  When the Fed floods the financial system with money, that causes inflation.  That means that the cost of living has gone up even though your paycheck may not have.

If you go to the supermarket frequently, you know exactly what I am talking about.  The new “sale prices” are what the old “regular prices” used to be.  They keep shrinking many of the package sizes in order to try to hide the inflation, but I don’t think many people are fooled.  Our food dollars are not stretching nearly as far as they used to, and we can blame the Federal Reserve for that.

For much more on rising prices in America, please see this article: “Somebody Should Start The ‘Stuff Costs Too Much’ Party“.

Sadly, this is what the Federal Reserve does.  The system was designed to create inflation.  Before the Federal Reserve came into existence, the United States never had an ongoing problem with inflation.  But since the Fed was created, the United States has endured constant inflation.  In fact, we have come to accept it as “normal”.  Just check out the amazing chart in the video posted below…

The chart in that video kind of reminds me of a chart that I shared in aprevious article…

Not that I expect the United States to enter a period of hyperinflation in the near future.

Actually, despite all of the reckless money printing that the Fed has been doing, I expect that at some point we are going to see another wave of panic hit the financial markets like we saw back in 2008.  The false stock market bubble will burst, major banks will fail and the financial system will implode.  It could unfold something like this…

1 – A derivatives panic hits the “too big to fail” banks.

2 – Financial markets all over the globe crash.

3 – The credit markets freeze up.

4 – Economic activity in the United States starts to grind to a halt.

5 – Unemployment rises above 20 percent and mortgage defaults soar to unprecedented levels.

6 – Tax revenues fall dramatically and austerity measures are implemented by the federal government, state governments and local governments.

7 – The rest of the globe rapidly loses confidence in the U.S. financial system and begins to dump U.S. debt and U.S. dollars.

I write about derivatives a lot, because they are one of the greatest threats that the global financial system is facing.  In fact, right now a derivatives scandal is threatening to take down the oldest bank in the world…

Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.

But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.

So when you hear the word “derivatives” in the news, pay close attention.  The bankers have turned our financial system into a giant casino, and at some point the entire house of cards is going to come crashing down.

In response to the coming financial crisis, I believe that our “leaders” will eventually resort to money printing unlike anything we have ever seen before in a desperate attempt to resuscitate the system.  When that happens, I believe that we will see the kind of rampant inflation that so many people have been warning about.

So what do you think about all of this?

Do you believe that Federal Reserve money printing is the real reason why the stock market is soaring?

Please feel free to post a comment with your thoughts below…

By Eric Peters (SHTFPlan.com | Original Link)

In New York, we have a prequel of what’s to come – the repeal of the Second Amendment and summary criminalization of peaceful citizens merely for possessing the means of self-defense, even in their own homes. As in Great Britain, citizens of NY  face prison if they use proscribed weapons against murderous thugs – even in their own homes. The tyrants Michael Bloomberg and Andrew Cuomo have made their decision. Now New Yorkers will have to make theirs. And so will the rest of us – if, as seems likely, the federal tyrants succeed in issuing a New York-style fatwa that applies to the rest of the country. Which brings us to the question:

What will you do?

It is a very hard question. Perhaps the hardest question Americans have had to face since 1861. As then, there may be no peaceful way to preserve our rights. There may be blood. As then, one side is absolutely determined to impose its will at bayonet-point. To murder us in the thousands – perhaps millions, this time -  if we refuse to submit. There is no reasoning, no discussing. What we face is violence against our persons by people who absolutely will not leave us in peace – no matter how peaceful we try to be – until we have submitted to them utterly and for all time to come. We wish only to be left alone – and demand that our right to defend ourselves against those who will not leave us alone be respected. That self-defense is the most basic of rights – a right conceded even to the lowest animal. They do not acknowledge our rights; they despise the very notion of us having any rights at all. They regard their power over us as limitless in principle – and rage at even the smallest assertion of freedom of action. They loathe our guns because our ownership of guns is an expression of our determination to defend our very lives – and thus, of self-ownership.

And that is what cannot be tolerated. Which is why the current bum-rush to disarm us has become absolutely frantic. The moment is at hand. We will either stand up and be reckoned with as free men – or we will sit down forever and accept any degradation, any humiliation. And in that case, we shall have proved worthy of such treatment. Future generations will look upon us with the same mixture of incomprehension and contempt that our generation looked upon those who meekly lined up naked in queue for their turn at the edge of the pit. Because it will come to that, in time.

For decades, in a slow and incremental way, they have progressively increased their claims on us. On the most intimate details of our private lives. On our literal bodies and those of our children. We no longer enjoy even the vestigial liberty of being free in our own homes. They are everywhere. They recognize no limits, no boundary beyond which they may not assert themselves over us. They read and record our conversations. They demand to know the minutia of our finances. They tell us with whom we must do business – and under what conditions. They lay claim to an unlimited amount of our income. They deny us even the prospect of real ownership of anything more than the clothes on our backs. They assert their “right” – that is, their unchecked power to do us violence – for any and no reason at all, beyond the reason that they have power and we do not. We are on the cusp now of literal, physical enslavement. Of being owned – because we are about to be rendered utterly defenseless.

Legally rendered defenseless.

If that is not just cause for resistance, then there is no cause for resisting anything, ever. Which is exactly the point being insisted upon: That we have no right to resist, because we have no rights. It is our role to Submit and Obey. Immediately, quietly. To anything and everything they tell us to do. To complacently accept as natural and right that our lives are the playthings of others – who may do with us as they please. That our lives do not matter. Because we do not own our lives.

Our lives are owned by them.

If we lose this battle, then we have already lost the war. The rest will be a mopping up operation. Having taken away not merely our guns but succeeded in intellectually defrocking us of the principle of self-defense and self-ownership that possessing arms affirms, it will be a very small thing indeed to take away much else besides.To take away anything – perhaps everything. Why not? We have already surrendered – and thus, already accepted the idea that nothing is off limits, that whatever small measure of vestigial liberty we may still possess is not actually possessed but merely tolerated . . . for the moment. And may be taken from us at any time, at their whim.

A defenseless man should expect no mercy. And a man unwilling to defend himself – and his fellow men – against tyranny deservesnone.

Michael Bloomberg and Andrew Cuomo have made their decision. Diane Feinstein and Barack Obama will soon make theirs.

Then it will be our turn.

I have already made mine. It is the same decision made by Joshua Boston (USMC):

“I will not register my weapons…

“I am not your subject…

“I am not your peasant… .”

I am not a “tough guy.” I am not looking for a fight. Rather, I desperately wish to avoid one. I’m a middle-aged American just trying to live my life, work, enjoy my pastimes and my friends and family. To be an American. A free American. I dearly value my life. Which is precisely why,  if I am backed into a corner by those who refuse to leave me be – even though I harm none – then I will turn and fight. God help me.

God help us all.

Eric Peters is an automotive columnist and author who has written for the Detroit News and Free Press, Investors Business Daily, The American Spectator, National Review, The Chicago Tribune and Wall Street Journal. His books include Road Hogs (2011) and  Automotive Atrocities (2004). His next book, “The Politics of Driving,” is scheduled for release soon. Visit his web site at Eric Peters Autos.

By Mark Lin (GuruFocus | Original Link)

Kid Brands. Inc (KID) is a leading designer, importer, marketer and distributor of innovative and fashion-led branded infant and juvenile consumer products across multiple price points, with products focused on newborns to children up to three years of age. Its design-led products are primarily distributed through mass market, baby super stores, specialty, food, drug, independent and e-commerce retailers worldwide. KID’s current operating subsidiaries consist of: Kids Line, LLC; LaJobi Inc; Sassy Inc.; and CoCaLo Inc. Through these wholly-owned subsidiaries, it designs, manufactures (through third parties) and markets branded infant and juvenile products in a number of complementary categories including, among others: infant bedding and related nursery accessories and décor, food preparation and nursery appliances, and diaper bags (Kids Line and CoCaLo); nursery furniture and related products (LaJobi); and developmental toys and feeding, bath and baby care items with features that address the various stages of an infant’s early years (Sassy). In addition to its branded products, KID also markets certain categories of products under various licenses, including Carter’s, Disney, Graco and Serta.

Guru and Insider Alerts
Chuck Royce, currently holds 1,330,950 of KID’s shares and added to his position in the fourth quarter of 2012 with a purchase of 240,100 shares at an average price of $1.55. In the third quarter of 2012, Executive Chairman and Acting CEO, Raphael Benaroya, bought 250,000 shares in KID at an average purchase price of $1.55.

Valuation
KID currently trades at a P/B of 0.91, a 29% discount to its five year average P/B of 1.29.

KID Historical P/B Valuation

KID has a dismal historical earnings track record with losses in five out of the last 10 years. This is in sharp contrast to its consistent cash flow generation, with positive operating cash flow and positive free cash flow in almost every single year in the past decade, except for 2004. KID’s gross margin has declined in every year for the past ten years, falling from 54% in fiscal 2002 to 14% in fiscal 2012. Gross margin 2011 was adversely affected by increased labor and raw materials costs in the PRC, the appreciation of the Chinese Yuan against the U.S. dollar and pressure from major retailers to offer additional mark-downs and other credits or price concessions.

KID Earnings-Cash Flow Comparison

KID Profit Margins Analysis

Financial and Business Risks
KID is moderately geared with a debt-to-equity ratio of 43%. Historically, it also does not hold much excess cash on its books.

KID Cash-Debt-Market Capitalization Comparison

KID faces significant customer concentration risk, with Toys “R” Us Inc. and Babies “R” Us Inc., Wal-Mart (WMT) and Target (TGT) accounted for approximately 39.8%, 12.7% and 8.8%, respectively, of its consolidated gross sales for the 2011 calendar year. Large retailers could potentially have a large impact on KID’s business, through actions such as store closings, import of products directly from factory sources and sell products under their own private label brands, or the imposition of stricter requirements for infant and juvenile products.

On the supply side, 74% of KID’s dollar volume of purchases in 2011 were attributable to manufacturers in the PRC. The largest supplier accounted for approximately 24% and the five largest suppliers accounted for approximately 48% of 2011 fiscal sales.

KID is currently party to litigation that could be costly to defend and distracting to management, including a class action lawsuit, a putative shareholder derivative complaint, U.S. Consumer Product Safety Commission staff investigation and an arbitration proceeding involving a former employee.

KID markets a significant portion of its products through third party licenses, with sales of licensed products representing 45% of its fiscal 2011 sales. These license agreements are generally limited in scope and duration and often require KID to make minimum guaranteed royalty payments.

KID is going through a transition phase with changes in management. On Sept. 12, 2012, KID announced the appointment of Kerry Carr as Executive Vice President and Chief Operating Officer; she has been serving as an operational consultant to KID Brands for the last few months prior to her appointment and has served in various senior level executive positions with Avon Products Inc. from 2003 to April 2012. Renee Pepys Lowe, the founder and ex-President of CoCaLo. returned as President of Kids Line LLC and CoCaLo Inc., KID’s subsidiaries. It also announced the resignation of David C. Sabin as President of Kids Line and CoCaLo, who held the position of President of Kids Line since January 2010 and CoCaLo since September 2010.

KID faces problems maintaining its listed status. On Dec. 20, 2012, KID announced that it has notified the NYSE that it intends to submit, no later than Jan. 28, 2013, a plan that it believes will demonstrate its ability to attain compliance, within 18 months, with the continued listing standards of the NYSE. KID fell short of meeting a NYSE continued listing standard because its average market capitalization was less than $50 million for a 30 trading-day period and its total stockholders’ equity was less than $50 million. Its shareholder equity fell to $40.5 million, primarily as a result of a $45 million increase in KID’s non-cash valuation allowance for deferred tax assets recorded during the quarter ended Sep. 30, 2012.

Business Quality and Capital Allocation

The infant and juvenile industry, in which KID operates in, is large and growing. Approximately more than half of KID’s products are in categories belonging to baby durables or “must haves” that are recession resistant. Older parents, the increasing proportion of first time births and more grandparents, the second largest group of baby durables, are expected to drive consumer spending in the industry.

By virtue of its operating model, KID generates strong cash flow, validated by an excellent track record of positive free cash flow in nine out of the last 10 years. KID has low capital expenditure requirements and plans and limited seasonal working capital needs.

Notwithstanding the losses, KID has successfully minimized working capital utilization, with inventory and receivable days showing a positive downward trend over the years.

KID Inventory and Receivable Days

Since 2006, KID has stopped paying out dividends to shareholders.

Conclusion

The relative under-valuation of the stock, coupled with recent guru and insider buying, does not sufficiently compensate for the huge risks involved with KID, in my opinion.

Disclosure
The author does not have a position in any of the stocks mentioned.

By Louis Basenese (Wall Street Daily | Original Link)

In the past few weeks, scientific-testing equipment company, Agilent (A), announced a $500-million stock buyback.

Metal components and products maker, Precision Castparts (PCP), unveiled a $750-million stock repurchase program.

Not to be outdone, khaki pants maker for the masses, Gap (GPS), announced a $1-billion repurchase program.

Shareholders should be rejoicing, right? After all, stock buybacks imply that management believes their stock is cheap. And cheap is good.

More significantly, conventional wisdom holds that stock buybacks reduce the total number of shares outstanding. And if you spread earnings over fewer shares – voila! – earnings per share increases, making the stock more valuable.

The only problem? Conventional wisdom isn’t always right. And in honor of Myth-Busting Monday, it’s time to prove why stock buybacks aren’t always bullish.

Less Than Meets the Eye

Riddle me this…

If stock buybacks reduce shares outstanding, then how is it that (according to Dow Jones Indices) the 500 largest U.S. companies spent roughly $1 trillion on share purchases since 1998 – and yet the actual number of shares outstanding grew by 7% over that period?

Or that, despite record periods of stock purchases, FactSet noted a 2.7% year-over-year quarterly increase in share counts for S&P 500 companies going back to 2005.

The number crunchers must have made a mistake, right? Nope.

It’s just simple math. Although companies repurchased gobs of stock over each respective period, they ended up issuing more than they bought back.

Some shares could have been issued to fund an acquisition, or to raise additional capital via a secondary offering. And more still could have been issued to provide shares for employees exercising stock option grants.

Long story short, as Andrew Lapthorne, Head of Quantitative Analysis at Société Générale, says, “Share buybacks get misinterpreted. Many people see them as a return to shareholders.” When, in actuality, many serve to prevent a dilution of shareholders.

The takeaway? Before we blindly consider a buyback announcement a bullish indicator, we need to dig deeper.

Here’s why…

Trust, But Verify

Even if a company announces a buyback, it’s not required to follow through. And a meaningful amount of executives renege (about 25% each year since 1985, according to Birinyi Associates data).

Accordingly, we should verify management’s track record of making good on their buyback promises. It’s easy to do so at Morningstar.com. The site allows us to view five years’ (or five quarters’) worth of “weighted average shares outstanding.”

If that number is flat or rising, management is either not following through, or they’re issuing a boatload of shares, too.

However, if the number is consistently declining, then it is, indeed, a bullish indictor.

How bullish? Studies vary, so let’s go with the most conservative out of Credit Suisse Quantitative Research. It found that companies that consistently buy back shares return almost 2% more per year than companies with less regular or erratic buyback histories.

Every extra percentage point in profits counts, so I’m not about to argue with an extra 2% per year. Candidly, though, I’d prefer more profits than that. Wouldn’t you?

The good news is, we can get it. We just need to add another indicator to the mix.

A Better Bullish Indicator: Buybacks And Insider Buying

Like I said before, a repurchase program signals that management thinks shares are undervalued. But if executives truly believe shares are cheap, wouldn’t they start buying shares in their personal accounts, too?

Turns out that if they do, shares perform even better.

A study by Professor Shrikant Jategaonkar at Southern Illinois University at Edwardsville found that stocks subject to both repurchases and insider buying outperformed other stocks in the sample – by 29 percentage points over four years.

Stocks subject to just repurchases only outperformed by about nine percentage points.

That’s 10 times better than just focusing on stock buybacks based on the Credit Suisse finding above.

Bottom line: In theory, buybacks are good for investors. But in practice, we need to make sure management is actually reducing the share count before we treat it as a bullish indicator. For the best results, we should also insist on insider buying.

Ahead of the tape,

Louis Basenese

By Andy Obermueller (StreetAuthority | Original Link)

Every now and then, I run across a statistic or a fact that makes me feel really stupid. I kick myself: “Why didn’t I already know that?”

What got me is that my red Dodge Ram 1500 is technically classified as a “light truck.” I was mortally offended. My pickup has a 5.7-liter HEMI V-8 and is as loud as the Space Shuttle and almost as fuel efficient. It doesn’t feel like a light truck.

But it is.

The thing that matters more than light trucks, though, are the larger semi trucks that roll down the highway. There are millions of them. They drive a huge amount of miles, and they get about five miles to the gallon. These rigs burn through billions of gallons of diesel a year.

Imagine if we could replace diesel with something else… that fuel would be a serious Game-Changer.

If that fuel were cleaner than gasoline and diesel, then transportation emissions would drastically decrease. And if this new fuel were cheaper, the diesel dominos would begin to fall. Quickly.

Now, hold on to your hats. Because the reality is, all of those various kinds of light and heavy trucks — and cars, too — can get the same energy out of a fuel that costs about half what diesel sells for.

Let me explain…

Natural gas is abundant, clean and, unlike oil, can be domestically sourced. In fact, there’s an entire ocean of natural gas in this country waiting to get tapped.

As most of you already know, natural gas production is on the rise because of an increase in oil production in the nation’s massive shale formations.

What you may not know is that natural gas has the ability to displace billions of gallons of diesel, not only on the road, but for heavy equipment like cranes and bulldozers and even tractors and combines on the farm.

That’s all around the corner. And I’ve found a stock that is the strongest pure play on this trend.

That stock is Westport Innovations (Nasdaq:WPRT).

This is an area that has several key tailwinds behind it: environmental, governmental, industry support — such that I think natural gas vehicles are the inevitable future. 

Westport makes natural gas engines that are cost-competitive with diesel engines and have 80% of the parts in common.

Vancouver-based Westport has a market cap of $1.5 billion, which is right in the sweet spot for the types of companies I like to recommend in Game-Changing Stocks, my bi-monthly stock advisory, which focuses on aggressive growth.

It’s growing its top line, and not by a little. The orders for these vehicles are clearly fueling remarkable growth: In the past 12 months, it’s booked $371.48 million, according to Bloomberg, a 64% increase from the $226.5 million recorded in fiscal 2011. (And that figure was $100 million more than the year before, in 2010.)

That’s the type of growth Westport is seeing now.

Today, as we speak, there aren’t all that many of these cars on the road in this country. So imagine what that revenue is going to do when consumers learn they can drive a car on fuel that costs drastically less than gas — or when truckers start buying big rigs that burn clean fuel that lets them sidestep ever-increasing diesel emissions rules.

Action to Take –> A number of factors have converged to form what looks a lot like the perfect storm for natural gas to become a substantial fuel source. Supply and pricing dynamics, industry support, continuing infrastructure development, strong political support and international opportunity — it’s all there. There’s simply too much to say on these points to fit into one article.

But let me be clear: None of this is theoretical. None of it is on a chalkboard.

It’s here. It’s happening.

The trucking industry wants to use natural gas, the truck-stop operators are willing to sell it, and Corporate America is only too glad to embrace the significant cost cuts natural gas will afford.

Natural gas also clearly has White House and Congressional support, and it is gaining serious traction abroad, especially in China. A prime candidate to invest in the space is clearly the pure play, Westport.

[Note: Westport is just the tip of the iceberg... The abundance of natural gas in the United States will lead to the third industrial revolution. One analyst is predicting a stock could rise $1,566%. Another stock has already jumped more than 1,000% and is expected to keep going. To learn more about investing in the natural gas boom, click here.]

By Louis Basenese (Wall Street Daily | Original Link)

Thank goodness it’s Friday in the Wall Street Daily Nation!

This is the day we abandon long-winded analysis, and let some carefully selected graphics do the talking for us.

That means less writing for me… and less reading for you. But don’t let our brevity fool you. Most subscribers tell us this is the most insightful and useful column we write each week.

Yes, picture books can be educational for adults, too!

And here’s the latest proof, as we serve up a few timely charts on Apple (AAPL), the future of residential real estate prices and boring old dividends…

Down Goes Apple

Saying “I told you so” is childish. But… I told you so!

You’ll recall in April 2012, just prior to becoming the biggest company in the world, I predicted that Apple “can’t keep growing at its current breakneck pace.” I reiterated my stance in July 2012.

And guess what? Apple isn’t growing that fast anymore.

The company reported its results after the bell on Wednesday. And its quarterly revenue growth rate dropped below 20%. Worse still, its quarterly profit growth rate flatlined.

Bottom line: As Apple’s growth slows, look out below!

Boring, But Better

It’s time for some Aretha Franklin-style R-E-S-P-E-C-T for dividend stocks.

I know… they’re totally boring. But they deliver where it counts – to our bottom line.

Here’s the latest proof, courtesy of BlackRock…

Bottom line: Dividend stocks are truly all-weather investments. Whether it’s a bull market or bear market, they outperform.

Of course, this profound truth is precisely what prompted us to start Dividends & Income Daily last year. If you’re not onboard already, hurry up and join us on the max-yield hunt by signing up here.

It’s All About Supply, Stupid!

When I first declared that the real estate market had hit rock bottom, I told you that prices would be the last fundamental to recover.

Well, guess what? Prices are rising.

On Wednesday, the Federal Housing Finance Agency said that its House Price Index rose again in November.

Will the increases continue? Yuuuuup! And here’s why…

As you can see, the number of months’ worth of existing home supply keeps dropping.

Bottom line: Shrinking supplies plus increasing demand from new household formation equals higher home prices. Bank on it!

And if you want some specific ideas on how, check your inbox next week. I’m going to share at least five overlooked ways to play the real estate rebound.

That’s it for today. Before you sign off, though, do us a favor. Let us know what you think about this weekly column – or any of our recent work at Wall Street Daily – by sending an email to feedback@wallstreetdaily.com, leaving a comment below, or catching us on Facebook or Google+.

Thanks and enjoy the weekend!

Ahead of the tape,

Louis Basenese

Maybe some of you might think about an investment aboard. A first target country to place your money is Canada. The country is the 12^th largest economy in the world with a total gross domestic product of USD1.736 billion. Year over year, Canada’s economic growth is up 1.5 and the unemployment rates are at 7.1 percent.

The interest rates, which are at 1 percent, are higher than the rates from the U.S. Not enough the most important issue for a financial stability is the debt to GDP ratio. The ratio shows if an economy is stable or fears to be bailed-out. Canada’s debt to GDP ratio is not low but has with 85 percent of the gross income a solid figure for a developed country. The U.S. have a ratio of 103 percent.

Today I like to screen some popular Canadian stocks with a listing in the U.S. You can also find a list of the best Canadian Dividend Aristocrats in my weekly published Dividend Weekly. The report is completely free and shows the yields and price ratios from over 1,000 stocks worldwide.

One-hundred eighty Canadian stocks are listed in the U.S. Sixty-six of them pay dividends and 37 of them have a current buy or better rating. Below is a small is of the 20 highest yielding stockswith a buy or better recommendation. Two of the results have a buy or better recommendation.

Do you like Canadian stocks? Do you think it makes sense to buy foreign stocks? Let me know by leaving a comment.

Here are my favorite stocks:

Baytex Energy (BTE) has a market capitalization of $5.61 billion. The company employs 159 people, generates revenue of $1.106 billion and has a net income of $219.30 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $587.32 million. The EBITDA margin is 53.10 percent (the operating margin is 24.58 percent and the net profit margin 19.83 percent).

Financial Analysis: The total debt represents 24.77 percent of the company’s assets and the total debt in relation to the equity amounts to 50.52 percent. Due to the financial situation, a return on equity of 18.76 percent was realized. Twelve trailing months earnings per share reached a value of $2.38. Last fiscal year, the company paid $2.44 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.44, the P/S ratio is 5.16 and the P/B ratio is finally 4.54. The dividend yield amounts to 5.74 percent and the beta ratio has a value of 1.53.

Toronto-Dominion Bank (TD) has a market capitalization of $76.28 billion. The company employs 78,397 people, generates revenue of $22.428 billion and has a net income of $6.290 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $10.949 billion. The EBITDA margin is 48.82 percent (the operating margin is 31.70 percent and the net profit margin 26.97 percent).

Financial Analysis: The total debt represents 17.60 percent of the company’s assets and the total debt in relation to the equity amounts to 300.32 percent. Due to the financial situation, a return on equity of 14.82 percent was realized. Twelve trailing months earnings per share reached a value of $6.82. Last fiscal year, the company paid $2.91 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 12.20, the P/S ratio is 3.32 and the P/B ratio is finally 1.73. The dividend yield amounts to 3.72 percent and the beta ratio has a value of 1.29.

Potash (POT) has a market capitalization of $36.18 billion. The company employs 5,703 people, generates revenue of $8.715 billion and has a net income of $3.081 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4.424 billion. The EBITDA margin is 50.76 percent (the operating margin is 49.41 percent and the net profit margin 35.35 percent).

Financial Analysis: The total debt represents 27.91 percent of the company’s assets and the total debt in relation to the equity amounts to 57.82 percent. Due to the financial situation, a return on equity of 42.40 percent was realized. Twelve trailing months earnings per share reached a value of $2.67. Last fiscal year, the company paid $0.28 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.71, the P/S ratio is 4.14 and the P/B ratio is finally 4.57. The dividend yield amounts to 2.01 percent and the beta ratio has a value of 1.04.

Take a closer look at the full list of the best yielding and most recommended Canadian dividend stocks. The average P/E ratio amounts to 19.72 and forward P/E ratio is 17.78. The dividend yield has a value of 3.86 percent. Price to book ratio is 2.06 and price to sales ratio 2.35. The operating margin amounts to 19.51 percent and the beta ratio is 1.40. Stocks from the list have an average debt to equity ratio of 1.14.

By Carla Pasternak (StreetAuthority | Original Link)

Most people thought it might never happen, much less happen in five short years.

The housing sector is back in the United States.

After going through its darkest hour, people are buying houses again and investors are making moneyfrom dividends and capital gains.

Last month in Dividend Opportunities, I discussed investing in KKR & Co. (NYSE: KKR) as a solid play for the single-family housing recovery. Since my article was published, the stock is up about 16%.

Today I want to talk about a different way to play the housing recovery… REITs, or real estateinvestment trusts.

There are all kinds of REITs… from shopping centers to housing to apartment REITs.

With even the hardest-hit markets recovering, like Phoenix and Orlando, you might think apartment REITs would be going gangbusters. Surprisingly, that’s not the case.

Last year, U.S. housing REITs returned 19.7%. In contrast, apartment REITs were only ahead 6.9%, according to the National Association of Real Estate Investment Trusts (NAREIT). In fact, the apartment REIT sector was the worst performing in the entire index in 2012.

So what gives?

For starters, some investors say that since single-family homes are seeing an influx, fewer people are moving into apartments. That is causing investors to focus their attention on housing REITS.

But that’s a mistake.

David Lee, who manages a $3.6 billion real estate fund for T. Rowe Price, recently said this about REITs: “People believe it’s a zero-sum game, that if for-sale housing is doing well, then rentals will not do as well.”

In fact, Lee says it’s a “win-win situation.”

Andy McCulloch, head of Research at Green Street Advisors, which specializes in U.S. real estate trends, agrees: There’s a “misconception that growing momentum in the single family market will hurt the rental market.”

So how could it be that if the single-family housing market is booming, then the apartment rental sector is also doing well? The answer comes from different projections based on how many new households will be formed between now and 2016…

In that time, some 5.5 million new households are expected to be formed. Of these, 3.8 million, or nearly 70%, will be renters, says Jeffrey Friedman, CEO of apartment REIT Associated Estates Realty (Nasdaq: AEC).

It’s that astronomical number that has me calling America the “Renter Nation.” And it’s why I am considering apartment REITs today.

This is just the start of the good news for apartment REITs… Those 3.8 million renters are going to be fighting with each other for less and less space.

Let me explain…

The uptick in new households is going so fast, that demand is outpacing supply by 2.5 million apartments, according to a March report from the NAREIT.

This supply/demand dynamic could lead to increasing income for apartments.

That, plus the 2012 underperformance of apartment REITs, make this an opportune time to enter the sector.

You would think with numbers like these, the financial media would cover more apartment REITs, but they seem focused on people buying single-family homes. However, you can use that to your advantage and jump in before other investors.

If you want to use REITs as an easy way to play the surge in demand, then there are several options.

The larger REITs such as Equity Residential (NYSE: EQR), Avalon Bay (NYSE: AVB) and Camden Property Trust (NYSE: CPT) offer yields of about 3%. But I just recently profiled an apartment REIT inHigh-Yield Investing that yields about 7%. (Out of fairness to my subscribers, I won’t give away the pick.)

Risks to Consider: Of course, with investing, nothing is guaranteed. A slowdown in the economy could slow the pace of new households and rents could remain flat.

Action to Take –> With that said… thanks to strong occupancy rates, rising rents, increasing household formation and a supply-demand gap, apartment REITs may be a good place to putsome money right now.

P.S. – Have you heard of “Retirement Saving Stocks“? Some pay quarterly. Others pay monthly. All offer you a safer, more stable and reliable source of high income even if the market goes down. If you’re interested in learning more, plus getting the names and ticker symbols of several companies with yields up to 15%, click here.]

The world learned on Sunday that PGA all-star Phil Mickelson is considering ‘drastic personal changes’ thanks to the pitiful direction of America’s tax policy. According to Mickelson:

“If you add up all the federal and you look at the disability and the unemployment and the Social Security and state, my tax rate is 62, 63 percent. So I’ve got to make some decisions on what to do.”

Though politicians never understand, it’s obvious to the rest of us:everyone has a breaking point. When governments continue pushing, continue bleeding, and continue eroding freedom, people start hitting their breaking points. Apparently Phil has reached his.

So, it seems, has Glenn Beck. The popular media personality has recently announced that he is planning a $2 billion libertarian community somewhere in Texas that will generate its own power and grow its own food.

Beck sees the writing on the wall with respect to inflation, police state tactics, and erosion of freedom. He understands the West is full of corrupt politicians who are driving their countries into the ground… and of dim-witted citizens who believe they cannot exist without the government’s continued support. “Take our guns! Bail us out! Give us healthcare!”

The conclusion is simple. When you no longer share any core values with your neighbors, it’s time to get new neighbors.

Of course, we’ve been talking about this concept for years at Sovereign Man… and have actually done it. I’m penning this message to you from our own ‘resilient community’, nestled in the gorgeous vistas and Mediterranean climate of central Chile.

Here, we make our own biodiesel and electricity. We grow our own livestock and food, then export a massive surplus to turn a very healthy profit. We have our own security and fire suppression. We have multiple, ample sources of fresh water. Plus strong Internet.

And we’re doing this in a place where freedom actually means something. Here, the government leaves you alone to act as a responsible adult. The police are actually respectful and honest. The banks are both sound and solvent. The economy is booming based on actual fundamentals as opposed to monetary inflation. In Chile, optimism abounds.

There are clearly huge vulnerabilities in the financial system. Central bankers are printing currency by the trillion, and governments are teetering on default.

Wealth?

These are not small issues… and if/when real turmoil happens, I don’t want to be anywhere near it. Nor do I want to be dependent on the system when that happens.

The way I designed this, though, our community makes sense no matter what. If tough times hit, we’ll be completely self-sufficient down here and won’t skip a beat. Yet if nothing bad ever happens, we won’t be worse off for having a highly productive agricultural operation in a thriving economy.

This project has also transformed my concept of prosperity. When I walk among organic fruit trees in the orchard, or crack morning eggsfrom free-range chickens, it’s difficult to define ‘wealth’ as pieces of paper in a government-regulated bank account.

…or wealth?

Sure, money’s great. And we all need some. But it is not an ‘end’ in and of itself.

When you’re in a gorgeous place surrounded by the most important ‘ends’– i.e. food, water, security, shelter, energy, close relationships, health, happiness, etc.– those silly pieces of paper suddenly aren’t so important.

By Louis Basenese (Wall Street Daily  | Original Link)

In yesterday’s issue, I encouraged you to begin flexing your contrarian muscles.

But I’ve been doing this long enough to understand a simple truth: The practical trumps the theoretical.

While you might enjoy consuming educational info on occasion, what you’re really after is specific, actionable recommendations.

Or as one loyal curmudgeon barked during my presentation at a financial conference, “Give me the picks already, Lou!”

Fair enough.

With that in mind, I’m sharing new data on two contrarian ideas I previously put on your radar.

My ultimate goal? To finally convince you to do something different from the majority before it’s too late.

Turning Japanese

Newsflash: I’m no longer the only bull in Japan.

In his annual “Surprises” list, Blackstone Advisory Partners’ Vice Chairman, Byron Wien, predicts, “The Nikkei 225 continues the strong advance that began in November and trades above 12,000 as exports improve and investors return to the stocks of the world’s third-largest economy.”

The data suggests that the “return” he speaks of is already materializing, too. Fund flow tracker, EPFR Global, reports that Japan equity funds recorded their biggest yearly inflow last year since 2005.

If you haven’t done so already, crank up The Vapors and start turning Japanese.

Based on Wien’s price target for the Nikkei – and the cheapness of Japanese stocks – we’re talking about a no-brainer, double-digit profit opportunity here.

How do we play it?

Well, a weakening yen bodes well for sales for large-cap exporters, as the currency decline makes their products more affordable overseas. While that’s good news for the company, it’s not so good for U.S. investors. Losses from currency translation can eat into our profits from stock price gains.

The solution? The WisdomTree Japan Hedged Equity Fund (DXJ).

As the name suggests, this ETF hedges its exposure to the yen, while investing in some of the largest dividend-paying Japanese stocks.

Now, if you’re a value investor, the biggest bargains in Japan reside in the small-cap space. And since these companies largely cater to the domestic market, currency fluctuations don’t matter nearly as much.

I’ve previously shared the WisdomTree Japan SmallCap Dividend Fund(DFJ) with you as a small-cap option. And it’s still a solid bet. But it’s about time I come clean on my favorite small-cap Japan play – the Japan Smaller Capitalization Fund (JOF).

It’s a closed-end fund, which means there’s an opportunity for us to scoop up shares for a discount to the Net Asset Value (NAV). And that opportunity is right now. The fund currently trades at a 10.13% discount to the NAV.

Even better, momentum is on our side. The fund is up 12% from the November lows and is still trending higher.

Super cheap and in an uptrend? Get onboard before it’s too late!

Don’t Forget Europe, Too

Next to Japan, one of the most detested investment regions in the world has to be Europe.

I originally sent out a contrarian alert on Europe about two weeks ago. But sentiments are changing quickly, which means it’s high time to act.

Case in point: Tim Stevenson, Director of Pan European Equities at Henderson Global Investors Ltd., recently said, “Global investors have been either reducing their underweight positions or even moving slightly overweight [into European equities].”

In other words, they’re turning bullish on European stocks.

The latest fund flow data backs him up, too. For instance, in the last week, almost $70 million flowed into the SPDR EURO STOXX 50 ETF (FEZ), according to ETFChannel.com.

What’s Stevenson’s read on the situation? The same as mine.

He expects “European equities to continue the improvement trend that began last July,” as “canny investors” take advantage of unjustifiably cheap stock valuations in Europe.

Mind you, it’s getting easier to take advantage of the situation, too.

BlackRock recently acquired Credit Suisse’s ETF business. And it’s ramping up ETF availability in Europe.

Joe Linhares, European head of iShares, BlackRock’s ETF unit, says, “Interest in ETFs in Europe by retail investors and wealth management firms is just coming alive.” He expects European-listed ETF assets to double over the next three years, to $700 billion.

In the end, Europe represents another cheap momentum trade. And such trades don’t last forever. So don’t delay.

Bottom line: If you lacked the intestinal fortitude to follow my original recommendations on Japan and Europe, maybe the latest data will finally convince you to act. If not, you could miss out, as the window of contrarian opportunity keeps narrowing.

Ahead of the tape,

Louis Basenese

By Barel Karsan (GuruFocus | Original Link)

As former market darling Apple (AAPL) has seen its stock price continue to fall, it has increasingly piqued the interest of value investors. At a market cap of $450 billion and twelve-month earnings of over $40 billion, Apple’s P/E is barely over 10. Considering the company has no debt and cash equivalents of almost $140 billion, the valuation appears very compelling indeed.

But Apple is now officially growing slower than its market, suggesting others (including rival Samsung) are eating some of its lunch. Could this be a temporary situation, allowing the long-term investor the opportunity to purchase a company with a moat at a discount?

It wasn’t long ago that Research In Motion (RIMM) found itself in a similar position. I know this from first-hand experience, because I started buying shares in the maker of this once ubiquitous product far too soon as they fell from grace.

What happened to RIM and what may be beginning to happen to Apple appears to be a characteristic of this fast-changing industry; one has to continually innovate just to stay in the same place.

Contrast this with the industry Microsoft dominates: operating system and the Office suite of products. Microsoft hasn’t innovated much in the last 15 years, but it has still shown enormous profit growth because of the nature of its industry. Network effects take massive precedent over innovation. Many companies could probably (and some have) created more intuitive, faster designs. But without a network of existing applications (or documents) that can run on such a platform, most users have shown an unwillingness to switch from Windows (or Office). As a result, breaking Microsoft’s grip on this industry has thus far proven impossible.

Does Apple enjoy the same kind of moat? Certainly it does to some extent. The range of apps available only to Apple products undoubtedly offers some advantage, along with the brand appeal that this company has cultivated. But absent substantial innovation, it may not be enough of a moat to ward off future declines. Samsung is already demonstrating that the Android platform is proving good enough for an increasing number of new phone buyers/upgraders.

Also consider that RIM enjoyed some very similar advantages when it dominated the scene. I overestimated the strength of these advantages when I purchased shares far too early. Specifically:

1) The network effects of BBM were easily overcome by the features and functionality that the iPhone offered over the clunky Blackberry (at least they did in the US; in countries where network charges represent a higher share of income, BBM has helped RIM hold its own)

2) Security and corporate customers did not force professionals into keeping their Blackberries; in fact, the opposite occurred, with BYOD advocates pushing corporations to open up to different platforms.

3) Economies of scale in the form of R&D and marketing spend per unit that market leaders usually enjoy appears to have been worth little; in this industry, the innovations appear to come from superior processes, not dollars.

The one competitive advantage that existing firms do appear to enjoy in this industry is barriers to entry. It has proven very difficult for newcomers to innovate their way into a decent market position, as this requires simultaneous relationships with carriers, developers and consumers, something that appears difficult to build-up all at once. This feature of the industry has likely saved RIM from bankruptcy, and even kept it in a position where it may once again succeed if it can out-innovate its limited number of competitors in its next product cycle.

While I don’t expect Apple to fall behind technologically to the same extent as did RIM, risks to Apple’s strong current position remain. In this industry, the market leader can be toppled to “also-ran” in a hurry. So while Apple is clearly cheap compared to its recent earnings and earnings capacity, a value investor may require more of a margin of safety than normal, considering that downside risks are particularly high in this industry.

By Joseph Hogue (StreetAuthority | Original Link)

We’ve managed to avoid the great Mayan prediction of the end of the world along with countless doomsday prognostications before it. But while we shrug off the continued calls that some people still predict about the end of the world, it’s undeniable there are good reasons investors should have a “doomsday portfolio” to protect them from catastrophic losses.

Hurricane Katrina destroyed more than $60 billion in economic value and led to massive looting and a surge in energy prices. The once-in-a-century disaster was followed just seven years later by Hurricane Sandy, which caused damage that may cost up to $50 billion. Officials in Japan have found radioactive material in produce up to 200 miles from the Fukushima nuclear disaster. Large-scale disasters, man-made or natural, seem to be getting stronger and more frequent.

• Hard assets that can be used to store value in the event currencies cease to carry popular support
• Production and sales across multiple regions or countries to diversify geo-political risk
• Current income to provide a reasonable return on your money in the event the sun comes out tomorrow

1. Gold

The ultimate storage of value when the government is no longer able to back its fiat money and investors get nervous about the future is gold. The precious metal just saw its 12th consecutive year of gains, jumping almost six-fold from the beginning of its run in 2000. Gold can pay off on two doomsday scenarios; a jump in inflation or a spike in market fear. An investment in physical gold through the SPDR Gold Shares (NYSE: GLD) has easily beaten most other assets during the past decade, but the fund pays no dividend. While I think the shares could edge higher and will surge in a crisis, I also want something that is going to pay me to wait. That’s why I also like Barrick Gold (NYSE: ABX). It’s the world’s largest gold company with 26 operating mines across five continents. This diversity in production insulates the company from unrest in any one part of the world. The stock pays a dividend yield of almost 2.5% and is not expensive at just 10.1 times trailing earnings.

2. Oil-exploration and production

Even with alternative forms of energy coming into their own, the world still runs on oil. The United States still meets 40% of its energy needs through petroleum and that percentage is much higher in most of the other countries. If confidence were to be lost in global governments and currencies, then oil would be needed as a store of value and for use in production. Chevron Corp. (NYSE: CVX), the nation’s second largest oil company, is the first to come to mind. The company also has assets and sales all over the world and a strong 3% dividend yield. I wouldn’t put all my eggs in one basket though, so I also like the exchange-traded fund (ETF) Energy Select SPDR (NYSE: XLE) for its 1.7% yield and diversification across 45 energy companies. The ETF carries an extremely low expense ratio of 0.18% and trades at a relatively cheap 12 times trailing earnings of the companies held.

3. Water

You can live for weeks without food and shelter, but water becomes a necessity within just a few days. The Journal of Environmental Science & Technology estimates that 1 in 3 counties in the United States could face a “high” or “extreme” risk of water shortages due to climate change by the middle of the 21st century. Combine this trend of scarcity with an unforeseen catastrophe that wipes out some supply and you’ve got hysteria on your hands. American States Water (NYSE: AWR) provides water services in 10 California counties, including drought-prone Los Angeles. The company pays a 2.8% yield and has a 58-year record for increasing dividends. The price-to-earnings (P/E) ratio of 19.1 might seem high, but it is still below the industry average of 21. Aqua America Inc. (NYSE: WTR) could diversify your water exposure through 12 other states in the United States and across other water and wastewater service providers. The company pays a sustainable 2.6% yield and has been successful in pushing through large rate increases to pay for infrastructure projects and increase annual revenue.

4. Tobacco

If you think tobacco is not a necessity, just ask anyone who has tried to quit smoking. In the event of an environmental or economic catastrophe, people may cut back on most other products, but they will always buy their cigarettes. Lorillard (NYSE: LO) is the third-largest cigarette producer in the United States and has been increasing its market share steadily from 11.8% in 2009 to 14.1% in 2011. The stock pays a huge 5.2% dividend yield and trades at just 14.2 times trailing earnings, well under the industry average of 16.8. Philip Morris International (NYSE: PM) diversifies exposure to the industry with its strong international presence and brands like Marlboro and Virginia Slims. The shares are relatively expensive at 18 times trailing earnings, but management has plans to expand into the Chinese market, which could significantly increase earnings.

The “Doomsday” Portfolio

Why does it seem like wherever there is human suffering, some giant bank is making money off of it?  According to a new report from the World Development Movement, Goldman Sachs made about 400 million dollarsbetting on food prices last year.  Overall, 2012 was quite a banner year for Goldman Sachs.  As I reported in a previous article, revenues for Goldman increased by about 30 percent in 2012 and the price of Goldman stock has risen by more than 40 percent over the past 12 months.  It is estimated that the average banker at Goldman brought in a pay and bonus package of approximately $396,500 for 2012.  So without a doubt, Goldman Sachs is swimming in money right now.  But what is the price for all of this “success”?  Many claim that the rampant speculation on food prices by the big banks has dramatically increased the global price of food and has caused the suffering of hundreds of millions of poor families around the planet to become much worse.  At this point, global food prices are more than twice as high as they were back in 2003.  Approximately 2 billion people on the planet spend at least half of their incomes on food, and close to a billion people regularly do not have enough food to eat.  Is it moral for Goldman Sachs and other big banks such as Barclays and Morgan Stanley to make hundreds of millions of dollars betting on the price of food if that is going to drive up global food prices and make it harder for poor families all over the world to feed themselves?

This is another reason why the derivatives bubble is so bad for the world economy.  Goldman Sachs and other big banks are treating the global food supply as if it was some kind of a casino game.  This kind of reckless activity was greatly condemned by the World Development Movement report…

“Goldman Sachs is the global leader in a trade that is driving food prices up while nearly a billion people are hungry. The bank lobbied for the financial deregulation that made it possible to pour billions into the commodity derivative markets, created the necessary financial instruments, and is now raking in the profits. Speculation is fuelling volatility and food price spikes, hurting people who struggle to afford food across the world.”

So shouldn’t there be a law against this kind of a thing?

Well, in the United States there actually is, but the law has been blocked by the big Wall Street banks and their very highly paid lawyers.  The following is another excerpt from the report…

“The US has passed legislation to limit speculation, but the controls have not been implemented due to a legal challenge from Wall Street spearheaded by the International Swaps and Derivatives Association, of which Goldman Sachs is a leading member. Similar legislation is on the table at the EU, but the UK government has so far opposed effective controls. Goldman Sachs has lobbied against controls in both the US and the EU.”

Posted below is a chart that shows what this kind of activity has done to commodity prices over the past couple of decades.  You will notice that commodity prices were fairly stable in the 1990s, but since the year 2000 they have been extremely volatile…

The reason for all of this volatility was explained in an excellent articleby Frederick Kaufman…

The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities — including food — seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. “You had people who had no clue what commodities were all about suddenly buying commodities,” an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.

The money flowed, and the bankers were ready with a sparkling new casino of food derivatives. Spearheaded by oil and gas prices (the dominant commodities of the index funds) the new investment products ignited the markets of all the other indexed commodities, which led to a problem familiar to those versed in the history of tulips, dot-coms, and cheap real estate: a food bubble. Hard red spring wheat, which usually trades in the $4 to $6 dollar range per 60-pound bushel, broke all previous records as the futures contract climbed into the teens and kept on going until it topped $25. And so, from 2005 to 2008, the worldwide price of food rose 80 percent –and has kept rising.

Are you angry yet?

You should be.

Poor families all over the planet are suffering so that Wall Street bankers can make bigger profits.

It’s disgusting.

Many big financial institutions just seem to love to make money on the backs of the poor.  I have previously reported on how JP Morgan makes billions of dollars issuing food stamp cards in the United States.  When the number of Americans on food stamps goes up, so does the amount of money that JP Morgan makes.  You can read much more about all of this right here: “Making Money On Poverty: JP Morgan Makes Bigger Profits When The Number Of Americans On Food Stamps Goes Up“.

Sadly, the global food supply is getting tighter with each passing day, and things are looking rather ominous for the years ahead.

