Watching Fed Counterfeiters Print Money in the Magic Kingdom

November 8th, 2010

Do you believe like I believe,
Do you believe in magic

– The Lovin’ Spoonful

Whew! What fun we had last week! It’s the Magic Kingdom for sure.

The Fed pulled a white rabbit out of its hat on Wednesday – a $600 billion mad hare. Stocks soared on Thursday. Commodities soared. Everything soared. Except the dollar. People dropped the buck.

Then, on Friday there wasn’t much follow through. The Dow rose only a few points. Gold continued going up – $14.

What’s ahead for this week? Heck, anything could happen. This is the Magic Kingdom.

What do we mean? Of course, counterfeiting is against the law.

The counterfeiter creates money that looks just like the real stuff, but it has no gold or other backing behind it.

The Fed creates money that looks just like the real stuff. It has no gold or other backing behind it either.

What’s the difference? You go to jail for counterfeiting. But by some magic, it’s okay when the Fed does it.

We have a suggestion. The Fed could save some money by giving up its monopoly on counterfeiting. Allow the private sector to create new money. There are probably plenty of people in jail today who could make useful contributions to our economy. These guys know how to print money. Let them out! They would create money – lots of it. At no cost to the taxpayer.

But wait, the feds want to control the counterfeiting process. They don’t want too much or too little. But just the right amount of new money.

How much is the right amount? Who knows? Between now and June ’11, the Fed will add another $600 billion to the $1.7 trillion it already put into the system. Is that enough?

Darned if we know.

We got a message from debt-tracker prof. Laurence Kotlikoff at Boston University. He told us that the money supply would be multiplied 4 times since 2007. Is that enough?

The whole thing would boggle our mind. But our mind was already boggled by the Fed’s last trick.

The Fed increased the world’s wealth by $1.7 trillion last year. That’s a lot of money. What did it mean? Presto, the world was richer. Right? If the world wasn’t richer, the extra money was a hoax, a fraud, and a scam, right?

But if it really did create $1.7 trillion worth of money…representing real wealth…well, it was…like magic!

We live in the Magic Kingdom. What a wonderful place to live in. We have a leader who is almost magical himself – Barack Obama. And we have a Congress that is expert at creating smoke and mirrors.

And the public? A bunch of yokels and rubes who will believe anything.

We can’t wait to see what happens today. Anything is possible!

Bill Bonner
for The Daily Reckoning

Watching Fed Counterfeiters Print Money in the Magic Kingdom originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Watching Fed Counterfeiters Print Money in the Magic Kingdom




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Fed Heads at Jekyll Island

November 8th, 2010

Chris was so kind to leave me notes about what happened in Friday’s trading, so let’s listen in to Chris first, and then I’ll pick it up with the overnight activity…

The dollar rallied throughout the day on Friday after the October jobs report showed a larger jump than expected and the previous month’s numbers were revised upward. It seems like we have made a shift from the “dollar safe haven” trades of earlier this year. Previously positive economic news for the US would lead to a sell-off in the US dollar as investors would be selling their safe haven investments to move the funds into higher yielding currencies. But today’s positive economic news for the US led to dollar buying as investors feel any positive news on the US economic front may lead to a decrease in the size of QE2. But this is just one month’s worth of data, and as Chuck pointed out in his email to me earlier today, the birth-death model was responsible for 61,000 of the 151,000 jobs added.

The Fed hasn’t even begun their second round of stimulus purchases, and traders are already betting on when they will pull the liquidity back in. None of us on the desk feel like the Fed will stop QE2 prior to spending all $600 billion (and it is likely they will have to spend even more!) QE2 simply adds another layer of volatility for the markets.

The euro (EUR) got hit, losing nearly 2 cents versus the US dollar today. The markets continue to be nervous about the sovereign debt refinancing which will need to occur in Spain, Ireland, and Portugal. Many traders feel the austerity measures put in place by these countries will not be enough to bring their deficits under control. And in today’s environment, their administrations are going to have trouble passing further cuts to social programs or increases to taxes. The euro also got sold after a report showed retail sales in the euro region fell for a second month in a row.