According to the United Nations, global food reserves have reached their lowest level in nearly 40 years.  Global food reserves have not been this low since 1974, but the population of the world has greatly increased since then.  If 2013 is another year of drought and bad harvests, things could spiral out of control rather quickly…

World grain reserves are so dangerously low that severe weather in the United States or other food-exporting countries could trigger a major hunger crisis next year, the United Nations has warned.

Failing harvests in the US, Ukraine and other countries this year have eroded reserves to their lowest level since 1974. The US, which has experienced record heatwaves and droughts in 2012, now holds in reserve a historically low 6.5% of the maize that it expects to consume in the next year, says the UN.

“We’ve not been producing as much as we are consuming. That is why stocks are being run down. Supplies are now very tight across the world and reserves are at a very low level, leaving no room for unexpected events next year,” said Abdolreza Abbassian, a senior economist with the UN Food and Agriculture Organisation (FAO).

The world has barely been able to feed itself for some time now.  In fact, we have consumed more food than we have produced for 6 of the last 11 years…

Evan Fraser, author of Empires of Food and a geography lecturer at Guelph University in Ontario, Canada, says: “For six of the last 11 years the world has consumed more food than it has grown. We do not have any buffer and are running down reserves. Our stocks are very low and if we have a dry winter and a poor rice harvest we could see a major food crisis across the board.”

“Even if things do not boil over this year, by next summer we’ll have used up this buffer and consumers in the poorer parts of the world will once again be exposed to the effects of anything that hurts production.”

We desperately need a good growing season next summer, and all eyes are on the United States.  The U.S. exports more food than anyone else does, and last summer the United States experienced the worst drought that it had seen in about 50 years.  That drought left deep scars all over the country.  The following is from a recent Rolling Stone article…

In 2012, more than 9 million acres went up in flames in this country. Only dredging and some eleventh-hour rain kept the mighty Mississippi River from being shut down to navigation due to low water levels; continuing drought conditions make “long-term stabilization” of river levels unlikely in the near future. Several of the Great Lakes are soon expected to hit their lowest levels in history. In Nebraska last summer, a 100-mile stretch of the Platte River simply dried up. Drought led the USDA to declare federal disaster areas in 2,245 counties in 39 states last year, and the federal government will likely have to pay tens of billions for crop insurance and lost crops. As ranchers became increasingly desperate to feed their livestock, “hay rustling” and other agricultural crimes rose.

Ranchers were hit particularly hard.  Because they couldn’t feed their herds, many ranchers slaughtered a tremendous number of animals.  As a result, the U.S. cattle herd is now sitting at a 60 year low.

What do you think that is going to do to meat prices over the next few years?

Meanwhile, the drought continues.  According to the U.S. Drought Monitor, this is one of the worst winter droughts the U.S. has ever seen.  At this point, more than 60 percent of the entire nation is currently experiencing drought.

If things don’t turn around dramatically, 2013 could be an absolutely nightmarish year for crops in the United States.  If 2013 does turn out to be another bad year, food prices would soar both in the U.S. and on the global level.  The following is from a recent CNBC article…

The severe drought that swept through much of the U.S. last year is continuing into 2013, threatening to cripple economic growth while forcing consumers to pay higher food prices.

“The drought will have a significant impact on prices, especially beef, pork and chicken,” said Ernie Gross, an economic professor at Creighton University and who studies farming issues.

So let us hope for the best, but let us also prepare for the worst.

It looks like higher food prices are on the way, and millions of poor families all over the planet will be hard-pressed to feed their families.

Meanwhile, Goldman Sachs will be laughing all the way to the bank.

I can’t believe how much airplay the expiration of the payroll tax cut is getting, and how utterly wrong the mainstream media’s focus is on the whole matter.

Newspapers and big websites are having a field day talking about how the “increased” payroll tax is hurting everyday Americans. Take this little excerpt from a Wall Street Journal article entitled “Payroll Tax Takes a New Bite” …

“Kari Barker, an accountant in Salt Lake City, recently received her first 2013 paycheck and realized that she and her husband will take home $250 less every month. The 32-year-old, who works as a financial controller for a medical-devices company, accepted a second job last week doing accounting work for a friend’s startup company.

“Ms. Barker recently had a second child, who joined the first in day care. She has been planning meals more carefully to spend less on groceries and has switched to less-expensive brands of household and baby items. ‘I used to be a diapers snob and would only buy Pampers or Huggies,’ Ms. Barker said. ‘Now I buy Target’s house brand, because it’s two-thirds the cost.’”

I’m sorry but this is hilarious stuff! And it demonstrates why both publications that should know better — as well as individual citizens who should know better — are absolutely clueless aboutwhat’s been happening with Social Security.

Let’s put aside the idea of someone being a “diaper snob,” which clearly indicates how ridiculous our consumer culture has become. I mean only in the U.S. would people complain about no longer being able to buy name-brand disposable diapers!

Instead, let’s focus on the fact that Ms. Barker is an ACCOUNTANT and the financial controller of a company.

Translation: It’s literally her job to understand things like payroll taxes. Yet this article makes it sound like she had no idea the payroll tax cut was a temporary measure.

Meanwhile, the entire piece seems to focus very little on just how damaging the initial cuts were to our nation’s retirement system!

Here’s how the Journal explains it:

“The payroll break wouldn’t have affected Social Security’s solvency, at least on paper, because Congress had promised to make up the lost revenue. But many liberal lawmakers had worried that the break could have added to the program’s long-term problems.”

That qualifier “at least on paper” is my favorite.

As I explain in my recently-released video — The Death of Social Security — it’s the very same one our lawmakers have been using over and over to explain away the fact that they’ve raided the Social Security trust fund.

Look, It’s Really Simple: The Payroll Tax Cut Was
Another Way Washington Robbed Our Retirements!

I’m all for tax cuts. But I do NOT like when politicians mislead the public about how these moves will actually impact our nation’s finances.

In the case of the payroll tax cut, lawmakers simply took more money out of the Social Security system and had us spend it.

Why? So Americans would think they got something for nothing. So stealing money from the future would make the present look just a bit better. And so that, ultimately, all of Washington’s career politicians would look better going into the 2012 elections.

Never mind that the Social Security system was already running annual deficits! It’s the same old game of musical chairs.

Now the rate has reverted back to where it was in 2010 and everyone is squawking?

Well, how on earth do they think we’re going to get back the additional money that was spent over the last few years?

I’ll tell you how: With higher taxes in the future … as well as through benefit cuts, new means testing for wealthier Americans, and other draconian measures.

This is what Congress really means when they say they’ll “make up the lost revenue.”

How else COULD politicians make up the lost revenue? Are they all going to donate money from their own pockets? Of course not.

I realize this whole thing stinks as bad as an off-brand diaper. But the best thing you can do isget the facts now, and take protective steps as soon as possible. Because based on what I’m seeing and hearing, most Americans simply have no clue just how bad things are about to get when it comes to retirement issues.

Best wishes,

Nilus

By Louis Basenese (Wall Street Daily | Original Link)

The father of value investing, Benjamin Graham, warns us, “It requires considerable willpower to keep from following the herd.”

In other words, it’s hard to be a contrarian. Even when we know that receiving outsized profits is the reward for doing so.

So what’s standing in our way? The same thing that’s keeping us from shedding those pounds we packed on over the holidays: discipline.

Thinking like a contrarian isn’t something that occurs naturally. It requires considerable practice to become second nature.

Or as Humphrey B. Neill says, “The art of contrary thinking consists in training your mind to ruminate in directions opposite to general public opinions. It is merely a matter of getting into the habit of looking on both sides of all questions.”

Well, you’re in luck. Because today I’m launching another semi-regular column,Think Contrarian, in which I’m going to routinely encourage you to flex your contrarian muscles.

Our first topic of discussion? The depressingly low projections for U.S. economic growth.

So let’s get to it…

Say It Isn’t So, Richard!

Last Friday, Richard Fisher, President of the Federal Reserve Bank of Dallas, told Bloomberg Radio, “We could have GDP growth of 3% this year [in the United States].”

What’s the big deal about a prediction for 3% growth? Simple. It flies in the face of prevailing wisdom.

Everyone and their mother know the U.S. economy is sucking wind. And it has been ever since the Great Recession hit.

Few (if any) people expect a boost in 2013. The average economist surveyed byBloomberg expects U.S. GDP growth of only 2% this year.

Yet here comes Fed President Fisher suggesting GDP growth could be 50% stronger.

Nonsense? Or could he possibly be smarter than your average economist – or, for that matter, the 83 economists surveyed by Bloomberg?

If we want to be true contrarians, we at least have to consider the possibility.

With that in mind, here are three pieces of evidence – including two infrequently cited, yet meaningful, indicators – that the U.S. economy might, indeed, be poised for a stronger-than-expected rebound.

~Exhibit A: Pickup truck sales are, well… picking up!

Forget headline-grabbing economic indicators like the Fed’s Beige Book or the ISM Manufacturing Index. As Peter Lynch noted, we can glean insight from our day-to-day routines. That is, as long as we’re observant. And lately, you might have noticed there’s been a preponderance of Ford (F) pickups on the road.

The latest data from Ford confirms a rebound is, in fact, underway. Last year, Ford sold 10% more F-Series trucks than in 2011, marking the third straight year of annual increases.

And since small business owners, particularly in construction-related industries, historically account for a large portion of pickup sales, the continued increases bode well for the U.S. economy.

~Exhibit B: Out with the (really) old stuff, in with the new.

Not all consumer goods are like luggage. They don’t last forever. They eventually break down and need to be replaced. And more and more of our “stuff” is bumping up against this inevitability. As BusinessWeek’s David Wilson notes, “The average age of cars, appliances, and furniture owned by U.S. households is at its highest in almost half a century.”

Here’s the key: As we begin replacing our really old stuff, it’s certain to pump up the economy. Indeed, Barry Ritholtz of Fusion Analytics Investment Partners, LLC suggests “well over 50%” of the replacement activity will benefit the U.S. economy.

~Exhibit C: (Surprising) strength on the sales front.

Don’t worry… I’m not just looking at esoteric indicators. The latest corporate results also support the possibility of an accelerating economy. Consider: Although it’s still early in earnings reporting season, 60.2% of companies put up better-than-expected revenue figures. As I noted, last quarter the revenue “beat rate” came in at an abysmal 48.2% – the lowest level since the bull market began.

Long story short, since revenue provides a strong indication of demand, the uptick points to the possibility of a broad-based acceleration. And that’s nothing but a positive for the U.S. economy.

Bottom line: A boost in economic growth in the United States isn’t as far-fetched as we might think. At the very least, the data suggests that an uptick in demand is in the works for housing-related and automotive companies. Invest accordingly.

Ahead of the tape,

Louis Basenese

By David Sterman (StreetAuthority | Original Link)

Just a few quarters ago, an increasing number of data points yielded an impression that the Chinese economy might soon be in distress. The housing sector looked overbuilt, the banking sector was carrying a rising number of non-performing loans and the Chinese government was soon headed for a possibly rocky transition.

But even as the country’s leaders prepared for a once-every-five-years transition, they still managed to pull many levers to aid the economy, led by a robust stimulus package focused on infrastructure investments. In response, the Chinese economy managed to grow at a 7.9% annual pace in the fourth quarter of 2012, up from 7.4% in the previous quarter. Although the economic statistics that the Chinese government releases are notoriously unreliable, many private economists concede that the economy turned the corner late in the year.

Exports or domestic consumption?
Economists now expect the Chinese economy to grow roughly 8% in 2013, though growth is likely to be moderate in 2014 and beyond to the 5 to 7% range as the era of ever-expanding exports finally winds down. To be sure, Europe and the United States, which still absorb more than 50% of all Chinese exports, will probably look healthier into the mid-decade. But China is slowly losing its competitive edge in exports as its currency strengthens, the seemingly endless supply of fresh (and inexpensive) labor starts to dry up and neighboring low-cost Asian nations build a head of steam in their export efforts.

As a result, China will need to look inward for growth. This means it will have to generate sustained growth in consumer spending. In a bullish sign for consumer spending, Chinese home prices are finally rising again after a two-year slide, and that should boost confidence among consumers.

And consumers do indeed appear to be in a spending mood. Retail sales rose 15.2% in December 2012 compared with a year earlier. That’s up from the 14.9% rate posted in November 2012 and the highest reading since March 2012.

It’s helpful to keep making the analogy to the U.S. economy in the 1950s. Heavy infrastructure investments such as the U.S. interstate highway system fed a robust economic expansion in many regions and many workers moved up from lower-income jobs to middle-income jobs, setting off a spending boom. That same trend, though already underway in China, should continue for many years to come.

For investors, this means it’s time to think about China-focused investments again. Many already have: the exchange-traded funds (ETF) iShares FTSE China 25 Index Fund (NYSE: FXI) has surged from $33 to a recent $42 since September 2012. But a much longer time frame shows that this index is still in a multi-year trading range, though perhaps due for a breakout if the economic data released in coming months are similarly robust.

Of course, investors have been badly burned with individual Chinese stocks listed in U.S. exchanges, so we still haven’t seen real progress on that front, which explains why Chinese initial public offerings have disappeared from the docket. That’s why it’s wiser to focus only on the strongest Chinese companies, a handful of which I discussed last month in this article.

I prefer to focus on mutual funds and ETFs such as the iShares fund noted earlier. And though ETFs are often a wiser path than mutual funds these days, thanks to their lower cost structure, investment firm Matthews Asia has built up impressive mutual funds focused on China that get high marks from Morningstar.

The Matthews China Investor fund (Nasdaq: MCHFX) receives a Gold star from the fund-rating firm: “Matthews is a first-rate Asia specialist and has an exceptional collection of regional experts on staff,” notes Morningstar, adding that the fund has delivered returns in the top quartile of its peer group on three-year, five-year and 10-year basis. The fact that this fund owns a number of Chinese consumer stocks is another plus in light of the steady shift in the Chinese economy toward domestic consumption.

The Matthews China Dividend Investor fund (Nasdaq: MCDFX) also holds great appeal and is “the top-performing China-region fund since opening in late 2009,” according to Morningstar, rising 8.9% on an annualized basis while its peers have averaged 1% annualized losses. The fund focuses on companies that have strong financial statements and have expressed a desire to maintain and boost their dividends.

Risks to Consider: The Chinese economy still has risks. The looming banking crisis of last summer is still unresolved as many Chinese banks hold too many non-performing loans. Real estate construction continues, so a glut of unsold homes and office buildings remains in some regions. And China is winding down its stimulus program, which may impede economic growth in 2013.

Action to Take –> Investing in China is a long-term proposition. Chinese stocks surged in the last decade, but dropped sharply by the end of the decade and have been in a trading range ever since. Looking ahead, the share price moves are likely to be less dramatic than a decade ago, simply because the Chinese economy is now much larger and poised for a phase of solid, but not sizzling growth. Yet a long-term economic expansion should help Chinese stocks to generate returns that exceed markets in more mature economies.

What in the world is China up to?  Over the past several years, the Chinese government and large Chinese corporations (which are often at least partially owned by the government) have been systematically buying up businesses, homes, farmland, real estate, infrastructure and natural resources all over America.  In some cases, China appears to be attempting to purchase entire communities in one fell swoop.  So why is this happening?  Is this some form of “economic colonization” that is taking place?  Some have speculated that China may be intending to establish “special economic zones” inside the United States modeled after the very successful Chinese city of Shenzhen.  Back in the 1970s, Shenzhen was just a very small fishing village, but now it is a sprawling metropolis of over 14 million people.  Initially, these “special economic zones” were only established within China, but now the Chinese government has been buying huge tracts of land in foreign countries such as Nigeria and establishing special economic zones in those nations.  So could such a thing actually happen in America?  Well, according to Dr. Jerome Corsi, a plan being pushed by the Chinese Central Bank would set up “development zones” in the United States that would allow China to “establish Chinese-owned businesses and bring in its citizens to the U.S. to work.”  Under the plan, some of the $1.17 trillion that the U.S. owes China would be converted from debt to “equity”.  As a result, “China would own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss.”  Does all of this sound far-fetched?  Well, it isn’t.  In fact, the economic colonization of America is already far more advanced than most Americans would dare to imagine.

So how in the world did we get to this point?  A few decades ago, the United States was the unchallenged economic powerhouse of the world and China was essentially a third world country.

So what happened?

Well, we entered into a whole bunch of extremely unfavorable “free trade” agreements, and countries such as China began to aggressively use “free trade” as an economic weapon against us.

Over the past decade, we have lost tens of thousands of businesses and millions of jobs to China.  When the final numbers for 2012 come out, our trade deficit with China for the year will be well over 300 billion dollars, and that will be the largest trade deficit that one country has had with another country in the history of the world.

Overall, the U.S. has run a trade deficit with China over the past decade that comes to more than 2.3 trillion dollars.  That 2.3 trillion dollars could have gone to U.S. businesses and U.S. workers, and in turn taxes would have been paid on all of that money.  But instead, all of that money went to China.

Rather than just sitting on all of that money, China has been lending much of it back to us – at interest.  We now owe China more than a trillion dollars, and our politicians are constantly pleading with China to lend more money to us so that we can finance our exploding debt.

Today, the U.S. government pays China approximately 100 million dollars a day in interest on the debt that we owe them.  Those that say that the U.S. debt “does not matter” are being incredibly foolish.

So thanks to our massive trade deficit and our exploding national debt, China is systematically getting wealthier and the United States is systematically getting poorer.

And now China is starting to use a lot of that wealth to aggressively expand their power and influence around the globe.

But isn’t it more than a bit far-fetched to suggest that China may be planning to establish Chinese cities and special economic zones in America?

Not really.

Just look at what has already happened up in Canada.  It is well-known that the Chinese population of Vancouver, Canada has absolutely exploded in recent years.  In fact, the Vancouver suburb of Richmond is now approximately half Chinese.  The following is an excerpt from aBBC article…

Richmond is North America’s most Asian city – 50% of residents here identify themselves as Chinese. But it’s not just here that the Chinese community in British Columbia (BC) – some 407,000 strong – has left its mark. All across Vancouver, Chinese-Canadians have helped shape the local landscape.

A similar thing is happening in many communities along the west coast of the United States.  In fact, Chinese citizens purchased one out of every ten homes that were sold in the state of California in 2011.

But in other areas of the United States, the Chinese are approaching things much more systematically.

For example, as I have written about previously, a Chinese group identified as “Sino-Michigan Properties LLC” has purchased 200 acres of land near the town of Milan, Michigan.  Their stated goal is to build a “China City” that has artificial lakes, a Chinese cultural center and hundreds of housing units for Chinese citizens.

In other instances, large chunks of real estate in major U.S. cities that are down on their luck are being snapped up by Chinese investors.  Just check out what a Fortune article from a while back says has been happening over in Toledo, Ohio…

In March 2011, Chinese investors paid $2.15 million cash for a restaurant complex on the Maumee River in Toledo, Ohio. Soon they put down another $3.8 million on 69 acres of newly decontaminated land in the city’s Marina District, promising to invest $200 million in a new residential-commercial development. That September, another Chinese firm spent $3 million for an aging hotel across a nearby bridge with a view of the minor league ballpark.

Toledo is being promoted to Chinese investors as a “5-star logistics region“.  From Toledo it is very easy to get to Chicago, Detroit, Cleveland, Pittsburgh, Columbus and Indianapolis…

With a population of 287,000, Toledo is only the fourth largest city in Ohio, but it lies at the junction of two important highways — I-75 and I-80/90. “My vision is to make Toledo a true international city,” Toledo’s Mayor Mike Bell told the Toledo Blade.

But some of these deals appear to be about far more than just making “investments”.  According to the Idaho Statesman, a Chinese company known as Sinomach (which is actually controlled by the Chinese government) was actually interested in developing a 50 square mile self-sustaining “technology zone” south of the Boise airport…

A Chinese national company is interested in developing a 10,000- to 30,000-acre technology zone for industry, retail centers and homes south of the Boise Airport.

Sinomach is not looking only at Idaho.

The company sent delegations to Ohio, Michigan and Pennsylvania this year to talk about setting up research and development bases and industrial parks. It has an interest in electric transmission projects and alternative energy as well.

The technology zone proposal follows a model of science, technology and industrial parks in China — often fully contained cities with all services included.

Thankfully the deal in Idaho appears to be stalled for now, but could we soon see China establish special economic zones in other communities all around America?

The Chinese certainly do seem to be laying the groundwork for something.  They have been voraciously gobbling up important infrastructure all over the country.  The following comes from a recentAmerican Free Press article…

In addition to already owning vital ports in Long Beach, Calif. and Boston, Mass., the China Ocean Shipping Company is eyeing major ports on the East Coast and Gulf of Mexico. China also owns access to ports at the entry and exit points of the Panama Canal.

And due to fiscal woes plaguing many American cities and states, U.S. legislators have been actively seeking out Chinese investors. In one of the worst cases, Baton Rouge, La., Mayor Kip Holden offered the Chinese government ownership and operating rights to a new toll way system if the Chinese would provide the funding to build it.

Does it make sense for the Chinese to own some of our most important ports?

Isn’t there a national security risk?

Sadly, there isn’t much of anything that our politicians won’t sell these days as long as someone is willing to flash a lot of cash.

The Chinese have also been busy buying up important real estate on the east coast as a recent Forbes article explained….

According to a recent report in the New York Times, investors from China are “snapping up luxury apartments” and are planning to spend hundreds of millions of dollars on commercial and residential projects like Atlantic Yards in Brooklyn. Chinese companies also have signed major leases at the Empire State Building and at 1 World Trade Center, the report said.

But it is not only just land and infrastructure that the Chinese have been buying up.

They have also been purchasing rights to vital oil and natural gas deposits all over the United States.

There have been two Chinese companies that have been primarily involved in this effort.

The first is the China National Offshore Oil Corporation (CNOOC).  According to Wikipedia, CNOOC is 100 percent owned by the Chinese government…

CNOOC Group is a state-owned oil company, fully owned by the Government of the People’s Republic of China, and the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) performs the rights and obligations of shareholder on behalf of the government.

The second is Sinopec Corporation.  Sinopec Group is the largest shareholder (approx. 75% ownership) in Sinopec Corporation.  And asthe Sinopec website tells us, Sinopec Group is fully owned by the Chinese government…

Sinopec Group, the largest shareholder of Sinopec Corp., is a super-large petroleum and petrochemical group incorporated by the State in 1998 based on the former China Petrochemical Corporation. Funded by the State, it is a State authorized investment arm and State-owned controlling company.

So whenever you see CNOOC or Sinopec, you can replace those names with the Chinese government.  The Chinese government essentially runs both of those companies.

And as you can see from the following list compiled by the Wall Street Journal, those two companies have been extremely aggressive in buying up rights to oil and natural gas all over the nation…

Colorado: Cnooc gained a one-third stake in 800,000 acres in northeast Colorado and southeast Wyoming in a $1.27 billion pact with Chesapeake Energy Corp.

Louisiana: Sinopec has a one-third interest in 265,000 acres in the Tuscaloosa Marine Shale after a broader $2.5-billion deal with Devon Energy.

Michigan: Sinopec gained a one-third interest in 350,000 acres in a larger $2.5 billion deal with Devon Energy.

Ohio: Sinopec acquired a one-third stake in Devon Energy’s 235,000 Utica Shale acres in a larger $2.5 billion deal.

Oklahoma: Sinopec has a one-third interest in 215,000 acres in a broader $2.5 billion deal with Devon Energy.

Texas: Cnooc acquired a one-third interest in Chesapeake Energy’s 600,000 acres in the Eagle Ford Shale in a $2.16-billion deal.

Wyoming: Cnooc has a one-third stake in 800,000 acres in northeast Colorado and southeast Wyoming after a $1.27 billion pact with Chesapeake Energy. Sinopec gained a one-third interest in Devon Energy’s 320,000 acres as part of a larger $2.5 billion deal.

Gulf of Mexico: Cnooc Ltd. separately acquired minority stakes in some of Statoil ASA’s leases as well as six of Nexen Inc.’s deep-water wells.

So why is the U.S. government allowing this?

That is a very good question.

For a nation that purports to be pursuing “energy independence”, we sure do have a funny way of going about things.

Unfortunately, the sad truth is that China is absolutely mopping the floor with the United States on the global economic stage.  China is rising and America is in an advanced state of decline.  Global economic power has shifted dramatically and most Americans still don’t understand what has happened.

The following are 44 more signs of how dominant the economy of China has become…

1. A Chinese firm recently made a $2.6 billion offer to buy movie theater chain AMC.

2. A different Chinese firm made a $1.8 billion offer to buy aircraft maker Hawker Beechcraft.

3. In December it was announced that a Chinese group would be purchasing AIG’s plane leasing unit for $4.23 billion.

4. It was recently announced that the Federal Reserve will now allow Chinese banks to buy up American banks.

5. A $190 million bridge project up in Alaska was awarded to a Chinese firm.

6. A $400 million contract to renovate the Alexander Hamilton bridge in New York was awarded to a Chinese firm.

7. A $7.2 billion contract to construct a new bridge between San Francisco and Oakland was awarded to a Chinese firm.

8. The uniforms for the U.S. Olympic team were made in China.

9. 85 percent of all artificial Christmas trees are made in China.

10. The new World Trade Center tower is going to include glass that has been imported from China.

11. The new Martin Luther King memorial on the National Mall was made in China.

12. In 2001, American consumers spent 102 billion dollars on products made in China.  In 2011, American consumers spent 399 billion dollars on products made in China.

13. The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

14. According to the New York Times, a Jeep Grand Cherokee that costs $27,490 in the United States costs about $85,000 in China thanks to all the tariffs.

15. The Chinese economy has grown 7 times faster than the U.S. economy has over the past decade.

16. The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

17. The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

18. Overall, the United States has lost a total of more than 56,000manufacturing facilities since 2001.

19. According to the Economic Policy Institute, America is losing half a million jobs to China every single year.

20. Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

21. In 2010, China produced more than twice as many automobiles as the United States did.

22. Since the auto industry bailout, approximately 70 percent of all GM vehicles have been built outside the United States.

23. After being bailed out by U.S. taxpayers, General Motors is currently involved in 11 joint ventures with companies owned by the Chinese government.  The price for entering into many of these “joint ventures” was a transfer of “state of the art technology” from General Motors to the communist Chinese.

24. Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

25. The United States has lost more than a quarter of all of its high-tech manufacturing jobs over the past ten years.

26. China’s number one export to the U.S. is computer equipment.

27. The number one U.S. export to China is “scrap and trash”.

28. The U.S. trade deficit with China is now more than 28 times largerthan it was back in 1990.

29. Back in 1985, the U.S. trade deficit with China was just 6 million dollars for the entire year.  For the month of November 2012 alone, the U.S. trade deficit with China was 28.9 billion dollars.

30. China now consumes more energy than the United States does.

31. China is now the leading manufacturer of goods in the entire world.

32. China uses more cement than the rest of the world combined.

33. China is now the number one producer of wind and solar power on the entire globe.

34. Today, China produces nearly twice as much beer as the United States does.

35. Right now, China is producing more than three times as much coal as the United States does.

36. China now produces 11 times as much steel as the United States does.

37. China produces more than 90 percent of the global supply of rare earth elements.

38. China is now the number one supplier of components that are critical to the operation of U.S. defense systems.

39. A recent investigation by the U.S. Senate Committee on Armed Services found more than one million counterfeit Chinese parts in the Department of Defense supply chain.

40. 15 years ago, China was 14th in the world in published scientific research articles.  But now, China is expected to pass the United States and become number one very shortly.

41. China now awards more doctoral degrees in engineering each year than the United States does.

42. According to one study, the Chinese economy already has roughly the same amount of purchasing power as the U.S. economy does.

43. According to the IMF, China will pass the United States and will become the largest economy in the world in 2016.

44. Nobel economist Robert W. Fogel of the University of Chicago is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040 if current trends continue.

Without the “globalization” of the world economy, none of this would have ever happened.  But instead of admitting our mistakes and fixing them, our politicians continue to press for even more “free trade” and even more integration with communist nations such as China.

In fact, according to Dr. Jerome Corsi, the U.S. government has already set up 257 “foreign trade zones” all over America.  These “foreign trade zones” are apparently given “special U.S. customs treatment” and are used to promote “free trade”…

Corsi noted that the U.S. government has created 257 foreign trade zones, or FTZs, throughout the United States, designed to extend special U.S. customs treatment to U.S. plants engaged in international-trade-related activities.

The FTZs tend to be located near airports, with easy access into the continental NAFTA and WTO multi-modal transportation systems being created to move free-trade goods cheaply, quickly and efficiently throughout the continent of North America.

“There is nothing in the U.S. government’s description of FTZs that would prevent a foreign government, like China, from operating a shell U.S. company that is in reality owned and financed by the Chinese government and operated through a Chinese government-owned corporation,” Corsi wrote.

Sadly, we are probably going to see a whole lot more of this in the years ahead.

According to Corsi, a professor of economics at Tsighua University in Beijing named Yu Qiao has suggested the following plan as a way to transform the debt that the United States owes China into something more “tangible”…

1. China would negotiate with the U.S. government to create a “crisis relief facility,” or CRF. The CRF “would be used alongside U.S. federal efforts to stabilize the banking system and to invest in capital-intensive infrastructure projects such as high-speed railroad from Boston to Washington, D.C.
2. China would pool a portion of its holdings of Treasury bonds under the CFR umbrella to convert sovereign debt into equity. Any CFR funds that were designated for investment in U.S. corporations would still be owned and managed by U.S. equity holders, with the Asians holding minority equity shares “that would, like preferred stock, be convertible.”
3. The U.S. government would act as a guarantor, “providing a sovereign guarantee scheme to assure the investment principal of the CRF against possible default of targeted companies or projects”.
4. The Federal Reserve would set up a special account to supply the liquidity the CRF would require to swap sovereign debt into industrial investment in the United States.

Apparently the Bank of China really likes this plan and would like to see something like this implemented.

In the years ahead, perhaps many of you will end up working in a “special economic zone” for a Chinese company on a project that is being financially guaranteed by the U.S. government.

If that sounds like a form of slavery to you, the truth is that you are probably not too far off the mark.

The borrower is the servant of the lender, and we should have never allowed ourselves to get into so much debt.

Now we will pay the price.

To get an idea of how much the world has changed in recent years, just check out this incredible photo which contrasts the decline of Detroit over the years with the amazing rise of Shanghai, China.

Things did not have to turn out this way.  Unfortunately, we made decades of incredibly foolish decisions and we wrecked the greatest economic machine that the world has ever seen.

Now the future for America looks really bleak.

Or could it be that I am being too pessimistic?  Please feel free to post a comment with your thoughts below…

By David Sterman (StreetAuthority | Original Link)

Each week, one of our investing experts answers a reader’s question in the Q&A column from our sister site, InvestingAnswers.com. It’s all part of our mission to help consumers build and protect their wealth through education. If you’d like us to answer one of your questions, then please email us. (Note: We will not respond to requests for stock picks.)

There’s a sharp divide between intelligence and wisdom. We’re born with intelligence, yet accumulate wisdom along the way. That’s surely a distinction any advanced investor will tell you. Even the savviest investors stumbled badly at the start, but they saw their performance improve as they learned from their mistakes. Here’s what one reader asks about the subject:

Q. ”I’m just starting to get into the market. What’s the biggest mistake you see people like me make?”

- Will, Austin, Texas

A. Will, there are ample missteps that a novice investor can make, but the biggest challenge is haste. Investors are quick to act on a hot tip and they invest too much money right away. You’re better off proceeding methodically with your investment research before you put a lot of eggs into any one basket.

Let me explain.

Investing isn’t just about profits — it can also be quite exciting. The challenge is to keep that excitement in check and remain circumspect while you are assessing a company’s growth opportunities.

Years ago, a colleague of mine did just that. He was convinced that Apple (Nasdaq: AAPL) had a potentially lucrative opportunity with a newly launched music service called iTunes. Though we now know iTunes became a spectacular success, few on Wall Street initially grasped its importance. Indeed, shares of Apple languished under $15 in the first few quarters that iTunes was under way.

My colleague used that time to really dig in to the concept. He rightly wondered if iTunes would be a success if most other investors seemingly remained dubious. So he invested just $1,000 in Apple and proceeded to read up on the topic. He analyzed the pricing model, Apple’s costs, barriers to entry, technology reviews and Apple’s financial statements.

With each passing step, he grew more impressed, buying more shares along the way, until he had invested $5,000 in Apple. To be sure, he had to pay a little more for each successive block of shares as Apple had begun to rise in price. But $15 and $20 for a stock is small change when that stock eventually goes to $700 (where Apple eventually peaked).

It’s especially important to proceed slowly when you are looking at an already popular stock that is being touted as a “can’t-miss winner.” In the middle of the past decade, the news media took note of a revolutionary way to extract natural gas from deep rock formations (known as shales). We now know this technique as fracking, and true to the hype, our nation’s gas production is now soaring.

But in the early stages, investors quickly grew excited about the companies with the most real estate in these shale regions, and none had amassed as much land as Chesapeake Energy (NYSE: CHK). Investors rushed to buy this stock, even as it soared above $60 in 2006. (High natural gas prices at the time also made this company look like a potential profit gusher).

Chesapeake eventually received low marks for corporate governance by activist investors such as Carl Icahn. Along with others, Icahn reportedly pushed Chesapeake to add independent directors to the company’s board and eliminate any separate profit-sharing agreements that CEO Aubrey McClendon allegedly had signed with the company. Still, shares have failed to rally above the $20 mark, even as the company reportedly has sought to address investors’ concerns. Winning back credibility will take time.

Action to Take –> My colleague who invested in Apple understood the first rule of investing: If you come across a great investment idea, you have to do the legwork to verify that it is as promising as you suspect. You would be surprised at how many stocks look like bargains or have growth plans that seem exciting, only to find later that there were some obvious problems beneath the surface.

This article originally appeared on InvestingAnswers.com:
The Cardinal Sin Of Beginning Investing — And How To Avoid It

By Louis Basenese (WallStreetDaily | Original Link)

Nuclear power is a goner!

At least, that’s what the headlines wanted investors to believe in the aftermath of the Fukushima disaster in March 2011.

Publication after publication trumpeted decisions by Japan, Germany and other nations to curb – or completely halt – their use of nuclear power.

Even China, a country undergoing rapid economic development and in dire need of any and all energy sources, mothballed its nuclear projects.

All the fear mongering worked, too.

Uranium prices fell about 30% in the immediate aftermath of the tragedy in Japan. And they’ve been slowly trending lower ever since.

Yet we could be approaching an important inflection point – and, in turn, a genuine investment opportunity.

Here’s why I think nuclear is a slam dunk this year. But we want you to weigh in, as well. In the survey below, let us know if you think nuclear is a “Smash Hit,” or if you’d rather throw it in the trash heap.

Newsflash: Nuclear Power is Not Dead

Despite the media’s best attempts, we didn’t fall for the ruse at Wall Street Daily.

As my colleague, Matthew Weinschenk, wrote in our May 2012 issue of WSD Insider, “Contrary to what the mainstream media reported, most nations are staying the course, and continuing to advance toward greater nuclear production.” Go here to upgrade your subscription to Insider status now.

And that is precisely what’s happening. Consider:

On December 21, 2012, China resumed construction of its Shidao Bay nuclear plant in coastal Shandong province, which was suspended in response to the Fukushima disaster. The country recently resumed construction on 27 other nuclear reactors, too.

Don’t be fooled into thinking that China is simply completing work that was already underway, either. In recent months, it approved the construction of four new reactors, as well.

Clearly, China is not abandoning nuclear. As it turns out, neither is Japan.

This month, Prime Minister Shinzo Abe didn’t leave any room for misinterpretation: “We will build new nuclear power plants and seek to win the people’s understanding.”

Add it all up, and after a multi-year hiatus, the world is going nuclear again. In fact, the International Atomic Energy Agency expects production to increase as much as 100% over the next 20 years.

And therein lies the opportunity.

“World demand is growing, and [yet] supplies aren’t growing fast enough,” says Adam Schatzker of RBC Capital Markets.

It’s a simple supply and demand situation: More demand will naturally lead to higher uranium prices.

The situation is compounded by the fact that uranium prices remain overly depressed. At current levels of $42 per pound, producers can’t turn a profit. Not even close.

Based on Schatzker’s estimates, uranium prices need to hit $75 or $80 a pound before mining makes sense. Over at JP Morgan (JPM), analysts insist that prices need to hit $83 per pound.

Either way, we’re talking about a commodity poised to rebound by at least 78%. And since supplies seldom increase fast enough to match demand, uranium prices could rise even higher.

How high? Well, prior to the financial crisis, uranium traded for $135 per pound. That represents a staggering 221% potential upside to current prices.

So how do we profit?

We can hit the easy button and buy the Global X Uranium ETF (URA). It provides exposure to all the major uranium players, including Cameco Corp.(CCJ), Uranium One (UUU.TO) and UEX Corp. (UEX.TO).

Or we can be more aggressive and invest in a smaller uranium producer that boasts greater leverage to an uptick in prices. Like the one we recently recommended toWSD Insider subscribers. (For the company’s identity, sign up for a risk-free trial here.)

For another option, if we simply want a pure play on the commodity itself (without the hassle of trading futures), we can buy Uranium Participation Corp.(URPTF). It’s a Canadian company that stockpiles uranium on the cheap. (Storage and management fees check in at about 0.6% of assets.)

Bottom line: We’re giving nuclear our “Smash Hit” designation for 2013!

By PETER KRAUTH, Global Resources Specialist, Money Morning (Original Link)

Higher Uranium Prices Ahead

Created in the wake of the cold war, theMegatons to Megawatts program is an agreement between the U.S. and Russia to convert highly-enriched uranium(HEU) taken from dismantled Russian nuclear weapons into low-enriched-uranium (LEU) for nuclear fuel.

The existence of this program alone bridges a large portion of the worldwide annual deficit, with 24 million pounds of uranium going to American utilities. In years past, up to 10% of the electricity produced in the United States has been generated by fuel fabricated using LEU from the Megatons to Megawatts program.

Unfortunately, the program will expire toward the end of 2013.

And if the Russians decide not to renew the agreement–and that’s the general consensus at least here in the West–there will be a uranium shortfall of 50 – 65 million pounds annually worldwide.

What’s more, just counting the reactors currently under construction, it’s expected that demand will increase by 13%, pushing up annual consumption to 200 million pounds. And I’m not even accounting for any reactors in the planning stages.

The problem is some experts think we may only see as much as 180 million pounds of annual uranium output by 2020. And it’s estimated that spot prices need to reach and stay around $70 – $80 for miners to be willing to bring on new projects to reach that 180 million pound level.

Right now, the uranium spot price is around $ 42.00/lb.

So there’s very little incentive at current prices for new projects to be brought online since average production costs are typically in the $85/lb. range. Obviously, this situation can’t last.

Producing something at twice its selling price is going to cause a lot of production to simply come off the market. Sure enough, in recent months scores of supply projects have been shelved thanks to persistently low uranium prices.

As a result, it now seems pretty clear that uranium prices will have to move up in an important and sustained way for new production to make it to market.

The good news for investors is that we may be reaching the end of this downward cycle. I expect the spot uranium price could well rise to the $70 range within the next 12-18 months. Here’s why…

When Japan promised to shut down its 50 nuclear power plants, they erased 20 million pounds of nuclear fuel demand, and exacerbated the pricing situation by simultaneously selling 15 million pounds into the market.

Now those sales may have finally worked their way through the market, stabilizing the spot price.

The Catalyst for Higher Uranium Prices

What’s been missing is a catalyst to get uranium and its producers to put in a bottom and reverse course.

Well we could have exactly that, and ironically from above all places, Japan.

You see, Japan’s current power grid, without nuclear power, has been experiencing rolling blackouts. Natural gas imports have risen 17%, and even coal imports are up 21%.

Now a landslide win by the pro-nuclear Liberal Democratic Party seems to have provided just the catalyst the nuclear power industry needs.

What’s more, China recently resumed the review of its nuclear power plant projects.

Its capacity is likely to climb to 40 million kilowatts from nuclear by 2015, compared to 12.54 million at the close of 2011. Clearly, China will need to build several more reactors and acquire a lot more uranium, which they’ve apparently been doing in the spot market recently. (courtesy of Japan, perhaps?)

As a result, industry insiders have begun making strategic moves since a number of uranium equities appear to have bottomed in the last few months.

For instance, earlier this month Russia’s state owned Atomredmetzoloto and its Effective Energy N.V. affiliate, otherwise known together as ARMZ, announced they would buy the remaining 48.6% of Uranium One Inc. (TSX:UUU) which they didn’t already own at a premium.

This effectively solidifies them as the world’s fourth largest uranium producer, concentrating uranium production even further into Russian hands.

So with the Megatons to Megawatts agreement between Russia and the U.S. about to run its course, Putin may well be placing his chips on what appears to be an increasingly safe bet: higher uranium prices ahead.

Given the growing supply and demand imbalance it looks like that is going to be a pretty safe wager.

 

The mainstream media covered the inauguration of Barack Obama with breathless anticipation on Monday, but should we really be celebrating another four years of Obama?  The truth is that the first four years of Obama were an absolute train wreck for the U.S. economy.  Over the past four years, the percentage of working age Americans with a job has fallen, median household income has declined by more than $4000, poverty in the U.S. has absolutely exploded and our national debt has ballooned to ridiculous proportions.  Of course all of the blame for the nightmarish performance of the economy should not go to Obama alone.  Certainly much of what we are experiencing today is the direct result of decades of very foolish decisions by Congress and previous presidential administrations.  And of course the Federal Reserve has more influence over the economy than anyone else does.  But Barack Obama steadfastly refuses to criticize anything that the Federal Reserve has done and he even nominated Ben Bernanke for another term as Fed Chairman despite his horrific track record of failure, so at a minimum Barack Obama must be considered to be complicit in the Fed’s very foolish policies.  Despite what the Obama administration tells us, the U.S. economy has been in decline for a very long time, and that decline has accelerated in many ways over the past four years.  Just consider the statistics that I have compiled below.

The following are 37 statistics which show how four years of Obama have wrecked the U.S. economy…

1. During Obama’s first term, the number of Americans on food stamps increased by an average of about 11,000 per day.

2. At the beginning of the Obama era, 32 million Americans were on food stamps.  Today, more than 47 million Americans are on food stamps.

3. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

4. The number of Americans receiving money directly from the federal government each month has grown from 94 million in the year 2000 tomore than 128 million today.

5. According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income” at this point.

6. The unemployment rate in the United States is exactly where it was (7.8 percent) when Barack Obama first entered the White House in January 2009.

7. When Barack Obama first entered the White House, 60.6 percent of all working age Americans had a job.  Today, only 58.6 percent of all working age Americans have a job.

8. During the first four years of Obama, the number of Americans “not in the labor force” soared by an astounding 8,332,000.  That far exceeds any previous four year total.

9. During Obama’s first term, the number of Americans collecting federal disability insurance rose by more than 18 percent.

10. The Obama years have been absolutely devastating for small businesses in America.  According to economist Tim Kane, the following is how the number of startup jobs per 1000 Americans breaks down by presidential administration…

Bush Sr.: 11.3

Clinton: 11.2

Bush Jr.: 10.8

Obama: 7.8

11. Median household income in America has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

12. The economy is not producing nearly enough jobs for the hordes of young people now entering the workforce.  Approximately 53 percentof all U.S. college graduates under the age of 25 were either unemployed or underemployed in 2011.

13. According to a report from the National Employment Law Project, 58 percent of the jobs that have been created since the end of the recession have been low paying jobs.

14. Back in 2007, about 28 percent of all working families were considered to be among “the working poor”.  Today, that number is up to 32 percent even though our politicians tell us that the economy is supposedly recovering.

15. According to the Center for Economic and Policy Research, only 24.6 percent of all of the jobs in the United States are “good jobs” at this point.

16. According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

17. According to the Economic Policy Institute, the United States is losinghalf a million jobs to China every single year.

18. The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

19. According to the World Bank, U.S. GDP accounted for 31.8 percentof all global economic activity in 2001.  That number declined steadily over the course of the next decade and was only at 21.6 percent in 2011.

20. The United States actually has plenty of oil and we should not have to import oil from the Middle East.  We need to drill for more oil, but Obama has been very hesitant to do that.  Under Bill Clinton, the number of drilling permits approved rose by 58 percent.  Under George W. Bush, the number of drilling permits approved rose by 116 percent.  Under Barack Obama, the number of drilling permits approved actuallydecreased by 36 percent.

21. When Barack Obama took office, the average price of a gallon of gasoline was $1.84.  Today, the average price of a gallon of gasoline is$3.26.

22. Under Barack Obama, the United States has lost more than 300,000 education jobs.

23. For the first time ever, more than a million public school students in the United States are homeless.  That number has risen by 57 percent since the 2006-2007 school year.

24. Families that have a head of household under the age of 30 now have a poverty rate of 37 percent.

25. More than three times as many new homes were sold in the United States in 2005 as were sold in 2012.

26. Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

27. Health insurance costs have risen by 29 percent since Barack Obama became president.

28. Today, 77 percent of all Americans live paycheck to paycheck at least part of the time.

29. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

30. The total amount of money that the federal government gives directly to the American people has grown by 32 percent since Barack Obama became president.

31. The Obama administration has been spending money on some of the most insane things imaginable.  For example, in 2011 the Obama administration spent $592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.

32. U.S. taxpayers spend more than 20 times as much on the Obamas as British taxpayers spend on the royal family.

33. The U.S. government has run a budget deficit of well over a trillion dollars every single year under Barack Obama.

34. When Barack Obama was first elected, the U.S. debt to GDP ratio was under 70 percent.  Today, it is up to 103 percent.

35. During Obama’s first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.

36. As I wrote about yesterday, when you break it down the amount of new debt accumulated by the U.S. government during Obama’s first term comes to approximately $50,521 for every single household in the United States.  Are you ready to contribute your share?

37. If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

But despite all of these numbers, the mainstream media and the left just continue to shower Barack Obama with worship and praise.  Newsweek recently heralded Obama’s second term as “The Second Coming“, and at Obama’s pre-inauguration church service Reverand Ronald Braxton openly compared Obama to Moses…

At Metropolitan African Methodist Episcopal Church, Braxton reportedly crafted his speech around Obama’s personal political slogan: “Forward!”

Obama, said Braxton, was just like Moses facing the Red Sea: “forward is the only option … The people couldn’t turn around. The only thing that they could do was to go forward.” Obama, said Braxton, would have to overcome all obstacles – like opposition from Republicans, presumably, or the bounds of the Constitution. Braxton continued, “Mr. President, stand on the rock,” citing to Moses standing on Mount Horeb as his people camped outside the land of Israel.

But it wasn’t enough to compare Obama with the founder of Judaism and the prophet of the Bible. Braxton added that Obama’s opponents were like the Biblical enemies of Moses, and that Obama would have to enter the battle because “sometimes enemies insist on doing it the hard way.”

So what do you think the next four years of Obama will bring?

Please feel free to post a comment with your thoughts below…

Louis Basenese, Chief Investment Strategist (Wall Street Daily | Original Link)

It’s Myth-Busting Monday. And that means it’s time to tackle a topic that’s potentially contentious.

Today, I’m taking on the idea of rarity in the financial markets. Specifically, whether or not “rare events” truly end up being a rare occurrence.

While the findings might not surprise you, the implications for our investing strategies certainly will. So let’s get to it.

“Unlikely” Doesn’t Mean “Never”

By definition, rare events should seldom occur.

Applying that understanding to financial markets, however, assumes that all market events follow a normal distribution. Or, in layman’s terms, a bell-shaped curve. (If you’re still clueless, fetch your Statistics 101 textbook from the attic to achieve enlightenment.)

More specifically, the statistics say that 99.7% of all daily movements should fall within three standard deviations of the mean, no more.

Well, guess what? New research suggests that they clearly don’t follow such a pattern.

Deutsche Bank recently measured the occurrence of rare events – defined as daily movements of three standard deviations or more from the mean – for various markets. Like stocks, 10-year Treasuries, the U.S. dollar/Japanese yen exchange rate… the list goes on.

As you can see, the proportion of three standard deviation movements hardly ranks as rare. In some instances, including the financial collapse in 2008, it happens over 25% of the time.

Long story short, outliers happen! Way too frequently. So, clearly, financial markets don’t follow a normal distribution.

Or if you prefer a more eloquent explanation, here’s how Deutsche Bank puts it:

“When thinking about the year ahead, it is tempting to extrapolate the recent past whether looking at risks or one’s base case. Moreover, there is a tendency not to deviate too far from consensus, perhaps seeing safety in being part of the herd. From a statistical perspective, this is very similar to assuming markets follow a normal or Gaussian distribution. That is, markets are well behaved and extreme outcomes are rare. The financial crisis of 2008 taught us otherwise, yet it is very difficult to shrug off the bias to assume normality in markets.”

Either way, the implications couldn’t be more straightforward. We should prepare for outliers.

Such advice is particularly timely, considering that we’re still in the middle of the season when pundits dole out predictions like breath mints.

We should be seeking out the wildest and boldest predictions. Because they could actually happen – and, in turn, we could score some serious contrarian profits.

Discarding the obvious in favor of the outrageous is easier said than done, of course.

We naturally gravitate toward predictions that jive with our own personal convictions. Psychologically speaking, it’s called “confirmatory bias.” We seek out information congruent with our own beliefs with much more fervor than contradictory data.

But based on what we’ve learned so far, it’s imperative to think outside the box if we want to identify new profit opportunities before anyone else.

Six Outrageous Predictions for 2013

Since I’m supposed to be here to help, let me share six outrageous predictions with you for 2013. Some are mine, and some came from elsewhere.

~Prediction #1: The burgeoning rally in Japanese stocks endures.

I know that’s crazy talk. But I’m no longer the only one guilty of it. (See here.) So is Blackstone Advisory Partners’ Vice Chairman, Byron Wien. In his annual “Surprises” list, he pegged the Nikkei 225 trading “above 12,000 as exports improve and investors return to the stocks of the world’s third-largest economy” as a possibility. Go long Japanese stocks, but beware of a falling yen sapping your profits.

~Prediction #2: Congress actually passes a budget.

It hasn’t happened since April 29, 2009. But it’s hard to curb spending when you don’t know how much you’re allowed to spend. (Just saying.) From an investment perspective, such an occurrence could help ward off a sovereign debt downgrade and help Treasury prices continue to defy gravity.

~Prediction #3: Stocks soar by more than 15%.

Bull markets aren’t supposed to last this long, until they do. I selfishly hope that nobody buys into this one, because it’ll serve as a strong contrarian indicator that the bull market will, indeed, charge higher. And that means more profits for the few, the proud, the bulls.

~Prediction #4: Ben Bernanke gets tired of buying bonds and opts for stocks instead.

All credit goes to the boys at Deutsche Bank for this one. As they said, “With the U.S. housing sector apparently turning the corner, stronger equities may be the necessary tonic to further increase household wealth, and also to boost investment… While the Fed does have restrictions on what assets it can buy, it can invoke Section 13(3) of the Federal Reserve Act that allows more extreme actions in ‘unusual and exigent circumstances.’”

Who knew such a monetary policy measure was even legal? I’m suddenly getting more bullish about stocks. As the saying goes, we never want to fight the Fed.

~Prediction #5: Inflation returns with a vengeance.

The Nostradamuses over at Morgan Stanley (MS) say, “Inflation could be triggered by a combination of another drought which limits agricultural production, stronger-than-expected recoveries from [the] world’s economic powerhouses (China and the U.S.), and ballooning central bank balance sheets.”

That actually doesn’t sound so outrageous, now does it? Hurry up and stuff your portfolio with gold, silver, timberland, real estate and, yes, stocks. (They’re the most unloved, but best inflation hedge, of the bunch.)

~Prediction #6: Greece discovers gas reserves worth more than all of the debt it owes.

I know what you’re thinking. There’s also a bottomless pot of gold at the end of a rainbow in Ireland, right? This prediction from Deutsche Bank might not be so far-fetched, though. As they note, “Greece has sizeable undersea terrain in the Mediterranean, and several Mediterranean countries have already discovered and are exploiting undersea natural resources.”

If you’ve got moxie, you can prove it by pushing a few chips in on the Global X FTSE Greece 20 (GREK). It’s in full-on rally mode – up 60% over the last six months. So it’s not really that outrageous of a bet. It’s a momentum play.

~Bonus Prediction: Lindsay Lohan avoids any run-ins with the police.

This is one prediction I won’t even consider betting a single dollar on. I may be a dyed-in-the-wool contrarian. But I’m not a sucker. However, if you’ve got a friend willing to bet that she avoids the law in 2013, bet the house… And make him pay up!

Bottom line: Just because something is unlikely, doesn’t mean it won’t happen. Especially in the financial markets.

So be a contrarian and bet on the unexpected happening much more frequently than everyone else. You’ll have a bigger net worth to show for your courage. Just ask John Templeton: “It is impossible to produce superior performance unless you do something that is different from the majority.”

And he practiced what he preached.

Ahead of the tape,

Louis Basenese

by Sheraz Mian (Zacks Investment Research | Original Link)

With the markets closed today for Martin Luther King Jr. Day, the earnings season takes the day off as the reporting flood gates open from Tuesday onwards. It has been a relatively uneventful earnings season thus far, but this week promises to give us a good taste of what’s really in store as we will see more earnings reports this holiday-shortened week than the last couple of weeks combined.

The focus will be on the Technology sector with Apple (AAPL - Analyst Report) on Wednesday, IBM (IBM - Analyst Report) and Google (GOOG - Analyst Report) on Tuesday and Microsoft (MSFT - Analyst Report) coming out with fourth quarter results on Thursday. Beyond Technology, we will hear from top players in a variety of industries, from DuPont (DD- Analyst Report) to McDonald’s (MCD - Analyst Report) and Starbucks (SBUX - Analyst Report).

Friday’s announcement about an apparent decoupling between the debt ceiling and the pending budget issues is a major positive for the market, which should help sustain the recent momentum in stocks. The market wasn’t showing any outward signs of fear to begin with, but this announcement has really pushed the CBOE’s VIX Index, generally considered a proxy for fear or anxiety in the market, to levels not seen since the first half of 2007.

You would be perfectly justified in wondering if investors are being a bit complacent here as there is no shortage of clouds on the horizon. It may not be the lull before the storm, but the level of calm in the market is nevertheless a bit unnerving.

The relatively uneventful fourth quarter reporting season thus far may also have played a role in contributing to market calm. Results from the 67 S&P 500 companies that came out with fourth quarter earnings as of Friday, January 18th were a tad bit better than what that same group reported in the third quarter. But that may not be saying much as the third quarter was the weakest earnings season on record since the start of the earnings cycle in 2009.

Overall, the corporate earnings picture remains quite weak, but you would hard-pressed to see that in current earnings expectations. Estimates for 2013 have started coming down a bit lately, but they still represent a significant ramp-up from the low single-digits growth pace of 2012. It will be interesting to see how the stock market behaves in the coming weeks and months as those expectations start coming down.

Today also marks the inauguration of President Obama’s second term. Americans may take presidential inaugurations for granted, but for someone like me was born and raised in a foreign country, this is always an awe-inspiring moment. I am not talking about the pageantry of the event and the lofty words of the inaugural speech, but the spectacle of the peaceful transfer of power that the event symbolizes.

Many nations rely on a monarch to ensure continuity and peaceful transfer of power, but this country has been able to ensure that in a republican framework. No country does the peaceful transfer of power better than America.

By David Sterman (Street Authority | Original Link)

In the 1930s, the U.S. government sought to boost a flagging economy by maintaining very low interest rates. Throughout the decade, consumers benefited by obtaining low-rate mortgages — though their savings accounts garnered insultingly low levels of interest as well.

Sound familiar? Well, the government has been pursuing that policy in recent years as well, as the Federal Reserve has initiated a series of programs (formally known as quantitative easing) that aim to keep interest rates — and inflation — at very low levels.

Now concerns are growing that the steps taken to spark the economy will have negative long-term consequences and the current period of low inflation and interest rates will again come to an abrupt end. What will this do to your portfolio, and what can be done?

Bill Gross, the nation’s top bond fund manager at Pacific Investment Management Co. (PIMCO), signaled just such a concern in a note to clients this past summer cautioning that “an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades,” adding that “the cult of inflation may only have just begun.”

All this raises the question: What kinds of investments should be pursued in order to protect yourself (or hedge, as industry types would say) against inflation? The answer is not what you would expect. In fact, the speculative cushion some investors fall back on may not be the answer.

Whenever the prospect of rising inflation rears its ugly head, many investors reflexively turn to precious metals such as gold and silver. Indeed, the move up in gold prices from $800 an ounce in late 2008 to a recent $1,670 coincides with the more aggressive steps taken by the Federal Reserve as “gold bugs” began to fret about runaway prices.

But here’s the problem: Gold is not really a hedge against inflation — it is only perceived to be. If and when inflation starts to kick in, there’s no clear-cut reason gold prices must move higher. In fact, gold has suffered from major sell-offs in past decades when inflation rose more slowly than had been feared.

Still, inflation is corrosive. It eats away at the present value of all assets. If you keep cash in the bank at a paltry 0.5% interest rate but annual inflation moves up from a current 2% to 4.5%, then it’s as if your banked cash is losing 4% of its value every year.

That’s why it pays to find investments that can hold their own when inflation reappears. And finding these opportunities is actually quite simple. You want to find any companies that have the pricing power to adjust or the hard assets that tend to serve as an inflation hedge.

Let’s look at a few examples.

When it comes to making beer, Anheuser-Busch InBev (NYSE: BUD) feels the effects of inflation. Virtually all of its costs go up, from the raw ingredients such as barley, malt and hops to the fuel used in delivery trucks. But beer makers simply pass on those higher costs to customers and, as a result, have shown remarkably steady operating profit margins in periods of both high and low inflation.

Automakers have no such luxury. If they choose to raise prices, then consumers may decide to stick with their existing vehicle a bit longer or they may check out lower-priced products made by foreign rivals. And thanks to a stream of government mandates regarding safety and fuel efficiency, car making has never been more complex or expensive. Still, car prices — adjusted for the content in each vehicle — have in fact fallen in value in the past decade on an inflation-adjusted basis. So a period of rising inflation may spell trouble on the profit front for automakers. But other investments adjust well with inflation.

You can extend this framework to virtually any industry. If you’re concerned about an imminent upturn in inflation, then focus on companies that have proven pricing power. Providers of consumer staples such as Procter & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CG) always raise prices when their costs go up.

Consider this as well: Consumers may not realize that one of the greatest inflation hedges is already in their possession. I’m talking about houses and condos. Sure, we saw neck-snapping plunges in home prices over the past five years, though that was partially a function of surging home prices in prior years. In the long haul, home prices tend to track inflation. That’s because the cost to build a new home or repair an existing one always rises as the costs of lumber, siding, plumbing, labor and other inputs rise.

In the early 1970s, a period of high inflation, my parents bought a home for less than $80,000. A decade later, they sold that same home for $225,000. They weren’t savvy real estate speculators, just the beneficiaries of high inflation that boosted their home’s price by a significant amount.

So there are ways to hedge against inflation. It’s just a matter of knowing where to look.

Action to Take –> Few investors are thinking about inflation right now, but that doesn’t mean we’ll have low inflation and low interest rates for a long time into the future. Indeed, prices may start to rise as soon as the global economy picks up, perhaps in a year or two. At that point, any slack in the global economy will have been eliminated, creating bottlenecks in shipping and production — which is often a key precursor to higher inflation. That makes this a good time to start reading up on the kinds of investments that will help protect you against the corrosive effects of inflation.

Brace yourself! Your passport to the innovation pipeline arrives in T-minus five days.

On Wednesday at 5:00 PM EST sharp, I’ll send the very first issue of Tech & Innovation Daily, Wall Street Daily’s new “Forever Free” publication.

In the inaugural broadcast, Wall Street Daily readers will receive a link to my new report, The Seven Most Investable Technology Trends of 2013.

It’s loaded to the gills with important moneymaking information.

If you can’t wait till then, don’t worry!

Our Publisher, Robert Williams, asked me to chat with him about the new e-letter and what “life inside the innovation pipeline” means for readers.

The footage from that interview is below.

Remember, as long as you’re a loyal Wall Street Daily subscriber, you don’t need to do a thing to start receiving Tech & Innovation Daily. (If you’re not subscribed to get our emails, you’ll need to sign up to receive the report.)

The first issue, along with the free report, will hit inboxes on Wednesday at 5:00 PM EST.

By Alan Knuckman (StreetAuthority | Original Link)

Hedge funds have been lining up on both sides of the fence regarding nutritional supplement multi-level marketing company Herbalife Ltd. (NYSE: HLF). The stock made a 52-week high of $73 last spring before shares took a huge hit following accusations from hedge fund investor William Ackman that the company was nothing more than a pyramid scheme.

The seven-month trading range between $56 and $42 a share projected a downside target of $28 ($14 height of the pattern subtracted from the breakdown level of $42). A volatility spike occurred when the downside channel support at $42 was broken in December, and as often happens at price extremes, the selling pressured the stock to $24 before a rebound.

Recent action has seen the price rally back above breakdown point at $42, which acts as the pivot point, to about $44. As the battle between short sellers and value buyers continues, traders can use a different approach to profit from Herbalife.

Because of the high volatility (another word for opportunity), the options on the stock offer many strategies with mathematical advantages over a straight purchase of the shares. In particular, selling put options could allow us to collect income while we wait to get into the stock at an even bigger discount.

Cash-secured put selling strategy
While the typical investor might use a limit order to buy a stock or exchange-traded fund (ETF) at a designated price or lower, the options trader can do one better by selling a cash-secured put.

This strategy has the same mathematical risk profile as a covered call. With put selling, there is an obligation to buy the stock at the strike price if it is assigned, allowing you to get into the stock at a discount. In fact, the true entry cost basis is even lower with the subtraction of the premium you earned from selling the puts.

And if the stock is not below the strike price at expiration, then the premium received is all profit. In other words, you’re getting paid not to own the stock.

There are two rules traders must follow to be successful at selling put options.

Rule One: Only sell puts on stocks you want to own.

The intention of this strategy is to be assigned the stock as a long-term investment (each option contract represents 100 shares). So make sure you have the funds in your account to buy the stock at the options strike price if a sell-off continues. Paying in full ensures that no additional money is needed to hold the stock for potentially many months or even years until a price recovery.

Rule Two: Sell either of the front two option expiration months to take advantage of time decay.

Collect premium every month on put sales until you are assigned shares at a cost-reduced basis. Every month you keep the premium is money subtracted from your entry price.

Action to Take –> Sell to open HLF Feb 30 Puts at $1 or better.

This cash-secured put sale would assign long shares at $29 ($30 strike minus $1 premium), which is about 34% lower than Herbalife’s current price, and would cost you $2,900 per option sold. Remember: Only sell this put if you want to own Herbalife shares at a discount to the current price. If you are assigned the shares, a March covered call can be sold against the stock to lower your cost basis even further.

And if the stock does not fall below the strike price before expiration, then you keep the premium you collected, essentially getting paid not to buy the stock.

This article originally appeared on ProfitableTrading.com:
This Controversial Stock Could be the Ideal Income Generator

[Note: My ProfitableTrading.com colleague, Amber Hestla-Barnhart, has put the finishing touches on a report that answers 10 commonly asked questions about boosting income with options. If you'd like to learn more about generating income using options, simply click here and tell us where to send the report.]

Alan Knuckman does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

If you want to frighten Baby Boomers, just show them the list of statistics in this article.  The United States is headed for a retirement crisis of unprecedented magnitude, and we are woefully unprepared for it.  At this point, more than 10,000 Baby Boomers are reaching the age of 65 every single day, and this will continue to happen for almost the next 20 years.  The number of senior citizens in America is projected to more than double during the first half of this century, and some absolutely enormous financial promises have been made to them.  So will we be able to keep those promises to the hordes of American workers that are rapidly approaching retirement?  Of course not.  State and local governments are facing trillions in unfunded pension liabilities.  Medicare is facing a 38 trillion dollar shortfall over the next 75 years.  The Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.  Meanwhile, nearly half of all American workers have less than $10,000 saved for retirement.  The truth is that I was being incredibly kind when I said earlier that we are “woefully unprepared” for what is coming.  The biggest retirement crisis in history is rapidly approaching, and a lot of the promises that were made to the Baby Boomers are going to get broken.

The following are 35 incredibly shocking statistics that will scare just about any Baby Boomer…

1. Right now, there are somewhere around 40 million senior citizens in the United States.  By 2050 that number is projected to skyrocket to 89 million.

2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.

3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.

4. One survey that covered all American workers found that 46 percentof them have less than $10,000 saved for retirement.

5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000″.

6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.

7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.

8. Today, one out of every six elderly Americans lives below the federal poverty line.

9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years.  Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.

10. Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.

12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.

13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.  The following is from a recent CNBC article…

New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.

15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

17. What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor inmore than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

18. In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.

19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check.  The truth is that most Social Security checks simply are not that large.  The following comes directly from the Social Security Administration website…

The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.

Could you live on about 300 dollars a week?

20. Social Security benefits are not going to stretch as far in future years.  The following is from an article on the AARP website…

Social Security benefits won’t go as far, either. In 2002, benefits replaced 39 percent of the average retirees salary, and that will decline to 28 percent in 2030, when the youngest boomers reach full retirement age, according to the Center for Retirement Research at Boston College.

21. In the United States today, more than 61 million Americansreceive some form of Social Security benefits.  By 2035, that number is projected to soar to a whopping 91 million.

22. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

23. As I wrote about in a previous article, the number of Americans on Medicare is expected to grow from 50.7 million in 2012 to 73.2 million in 2025.

24. Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately$328,404 for each and every household in the United States.

25. Today, only 10 percent of private companies in the U.S. provide guaranteed lifelong pensions for their employees.

26. Verizon’s pension plan is underfunded by 3.4 billion dollars.

27. In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.

28. The state of Illinois has accumulated unfunded pension liabilities of more than 77 billion dollars.

29. Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have 325 billion dollars in combined unfunded pension liabilities.

30. According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.

31. In 2010, 28 percent of all American workers with a 401(k) had taken money out of it at some point.

32. Back in 2004, American workers were taking about 30 billion dollars in early withdrawals out of their 401(k) accounts every single year. Right now, American workers are pulling about 70 billion dollars in early withdrawals out of their 401(k) accounts every single year.

33. Today, 49 percent of all American workers are not covered by an employment-based pension plan at all.

34. According to a recent survey conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.

35. A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.

So what is the solution?  Well, one influential organization of business executives says that the solution is to make Americans wait longer for retirement.  The following is from a recent CBS News article…

An influential group of business CEOs is pushing a plan to gradually increase the full retirement age to 70 for both Social Security and Medicare and to partially privatize the health insurance program for older Americans.

The Business Roundtable’s plan would protect those 55 and older from cuts but younger workers would face significant changes. The plan unveiled Wednesday would result in smaller annual benefit increases for all Social Security recipients. Initial benefits for wealthy retirees would also be smaller.

But considering the fact that there aren’t nearly enough jobs for all Americans already, perhaps that is not such a great idea.  If we expect Americans to work longer, then we are going to need our economy to start producing a lot more good jobs than it is producing right now.

Of course the status quo is not going to work either.  There is no way that we are going to be able to meet the financial obligations that are coming due.

The federal government, our state governments and our local governments are already drowning in debt and we are already spending far more money than we bring in each year.  How in the world are we going to make ends meet as our obligations to retirees absolutely skyrocket in the years ahead?

That is something to think about.

So what do you think?  Do you believe that there is a solution to our retirement crisis?  Do you think that we can actually keep all of the promises that we have made to the Baby Boomers?  Please feel free to post a comment with your thoughts below…

It was 1988 when I took my first visit to the New York Stock exchange and realized what I wanted to do with my life. Back then I just wanted to wear a cool-looking jacket and yell at my coworkers; but those frenetic men and women (also called specialists and market makers) yelling at each other and glaring at old-timey CRT screens were actually creating a sort of harmony in all the chaos.

You see, when you buy or sell a stock, there must be someone on the other side of the trade to provide liquidity; they sell when you buy and vice-versa. If there isn’t anyone willing to buy at your price, it drops until someone is willing to step in.

In those days, much of the trading done was with real humans and it was hard enough to compete with them. Now you’re most likely trading with an automated system that is given a set amount of risk and technical parameters, and programmed to make money by taking advantage of any mistakes made.

In fact, the majority of all the volume on the NYSE is algorithmic or program trading, which also includes H.F.T (High Frequency Trading).

Sure, humans are still involved, but to a much lesser degree, and the exchanges are shadows of what they once were as computers have taken over to facilitate the billions of shares that are exchanged daily. These programs use order flow, math, fundamentals, statistics and technical analysis to execute their trades automatically, and they don’t take prisoners.

Yes, commissions have come down and orders are filled faster than lightening; but the downside is that you and your portfolio are increasingly susceptible to irrational movements in the stock market like the flash crash of 2010.

While another flash crash is probable, the bigger issue lies in the sometimes violent and unexplained movements that individual stocks make from time to time and how they can affect our investing success.

More . . .

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Below we see a monthly chart of the S&P 500 going back 40 years. The lower area of the chart is the Bollinger Band %b oscillator. It looks like the price chart above, but gives us a relative volatility perspective. The upper dotted line represents an ‘overbought condition’ and the lower dotted line is an ‘oversold’ condition.

Notice how stock prices stayed in a narrower band closer to the “over-bought” area of the chart. Then, in the late 90s, you can see that for the first time in 30 years the market started making these wild moves, going all the way to the bottom and back, only to repeat again in 2008 and perhaps for a third time in the next couple months.

This chart demonstrates the increased volatility in the marketplace and extraordinary condition we have seen since computers began infiltrating the stock market.

If you’re not prepared, you might be a sitting duck when the algorithms decide to take your portfolio for a ride. Yes, it will happen eventually.

As a trader, you need to know how to both recognize and/or protect yourself against them when they get overzealous. Here are some steps you can take to minimize losses caused by the algorithms and even take advantage of their actions.

Stop Order Danger

Stop orders have been a source of contention for traders even before the algos took over.

It’s a little known fact that most “Stop” orders are held by the exchange and are seen by both market makers and specialists. In other words, if you buy a stock at $53.00 and place a “stop order” to sell if it drops to $50, certain pros can see that order and can “lean” on it (use it to their advantage).

Remember that a “Stop Order” is essentially a trigger that activates a market order to buy or sell, at the MARKET’S discretion.

So if the market is weakening and the algorithms begin to add to the momentum the specialist might remove his bid and lower it down to your stop level, triggering your stop order and then he gets to buy just below that (he’d be buying the shares you’re selling) and then bring the stop back up again once the algo slowed down.

This means you not only sold at a loss, but have no position when the stock bounces back.

There are even programs that sniff orders out and use them as part of their strategy, and even “stop limit” orders are susceptible.

One solution is to use “trigger orders” which are held on your broker’s servers and NOT seen by markets until they are active. Also try to use stop limit orders if your broker doesn’t offer in-house triggers. This helps to mitigate any “slippage” between your stop price and the price you get filled at.

I use these sorts of tactics in my own trading to keep my stop orders “safe.”

Abnormal Volume and Movement

Most stocks have a normal rhythm or volatility range that they tend to stay within. In other words, every stock has its own unique set of behaviors that can be observed and used to profit and prevent catastrophe.

Indicators like Average True Range, Volatility, Average Volume and several other characteristics make up a stock’s unique personality. If a stock is behaving oddly and there are no earnings reports or major news events, chances are that program trading may be to blame.

The average true range can tell you what a “normal” movement is for a stock, while placing a 20 day moving average on your volume chart can help quickly identify high or low volume days. Volatility is a bit more complicated, but can be quantified with a simple tool or chart. Most option brokers offer charts in which you can see just how volatile a stock relative to past movement.

If you see elevated volume, high volatility and a stock that’s outside of its normal range, it could mean that program traders have gotten the best of the stock and it may be one to avoid. It could also be an opportunity brewing if you know how to play it.

Combine Technical Analysis with Fundamentals
Many algorithms are programmed with technical indicators and use them to execute trades.

Because markets are no longer ‘straightforward’ and computers are making billion dollar decisions in milliseconds, you must understand at least the basics of technical analysis. I say this because you may be in a stock when it starts to go bonkers and wonder what the heck you need to do next and if you should stick to your fundamental thesis.

Even the best of stocks can see dramatic drops in price, often predicated by a technical formation (or several in the case of Apple above).

Pure fundamentalists have been buying Apple since it dropped from $750 to $700, but technical analysts and algorithmic traders saw the bearish writing on the wall when Apple breached below the 200 day moving average and gained momentum to the downside.

Notice all the volume coming in as this breach occurred in early December, and then the resistance at the 50 day moving average in early January. I even went on air TWICE and said the stock was most likely moving lower. Not just because of fundamental data, but the charts were screaming sell!

Would you rather have bought Apple at $700 or $500?

Beat Them at Their Own Game

Much of technical analysis works because so many believe in it. Those beliefs translate into self fulfilling prophecies for the underlying stocks and can create extremely powerful waves for the algorithms to ride to profits. You can either ride those waves or be crushed by them.

You must defend your portfolio as best you can. You can do it alone by learning these techniques and more, but it helps to have someone knowledge on your side or a very powerful tool to indentify the pitfalls and opportunities.

Buying quality stocks with strong fundamentals is a start, but you must have another layer of analysis in your trading. In my new TAZR trader, I have assembled some of the most powerful technical tools and combined them with a tried and true fundamental screening system, the Zacks Rank, to create the perfect strategy to counteract these algo traders. You’ll receive a handful of precisely timed trades, so you won’t have to become a technician yourself to beat them at their game.

I strongly suggest that you look into TAZR, Technical Analysis + Zacks Rank and its remarkable guarantee right away. Entry to the public closes Sunday, January 20.

Learn more about TAZR >>

Good Trading,

Jared

Jared Levy is a Zacks Rank Senior Equity Strategist with a broad international following and deep expertise in technical trading. He provides private recommendations and commentary for the new Zacks TAZR Trader.

As probably most of those interested in Dell (DELL) already know, there is a possibility that it will go private. Supposing that is the case, it is worth thinking about who could be interested in this deal going through. For this reason I made a small list of the possible interested groups:

1) All the shareholders, institutional or retailers, who bought at low levels and want to get out relatively fast at a premium.

2) The private equity firms clearly are interested; that is the reason they are in talks to buy it.

3) The one whom few are talking about is the CEO and 15% owner: Michael Dell. Michael Dellcould be considered one of the private equity partners, maybe even the bigger one. After all, he has more or less $15 billions of net worth. His net worth is as big as his company’s market capitalization value just a few days back. He is one of the richest men on the planet ranking high on the Forbes list of billionaires. With only a fraction of his net worth he could put the whole equity part of the deal. With his big ownership not many votes would be needed to approve the deal. He also has investing experience via his MSD Capital hedge fund which has reportedly been quite successful.

Michael Dell, already a major owner, has been buying shares of his company in the last few years at even higher prices than now. As a billionaire and founder, if he decides to put equity into the deal he could end up owning north of 40% of the shares of the private company, maybe even more. Once private the dividend could be cut in order to pay the bank and the bond holders. That could cover a substantial part of the interests. Specially if the deal is done at low interest rates. Not strange at all these days, thanks to the governments zero interest rates policy, where many junk bonds yield hardly above inflation. That said it might not be easy to pull off the deal at low prices due to the possibility of competitive offers or of lawsuits from shareholders against the board of directors.

If I represented Silver Lake or another of the undisclosed private equity partners, I might be interested in Michael Dell remaining to run the company. I do not think it is clearly advantageous to replace him as CEO.

Given that possibility, the ones that would not benefit are all those who invested at prices substantially higher than today. Considering the current low historical levels of the stock price, many could fall in that category.

The important fact to note is that as a shareholder with the intention to remain at his company or even increase his ownership, Michael Dell would be interested in taking his company private as cheaply as possible. In other words, in paying as little as possible for it. Therefore, his personal goal could be making the cheapest possible deal for the rest of the public shareholders. That would allow him to remain owner, with a much bigger ownership, and his fellow owner(s) would be some private equity firm(s), instead of institutional and retail public investors. He would have increased power and could execute freely without having to live under the pressure of being a public company.

The situation reminds me when Warren Buffett years ago bought Berkshire Hathaway (BRK.A)(BRK.B). The big difference then was that he warned investors not to sell if they did not want. They were explicitly told that he would buy their shares because he considered them to be cheap.

With a deal or not, this could be taken as a sign that the company is not shareholder friendly. It might not be doing its shareholders a favor by letting a deal go through at a cheap level. The bad consequences are also for employees who probably feel more insecure now. It could also explain why so many good high-level managers have left Dell lately.

Being a current shareholder, it is beneficial to do this kind of exercise to understand the incentives of the related parties. If Michael Dell is really interested in remaining in the company as CEO and equity owner, this could be an opportunity for him to buy back his company at a low price and remain on the helm. Under that scenario the one more interested in the private equity deal going through could be the current owner/CEO himself, and shareholders expecting to get high prices could be disappointed.

By Michael Vodicka (StreetAuthority | Original Link)

Carla Pasternak, editor of Street Authority’s High-Yield Investing, calls it “the most dramatic turnaround in U.S. history.” And millions of people across the country are reaping its benefits, increasing their net worth, while reducing the stress point that used to cause many to lose sleep at night.

I’m talking about the clear recovery taking place in the residential and commercial real estate markets.

The latest read on the S&P/Case-Shiller Home Price Index, a leading home-value index that tracks prices in 20 residential markets, showed that home values rose 4.3% in October 2012 from the previous year, ahead of estimates looking for 4% growth. That follows the trend that has been in play for the past 12 months, with home prices showing steady gains through most of the year.

And sure to fuel the rebound in home prices is the recent settlement of a massive lawsuit against 10 major U.S. banks and mortgagecompanies brought by the federal government. Not only is the settlement value of $8.5 billion barely a glitch in the earnings power of these major banks and mortgage companies, but removing the uncertainty of a lawsuit will likely provide a boost of confidence and drive higher lending volumes. Both of these factors will benefit home prices.

If you’re a regular reader of StreetAuthority.com articles, then you may have seen Nathan Slaughter, editor of Scarcity & Real Wealth, declare that “Now is the Greatest Opportunity in a Generation to Buy Real Estate.”

But as every homeowner knows all too well, investing in housing is risky and expensive. Broker transactions can easily hit 5% of the value of the home, and when it’s time to sell, homeowners are frequently confronted with the reality of anilliquidasset that’s difficult to unload. These two factors weigh very heavily on the total return of any housing investment.

That’s why I am such a big fan of private-equity firms when it comes to investing in the housing market. These companies stand to reap huge gains from rising home values and higher lending volumes, which will likely decrease delinquency rates and increase the value of distressed loans and fixed-income assets.

[See also: The Easiest Way to Become a Landlord in 2013]

And my favorite pick from the group is Blackstone (NYSE: BX). The company is a major player in the private-equity space and the largest private real-estate owner in the United States. Beyond residential and commercial real estate, Blackstone also operates in distressed debt, hedge fund solutions and financial advisory.

The stock has already been rallying on the housing rebound. While home-owners and the market have been cheering the 4.3% rebound in home prices in the past year — certainly great news in its own right — Blackstone has been ripping higher, posting a market-smashing 33% return in the past six months. Take a look at the big gains below.

But even though shares are up sharply, there is still plenty of room for Blackstone to move higher. In fact, I think this stock can easily double.

That’s because Blackstone is insanely undervalued.

In just the past 90 days, the full-year 2012 estimate has seen big upward revisions, jumping 11% to $1.63 a share. The full-year 2013 estimate is even more bullish, with analysts projecting 30% earnings growth to $2.11 per share. Taking the full-year earnings estimate of $2.11 a share for 2013, Blackstone trades at just eight times forward earnings, a big discount to its five-year average of 12 times and an even bigger discount to its peer average of 18 times. If Blackstone simply traded with the same valuation as its peers, then shares could more than double to $38.

But it’s not just about valuation. Blackstone is also razor-focused on cashing in on the rebound in housing to grow earnings. The company recently accelerated purchases of single-family homes as prices increased faster than it expected, deploying $2.5 billion from a $13.3 billion fund raised last year to invest in 16,000 homes to manage as rentals, according to Bloomberg. Now that’s what I call an investment in housing.

Sweetening the deal a little more is the stock’s solid 2.4% dividend yield, safely ahead of the benchmark10-year Treasury note’s 1.9% yield and the S&P 500′s 2% yield.

Risks to Consider: The big banks have been conservative lenders in the past four years. Although this trend is improving and should improve more due to the recent mortgage settlement, lower lending volumes would continue to weigh on the housing recovery and Blackstone’s earnings growth.

Action to Take –> Anytime I see two of StreetAuthority’s experts make such a bold statement, especially when it comes to the beleaguered housing sector, I take note. And Blackstone is uniquely positioned to benefit from the growing recovery in housing. The stock has great earnings, an amazing valuation, and while the yield is perhaps a little low for Carla to consider for High-Yield Investing, it’s still solid. If shares simply traded with the same valuation as its peers, then Blackstone could jump to $38 share, more than 100% from current levels.

P.S. – StreetAuthority’s High Yield Investing is dedicated to bringing investors the highest-paying and most stable stocks, bonds and funds on the market. Click here to learn how to profit from some of our latest income investing picks.

By Frank Curzio, editor, Small Stock Specialist (Originally Posted at Growth Stock Wire)

After being held up for years, the giant natural gas boom is ready to happen…

It’s a familiar story to longtime readers… Thanks to advances in drilling technology, America now has a 100-year-plus supply of natural gas. As a result, prices have collapsed to near historic lows.

Within a few short years, we’ll be exporting liquefied natural gas (LNG). We’ll see thousands of trucks converted to run on natural gas. And hundreds of natural-gas-fueling stations will pop up all across the U.S.

Obvious winners include Westport Innovations (NASDAQ: WPRT) (natural gas engines), Chart Industries (NASDAQ: GTLS) (LNG storage), and Cheniere Energy (NYSEAMEX: LNG) (LNG exports). My Small Stock Specialist subscribers have pocketed big returns on many of these stocks in less than two years.

But they’re not the only companies that will see huge increases in profits. The next leg of this energy megatrend is beginning to take place right now. Here’s why…

The natural gas market isn’t a typical “global” market like the market for iron ore, copper, or crude oil. Right now, natural gas cannot be easily shipped over the ocean like a load of iron ore. It requires extremely expensive, extremely complex loading/unloading terminals and ships.

Because of the cost of these terminals, we don’t have an extensive transportation network for natural gas. Thus, natural gas prices can be very low in North America, but very high in Asia.

Because of the awesome boom in North American natural gas production, the current price of its natural gas is below $3.50 per million British thermal units (BTUs). The U.S. government expects prices to stay below $5 for another decade.

India, China, and Europe are starving for the clean fuel. But they have not unlocked major shale deposits. Thus, prices are much higher there. Prices for natural gas in these areas averaged around $11 per million to $16 per million BTUs last year. That’s roughly 200%-350% higher than U.S. prices.

The National Energy Administration predicts China will import 35% of its natural gas needs by 2015. India is expected to begin importing natural gas in two years. Japan and most of the biggest economies in Europe are also big importers. So the differentials between natural gas prices in the U.S. and the rest of the world should remain intact for several years.

These price gaps present a huge opportunity for investors…

Energy giants like ExxonMobil, BP, and Chevron are partnering up with some of the largest state-owned energy giants to open up LNG export terminals along U.S. coastlines.

Consulting firm Tudor Pickering Holt & Co. estimates that U.S. energy companies can generate $93 million per day exporting LNG at Japan’s current import price of $15 per million BTUs. That’s over $30 billion of new income each year.

Right now, only one company has been licensed to build an LNG export facility. That’s Cheniere Energy. However, there are at least 16 in the pipeline awaiting government approval. I expect several of these projects to get approved in 2013.

These projects didn’t get approved last year because 2012 was an election year. Neither party would risk votes by approving such a measure. Recent studies commissioned by the government and released last month show the huge economic benefits from building these LNG facilities.

They would allow the U.S. to export billions of cubic feet of natural gas per day. More important, they would create millions of new jobs and generate billions of dollars in new income for the U.S. government, which is in dire need of more revenue.

Sure, it would take years before America actually exports the clean fuel. It also costs tens of billions of dollars to build these facilities which require pipelines, large shipping terminals, and massive storage facilities. In other words, I wouldn’t be buying natural gas producers on the hopes prices rebound in the near term.

Instead, I recommend focusing on the companies that supply the building materials and building services for all the infrastructure we’re going to need. It’s like focusing on Cisco and Microsoft during the Internet boom of the 1990s. These companies were huge winners because they supplied the Internet’s infrastructure. (They were a much better bet than fad websites).

As I mentioned, my readers have done very well in Chart Industries (GTLS). It provides products and systems for natural gas storage and transmission. You can also consider a company like Chicago Bridge & Iron (NYSE: CBI), which builds natural gas terminals.

Whatever way you decide to trade it, make sure you take a position soon. Now that the election is past, politicians can actually make some things happen with this giant potential trend. But the best time to get in is before you hear about it on the news.

Good investing,

Frank Curzio

P.S. If you’re interested in making the biggest possible gains from this coming infrastructure boom, you should consider the small-cap LNG infrastructure builder we recently added to the Small Stock Specialist portfolio. It’s very cheap… which is why I expect triple-digit upside from the stock in 2013. You can access my huge report on this trend – and this stock – with a risk-free trial subscription. Learn how to get started here.

Further Reading:

Catch up on the natural gas boom here…

A New Energy “Megatrend” Is Starting… Get in Now
“Getting in early and holding stocks through megatrends is how millionaires are created… Right now, you have the chance to invest in one of the biggest energy megatrends in more than a decade.”

The World’s Biggest Companies Are Going “All-In” on This Trend
“Pretty soon, every heavy-duty truck in the world will run on natural gas.”

By Ben Shepard (Investing Daily | Original Link)

For more than four years, Americans were locked in a raging debate over the future of our healthcare system. Despite the deepening financial crisis at the time, healthcare reform turned out to be one of the pivotal issues in the 2008 presidential election. During that campaign, then-candidate Barack Obama proposed radical changes to how care is delivered and who pays for it, while Republican nominee Senator John McCain favored largely maintaining the status quo.

In 2010, Congress passed the Patient Protection and Affordable Care Act (PPACA) and the president signed the bill into law. The landmark legislation created an individual mandate for every American to carry health insurance or face financial penalties, while requiring most employers to offer coverage or incur penalties. The end result is the single largest increase in the number of insured Americans since the creation of Medicare under President Lyndon Johnson’s Great Society program in 1965.

But the mere passage of the healthcare reform bill hardly ended the debate.

The constitutionality of the sweeping changes to the healthcare system came under challenge before the Supreme Court, which ruled in 2012 that the PPACA withstood constitutional scrutiny. While the court’s ruling required some minor changes to a mandated expansion of Medicaid–a program that provides medical care for children and the poor that’s largely funded with federal dollars, but administered by the individual states–it ensured that the PPACA was the prevailing law of the land.

Even then, the debate still didn’t end.

While economic issues remained the primary focus of the 2012 presidential election, the possibility of rolling back the PPACA also received significant attention. It was discussed during the debates and was the subject of stump speeches by both presidential candidates and their surrogates. Meanwhile, millions of dollars were spent on ads addressing the issue.

But Americans ultimately reelected President Obama and handed Democrats slight gains in Congress, which ensured the PPACA is here to stay.

Picking the Winners and Avoiding the Losers

Such sweeping reform inevitably creates winners and losers, and as investors it’s our job to understand those consequences regardless of how we feel about the healthcare law.

Beyond that, healthcare will be a difficult industry to ignore. Indeed, it stands to become one of the largest segments of our economy thanks to the massive expansion of coverage as well as the aging baby boomer population.

While Congress is contemplating changes to entitlement programs such as Medicare as part of the upcoming spending debate, healthcare has already become a $2 trillion a year industry. And it will only continue to grow: Healthcare spending is expected to account for a fifth of US gross domestic product (GDP) by the end of the next decade.

Although uncertainty surrounding the PPACA’s implementation has caused many analysts and financial pundits to become a bit gunshy when it comes to the healthcare industry, I’ve devoted a substantial amount of time to researching this space. In fact, I’ve found a number of areas in the industry where investors can profit from healthcare reform. I also expect the industry to be a solid performer in 2013, which is why I’ve devoted the past two issues of ETF Investment Insider to healthcare topics.

Unfortunately, the healthcare industry is so broad that sector-specific exchange-traded funds (ETF) simply don’t have the flexibility to pick winners while avoiding losers. But since the healthcare industry has become such an integral part of the US economy, it will be critical for investors to maintain exposure to it so they can enjoy robust gains in addition to well-balanced portfolios.

As such, I’ll be devoting the next eight weeks of this e-letter to covering the healthcare industry. And while I’ll continue to include some ETFs among my mix of recommendations, you’ll notice that individual stocks will be getting a lot more attention, as I highlight names that offer the greatest upside potential while providing at least some downside protection.

This shift in emphasis also means that ETF Investment Insider merits a name change. Next week, this e-letter will be published under its new title: Money & Medicine.

My hope is that that you’ll gain enough insight about the industry to position yourself for years of healthy returns. Keep reading for a sampling of just a few of the topics I’ll be expanding upon in the coming weeks.

The Demand Surge

If you’ve been to see your doctor recently, you probably spent quite a bit of time idling in the waiting room. Wait times are getting longer because insurance companies and the federal government have cut reimbursement levels as a cost-saving measure, which means doctors have to see more patients in a day just to break even.

The situation in US hospitals is even more acute, especially in more rural areas where the number of medical professionals is much more limited. But hospitals are required to maintain a minimum nurse-to-patient ratio and keep a particular mix of doctors on staff in order to be accredited by the Joint Commission, a nonprofit organization that ensures medical facilities meet set performance benchmarks and standards of care. Without that accreditation, hospitals are ineligible for reimbursement from many insurance companies and are subject to strict limitations on treating Medicare and Medicaid patients.

Existing capacity constraints in American healthcare will only be exacerbated by the massive expansion of the pool of insured patients. That coupled with the graying baby boomer generation creates a perfect storm in terms of capacity constraints.

As a result, the huge demand for medical staff will be a boon for companies such as AMN Healthcare Services (NSDQ: AMN), which pro­vides nurses and other clinical workers on a temporary basis. The company serves hospitals, medical practices, government-run hospitals such as those maintained by the Department of Veterans Affairs, and pharmacies in all 50 states. As the number of patients grows, hospitals will increasingly have to rely on temporary services to maintain target staffing levels in order to keep their accreditations.

Companies that produce consumable medical supplies–catheters, syringes and other devices that are for one-time use only–will also get a huge boost in the coming years due to the broadening pool of insured patients.

ICU Medical (NSDQ: ICUI) manufactures and markets catheters and connections used in the delivery of intravenous fluids and medications such as cancer-fighting oncologics. Due to their innovative design, the company’s products drastically reduce the risk of acquiring a hospital-based infection because of the reduced “dead space” in the tubing.

The equipment is also needleless, which allows for the creation of closed systems that lessen the possibility that healthcare workers might accidently stick themselves with dirty needles or get exposed to the radiation and chemicals in oncologics.

Since these products can only be used once, that should create an impressive spike in earnings as their adoption becomes widespread and the pool of insured rises.

Rapid Innovation

The game-changing technological innovation occurring in the healthcare space is mind boggling and will present huge opportunities for investors over the coming decades.

Life Technologies (NSDQ: LIFE) is a perfect example of that.

In 2003, the Human Genome Project successfully sequenced the full genetic code of a single human being at a cost of about $3 billion. That sparked a huge wave of investor interest in “personalized medicine,” which involves tailoring medical treatment to a patient’s genetic profile. Unfortunately, many investors were burned as the technology failed to keep pace with their expectations. The cost of genetic sequencing was too prohibitive for personalized medicine to realize its full potential–until now.

Life Technologies has developed a new gene-sequencing machine called the Ion Proton Sequencer, which can decode an entire human genome is less than a day for only $1,000. That’s a major breakthrough, as prior sequencers required a week to accomplish the same feat at a cost of $10,000.

This latest sequencer has the potential to radically change the face of medicine.

For example, the ability to cheaply and efficiently sequence genes could lead to improvements in cancer treatment. Instead of a broad-based approach, oncologists could customize their treatment according to a patient’s genetic profile. And biotech companies could develop tests to determine precisely the type of cancer a patient has.

Additionally, this advance could allow doctors to identify genetic diseases in patients and even help determine the origins of infectious diseases. It will also be a boon for the pharmaceutical industry by enabling drug companies to develop more targeted and effective medications for all manner of disorders and illnesses.

Beyond just healthcare, cheap and easy genetic sequencing could have applications in the agricultural arena, allowing companies to improve livestock and develop better seed for a wide range of crops.

Thanks to the innovative streak of companies such as Life Technologies, the size of the personalized medicine market is expected to double to more than $450 billion over the next two years. That makes it a key theme to which investors will need exposure in the coming years.

Good Health on a Global Basis

The US hasn’t been the only country changing the face of healthcare within its borders.

In 2006, just 45 percent of the Chinese population was covered by health insurance. But with the Middle Kingdom’s rising incomes and burgeoning middle class, demand for modern, Western-style healthcare surged. Several private companies stepped in to meet that demand, as wealthier Chinese essentially paid out of pocket for medical care.