Thanks Chris! That always helps when I come back from being gone for a week to have that waiting for me!

Well… Overnight the dollar is still swinging the hammer it began to swing on Friday morning. The currencies, even the Chinese renminbi (CNY) are all weaker versus the dollar this morning. Gold is down $2, and silver is down 70-cents…

In the overnight news, China’s Vice Finance Minister Zhu, was expressing his distaste with the FOMC’s latest round of QE. Zhu, gave the FOMC a get out of jail free card, with the first round of QE that was implemented in March of 2009, as he felt the global economy lacked liquidity… But this time? He’s not so much a fan of the FOMC right now. Zhu feels as though “we have $10 trillion of hot money flowing around the world, more than $9 trillion in hot money at the beginning of the financial crisis. The US has not fully taken into consideration the shock of excessive capital flows to the financial stability of emerging markets.”

Zhu also went on to mention that this latest round of QE will be on the agenda at this week’s G-20 meeting in Seoul. I’m certain any discussion of this round of QE will fall on deaf ears, with US officials.

Hmmm… Do you know what “reunion” took place this past weekend? Fed heads new and old, met this past weekend on Jekyll Island, the Georgian island where a secret 1910 meeting led to the Federal Reserve, or cartel, as they should actually be called… Read the book, The Creature from Jekyll Island, and you’ll know why! Anyway, there was a lot of back slapping for the current Cartel for their “guidance” through the financial storm… But I side with former Cleveland Fed President Lee Hoskins who said at the conference that “the central bank is in a position of running a policy that has more risks than potential benefits.” He went on to say something that I hope all the Fed Heads heard clearly…

“In the early 1970s, there was an idea that they could buy a little more employment by running a little higher inflation rate, and people were really caught in that idea, that they could manipulate the unemployment rate through monetary policy. That turned out to be a grievous error.”

OK… Enough Fed Head talk… But wait… I did want to give kudos to Big Ben Bernanke for a statement he made last Friday… FED CHAIRMAN BERNANKE SAYS ONE EXCEPTION TO LOW INFLATION OBSERVATION IS GLOBALLY TRADED COMMODITIES RISING “PRETTY SHARPLY” but that… RISING COMMODITY PRICES WILL CONTRIBUTE TO US INFLATION. BUT FED RESEARCH SUGGESTS ECONOMIC SLACK WILL PREVENT PRODUCERS FROM FULLY PASSING ON COSTS TO CONSUMERS.

OK… He recognizes that commodity prices, that includes food and energy prices, are rising “pretty sharply”… But to suggest that the economic slack will prevent producers from fully passing on costs to consumers is ludicrous… That’s my thought and I’m sticking to it!

Well, the Irish bond sales are weighing heavily on the euro and other currencies this morning… I’m nodding my head, yes, as I recall telling you a few weeks ago, that it was about time for the media to shift its focus back to the European GIIPS again… I made a statement in Cabo last week during my presentation, that will shock a few of you… But I said that in the next decade we could see some, if not all, of the periphery countries of the Eurozone leave or get asked to leave, but it would not collapse the Union, nor would it collapse the euro, as it would be a case of what didn’t kill you makes you stronger!

But for now… The euro and thus other currencies have to deal with the periphery countries’ problems… But watch, I truly believe this will happen again… Things will look bleak for the Eurozone and then the media will shift its focus to the problems in the US again, and then we’ll start these shenanigans all over again.

Eventually this will all play out, and when the dust settles, we’ll still see the dollar in the underlying weak trend it’s been in since 2002…

So, that gives us all a chance to buy things that we wanted to buy, on the dips!

The euro has lost 1/4-of a cent since I came in this morning, and is looking like it will soon be trading below 1.39…

The Canadian dollar/loonie (CAD) traded above parity on Friday, after a strong (for them) employment report showed the jobless rate declining to 7.9%… The loonie has slipped back below parity this morning with the US dollar strength. Canadian loonies are still in my top ten of currencies even with it being so closely tied to the US. I truly believe that the commodity pull will win the tug-of-war here…

Then there was this… As reported in Reuters this morning…

Leading economies should consider readopting a modified global gold standard to guide currency movements, said World Bank president Robert Zoellick.

Writing in the Financial Times, Zoellick said a “Bretton Woods II” system of floating currencies is needed to replace the Bretton Woods fixed-exchange rate regime that broke down in the early 1970s.

Zoellick called for a system that “is likely to need to involve the dollar, the euro, the yen, the pound and (yuan) that moves toward internationalization and then an open capital account.”

He added: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

While it’s something to think about, I doubt Zoellick will get much traction for his idea… But, the reason I brought it up is that once again, we’re talking about something that could lead to a “world currency”…

To recap… The currencies and precious metals have sold off since the trumped up jobs jamboree on Friday showed that 151,000 new jobs were created in October. (We know that 61,000 were created out of thin air, but don’t let that get in the way of a “feel good story”) the dollar is even stronger this morning, as Irish bond sales are creating a real drag on the single unit.

Chuck Butler
for The Daily Reckoning

Fed Heads at Jekyll Island originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Fed Heads at Jekyll Island




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Two Defense ETFs To Play Mid-Term Elections

November 8th, 2010

The results of the recent mid-term elections, putting Republicans in control of the U.S. House of Representatives, will likely be favorable for the defense and aerospace sector giving positive support to the iShares Dow Jones US Aerospace & Defense Fund (ITA) and the PowerShares Aerospace & Defense (PPA).

Historically speaking, the GOP has been an advocate of strong national defense and a resilient military.  As a result of this, the Obama administration’s proposed 2011 defense budget of more than $700 billion is likely to be passed without much restraint. 

One reason the budget is likely to be passed is that it will enable the military to upgrade equipment that it uses around the world which will further lead to a sustainable global strength and presence.  Secondly, the wars that the US is engaged in around the world do not appear to be coming to an end anytime soon.  In fact, most recently, a senior Obama administration official stated that leaders of the Taliban resistance in Afghanistan have no interest in a negotiated end to the war despite increased pressure by NATO and the US.  Lastly, China and Russia continue to build and strengthen their respective militaries and in order for the US to remain the strongest military power in the world, improvements and development have to continuously be made in defense software, communications, equipment and training.

At the end of the day, the US is expected to keep a large appetite for defense spending in the near future which will likely bode well for companies which generate a significant portion of their revenues from Department of Defense contracts.

As mentioned above, two diversified plays on the defense sector which give exposure to defense contractors Northrop Grumman (NOC), Lockheed Martin (LKM) and General Dynamic (GD), as well as military software and communications provider, Raytheon (RTN) and aircraft manufacturer Boeing (BA) include:

  • iShares Dow Jones US Aerospace & Defense Fund (ITA)
  • PowerShares Aerospace & Defense (PPA)

Disclosure: No Positions

Read more here:
Two Defense ETFs To Play Mid-Term Elections




HERE IS YOUR FOOTER

Uncategorized

Euro FXE Update Shows Weekly Confluence Level to Watch

November 8th, 2010

A lot of traders have been paying attention to the Dollar, but it’s also important to watch the Euro and what’s taking shape on its respective price charts.

Let’s take a quick Weekly then Daily look at the Euro-trust ETF – FXE – and reveal a weekly confluence level to watch, and a possible daily bull trap to keep an eye on.

First, the FXE Weekly:

Cutting through the chart to what’s most important right now – there is a key indicator confluence at the $139 per share level (which is roughly 1.39000 in the EUR/USD pair).

We’re still at the $140 level, which I updated previously in “Daily Chart Price Target for the EUR/USD Pair” (which addressed the EUR/USD and the 1.4000 level – which has so far been a wall of resistance).