Unfortunately, this set of circumstances created a healthcare gap between the rich and poor. For a supposedly socialist country, this dichotomy proved unseemly and embarrassing, prompting the Chinese government to take action.

First, it greatly expanded its Urban Employee Basic Medical Insurance program, which provides basic insurance coverage for urban employees of both state-owned and private enterprises. As with employer-sponsored insurance programs in the US, the cost of that insurance is shared by both the employer and the employee.

Secondly, it created two new insurance programs for low-income workers, one for urban residents and the other for rural residents. The programs are primarily funded by the Chinese government and also require small annual premiums from the insured themselves.

As a result of these programs, nearly 95 percent of the 1.3 billion citizens of China are now covered by health insurance, and the county is quickly becoming one of the largest healthcare markets in the world, second only to the US.

Within the next three years, healthcare spending in China is expected to reach nearly 7 percent of China’s gross domestic product (GDP). While China’s Ministry of Health has yet to release total spending figures for 2012, in 2011 China spent nearly USD120 billion on healthcare.

Despite that jump in spending, Chinese hospitals, especially those in rural areas, tend to be under-equipped. And more than half of the equipment they do have is at least 30 years old.

Mindray Medical International (NYSE: MR) addresses those deficiencies by offering mid-priced patient monitoring equipment, blood chemistry analyzers, and imaging systems such as ultrasounds with multiple capabilities that are reliable and easy to use.

Its strategy has paid off remarkably well: Revenues have grown 35 percent annually over the past five years, while earnings per share have climbed 24 percent annually. Its impressive profit margins are the result of tight cost controls and continued improvements to its manufacturing processes.

In addition to playing an integral role in modernizing the Chinese healthcare industry, Mindray also has a growing presence in other emerging markets as well as the US. The company should be able to sustain its rapid growth rate over the coming years because of its pricing edge. A typical Mindray device costs about a third less than one from its competitors.

But China isn’t the only country that’s experiencing booming healthcare demand; in India, Brazil and a number of other emerging markets, the healthcare sector is growing faster than GDP as a whole.

More to Come

There’s a world of intriguing healthcare names both here and abroad. Keep reading over the next eight weeks, and I’ll point you toward the most profitable opportunities in each issue ofMoney & Medicine.

By Louis Basenese (Wall Street Daily | Original Link)

As I mentioned in yesterday’s column, we’re gearing up to launch our new “Free for Life”
e-letter: Tech & Innovation Daily.

The purpose of our latest “truth” initiative will be to unlock the world’s best investable technology trends… long before other investors even have a clue.

It’s what we like to call, “life inside the innovation pipeline.”

Ahead of our official launch date, however, I wanted to give you a small taste of what you can expect from our the new site.

Today, I’m taking aim at one company that many consider to be the indisputable vanguard of innovation: Apple (AAPL).

Time to Knock This Tech Giant Down a Few Notches

Apple is the most innovative company in the world, right?

I mean, what other company can claim ubiquity – and iconic status – for nearly all of its products?

Apple’s popularity is certainly attractive to most investors, since fame generally leads to massive sales and profits, which, in turn, help propel share prices higher. But popularity is hardly an objective measuring stick.

So today, we’re taking a closer look at more quantifiable aspects of innovation to see if Apple does, indeed, deserve to be crowned “The World’s Most Innovative Company.”

Not only will the results surprise you, they also point to some killer investment opportunities.

The Proof is in the Patents

In today’s highly competitive global market, any talk about innovation must include patents. They represent the means by which companies protect key technologies and their competitive advantage. For some industries, like pharmaceuticals, patents literally represent an insurance policy on profits.

(You can be sure that patents will come under scrutiny regularly in Tech & Innovation Daily.)

Accordingly, we need to put patents front and center when analyzing a company’s innovative might.

And when it comes to patents, Apple is an innovating behemoth. It boasts an estimated 6,805 patents and another 4,051 applications.

Impressive, considering that the roughly 3,500 publicly traded companies that claim any intellectual property (IP) hold about 20 patents on average.

Apple’s not alone, though.

Truth is, there are actually 21 public companies with even more patents than Apple. Like Google (GOOG), International Business Machines (IBM), Microsoft(MSFT) and General Motors (GM).

Of course, when it comes to patents, quantity certainly isn’t everything. After all, not all patents are created equal. Some are old. Some are defensive in nature, meaning they were filed in an effort to prevent competitors from being able to develop the same technology. And some are just plain obsolete.

Not to mention, while some patents can produce upwards of $1 billion in licensing fees, others might never generate a single penny.

So to more accurately determine how innovative a company is, we need to verify thequality of a company’s patents. That’s where MDB Capital Group, Wall Street’s only IP investment bank, comes in…

The firm has built a one-of-a-kind patent database and screening platform, called PatentVest (PV). In the process, MDB also developed several proprietary IP-related metrics that leverage patent information that’s updated weekly from the United States Patent and Trademark Office.

Today, we’re going to focus on three of MDB’s metrics:

~Key Patent Metric #1: PV Tech Score

If a patent is extremely valuable or foundational, other patent applications are going to cite it over time. Just like how academic papers use key research from outside sources.

Therefore, by measuring the number of external citations each patent racks up, we can gauge the quality of a company’s IP portfolio. Simply put, the more, the better.

Of course, MDB’s platform also takes the patent’s age, marginal value of each citation and total size of the company’s portfolio into account to provide a more accurate measure of quality.

The median PV Tech Score is about 0.90. Any number over the median is better, as it signifies technology leadership (i.e. – more significant innovation).

Apple’s PV Tech Score of 1.04 hardly tops the charts. In fact, 773 other companies sport higher scores. (Expect more details afterTech & Innovation Daily officially launches.)

~Key Patent Metric #2: PV Tech Isolation Score

A lack of significant external citations isn’t always a bad sign. Here’s why…

Booking the best profits requires that we find companies on the cutting edge – innovating in areas of the market others haven’t even dreamed of yet, right?

Well, if a company is truly doing that, then not many companies are going to be citing the work (yet).

Enter the PV Tech Isolation Score.

It measures the novelty of a company’s innovations by looking at the percentage of self-citations versus external citations. Again, the higher the score, the better.

The median is 7%, with true innovators sporting scores of 20% (or more). And any score above 50% suggests the company is working on a potentially disruptive innovation.

Of course, if a technology is trulyinnovative, other companies will eventually move into the space and the external citations are bound to follow. As that happens, the percentage between self-citations and external citations will come down, thereby lowering the PV Tech Isolation Score.

But if other companies don’t start working in the space, it could indicate that the technology is novel, yet not necessarily commercially relevant.

Further analysis of the individual patents would be necessary to determine if the innovations are both novel and relevant. But we’ll save that discussion for another day.

As far as the PV Tech Isolation Score goes, Apple definitely impresses. It checks in at 19%, well above the median score of 7%. Once again, though, Apple doesn’t top the charts. A total of 657 companies currently sport higher scores.

~Key Patent Metric #3: PV Three-Year Application CAGR (PV CAGR) Score

Before we dub any company “The Most Innovative,” we can’t rely on previous work alone. We need to make sure it’s still innovating. That’s where the PV CAGR Score comes in.

It measures the velocity of innovation by calculating a company’s three-year compound annual growth rate of patent applications.

Based on this metric, Apple once again compares favorably to the average, with a PV CAGR of 19% versus the average of 12%. However, there are 109 companies innovating more rapidly than Apple.

The Final Tally

No single patent metric should be considered in isolation. Just like no single fundamental metric can determine whether or not to invest in a stock. Instead, it’s much more useful to evaluate a company’s IP based on multiple factors.

With that in mind, I ran a screen for companies with equal or higher scores than Apple for all three metrics. The results? There are actually three companies that are more innovative than Apple.

Investors should take note of AutoNavi Holdings (AMAP). It’s a leading provider of digital map content and navigation, and location-based solutions in China. And it just surpassed 100 million users.

To put that number in perspective, consider: Only five other Chinese companies have more than 100 million mobile app users, according to independent research firm, Analysys International. They are Tencent, Alibaba Group, Qihoo 360(QIHU), SINA Corporation (SINA) and UCWeb.

What’s more, Apple only has 11 stores across China. And its iPhone sales are still trailing behind Samsung’s Android-powered devices. So if you’re looking for an under-the-radar way to invest in the mobile device explosion in China – with over 700 million subscribers and counting – forget Apple, and consider AutoNavi.

Bottom line: Perception hardly matches reality. And in this case, despite the perception, Apple is clearly not the most innovative company in the world.

To find out which companies are the most innovative in the world, be sure to tune in to Tech & Innovation Daily.

We’ll be serving up the market’s hottest technology trends, profit-side up, straight to your inbox.

Just make sure you’re signed up to receive Wall Street Daily. When we broadcast our very first issue of Tech & Innovation Daily, Wall Street Daily subscribers will get a link to my special report, The Seven Most Investable Technology Trends of 2013.

The report and the subscription are “Forever Free” for Wall Street Daily subscribers. We’ll never charge you a penny. Ever.

The very first broadcast, with a link to the full report, hits inboxes next Wednesday, January 23.

Ahead of the tape,

Louis Basenese

By David Sterman (StreetAuthority.com | Original Link)

U.S. Investors poured a stunning $54 billion into emerging-market exchange-traded funds (ETFs) in 2012, according to research firm ETFGI. That’s a stunning growth from just $3 billion in 2011. The two largest ETFs in the category, Vanguard FTSE Emerging Markets ETF (NYSE: VWO) and the iSharesMSCI Emerging Markets Index (NYSE: EEM) now have a hefty $125 billion in assets under management.

Many investors have moved beyond those catch-all funds, and are now focusing on country-specific ETFs such as the iShares FTSE China 25 Index Fund (NYSE: FXI) or the iShares MSCI Brazil Index (NYSE: EWZ). But many still don’t know about the two most important factors that will affect their returns.

I’m talking about currency and inflation.

The Nikkei’s blunted rally
While Washington was mired in year-end talks over the “Fiscal Cliff,” Japanese investors were breaking out the champagne. A new government in Tokyo, promising to provide a major stimulative boost to theeconomy, kicked off a major stock rally.

But U.S. investors who had the foresight to invest in Japan aren’t quite so happy. Since the start of November 2012, the Japanese yen has weakened, from 79 yen to the dollar to a recent 89.3. The yen’s 13% depreciation has offset some of the Japanese stock market’s gains, meaning U.S. investors have failed to fully prosper from the rally.

However, it works both ways. A number of economists say the rally in the yen has come too quickly, aided by short-covering by investors who were betting against the dollar. These economists say the yen will restrengthen in coming weeks, which means that an ETF such as the MAXIS Nikkei 225 Index (NYSE: NKY) will likely get a lift from the currency reversal. The key takeaway is to steer clear of any country-specific ETFs if you think the country’s currency is too strong and due for a drop. (Indeed, the Japanese yen had been trading near all-time highs against the dollar until the recent pullback).

The inflation bug
Japan’s economy is quite advanced, and on parwith our own. As a result, inflationary concerns are nearly non-existent at the moment, as is the case in Europe and the United States. But in more dynamic emerging economies, inflation is an ever-present threat.

Nearly two years ago, I extolled the virtues of Vietnam and recommended the Vietnam Fund (NYSE:VNM) as a solid investment choice.

Soon thereafter, the Vietnamese economy started to choke on its own growth, as bottleneck pressures led to rising inflation. Here’s the problem with inflation: It forces government to take a series of punitive measures to slow the economy to help reduce inflationary pressures. Vietnamese inflation figures are now starting to trend lower, which helps explain why the Vietnamese ETF has begun to rally.

Back in 2011, I looked at India as well, noting that :”years of steady growth — 14.4% annually in the past decade — have created choke-points in the economy where the roads, bridges and rail lines simply can’t keep up with the rising level of economic activity.”

Fast forward to 2013, an India finally appears to have inflation under better control. As The Wall StreetJournal recently reported, India’s inflation rate has slowed to its lowest level in three years. A slowing economy gets some of the credit, as do several key investments in infrastructure in major cities that have removed some bottlenecks.

The drop in inflation is expected to lead to government policies that augment economic growth (whereas the Indian government had sought to slow the economy while inflation was rising). As a result, the Indian economy looks set to rebound in 2013 and 2014, making for a more timely entry point for this fund.

Risks to Consider: Investors are pouring into emerging-market funds, but they will need to have a strong stomach. These funds can quickly lose steam if the U.S. market stumbles, which is why you need a multi-year time horizon with your emerging market investments.

Action to Take –> Whenever you are assessing emerging markets, you must spend time analyzing the country’s currency and inflation pressures. An already-weak currency and a benign inflation backdrop, are two key positives you want to look for.

By Charles Hugh Smith (PeakProsperity.com | Original Link)

Rather than attempt to predict the unpredictable – that is, specific events and price levels – let’s look instead for key dynamics that will play out over the next two to three years. Though the specific timelines of crises are inherently unpredictable, it is still useful to understand the eventual consequences of influential trends.

In other words: policies that appear to have been successful for the past four years may continue to appear successful for a year or two longer. But that very success comes at a steep, and as yet unpaid, price in suppressed systemic risk, cost, and consequence.

Trend #1: Central Planning intervention in stock and bond markets will continue, despite diminishing returns on Central State/Bank intervention

Intervention in the stock market may successfully keep the markets in an uptrend or a narrow trading range for 2013, but this would only increase the odds of a dislocation/crash in 2014 or 2015. Temporary success does not imply permanent success or even continued success of intervention. Why is this so?

Virtually all Central Planning intervention—fiscal and monetary stimulus, subsidies and market manipulations—suppresses market pricing of risk and volatility. In a healthy, transparent market, millions of participants openly price risk, volatility, assets, and capital.  This creates low-intensity volatility and resilience. When transparent markets reprice risk, assets, and capital in a panic, the recovery is equally dramatic as participants quickly adjust to the repricing. Confidence is based on transparent pricing by participants, not officially sanctioned manipulation.

The purpose of Central Planning intervention is perception management. Central Planners want to restore confidence; not with transparent repricing, which would hurt holders of assets and banks, but by engineering a steady rise in asset prices and reversing any declines with indirect buying.

This instills confidence via participants’ “Don’t fight the Fed” belief that Central Planners will never let the market go down.

History rather unkindly finds that Central Planning elevation of markets and suppression of risk is impermanent: Intervention leads to crashes. Why is this so? Risk cannot be eliminated; it can only be transferred or suppressed. When it is suppressed, it eventually bursts out. The greater the suppression, the greater the eventual dislocation. There are various analogies for this; for instance, the stick-slip hypothesis of seismic faults and earthquakes. While the surface appears stable, pressure invisibly builds far below and is eventually released in an earthquake.

In our financial example, sudden repricing of risk and assets is the equivalent of an earthquake.

Many commentators have observed that the positive effects of the Federal Reserve’s Quantitative Easing programs are diminishing both in duration and market pricing. The market soared for months on end after QE1, but the rally quickly fizzled after QE4.

This reveals the decay factor in intervention: Each intervention must be larger as its efficacy decays.

The policy consequence of this decay is that Central Planners must “double down” their bets to keep the perception-management “recovery” and market on track. As I explained in my book, Why Things Are Falling Apart and What We Can Do About It, the analogy is a gambler who is using borrowed money to make ever-larger bets in a casino. His first few bets are wins, prompting confidence in his skills and in his lenders. Eventually the gambler loses his entire stake in one enormous bet, and the loss is so monumental that it brings down the casino and his lenders.

The markets’ ability to transparently price risk, capital, and assets has been fatally compromised. A systemic increase in brittleness and fragility is the inevitable result when low-intensity volatility and risk are both suppressed by constant intervention.

The widening credibility gap between official pronouncements of recovery and less manipulated metrics also forces Central Planners to double down on their interventions. This is evident globally, as Europe, Japan, and China are all doubling down on interventions that are yielding increasingly marginal returns.

Trend #2:  The omnipotence of the Federal Reserve will suffer a fatal erosion of confidence as recession voids Fed policy and pronouncements of “recovery”

Though the Fed is nominally independent, like every other arm of Central Planning, it swims in a political sea. The initial success of QE1, 2, and 3 and ZIRP (zero-interest rate policy) boosted the political capital of the Fed. Faith in the implied omnipotence of “Don’t fight the Fed” has been rewarded for four years.

The failure of its policies to engineer a durable recovery will erode that faith and the Fed’s political capital, restraining its freedom of movement. We can already discern rising doubt in infinite QE and permanent ZIRP in the Fed’s minutes. Outside the Fed, what can only be characterized as distain of the Fed and its destructive policies is increasingly visible.

The decay factor of its monetary-stimulus policies and the decline of its political capital will increasingly render the Fed impotent. By 2015 we may well be dumbstruck that everyone once hung on the Fed’s every word as if the Fed resided on Mount Olympus.

Trend #3: The Mainstream Media (MSM) will continue to lose credibility as it parrots Central Planners’ perception management

The credibility gap between MSM stories of recovery—higher GDP, auto and home sales, lower unemployment rate, etc.—and what is visible on the ground will widen, eroding MSM credibility.

With the Internet providing distribution of alternative metrics, Central Planning and the Mainstream Media will increasingly be revealed as propaganda organs rather than servants of the citizenry.

Trend #4:  The failure of what is effectively the “State religion,” Keynesianism, will leave policy makers in the Central State and Bank bereft of policy alternatives

Now that all Keynesian policies have been pushed to the maximum, there is essentially nothing left to deploy.

This chart of money velocity reflects the endgame of Keynesian stimulus. Money is being printed and dumped into the financial system in size, yet the velocity of that money is trending toward zero.

Trend #5: Economic Stagnation will fuel the rise of Permanent Adolescence

The social consequences of economic stagnation will attract more attention. Japan is the lab experiment for what happens to a nation’s youth when opportunity declines and many young people are unable to earn enough money to buy homes and support families. They withdraw into a state of permanent adolescence, living at home, staying in college for extended periods, delaying marriage and children, working part time, surrendering long-term goals, and in some cases indulging in a lifestyle centered around video-gaming and pop-culture hobbies.

Consequences of Permanent Adolescence include lower birth and marriage rates, depressed rates of household formation, lower auto and home sales, declining tax receipts, and what might be called “social depression,” as expectations and goals stagnate along with opportunity.

Soaring student debt has turned the current generation of university students into debt serfs. This will continue as alternatives to a conventional college education remain on the margins.

Trend #6: Income is the foundation of real economic growth and wealth-distribution stability

Income will continue declining in real terms. Nominally, income appears to have grown 24% since 2000. Adjusted for inflation, it has declined by almost 10%.

Trend #7: Small business—the engine of growth—will continue to decline for structural reasons

Uncertainty, globalization, recession, and higher taxes and regulatory fees have eroded the incentives to risk capital and time in starting or expanding a small business.

Trend #8: Territorial disputes will continue to be invoked to distract domestic audiences from domestic instability and inequality

The Senkaku Islands are one such flashpoint where compromise appears impossible since the domestic populations of Japan and China have been persuaded by nationalistic hyperbole that a “line in the sand” has been drawn.

It is already abundantly clear that trade will be trumped by domestic politics in territorial conflicts. This creates the potential for serious economic dislocations in global trade and capital flows.

Earthquakes are notoriously difficult to predict. So are market dislocations. Risk is inevitably mispriced when unprecedented intervention suppresses risk.

In Part II: Understanding the Outcomes that Will Matter Most, we look at eight fundamentally disruptive developments that will manifest from the one dynamic that really counts: the powerlessness of the Status Quo to reverse the eight trends discussed above. The only thing maintaining the Status Quo is faith in its stability.

What will happen when that confidence breaks, as the math shows it must?

Financial dividend stocks with highest buy recommendation originally published at “long-term-investments.blogspot.com.” One sector I’ve tried to avoid in the past was the financial sector. I have only stocks from financial services provider like Thomson Reuters or some Stock Exchange Operator like the NYX. Some major investors and hedge funds have started bets on the post-financial recovery earlier with no greater success.

The whole financial industry is still in a crisis and this should go on. I don’t know how long. Jobs in the industry are still degraded and as long as the interest rates are low, there will be more and more jobs degraded.

Despite the bad sector news, last year, the financial sector was the top performing bet with a 27.5 percent gain. I missed this opportunity but as of today, I cannot evaluate all the risks within the sector. I have no idea what kind of risk assets banks have and how they manage them.

What do you think about the sector? Do you have some shares from banks or related industries? Let me know and leave a comment in the box below.

Today, I would like to show you the 20 best recommended financial stocks with a higher capitalization (over USD2 billion). Below the results are five with a high yield.

Here are my favorite stocks:

SLM Corp (SLM) has a market capitalization of $8.02 billion. The company employs 6,600 people, generates revenue of $5.756 billion and has a net income of $599 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $951 million. The EBITDA margin is 16.52 percent (the operating margin is 16.10 percent and the net profit margin 10.41 percent).

Financial Analysis: The total debt represents 95.15 percent of the company’s assets and the total debt in relation to the equity amounts to 3,508.79 percent. Due to the financial situation, a return on equity of 12.76 percent was realized. Twelve trailing months earnings per share reached a value of $2.17. Last fiscal year, the company paid $0.30 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 8.01, the P/S ratio is 1.39 and the P/B ratio is finally 1.89. The dividend yield amounts to 2.88 percent and the beta ratio has a value of 1.36.

Prudential (PUK) has a market capitalization of $38.18 billion. The company employs 25,414 people, generates revenue of $58.884 billion and has a net income of $2.288 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $11.641 billion. The EBITDA margin is 19.77 percent (the operating margin is 5.01 percent and the net profit margin 3.89 percent).

Financial Analysis: The total debt represents 4.02 percent of the company’s assets and the total debt in relation to the equity amounts to 128.18 percent. Due to the financial situation, a return on equity of 17.05 percent was realized. Twelve trailing months earnings per share reached a value of $1.95. Last fiscal year, the company paid $0.81 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.28, the P/S ratio is 0.65 and the P/B ratio is finally 2.75. The dividend yield amounts to 2.72 percent and the beta ratio has a value of 1.83.

Deutsche Bank AG (DB) has a market capitalization of $45.78 billion. The company employs 100,474 people, generates revenue of $46.537 billion and has a net income of $5.772 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $22.740 billion. The EBITDA margin is 48.86 percent (the operating margin is 16.22 percent and the net profit margin 13.02 percent).

Financial Analysis: The total debt represents 60.30 percent of the company’s assets and the total debt in relation to the equity amounts to 2,444.04 percent. Due to the financial situation, a return on equity of 8.09 percent was realized. Twelve trailing months earnings per share reached a value of $4.06. Last fiscal year, the company paid $1.00 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 12.18, the P/S ratio is 1.04 and the P/B ratio is finally 0.63. The dividend yield amounts to 1.88 percent and the beta ratio has a value of 2.27.

Take a closer look at the full list of the 20 most recommended financial dividend stocks. The average P/E ratio amounts to 15.48 and forward P/E ratio is 12.41. The dividend yield has a value of 3.34 percent. Price to book ratio is 1.81 and price to sales ratio 4.21. The operating margin amounts to 12.23 percent and the beta ratio is 1.59. Stocks from the list have an average debt to equity ratio of 4.88.

Related stock ticker symbols:
NCT, ARCC, STWD, HTA, WPC, OZM, BNS, TD, GZT, SLM, CS, PUK, DB, MTU, SEIC, IBN, UBS, L, HDB, COF

Selected Articles:
· My Best Financial Stock Picks For 2013
· Best Financial Stock Picks For 2012
· 20 Highly Recommended Basic Material Stocks
· 20 Best Recommended Technology Stocks
· Most Recommended Healthcare Stocks For 2013

(Subscribe to my blog via RSS Feed or E-Mail. Alternatively, you can follow me on Facebook orTwitter.)

For as long as I can remember, I have always questioned the status quo and the established way of looking at things.

If the majority is doing one thing, then it’s my natural state to think the opposite. But as you likely know, a contrarian attitude isn’t generally perceived in a positive way. But I was happy to find out I’m not alone in the investment world.

Many successful investors are contrarians by nature. In fact, being an investment contrarian can provide a huge edge. This is because the majority of investors is often wrong.
Once the crowd gets excited about a particular stock, investment or tactic, it’s often a signal to do the opposite. The stock market has an uncanny knack for attracting the most possible money into an idea or stock right before a sharp change in direction causes many to take a loss.

And one way I take advantage of my contrarian nature is by locating stocks with heavy short interest.

Short interest is the total number of shares that have been sold short. Therefore, the higher the short interest, the more investors are bearish on the stock. High short interest is generally believed to be a bearish indicator. However, I have discovered that stocks with a high short interest tend to outperform their brethren during an uptrend. This is particularly true when short interest climbs along with the stock price.

I created a screen to locate stocks that fit this criterion and the result revealed two interesting picks…

1. SouFun Holdings (NYSE: SFUN)
This company is in the real estate technology sector and operates the largest real estate information website in China. Short interest has ramped up from just under 800,000 shares to nearly 3 million from March to December 2012. This increasing short interest comes despite a 17% increase in revenue to more than $127 million from $109 million last quarter year-over-year. The company provides an annualdividend yield of more than 7% and a nearly 32% profit margin.

Clearly, the rising short interest is a bet that China’s real estate recovery will fail. The facts are that the country just posted its seventh straight month of rising home prices, soit appears the Chinese real estate slowdown is over.

That’s why, as short interest has increased, so has the stock price. Shares have climbed from the $11 range in August 2012 to a recent $28. I like this stock as a momentum play with a $35 a share, 12-month target. But it’s critical to keep in mind that Chinese companies don’t have the best record of acceptable accounting practices, which can lead to potential fraud issues.

2. Research in Motion (Nasdaq: RIMM)
I am not a fan of BlackBerry, but this beleaguered technology stock has caught my eye. It has launched a comeback from the lows nearing $6 a share in September to a recent $12. Short interest has increased 36% to nearly 120 million shares at the same time as the stock is bouncing higher. It’s critical to note this stock has fallen nearly 90% during the past five years due to continual weak financial reports, combined with heavy competition in the smartphone market

However, bullish investors are betting the launch of the BlackBerry 10 on Jan. 30 will turn the company around. This latest iteration of the popular BlackBerry smartphone boasts a revolutionary feature called the “Hub,” which enables users to peak at all their messages and notifications without leaving the active screen.

In addition, the phone will launch with more than 70,000 available apps, which may create serious competition for Apple’s (Nasdaq: AAPL) iPhone. Not to mention the fact that Research in Motion’s Chief Marketing Officer Frank Boulben expects more than 200 carriers to offer the BlackBerry 10 by this summer.

There is heavy technical resistance at the $14 level and there’s much riding on the success of the BlackBerry 10. The new product appears to offer revolutionary functionality, but I am not quite willing to take a long position just yet in the company. I would wait for a daily breakout close above $14 to enter longs. Should this occur, my 12-month upside target is $20 .

Risks to Consider: My short interest screening method simply identifies stocks that have an increasing short interest while climbing higher. This provides candidates for investment consideration. SouFun Holdings has Chinese political and economic risk, not to mention potential accounting issues. Long positions in Research in Motion are bets on the new BlackBerry turning around the company’s fortune. Although these two stocks have proven short sellers wrong, it does not mean their uptrends will continue. Always use stops and position size properly.

Action to Take –> I think the worst is over in China and things will continue to improve, so SouFun Holdings is a good pick right now as a long position. While Research in Motion appears to have an interesting new BlackBerry in the pipeline, I prefer to wait and see attitude on this stock. I willnot enter long before a breakout close above resistance and only then with small size.

As I mentioned in yesterday’s column, we’re gearing up to launch our new “Free for Life”
e-letter: Tech & Innovation Daily.

The purpose of our latest “truth” initiative will be to unlock the world’s best investable technology trends… long before other investors even have a clue.

It’s what we like to call, “life inside the innovation pipeline.”

Ahead of our official launch date, however, I wanted to give you a small taste of what you can expect from our the new site.

Today, I’m taking aim at one company that many consider to be the indisputable vanguard of innovation: Apple (AAPL).

Time to Knock This Tech Giant Down a Few Notches

Apple is the most innovative company in the world, right?

I mean, what other company can claim ubiquity – and iconic status – for nearly all of its products?

Apple’s popularity is certainly attractive to most investors, since fame generally leads to massive sales and profits, which, in turn, help propel share prices higher. But popularity is hardly an objective measuring stick.

So today, we’re taking a closer look at more quantifiable aspects of innovation to see if Apple does, indeed, deserve to be crowned “The World’s Most Innovative Company.”

Not only will the results surprise you, they also point to some killer investment opportunities.

The Proof is in the Patents

In today’s highly competitive global market, any talk about innovation must include patents. They represent the means by which companies protect key technologies and their competitive advantage. For some industries, like pharmaceuticals, patents literally represent an insurance policy on profits.

(You can be sure that patents will come under scrutiny regularly in Tech & Innovation Daily.)

Accordingly, we need to put patents front and center when analyzing a company’s innovative might.

And when it comes to patents, Apple is an innovating behemoth. It boasts an estimated 6,805 patents and another 4,051 applications.

Impressive, considering that the roughly 3,500 publicly traded companies that claim any intellectual property (IP) hold about 20 patents on average.

Apple’s not alone, though.

Truth is, there are actually 21 public companies with even more patents than Apple. Like Google (GOOG), International Business Machines (IBM), Microsoft(MSFT) and General Motors (GM).

Of course, when it comes to patents, quantity certainly isn’t everything. After all, not all patents are created equal. Some are old. Some are defensive in nature, meaning they were filed in an effort to prevent competitors from being able to develop the same technology. And some are just plain obsolete.

Not to mention, while some patents can produce upwards of $1 billion in licensing fees, others might never generate a single penny.

So to more accurately determine how innovative a company is, we need to verify thequality of a company’s patents. That’s where MDB Capital Group, Wall Street’s only IP investment bank, comes in…

The firm has built a one-of-a-kind patent database and screening platform, called PatentVest (PV). In the process, MDB also developed several proprietary IP-related metrics that leverage patent information that’s updated weekly from the United States Patent and Trademark Office.

Today, we’re going to focus on three of MDB’s metrics:

~Key Patent Metric #1: PV Tech Score

If a patent is extremely valuable or foundational, other patent applications are going to cite it over time. Just like how academic papers use key research from outside sources.

Therefore, by measuring the number of external citations each patent racks up, we can gauge the quality of a company’s IP portfolio. Simply put, the more, the better.

Of course, MDB’s platform also takes the patent’s age, marginal value of each citation and total size of the company’s portfolio into account to provide a more accurate measure of quality.

The median PV Tech Score is about 0.90. Any number over the median is better, as it signifies technology leadership (i.e. – more significant innovation).

Apple’s PV Tech Score of 1.04 hardly tops the charts. In fact, 773 other companies sport higher scores. (Expect more details afterTech & Innovation Daily officially launches.)

~Key Patent Metric #2: PV Tech Isolation Score

A lack of significant external citations isn’t always a bad sign. Here’s why…

Booking the best profits requires that we find companies on the cutting edge – innovating in areas of the market others haven’t even dreamed of yet, right?

Well, if a company is truly doing that, then not many companies are going to be citing the work (yet).

Enter the PV Tech Isolation Score.

It measures the novelty of a company’s innovations by looking at the percentage of self-citations versus external citations. Again, the higher the score, the better.

The median is 7%, with true innovators sporting scores of 20% (or more). And any score above 50% suggests the company is working on a potentially disruptive innovation.

Of course, if a technology is trulyinnovative, other companies will eventually move into the space and the external citations are bound to follow. As that happens, the percentage between self-citations and external citations will come down, thereby lowering the PV Tech Isolation Score.

But if other companies don’t start working in the space, it could indicate that the technology is novel, yet not necessarily commercially relevant.

Further analysis of the individual patents would be necessary to determine if the innovations are both novel and relevant. But we’ll save that discussion for another day.

As far as the PV Tech Isolation Score goes, Apple definitely impresses. It checks in at 19%, well above the median score of 7%. Once again, though, Apple doesn’t top the charts. A total of 657 companies currently sport higher scores.

~Key Patent Metric #3: PV Three-Year Application CAGR (PV CAGR) Score

Before we dub any company “The Most Innovative,” we can’t rely on previous work alone. We need to make sure it’s still innovating. That’s where the PV CAGR Score comes in.

It measures the velocity of innovation by calculating a company’s three-year compound annual growth rate of patent applications.

Based on this metric, Apple once again compares favorably to the average, with a PV CAGR of 19% versus the average of 12%. However, there are 109 companies innovating more rapidly than Apple.

The Final Tally

No single patent metric should be considered in isolation. Just like no single fundamental metric can determine whether or not to invest in a stock. Instead, it’s much more useful to evaluate a company’s IP based on multiple factors.

With that in mind, I ran a screen for companies with equal or higher scores than Apple for all three metrics. The results? There are actually three companies that are more innovative than Apple.

Investors should take note of AutoNavi Holdings (AMAP). It’s a leading provider of digital map content and navigation, and location-based solutions in China. And it just surpassed 100 million users.

To put that number in perspective, consider: Only five other Chinese companies have more than 100 million mobile app users, according to independent research firm, Analysys International. They are Tencent, Alibaba Group, Qihoo 360(QIHU), SINA Corporation (SINA) and UCWeb.

What’s more, Apple only has 11 stores across China. And its iPhone sales are still trailing behind Samsung’s Android-powered devices. So if you’re looking for an under-the-radar way to invest in the mobile device explosion in China – with over 700 million subscribers and counting – forget Apple, and consider AutoNavi.

Bottom line: Perception hardly matches reality. And in this case, despite the perception, Apple is clearly not the most innovative company in the world.

To find out which companies are the most innovative in the world, be sure to tune in to Tech & Innovation Daily.

We’ll be serving up the market’s hottest technology trends, profit-side up, straight to your inbox.

Just make sure you’re signed up to receive Wall Street Daily. When we broadcast our very first issue of Tech & Innovation Daily, Wall Street Daily subscribers will get a link to my special report, The Seven Most Investable Technology Trends of 2013.

The report and the subscription are “Forever Free” for Wall Street Daily subscribers. We’ll never charge you a penny. Ever.

The very first broadcast, with a link to the full report, hits inboxes next Wednesday, January 23.

Ahead of the tape,

Louis Basenese

Originally Posted at Wall Street Daily

By Louis Basenese (Wall Street Daily | Original Link)

Lately, Wall Street’s been shouting from the rooftops about 3-D printing technology.

I’m laughing, though, because I recommended the industry pioneer, 3D Systems(DDD), way back in October… of 2010!

Yes, that’s more than two years before the likes of T. Rowe Price and other respective “gurus.” But who’s keeping track?

When I first wrote about the company, I dubbed it “The Most Innovative Company of the Year” and “one of the strongest ‘Buys’ we’ve ever seen.”

Exaggeration? Hardly. Since my original recommendation, the stock’s up a staggering 284%.

I’m not bringing this up to brag, though. Instead, I want to prove a point: When it comes to investing in the technology sector, you need to be early to reap the most handsome profits.

With that in mind, I have a major announcement to share with you today…

Our Newest “Truth” Initiative

When we first launched Wall Street Daily in April 2011, we set out to be truth-tellers in a world full of liars.

A lofty mission, no doubt. But there’s obviously a demand for such a no-nonsense approach. Case in point: Our readership is about to top 400,000 subscribers strong. (Thanks for being a part of it!)

Today, though, I’m excited to announce that we’re launching our newest “truth” initiative: Tech & Innovation Daily. This “Forever Free” e-letter will maintain a laser-sharp focus – to uncover the market’s next best investable technologies, early.

As I shared on Friday, the world is overrun with technology analysts and websites that miss the point. All they do is track the hottest, coolest and newest technologies.

Like you, though, I’m first and foremost an investor. My love of technology comes second. So none of those qualities matter much to me.

The only thing I care about is my bottom line and whether or not the technologies are investable and ready for a breakout – just like 3-D printing stocks were two years ago.

That’s where Tech & Innovation Daily comes in…

Two times per week, we’re going to deliver the best investable opportunities and strategies in the technology sector, right to your inbox. We’ll also provide additional free research and commentary every day on our website (www.TechandInnovationDaily.com).

So get ready. You’re about to be served the market’s hottest technology trends, profit-side up. Starting right now…

My Top Tech Profit Predictions for 2013

When the calendar flips to January, the only thing that outnumbers New Year’s resolutions is everyone’s predictions about the future.

And nowhere is the prediction mania more pronounced than in the technology sector.

From mainstream sources like CNN, to the geeks-only EDN Network (if you’ve never heard of it, you’re all jock, zero nerd), everyone’s cranking out his or her list of the top technologies for 2013.

Today, I’m dusting off my crystal ball and jumping into the mix, too.

~Investable Tech Trend #1: Near Field Communications (NFC)

This technology involves smartphones or similar devices establishing radio communication with each other. This is done by touching them together or bringing them in close proximity to one another (within five centimeters).

NFC technology has actually been around for a decade. But it’s finally ready for primetime. And I say that based on hard data, not on a hunch.

In the last year, the number of NFC-enabled device shipments topped 100 million, a 4,900% (not a typo) increase from the number of devices shipped in 2010. What’s more, within the next three years, estimates call for shipments to exceed one billion. (For more on the prospects of NFC, check out our interview with chip maker NXP Semiconductors (NXPI) during the Consumer Electronics Show last week.)

Clearly, we’ve reached the tipping point. Accordingly, it’s time to start hunting for the best investment opportunities.

~Investable Tech Trend #2: Biometric Authentication

With each passing year, more and more functionality keeps getting added to mobile devices. Want to deposit a check from your phone? There’s an app for that. Want to control your home’s thermostat on the go? There’s an app for that, too. Want to remotely log on to your work computer and network? No problem.

But there is one major obstacle: Consumers and enterprises won’t embrace these conveniences – or any future ones that developers dream up – unless security can be absolutely guaranteed. And everyone knows that simple passwords and PIN codes won’t cut it.

The solution? Biometric authentication. That is, leveraging the uniqueness of your fingerprints, palms, eyes (iris and retina), voice, face, hand geometry, signature and DNA to verify your identity.

Is the world really ready for such technology? More than you know. It’s already battle-tested, having been used in government applications for years to protect our ports and borders. And the latest evidence points to commercial adoption picking up in 2013. That’s not just my opinion, either. In the summer of 2012, tech research firm Gartner predicted that biometrics would enter primetime within two years. We’re right in that window now.

If you’re reluctant to accept predictions at face value, then consider the latest actions of companies that set new technology standards. Like Apple (AAPL). In July 2012, the company plunked down $356 million for fingerprint sensor maker AuthenTec(AUTH). You don’t think Apple is going to sit on the technology now, do you? Heck, no! An Apple product (most likely an iPhone) with a fingerprint sensor is inevitable – and sooner rather than later.

Lest you think Apple’s an outlier, consider that Intel (INTC) is working with a palm-scanning technology. And Intel’s venture capital arm also recently invested in a leading fingerprint sensor technology company, privately held Validity Sensors, Inc. Meanwhile, Microsoft (MSFT) recently filed a patent for a biometric sensor in its popular Xbox gaming system, which underscores a key point…

The mobile market isn’t the only vertical for biometric authentication. It can be used for secure identification in any type of setting. And it is. Case in point: More than 50 school districts and 160 hospital systems in 15 states are currently using palm scanners to verify identities. Next up? ATMs and various retail transactions. So get ready to replace what you know (passwords) with who you are (biometrics).

You’re Already in the Pipeline

To discover the best stocks to profit from both of these trends – along with the five other most investable trends for 2013 – stay tuned.

When we broadcast our very first issue of Tech & Innovation Daily, we’re going to provide a link to my special report, The Seven Most Investable Technology Trends of 2013.

To receive it, all you have to do is… well, nothing! As a loyal Wall Street Dailysubscriber, you’re automatically set up to receive Tech & Innovation Daily. Look for the very first broadcast, with a link to the full report, to hit your inbox next Wednesday, January 23.

Remember, the report and the subscription are “Forever Free.” (You can manage your subscription here.) We’ll never charge you a penny. Ever.

So stay tuned. You’re about to experience what we call “life inside the innovation pipeline.”

Ahead of the tape,

Louis Basenese

A new television advertisement from American International Group, Inc. (AIG - Analyst Report) shows the company thanking America for the bailout it received from the Troubled Asset Relief Program (TARP). AIG received a massive $182.3 billion, $70 billion of which was received from the Treasury and the balance from the Federal Reserve Bank of New York (FRBNY).

Both the Federal Reserve and the Treasury have already recovered the full amount from AIG. An additional $22.7 billion of positive return have also been generated from this exercise. The ad mentions this clearly and thanks the taxpayer for that too.

However, this campaign may have little effect since it emerged that the company was considering suing the government for the unfair terms under which it received the bailout.

The company was considering joining a $25 billion lawsuit by former CEO Hank Greenberg which claims the terms under which the bailout was provided was unconstitutional. Following widespread public outrage, the firm has now decided not to join the lawsuit. However, this has once again brought to the fore the discontent about TARP, which is close to recouping the amount it invested in its bailout initiative.

Nearly $418 billion has been spent on the TARP initiative, and the Treasury’s sale of outstanding AIG shares has been a big step in bringing the process to a close, at least in the collective mind of the public. The other move has been the Treasury’s decision to sell its 32% stake in General Motors Company (GM - Analyst Report) within the next 15 months. Nearly $49.5 billion was injected into the automaker to keep it from folding.

It is generally being agreed that TARP is a success, but a qualified success at best. The Treasury has now received $375 billion of the $418 billion it spent. But these returns could have been greater. All banks and financial institutions were disbursed funds under identical terms irrespective of their financial health.

As a result, relatively robust institutions such as The Goldman Sachs Group, Inc. (GS -Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) paid a 5% annual dividend on the preferred shares that the Treasury received. This was the same rate at which those with far weaker financial health received funds.

In contrast, Berkshire Hathway Inc. (BRK.A - Snapshot Report), (BRK.B - Analyst Report) invested $5 billion in Goldman Sachs September 2008 at 10%. This has resulted in a profit of $3.7 billion compared to the $1.1 billion positive return the Treasury has received for the $10 billion that it invested.

The more fundamental issue is whether legislation and monitoring has been successful at curbing the unhealthy business practices that caused the crisis in the first place. The New York Federal Reserve has said that with the help of government support, banks have made some loans that are even more questionable.

Additionally, the Dodd-Frank Financial legislation and the Volcker Rule which was incorporated into it were designed to curb the practice of proprietary trading. This is a situation where a bank or financial institution invests its own funds in stocks and bonds instead of using funds received from depositors. However, the Volcker Rule only restricts short-term investments. JPMorgan Chase and Morgan Stanley (MS - Analyst Report) had announced that they would shut down or reduce the size of such units to comply with these provisions.

But that has not ended the tendency to indulge in risky bets. According to a report by Bloomberg Businessweek, Goldman Sachs has a unit named Multi-Strategy Investing that utilizes about $1 billion of the bank’s own funds to make investments. Short-term trades are now defined as those which last over 60 days or less. An email for a spokesman for Goldman Sachs claims that this new unit is involved only in long-term investing and lending. The Bloomberg Businessweek report claims that the unit acts like an internal hedge fund.

The major complaint is that the bailout has done little to aid distressed homeowners. Only $6 billion was spent on combating foreclosures and the Obama administration’s recent attempt to expand the program has also received little support.

There is no doubt that TARP pulled the economy back from the brink, but the wisdom gleaned from this experience must not be forgotten. That will possibly be its greatest benefit.

Barack Obama has greatly expanded the powers of the presidency during his time in the White House, but there is one institution that he simply will not mess with.  There is one organization that is considered to be so sacred in Washington D.C. that Obama will not dare utter a single negative word against it.  That organization is the Federal Reserve.  Even though he has shown that he is unafraid to pick a fight with just about everyone else in Washington, Obama flat out refuses to criticize the Fed and he even reappointed Ben Bernanke for another term as Fed Chairman even though Bernanke has a track record of failure that would make the Chicago Cubs look good.  Perhaps Obama is aware of what has happened to other presidents that have chosen to tangle with the Fed.  In any event, it has become clear that Obama submits to anything that the Fed says without question, and the controversy over the “trillion dollar coin” is another perfect example of this.  For weeks, there has been much speculation in the mainstream media about the possibility that the Obama administration may print up a one trillion dollar coin that it would use to keep paying the bills of the federal government if an agreement to raise the debt ceiling is not reached.  But on Saturday the Federal Reserve killed that idea, and we shouldn’t be surprised by that because under no circumstances will the Fed ever accept a threat to their monopoly over money creation in the United States.  If the Federal Reserve had allowed Obama to print up a debt-free trillion dollar coin, that would have set a very dangerous precedent for the Fed.  The American people would have realized that the federal government can actually create debt-free money whenever it wants and that it does not actually have to borrow money from anyone.  That is something that the Fed probably would have moved heaven and earth to keep from happening.  But now we won’t ever know how far the Fed would really be willing to go to keep their monopoly over money creation, because Obama has no plans to challenge this latest ruling from “the real boss” of our financial system.

Sadly, most Americans don’t even realize that a private banking cartel has a monopoly over all money creation in this country.  In recent years they have abused this power by wildly printing money (“quantitative easing“), and by making more than 16 trillion dollars in secret loans to their friends during the last financial crisis.  Under our system, the private Federal Reserve creates money whenever they want, and nobody else gets to create money.  It is an insane system, but very, very few of our politicians will ever dare to question it.

At this point, the U.S. Treasury Department is essentially just an arm of the Federal Reserve.  That is why it was no surprise that the Fed and the Treasury Department issued a joint statement on Saturday.  According to Treasury spokesman Anthony Coley, both the Treasury and the Fed have come to the conclusion that under no circumstances should a trillion dollar coin be printed up by the Obama administration…

“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit”

But of course it was actually the Federal Reserve which made this decision.  The following is from a report posted by Zeke Miller of Buzzfeed.com…

The Federal Reserve was responsible for killing a controversial proposal to circumvent the debt limit, a senior administration official told BuzzFeed Sunday.

On Saturday the Treasury Department released a statement ruling out the only remaining alternative to Congress raising the nation’s borrowing limit, which would utilize a loophole in federal law to mint a $1 trillion coin to be deposited in the Federal Reserve and ensure the federal government could pay all bills and debt obligations.

According to that Buzzfeed article, the Federal Reserve would have actually refused to recognize the trillion dollar coin if the Obama administration had tried to deposit it with the Fed…

But it was the Federal Reserve that killed the proposal, the official told BuzzFeed, denying a purely political rationale for the announcement, saying the independent central bank would not have credited the Treasury’s accounts for the vast sum for depositing the coin.

Wow.

So there you go.

The real boss has told Barack Obama how it is going to be, and Obama plans to meekly comply.

So why is the Federal Reserve so adamant about maintaining their monopoly over money creation?