So as of now, at least on the FXE chart above, the 200 week SMA rests currently at $139.16 while the 61.8% Fibonacci Retracement as drawn is $138.84.

This forms a simple dual convergence at $139 – just shy of the all-important $140 level.

What happens here at the $140 level will be key to the future – a pause here (meaning resistance holds) implies that the Euro will begin declining – and thus the Dollar start rising – which could indicate a pull-back in stocks, gold, and oil in the short term.

And of course the opposite is true – a price breakthrough above $140 suggests this rally remains strong and that the Euro will continue its rise, Dollar continue its fall, and thus stocks, oil, and gold will similarly continue their rallies above their resistance levels (for example, 1,228 in the S&P 500 and $87 in oil).

In simplest terms, what happens here is key – particularly if a Bull Trap just sprung.

Now, let’s drop to the Daily Chart:

I’m highlighting a negative volume and momentum divergence, but only as chart facts at the moment.

Beyond that, we have a sideways rectangle consolidation at the $140 level (technically $137 to $140) which price broke to the upside last week.

Unfortunately, as of this morning, that breakout has failed in what might be developing into a Bull Trap.  It will officially be a Bull Trap if price continues its decline and breaks under the lower trendline at the $137 level.

Speaking of that, we have a mini-dual confluence of support at the $137 level that is important to watch.  It’s the horizontal trendline and the 50 day EMA (currently just shy of $136).

So, to make it even easier to keep score, a break back above $140 triggers a range breakout play in line with a positive breakout in the weekly chart.

However, anything less – particularly if the fund breaks under $137 – would be a bearish development that could argue for a cross-market reversal (down Euro, up dollar, down stocks, down gold, down oil).

I speak more about these sort of cross-market levels, structure, and opportunities in the weekly reports to members.

So, Euro bulls need to watch the $140 level for a price breakout that could lead to another leg up, while Euro bears need to watch the daily chart dual support level at $137 for a downside break which could lead to a new leg lower to $132 at least.

Either way – watch these levels closely whether or not you trade the Euro.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Euro FXE Update Shows Weekly Confluence Level to Watch

ETF, Uncategorized

4 ETFs Beating the Dow by a Mile

November 8th, 2010

Martin D. Weiss, Ph.D.

Martin here with a quick update on four of our favorite exchange traded funds (ETFs).

From the first trading day in May through this past Friday, November 5, the Dow is up 4 percent.

That’s actually somewhat better than we expected for U.S. stocks — given the still-somber state of the American economy.

But we don’t feel we missed much by avoiding Dow stocks.

Quite the contrary, we’re very glad we did … because in the same time frame …

• Our gold ETF (GLD) is up 18.2 percent, or more than four times better than the Dow.

• Our favorite ETF that tracks agricultural commodities (DBA) is up 21.8 percent, more than five times better than the Dow.

• The performance of our favorite emerging market ETF — IDX which owns Indonesia’s blue chips — is very similar. It’s up 22.5 percent, or nearly six times better than the Dow.

• And the Chile ETF (ECH) has trumped them all — up 38.6 percent or over NINE times better than the Dow.

All since the beginning of May!

If Wall Street fund managers could perform, say, 1.2 or 1.3 times better than the Dow, they’d be leaping for joy!

But these ETFs are doing far better — beating the Dow by 4.55, 5.45, 5.62, and 9.65 times, respectively.

In other words, for each $10,000 in gains earned by investors in the average Dow stock, these four ETFs have delivered $45,500, $54,500, $56,250, and $96,500, respectively.

This Is No Petty Change.
Nor Is It a One-Time Fluke.

With one exception, these same ETFs have continually delivered similar outperformance going back much further in time.

Take the period since the beginning of 2009, for example …

chart 4 ETFs Beating the Dow by a Mile

Let me start with the exception — the agricultural commodity ETF (DBA). From the first trading day of January 2009 through this past Friday, it’s up just 16 percent, underperforming the Dow by 10.7 percentage points.

But most of these commodities didn’t really start taking off until around the middle of this year. And now, especially in the wake of the Fed $600 billion quantitative easing announcement last week, their rise has accelerated dramatically.

Meanwhile, the other three ETFs leaped ahead of the Dow from the starting gate of 2009 — and never ONCE looked back:

  • The gold ETF (GLD) is up 58.2 percent. That’s more than DOUBLE the Dow’s performance.

Thank you, Larry Edelson and Claus Vogt, for reminding our readers so relentlessly — in article after article and video after video — about the vital importance of holding gold!

  • The Chile ETF (ECH) has soared 157.8 percent, or almost SIX times better than the Dow.

Thank you, Sean Brodrick, for traveling all the way to Chile last year and making it the focus of your presentation to Money and Markets readers in “Our 11 Startling Forecasts for 2010.”

  • The Indonesia ETF (IDX) has greatly trumped all four: It’s up 263.9 percent, or nearly TEN times better than the Dow.

Thank you, Ron Rowland, for introducing this ETF to our readers in your Money and Markets of September 24, 2009 … and AGAIN in your issue of January 7, 2010 (not to mention all the times before and since).

And thank you, Tony Sagami for trekking to Jakarta last year and telling all our readers attending our video gala event (transcript in Money and Markets) that Indonesia would be “one of the three best performing stock markets in 2010.”

Heck! Even including the one underperformer among the four, investors would still have wound up with an average gain of 124 percent since 2009 — 4.64 times better than the Dow during the same period.

Is It Too Risky or Too Late to Get This
Kind of Stupendous Outperformance?

If you had to count exclusively on Mr. Bernanke’s money printing program, perhaps.

Yes, he promises he will pursue it to the bitter end, and he certainly has been going to great lengths in the last few days to justify his actions — editorials, speeches, and more.

And yes, if he stays on this current path, he will probably blow past the $600 billion mark he’s committed to so far.

Still, we don’t think it’s prudent to depend on the madness of any one central banker, no matter how powerful — and bull-headed — he may be.

That’s why our editors like to recommend strictly investments that not only benefit from Fed policy … but are ALSO propelled by sustainable growth in demand — from investors, from strong economies, and from powerful fundamental forces that transcend money printing.

That’s the case for our four favorite ETFs I’ve covered here today.

That’s why our editors cited above have been recommending them and continue to do so.

That’s also why Monty Agarwal has used these same ETFs (among others) for my $1 million portfolio. For more details on this aspect, see the new video presentation he just uploaded late Friday, available for your immediate viewing by clicking here.

Good luck and God bless!

Martin

Related posts:

  1. Beating the Dow by More Than Six to One!
  2. Three Ways into South America with ETFs
  3. Goldman Sachs and ETFs

Read more here:
4 ETFs Beating the Dow by a Mile

Commodities, ETF, Mutual Fund, Uncategorized

How Fully-Transparent Active ETFs Are Being Managed Effectively

November 8th, 2010

The daily transparency required of actively-managed ETFs in the US has been one of the main selling points of these new products, while at the same time being probably the biggest hurdle discouraging many active managers from embracing this relatively new structure. Since they were approved in 2008 by the SEC, actively-managed ETFs in the US have been required by regulation to disclose all their portfolio holdings publicly, with a 1-day lag. In other words, before markets open every day, every portfolio manager behind an Active ETF has to disclose what his/her holdings were at the end of the previous day.

Regulatory Justification

From a regulatory standpoint, this transparency requirement makes sense. Shares of exchange-traded funds are ultimately a claim on the underlying basket of securities held by the fund. This means that the price of the ETF shares should represent the value of the underlying holdings in the fund. The market makers help maintain that relationship by arbitraging between the ETF shares and the underlying securities if there is a significant deviation between the value of the two. From the SEC’s standpoint, for the market makers to do this job effectively, they need to know what those underlying holdings are, in the absence of other information, so that they can assess whether the value of the ETF shares is indeed in-line with the value of the underlying.