Well, it is all about compound interest.  Albert Einstein once made the following statement about compound interest…

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

When the Federal Reserve system was initially created back in 1913, the bankers that created it intended for it to be a perpetual debt machine that would extract massive amounts of wealth from the U.S. government (and ultimately from all of us) through the mechanism of compound interest.  Each year, hundreds of billions of dollars of interest are transferred into the pockets of the wealthy bankers and foreign nations that own our debt.  This is one of the reasons why I preach about the evils of government debt until I am blue in the face.  The debt-based Federal Reserve system is a way to systematically steal the wealth of the United States, and it is happening right in front of our eyes, but very few people actually understand it well enough to complain about it.

Unfortunately, we are rapidly getting to the point where we have accumulated so much debt that it is threatening to collapse our entire financial system.  The following comes from a recent Zero Hedge article…

By now most are aware of the various metrics exposing the unsustainability of US debt (which at103% of GDP, it is well above the Reinhart-Rogoff “viability” threshold of 80%; and where a return to just 5% in blended interest means total debt/GDP would double in under a decade all else equal simply thanks to the “magic” of compounding), although there is one that captures perhaps best of all the sad predicament the US self-funding state (where debt is used to fund nearly half of total US spending) finds itself in. It comes from Zhang Monan, researcher at the China Macroeconomic Research Platform: “The US government is now trying to repay old debt by borrowing more; in 2010, average annual debt creation (including debt refinance) moved above $4 trillion, or almost one-quarter of GDP, compared to the pre-crisis average of 8.7% of GDP.”

This is a key statistic most forget when they discuss the stock and flow of US debt: because whereas the total US deficit, and thus net debt issuance, is about $1 trillion per year, one has to factor that there is between $3 and $4 trillion in maturities each year, which have to be offset by a matched amount of gross issuance just to keep the stock of debt flat (pre deficit funding). The assumption is that demand for this gross issuance will always exist as old maturities are rolled into new debt, however, this assumption is contingent on one very key variable: interest ratesnot rising.

Do you understand what is being said there?

Not only is our debt rising by more than a trillion dollars a year, we also need to roll over trillions of dollars of federal debt each year.  If interest rates on that debt start rising, we are going to start feeling the pain very rapidly.

As I have mentioned previously, the average rate of interest on U.S. government debt was 6.638 percent back in 2000.  If we returned to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt.

The main thing keeping interest rates low right now is the fact that the U.S. dollar is the de facto reserve currency of the world.  If that ends, interest rates on U.S. debt will skyrocket.  The following is from a recent article by Chris Ferreira…

The US Dollar is the reserve currency of the world. You need it to buy oil, a vital component of any economy. Since other countries like China cannot print US dollars at their leisure, they have to get it from somewhere. They get it from trade with the US. The US buys products in Asia and the rest of the world with US dollars, and in turn these same dollar surpluses are used to buy oil and US bonds, creating a much needed artificial demand for US dollars.

This is also how the enormous US 558$ billiontrade deficit in 2011 was financed. The US has been in a trade deficit since the 1980′s and it continues the grow as jobs and manufacturing are being lost to more competitive nations. The trade deficit also accounts for the national debt. The financing of the debt creates artificial demand for US bonds which helps lower the interest rate and coincidentally helps to raise the debt levels even higher.

Unfortunately, the rest of the world is starting to move away from the U.S. dollar.  Over the past couple of years, a whole host of international currency agreements have been signed that are intended to start reducing the use of the U.S. dollar in international trade.  For much more on this, please see the following article: “The Giant Currency Superstorm That Is Coming To The Shores Of America When The Dollar Dies“.

Most Americans have absolutely no idea how very close we are to financial catastrophe.  The only way we can continue to service our enormous 16 trillion dollar debt is for interest rates on that debt to remain super low.  But the only way those interest rates can remain low is for the U.S. dollar to remain absolutely dominant in international trade.  Once the rest of the world rejects the U.S. dollar, the game is over.

We are headed for total system meltdown, but neither major political party is going to do a thing about it.  They are both just going to continue to meekly comply with the dictates of the real boss of our financial system – the Federal Reserve.

It is imperative that we educate the American people about these things.  Please share this article with as many people as you can, and the following is another great article for anyone that does not understand how the Federal Reserve is destroying our financial system: “10 Things That Every American Should Know About The Federal Reserve“.

By Louis Basenese (Wall Street Daily | Original Link)

For almost half a century, Wall Street has been telling us a whopper.

Specifically, that a so-called “balanced” portfolio – 60% in stocks and 40% in bonds – is an ideal way to stay invested in the stock market while reducing risk. Especially if you’re a conservative investor or retiree.

Dozens of mutual funds exist to make such a simplistic approach even easier, too.

And sure enough, like lambs to the slaughter, countless Americans have plowed hundreds of millions of dollars into these funds.

Heck, check your 401(k) plan at work. I’ll bet you dollars to donuts that there’s a balanced fund option just waiting to seduce you with its promise of modest returns and lower risk.

Total hogwash. And in honor of Myth-Busting Mondays, I’m going to prove it with a single number… 99%.

That’s the correlation a traditional 60/40 allocation has with a portfolio that’s 100% stocks. In other words, a balanced portfolio moves in almost virtual lockstep with a pure stock portfolio.

So if you’re investing in a traditional balanced fund, you’re essentially investing 100% in stocks.

Shocked? You should be. Because this isn’t some market anomaly caused by the severity of the Great Recession and compounded by unprecedented low yields on bonds.

Nope. It’s been going on for the last 15 years, according to the number crunchers at BlackRock.

Of course, I never take any stat at face value on Wall Street. So I did some further digging and number crunching. What did I discover? Even more shocking news…

This near-perfect correlation has existed for over 40 years.

As Robert Arnott reveals in his “Bonds: Why Bother?” article in the Journal of Indexes, “One little-known fact is that the classic 60/40 balanced portfolio has roughly a 98 percent correlation with stocks [since 1969].”

And all the while, Wall Street has been peddling balanced allocations to us as a sound alternative to investing entirely in the stock market.

In fairness, a recent survey by Natixis Global Asset Management reveals that advisors are waking up to the error of their recommendations.

Approximately 40% of 163 advisors questioned believe a 60/40 allocation is no longer the “best way” to achieve performance and manage risk.

But that’s an awfully small sample size.

Plus, the omission isn’t exactly a full-blown repentance. I mean, saying the traditional 60/40 allocation isn’t the best way to increase returns and manage risk is simply dodging the issue.

It’s a terrible way. Particularly now.

Consider:

• A 60% allocation to U.S. equities ignores a world of diversification opportunities. In 1970, U.S. stocks represented 70% of investable market cap. Today, they represent less than 46%.
• Bonds perform worst in the current environment. Average annual returns for bonds during rising inflationary and rising growth periods clock in at just 1.1% and 3.9%, respectively. That compares to returns of 7.1% and 8.8% during periods of falling inflation and falling growth, respectively, according to Merrill Lynch’s Alex Shahidi.

So what’s an investor to do?

If you’re after a simplistic, do-it-yourself option, consider replacing the traditional 60/40 allocation with the alternative proposed by Shahidi in a paper for the Investment Management Consultants Association. That is, a portfolio of 20% stocks, 30% long-term Treasury bonds, 30% TIPs and 20% commodities.

Such a portfolio can easily be constructed with low-cost ETFs and/or mutual funds.

Or ignore brokers who regurgitate old-school advice that doesn’t work. Instead, find one who’s committed to taking the time to customize a strategy that suits your individual risk tolerance and time horizon.

It might take some time to find such an individual. But it’s worth the effort if you care about preserving and increasing your net worth.

Bottom line: The classic asset allocation – 60% equities and 40% bonds – is virtually no better than a 100% allocation to stocks. So know the risks and be wary of any broker who might be recommending such a strategy.

Ahead of the tape,

Louis Basenese

After a bull-run lasting more than 12 years, gold has shown some signs of weakness in the last few months.

The minutes of the latest FOMC meeting suggest that several members want the quantitative easing to end in 2013. Continued easing by the Fed and other major central banks was one of the reasons for the bullish run in gold in recent years.

On the other hand, central banks have continued their gold purchases. The demand in China may also pick up this year as the economy recovers. The demand in India is holding up well so far, even though the metal price is near all-time high in Indian Rupee terms.

In fact the Indian government is considering some tax measures to make the gold imports more expensive as massive gold imports by the country are worsening the country’s current account deficit.

I remain positive on the long-term prospects for gold for reasons mentioned here. What do you think?

Don’t blink! The price of oil is secretly creeping higher.

In the face of U.S. supply gluts and recession talk, the price of crude has made a steady, month-long run above $93 a barrel.

Today I want to show you why this general rise in the price per barrel may not be a blip on the radar. Instead, it could be the beginning to crude’s next big move. Let’s take a look…

Looking at the oil price action for the past few months it’s clear that there are several key trends controlling the price of oil. Today I want to cover three of the four most important trends.

Off the bat, I’m not going to cover the U.S. economy in this article. We all know the impact a recovery or recession can have on the price of oil – but for now we’ll just assume the U.S. will keep plodding along like it has for the past 24 months.

That said, let’s get to the good stuff. There are three trends that I believe will control the price of oil in 2013. In fact, if what I’m seeing is correct we’re staring at the biggest oil opportunity of the year.

Arab Spring 3.0?

The first important oil trend that’s re-emerging, as it did in 2012, is the latest installment of the Arab Spring. This year, let’s call it Arab Spring 3.0.

The past two years were host to an early-year run-up in the price of oil. Both times, Arab uprisings led to higher than $100 oil here in the U.S. Take a look:

The reason is simple. If we run into another situation like Libya, where oil production simply shuts down, the world oil supply could quickly tighten up — especially if you’re talking about a big player like, say, Saudi Arabia

This year is already following the same bottoming pattern we saw in 2011 and 2012. With oil prices out of the gate strong in 2013 only a mere bit of turmoil in the Middle East could hurl prices into triple digits.

But “mere” may not be the word that describes the next round of turmoil. Two big players in the area are still on the chopping block.

First up is Iraq. Although 2012 and the beginning of 2013 have been a coming out party for Iraqi production, civil war between the Kurdish region to the north and Bagdad could put the oil flow on hold. We’ll see how this turns out – but our good friend, and oil maven, Byron King has gone on record saying this could be the year we see and official country form as “Kurdistan” in northern Iraq. That type of thing won’t happen quietly, of course.

The other big player that could soon find its tookus in the fire is Saudi Arabia. We’ve covered this Saudi-time bomb before, but to be clear there are several things that could impact the production flow from the world’s largest oil producer.

Simply put, with more oil production coming from the U.S., Saudi is losing its monopoly power by the day (for a refresher on this, click here.) Combined with that, the country is using much more of its own oil AND government budgets are rising. Add it all up and the government could face some serious hardships in the months to come. If Saudi can’t keep the ever-growing welfare system rolling, turmoil will ensue.

Plus, as an added wildcard, all bets are off with a changing of the guard when King Abdullah passes. Prolific oilman, T. Boone Pickens has gone on record saying this could be the next big reason for a spike in the price of oil.

Will turmoil strike Saudi in 2013? Your guess is as good as mine, but we both know which way oil will head if turmoil strikes. Stay tuned for Arab Spring 3.0 and a potential run to $100.

Forget The Never-Ending China Chatter…

I’m sure by now you’re sick of the China chatter. That is, everyone has their opinion on whether China can keep growing or if a slowdown is in the cards.

Well without getting into any opinions, the data out of China continues to tell the tale of growth.

For the oil side of the story, take a look at the chart below:

Just following the data from the chart, China (dark blue) has enjoyed seven straight years of oil consumption growth – and the trend remains strong through 2014.

Add to that the rest of the emerging world and you’ll start to see that demand from oil is set to soar (note the black line indicating total global oil consumption.) Or said another way, even with all of the China chatter and recession talk, global demand for oil is still headed higher.

This brings our discussion to another simple fact about the Chinese economy/government (I use the slash there because in the People’s Republic the economy and government are one and the same!)

The Chinese know the importance of secure resources – commodities like gold, iron, copper, coal, natural gas and oil are all strategically vital to the Chinese. One point to this story that you may not know is that Chinese citizens and manufacturers don’t actually see a real price for the price of oil. That is, government subsidies and price controls abound.

So when prices rise to $110 a barrel Chinese end users consume as much oil as if the price were $50 a barrel. That’s one of the key points to the whole China growth story, without “real” prices consumption will continue to grow. It’s simple, government-controlled economics!

Keep the people happy, keep the growth engine rolling. And with their stash of U.S. cash the Chinese can play this game for decades. Let alone 2013!

A Homegrown Oil Trend – And Why It Doesn’t Matter (Much)

The last important oil trend to spy for 2013 is the growth in U.S. production. As we know, the U.S. is enjoying an energy renaissance no one could have predicted.

“U.S. oil production exceeded 7 million barrels a day for the first time since March 1993” Bloomberg report, “as improved drilling techniques boosted exploration across the country.”

Oil and gas are flowing from America’s shale patch and creating a boom from Texas to Pennsylvania to North Dakota (and don’t look now, but California could be next!)

And when you put this boom in global perspective, you’ll realize the U.S. stands alone. Take a look:

Other than an increase in Iraqi production that helped push OPEC higher in 2012, the U.S. stands alone as the mega growth story for the foreseeable future. This is especially true this year.

At the risk of sounding like a broken record, the shale boom isn’t happening anywhere else.

So on one hand you have a godsend for the U.S. – where we’re producing more natural gas than ever and oil production is the highest it’s been since 1993 (and surely there are ways to play it.) But while that’s well and good for our investments and our economy it’s not the type of windfall oil production that could change the global oil game. That is, when you put America’s shale boom in perspective it’s not having any profound impact on global oil supply.

The proof is in the pricing. By now, if the U.S. growth in production had a major impact on production we’d have seen it in the price per barrel. On a global scale, that’s just not happening! Instead, while the U.S. is producing more oil each month, prices are steadily climbing.

That’s a telling statistic. And combined with the demand data out of China and the potential for an Arab Spring 3.0 I know where I’d stack my chips for oil.

Now’s the time for a bullish bet – so far, it looks like one heckuva oil opportunity.

Keep your boots muddy,

Matt Insley

Original article posted on Daily Resource Hunter 

Read more: Get Ready For This Year’s Massive Oil Opportunity http://dailyreckoning.com/get-ready-for-this-years-massive-oil-opportunity/#ixzz2HaVJ2Uun

Whether you’re bullish on the market or bearish; whether you believe there’s more upside to come, or that it’s getting ready to roll over; it’s now more important than ever to make sure you’re doing everything you can to get the most out of your trades.

By Lisa Springer (StreetAuthority | Original Link)

If a rich yield is your goal, then few investments can compete with mortgage real estate investmenttrusts (REITs).

These stocks currently pay exceptional 9-19%dividend yields. In a world where U.S. Treasuriesyield just 2%, these REITs truly offerextraordinary performance. Mortgage REITs can afford to pay outsized dividends because they must distribute the majority of their income to investors and utilize leverage – borrowing moneyat low rates and investing in high-yielding mortgage securities — to amplify shareholder returns.

Despite generous dividends, prices for mortgage REITs took a beating in the second half of 2012, after the Federal Reserve launched a $40-billion monthly purchasing program for agency-backed mortgage securities. As a result, demand for mortgage securities rose, yields fell and the spreads mortgage REITs earn from their investments declined. Major players such as CYSInvestments (NYSE: CYS), American Capital Agency (NYSE: AGNC) and Annaly Capital (NYSE: NLY) experienced price declines of 20% or more.

The good news is that mortgage REITs may be poised for a comeback this year, as higher taxes on dividends and capital gains for upper-income earners make these investments more appealing.

[Because REITs pay no corporate taxes, they aren't qualified for the lower dividend tax rate. In addition, a big portion of REIT dividends typically consist of return of capital. This reduces the investor's taxable income in the year the dividend is received, lowers the cost basis of the investment and defers taxes until the investment is sold.]

Here is a look at the five highest-yielding mortgage REITs:

1. Two Harbors Yield: 18.8%

Two Harbors (NYSE: TWO) mainly invests in residential mortgage-backed securities (RMBS) guaranteed by government agencies (such as Fannie Mae). These represent 83% of the REIT’s $15-billion portfolio. Two Harbors also owns a 47% stake in Silver Bay Realty (NYSE:SBY), a new residential REIT.During the third quarter of 2012, earnings per share declined 22% to 31 cents from 40 cents a year earlier, due to lower yields on recently-purchased mortgage securities. The REIT’s third quarter dividend of 36 cents a share wasn’t fully covered by earnings. Two Harbors declared a 55-cent dividend for the fourth quarter, but may struggle to maintain current payout if earnings from new investments continue to slide. The company has $834 million of cash to cover the dividend.

 

2. Western Asset Mortgage Capital Corp. Yield: 16.9%

Western Asset Mortgage Capital Corp. (NYSE: WMC) is new agency mortgage REIT is managed by Western Asset Management Co., which is owned by Legg Mason (NYSE: LM). During the September quarter, its first quarter as apublic company, Western Asset generated solid earnings of $2.72 per share, increased book value 10% to $21.76 a share and paid an 85-cent dividend. The company’s $4.6 billion portfolio of mortgage securities consists mainly of 30-year fixed-rate agency-guaranteed RMBS.Because it is new, this REIT is experiencing lower prepayment rates than its competitors. This helps Western Asset maintain a favor spread between yields on investments and borrowing costs. Management signaled confidence by raising the dividend 5% in the December quarter to 90 cents a share, while distributing an additional dividend of 22 cents a share to investors.

 

3. American Capital Agency Corp. Yield: 16.1%

American Capital Agency Corp. (Nasdaq:AGNC) has a $90-billion investment portfolio and ranks as the country’s second-largest mortgage REIT. You may already be familiar with this stock as it’s been featured in Carla Pasternak’s High Yield Investing.Investments consist mainly of agency-guaranteed RMBS. The REIT is also highly leveraged, with debt of $80.3 billion totaling more than seven times equity. While the REIT’s earnings more than doubled in the third quarter to $3.98 per share from one year ago, most of the increase was non-cash unrealized gains on investments. Year-over-year Taxable earnings declined 27% to $1.36 a share. American Capital has maintained its quarterly dividend at $1.25 all year after cutting payout in June 2011 from $1.40.

 

4. New York Mortgage Trust Yield: 16.3%

New York Mortgage Trust (Nasdaq: NYMT)invests in agency-guaranteed and non-agency RBMS, and owns a $990-million investment portfolio. New York Mortgage changed managers and used stock offering to grow its portfolio in 2012. The result has been a significantly-improved financial performance.Third-quarter earnings jumped to 30 cents a share from no earnings a year earlier, which were more than sufficient to cover the 27-cent dividend. The REIT has also declared a fourth-quarter dividend of 27 cents a share.

 

5. Resource Capital Corp. Yield: 13.4%

Unlike the residential mortgage REITs mentioned above, Resource Capital Corp. (NYSE: RSO) specializes in commercial real estate. Roughly 87% of the $2.3 billion commercial real estate loan portfolio consists of senior debt (the safest kind) and most of the REIT’s mortgage debt is adjustable rate, which provides some protection against rising interest rates. This REIT is externally managed byResource America Inc. (Nasdaq: REXI).Resource Capital’s September quarter earnings were 20 cents a share, the same as a year earlier. The REIT pays a 20-cent quarterly dividend. The company has made good progress recently cleaning up its balance sheet, so leverage has declined from a high of 10 times a few years ago to 2.9 times today.

Risks to Consider: Dividend cuts are common for mortgage REITs, so these investments must be monitored carefully. The biggest risks come from increases in interest rates and prepayment. Interest rates are unlikely to rise significantly this year, but investors should be cautious if prepayments rates accelerate since this affects the REIT’s earnings and ability to pay dividends.

Action to Take –>  My top picks from this group are Western Asset and New York Mortgage. Both are easily covering their dividends from earnings and steadily improving their book value and financial performance. Of the two REITs, Western Asset is likely the safer choice due to its larger portfolio and skillful management of prepayment risk. This mortgage REIT is also attractively priced at a 4% discount to book value.

P.S. – StreetAuthority’s High Yield Investing is dedicated to bringing investors the highest-paying and most stable stocks, bonds and funds on the market. Click here to learn how to profit from some of our latest income investing picks, including the name and ticker symbol of one company that has raised its dividends 205% since going public…

Lisa SpringerLisa is a stock analyst with nearly 25 years of investment research experience. She earned a MBA in Finance from the University of Chicago in 1987 and began her career in … Read More

Lisa Springer does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC owns shares of AGNC in one or more of its “real money” portfolios.

What does America stand for?  That question is a lot more complicated than you might think.  Our Founding Fathers established a Republic that was based on a set of shared values that were embodied in the text of the U.S. Constitution.  But today, many of our politicians openly disregard the Constitution whenever they want and it has become fashionable to mock the U.S. Constitution.  For example, the New York Times recently published a piece by Georgetown University Professor Louis Michael Seidman entitled “Let’s Give Up On The Constitution” in which he publicly called the Constitution “archaic” and “downright evil”.  This is a man that has been teaching constitutional law to the next generation of lawyers at one of the top universities in the nation for nearly 40 years.  Unfortunately, Seidman is not an aberration.  The truth is that law schools all over America are absolutely packed with professors that teach that we should consider the U.S. Constitution a “living, breathing document” that must “evolve” as society evolves.  They also teach that when we find something in the Constitution that does not work for us today that we should just ignore it.  In fact, in his New York Times article Seidman insisted that “constitutional disobedience” is “as old as the Republic”.  But if we can just ignore the U.S. Constitution whenever we want, where does that leave us?  Should we be able to ignore all laws when they are not convenient for us?

Personally, I strongly believe that we should follow the U.S. Constitution, and there are millions of others out there that agree with me.  If we want to amend the Constitution, there is a procedure for doing that, but it is not easy.  Our founders did that to try to ensure that any changes to our Constitution would reflect an overwhelming consensus of the American people.

But today America is more divided than ever before.  We can’t seem to agree on much of anything.  We are at a period in our history when we desperately need to come together, but instead we are constantly at each other’s throats.

Is there anything that truly unites us anymore?

In the old days, if you would have asked people to give you a one word definition of America, many people would have responded by naming important values such as “freedom” and “liberty”.

Sadly, much of the country appears not to even value those things any longer.  One poll found that 51 percent of all Americans believe that “it is necessary to give up some civil liberties in order to make the country safe from terrorism.”  Other surveys have found similar results.

Not only that, we continue to elect control freak politicians from both political parties that appear to be obsessed with constantly eroding our freedoms and liberties.  There are literally millions of ridiculous laws, rules and regulations that govern even the smallest details of our lives, and the government is constantly inventing new ways to watch, track, register, monitor and control all of us.  If you doubt this, please see this article and this article.  If we continue down this path, we are going to end up in a very dark place as a nation.

Well, what about economics?

Aren’t we united by a common economic philosophy?

Sadly, no we are not.

In the old days, Americans overwhelmingly believed in free market capitalism and overwhelmingly rejected socialism, but now that is rapidly changing.

According to a stunning Pew Research Center survey, 49 percent of Americans in the 18 to 29 age bracket have a positive view of socialism while only 46 percent of Americans in that same age bracket have a positive view of capitalism.

So what will the future look like if we continue to see this kind of shift among our young people?

And of course we have not had anything even close to a true free market system in the United States in a very, very long time.  Our economy is dominated by a partnership between the federal government and the monolithic predator corporations that dominate our society.  Individuals and small businesses that try to compete are being absolutely suffocated.  Our Founding Fathers were very suspicious of all large concentrations of power, and they sought to greatly limit the power of both the federal government and of the big corporations.  But today we have gone totally in the other direction.

Well, is there anything else that truly unites America?

What about religion?

Of course it is true that the overwhelming majority of the early colonists were Christian, and even 50 years ago it would have been accurate to say that America was a “Christian nation”, but that is definitely no longer the case today.

The number of Americans with no religious affiliation has absolutely exploded in recent years.  It has grown by a whopping 25 percent over the past five years, and meanwhile the percentage of people that identify themselves as “Christians” in America is dropping like a rock.  In fact, one poll found that the percentage of Protestants in the United States has dropped below 50 percent for the first time ever.  For many more shocking numbers that show the precipitous decline of Christianity in America, please see this article.

So what fundamental principles do most Americans actually agree on?

And I am not talking about things like “American Idol is going downhill” or “Justin Bieber gets too much attention”.

Is there still a core set of shared values that the entire nation can agree upon?

If not, where does that leave us?

Unfortunately, I think that it leaves us in a very difficult place.  The divisiveness that we have seen in Washington D.C. in recent years is just the tip of the iceberg.  We are living in a nation today that is more divided than I can ever remember.  A whole host of opinion polls have shown that anger and frustration in America are rising to very dangerous levels, and instead of focusing on the real reasons for our problems we all tend to point the fingers at one another.

In America today, we have been trained to group ourselves together by certain “categories” and to see those on the other side as “the enemy”.  This is a very dangerous thing.  It keeps the American people from coming together to fix the very serious problems that are facing our country.

The truth is that we are being divided in dozens of different ways today.  The following are just a few of the ways we are currently being divided…

Republican vs. Democrat

Conservative vs. Liberal

Rich vs. Poor

Black vs. White (or insert any other two races or ethnic groups)

North vs. South

Urban vs. Rural

Anti-Gun vs. Pro-Gun

Male vs. Female

Young vs. Old

Traditional vs. “Modern”

Religious vs. Secular

Of course we should never compromise what we believe just for the sake of “unity”.  That is foolishness.  But you can disagree with someone without hating them.

In America today, people will find a reason to hate someone else at the drop of a hat.  Surprisingly large numbers of Americans will hate others because of where they are from, what they look like, what their ethnic background is, what their political affiliation is or what their religious beliefs are.

If America is going to have any kind of a future, we have got to start loving one another.  That does not mean that we all have to agree with one another.  But we do need to start caring about one another and hoping for the best for one another.

For example, I fundamentally disagree with almost every single thing that Barack Obama does.  But I do not hate him.  On the contrary, I pray for him and his family.  I would love to see him experience a 180 degree turnaround and start fighting for the truth.  I believe that love is stronger than hate, and I believe that there is hope for every one of us.

I know that I have had my mind changed on a lot of things throughout my life, and if I could go back there are many things I would do differently.  I am thankful for those that loved me and had patience with me when I was younger.

And that is the kind of grace that we should extend toward others.  Yes, a stand needs to be made when others are promoting evil and trampling on our rights.  But instead of responding to hate with even greater amounts of hate, perhaps it would be better if we responded with even greater amounts of love.

And I am not saying that we always have to be “meek” in our approach.  For example, if I was pushing a shopping cart around the local supermarket and I came upon a young child that was about to guzzle an entire bottle of liquid bleach, I would yell and scream at that child to stop.  Sometimes yelling and screaming is the loving thing to do.  There is nothing wrong with “tough love”.

There are preachers and radio hosts that I know that express what they believe in a very vociferous manner, but it is coming from a good place.  They love their listeners and they love their country and they are just trying to wake people up.  There is nothing wrong with that.

On the flip side, there are others that truly do hate particular categories of people.  For example, I was on a radio show earlier today, and the first half of the interview went great as I explained the problems with our economy, how our cities are degenerating and how the Federal Reserve is at the very heart of our financial problems as a nation.

But then in the second half of the interview, the radio host started blaming one particular ethnic group for all of our problems.  I had not properly researched this particular host and I was horrified.  I told her in a very clear manner that I thought that she was wrong.  I don’t think that she appreciated that very much.

But the truth is that we are never going to fix the very serious problems that are facing this country if we choose to hate one another because of what we look like or who are ancestors were.  We are never going to fix the very serious problems that are facing this country if we choose to remain trapped in the “red vs. blue” paradigm and keep pointing fingers of hatred at one another.  We are never going to fix the very serious problems that are facing this country if we would rather indulge in hatred rather than love.

That doesn’t mean that we don’t fight for what is right.  There are most certainly politicians that need to be voted out of office.  There are most certainly big corporations that need to be exposed.  There are most definitely evil agendas that are being promoted at the highest levels.  Our society is clearly headed in the wrong direction and this country needs a massive wake up call.

But I think that we will get a lot farther if love is our primary motivation.  Without love, we are nothing.  Let us start to love one another as we would like to be loved ourselves.

So what do all of you think about this?  I am sure that there are probably some very strong opinions out there.  Please feel free to post a comment with your thoughts below…

By David Dittman (Investing Daily | Original Link)

A little more than a year ago, on Dec. 22, 2011, the Canada Revenue Agency (CRA) delayed from Jan. 1, 2012, until Jan. 1, 2013, the effective date of new rules that require certification by non-Canadian-resident shareholders of Canadian companies that they are eligible for tax treaty benefits, including a reduced withholding rate on dividends paid by Canadian companies.

The CRA is seeking formal validation of tax-treaty rate eligibility from Canadian dividend payers, a change from the previous view that merely residing in such a country was sufficient to qualify. This means that companies that pay dividends to, for example, US shareholders, must have on record information that supports their eligibility for tax treaty benefits.

You may not be required to do anything. In fact it’s likely that your broker has already taken care of the certification on your behalf.

According to the CRA, Canadian dividend-payers are required to have

…recent and sufficient information to establish the identity of the beneficial owner for the purpose of the application of treaty benefits, whether they are resident in a particular country with which Canada has a tax treaty and whether they are eligible for treaty benefits under the tax treaty on the income being paid.

CRA Form NR301, “Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer,” details the information the CRA is seeking. Form NR301 is available here. The new rule does not specifically require use or submission of the form in all cases. It simply requires the Canadian dividend payer to have sufficient information, based on the criteria set forth in Form NR301, to support eligibility.

The information requested on Form NR301 includes:

• Legal name of non-resident taxpayer;
• Mailing address;
• Foreign tax identification number (for US residents this is your Social Security number);
• Recipient type and Canadian tax number if you have one (you simply indicate whether you or the entity upon whose behalf your providing certification is an “Individual” or “Corporation” or a “Trust” along with the relevant Canadian identification number);
• Country of residence for treaty purposes;
• Type of income for which the non-resident taxpayer is making the declaration (“Interest, dividends, and/or royalties,” the relevant selection for our purposes, or “Trust income” or “Other,” with instructions to specify “income type”).
• A signature by the non-resident taxpayer or an authorized person of “certification and undertaking.”

According to the CRA, if the verification it seeks hadn’t been received by Jan. 1, 2013, it will withhold from dividends paid to US owners of shares in Canada-based companies at a rate of 25 percent rather than 15 percent, as is contemplated by the Convention Between the United States of America and Canada with Respect to Taxes on Income and Capital, or the US-Canada tax treaty, and accompanying conventions and explanatory notes.

You may have been asked by your brokerage to fill out and submit CRA Form NR301. On the other hand, many brokerages likely provided certification based on information they already possessed through your existing account information.

“Registered shareholders”–the stock you own is registered in your name on the underlying company’s books, which is kept by the company’s transfer agent, and you’re in physical possession of a certificate that represents your ownership interest–will likely have to complete forms for submission to your respective underlying companies’ transfer agent.

By now you should have received forms directly from transfer agents for all the underlying companies you own requesting information to confirm your tax treaty eligibility. If you haven’t already done so, registered shareholders should complete and remit these forms as soon as possible.

If you’re a registered shareholder of any Canada-based dividend-paying corporation, whether it was ever a trust or not, complete any such forms if they’ve already been forwarded to you.

If you are a registered shareholder of a dividend-paying Canadian corporation and haven’t received notification from it, it might be a good idea to send an e-mail or phone an investor relations representative at the relevant company.

Canadian Employment

Statistics Canada reported Jan. 4 that employment increased by almost 40,000 in December 2012, pushing the jobless rate down 0.1 percentage points to 7.1 percent, the lowest level since December 2008, when the rate was 6.8 percent.

The December 2012 increase, the fourth month of growth in the last five, was all in full-time work.

The consensus expectation was for job growth of around 5,000 for December after a surge of 59,000 in November. Analysts expected unemployment to rise to 7.3 percent.

Canadian employment is up 1.8 percent, or 312,000 jobs–all in full-time work–compared to 12 months ago. Over the same period the total number of hours worked rose 1.6 percent.

Employment in the private sector increased by 59,000 jobs in December, while there was little change in public-sector employment and self-employment.

On a year-over-year basis employment gains among private-sector employees totaled 242,000, or 2.2 percent, while public-sector employment rose by 92,000, or 2.6 percent. The number of self-employed was little changed over the last 12 months.

Among industries, employment increased in transportation and warehousing as well as construction, while there were fewer workers in professional, scientific and technical services; natural resources; and public administration.

The Canadian dollar has closed above parity with the US dollar every trading session since Nov. 19, 2012. The loonie got some uplift from resolution of the US “fiscal cliff” crisis, as the scheduled tax increases and sequestered spending cuts included in that legislated precipice threatened a recession south of the border that would undoubtedly have imperiled Canadian growth in 2013.

Attention will now turn to negotiating away the massive spending cuts that weren’t included in the last-minute deal in Washington, DC. These were kicked two months down the road and will now be wrapped into another debate that promises to be at least as contentious as recent conflicts, one that involves raising the ceiling on US federal government borrowing.

Whatever comes of this imbroglio–marked already by talk of defaulting as a means of enforcing federal spending discipline and by serious contemplation of minting a trillion-dollar platinum coin–it remains the case that Canada’s fiscal, monetary and economic situations provide long-term support for a strong loonie.

There’s no question that whatever threatens US and therefore global economic growth will have a short-term knock-on effect on Canada as well as the value of the Canadian dollar versus the US dollar. But this short-term weakness is premised on the US being the last bastion of safe assets.

Even the threat of default would pull a significant leg of support from the buck and likely send global central banks running even faster to diversify their foreign currency holdings.

First of all, I want to wish you a healthy, happy, and wealthy New Year.

2013 promises to be the most exciting year since the financial crisis started out in 2007, because we’re not finished with that crisis yet.

Here’s what all of my work tells me:

Over the last year or so where we’ve seen markets swinging wildly but pretty much in trading ranges, is really the eye of the hurricane. And almost immediately in 2013 we’re going to start to pass into the back wall of that hurricane, which could last another several years and pack a lot of punches for investors.

Right off the bat we saw Congress agree to a solution to the fiscal cliff. It’s a little bit better of a deal than I expected. However, what they’ve really done on the spending side is push things off to the budget negotiations, which will be ongoing over the next couple months and certainly provide a lot of background noise and volatility for the markets.

That’s why there is one market in particular I want to start out with today. And that is none other than the …

U.S. Treasury Bond Market—
The Riskiest Market on the Planet

Over the holidays, I took a close look at the U.S. bond market. And I believe the 64-year cycle in interest rates, which I’ll be explaining in the upcoming Weiss Wealth Summit Series later this month, has indeed bottomed from the 1989 high to the record low in 2012.

Now the bond market, despite some progress in Washington, is starting to show that the Federal Reserve will not be able to control interest rates going forward.  That means rates are set to rise for many years to come. And the U.S. bond market bubble is already starting to burst.

Below is the weekly chart of the U.S. Treasury 30-year bond. As you can see it’s already broken a significant uptrend line dating back to the mid-first quarter of 2011.

Click chart for larger version

Right after Congress agreed to the fiscal resolution and postpone the spending cuts for further debate, we saw the bond market take a hard hit. And now I have the first daily sell signals …

I’m targeting a move down to system support, which is the red line in the above chart. You can see there’s significant downside potential in the short term. And over the longer term, U.S. bond prices can fall substantially.

I have been warning my readers to get out of U.S. Treasury bonds. And this is pretty much your last chance.

It may look like the safest market around, but ironically it is the most dangerous, riskiest market on the planet.

Today I also want to quickly cover some of the other markets I’m watching closely …

Gold Market—
Not Quite Ready for Next Phase Up

We’ve seen a rally in gold after the fiscal cliff news, but it’s nothing. As you can see below, the gold market is just bouncing back up to overhead resistance, just above the $1,700 level. Gold has not completed its downtrend yet. It remains in a very bullish long-term bull market, but it is not yet time for gold to take off to the upside.

Click chart for larger version

The Same Thing Pretty
Much Applies to Silver

Silver is holding support here. We’re seeing a little bit of a bounce. But silver has significant system resistance overhead and technical resistance. I expect silver to test and probably break the $26 level before it hits a long-term bottom and begins its next phase up in a long-term bull market.

Click chart for larger version

Now the Dollar Index …

The dollar is holding support. That’s basically analogous to what I’m seeing in the metals. The dollar should rally in the weeks ahead, probably going into the budget deficit talks. And then later this year I expect the dollar to resume its long-term bear market.

Another reason the dollar is acting strong and holding support and will probably rally in the weeks ahead is because Japan has come out and officially declared a policy of weakening the yen. So we’re starting to see that shift of money out of yen into dollars, which is holding up the dollar in the shorter-term.

The Dow Industrials —
Obviously a Very Key Market Here

I’ve been saying for quite some time that we’re transitioning to a longer-term bull market in the Dow Industrials. It is close but no cigar just yet. We need to keep an eye on the 13,335 level, a significant level of resistance.

I call it a pivot point for 2013. If we can get a close above 13,335 on a Friday basis, we will begin to see that transformation to a bull market. And it will occur even if interest rates are going up.

You have to set aside an old economic rule of thumb: Rising interest rates are bad for the economy, bad for stocks.

When interest rates start to rise from such a low level it means money is coming out of the bond market. All the money the Fed has printed is starting to move into the economy. The demand for money and credit is going up so the cost of money and credit is going up too. And that’s a very bullish indication for the stock market.

So stay tuned to my columns each Monday here in Money and Markets. I believe 2013 is going to be the most significant year in the markets in our lifetime because it’s going to be, as I said at the outset, a period where we start to leave the eye of the hurricane and enter the back wall, which is often the strongest, most chaotic portion of the financial storm.

Best wishes,

Larry

After the tough years 2006-2007, the housing market is now recovering steadily. The stability in the home buying market, combined with low interest rates and increased rentals, have increased the affordability of homes. Improvement in employment and consumer confidence is also contributing to a rise in demand for new homes.

Inventory of foreclosed homes and short sale homes is declining, thus stabilizing prices of new homes. Additionally, buyers are selecting larger and upscale homes with energy-efficient features, which are increasing average sale prices.

Thus, homebuilders are witnessing increasing traffic levels due to heightened consumer demand. Most homebuilding companies are witnessing significant growth in both volumes and average selling prices (ASP). New home orders, backlogs (number of homes under sales contracts at the end of the year) and homes delivered are climbing year over year. Home prices have started moving up lately with market demand gaining momentum.

Moreover, improving homebuilding revenues combined with tight cost control and better overhead leverage (as volumes improve) are boosting margins for most homebuilders. The large discounts and incentives offered in response to declining demand and an oversupply situation are gradually being rolled back.

Overall, the U.S. housing market has seen significant upside in new home sales volume for the first nine months of 2012 with industry-wide sales increasing roughly 25% from prior-year levels. The improving housing outlook thus has been a solitary bright spot on the economic horizon.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI), known as the homebuilder sentiment index, rose for the eight consecutive month in December, improving by 2 points to 47. This is a significant improvement from the depths of the housing downturn and is the index’s highest level since April 2006. The improvement in this index suggests an increased demand for housing and better sales prospects for the next few months.

Focus on High-End Communities

Most homebuilders are focusing on the high end communities. The average selling prices (ASPs) are improving for most large-cap homebuilders due to changes in the community/product mix. ASPs have gained from increased sales in high-end communities of California, Arizona, Colorado and Florida, where home prices are generally higher.

Given the scenario, large builders are eating into the shares of other undercapitalized small/medium-sized private builders on the back of overall housing demand, stronger capital and better land positions.

Lennar Corporation (LEN - Analyst Report) strategically focuses on acquiring new home sites that would boost margins and benefit the bottom line. The company focuses on high-margin, well-positioned communities and avoids fringe or tertiary markets where price is the only driver. The company’s focus on quality instead of quantity is benefiting margins and boosting new sales orders.

PulteGroup, Inc. (PHM - Analyst Report) is also shifting its focus toward high-priced Pulte-branded move-up homes, which improve the overall ASP. A better mix of sales, particularly Pulte-branded move-up homes, as well as addition of new higher margin communities, is consistently boosting the company’s margins.
Small homebuilders like KB Home (KBH - Analyst Report) has started rolling out communities in highly desirable submarkets, primarily in the Central and West Coast regions, which allows it to sell larger, higher-priced homes, driving up the ASP. The company is also reallocating resources to focus on core preferred markets with strong growth prospects like those of California and Texas. KB Home is also targeting higher income, first-time and move-up buyers — all of whom are more inclined toward buying a new home rather than buying a foreclosure.

Another small homebuilder, Meritage Homes Corporation (MTH - Snapshot Report) is investing in well-positioned and high-priced land and new communities in the most desirable submarkets, which should ensure profits as the market gets stronger.

Increased Investments in Land Positions

In addition to purchasing finished home sites, companies like Lennar and D.R. Horton, Inc.(DHI) also acquire early-stage raw lands in A-plus locations on which finished home sites can be built faster and at a relatively lower cost.

The pace of D.R. Horton’s investments in homes under construction, land development and finished lots has increased following the improved liquidity position from solid sales growth in the first nine months of 2012. In the first nine months of 2012, the company invested $938 million on land developments versus total investment of more than $800 million over the past couple of years.

Pulte is also investing in acquiring land positions and expects to spend $1 billion on land and land development in 2012. While the company is disciplined in adding land positions, it is also divesting lower margin projects and exiting underperforming communities and lower margin land lots, which no longer fit into its operating strategy, thus freeing up cash to invest in other potential opportunities, which could generate higher returns. Pulte is also using its existing land assets more efficiently and lowering unsold inventory levels more aggressively, which in turn are benefiting its working capital and margins.

Cost Savings

Most housing companies resorted to cost reduction initiatives in order to cope with the housing downturn and raw material cost inflation.

Pulte has made significant workforce reductions and is also aggressively working to reduce overhead costs. In 2011, the company consolidated its field organization and certain corporate functions. It also consolidated its regional operations in Arizona, Florida, New York and New Jersey and merged its West and Central areas.

Home improvement products-maker Masco Corporation’s (MAS - Analyst Report) cost-saving initiatives included business consolidations, system implementations, plant closures, improvement in the global supply chain and headcount reductions. The restructuring initiatives are expected to result in about $175 million of gross cost reduction in 2012.

Construction aggregates maker Vulcan Materials Company (VMC - Analyst Report) has invested in a new Oracle-based ERP and Shared Services platform, which allowed the consolidation of the company’s eight divisions into four regions. The system also streamlined its support functions, thereby reducing related positions and overhead costs.

The company also has two other ongoing initiatives: a Profit Enhancement Plan and planned asset sales in order to improve earnings and cash flows, pay off debts and thereby strengthen its overall credit profile.

The Profit Enhancement Plan is designed to reduce costs as well as enhance profitability by streamlining the management structure. Under the planned asset sale, the company plans to divest its non-core assets in order to focus on the higher-growth Aggregates business. These sales will improve the company’s liquidity position and earnings.

Other smaller homebuilders like KB Home significantly reduced its overhead, inventory and community count levels to better align operations with the reduced housing activity. Consequently, the company exited underperforming markets like South Carolina, downsized operations in Arizona and Charlotte, North Carolina, lowered production costs, disposed of unnecessary land and reduced exposure to risky joint ventures.

Most homebuilders are expecting these restructuring and cost savings initiatives to help them achieve profitability as the housing dynamics continue to improve.

Performance of Key Players in the Past Quarter

Gaining from the improving housing dynamics, key housing companies like Pulte, Lennar and D.R. Horton delivered stronger-than-expected results in the third quarter. However, other operators like Vulcan Materials and Fastenal Company (FAST) either missed or could only meet expectations. While Fastenal, a national distributor of industrial and construction supplies, faces uncertainty in the growth outlook for some of non-housing end markets, Vulcan Materials is facing volume headwinds in its largest segment, Aggregates.

A look at the Earnings ESP (Expected Surprise Prediction – Zacks’ proprietary methodology for determining which stocks have the best chance to surprise with their next earnings announcement) shows that Pulte could beat the Zacks Consensus Estimate in the fourth quarter of 2012. Pulte management is also expecting better profitability in the future quarters.

Overall the earnings picture for the group as a whole remains very robust. Total fourth quarter 2012 earnings for the homebuilder sector are expected to be the highest of all 16 Zacks sectors at 33.3% from the same period last year, reflecting a combination of strong revenue growth and margin expansion. This follows the group’s strong performance in the third quarter, when total earnings increased 56.6%.

With overall earnings growth in the broader S&P 500 essentially flat in the third quarter and expected to be no different in the fourth quarter, the housing group provides the few areas of earnings growth in the present environment. Importantly, the trend has only just started and still has plenty of room to grow.

Full Housing Recovery Will Take Time

The last few years have seen a very fragile housing market. The downturn in housing — aggravated by an overall weak economy, high unemployment rates, low consumer confidence, rising interest rates and tightened mortgage-lending standards — weighed on homebuilders.

Declining demand for new homes and an excess of supply in the market in 2011 drove homebuilders to make large concessions in prices, largely hurting profitability. Homebuilders’ sales and profit margins had dropped dramatically from peak levels in 2006.

As discussed above, there have been signs of a gradual strengthening in the housing market in 2012. However, homebuilders have cautioned that the process of stabilization is erratic and not adequately broad-based.

The housing market improvement has been uneven across the country. Most of the gains have, by and large, been observed in high-end communities. In addition, some homebuilders are still facing impediments in raising prices in some markets. Tight credit standards and reduced credit availability for residential consumer mortgage loans still remains a constraint.

OPPORTUNITIES

The improved business backdrop is showing up in positive earnings momentum for homebuilders, resulting in Zacks #1 Rank (Strong Buy) for Lennar and Zacks #2 Rank (Buy)Pulte (PHM - Analyst Report), Hovnanian Enterprises, Inc. (HOV) and The Ryland Group, Inc. (RYL).

Lennar has witnessed solid year-over-year growth in new home orders, average selling prices and home closings in all the three quarters of 2012. Margins have also been above average, despite rising costs, driven by strong operating leverage. Lennar appears to be well positioned for growth in the future quarters as well.

We believe that the company is performing better than its peers by increasing sales prices, reducing incentives, improving volumes and by making opportunistic land acquisitions.

Pulte has beaten the Zacks Consensus Estimates in the second and third quarters of 2012. Improving homebuilding revenues combined with the company’s cost control initiatives are boosting margins. We believe that homebuilders like Pulte, who have significant land positions, broad geographic and product diversity, and better capital positions, are expected to benefit the most as market conditions recover.

We are also optimistic that, despite a Zacks #3 Rank, these companies have bright prospects going forward:

Toll Brothers (TOL) enjoys the competitive advantage of being the largest luxury home builder in the country with little competition in this niche sector. Toll Brothers delivered solid results in the last three quarters of fiscal 2012 (ended October 2012). The company has delivered double-digit growth in net orders in every quarter of fiscal 2012 and expects the momentum to continue in fiscal 2013 as well.