Since actively-managed ETFs represent an actively-managed fund where, unlike index funds, the portfolio manager could make daily holdings changes, this translates into a daily transparency requirements. Gary Gastineau, Principal at ETF Consultants, spoke to us in a recent interview with ActiveETFs | InFocus, saying that, “The SEC, for very understandable reasons, is reluctant to permit a non-transparent fund to trade at an intraday price. If there is no information on the composition of the portfolio out there – there will be no information on intraday values”.

Manager Concerns

The daily transparency results in concerns from active managers of their strategy bring front-run and also of the overall portfolio strategy being copied as a way to avoid the management fee.

Front-running is not a problem if the portfolio managers are able to finish all their desired trades within a day. If they can do that, then any changes to the portfolio will be completed by the time the “new” portfolio is disclosed before market open on the following day.

However, in situations where portfolio manager is unable to complete his/her trading program within a single day and changes take several days or weeks to implement, front-running becomes a possibility. This is because an observer would be able to see that a manager is building or reducing a position by comparing the disclosed portfolio from two separate days. If the manager still has to continue building or reducing the same position, then that trade could be front-run by the observer. Of course, to the outside observer, there is no guarantee that the manager has not already finished a particular change in holding. So there is some degree of risk involved for people trying to front-run the manager, but with enough traders “guessing” the changes, trading programs that run beyond a day have the potential to be affected.

Completing trades within a single trading day would be harder especially if funds become large, relative to the market they operate in or if they operate in small, less liquid markets like emerging market bonds or equities. Referring to the daily disclosure requirement affecting active managers, Patrick Daugherty, Partner at Foley & Lardner, in an interview with us said that, “There’s no doubt it discourages some of them because sophisticated and active traders whom I speak to, who have been known to do other things that require capital and human resources, have told me that this is the reason they have not gone into this field”.

Other concerns also revolve around the entire portfolio being copied by investors/traders who can just replicate the portfolio disclosed and avoid paying the management fee all together. This is a much broader concern compared to individual trades being front-run.

How Existing Managers Are Dealing With It

Having talked about all these concerns, it’s important to see that there are 32 actively-managed ETFs now listed in the US, according to the Active ETFs Database. Each of these funds has launched and is operating successfully with the daily disclosure requirement in place. So how are some of these funds dealing with the issue?

1. Utilizing A Fund-of-Funds Approach

One of the ways that managers behind Active ETFs have dealt with this is by utilizing a fund-of-funds approach and investing exclusively through ETFs, instead of individual securities. Funds such as the AdvisorShares’ Dent Tactical ETF (DENT: 20.81 0.00%) and Mars Hill Global Relative Value ETF (GRV: 24.74 0.00%), use this approach. Each of these funds discloses all the underlying ETFs that they hold from day to day. It is much harder for a trader to benefit from front-running trades in ETFs than in individual securities. This is because the value of the underlying ETF shares, unlike individual stocks and bonds, is not dependent of the supply and demand of the ETF shares, but instead on the underlying securities of that ETF. As such, the price of that underlying ETF will not be affected significantly if someone traded a large block of shares in the ETF just before the portfolio manager. Also, the managers generally utilize high volume ETFs which makes any one market player insignificant relative to the total activity in that ETF.

2. Utilizing Market-on-Close (MOC) Trading

Another method used by managers to reduce the market impact of completing trades in a day is to utilize the higher liquidity available at market-on-close, instead of trading intraday. AER Advisors, which is the sub-advisor to two PowerShares’ Active ETFs – Active AlphaQ Fund (PQY: 27.6301 0.00%) and Active Alpha Multi-Cap Fund (PQZ: 18.85 0.00%), utilizes this approach by focusing all their trades at MOC instead of trading throughout the day. This means that the portfolio manager receives whatever the closing price is for their orders and also benefits from the liquidity which is usually much higher at MOC. David O’Leary, CIO at AER Advisors, spoke to us recently as well, and explained, “In our case, we’re doing market on close and I’ve found that small changes in the portfolio are much better than continually trading during the day”. O’Leary has been managing PQY and PQZ since April 2008 and added that he no longer has concerns resulting from the transparency of the portfolio, even though he believes the potential for front-running still exists. “I was concerned about the transparency issue but having been managing it for a couple of years now, I really am not concerned about it at all”, said O’Leary.

3. ETF Convenience Justifies Expense

When it comes to investors copying the entire portfolio to avoid the management fee, there are those managers who believe that is just not cost effective for investors to replicate the portfolio and “follow along”. Paul Hrabal, President CIO of U.S. One, and also the portfolio manager behind One Fund (ONEF: 27.37 0.00%) mentioned this in an interview, saying that “If you think about it, if you have 5 ETFs and you’re going to rebalance it and you’re going to put in new money maybe 4 times a year, to make those incremental trades for 5 different ETFs, depending on where your brokerage account is, could end up being much more costly than paying us the 35 basis points. Consider a $10,000 investor, they’re going to pay us $35 a year extra to do it for them versus doing it themselves. In most people’s view, that’s not going to be enough of a cost that they’re going to want to do it themselves”.

In fact, Hrabal encourages investors who’d rather implement the portfolio strategy themselves to look at their holdings and read their methodology. His reasoning is that he believes the majority of investors would rather opt for the convenience of holding the entire portfolio through a single fund rather than monitoring disclosures for changes regularly.

ETF

Three ETFs To Play Amazon And Remain Diversified

November 8th, 2010

As technology companies continue to generate cash and hoard it, some, like Amazon (AMZN) are looking at acquiring others to broaden their current offerings paving the road to prosperity for the Internet HOLDRs (HHH) the Retail HOLDRs (RTH) and the PowerShares NASDAQ Internet (PNQI).

According to insiders, Amazon, which was sitting on cash and short-term securities of $5.9 billion at the end of September, is currently nearing an agreement to buy Quidsi Inc., owner of Diapers.com and Soap.com.    Furthermore, the Seattle based online retailer recently bought Woot.com, a site that offers a daily discounted item and has agreed to purchase BuyVIP, a fashion site, which will expand its presence in Europe. 

The acquisition of Quidsi Inc., will enable Amazon to focus to penetrate a market of parents who have young children that use diapers and offer the ability to have this necessity delivered directly to the consumers front door.   Additionally, the acquisition will take out a competitor in the e-commerce space making Amazon that much stronger. 

At the end of the day, it appears that Amazon is utilizing its cash reserves to acquire firms, lessen competition, strengthen its market share in the e-commerce space and compete with retail giants Wal-Mart (WMT) and Target (TGT).

As noted earlier, some ways to play Amazon and remain diversified include:

  • Internet HOLDRs (HHH), which allocates 40.23% of its assets to Amazon, while also giving ample exposure to eBay (EBAY) and Yahoo (YHOO).
  • Retail HOLDRs (RTH), which allocates 11.44% of its assets to Amazon and also includes Wal-Mart and Target in its top holdings.
  • PowerShares NASDAQ Internet (PNQI), which allocates 8.65% of its assets to Amazon and gives ample exposure to Google (GOOG) and Chinese Internet search engine giant Baidu (BIDU).

Disclosure: No Positions

Read more here:
Three ETFs To Play Amazon And Remain Diversified




HERE IS YOUR FOOTER

Uncategorized

Chart of the Week: Andrews Pitchfork View of SPX

November 8th, 2010

I occasionally feature charts with an Andrews Pitchfork in my subscriber newsletter and I am always surprised by how favorable the reaction is. I am not sure why this is the case, but my hunch is that part of the reason has to do with the relative rarity of Andrews Pitchfork charts.

So…in thinking about the week’s market activity and searching for a fresh approach to evaluating the recent movements in stocks, I elected to take a Neptunian approach with the Andrews Pitchfork below.