D.R. Horton’s (DHI) strong cash flows, its geographic diversity and its solid cost discipline encourage us. The company has beaten the Zacks Consensus Estimate of earnings in all the quarters of fiscal 2013 (ended September 2012) driven by growth in net sales orders, homes closed and sales order backlog as the housing market recovers.

Meritage Homes (MTH - Snapshot Report) delivered solid results in the second and third quarter of 2012, owing to robust new order growth and improved pricing. The company saw significant growth in closings, average sales prices, revenue, orders, backlog, gross margin and net earnings in both the quarters. The company has also started raising prices in most of its communities. It is expecting revenues to increase at an impressive growth rate of 20%-30% in fiscal 2013. We believe the company’s focus on acquiring new communities in the most desirable submarkets will generate profits in the long run.

WEAKNESSES

With the housing market showing a steady recovery, we are not generally bearish on any housing company. However, we advise investors to avoid names that have reported sluggish results in the past 2-3 quarters.

Fastenal’s (FAST) daily sales growth rates in the second and third quarters of 2012 were lower than the first quarter as well as year-ago comparable periods. Daily sales growth rates to manufacturing customers have declined sharply due to lower sales of its fasteners product line, which are being hurt by end market slowdown and broader economic uncertainty. We believe that the shift of resources to vending may also hurt fastener sales. The stock carries a Zacks #4 Rank (Sell), reflecting its lack of earnings momentum.

Vulcan (VMC - Analyst Report) reported lackluster earnings in the second and third quarters of 2012 due to a decline in revenue and volumes. Revenues declined from the prior-year quarter levels mainly due to a decline in shipments and an unfavorable geographic mix in its flagship Aggregates segment, which produces construction aggregates. The stock carries a Zacks #3 Rank (Hold). Despite being a Zacks #3 Rank stock, we cannot rule out a downgrade in the near future following back-to-back disappointing quarters.

Masco (MAS - Analyst Report) can also be avoided currently as it faces headwinds from weak big ticket remodeling activity and slow European economies, offsetting the benefit from an improving new home construction environment in the U.S. The stock carries a Zacks #3 Rank.

First of all, Warren Buffett, chairman of Berkshire Hathaway (BRK.A)(BRK.B), is gleefully optimistic about America. “Tomorrow’s always uncertain,” he said this morning on CNBC. “But the future, the longer future, is always very certain. And that’s what you have to keep your eye on.”

This attitude keeps Buffett building up huge stakes in companies he deems worthy in the best and worst of times. But what makes Buffett choose the companies to begin with? There is evidence in the stock he keeps adding the most to: Wells Fargo (WFC).

Wells Fargo (WFC)

Wells Fargo has merited membership in Warren Buffett’s portfolio since the 1990s, a shining representation of his long-term philosophy. A steady trend since the first quarter of 2009 is apparent: continual buying. The investor bought 119,940,333 shares cumulatively from then through the third quarter of 2012. This placed him at a total position size of more than 422 million shares.

Wells Fargo was one of Buffett’s “three important moves” in his portfolio in 2011, along with purchases of IBM (IBM) and Bank of America (BAC). He cited several reasons why in his annual letter: “The banking industry is back on its feet, and Wells Fargo is prospering. Its earnings are strong, its assets solid and its capital at record levels.”

Buffett’s premier metric for measuring a bank is its return on assets (ROA). Wells’ ROA record before the financial crisis this decade was a solid 1.6% to 1.8%. After dropping to 0.2% in 2008, Wells has raised its ROA to 1.2% by 2011, and is on its way back to business as usual at 1.4% as of the first quarter.

Wells Fargo is also massive – it serves one in three households in the U.S. through its more than 9,000 shares, 12,000 ATMS and website, in more than 35 countries. Though it ranked fourth in assets, it is also the first in market value of its common stock of all U.S. banks.

Though Buffett requires a high ROA at a bank, he also insists that it be achieved conservatively. On that front, Wells maintains a well-controlled operating environment. It has established ground rules for extending credit to help it manage credit risk, and closely monitors the performance of its loan portfolio. It also keeps its interest rate and market risks in its asset and liability balances within set ranges, while concurrently enabling ample liquidity and capital levels to fuel growth.

Additionally, Wells continues to slough nonperforming loans from its assets. Loans 90 days or more past due totaled $1.5 billion in the third quarter, as opposed to $2 billion at year-end 2011.

Similarly, it fortified its capital position. Equity in the third quarter increased $6.6 million from the second quarter to $156.1 billion. Its Tier 1 common equity under Basel I reached $105.8 billion, equal to 9.9% of risk-weighted assets. Wells also boasts a Tier 1 capital ratio of 11.5%, total capital ratio of 14.51% and Tier 1 leverage ratio of 9.4% to end the third quarter.

Other third quarter results were a testament to its gathering strength and ability to withstand economic uncertainty. The bank reported $4.9 billion in earnings, compared to $4.1 billion at the same time last year. The year’s improvements were spurred largely by balanced net interest and fee income, diversified sources of fee income, a diversified loan portfolio and strong underlying credit performance, as well as growth across many of its businesses.

Third quarter revenue bounded to $21.2 billion from $19.6 billion at the same time last year. The revenue increase came primarily from noninterest income growth in mortgage banking, combined with a mild increase in net interest income. The bank originated 56% more loans in the third quarter from a year ago.

During the quarter, it bought back about 17 million shares and paid a 22 cent dividend, up from 12 cents a year previously. Buffett predicted the dividend increase in his 2010 letter, saying he expected his largest dividend gain to come from Wells Fargo, which was forced to lower it though it was “consistently prospering throughout the worst of the recession.”

Buffett seemed to know based on its fundamentals and execution strategy that Wells Fargo would come through any economic environment – he made his largest purchases in the past five years on its biggest stock dips, in the first quarter of 2009, third quarter of 2009 and third quarter of 2010. But he has been making his boldest purchases over the past year, as the stock has climbed almost 23%.

WFC data by GuruFocus.com

As of Thursday, Wells Fargo has a P/E of 10.5, P/B of 1.2 and P/S of 2.

See more of Warren Buffett’s stock holding in his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Warren Buffett.

By Chad Tracy (StreetAuthority | Original Link)

Some of the world’s best investors are betting that the U.S. housing rebound will continue in 2013.

John Paulson, the billionaire hedge-fund manager, made a fortune betting on the collapse of the housing market in 2008. Yet today, he’s posting strong results in residential housing investments.

The total value of the properties in Paulson’s $298.4 million Paulson Real Estate Recovery Fund has roughly doubled on paper since it was launched in 2009.

Warren Buffett is betting on the U.S. housing rebound by buying up real-estate brokerages around the country. He recently announced a partnership with Brookfield Asset Management (NYSE: BAM), a Canadian real-estate investor, that will more than double the size of his brokerage business.

In February, Buffett was quoted on CNBC saying that he’d buy “a couple hundred thousand” single family homes if it were practical to do so.

But that’s the catch. It hasn’t been a practical option, even for Warren Buffett.

Until recently, investors who wanted to get into the residential real estate market were forced to spend thousands of dollars to buy houses individually, renovate them and either rent them out or try to sell them for a profit. As you can imagine, that’s an incredibly time-consuming process (not to mention expensive and risky).

Still, I’m convinced it’s the single best way for individual investors to profit from the housing recovery.

So you can imagine my excitement when I learned that on Dec. 14th, a new publicly traded company was launched that allows you to do what Buffett can’t — own a stake in thousands of residential properties.

The name of the company is Silver Bay Realty Trust Corp (NYSE: SBY).

Silver Bay is a real estate investment trust (REIT) with a portfolio of 3,100 single-family properties. It focuses on buying distressed homes in hard-hit regions like Arizona, California, Florida and Nevada.

The company has no debt, and it just raised $245 million during its December IPO. It is now the largest REIT on the market to concentrate solely on single-family homes.

As a REIT, Silver Bay is legally required to distribute at least 90% of its taxable income to investors. This income comes from rent, management fees and leasing of properties.

Silver Bay offers investors the benefits that come with being a landlord, like dependable rental income and capital appreciation through rising home prices.

Phoenix is a good example of the gains to be made from rising home prices. The city is one of Silver Bay’s target areas, and housing prices are up more than 20% in the past year alone.

By investing in Silver Bay, you also avoid the hassles that come with being a landlord…

You won’t have all your money tied up in property. You won’t have to worry about finding and keeping tenants. And you won’t get phone calls to come fix someone’s toilet at 2 a.m.

Risks to Consider: Silver Bay is a brand new company, and as such it has no history of profitability or success. However, it is an off-shoot of Two Harbors Investment Corp (NYSE: TWO), and its management team has years of experience working within Two Harbors’ successful business model. Also, the stock is thinly traded, so be sure to place a limit order when purchasing shares so you don’t end up chasing the price higher.

Action to Take –> The housing recovery is here. In fact, Nathan Slaughter, Chief Investment Strategist of Scarcity & Real Wealth says, “Now may be the best time in a generation to buy real estate.” The only question is, what’s the best way to profit? If you don’t have the capital or the time to go out and buy, renovate and rent properties on your own, then investing in Silver Bay can be the next best thing.

With the recent reelection of Huge Chavez in Venezuela, it appeared as though the South American oil power was destined for another six years of his rule, stretching his reign over the nation to nearly two decades. However, a potent form of cancer has been afflicting the Venezuelan president for quite some time, and it forced him to seek medical treatment in Cuba once more.

By Nilus Mattive (MoneyandMarkets | Original Link)

Happy 2013!

In one respect, it already IS a great new year since — as I predicted — our dividend tax rates will remain much lower than all the doom-and-gloomers expected.

At the same time, let’s recognize that the fiscal cliff “agreement” was NOT some type of big fix. It merely kept the government’s cash registers running a bit longer.

The headlines are already filling up with some of the next major financial debates that will take place in Washington, including the debt ceiling.

Of course I think the biggest battleground of 2013 is going to be something that most of the media is not yet talking about — the Social Security system.

As I explain in my brand-new video — “The Death of Social Security” — lawmakers have been running the program into the ground with reckless abandon.

They have continually expanded the Social Security’s scope …

They have aggressively “borrowed” from the trust fund …

And for the last few years, they passed new laws that only made Social Security’s annual shortfalls WORSE!

But as with all the other fiscal problems plaguing our country, the bill is coming due. Millions of newly-retiring Americans are expecting to get the money they were promised.

The first little sign that things are hitting a critical wall: During the fiscal cliff negotiations, lawmakers didn’t push to keep the payroll tax cut in place.

I can only shake my head at all the mainstream commentators saying how hard this is going to hit average Americans. Not because they’re wrong, but because this is just a reversion back to the old rate!

Wait until they see what actually has to be done to really get the program back in the black:

• People who are already receiving benefits may see their future cost of living adjustments taken away or even suffer some new means testing system that reduces promised payments …

• Middle-aged folks may watch helplessly as retirement ages are raised across the board …

• And anyone still paying into the system should expect as much as $15 of every $100 earned to go into the program when caps and taxes get jacked up.

In fact, I don’t think you’ll find one single person arguing that Social Security’s problems can be fixed WITHOUT more taxes and/or benefit cuts. It’s basic math.

Unless we abandon the program entirely, these outcomes are inevitable. And the longer it takes for lawmakers to implement them, the more extreme the measures will ultimately have to be.

So if you haven’t yet prepared, please do so now by watching my free video. As you’ll see, while the situation is maddening, there are a lot of simple steps you can take right now to help you continue enjoying the lifestyle you deserve.

Of course, whatever your personal opinion about programs like Social Security, there is absolutely no denying that our elected officials are to blame for the current state of affairs.

And this is just one of the many ways Washington is destroying Americans’ ability to retire comfortably.

It’s no secret that I believe dividend stocks remain one of the best ways to gain financial independence and growing income streams. However, there are plenty of other tools you can use, too. I’ll be doing my best to introduce you to more of them in the coming weeks … so that, despite all the challenges, 2013 can be your most successful year yet.

Best wishes,

Nilus

If Barack Obama can “solve” the debt ceiling crisis by printing up some trillion dollar coins, then why does the federal government need our money?  As another debt ceiling showdown approaches, many in the liberal media are suggesting that if Congress does not raise the debt ceiling that Obama should just have the U.S. Treasury create a trillion dollar platinum coin and use it to pay our bills.  It sounds crazy, but many notable voices (including Paul Krugman of the New York Times) are supporting this idea.  But if the federal government has had the power to create trillion dollar coins out of thin air all this time, then why do we have to pay taxes?  Not only that, why do we have a national debt?  If the federal government can just create money whenever it wants, then why does the federal government ever have to borrow it from others?  The U.S. Constitution actually grants Congress the power to “coin money”, so why is the Federal Reserve doing it?  Those are some very important questions.  Most Americans don’t even realize that the U.S. government never actually needed to borrow a single penny from anyone else.  The U.S. Congress has the authority to create debt-free money whenever it wants to.  Conceivably, the entire federal government could be funded without ever borrowing a single dollar and without ever receiving a single dollar from any of us in taxes.  Just imagine that – a nation without a single penny of national debt, no income tax and no IRS.  What a wonderful world that would be.  Of course there would be other potential dangers under such a system (such as runaway inflation), and those dangers would have to be addressed.  But the truth is that we don’t have to have an income tax or 16 trillion dollars of government debt.  We only have those things because we have chosen to have those things.

Sometimes, a crisis can illuminate options that most people had not considered previously.  As another debt ceiling crisis draws closer, many are looking for ways for the U.S. government to be able to continue to pay its bills if Congress does not authorize an increase in the debt ceiling.

If a debt ceiling agreement is not worked out, the U.S. government will soon only be able to pay about half the bills that are coming due after interest payments on the national debt (which will almost certainly be prioritized) are made.

That is why a lot of people on the left are pushing the “trillion dollar coin” alternative.  So how would this work exactly?  The mechanics were recently explained by Jim Pethokoukis on his American Enterprise Institute blog…

There are limits on how much paper money the U.S. can circulate and rules that govern coinage on gold, silver, and copper.  BUT, the Treasury has broad discretion on coins made from platinum.  The theory goes that the U.S. Mint would create a handful of trillion dollar (or more) platinum coins.  The President would then order the coins deposited at the Fed, who would then put the coin(s) in the Treasury who now can pay all their bills and a default is removed from the equation.  The effects on the currency market and inflation are unclear, to say the least.

In my opinion, if anyone in the federal government is going to be creating money out of thin air, it should be the U.S. Congress.  After all, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been granted the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.

But those that are pushing Obama to create a “trillion dollar coin” point to a law that Congress passed that allows the U.S. Treasury to mint platinum coins.  The following is from a recent CNN article…

Normally, the Federal Reserve is charged with issuing currency. But U.S. law, specifically 31 USC § 5112, also grants Treasury permission to “mint and issue platinum bullion coins and proof platinum coins.”

This section of law was meant to allow for the printing of commemorative coins and the like. But the Treasury Secretary has the authority to mint these coins in any denomination he or she sees fit.

But it wouldn’t quite be that easy.  According to a recent ABC News article, some elements of the coin design would have to be determined by legislation…

The more difficult part comes sometime after the decision is made to coin the platinum and before the Mint gets to work in sculpting the pieces.

At that point, the American people must decide whose face will adorn the trillion dollar trinket. The process to determine the “specs” of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be “determined by legislation,” creating the potential for another congressional impasse.

So we would likely end up back at square one.

But if printing up a “trillion dollar coin” does not work out, Paul Krugman of the New York Times has come up with another option…

Don’t like the platinum coin option? Here’s a functionally equivalent alternative: have the Treasury sell pieces of paper labeled “moral obligation coupons”, which declare the intention of the government to redeem these coupons at face value in one year.

It should be clearly stated on the coupons that the government has no, repeat no, legal obligation to pay anything at all; you see, they’re not debt, and therefore don’t count against the debt limit. But that shouldn’t keep them from having substantial market value.

Of course there is a very, very low probability that any of these wild ideas will ever be tried, but this debate has raised some very interesting points.

The truth is that we do not have to have a system where more money is only created when more debt is created.  We could have a system where the federal government directly creates debt-free money that is spent directly into circulation by the federal government.

In fact, this has happened before.

As I have written about previously, during the presidency of JFK a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government directly into circulation without any new debt being created.  In fact, each bill said “United States Note” right at the top.

Unfortunately, after JFK’s presidency no more debt-free United States Notes were ever issued.

But even before JFK, there were times when debt-free United States Notes were being used.  According to Wikipedia, United States Notes were first used during the Civil War….

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?

If the Federal Reserve did not exist and the U.S. government directly created money instead of borrowing it, it is conceivable that we could have a national debt of $0.00 today instead of $16,432,707,263,449.56.

Which option do you think our children and our grandchildren will wish that we had opted for?

In a system where the government directly created money, it is also conceivable that we could completely do away with the income tax and the IRS completely.  The U.S. once prospered greatly without an income tax, and it could do so again.

And the truth is that our system of taxation is broken beyond repair.  If you doubt this, just read this article.

So what would the downside be to such a system?  Well, of course rampant inflation would be a huge danger.  Allowing Congress to print up money whenever they wanted to would be playing with fire.  That is why it would be imperative for there to be a hard cap on what the federal government could spend.  For example, you could set the cap on spending by the federal government at 20 percent of GDP.  That way we would hopefully never end up looking like the Weimar Republic.

And the current federal debt could be paid down a little at a time using newly created debt-free currency.  This would have to be done slowly to keep inflation under control, but it could be done.

Of course if you wanted to continue to fund the federal government through taxation, there are other options that would still allow you to do away with the income tax.  For example, one of the ways that our founders intended for the federal government to be funded was through tariffs, and we could definitely raise a lot of money that way.  Plus, that would have the added benefit of making American companies much more competitive again and it would reduce the flow of American jobsout of the country.

So am I in favor of having Barack Obama create a trillion dollar coin to get around the debt ceiling crisis?

Most definitely not.  If it does not violate the letter of the Constitution (which I believe it does), it sure does violate the spirit of it.

But if the U.S. Congress decided to shut down the Federal Reserve and the IRS and they decided to abolish the income tax, and instead they started directly issuing debt-free currency directly into circulation, that is something I would very much be in favor of.

Yes, that system would not be perfect either, but it would be far more preferable to what we have today.

So what do you think?  Should we keep our current system of debt-based money, or would a system of debt-free money be better?

Please feel free to post a comment with your opinion below…

By Ari Charney (Investing Daily | Original Link)

Numerous academic studies have shown that corporate insiders tend to be far savvier investors in their company’s shares than the average investor. Of course, it’s obvious that executives should be in the best position to know how their firm will fare.

However, in the short term, insiders don’t always get it right. But their long-term record means that it’s worth monitoring their buying and selling activity.

And for investors in master limited partnerships (MLP), it’s especially timely to consider such patterns, given that MLPs barely finished 2012 in the black. At one point during November, MLPs dropped as much as 7 percent over about a week.

Although income investors depend on MLPs for their distributions, few were immune from the negative sentiment resulting from a decelerating global economy coupled with possible austerity measures. The space may have also suffered from tax-related selling, as investors booked gains in anticipation of higher taxes, as well as fear of a change to MLPs’ tax-advantaged status.

While MLPs could certainly take a hit from a global economic downturn, the twin worries about taxes were temporary headwinds. As such, one would hope to see the management teams of MLPs taking advantage of short-term selling to buy additional units while they’re beaten down.

In fact, there has been a decent spate of insider buying in the MLP space over the past six months. According to Bloomberg, the percentage of shares held by MLP insiders rose 4.5 percent over that period.

I then narrowed my search to just those MLPs that already have significant insider holdings. I like to see firms with high insider ownership because it suggests that management’s interest is aligned with shareholders. So presumably it’s even better to not only see high insider ownership, but also a meaningful jump in recent insider buying.

With these criteria in mind, there were two MLPs that stood out from their peers:

EV Energy Partners LP (NSDQ: EVEP) and Inergy LP (NYSE: NRGY).

EV Energy executives boosted their holdings in the MLP’s units by 37 percent over the past six months, bringing the total percentage of inside ownership to 11 percent of outstanding units. EV’s output skews toward natural gas, and because the price of that commodity cratered this year, the upstream MLP’s distribution grew just 0.5 percent year over year.

But its distributable cash flow climbed 15 percent in the third quarter from the year-ago period. Management attributed that performance to its $1.2 billion acquisition of oil- and gas-producing properties in the liquids-rich Barnett Shale in early 2012.

That acquisition further diversified its asset base, and perhaps the possibility of additional acquisitions along those lines drove insider buying. The MLP is a disciplined acquirer, and has financed 60 percent of its $1.9 billion in transactions with equity and free cash flow since its initial public offering in late 2006.

In December, management announced that it’s currently negotiating with potential buyers of its Utica Shale acreage.

The company does hedge its commodity exposure, and it already has hedges in place for 83 percent of its 2013 production. So executives probably aren’t betting on a near-term rise in natural gas prices, since the hedges mean the MLP would have limited exposure to such a move.

After enjoying staggering gains in 2009-11, EVEP fell 9.5 percent in 2012, and its units currently yield 5.1 percent.

Inergy LP’s executives were also extremely active buyers over the past six months, accumulating enough units to increase insider holdings by 20 percent. Total inside ownership now stands at just over 20 percent.

The major catalyst for Inergy is the fact that it divested its retail propane business in early August and is now a pure-play midstream MLP. Inergy sold its propane operations toSuburban Propane Partners (NYSE: SPH) in a $1.8 billion deal. The propane business had weighed heavily on results, as the recent unseasonably warm winters caused a sharp drop in demand.

That dismal performance forced two distribution cuts in 2012, with the most recent payout down almost 60 percent year over year.

The MLP now handles natural gas storage, natural gas liquids (NGL) supply logistics and transportation. Inergy is also the general partner (GP) for Inergy Midstream LP (NYSE: NRGM).

Inergy’s units fell almost 31 percent in 2011 and another 1 percent in 2012. Clearly, management must believe most of the damage has been done and the company’s shift toward midstream operations puts it firmly in turnaround mode. But the units currently yield 9.1 percent, a sure sign that investors are still waiting to see if management’s efforts prove successful.

By Larry Edelson (Money and Markets | Original Link)

First of all, I want to wish you a healthy, happy, and wealthy New Year.

2013 promises to be the most exciting year since the financial crisis started out in 2007, because we’re not finished with that crisis yet.

Here’s what all of my work tells me:

Over the last year or so where we’ve seen markets swinging wildly but pretty much in trading ranges, is really the eye of the hurricane. And almost immediately in 2013 we’re going to start to pass into the back wall of that hurricane, which could last another several years and pack a lot of punches for investors.

Right off the bat we saw Congress agree to a solution to the fiscal cliff. It’s a little bit better of a deal than I expected. However, what they’ve really done on the spending side is push things off to the budget negotiations, which will be ongoing over the next couple months and certainly provide a lot of background noise and volatility for the markets.

That’s why there is one market in particular I want to start out with today. And that is none other than the …

U.S. Treasury Bond Market—
The Riskiest Market on the Planet

Over the holidays, I took a close look at the U.S. bond market. And I believe the 64-year cycle in interest rates, which I’ll be explaining in the upcoming Weiss Wealth Summit Series later this month, has indeed bottomed from the 1989 high to the record low in 2012.

Now the bond market, despite some progress in Washington, is starting to show that the Federal Reserve will not be able to control interest rates going forward.  That means rates are set to rise for many years to come. And the U.S. bond market bubble is already starting to burst.

Below is the weekly chart of the U.S. Treasury 30-year bond. As you can see it’s already broken a significant uptrend line dating back to the mid-first quarter of 2011.

Click chart for larger version

Right after Congress agreed to the fiscal resolution and postpone the spending cuts for further debate, we saw the bond market take a hard hit. And now I have the first daily sell signals …

I’m targeting a move down to system support, which is the red line in the above chart. You can see there’s significant downside potential in the short term. And over the longer term, U.S. bond prices can fall substantially.

I have been warning my readers to get out of U.S. Treasury bonds. And this is pretty much your last chance.

It may look like the safest market around, but ironically it is the most dangerous, riskiest market on the planet.

Today I also want to quickly cover some of the other markets I’m watching closely …

Gold Market—
Not Quite Ready for Next Phase Up

We’ve seen a rally in gold after the fiscal cliff news, but it’s nothing. As you can see below, the gold market is just bouncing back up to overhead resistance, just above the $1,700 level. Gold has not completed its downtrend yet. It remains in a very bullish long-term bull market, but it is not yet time for gold to take off to the upside.

Click chart for larger version

The Same Thing Pretty
Much Applies to Silver

Silver is holding support here. We’re seeing a little bit of a bounce. But silver has significant system resistance overhead and technical resistance. I expect silver to test and probably break the $26 level before it hits a long-term bottom and begins its next phase up in a long-term bull market.

Click chart for larger version

Now the Dollar Index …

The dollar is holding support. That’s basically analogous to what I’m seeing in the metals. The dollar should rally in the weeks ahead, probably going into the budget deficit talks. And then later this year I expect the dollar to resume its long-term bear market.

Another reason the dollar is acting strong and holding support and will probably rally in the weeks ahead is because Japan has come out and officially declared a policy of weakening the yen. So we’re starting to see that shift of money out of yen into dollars, which is holding up the dollar in the shorter-term.

The Dow Industrials —
Obviously a Very Key Market Here

I’ve been saying for quite some time that we’re transitioning to a longer-term bull market in the Dow Industrials. It is close but no cigar just yet. We need to keep an eye on the 13,335 level, a significant level of resistance.

I call it a pivot point for 2013. If we can get a close above 13,335 on a Friday basis, we will begin to see that transformation to a bull market. And it will occur even if interest rates are going up.

You have to set aside an old economic rule of thumb: Rising interest rates are bad for the economy, bad for stocks.

When interest rates start to rise from such a low level it means money is coming out of the bond market. All the money the Fed has printed is starting to move into the economy. The demand for money and credit is going up so the cost of money and credit is going up too. And that’s a very bullish indication for the stock market.

So stay tuned to my columns each Monday here in Money and Markets. I believe 2013 is going to be the most significant year in the markets in our lifetime because it’s going to be, as I said at the outset, a period where we start to leave the eye of the hurricane and enter the back wall, which is often the strongest, most chaotic portion of the financial storm.

Best wishes,

Larry

By Amy Calistri (StreetAuthority | Original Link)

For the past two months, if you asked most investors what they feared most, then they would have said the fiscal cliff.

And why wouldn’t they? Income tax rates for all Americans were scheduled to rise. The maximumqualified dividend rate of 15% was set to expire and revert back to ordinary income tax rates. Almost every government budget was scheduled to be slashed. And all of these factors would have weighed on the economy…

But even before Congress arrived at last-minute on a New Years Day tax deal, the fiscal cliff concerned me. But as an investor, it never scared me.

Maybe it’s because I’ve been investing for more than 30 years now. I’ve had money in the marketthrough almost every conceivable economic and financial scenario — historically high and low interest rates, higher and lower tax rates, recessions and overheated economies.

What I’ve learned is that there are always ways to minimize losses and maximize gains when conditions change.

But there is one thing that does scare me:People aren’t investing for their retirement.

The annual Wells Fargo Retirement Survey of middle-class Americans almost always makes me nervous. Here are some highlights from the 2012 survey…

– 30% of middle-class Americans say they will need to work until at least the age of 80 to live comfortably in retirement.

– 70% of those surveyed weren’t confident the stock market was a good place to invest for retirement.

– If given $5,000 to invest for retirement, 40% of those surveyed said they would invest in a CD orsavings account while 22% said they would invest it in gold or precious metals.

While CDs and hard assets like gold are safer, especially in a time of turmoil, your money doesn’t go very far. Look how $5,000 fares invested in some of these popular methods when compared with myDaily Paycheck strategy…

In the chart above, you can see that those who chose a savings account would have made little progress toward their retirement savings plan. That’s because the average savings account rate at the end of 2011 was 0.217%. The 10-year Treasury only yielded 2%.

Gold is generally a good asset class to own in times of uncertainty. And many financial advisorsrecommend holding some portion of your portfolio in hard assets for diversification. Investors who dedicated all their investable funds in gold over the past year gained 4.7%.

But it turns out that even a conservative income portfolio — with the benefit of compound growth throughdividend reinvestment — would have been a much better retirement savings ally…

All investments are risky. But by choosing wisely from a diverse range of income-generating assets,investors can create a portfolio that has the ability to outperform the broader market – with much less volatility.

For instance, August 2011 was a terrible month in the market; in those 30 days, the S&P 500 lost 6%. It was the kind of month that discouraged even the most steadfast investors. But my subscribers and I slept better than most; The Daily Paycheck portfolio was down just 1%, buffered by the 35 dividend checks I received that month.

Granted, my portfolio isn’t always that resilient. But on average, it is 43% less volatile than the overall market — which might be another reason why events like the fiscal cliff don’t scare me.

I understand why people are reluctant to invest their retirement money in the market. Unfortunately, too many people think a savings account is a more secure path to retirement. And it scares me to think someone’s retirement dream may never become a reality.

[Note: I recently put together a three point strategy to determine how I pick stocks for my Daily Paycheck portfolio... I call it the Dividend Trifecta. In just 37 months I've earned $41,878 in dividends alone by using this simple strategy. To learn more about this, click here.]

Amy CalistriAmy Calistri is the Lead Investment Analyst behind StreetAuthority’s Stock of the Month and The Daily Paycheck. So confident in her simple, but effective, strategies, … Read More

Amy Calistri does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

The middle class in the United States is being systematically destroyed, and nobody is doing much of anything to stop it.  Our incomes are shrinking, our share of the income pie is at an all-time low, our jobs are being sent overseas, debt burdens have soared to unprecedented heights and millions of formerly middle class Americans have fallen into poverty.  America once had the largest and most vibrant middle class that the world has ever seen, but now it is rapidly being shredded.  Unfortunately, this is particularly true for younger Americans.  Today, families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.  That is astounding.  The truth is that there are not enough decent jobs for the hordes of young people that are entering the marketplace each year.  Once upon a time, a college degree was just about a guaranteed ticket to the middle class, but in 2011 more than half of all college graduates under the age of 25 were either unemployed or underemployed.  Sadly, statistics tell us that the younger you are, the less likely you are to have a chance to live “the American Dream”.  Nearly half the country already lives in a household that receives direct financial assistance from the federal government, and that percentage grows with each passing day.  We are rapidly being transformed from a country of middle class citizens into a country of impoverished government dependents.  If dramatic changes are not made, the middle class in America will continue to decline every single year.  What would our society look like if the middle class disappeared entirely at some point?

The following are 60 facts that prove that the middle class in America is being wiped out…

#1 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

#2 As the middle class shrinks, more Americans than ever have been forced to become dependent on the federal government.  Federal spending on welfare programs has reached nearly a trillion dollars a year, and that does not even count Social Security or Medicare.  Welfare spending is now 16 times larger than when the “war on poverty” began.

#3 Median household income in the U.S. has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

#4 The U.S. economy continues to trade good paying jobs for low paying jobs.  60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

#5 The number of Americans living in poverty has increased by more than 15 million since the turn of the century.

#6 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.

#7 Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6.5 Americans is on food stamps.

#8 According to the Pew Research Center, 61 percent of all American households were “middle class” back in 1971.  Today, that figure has fallen to 51 percent.

#9 In the United States today, 35 percent of all households live on $35,000 or less each year.

#10 One recent survey discovered that 85 percent of all middle class Americans believe that it is harder to maintain a middle class standard of living today than it was 10 years ago.

#11 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.

#12 According to one survey, 77 percent of all Americans are now living paycheck to paycheck at least part of the time.

#13 In 1989, the debt to income ratio of the average American family was about58 percent.  Today it is up to 154 percent.

#14 Total U.S. household debt grew from just 1.4 trillion dollars in 1980 to a whopping 13.7 trillion dollars in 2007.  This played a huge role in the financial crisis of 2008, and the problem has still not been solved.

#15 While debt loads for middle class families are going up, the net worth of those same families is going down.  According to the Federal Reserve, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.

#16 The percentage of working age Americans with a job has been below 59 percent for 40 months in a row.

#17 Today there are about 3.25 million Americans that say that they want a job but that have not searched for a job in more than a year because they believe that it is so hopeless.

#18 When you total up all working age Americans that do not have a job in America today, it comes to more than 100 million.

#19 The unemployment rate for African-Americans rose dramatically from 13.2 percent in November to 14.0 percent in December.

#20 The unemployment rate for Americans in the 18 to 29 year-old age bracket is 11.5 percent overall.  For African-Americans in that age group, the unemployment rate is now up to 22.1 percent.  Millions of young people believe that the system has totally failed them.

#21 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

#22 Last year, an astounding 53 percent of all U.S. college graduates under the age of 25 were either unemployed or underemployed.

#23 Today, approximately 25 million American adults are living with their parents.

#24 According to the Tax Policy Center, the recent fiscal cliff deal will raise taxes more for those making between $30,000 and $200,000 a year than it will for those making between $200,000 and $500,000 a year.

#25 According to a Gallup survey, only 60 percent of all Americans say that they have enough money to live comfortably.

#26 One recent survey found that 63 percent of all Americans believe that the U.S. economic model is broken.

#27 Each year, the average American must work 107 days just to make enough money to pay local, state and federal taxes.

#28 Consumer debt in America has risen by a whopping 1700 percent since 1971.

#29 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#30 The average American household spent approximately $4,155 on gasoline during 2011, and electricity bills in the U.S. have risen faster than the overall rate of inflation for five years in a row.

#31 According to USA Today, many Americans have actually seen their water bills triple over the past 12 years.

#32 Health insurance costs have risen by 23 percent since Barack Obama became president. According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.

#33 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 55.1 percent are covered by employment-based health insurance.

#34 According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percentof all American workers have less than $1,000 saved for retirement.

#35 The United States has lost an average of approximately 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

#36 The United States has lost more than 56,000 manufacturing facilities since 2001.

#37 According to the Economic Policy Institute, America is losing half a million jobs to China every single year.

#38 In 2000, there were more than 17 million Americans working in manufacturing, but now there are less than 12 million.

#39 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.

#40 Since 2000, U.S. multinational corporations have eliminated 2.9 millionjobs in the United States and have added 2.4 million jobs overseas.

#41 According to Professor Alan Blinder of Princeton University, 40 millionmore U.S. jobs could be sent offshore over the next two decades if current trends continue.

#42 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 declined by 27 percent after you account for inflation.

#43 At this point, one out of every four American workers has a job that pays $10 an hour or less.  If that sounds like a high figure, that is because it is.  Today, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.

#44 According to the Pew Research Center, only 23 percent of all American workers believe that they have enough money to get them through retirement.

#45 According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.

#46 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#47 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

#48 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.

#49 At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

#50 The United States now ranks 93rd in the world in income inequality.

#51 The average CEO now makes approximately 350 times as much as the average American worker makes.

#52 Corporate profits as a percentage of GDP are at an all-time high.  Meanwhile, wages as a percentage of GDP are near an all-time low.

#53 Today, 40 percent of all Americans have $500 or less in savings.

#54 One recent survey found that 28 percent of all Americans do not have a single penny saved for emergencies.

#55 Shockingly, at this point 48 percent of all Americans are either considered to be “low income” or are living in poverty.

#56 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

#57 According to the U.S. Census Bureau, an all-time record 49 percent of all Americans live in a home where at least one person receives financial assistance from the federal government.  Back in 1983, that number was less than 30 percent.

#58 According to U.S. Census data, 57 percent of all American children live in a home that is either considered to be “poor” or “low income”.

#59 For the first time ever, more than a million public school students in the United States are homeless.

#60 According to a stunning new Gallup survey, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty”.

By Brett Eversole, analyst, True Wealth Systems
Monday, January 7, 2013

While 2013 could easily be another great year for U.S. blue-chip stocks… I believe much bigger stock market gains are possible in a place where nobody else is buying right now…

I’m talking about Europe…

While U.S. blue-chip stocks are reasonably cheap, European blue-chip companies are cheaper in every way.

I know what you’re thinking… Europe is a mess. Its countries are debt-laden. And the overall economy is bordering on recession. Nothing good happens in Europe, right?

That’s what the headlines say. And that’s what created our incredible opportunity last year…

The U.S. Dow Industrials Index returned double digits in 2012. But European blue chips more than doubled that return. And they’re set to double it again this year.

Last April, I showed readers how cheap a few of Europe’s household names had gotten. Big oil company Total was trading at 6.8 times forward earnings… and yielding a huge 6%. Drugmaker Sanofi was nearly as cheap… so was manufacturing giant Siemens… communications company Telefonica… and more.

The “Dow Jones Industrials of Europe” is the Stoxx 50 Index. At the time, the whole index of blue chips was yielding an incredible 5.2%. Excluding the financial crisis, European stocks are coming off their highest dividend yields in nearly 20 years.

Since then, the Stoxx 50 is up 20.5% (including dividends). The Dow Jones Industrial Average is up just 6.7% over the same period.

After this big outperformance, you might expect European blue-chips to underperform the U.S. But I expect the opposite for one simple reason… European companies are still dirt-cheap compared to the U.S.

The table below clearly shows it. Take a look…

As you can see, European blue chips are cheaper than their U.S. counterparts in every way. To match the price-to-book ratio of U.S. blue chips, European blue chips would have to more than double!

Now, I don’t expect a quick double in European stocks. I think a better way to get a gauge of what to expect in 2013 is to look at earnings…

Analysts figure the U.S. Dow Jones Industrial Average will increase earnings 9% over 2012… and the Euro Stoxx 50 Index will increase earnings 11%.

Stocks to tend to rise as earnings grow. If earnings grow 11%, the Stoxx 50 will also have to increase 11% to maintain its current P/E ratio. I believe that will happen. I also believe the Stoxx 50 will close at least half the valuation gap between it and the U.S. Dow (currently a 12% discount).

If that happens, we’re looking at a potential 18.3% gain this year. If the Euro Stoxx 50 closes the entire discount, our upside is 25.9%.

Of course, earnings could disappoint. And outside events could cause valuations to fall. But that doesn’t change the simple fact…

If you want to own blue-chip businesses this year, the best value around is in Europe.

You can easily make the trade with the SPDR Euro Stoxx 50 Fund (NYSEARCA: FEZ). This fund perfectly tracks the Euro Stoxx 50.

European blue chips crushed their U.S. counterparts in 2012, more than doubling their total return. And I believe we’re set up to see the same thing happen in 2013.

If I’m right, safe 18%-26% returns are possible this year. Don’t miss out.

Good investing,

Brett Eversole

Further Reading:

One investment guru was buying European stocks last year. “But wait a minute… Isn’t Greece about to explode? Isn’t Spain next? Isn’t the very existence of the euro in doubt?” Steve writes. “Yes, yes, and yes.” But this is the type of situation that contrarian investors look for. Read more here: Why the “Gloom and Doom” Man Is Actually BUYING European Stocks.

Last April, Brett Eversole explained the deals being offered in European blue-chip stocks. Readers who took his advice and waited for the uptrend to appear are up 40%. Read more here: The World’s Best Companies Want to Pay You Big Investment Income.

No matter what Washington did at the 11th hour, we ended the year with one, absolutely indisputable, conclusion:

The mammoth U.S. debt monster is not going away. It’s continuing to grow. And in early 2013, it will return to haunt the White House, Congress and the Fed in a great, new debt ceiling debate!

Here are the hard facts:

1. The U.S. government and its agencies still owe $18.8 trillion just in interest-bearing debts!

2. American families still owe $13.1 trillion on their mortgages, with a huge chunk of those under water.

3. Other borrowers in the U.S. (corporations, local governments, and individuals) owe an additional $23.3 trillion.

These are, by far, the greatest debts in the history of the world. But it doesn’t end there …

4. The U.S. government has obligations of AT LEAST another $150 trillion to present and future recipients of Social Security, Medicare and other benefits.

5. U.S. banks are clinging to a giant mountain of $222 trillion in derivatives, also a form of debt.

Grand total of debts and other financial obligations: $427 trillion!

Meanwhile, the ONLY solution Washington seems to agree upon is that the Federal Reserve can continue to step on the gas, accelerating the most reckless money printing since Weimar Germany.

So you don’t need a Ph.D. in economics to understand that Washington is incapable of addressing this mammoth problem — that no matter what our leaders do, or fail to do, America’s massive debt crisis has reached a tipping point.

Most of our readers and friends now see this clearly. They see it in the news. And they feel it in their daily lives. Even many who scoffed at our warnings in the past, are now asking astute, thought-provoking and URGENT questions for 2013 …

Question #1
The U.S. debt crisis is not new; we’ve had one ever since I can remember. When will it reach critical mass?

It already has, as you saw beginning more than four years ago, during the great debt crisis of 2008.

What’s most shocking to me is not the debt crisis itself — that was something we saw coming and about which we wrote very specifically.

No. What’s truly shocking is how quickly investors have forgotten the mammoth consequences:

The failure of the world’s largest brokerage firm (Merrill Lynch) …

The near collapse of the world’s largest mortgage companies (Fannie Mae and Freddie Mac) …

The bankruptcy of the world’s largest insurance company (AIG) …

And the nearly fatal waves of losses and withdrawals at the world’s largest banks (Bank of America, Citigroup, and many more).

The threat was so large and so obvious, the U.S. Treasury Secretary, the U.S. Congress, and even the president of the United States stood before the American people to warn about the very same crisis that we had warned about many months earlier — a Wall Street meltdown and a Great Depression.

It didn’t happen.

But that was due to one, and only one, factor: The greatest, wildest and riskiest government rescues of all times — trillions of dollars in bank bailouts, trillions more in government guarantees, plus still more trillions in money printed by the Fed to buy up assets no one else wanted.

And again, as we have consistently warned, all those Herculean efforts did not truly END the debt crisis; they merely shifted debt burdens from financial institutions to governments; from Wall Street to Washington.

In the grand scheme of things, no debts were liquidated. No new savings were created. No new capital was raised. The debts were merely transformed and transferred.

And they immediately popped up in the form of the federal deficits that have been as much as FIVE times larger than the record deficits prior to 2008; that have continued year after year with no end in sight.

This sudden EXPLOSION of government debt — along with the rapidly declining ability of the U.S. economy to support it — is why the debt monster is AGAIN raising its ugly head.

Question #2
How do we know the debt crisis is truly blowing up?

Isn’t it obvious? Despite everything our leaders have tried to do …

The U.S. government is STILL driving the nation over the fiscal cliff!

The U.S. Treasury is STILL running out of money to finance its operations and facing a massive showdown over the U.S. debt ceiling.

And the United States is AGAIN vulnerable to history-smashing downgrades — this time not just by Standard & Poor’s but also by Moody’s and Fitch.

Question #3
When will the debt crisis cease to be just a political battle? In other words, when will it turn into a flesh-and-blood disaster with a direct impact on our daily lives?

When the price of bonds begin to collapse in the marketplace, driving interest rates sharply higher.

In the past, we’ve typically seen the collapse show up first in other bond markets such as junk bonds or tax-free municipal bonds, and finally in U.S. Treasury bonds themselves.

And that’s precisely the pattern we’ve also witnessed in the last few weeks of 2012:

Just recently, we have witnessed a massive, unprecedented outflow of money from the municipal bond market (see chart above).

And this sudden selling has helped trigger an unusually sharp decline in municipal bond prices.

But the decline is not limited to municipal bonds.

Treasury-bond prices, which first suffered a sell-off last summer, are now beginning to sink again — another initial warning of further bond market declines ahead.

Here’s the key: When bond prices fall, interest rates automatically rise.

In fact, falling bond prices and rising interest rates are just two different ways of measuring the same thing: The fact that it’s getting harder and more expensive to borrow.

Therein lies the KEY to how all this impacts everyone: If it’s harder to borrow, it’s harder to buy and invest. And no one — not even the Fed — can easily prevent the obvious consequences:

Lower corporate profits.

An end to the recent rally in home sales and a renewed decline.

And even bigger deficits in Washington as Uncle Sam chokes on higher interest costs.

Question #4
Will we ultimately wind up with hyperinflation and an ugly dictatorship much as Germany did after World War I?

I hope not, and I think there’s some solid basis for that hope.

In Germany after World War I, there were no large, liquid free markets for Germany’s debts. So the regime could make unilateral decisions with impunity and without interference from global financial markets.

Not anymore! Fortunately, even if major governments (such as Washington, Brussels and Tokyo) are dysfunctional or outright crazy, bond and other debt markets are not.

We continue to have open, liquid markets for government bonds, corporate bonds, mortgages and virtually every kind of debt.

As with any financial market, investors can sometimes get carried away by false hopes or fears and prices can get out of line with reality.

And our government is clearly pushing the envelope to an extreme. But ultimately, bond markets must reflect supply and demand.

Ultimately, history proves that they have the power to overrule and overwhelm politicians of all stripes and colors.

And fundamentally, these markets are democratic, reflecting the will of millions of investors.

The simple fact is that bond investors don’t have to wait for the next election to be heard. Nor do they have to pound their fist on the table of some faceless bureaucrat. All they have to do is call their broker or click on a mouse, issuing a simple four-letter order: SELL!

And much like we’ve seen in Greece, Spain and Italy in recent months, that mass selling has the power to force even the most stubborn governments to radically change course.

Question #5
Sometimes, it seems this debt crisis leads down the path of hyperinflation. Sometimes, it seems to imply deflation. So which should we act on?

BOTH — an approach that is very possible, and potentially very profitable with the diversity of instruments and strategies now available to investors.

This is another reason why I think it’s so important that you register to join me at The World MoneyShow Orlando, January 30 – February 2, 2013, at the Gaylord Palms Resort & Convention Center!

The World MoneyShow has another stellar line-up of over 150 financial investing and trading experts who are joining me to share what they see as the best places offering profits in the coming months; projections on what to expect from the markets; what sectors will be offering the best opportunities for profit, and much more!

You cannot afford to miss this most important investor gathering in 2013! It will be your one-stop resource for the most comprehensive education, efficient research, and valuable advice that will lead you to a profit-packed 2013!

And while at the show, be sure to join me for my presentation …

12 Big-Name Stocks I Won’t Touch with a Ten-Foot Pole
Friday, February 1, 2013: 9:15 am – 10:15 am

Five years ago, while Wall Street issued strong buys on major stocks that soon crashed, the independent ratings we developed identified most of those same stocks as urgent sells.

And just months later, the stocks had plunged dramatically, including Ford (-80%), AMD (-84.5%), CBS (-88%), plus many more.

Now, I will again name the 12 most dangerous big stocks and show you how to invest safely in good times or bad.

Then …

Be sure to come get your free Weiss Ratings Report at

The MoneyShow/Weiss Ratings Center,
Thursday, January 31, 2013: 11:30 am – 7:15 pm
Friday, February 1, 2013: 10:15 am – 5:15 pm
Saturday, February 2, 2013: 9:15 am – 1:00 pm

Come to our major center in the Exhibition Hall for free independent and objective ratings reports on:

• Your stocks, ETFs, and mutual funds
• Your banks, S&Ls and credit unions
• Your life, health and property insurers, plus
• Major overseas banks and sovereign nations

Get a report sent instantly to your computer or mobile device on the investment, bank, insurer or country of your choice. Peruse our printed guides on every investment and institution imaginable. Or simply have our on-site representative give you a ratings report about the specific companies you own or do business with.

Remember: Weiss Ratings has been widely acclaimed as the world’s leading INDEPENDENT ratings provider:

The U.S. Government Accountability Office (GAO) found that the Weiss insurance company ratings beat those of major Wall Street ratings agencies by a factor of three to one.

Barron’s wrote that “Weiss is the leader in identifying vulnerable companies.”

And the Wall Street Journal reported that the Weiss stock ratings beat every single Wall Street firm AND even independent research firm they covered.

For your free registration, just click here.

God bless and Happy New Year!

Martin

King World News interviewed John Mauldin who is a leading observer of the financial markets and author. He has some interesting observations:

- Mauldin thinks Japan is a bug in search of a windshield and thinks 2013 is the year the bug finds the windshield.

- Believes Japan has kicked the can as far down the road as possible.

- New Japanese leader wants to take the limits off the amount of debt the country has and Mauldin believes this needs to be taken seriously.

- Mauldin thinks the yen is going to make a big reverse over the next decade, and he thinks that is a trade to start putting on.

- He thinks the yen weakening will be one of the great macro trades of his lifetime.

- Japan can’t allow interest rates to rise, so they have to weaken the currency.

- Thinks France is also going to be facing its own Armageddon, as it has been doing everything it possibly can in the wrong direction.

- Relative to France, Mauldin thinks Italy is a beacon of austerity.

- Investors just don’t get how bad a situation France has created for itself.

Listen to the audio here.

By David Sterman (StreetAuthority | Original Link)

“Let your winners ride.”

It’s a favorite maxim among gamblers, and also applies to a top-performing casino stock. Recently announced monthly revenue figures from the world’s newest gambling mecca implies a robust year ahead and further upside forMelco Crown Entertainment (Nasdaq: MPEL).

I laid out the investment case for this stock in September 2010, noting that Melco was the newest initiative from billionaire Stanley Ho, the legendary Hong Kong mogul that owns some of the world’s top casinos.

I took a fresh look at Melco roughly a year ago and once again this past summer, concluding that a pullback below $12 a share was a clear buying opportunity.

Thanks to newfound momentum at the gaming tables of Macau, along with a series of upcoming catalysts, this stock now appears headed into the $20s, perhaps yielding 50% or more in upside from here.

Now and later
Over the course of 2012, the major players in Macau built out their hotel and casino complexes and now appear to be benefiting from critical mass. Las Vegas Sands’ (NYSE:LVS) Sands Cotai Central and Venetian Macau casinos, along with Melco’s City of Dreams (COD) are all on the same block in the Cotai district and now have a combined 8,000 hotel rooms. Gamblers have started to migrate to that area, thanks to its convenience to transit and hundreds of shops.

The strong traffic at Melco’s COD complex likely fueled an 8% spike in revenues for the company in the fourth quarter, according to Goldman Sachs (Consensus forecasts had been anticipating flat growth in the fourth quarter). If Goldman Sachs’ analysts are correct, then that would be the strongest year-over-year quarterly gain in 2012. Macau gambling revenues slowed earlier in the year on the heels of a slowing Chinese economy.

Indeed, the entire casino sector finished 2012 on a high note, with December revenues spiking nearly 20% higher than the year-ago monthly take, which should set the stage for solid 5% to 10% revenue growth in 2013 as well, according to analysts (No new casinos are slated to open, so growth will have to be on an organic basis).

Yet it’s the middle of the decade that has analysts focusing on the next big catalyst for Melco Crown. The company has been sharply boosting spending in recent quarters in preparation of a launch for a new casino — Macau Studio City — in 2014, and then the opening of a new casino in the Philippines in 2015, which will instantly become the largest in that country.

With plans to spend more than $2 billion to complete those two construction projects, investors will need patience. Melco Crown likely generated more than $2 billion in free cash flowin 2012, but look for a similarly-sized free cash flow loss in 2013. Free cash flow should be modestly negative in 2014, before spiking back to 2012 levels in 2015.

With such a muddled near-term cash flow picture in place, this is a tricky stock to value. Goldman Sachs has refrained from valuing the big 2014 and 2015 casino launches, and instead focused on existing opened casinos and values this stock at $21.50 a share.

Analysts at Citigroup have a similar price target and methodology, but think that Macau Studio City will add an additional $5 in value to this stock when it opens in 2014, and the casino in the Philippines will add another $2 in value. In effect, this stock may approach $30 a share once this business modelcomes to fruition.

Risks to Consider: As we saw in 2012, any concerns about economic growth in China will depress valuations for Macau casino stocks as concerns rise that gambling revenues will slump.

Action to Take –> The Chinese middle class continues to expand at a solid pace, and that trend is expected to remain in place for the rest of the decade. With a strong predilection for gambling, Chinese consumers should help fuel solid multi-year gains for Melco Crown.

P.S. – When you get in on the ground floor of a promising new trend or technology, the profits that can follow can change your life forever. Andy Obermueller’s Game-Changing Stocks is entirely devoted to finding the next big, life-changing investing idea. See his latest report for more ground-breaking investment plays.

Why does it seem like America is getting crazier with each passing year?  It has become glaringly apparent that very deep corruption has taken root in our society from the lowest levels of society all the way up to the highest levels of society.  In fact, some of the worst behavior of all is being exhibited by those that are supposed to be “examples” for our young people – politicians, bankers, lawyers, CEOs, etc.  As we enter 2013, the American people are greedy, selfish, boastful, proud, arrogant, disrespectful, ungrateful, materialistic, unforgiving, without self-control and they are completely and totally addicted to entertainment.  They believe that America will always be “the greatest nation on earth” just because of who we are, and they believe that the rest of the world should look up to us as a bright, shining example of everything that is good in the world.  Meanwhile, we lead the world in a large number of negative categories and our society is decaying right in front of our eyes.  It reminds me of what happened during the waning days of the Roman Empire.  The Romans just assumed that Rome would always be dominant forever, and they became extremely complacent and extraordinarily decadent.  We all know how that turned out, and at this point things are not looking good for America either.

So where do we go from here?

Well, it might help to ask ourselves a few questions as another year begins.

The following are 25 “why questions” for you to ponder as we enter 2013…

Why did the New York Times (the most read newspaper in the country) publish an article by a Georgetown University professor entitled “Let’s Give Up On The Constitution“?  What kind of message are they trying to send by publishing that trash?

Why is the U.S. government actively supporting and giving aid to Syrian rebels that are beheading Christians?  Just the other day, Syrian rebels beheaded one Christian man and fed his body to dogs.  The man that they killed had recently been married and was expecting his first child.

Why is the U.S. military sending troops to 35 different African nations in 2013?  Can we really afford to be the police of the world?

Why does California keep doing such stupid things?  On January 1st, more than 800 new laws (most of them ridiculous) go into effect in the state.

Why is so much U.S. real estate being bought up by China?  Chinese citizens purchased one out of every ten homes that were sold in the state of California in 2011.

Why is Texas Governor Rick Perry resurrecting the Trans-Texas Corridor project?  Does he honestly believe that nobody will notice?

Why is the mainstream media ignoring the fact that the percentage of Americans that are against a ban of handguns is at an all-time high?

Why is the mainstream media ignoring a recent theater shooting that was stopped by a man with a gun?

Why do celebrities that claim to be “anti-gun” constantly make movies that areabsolutely brimming with gun violence?

Why is genetically-modified rice that has human genes in it being grown in Kansas?

Why is the Obama administration working so hard to “force Christians to act against their faith“?

Why was a surveillance drone hovering over the Vikings-Packers game at the Metrodome on Sunday?

Why did the U.S. government ask the Mexican government to help them increase participation in the U.S. food stamp program?

Why does the U.S. government have a website that teaches immigrants how to sign up for welfare programs once they arrive in the United States?

If “terrorists” are the threat we are all supposed to be worried about, then why is the U.S. government spending gigantic mountains of money to watch and monitor Americans?  Today, the American people are the most surveilled people in the history of the world.  Why is this happening?  What will our society eventually look like if we keep going down this path?

Why is the mainstream media being so quiet about the giant sinkholes that are opening up all over the world?

Why have volcanic activity and earthquake activity along the Ring of Fire increased so dramatically as we approach 2013?

Why are Protestants losing political power so rapidly in America today?

Why does the Obama administration seem so determined to reduce the size of the U.S. strategic nuclear arsenal?

Why don’t more Americans know about the population control agenda of the global elite?

Why are so many workers claiming Social Security disability?  Back in 1967, there were about 41 workers for every person on Social Security disability.  Today, there are only about 16 workers for every person on Social Security disability.

Why do 77,000 federal employees earn more money than the governors of their own states do?

Why does it cost American taxpayers more than a billion dollars to take care of the Obamas each year?

Why is Hillary Clinton the most admired woman in America?

Why is Barack Obama the most admired man in America?

Do you have any why questions to add to this list?

If so, please feel free to post a comment with your suggestions below…

By Porter Stansberry (Daily Wealth | Original Link)

Let’s make a fundamental point about investing…

Most investors obsess about growth. They want a story about a company that’s poised to experience massive growth. And yes, growth is very good. But you can’t forget that the point of growth is to generate capital for shareholders.

How many Internet companies actually did anything to enrich their shareholders? Out of hundreds, maybe a handful. Their growth was a mirage.

Always remember… Capitalism is about capital – how much you earn and how much you keep.

Thus, in my Investment Advisory, we judge companies primarily by how efficiently they produce cash. We’re interested in how much cash a company generates per unit of sales. And we’re interested in how much of this profit is reinvested into the business (through capital expenditures or acquisitions) versus how much is simply returned to the company’s real owners – its shareholders. And we’re very interested in the price per share we have to pay to capture our share of the cash the underlying business is producing.

Most investors completely ignore a lot of businesses that produce little earnings growth on an annual basis. Nevertheless, these companies can generate massive returns for patient, long-term investors. They do so because they’ve become extremely capital-efficient.

We write about this secret frequently because we think it’s the single greatest investment secret that’s ever been discovered. Warren Buffett used this secret – along with the capital-raising power of insurance companies – to become the world’s richest man.

Let us show you, again, how to do it.

Measuring capital efficiency is easy. Anyone can do it. All you do is figure out what a company earns on a gross-profit basis (after the cost of sales is deducted). Then, you compare that to the amount of capital that’s returned to shareholders each year in the form of cash dividends or net share buybacks.

If the company is earning $100 and distributing $80 to shareholders, we’d say it had a capital efficiency of 80%. These cash flows allow investors to rapidly compound their gains by reinvesting the dividends. Even if the company doesn’t grow much, its shareholders will still become extremely wealthy.

Highly capital-efficient companies tend to produce annual compound returns of about 15% a year. Few investors make this much in their own portfolios, no matter what strategy they claim to be following. But consider the long-term, total returns earned by these companies over the last 30 years:

• Hershey’s: 3,591% (13% annualized)
• Heinz: 5,967% (15% annualized)
• Coca-Cola: 6,828% (15% annualized)
• McDonald’s: 6,246% (15% annualized)

These are all what we’d call high-class companies. They are extremely capital-efficient. They don’t have to spend much money investing in their businesses because their primary asset is their well-established, good reputation.

These companies possess huge amounts of what Buffett calls “economic goodwill.” That’s an asset that doesn’t show up on the balance sheet. It’s an asset that can’t be purchased with any given amount of capital investment. It’s simply a well-deserved reputation for quality, consistency, value, and customer service.

It seems simple… but it’s a very hard thing to get right. Companies that have it, tend to keep it.

You’ll find that investors looking for capital efficiency (like us and Buffett) tend to focus on these kinds of consumer staples because they tend to have large amounts of economic goodwill. Thus, they are tremendously capital-efficient.

If you’re a Heinz ketchup man, you’re not going to switch brands. As long as Heinz delivers the same high-quality product at the same reasonable price, you’ll stick with it. Heinz doesn’t have to build lots of new plants or constantly create new products. It doesn’t even have to spend a fortune on advertising. It has an installed, loyal, and ready base of buyers… and a large moat around its business, thanks to brand loyalty.

It’s unlikely to grow rapidly. But it will generate loads of capital for its shareholders. If you’re a serious, long-term investor, that’s exactly what you should be looking for.

Good investing,

Porter Stansberry

P.S. Keep in mind: You can’t ignore the basics of valuation. If you pay way too much for these businesses, your returns will disappoint. And there are two more important risks to consider when you’re looking for capital-efficient companies. We’ve seen folks far smarter and wealthier miss them. I’ll explain exactly what I mean in my next essay. Look for it next week.

Editor’s note: To learn more about Porter’s Investment Advisory – and how to access his full screen of capital-efficient stocks, plus his top recommendation – click here.

Further Reading:

DailyWealth classic: Focusing on capital-efficient companies is a “sure-fire path to wealth” used by some of the most successful investors in the world – like Warren Buffett. Learn more about how Buffett used this long-term approach to build his most famous investment – and become one of the richest men in the world – here: The Gift of Capital Efficiency.

And learn why Hershey – one of Porter’s all-time favorite stocks – is a classic example of a capital-efficient business here: One of the Greatest Investments of My Career.

December 31, 2012
Buenos Aires, Argentina

As we slide into the end of yet another year in which the nominal price of gold has posted a positive return, I thought it would be interesting to take a look back on history to get a better understanding of where we are today.

It’s obvious that, for many reasons, the size of the global economy is far greater than it was decades ago. We learn in any basic economics course that, over the long run, enhanced productivity and increased technology drive long-term production gains.

Certainly, an economy can produce more widgets if you’re a lean, mean, automated machine… as opposed to a blacksmith with a hammer and forge.

But there are other factors as well. Population growth. Accounting standards. And of course, the continued inflation of the currency. $1 today buys a whole lot less today than it did a century ago, so when comparing, it’s important to find a better standard of measurement.

There are a number of pricing yardsticks we could use… like the cost of a New York City cinema ticket (25 cents in 1935, $20 today). But it would be awkard to calculate GDP in terms of billions of cinema tickets.

Gold is a much more appropriate (though still imperfect) long-term standard of pricing, with its history as a store of value dating back to the ancients.

With this in mind, I collected the appropriate data on gold prices, population, and GDP in the United States since 1791 and plotted GDP per capita denominated in ounces of gold.

This measurement smooths out changes in economic growth due to currency inflation and changes in the population, making it much easier to compares apples to apples.

The results are rather startling. In its earliest days, US GDP per capita was a mere 2.6 ounces of gold per person per year. But this grew quickly, effectively doubling in the 20 year period from 1791 to 1811.

Most of the 19th century proved difficult for growth, as it took another seven decades (over three times as long) for GDP per capita to double again. This makes sense given that the 19th century was marked by several costly wars (War of 1812, Mexican War, Civil War, etc.)

An industrialized American economy began to take off in the 20th century; GDP doubled from 12.00 ounces of gold per capita in 1892 to 23.55 ounces of gold per capita in 1916. And by 1929, it had almost doubled again to 41.12 ounces of gold per capita.

We know what happened after that– years of depression and economic stagnation. The economy bottomed in 1934 at 14.93 ounces of gold per capita, and then it began a multi-decade rise, peaking at 139.05 ounces of gold per capita in… 1970. This was right before Nixon closed the gold window. And the economy never touched that level again. How interesting.

Since 1970, it’s been a series of peaks and troughs. The economy boomed during the 1990s, then ran out of steam quickly in the ensuring dot-com/housing/sovereign bust.

We have just ended the year at 28.40 ounces of gold per capita (based on trailing twelve month GDP data). This is an astoundingly low figure.

To put it in perspective, since the end of the Great Depression, US GDP per capita has only been under 30 ounces of gold two times– this year, and 1980. That’s it.

In fact, the post-war average for the US economy is 72.83 ounces of gold per capita, so the economy today is an amazing 61% off this historical average.

Right now, the largest economy in the world is producing as much as it did in 1931, almost at the peak of the Great Depression. And no matter what the talking heads and politicians say, the data show that the trend is getting worse. Today’s figure is worse than last year, which was worse the year before. This trend of economic contraction goes back to 2001.

Curiously, this time period also coincides with the greatest expansion of debt and the monetary base in history. Hmmm. Coincidence?

This is truly incredible. With all of our modern advances in technology and productivity, our criminal Ponzi scheme debt-based fiat monetary system is so destructive that it’s turned the clock back seven decades on the economy. Mind blowing. If this doesn’t scream “SYSTEM RESET”, I don’t know what will.

Please share this with your friends and loved ones. It’s time for a wakeup call.

By Michael Vodicka (StreetAuthority | Original Link)

The best time to pick up outsized gains is when everyone’s bearish. And there’s plenty of bearishness on the Street right now.

Third-quarter earnings were flat, with margins compressing for the first time in three years. Fourth-quarter and 2013 gross domestic product (GDP) estimates have been trending lower into the New Year. And as always, there is concern about stability in Europe and slow growth in China.

But that bearish sentiment isn’t a signal to avoidstocks. In fact, it’s the exact opposite. It’s the perfect foundation for a big rally.

Bearish sentiment is the perfect foundation to push the S&P 500 another leg higher. Despite the problems and uncertainties with the globaleconomy, there are still a number of reasons why the S&P 500 could hit an all-time high in 2013. And that’s going to mean big gains for investors who are buying right now.

With this in mind, here are five reasons why the S&P 500 will hit an all-time high in 2013.

1. The Fed

Asset prices and stock prices in particular are affected by “flow.” Flow is basically a fancy name for cash. As long as the Federal Reserve is pumping cash into the market, then stocks could keep rising. And we haven’t even seeninflation yet. If inflation shows up, then stocks could get another boost.But it’s not just the Fed; other central banks are in on the action too. Japan and England have also been pumping cash and devaluing their currencies. While that’s bad for the consumer, it’s good for inflation and the economy. The race to the bottom of currencydevaluation and the river of cash from the central banks could support asset prices and stocks in particular. The central banks have used some big bullets, but in the big picture, they are deep into a very risky hand and showing no signs of backing down.

2. China done tightening

China’s economy continues to slow, which has been a drag on the global economy.China’s slowdown has been driven partially by anti-inflationary measures taken by the government, increasing reserve requirementsand reducing lending volumes between national and regional banks. But now, China is at the end of a tough two-year tightening schedule that has seen their stock market fall three years in a row. Rate and reserve stability will give the market more room to breathe. Any loosening in rates or reserve requirements could give the Chinese and global economy a nice jolt.

3. Fiscal integration in Europe

Europe is still a total disaster, but the European Union (EU) has recently taken steps to increase fiscal integration.Although this is controversial from a social perspective, fiscal integration is important because it sets a standard for two countries sharing a currency to also share fiscal responsibilities with government tax and spending. This issue is particularly relevant in light of the fracture between creditor EU countries like Germany and debtor EU countries like Italy and Greece. While controversial, fiscal integration would be viewed as a positive on the Street. The EU continues to defy an implosion. Expect Europe and the EU to go all in and exhaust all possible options before letting the euro and euro zone fall apart. And that can go on a lot longer than most people think.

4. Earnings at all-time high

The economy isn’t great, but corporate earnings are.The S&P 500 is projected to earn $112 per share in 2013, well past the high in 2007 of $90 before the financial crisis, according to data from FactSet Research Systems. But back then, the S&P 500 was trading at 1,565 points, an 8% premium from current levels. That compelling valuation shows up in the long-term trend. The current forward P/E (price-to-earnings) ratio of 12.6 times is below the ten-year average of 14.2 times, according to FactSet. For a market desperately searching for inflation, there is not very much inflation premium-priced into stocks right now.

Risks to Consider: There are still plenty of obstacles for the global economy, such as slow growth in China and uncertainty in Europe. Any major disruptions in either region would weigh on GDP and earnings.

Action to Take –> Sentiment isn’t super bullish going into 2013, which sets the perfect foundation for a contrarian rally. The uptrend of the past three years is still well in play, which could lift the S&P 500 to a new all-time high in 2013.

P.S. – It’s finally here… our Top 10 Stocks for 2013. Since we first began publishing this annual report in 2003, our picks have beaten the market seven out of the past nine years… including average annual gains of up to 38.7% in a single year. Go here to learn more.

The fiscal cliff deal contains more bad news than it does good news.  Yes, the tax increases on the middle class could have been much worse, and we should be thankful that Congress at least did something for the middle class.  Unfortunately, they didn’t do enough.  Every American worker is going to pay higher taxes next year as a result of this deal.  The fiscal cliff deal represents the biggest tax increase in 20 years, and it is also projected to increase the U.S. national debt by an additional 4 trillion dollars over the next decade.  In the final analysis, U.S. government finances are still wildly out of control and we are all going to be paying higher taxes.  Not a whole lot to be excited about, and nothing has really been fixed for the long-term.  Our politicians have kicked the can down the road once again, but someday they will run out of road and all of this debt will absolutely crush us.  And of course a lot of our politicians didn’t even really know what they were voting for.  The fiscal cliff bill was more than 150 pages long, and our Senators got the bill into their hands just 3 minutes before they voted on it.  So none of them actually read the bill.  But that is the way things work in America today.  The blind are leading the blind and everyone is mindlessly hoping that everything will turn out okay somehow.

For a few moments, let’s take a closer look at the fiscal cliff deal.  There are some good things in there, there are some bad things in there, and there are some things about the deal that are downright ugly.

The Good

-One of the best things about the fiscal cliff deal is that income tax rates did not rise on the poor and the middle class.  This is great news for millions of families that are struggling to make ends meet each month.  A significant rise in income tax rates would have been crippling.

-The Alternative Minimum Tax will now be permanently adjusted for inflation.  This is something that I had screamed about in previous articles.  If an AMT fix had not been passed, approximately 28 million households would have been hammered with the Alternative Minimum Tax on their 2012 earnings.

-Millions of unemployed workers will continue to receive extended federal unemployment benefits.  We probably cannot really afford to keep doing this, but at least now there won’t be millions of unemployed workers that suddenly have their only source of income shut off.  The next trick will be to find jobs for all of those workers.  Unfortunately, millions of our jobs continue to be shipped to the other side of the world.

The Bad

-Payroll taxes are going up for every American worker.  The fiscal cliff deal allows the 2 percent payroll tax cut to expire, and so now the average U.S. household bringing in about $50,000 a year will pay approximately $1,000 more per year in payroll taxes.  As a result, it is being projected that U.S. consumers will have $115 billionless in disposable income to spend in 2013.  Happy New Year American workers!

-The fiscal cliff deal did nothing about the new Obamacare taxes that went into effect on January 1st.  Many of these taxes will hurt the middle class.  To see an example of a receipt where a consumer was charged the new “medical excise tax” in Obamacare, just check out this article.

-The carried-interest deduction loophole remains intact, so incredibly wealthy hedge fund managers will continue to get away with paying very little in taxes.  If the rest of us are being taxed into oblivion, then they should share in the pain with the rest of us.  Of course I personally believe that the income tax should be abolished entirely, but none of our politicians seem interested in that idea at all.

-Income tax rates will increase for high earners.  This will hurt a lot of small businesses.  Many small businesses that earn more than $400,000 a year will now be faced with making some really tough choices.  Some may have to lay off workers.  The top rate will now be 39.6 percent, but when other federal and state taxes are factored in, many small businesses will now be paying a top marginal rate of well over 50 percent.  That is absolutely obscene.

-A compromise was reached on the estate tax.  The exemption was scheduled to fall to just $1 million and the rate was scheduled to go up to 55 percent, and fortunately Congress decided to do something about that.  As I have written about previously, that would have been a disaster for many small businesses and family farms.  As a result of the fiscal cliff deal, the estate tax will only rise from 35 percent to 40 percent.  The exemption for individuals will be about 5 million dollars and for couples it will be about 10 million dollars, and those figures will now be indexed for inflation.  A tax increase is never a good thing, but if Congress had done nothing things would have been far worse.

-The fiscal cliff deal contains a lot of pork.  In particular, it contains provisions that extend specific tax breaks related to Puerto Rican rum, electric motorcycles, biodiesel and renewable diesel fuel, the film and television business, and motorsports entertainment complexes.

The Ugly

According to the Congressional Budget Office, as a result of this deal the U.S. national debt will be about $4 trillion higher a decade from now than it would have been if Congress had done nothing.

The deficit for fiscal year 2013 alone will be about $330 billion higher than it would have been if Congress had done nothing.

So this deal has made our debt problems even worse.

Right now, the U.S. has a debt to GDP ratio of about 103 percent.  We are already well into the “danger zone”, yet most Americans still don’t seem very concerned about all of this debt.

The fiscal cliff deal contained hardly any spending cuts at all.  In fact, there was a 41 to 1 ratio of tax increases to spending cuts in the deal.  The Democrats definitely won this round.  But of course they had most of the leverage.  If Congress had done nothing, the middle class would have been absolutely devastated by all of the tax increases, and the Republicans were desperate to prevent that.

But now that the battle over taxes is done, the leverage is going to shift over to the Republicans for the next big fight.

The battle over the debt ceiling is next.  If Congress does not act, the U.S. government will soon not be able to borrow any additional money.  This battle will be one of the stories that dominates the headlines over the next few months.

If the Republicans want to do something serious about spending, now is their chance.  The battle over tax rates is already over, and there is no election in November.  The Republicans could conceivably say “NO” to a debt ceiling increase if they want to.  If that happened, the federal government would only be able to spend the money that it already has.  It would not be able to borrow more.  That would mean that we would have to start living within our means.

What a novel concept.

Of course there is no reason to believe that the Republicans in the House will suddenly grow a spine.  They have folded every other time that the debt ceiling has come up.  It will probably be the same again in 2013.

And Barack Obama is already saying that there will be “no negotiations” over the debt ceiling this time.  He expects the Republicans to raise the debt ceiling for him without getting anything in return…

“I will not have another debate with this Congress over whether they will pay the bills they’ve already racked up.”

But the U.S. government cannot spend a single penny or borrow a single penny without the approval of the U.S. House of Representatives.

If the Republicans in the House want to ever get serious about government spending, the upcoming battle over the debt ceiling is a golden opportunity.

They could stop the Obama administration from piling up crazy amounts of debt if they want to.  All they need is the courage to take a stand.

During the first four years of the Obama administration, the U.S. government accumulated about as much debt as it did from the time that George Washington took office to the time that George W. Bush took office.

The Republicans have had control of the House for about half of that time.  That means that they have been willing accomplices.

So will they take a stand?

That is very doubtful.  Over the past few years they have exhibited the intestinal fortitude of a frightened chicken.  They will probably huff and puff a little bit, but in the end they will probably give in to Obama once again.

But what we are doing to our children and our grandchildren is so immoral that it is hard to describe.  We are stealing more than 100 million dollars from them every single hour of every single day, and we plan on leaving them with the biggest pile of debt the world has ever seen.  We should be absolutely ashamed of ourselves.

Why can’t we just spend the money that we have?

What would be so wrong with that?

Unfortunately, that would mean such a painful downward adjustment in our standard of living that most Americans would freak out.  We are addicted to debt-fueled prosperity, and so we can’t stop stealing from future generations.  We need their money to feed our addiction.

In the end, this gigantic mountain of debt is absolutely going to destroy everything that our forefathers built for us.  There have been some people that have been warning about this for decades, but the American people did not listen.

Soon enough, we will all pay the price for this foolishness.

By Dr. Steve Sjuggerud (DailyWealth | Original Link)

France’s leaders are calling actor Gerard Depardieu “unpatriotic” and “pathetic.”

You see, Depardieu is leaving France. He’s leaving because of the new French tax laws.

French President François Hollande is trying to push through a 75% income tax, plus a higher “wealth” tax, higher capital gains taxes, higher inheritance taxes, and a tax on selling your business, among other taxes.

Depardieu has had enough…

He said he paid 85% of his income in taxes last year. He says he’s paid 145 million euros in taxes to France over his career (roughly $190 million).

So he’s moving to Belgium to avoid taxes.

France’s Prime Minister called this move “pathetic really.” He continued: “Paying taxes is an act of patriotism and we’re asking the rich to make a special effort here for the country.”

At what level is tax no longer an “act of patriotism”? This question doesn’t just apply to France… European countries are just a few years ahead of the U.S. in terms of becoming more socialist, with an insatiable demand for more of your income to pay for ever-growing government programs.

Depardieu took offense at being called “pathetic.” Based on that, he offered to surrender his French passport. Belgium’s finance minister said he welcomes Depardieu and “any other French citizens.” And Russia’s President Vladimir Putin offered Depardieu citizenship.

Other successful French citizens are leaving, too. For example, the founder of Moet Hennessy Louis Vuitton is also applying for citizenship in Belgium.

Even worse, not only are talented people leaving France, but you can’t get talented people into France to work. “We can’t bring high-level managers to France,” Eric Chaney, an economist at French insurer AXA, told Bloomberg news. “They work in an international market. And the market price for those salaries is well above 1 million euros.”

So major French companies are looking to hire senior managers in London or Amsterdam instead of Paris, Chaney explained. France will miss out on all their taxes. By raising tax rates so high, instead of getting more in taxes, France will get no taxes from these guys.

Again, at what level is tax no longer an “act of patriotism?” At what level does it become an “act of confiscation” by the government? And when that point is reached, when is it time to give up on your country?

I don’t know what the right level is. It appears that Depardieu has found the level for himself… and that’s 85% of his income.

What do you think is the right level? How much of your income should the government be allowed to take? Is Depardieu a traitor? Or is he courageous?

With ever-increasing budget deficits in the U.S., and no real political will (on either side of the aisle) to dramatically cut entitlements, it’s a safe bet that higher and higher tax rates are coming in the U.S.

It’s time to start thinking about how “patriotic” you want to be.

Good investing,

Steve

Further Reading:

Jeff Clark offered a solution to fix the United States’ own income-tax structure. It just involves taking a page from the playbook of one of the most successful companies in the world. In September, Jeff showed Growth Stock Wire readers why this company’s “equal-for-all” policies work… and how we can mirror its policies on a national level.

By Louis Basenese (Wall Street Daily | Original Link)

Please allow me to interrupt the non-stop coverage of the Fiscal Cliff to provide an important reminder.

It’s not all about us!

A whole world of investments exists out there.

Instead of being paralyzed by the historical impasse in Washington D.C. – and the accompanying U.S. stock market volatility – we should be on the lookout for investment opportunities abroad.

Believe it or not, they do exist. And to prove it, today I’m serving one up for you on a silver platter.

So let’s get to it, before it’s too late.

Re-Emerging Emerging Markets

While U.S. stocks understandably suffer from the uncertainty surrounding the Fiscal Cliff, emerging markets stocks are in full-on rally mode.

Consider: Since October, the S&P 500 Index is down 2.9%. Yet the MSCI Emerging Markets Index (MXEF) is up 5.3% over the same period.

The outperformance isn’t a fluke, either. It’s a result of an improving outlook for the global economy, epitomized by the latest reading of the JP Morgan Global Manufacturing Purchasing Managers Index.

In November, the Index checked-in at 49.7, reversing a four-month period of contraction – thanks to expansion in China, Brazil, India, Indonesia, Mexico, Russia, Switzerland, Turkey, the UK and Vietnam.

The upshot? According to a recent research report from Goldman Sachs (GS), now’s a good time to buy emerging markets.

I completely agree. And here’s why I’m dancing Gangnam Style over the opportunity in South Korea…

South Korea: Seven Reasons to Be Bullish

Goldman Sachs’ research revealed a key reality: Emerging markets perform best when the global economy begins to pick up, like it’s doing now.

The research showed that the MSCI Emerging Markets Index rises an average of 3.1% per month when the global economy is growing.

You might think that doesn’t sound too impressive. But just consider that the Index’s average monthly gain during all phases of the economic cycle is a scant 0.7% per month.

So we’re talking about a market that’s on the cusp of rallying more than three times its monthly average.

And historically, South Korea’s stock market is one of the top performers during periods of economic expansion.

That alone is a solid justification to consider investing in South Korea. But here are six more reasons for good measure:

~ It’s All About the Economy, Stupid. South Korea carries the rare distinction of being one of the few economies that was able to avert the global recession. Impressive. But what’s most important is the fact that the world’s eleventh-largest economy is expected to pick up steam in 2013. Barclays Capital expects GDP growth to accelerate to 3.0%, up from 2.2% in 2012.

And while the United States might be able to match that growth in 2013 – and that’s a big “might” – our economy can’t hold a candle to South Korea’s when it comes to employment. At 3%, South Korea’s unemployment rate is among the lowest in the world – a clear indication of the strength of its underlying economy.

To be fair, a strengthening economy doesn’t guarantee a strong equity market. But it certainly helps.

~ Buy High, Sell Higher? Since bottoming out in late July, South Korean stocks are up about 12%. In other words, momentum is on our side.

But don’t be fooled into thinking investors abandoned the old “buy low, sell high” adage in favor of a “buy high, sell higher” motto. Hardly.

Even after the short-term rally, South Korean stocks are anything but expensive…

~ A Bargain By Any Measure. Despite the recent run-up, stocks in South Korea are about 36% cheaper than stocks in the United States. On average, they trade for 9.6 times trailing earnings, compared to 15.1 times for U.S. stocks.

South Korean equities are trading at a discount in relation to emerging markets, too. The MSCI Emerging Markets Index boasts a price-to-earnings (P/E) ratio of 11.3, which is 17% higher than the P/E ratio for South Korean stocks.

If you prefer alternate measures of value, chew on this: Ned Davis Research recently pegged South Korea as the eighth-cheapest emerging market, based on the difference between the country’s earnings yield and its 10-year bond.

So buying into the recent rally actually means we’re buying low, not high.

~ No Fiscal Irresponsibility, Here. While the United States and much of Europe overindulged at the debt buffet, South Korea did not. Public spending only accounts for about 30% of GDP, and the country actually boasts a growing current account surplus.

Corporations are in solid financial shape, too. The days of excessive leverage, evidenced by net debt-to-equity (D/E) ratios of 300%, are long gone. And now the average D/E ratio checks-in below 50%, which means corporate profits are much more stable.

Translation: There’s no risk of a government or corporate debt crisis undermining South Korean stocks. That’s a good thing, because as I shared before, lower risk actually equals higher reward.

~ Promotion, Please. Each June, MSCI reclassifies countries across its family of indices. South Korea is one of only two countries in line for a promotion from “emerging market” status to “developed.”

Barclays’ strategist, Chanik Park, agrees with me that the reclassification could come this year. If so, we can expect more investment capital to flow into the country, boosting equity prices further.

~ An Indirect China Play. The value vultures continue to circle China for signs of a turnaround, which is anything but a sure thing. If you’ve been considering a bet on China, go with South Korea, instead. It represents a low-risk way to benefit from any rebound in Chinese stocks.

How so? Because any growth in China is bound to stir up demand for “raw materials” from South Korea – from steel for auto making to semiconductors for high-end electronics. In other words, South Korea provides two investment opportunities in one.

The Easiest (and Safest) Path to Profits in South Korea

The only drawback to investing in South Korea is that very few companies trade on the major U.S. exchanges. According to the database at The Bank of New York Mellon, there are only nine!

That makes the iShares MSCI South Korea ETF (EWY) our best option. The ETF provides exposure to 105 actively traded South Korean stocks. And at a reasonable price, too. The ETF charges an expense ratio of just 0.59%.

Granted, investing in so many stocks at one time can mute the upside potential. But it also limits the downside risk, which is never a bad thing.

Bottom line: Consider ringing in the New Year with an investment in South Korean stocks. They’re in an uptrend, cheap and still relatively unnoticed by the average investor. In other words, the stage is set for a classic contrarian rally as 2013 unfolds. Don’t miss out!

Ahead of the tape,

Louis Basenese

By Bob Bogda (StreetAuthority | Original Link)

It’s every investor’s dream. And this one came true…

For lucky shareholders in this formerly tiny maker of automated medicine dispenser machines, last November’s election changed everything.

No, not that election. And, no, not just any medicine.

I’m referring to the state ballot in Massachusetts… along with a medical treatment that’s still illegal in most parts of the United States.

You see, the “medicine” that’s distributed from this company’s dispensers is marijuana. And after the Bay State’s citizens voted to make Massachusetts the 19th U.S. state to allow the use of cannabis for medicinal purposes, the mainstream media took note. (Adding to the storyline was the fact residents of Washington and Colorado on the same day voted to make recreational use of marijuana legal.)

One week after the elections, The Wall StreetJournal’s Marketwatch.com published an article entitled “How to invest in legalized marijuana.”

Topping Marketwatch’s short list of stocks “for regular investors looking to get in on the action… without having to actually grow or sell drugs” was Hollywood, Calif.-based Medbox Inc. (OTC: MDBX), whose patented machines use biometrics to verify patients and doses. Also, as the company’s founder told Marketwatch, the machines could potentially be used in ordinary drugstores too.

Two days later, the $4 stock was trading at $200 a share, and the $45 million company was worth billions. Now that’s a Hollywood feel-good story if there ever was one.

Welcome to the world of game-changing stocks.

In the case of Medbox, share prices quickly fell just as fast, but not as far. On Friday, Dec. 28, MDBX closed at $63, down from the high, but still up a whopping 2,400% from the company’s debut on the over-the-counter (OTC) market.

StreetAuthority’s guide to investing in aggressive growth stocks is Andy Obermueller, Chief InvestmentStrategist for Game-Changing Stocks.

In his most recent issue, Andy pointed out that the Medbox example is extreme but hardly isolated. Every year — regardless of the market environment — companies emerge seemingly out of nowhere to deliver eye-popping returns to early shareholders.

Andy admitted he didn’t see this one coming (for more on Andy’s Medbox ”confession,” see the interview below).

But the fact that the sudden burst in Medbox was triggered by a news article suggests that neither did anyone else.

With or without Medbox, however, there was money to be made in the game-changing universe in 2012.

Last February, for instance, Andy recommended Human Genome Sciences (Nasdaq: HGSI), which had developed the first new drug in 50 years to treat Lupus, a chronic inflammatory disease that can affect various systems of the body, especially the skin, joints, blood and kidneys. At the time, HGS was trading at $9.16 a share; less than five months later, British pharmaceutical giant GlaxoSmithKline (NYSE: GSK) bought the company for $14.25 a share — a 55.6% gain.

In July 2011 Andy named Celsion (Nasdaq: CLSN) his top cancer-treatment pick on the strength of a promising liver drug. At the time, the oncology drug developer was a $50 million company trading at $3.13 a share. Earlier this month, the $272 million company posted a 52-week high of $8.86 a share. That’s a gain of $183% against a meager 6.8% increase in the S&P 500 during the same period.

This past summer, Andy published a special issue on business development companies (BDCs), which are a form of publicly traded private equity that invest in promising businesses. His top pick on June 20 from 27 such stock: Main Street Capital (Nasdaq: MAIN), which has since appreciated 26.5%.

For more on Andy’s quest for game changers, read on…
________________________________________

Bob: What’s your analysis of Medbox? At what price would you be a buyer?

Andy: Medbox is an important story for investors to be aware of. I hope that the huge returns catch people’s attention. But let me be clear: I would not be a buyer of Medbox at anything near its current valuation. The stock flew too high, too fast. It is unlikely to be able to produce results that will justify its current prices.

But there is nevertheless a lot to learn from the phenomenon, a lot to take away from the idea that a stock can skyrocket because of an external catalyst.

First, a confession. I didn’t conceive of the marijuana initiatives as an investment opportunity. So that has to be the first lesson: Never let a failure of imagination limit your investment choices. Do not confine your cerebral activity to the interior of an enclosed rectangular space. Or, to putit another way, “Think outside the box.” I didn’t on this one. I wish I had.

But having said that, let’s look at Medbox. It’s not actually in the marijuana business. It doesn’t even make money from the sale of medicine. It simply provides machines that verify documentation and identity and then dispense. Now, as I mentioned in the newsletter, there’s a lot of detail work in that — tons of red tape to wade through. Medbox came up with a nifty tool to do just that. But CareFusion — a stock I have recommended in the past — has the same sort of dispensary, and with a much stronger brand and vastly superior market position. The Medbox technology is good, but it’s not the only competitor in its field, nor is it the best. That’s lesson two, then: Always invest in stocks with the best technology coupled with the best industry position.

Finally, and maybe more importantly, heed the words of country music legend Kenny Rogers, who tells us to “know when to walk away, and know when to run.” Investors have to be clear-eyed as to whether a trend has played out. This one has. It played out on Election Day. MedBox was long on ink and light on squid. There is perspective to be gained, but that’s the extent to which I would seek to profit from theseshares at this point.

Bob: Some of the stocks I mentioned above, including Medbox, achieved game-changing status relatively quickly. But that’s not always the case, is it?

Andy: Let me bring your attention to Obermueller’s rule number two when it comes to investing in potential game changers: The aggressive growth investor must be patient. Or, to put it another way, “A nut has to stand his ground for a long time to become an oak.”

If you look at companies that built and kept strong businesses, the stock chart is revealing. Typically, not all the years were good ones, and most success stories took years to make the journey from nano cap to mega cap.

In the most recent issue of Game-Changing Stocks, I cite the example of Apple (Nasdaq: AAPL). The iPod, the device that began Apple’s transformative march, was released in November 2001. The share price was around twenty bucks at that time, and the stock was functionally dead money for two years. Thereafter, the shares rallied, though the company also saw periods where the stock turned negative.

That’s why I frame my advice about patience in terms of its cousin, confidence. When you really understand why a stock is a real game changer, then you have confidence. Confidence must be present for patience to triumph.

Bob: What are some of your other rules for investing in game-changers?

Andy: The first rule is: Be realistic to the point of hyper rationality. There’s a lot to know before investing, and that reality — those realties — have to be acknowledged and accepted for what they are. Being realistic means collecting and assimilating a lot of information. I know that might sound obvious, even silly, but I see people skip this every day. I get 100 emails a month from otherwise intelligent people who fail to heed the most basic information about their investments.

My third rule is a portfolio manager’s most important job: allocation, allocation, allocation. Investors have to find a mix of securities that meets their needs and fits their risk profile. Aggressive growth should never make up more than 20% of a portfolio, and that might be high for some investors.

Bob: What are you looking at these days?

Andy: Health care, energy and some pure science – the next “big thing” stuff. I’m also interested in taking a global view of growth this year and investigating where the next boom will hit (my initial guess is Mongolia, though two other countries also intrigue me) I also see a whole lot of tech companies with a whole lot of cash on hand, and I’m interested to see what the early acquisitions in 2013 will foretell. So I’m all over the map. Basically, I hit the reset button every year and begin a new search. It might sound a bit chaotic, but I see a lot of areas to be really hopeful and excited about. I looked at the performance of the first year of second terms, and the average market gain since 1965 (Nixon 1973, Reagan 1985, Clinton 1997 and Bush 2005) was 13.8%, versus a historical average total S&P return of 10.9%. What’s more, in two of those four years, the total return exceeded 30%. Given the relatively low earningsmultiple of the market, 2013 might well be another breakout year.

[Note: As Andy is fond of saying, "all it takes is one solid game changer to move the needle on an entire portfolio." And Andy's had a number of them recently, including a pharmaceutical company that surged 55% in the five months following his recommendation... a biotech stock that is already up 183%... and a business development company that has gained 27% since he brought it to his subscribers' attention a few months ago.

To get Andy's latest pick, or to learn more about Game-Changing Stocks, you can follow this link here.]

In what must be the longest 11th hour in the history of time, legislators in Washington DC have finally put together a compromise deal that will avoid the largest tax increase in U.S. history and $110 billion in government spending cuts. Though the next chapter in this “epic” battle will occur when the debt ceiling debate begins in the coming days, weeks and months, for now the pre-markets are up on the news.

Not only that, but overseas markets have made notable gains upon hearing the fiscal cliff in the U.S. has been (temporarily) avoided. The Hang Seng in Hong Kong has gone up 2.9% to its highest level in a year and a half. Markets elsewhere in Asia also showed gains, and European markets increased over 2% on the news.

Still relatively fresh off his successful re-election bid 2 months ago, President Obama seemed content to play chicken with the fiscal cliff issue in Congress. He has now gotten a short-term victory with tax increases to Clinton-era levels and an increase in the inheritance tax for the wealthy, but the drama regarding entitlement reforms and the debt ceiling will remain with us. So while markets may finally be able to exhale in relief this week, the new year is far from putting these issues behind it.

We also will see fourth quarter earnings season emerge over the next couple weeks, but preliminary expectations are less than sunny. We’ve seen a 3.6 negative guidance ratio for the S&P 500 for Q4, more or less in-line with pre-Q3 guidance — and Q3 was a tough quarter, no matter how you slice it.

Though Housing and Consumer Discretionary stocks may continue to see improvement, recent stalwarts like IT still appear to be flagging. Overall, 3% growth is expected by analysts for Q4 earnings — and while that’s a lot better than the 0.1% we saw in Q3, it’s a far cry from the 9.9% expected just a few short months ago.

With the holiday season in the rear-view window, our markets may indeed rejoice short-term to ring in the new year. But obviously we will keep our eye on the ball going forward. After all, in the past 2 years, we’d seen markets ramp up big gains in the early months on the calendar upon abundant optimism, only to give many of those gains back in the later months as earnings results brought everyone back down to earth.

Are you ready for a wild 2013?  It should be a very interesting year.  When the calendar flips over each January, lots of people make lots of lists.  They make lists of “resolutions”, but most people never follow through on them.  They make lists of “predictions”, but most of those predictions always seem to end up failing.  Well, I have decided to put out my own list of predictions for 2013.  I openly admit that I won’t get all of these predictions right, and that is okay.  Hopefully I will at least be more accurate than most of the other armchair prognosticators out there.  It is important to look ahead and try to get a handle on what is coming, because I believe that the rest of this decade is going to be extraordinarily chaotic for the U.S. economy.  The false bubble of debt-fueled prosperity that we are enjoying right now is not going to last much longer.  When it comes to an end, the “adjustment” is going to be extremely painful.  Those that understand what is happening and have prepared for it will have the best chance of surviving what is about to hit us.  I honestly don’t know what everybody else is going to do.  Many of the people that don’t see the coming collapse approaching will be totally blindsided by it and will totally give in to despair when they realize what has happened.  But there is no excuse for not seeing what is coming – the signs are everywhere.

So with that being said, the following are 50 bold predictions for 2013…

#1 There will be a major fight between the Republicans and the Democrats over raising the debt ceiling.  This will be one of the stories that dominates news headlines in the months of February and March.

#2 Most of the new “revenue” that will be raised by tax increases in 2013 will come out of the pockets of the middle class.

#3 No matter what “fiscal deals” the Democrats and the Republicans make in 2013, the federal budget deficit will still end up being greater than a trillion dollars for the fifth consecutive year.

#4 The credit rating of the U.S. government will be downgraded again in 2013.

#5 The Federal Reserve, along with major central banks all over the globe, will continue to wildly print money.

#6 There will be more criticism of the Federal Reserve in 2013 than at any other time since it was created back in 1913.

#7 The term “currency war” will be used by the media more in 2013 than it was in 2012.

#8 The movement away from the U.S. dollar as the primary reserve currency of the world will pick up momentum.  This will especially be true in Asia.

#9 The economic depressions in Greece and Spain will get even worse and unemployment in the eurozone will go even higher in 2013.

#10 A financial crisis in Europe will cause officials to grasp for “radical solutions” that will surprise many analysts.

#11 The unemployment rate in the United States will be higher by the end of 2013 than it is now.

#12 The percentage of working age Americans with a job will fallbelow 58 percent by the end of the year.

#13 At least one “too big to fail” bank will fail in the United States by the end of 2013.

#14 By the end of the year, more people than ever will understand what “derivatives” are, and that will be because they have caused major problems in the financial world.

#15 We will see the beginnings of another major housing crisis before the end of 2013 and foreclosure activity will start rising once again.

#16 We will see another new wave of “tent cities” start to go up in communities around the nation before the end of the year.

#17 There will be another major drought in the United States this upcoming summer and there will be widespread crop failures once again.

#18 The massive dust storms that we have seen roll through cities like Phoenix in recent years will become even larger and even more intense.

#19 Traffic along the Mississippi River will be significantly interrupted at some point during 2013.  This will be a very negative thing for the economy.

#20 Food prices will soar in 2013.  This will especially be true for meat products.

#21 In some of the poorer areas of the globe, major food riots will break out.  Governments will have trouble containing the civil unrest.

#22 There will be more genetically-modified foods in our supermarkets than ever before, and more Americans than ever will reject them and will seek out alternatives.

#23 The average price of a gallon of gasoline in 2012 was about$3.60.  The average price of a gallon of gasoline in 2013 will be lowerthan that.  Yes, you read that correctly.

#24 The number of vehicle miles driven in the United States will continue to decline in 2013.

#25 The Dow will end 2013 significantly lower than it is right now.

#26 When the final statistics for 2013 are compiled, U.S. share of global GDP will be less than 20 percent for the first time in modern history.  Back in the year 2001, our share of global GDP was 31.8 percent.

#27 The U.S. Postal Service will continue to experience massive financial difficulties and will lay off personnel.

#28 As violence in our public schools becomes increasingly worse, more Americans families than ever will decide to home school their children.

#29 The Obama administration and Democrats in Congress will makean all-out attempt to pass gun control measures in 2013.  When their efforts on the legislative front are stalled somewhat by Republicans in the House, Obama will use his executive powers to further his gun control agenda.

#30 One of the cities with the strongest gun laws in the nation, Chicago, had 532 murders in 2012 and it is now considered to be one of the most dangerous cities on the planet.  By the end of 2013, the murder total in Chicago will be above 600.

#31 There will be an increasing amount of tension between state governments and the federal government.  The issue of “states rights” will move front and center at various points in 2013.

#32 CNN will continue to sink to horrifying new lows.  Piers Morgan will end up leaving the network before the end of the year.

#33 The number of Americans on food stamps will surpass 50 million for the first time ever at some point during 2013.

#34 The U.S. trade deficit with China in 2013 will be well over 300 billion dollars.

#35 The phrase “made in China” will increasingly be viewed as a reason not to buy a product as Americans become more educated about the millions of good jobs that we have lost to China over the past decade.

#36 We will see increasing cooperation between the governments of the United States, Canada and Mexico and border restrictions will be loosened.

#37 There will continue to be a mass exodus of families and businesses out of the state of California.  The favorite destination will continue to be Texas, but Texas residents will become increasingly resentful of all of these new transplants.

#38 There will be some truly jaw-dropping examples of violence by parents against their own children in 2013.  Many of these stories will make headlines all over the nation.

#39 The percentage of Americans that are obese will continue to rise and will set another new all-time record in 2013.

#40 There will be more war in the Middle East in 2013.  But it will only set the stage for even more war in the Middle East in 2014 and 2015.

#41 U.S. troops will be deployed in more countries than ever before in 2013.

#42 Volcanic eruptions and major earthquakes along the Ring of Firewill make headlines all over the globe in 2013.

#43 Giant sinkholes will continue to appear all over the United States and all over the globe, and scientists will continue to struggle to find an explanation for why it is happening.

#44 The peak of the solar cycle in 2013 will cause significant problems for satellite communications.

#45 The U.S. government will put more resources into the surveillance of the American people than ever before, but most Americans won’t mind all of this surveillance because they have become convinced that it is important to give up some of our liberties for more “security”.

#46 Our infrastructure (roads, bridges, tunnels, airports, sewers, electrical grids, etc.) will be in worse shape by the end of 2013 than it is now.

#47 The percentage of “two parent households” in the United Stateswill continue to decline.

#48 ”Political correctness” will reach ridiculous new heights during 2013, and more Americans than ever will start to rebel against it.

#49 There will be more anger at the wealthy in 2013 than at any other time in modern history.

#50 There will be some shocking political scandals in Washington D.C. in 2013.  We will see some high profile resignations by the end of the year.

Once again, please keep in mind that I do not expect to be 100% correct about all of these things.  I am just trying to put all of the pieces of the puzzle together just like everyone else is.

But I do hope to have a better track record than most of the other people putting out lists of predictions at the beginning of this year.  So save this list and let’s revisit it at the end of the year.

Do you have any bold predictions of your own for 2013?  Please feel free to share them by posting a comment below…

By Matt Badiali, editor, S&A Junior Resource Trader (Growth Stock Wire | Original Link)

More great news for commodity investors…

Early last month, I showed you a new upswing in the price of copper. China – a major copper consumer – is manufacturing more goods and increasing exports. That’s going to support copper prices…

And it’s showing up in iron ore prices as well. This could be a big commodity trade for 2013…

Iron ore is used in nearly everything, from building materials to consumer appliances. As the global economy sputtered in 2011 and 2012, the price of iron ore was cut in half.

The chart below shows the price of iron ore at the largest port in Northern China, Tianjin. Tianjin is the world’s fourth-largest port and the main import terminal for Beijing. Iron ore prices here tell us a lot about global iron ore demand.

Tianjin’s iron ore prices peaked in March 2011 at more than $190 per metric ton… then fell 54% to a September 2012 low of $86.90. But in the last three months, the price of iron ore at Tianjin is up 67%…

As China’s economic growth sagged and iron ore prices fell, we saw many major mining companies cancel major new projects. Fortescue Metals Group (ASX: FMG), the giant Australian iron ore miner, fired 1,000 workers and canceled its $9.3 billion Kings iron ore mine development.

By August, many analysts and experts cited the collapse in iron ore prices as a sign that the “commodities super cycle” was done. The commodities “super cycle” refers to three to four decades of growth in commodity demand, spurred by globalization and the rise of China. If it is dead, commodity investors will need to adjust their expectations.

But in a recent note, Colin Fenton – head of commodities research at JPMorgan – called this year’s volatility in natural resources just a “temporary consumption slump”… not – as many investors worry – the “conclusion of a multi-decade investment boom.”

The recent downturn in China’s economy reflected the economic woes of the nations that consume its goods… like the U.S. and Europe. But since August, things have been looking up as demand for copper, iron ore, and coal has surged…

Demand has increased so much that on Friday, December 21, iron ore stockpiles at China’s major ports fell to a two-year low – just 73.8 million metric tons. The stuff is moving again… Commodities – and China – are beginning to rebound.

I agree with Fenton. The enormous recovery in iron ore prices – plus a recovery in copper – is a sign that commodities weathered a simple move lower in the larger super cycle. And that means commodity investing could be looking up for 2013.

As longtime Growth Stock Wire readers know, commodities move in cycles. And as we’ve discussed, the key to making money in commodities is to get in the cycle early. That is right now for iron ore.

While we’re early in the uptrend, giant iron miners like Vale (NYSE: VALE) and Cliffs Natural Resources (NYSE: CLF) are beginning to rally from recent low prices. And these companies are cheap. Right now, they trade for about five times estimated 2013 cash flows, according to Bloomberg. That’s far lower than they traded back in 2009, which was the bottom of the market for resources.

These companies, which will produce much larger profits from the recovered iron prices, offer outstanding rewards with only modest risks.

If you are looking for a good commodity trade for 2013, consider iron ore.

Good investing,

Matt Badiali

Further Reading:

Like iron ore, Matt believes there are two other resource investing opportunities set to move higher. Find them here…

A Major Reversal in Copper
Matt shares his favorite ways to profit off a bullish uptrend in copper.

A Big Trend Change Is Coming in This Beaten-Down Commodity
It’s almost time for this trend to turn. And when it does, you’ll want to own these companies.

When people find out I work in the world of stocks, I often get asked “what’s a good book on stocks for my college age son?” or “what book should I read if I want to learn about investing?”

Throughout the years, there have been thousands of books written on stock investing. Books on stocks became especially popular in the late 1990s with the dot-com boom as everyone raced to be “in” the stock market.

Investing books are different from those on personal finance or trading. Personal finance books are like those by Suzy Orman which tell you how to get out of debt or best sellers like The Millionaire Next Door. The popular trading books cover more than just stocks and deal with the speculative side of the trade. Those are books like Market Wizards. Books on stock investing cover only the art of picking stocks.

I know what my own personal favorites are but I also took an informal poll in the office to find out what investment books influenced the great minds here at Zacks.

Some of my colleagues’ answers surprised me.

The Top 5 Investment Books Of All Time

1. The Intelligent Investor, The Definitive Book On Value Investing, Revised Edition, by Benjamin Graham, Jason Zweig and Warren Buffett

This was the most read book in the office. It’s considered a “classic.”

Originally written by famed value investor Benjamin Graham in the 1930s, it was updated in 2003 and 2009 by Zweig and Buffett. The revised edition now includes more up to date examples on stock investing techniques.

While the book is jammed with practical information, many new investors might find it dry and intimidating. It’s 640 pages long!

2. One Up On Wall Street: How to use what you already know to make money in the market by Peter Lynch

Does anyone remember Peter Lynch?

Peter Lynch is the former manager of Fidelity’s Magellan mutual fund who rose to fame in the bull market rally of the 1980s. In the 1980s and 1990s he was one of the best known mutual fund managers in America but has since faded from view as hedge fund managers became the new golden boys.

One Up On Wall Street was his first book. The original edition came out in 1989 but the second edition was revised for the dot-com boom in 2000.

It incorporates his popular investment philosophy: “buy what you know.”

3. The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren Buffett and Lawrence Cunningham

This book contains Buffett’s letters to Berkshire Hathaway shareholders over the last several decades through 2008. The letters are filled with more than just updates about the company as Buffett also shares investing tidbits and insight into his investing philosophy.

This may sound like a snooze, but Buffett’s folksy writing style makes it seem like he’s talking directly to you.

4. The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New by Jeremy Siegel

Published in 2005, the book shatters the myth that investors have to be in the latest “in” growth stock or hot IPO to be successful investors.

For instance, he compares the historical returns of Exxon and IBM. IBM was the Microsoft or Apple of its time in the 1940s and 1950s. Exxon was the boring big oil company. Even though IBM was growing earnings at a faster pace, Exxon had a lower P/E and paid a larger dividend. Readers might be surprised at which company was the better long term investment.

Siegel explains why dividends matter for long term investors and how a company that makes candy triumphed over all of those with the latest hot product.

5. Rule #1: The Simple Strategy For Successful Investing in Only 15 Minutes a Week! by Phil Town

This book didn’t gain much traction in the investing world because it was released in 2007 just before the financial crisis hit. But many here at Zacks found it especially helpful for novice investors because it lays out an investing plan.

Town’s strategy is to find and invest in wonderful businesses, including those with moats and other margins of safety. It incorporates both value investing principals espoused by Graham and Buffett with some technical analysis.

These Books Are Just A Start

I know many of you will have different choices than these 5 books.

It’s important to remember that there isn’t just one book which will give you all the answers or a winning investment plan. The key is that they each offer basic information in which to learn how to invest in stocks.

The learning never ends. I’ve read some of the books listed above more than once and continue to reference back to them and to my favorite web sites like Zacks.com on a daily basis.

But if stock investing is your goal in 2013, these 5 books are a good place to start.

Want More of Our Best Recommendations?

Zacks’ Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

By Louis Basenese (Wall Street Daily | Original Link)

I’m beginning to think that the Wall Street Daily Nation doesn’t like to read… Or you all just prefer to consume market updates as quickly as possible… Or you just like looking at pretty pictures.

Because for whatever reason, my regular Friday Charts articles receive the most praise from our members.

That also means the articles we’re recapping today had to receive a massive amount of traffic to make it in the top five.

Let’s see if any of your favorites made the cut…

Top 5 Friday Charts Articles

Killer Charts Edition #5: Oil, Housing and Stocks, Oh My!

In this article, we discussed the relationship between oil and natural gas. I also told you not to sweat the dip in housing prices at the time (you’re welcome). And we covered why stocks were likely to ramp higher (which they did).

Killer Charts Edition #4: Three Bold Predictions Come to Pass

Back in June, I was able to gloat a bit after three of our most unpopular predictions came to pass – despite all the nasty feedback that they wouldn’t.

Killer Charts Edition #3: A Mountain of Cash and Two Shocking Rebounds

Much like today, the Fiscal Cliff was dominating the headlines and scaring investors stockless. So I shared two shocking investment opportunities that were brewing right under our noses.

Killer Charts Edition #2: Don’t Fear Another Financial Collapse Until This Indicator Soars

In this Friday Charts edition, I dished on digital and print media, and tried to (once again) calm investors’ fears about the Fiscal Cliff. Are you surprised that two Fiscal Cliff-related articles made it into the top five? Neither am I.

Killer Charts Edition #1: The Boldest Gold Prediction Ever

In July, I addressed the rebound in residential real estate prices, the slump in silver prices, and a whacky prediction that gold was headed to $8,300 by the spring of 2015.

So, did any of your favorite Friday Charts articles make it in the top five? Let us know by sending an email to feedback@wallstreetdaily.com, leaving a comment on our website, or catching us on Facebook or Google+.

And be sure to tune in Monday for the best myth-busting articles of 2012.

Ahead of the tape,

Louis Basenese

On average, they’re yielding 8%. That’s more than three times the yield of the S&P 500. Try getting that amount from a money market or savings account.

But that’s not the half of it. In tandem with those high yields, the capital gains have been great too. The average total return for these forty securities is 28.4%. The best performer has gained 209.1%, yet still yields more than 4.5%.

This isn’t the performance of some secret index or an exclusive hedge-fund’s holdings. It’s what is currently happening within the portfolios of my High-Yield Investing advisory.

What’s the secret to that sort of performance? How can you build a similar portfolio for yourself? Don’t get me wrong — I do an enormous amount of research and watch my holdings and the market like a hawk. But much of the good fortune comes from sticking to a few simple rules that you can use as well.

Over the years, these rules have proven their value in bull and bear markets. The techniques are not complicated. Anyone can follow them and potentially get the same results. So I wanted to share with you, my fellow income investors, the four basic rules I follow to build my winning High-Yield Investing portfolios. I’m confident these tips can work for you as well:

	Look for high yields off the beaten path To find exceptional returns and yields, I frequently venture off the beaten path. Some of the best yields I’ve found have come from asset classes few investors know about. A case in point is Canadian REITs. These REITs delivered exceptional yields this year (some as high as 12%), but many stateside investors have never heard of them.Other lesser-known securities I look at are exchange-traded bonds, master limited partnerships and income deposit securities. All of these usually yield more than typical common stocks. In addition, they can also be less volatile and hold up better during market downturns. If you’re not familiar with these securities don’t fret. I have — and will continue to — cover them within Dividend Opportunities.
	Consider alternatives to common stocks It is a well-known fact that the vast majority of common stocks simply don’t yield much. The S&P 500′s average yield is only 2%.So when I can’t find the income I want from common stocks I like, I look elsewhere. My first stop is often preferred shares of the same company, which almost always yield more. Say you wanted to invest in General Electric (NYSE: GE). The common shares of General Electric currently yield close to 4%, but you can find preferred shares of GE yielding upward of 6.5%. You still benefit from the underlying company’s backing, but with a much higher yield. Similarly, many companies offer exchange-traded bonds. While you don’t get actual ownership of the business as you would with common stock, you will earn a much higher yield and have your principal backed by the underlying company.
	Look for securities trading below par value Some of my highest returns have come from buying bonds when they trade below par value. Par value is simply the face value assigned to a stock or bond on the date it was issued. Most exchange-traded bonds (which you can buy just like a share of stock) have a par value of $25 per note.But sometimes — for instance, during a market panic — investors indiscriminately dump these bonds, pushing their prices down. By purchasing the bonds at a discount to par, you lock in great opportunities for capital gains in addition to higher-than-normal yields. A case in point was Delphi Financial Group 8% Senior Notes (which have since been called). I purchased the notes in July 2009 for $19.27 — a 23% discount to par value. During the 16 months I held, I collected $3 per note in interest payments while the shares rose to their $25 par value. In total, the notes returned more than 45%.
	Sell when it’s time This rule may seem the most obvious, but it is also the most difficult to follow.Like everyone else, I hate to admit I was wrong about an investment. But I find it even harder to watch losses mount as a pick falls further. That’s why I’m not afraid to take a loss. I swallowed my pride and closed out several positions for losses during the last bear market, and I’m glad I did. Continuing to hold these would have greatly reduced returns on my portfolio.

Action to Take –> It may sound like a cliche, but knowing when to sell is just as important as knowing when to buy. A wise investor knows when to cut losses and move on to the next opportunity. If the security in question is falling with the market, I may not be worried. However, if changes in the company’s operations mean it could see rocky times ahead, then I don’t want any part of it.

P.S. StreetAuthority’s High Yield Investing is dedicated to bringing investors the highest-paying and most stable stocks, bonds and funds on the market. Click here to learn how to profit from some of our latest income investing picks, including the name and ticker symbol of one company that has raised its dividends 205% since going public…

Carla Pasternak is a leading income investing expert, serving as Director of Income Research for High-Yield Investing and Dividend Opportunities. Together, these … Read More

The beginning of the year has traditionally been a time of optimism when we all look forward to the exciting things that are going to happen over the next 12 months.  Unfortunately, there are a whole bunch of things about 2013 that we already know are going to stink.  Taxes are going to go up, good paying jobs will continue to leave the country, small businesses will continue to be destroyed, the number of Americans living in poverty will continue to soar, our infrastructure will continue to decay, global food supplies will likely continue to dwindle and the U.S. national debt will continue to explode.  Our politicians continue to pursue the same policies that got us into this mess, and yet they continue to expect things to magically turn around.  But that is not the way that things work in the real world.  Bad decisions lead to bad outcomes.  Instead of realizing that what we are doing is not working, our “leaders” continue to give us more of the same.  As a result, there are going to be a lot of things about 2013 that will not be great.  Sticking our heads in the sand and pretending that everything will be “okay” somehow is not going to help anyone.  We’ve got to make people understand exactly what is happening and why it is happening if we ever hope to see real changes.

The following are 16 things about 2013 that are really going to stink…

#1 Taxes Are Going To Go Up

Even if a fiscal cliff deal is reached, some taxes will still go up next year.  And if no deal is reached, there will be a whole bunch of different tax increases in 2013.

According to CBS News, these tax increases would be very painful for the middle class…

If lawmakers fail to work out any sort of deal, there will be severe long-term consequences for the economy: According to the Tax Policy Center, going off the “cliff” would affect 88 percent of U.S. taxpayers, with their taxes rising by an average of $3,500 a year; taxes would jump $2,400 on average for families with incomes of $50,000 to $75,000. Because consumers would get less of their paychecks to spend, businesses and jobs would suffer.

#2 The Middle Class Is About To Be Scorched By The Alternative Minimum Tax

Of more immediate concern for the middle class is the Alternative Minimum Tax.  Many Americans have never heard of the AMT, but it is truly one of the worst things about our tax code.

If Congress does not act, and right now it does not look promising, millions of middle class households will see a massive increase in their tax bills for 2012.

According to one analysis, households that are forced to pay the AMT will end up paying an extra $3,700 in taxes…

Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year. Because those people have never paid the AMT, they have no idea they are in its crosshairs — put there by a broader stalemate over tax policy that has kept Congress from limiting the AMT’s reach.

Do you have an extra $3,700 sitting around to send to Uncle Sam?

If not, you had better contact your representatives in Congress and scream like crazy about passing a fix for the AMT.  They have always gotten it done before, but this year there is so much animosity between the Republicans and the Democrats that nothing may end up getting done.

#3 The Economy Will Continue To Get Worse

Despite all of the talk in the mainstream media and from our politicians that our economy is getting better, the truth is that the U.S. economy continued to decline in 2012.  If you doubt this, just read the 75 statistics in this article.

And there are a whole host of signs that the economy is starting to slow down even more as we enter 2013.  For example, consumer confidence in the United States has experienced its largest two-month drop in over a year, and retail sales during the holiday season turned out to be quite disappointing.

#4 Good Paying Jobs Will Continue To Be Shipped Out Of The United States

Thanks to decades of “free trade agreements”, workers in the United States must directly compete for jobs with hundreds of millions of workers on the other side of the globe that live in countries where it is legal to pay slave labor wages.

We continue to see millions of jobs being shipped out of the country and our politicians stand by and do nothing.

Most Americans have no idea how this emerging one world economic system works.  The beautiful product that you buy at the big retail store may have been made by someone working in some of the most horrific conditions imaginable.

A 42-year-old woman named Julie Keith recently found this letter inside a box of Halloween decorations that had been made in China…

“If you occasionally buy this product, please kindly resend this letter to the World Human Right Organization. Thousands people here who are under the persecution of the Chinese Communist Party Government will thank and remember you forever.

People who work here have to work 15 hours a day without Saturday, Sunday break and any holidays. Otherwise, they will suffer torturement, beat and rude remark. Nearly no payment (10 yuan/1 month).

People who work here, suffer punishment 1-3 years averagely, but without Court Sentence (unlaw punishment). Many of them are Falun Gong practitioners, who are totally innocent people only because they have different believe to CCPG. They often suffer more punishment than others.”

But both political parties continue to tell us how wonderful it is that we are trading with communist China.  They see no problem with the fact that good paying jobs that used to be performed in America are now being performed by slave laborers on the other side of the planet.  And most Americans continue to support this system by filling their shopping carts with lots of stuff that has “made in China” stamped on it.

#5 Small Businesses Will Continue To Be Destroyed

At the same time, small businesses all over America are being strangled to death by taxes and regulations.  Just consider the following numbers from a previous article…

We are told that the economy is supposed to be “recovering”, but the number of “startup jobs” at new businesses has fallen for five years in a row.  According to an analysis of U.S. Department of Labor data performed by economist Tim Kane, there were almost 12 startup jobs per 1000 Americans back in the year 2006.  By 2011, that figure had fallen to less than 8 startup jobs per 1000 Americans.

How is our economy ever going to thrive if we keep killing off our small businesses?

#6 Hunger And Poverty Will Continue To Explode To Unprecedented Levels

As the U.S. economy bleeds jobs and loses small businesses, the number of Americans living in poverty continues to explode.

Here are some numbers to show to people who still don’t understand how desperate the situation is…

-Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

-According to U.S. Census data, 57 percent of all American children live in a home that is either considered to be “poor” or “low income”.

-For the first time ever, more than a million public school students in the United States are homeless.  That number has risen by 57 percent since the 2006-2007 school year.

#7 The Number Of Americans On Food Stamps Will Continue To Increase

If the economy is recovering, then why does the number of Americans on food stamps continue to soar?

As I wrote about yesterday, about 17 million Americans were on food stamps back in the year 2000.

Today, more than 47 million Americans are on food stamps.

Does anyone want to explain to me how that is a sign that things are getting better?

Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6.5 Americans is on food stamps.

How much worse do things have to get before people realize that what we are doing is not working?

#8 Millions Of Americans Are About To Lose Their Unemployment Benefits

During this economic crisis, an unprecedented number of American families have been relying on unemployment benefits in order to stay afloat.

Well, if no agreement is reached in Washington D.C., millions of Americans will shortly lose those benefits…

Three million Americans may become unwitting casualties of the political war in Washington over the fiscal cliff.

Since 2008, the federal government has funded extensions of the unemployment insurance offered by states, more than tripling the amount of aid available to the unemployed in some areas. But the program is expensive, with the Congressional Budget Office estimating it would cost $30 billion to extend it through 2013. President Barack Obama wants to extend the benefits for another year, but Congress has already pared back the program, and Republicans insist it represents the kind of largesse Washington can no longer afford.

#9 Our Infrastructure Will Continue To Rot And Decay

The United States once had the most beautiful infrastructure in the entire world.  Our highways, bridges, airports, railroads, sewer systems and electrical grids were the envy of the entire planet.

Well, now we don’t even have enough money to repair what we already have, so our infrastructure will continue to rot and decay in 2013…

Highways and bridges will need $2.5 trillion in upgrades if they are to survive for another 50 years — a must-do to keep commerce thriving. And that figure doesn’t even take into account the airports, railroads, subways, sewage-treatment plants, waterworks, levees, electric grids, pipelines, and all of those other expensive systems that people ignore until they break down.

#10 Many Of Our Major Cities Will Continue To Be Transformed Into Festering Hellholes

A lot of our major cities are also rapidly degenerating.  Detroit is one of my favorite examples, but the same kinds of things could be said about dozens of other major cities all over the country.  The following is a brief excerpt from one of my recent articles…

If you can believe it, more than 50 percent of all children in Detroit are living in poverty, and close to 50 percent of all adults living in the city are functionally illiterate.  The high school graduation rate in Detroit is down to about 25 percent, and the city has become a breeding ground for gangs and violence.  The number of murders in Detroit is already higher than last year, and recently groups of young men toting AK-47s have been running around robbing gas stations.  How much worse can things possibly get for Detroit?

#11 State And Local Governments Will Find Ways To Squeeze Even More Money Out Of Us

In case you haven’t noticed, state and local governments all over the country are bleeding cash and are desperate for money.  In 2013 you can expect them to continue to find more ways to squeeze even more money out of all of us.  Here is one example…

Over the course of 2013, the District government will add 134 traffic cameras to its network, more than doubling the size of a system that generated $85 million in revenues for the city in its last fiscal year.

Police spokeswoman Gwendolyn Crump told The Washington Examiner that the city will intensify its camera-based efforts to cite motorists for speeding and stoplight violations while also adding cameras to detect other moving violations.

#12 Drug Cartels Will Continue To Easily Cross Our Borders And Terrorize Our Citizens

The federal government continues to refuse to protect our borders, and that means that drug runners and gang members will continue to pour into the United States.

Down in the Southwest, many ranchers are being absolutely terrorized by these criminals.  The following is from a recent NBC News article…

Just before nightfall, 73-year-old rancher Jim Chilton hikes quickly up and down the hills on his rugged cattle-grazing land south of Tucson, escorting two U.S. Border Patrol agents.

He wants to show them the disturbing discovery he made earlier in the day: a drug-smugglers’ camp on his private property.  Stacked together under a stand of trees are blankets, jackets, food, water, binoculars and bales of marijuana from Mexico wrapped in burlap. The smugglers, themselves, are nowhere in sight and are believed to have fled the area, which is about 10 miles north of the Mexican border.

Chilton has had his house burglarized a couple of times and his family regularly encounters groups of armed drug smugglers coming across from Mexico…

Their cattle fences are frequently cut and paths heading north from Mexico cross their property.  Beckham says a smuggler even fired shots at him while he walked his land with a U.S. Border Patrol agent.  Several illegal border crossers have also approached his house at night–one even reaching his hand into their bathroom window.

“Several years ago, one of my children was taking a shower and had a gentleman reach into the shower while he was in there, and he came out screaming, absolutely refusing to take a shower for the next couple months.”

But even if you don’t live along the border, all of this still affects you.  According to government figures, Mexican drug cartels are actively operating in more than 1,200 U.S. cities right now.  They are probably hard at work in the community where you live.

So what is the Obama administration doing to fix the problem?

Not much.

In fact, the Obama administration is actually encouraging people to come to the U.S. and become dependent on the system.  If you can believe it, there is actually a website run by the Department of Homeland Security that teaches immigrants how to apply for welfare benefits once they get into the United States.

#13 Social Decay Will Continue To Accelerate

All over America we are seeing signs of social breakdown.  Here is yet another example…

A woman sleeping on a street bench outside a drug store was doused with an accelerant and set on fire early Thursday morning in Van Nuys.

Witnesses told police that a man poured liquid — possibly a beverage containing alcohol — on the sleeping woman at about 1 a.m. outside a Walgreens store near Van Nuys Boulevard and Sherman Way. He lit a match and ran from the location, witnesses told police.

Who would just run up and set a woman on fire?

Sadly, this is not an isolated incident.  For many more examples like this, please see this article: “20 Shocking Examples Of How Sadistic And Cruel People Have Become“.

We need to admit that we have a major problem on our hands.  Violent crime in the United States increased by 18 percent in 2011, and another huge increase is expected when the numbers for 2012 come out.

America is changing, and not for the better.

#14 Global Food Supplies Will Continue To Dwindle

Did you know that for six of the last eleven years the world has consumed more food than it has produced?

As a result, global food reserves have reached their lowest level in almost 40 years.

So what is going to happen if the world continues to eat more food than it makes?

Let us hope that there is not another major drought in 2013.  If there is, we could be looking at a very serious food crunch.

#15 Wall Street Will Continue To Resemble A Giant Casino

Our financial system seems to have not learned any lessons from the financial crash of 2008.

Instead of admitting their mistakes, they just continue to engage in even more reckless behavior.

Today, there are four major U.S. banks that each have more than 40 trillion dollars of exposure to derivatives.

At some point that house of cards is going to collapse and we will be facing a derivatives crisis of unprecedented magnitude.

Will it be in 2013?

#16 The U.S. National Debt Will Cross The 17 Trillion Dollar Mark

In 2013, our national debt will blow past the 17 trillion dollar mark and start heading toward 18 trillion dollars.

How stupid can we possibly be?

During the first four years of the Obama administration, the U.S. national debt has grown by about as much as it did from the time that George Washington took office to the time that George W. Bush took office.

It really takes something to match more than 200 years of debt accumulation in less than four years.

But our politicians don’t seem to care about all of this debt.  They will continue to steal more than 100 million dollars from our children and our grandchildren every single hour of every single day.  That is beyond criminal, and yet the American people don’t seem to care.

What in the world has happened to this country?

Of course not everything about 2013 will be bad.  Personally, I am looking forward to an exciting year.  I have a new book that will be coming out, and my family is blessed and healthy.  I would like to wish all of you a very blessed 2013.  Things may be falling apart all around us, but that doesn’t mean that we can’t have a great year even in the midst of all the chaos.

By Chad Fraser (Investing Daily | Original Link)

Yesterday we looked at two trends that are bound to affect the technology sector in 2013, and how investors can cash in. (Click here to read that article.) Below, we examine two more.

2013 Tech Trend #3: Emerging Markets Steal the Spotlight

As we noted in part 1, global IT spending is expected to rise 5.7% next year, to $2.1 trillion. Much of that increase will come from emerging markets. IT research firm IDC expects companies in these fast-growing countries to pour more than $730 billion into technology next year, up 8.8% from 2012. That total also accounts for 34% of total global IT spending.

That’s music to the ears of International Business Machines (NYSE: IBM) shareholders. A large part of the company’s growth plan hinges on harnessing rising tech investments in emerging markets. Overall, IBM expects these countries to supply 30% of its total geographic revenue in 2013. It’s already well on its way to this goal: in 2011, some of the fastest-growing emerging markets—the so-called BRIC countries (Brazil, Russia, India and China)—accounted for 19% of its revenue. In IBM’s latest quarter, sales to emerging markets increased 4%, or 11% on a constant-currency basis.

Brazil is particularly important for IBM. The country is the second-biggest IT spender among emerging markets, behind China. IBM recently announced that it is opening three more offices in the country, bringing its total to 30.

The country’s tech investments should keep rising in both the short- and long-term. Right now, it’s getting ready to host the FIFA World Cup in 2014 and the Summer Olympics in 2016. As well, the government is investing heavily in IT infrastructure, including projects under its National Broadband Plan, under which it will expand high-speed Internet access across the country.

IBM is also nicely positioned to pick up on another tech trend spotlighted by IDC: increasing spending on analytics software, which businesses use to collect and analyze sales data. In a previous report, IDC said that the market for analytics software grew 14.1% in 2011, and should increase at an annual rate of 9.8%, to reach a total of $50.7 billion by 2016. Through the first nine months of 2012, IBM’s business analytics revenue was up 14% from the same period in 2011.

2013 Tech Trend #4: Network Security Remains a Top Priority

Computer security is another significant growth area within the IT sector. In September, IT research firm Gartner released its latest analysis, which predicted that spending on IT security would hit $60 billion this year—up 8.5% from 2011—and would rise to $86 billion by 2016.

Two relatively recent trends are highlighting the importance of strong security controls even more. One is the switch to cloud computing, which will require even better security for servers and networks, and the other is the trend toward BYOD, or “bring your own device.” That’s where employees use their own smartphones and tablets for work instead of being supplied with them by their companies.

While employing a device that the employee already owns and is familiar with is a plus, it also makes it tough for IT departments to ensure that any corporate data on these gadgets isn’t compromised or distributed inappropriately.

One stock that’s well-positioned to profit from the trend toward rising security spending is Symantec (NasdaqGS: SYMC), which controls one of the leading brands in the field, Norton Anti-Virus. It also sells a range of other products and services for managing and storing data.

The company has embraced the BYOD trend with its Mobile Management Suite, a set of programs that help businesses manage a wide array of mobile devices while keeping data secure. This software also protects mobile devices from malware, or programs designed to damage computer networks or steal important data.

In its latest quarter, Symantec’s revenue rose 1% from a year ago, to 1.7 billion. A 6% revenue increase at its Security and Compliance division was the main reason for the gain; revenue fell 1% at its Consumer segment and 2% at the Server and Storage Business. Services revenue rose 2%.

The company earned $193 million in the quarter, up 6% from $182 million a year ago. Thanks to Symantec’s ongoing share buybacks—which lowered the number of shares outstanding—earnings per share rose 13%, to $0.27 from $0.24. Without one-time items, earnings per share rose 15%, to $0.45. That topped the consensus forecast of $0.38.

Symantec doesn’t pay a dividend, but it does plan to continue with its share buyback plan. It repurchased 12 million shares for $200 million in the latest quarter, at an average price of $16.48. The company has $483 million remaining on its current authorization.

David Einhorn, founder of hedge fund Greenlight Capital, has moved markets with his powerful presentations on stocks he has decided to short and reaped sizable gains. The companies he targets typically have to respond to accusations leveled at them and after some time has passed, it becomes clearer whether Einhorn was right in his assessment. Perhaps most famous are his short positions in Chipotle (CMG), Lululemon (LULU) and Green Mountain (GMCR).

David Einhorn announced his short position in Green Mountain Coffee Roasters (GMCR) in October 2011 at the Value Investing Congress. Shares began to plunge immediately, eventually bottoming at a 52 percent loss by about a month.

In his 110-page presentation, he accused the company of many transgressions. He noted that Green Mountain began in 1981 as a small café in rural Vermont, and enjoyed the effects of growth along with the expanding premium coffee industry in the 1990s. From 1991 to 2000, its revenues grew 25 percent a year. Then, from 2000 to 2005, growth slowed to 14% a year.

In 1998, it began to partner with Keurig, a single-cup coffee brewing machine maker to manufacture and sell the K-cups, and bought the whole company in 2006. Growth exploded at GMCR since then – revenue increased at a 57% CAGR from 2006 to 2010.

Shares of GMCR responded in kind, peaking around $107 a share in 2011, just before Einhorn questioned the situation in October. Then, in November, the company’s shares plunged 39 percent the day after it announced its first sales miss in two years. Sales were $711.9 million that quarter, up 91% over the same period in fiscal 2010, but far short of analysts’ expected $760 million.

“Our fiscal fourth quarter revenue growth of 91% was strong. This was off of our estimates as a result of a number of factors including changes in wholesale customer ordering patterns in our grocery and club channels despite steady consumer point-of-sale demand in those channels,” GMCR CEO Lawrence Blanford said of the miss.

Einhorn gave his take on the shortfall in an exclusive interview with Reuters in December: “The thing about an investment like this is that there are really a lot of ways for us to come out well because the risk-reward for the stock is so poor. And there are so many problems that they don’t all have to hit at the same time in order for us to get a good result. In terms of what actually did cause them to miss the quarter? It was largely a sales miss, which seemed to follow from the unexplained sales spike that we highlighted in the presentation,” he said.

The company’s stock seemed to level off after the fall though and had increased almost 10 percent by May, when it plunged a further 40% on lowered sales guidance. The price continued roughly flat for almost the rest of the year. In October, Einhorn reiterated his position on Green Mountain in his investor letter:

Regarding GMCR, we pointed out:

- GMCR recently lowered the list price of many of its leading products by about 8 cents per K-Cup. This will likely have a large impact, as last quarter GMCR only made 8 cents per K-Cup.

When Einhorn revisited the presentation at the Value Investing Congress in October 2012, shares fell only 2 percent during the talk.

Since announcing fourth quarter results on Nov. 27, however, shares have pushed up almost 44 percent after earnings beat expectations. Net sales were $946.7 million, up 33 percent year over year, and earnings were $91.9 million, up 22% year over year (which included an additional week).

Ninety-percent of the company’s sales in fiscal year 2012 came from sales of its Keurig single-cup coffee brewing machines and related items. During the year it introduced two new brewing platforms, the Keurig Vue brewer and the Keurig Rivo Cappuccino and Latte system in partnership with Lavazza, along with multiple new beverages and a travel Vue model.

The company’s gross margin for fiscal year 2012 declined to 32.9 percent from 34.1 percent a year previously primarily because the company invested more in new products such as the Vue brewing system. The company also cited as a reason “an increase in single-serve pack obsolescence.”

The new coffee machines are intended to rival Starbucks (SBUX)’s new single-serve espresso maker, introduced in late 2012. Green Mountain also currently has a deal with Starbucks to sell K-cups for Keurig machines, which will continue even after competition intensifies between the two companies.

Green Mountain’s outlook for the first quarter of 2013 is total net sales growth in the range of 14% to 18%. For the full year 2013, it expects total net sales growth in the range of 15% to 20% over fiscal year 2012.

Green Mountain currently has a P/E of 18.4, P/S of 1.5 and P/B of 2.9. Einhorn has not revealed yet whether he is has sold his position in Green Mountain.

See David Einhorn’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of David Einhorn.

By Jay Peroni (Street Authority | Original Link)

Aging baby boomers have been a topic among investors for quite some time. After all, with a demographic of more than 76 million in the United States, they’re the biggest — and richest — generation in history. With a baby boomer turning 60 every eight seconds, this segment is expected to comprise 20-25% of the U.S. population in about 20 years.

As a group, baby boomers have accumulated a lot of wealth. With the average baby boomer predicted to retire with $500,000 and $1 million in assets, this group is estimated to have $7 trillion in wealth, which accounts for nearly 70% of the total wealth in the United States.

Most of the individual clients I counsel fall into this demographic. My typical new client is a male baby boomer with most of his accumulated assets invested into a former employer’s 401k, IRAs and his home equity. He’s invested in stocks to save for retirement, but now he is concerned with making these assets last for the rest of his life.

He is well aware his investments are the key to his retirement, but he is afraid to make a mistake with them. He’s lived through the 1987 Black Monday stock market crash, the dot-com bust and the most recent subprime mortgage crisis. Some of these boomers have an inheritance coming from parents, but they are also concerned about their aging parents’ long-term care. They may also be paying off their kids’ college loans, which makes them concerned about not having enough funds to cover all their expenses. It’s no wonder they have been increasingly becoming more risk-averse.

So as they get closer to retirement, they’ve been shifting toward low-risk investments. Many have already begun shifting their portfolios from stocks to fixed-income securities, a trend that’s likely to continue for many years to come.

And there is one particular stock poised to explode as boomers become more conservative with their investments — MarketAxess Holdings Inc. (Nasdaq: MKTX).

The company operates an electronic-trading platform that allows investment professionals to trade corporate bonds and other types of fixed-income instruments. It has more than 900 active institutional investor clients and a market share of 12.5%. Through its proprietary Corporate Bondticker service, MarketAxess provides fixed-income market data, analytics and compliance tools that help its clients make trading decisions.

Another trend that will greatly benefit MarketAxess’ top line is the recent popularity of corporate bonds over sovereign debt. As countries’ financial positions and debt ratings continue to worsen and as corporations improve their impressive liquidity, institutional investors are likely to flock to corporate bonds to get higher yields with less risk.

MarketAxess also has an unusually secure financial position for a company of only $1.15 billion market cap. The company has strong, consistent free cash flow and zero debt. Since 2009, it’s been paying a quarterly dividend of 11 cents a share and it recently announced a special dividend of $1.30 a share scheduled for Dec. 27. The company has more than $150 million in cash it can use to purchase other electronic-trading companies and increase its market share.

Although there isn’t much revenue growth right now, it is still consistent and the company enjoys an average operating margin of 44%. Another strong indicator of the company’s compelling position is the fact that 97% of the stock’s float is owned by mutual funds and institutional investors.

Take a look at MarketAxxess since 2008 when the first baby boomers started to retire:

Why MarketAxess looks like a great buy

MarketAxess is quietly becoming the largest liquidity pool for fixed-income trading, so I would anticipate its market share could go from the current 12.5% to as high as 20% as acceleration gains steam. I also like its high fixed-fee income stream, which should help the company if revenue declines due to less trading volume. Finally, the stock is attractively priced compared to competitors. Its price-to-earnings/growth (PEG) ratio is 1.37, below the industry average of 1.53 and sector average of 5.70. Moreover, its year-over-year revenue growth of 10.5% is the highest within its investment market operators industry.

Risks to Consider: Overall trading volume of high-grade U.S. corporate bonds decreased every year from 2003 through 2008 prior to the major shift in baby boomers retiring. This decreased MarketAxxess’ market. However, corporate-bond trading volume increased dramatically in 2009 because of many factors including constrained bank lending, fewer asset-backed securities being issued and larger volumes of outstanding corporate bonds. If trading volume slips back, then it could hurt MarketAxxess’ profitability. Also, its European exposure could negatively affect earnings if there is further decline in the revenue coming from Europe.

Action to Take –> That being said, the trend has been very favorable for MarketAxess and I expect it to continue. Buy MarketAxess up to $36 a share. It is a strong pick for any long-term investor who is looking for a safe dividend-paying investment with the potential for long-term growth.

Jay Peroni is a renowned financial advisor and author of two books on investing. His work has been featured in notable media outlets including Crosswalk.com, … Read More

Jay Peroni does not personally hold positions in any securities mentioned in this article.

StreetAuthority LLC does not hold positions in any securities mentioned in this article.

By Louis Basenese (Wall Street Daily | Original Link)

On Mondays, I normally serve up a widely held Wall Street belief on a silver platter. Then I squash it like a bug with cold hard facts to prove it’s nothing more than a myth.

This week, we’re sticking to the program and busting another myth. Only this time, I’m asking you to do all the heavy lifting.

In the process, you’ll be making the last great investment available in 2012.

I think that’s fair compensation for asking you to exert some effort. But let’s see what you think…

Greedy or Charitable?

It’s long been said that Wall Street is overrun by greed – and it has been since the beginning.

That’s pretty hard to refute, too. Especially when stories like this one circulate for decades…

One day, someone reportedly asked multi-billionaire, John D. Rockefeller, “How much money is enough?” He responded, “One more dollar than I have.”

And a new study suggests that not much has changed over the last 100 years or so.

The Chronicle of Philanthropy found that lower-income Americans donate a much bigger share of their discretionary income than wealthier people do. And the trend is shockingly evident at the epicenter of wealth creation – the New York metro area.

The richest Americans in the region only give 4% of their discretionary income to charity. The lowest wage earners in the region give 8.6%. That’s more than double.

I know it’s hard to argue with numbers. But I refuse to believe that Wall Street is that greedy and self-serving.

Why? Because I’m a Wall Streeter, and I know I’m not that greedy. (No, I didn’t need to check my income tax returns to be sure.)

And I know I can’t possibly be the only one.

In fact, I believe the majority of Americans are more charitable than they are greedy. And I’m dead set on proving it today.

That’s where you come in….

A New Breed of Asset Allocation

If we’ve done anything in the last year at Wall Street Daily to make you money, make you laugh, or improve your financial wisdom, I’d ask that you consider joining me today by donating to a very worthy cause – The Roberto Clemente Santa Ana Health Clinic.

Located in Nicaragua – one of the poorest countries in Latin America – the clinic provides free and low-cost medical care to over 10,000 patients in the isolated villages of Limon, Rancho Santana and 41 other surrounding communities.

Think prenatal care, basic prescriptions, treatment for asthma attacks and allergic reactions, and general checkups. Things we take for granted because walk-in clinics and hospitals abound in the United States.

Why donate to Nicaragua instead of a cause here at home? Two reasons…

First, even in our darkest economic times, we’re way more blessed than the average Nicaraguan. Case in point: If U.S. GPD contracted an apocalyptic 10% next year, the average American would still be 15 times wealthier than the average Nicaraguan.

So our charitable donations – no matter how small – can have a much bigger impact.

And second, my friend and Oxford Financial Group Publisher, Julia Guth, started the clinic.

Without her, Wall Street Daily would never exist. She’s the one who gave this young punk from New Jersey a chance to break into the financial publishing business. So helping her help others is the easiest way I can say “thanks.”

Bottom line: I’m asking you to help me bust the myth that Wall Street and America are overrun with greed. It’s time to prove that you’ve got nothing but charitable feelings pulsing through your veins.

Simply take a few minutes to watch this short informational video about the work being done at the clinic.

Afterwards, I’m hopeful you’ll follow my lead and support the cause. Even if it’s just because you’re looking for a last-minute tax deduction, as the clinic is a U.S.-based 501(c)(3) non-profit organization.

After all, beggars can’t be choosers, right?

If you need a little extra coaxing, these quotes always prompt a reflexive opening of my wallet. Maybe they’ll work on you, too.

Again, all I’m really asking is that you have an open mind and check out the video about the clinic here.

If you cannot (or choose not to) donate, no worries. I’m thankful for your consideration, continued support and confidence in our work here at Wall Street Daily.

As always, if you’ve got something to say or share, don’t hesitate to contact us at feedback@wallstreetdaily.com.

I wish you and your family a very Merry Christmas and a Happy New Year!

Ahead of the tape,

Louis Basenese