This week’s chart of the week incorporates four years of weekly SPX bars in order to capture the full extent of the fall from the 2007 highs to the 2009 lows in order to put the recent rise in perspective.

As the chart shows, the Andrews Pitchfork has captured almost perfectly the slope (at least as shown on the semi-log scale below) of the rally in stocks over the course of the last ten weeks. Note that in order for the Andrews Pitchfork to continue to be relevant, stocks will have to continue to rise at their recent rate in order to stay above the bottom prong, which means that looking forward, this graphic will likely have a short half-life.

In a general sense, pitchforks can be a valuable tool for evaluating the strength and sustainability of continuation moves. The slope of the current strikes me as unsustainable, but it will be interesting to see how long the current trend can last.

Related posts:

Uncategorized

100-Years of the Ever-Disintegrating Dollar

November 7th, 2010

Ben Bernanke, Alan Greenspan, a Goldman Sachs Managing Director – a fitting invitee — and others descended upon Jekyll Island, Georgia, for the weekend to celebrate the Fed’s founding.

The immensely powerful and secretive institution, which has the exclusive reins on the US money supply, is coincidentally recognizing the occasion with another round of quantitative easing to the tune of $600 billion. Is the election going to help change things? Well… you can form your own opinion on that as you take a look at the clip below, which came to our attention via a Daily Bail post on the Fed celebrating a century of domination.

100-Years of the Ever-Disintegrating Dollar originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
100-Years of the Ever-Disintegrating Dollar




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

SPX’s Running Correction, Gold’s Setup, Oil Explodes!

November 7th, 2010

The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered.

Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.

The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.

Extreme Trend Trading Analysis

Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).

Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead.

SPX Running Correction

Since early September the equities market has been on fire. In late September the market was extremely toppy looking and trading at key resistance levels from prior highs convincing a lot of traders to take a short position. But instead of a correction the market surged and has since continued to grind its way up week after week.

This rising choppy price action can be seen two ways:
1. As a rising wedge with a blow off top (Bearish)
2. Or as a Running Consolidation (Bullish)

The running consolidation happens when buyers are abundant picking up more shares on every little dip. Overall looking at the intraday price action you will see market shakeouts as it tries to buck traders out before it continues higher. This choppy looking market action if not read correctly looks extremely bearish to the novice trader and the fact the market is so overbought it easily convinces them to take short positions. This choppy action is just enough to wash the market of weak positions before starting another run up.

All that said, both a blow off rising wedge and a running correction are very bullish patterns for a period of time. Again I cannot state it enough, trade with the trend and the key moving averages.

Gold Shines On The Daily Chart

The gold story is straight forward really… Trend is up, quantitative easing is back in action and that is helping to list gold and silver prices. Key moving averages have turned back up and gold closed at a new high which shows strength.

Golden Rocket

With another round of quantitative easing just starting and gold making another new high last week there is a very good chance gold stocks will rocket higher in the coming 8 months. I have been following Millrock Resources Inc. because of the team involved with this company. A breakout to the upside here could post some exciting gains if you take a look at the chart and see where the majority of volume has traded over the years along with the bullish chart patterns (Cup & Handle/Rising Wedge) with strong confirming volume. From 84 cents to the $3.50 area there should not be many sellers other than traders slowing taking profits on the way up.

Crude Oil Breaks Out Of Cup

Crude oil has been dormant the past few weeks even though the US Dollar has plummeted. But last week’s news on more QE was enough to send oil higher. The surge took oil prices straight to the 2010 highs as expected and blew past my first target of $86.00 per barrel. I figure it will consolidate here for a while until we see if the dollar bottomed last week or is just testing the breakdown level.

Weekend Trading Conclusion:

In short, the market has played out exactly as we planned and all four of our positions are deep in the money. As we all know the market goes in waves in both price and for trade setups. The past couple weeks were great for getting into trades and now the market is running in our direction. It will take a few days for the market to stabilize (pullback or pause) before we could get anther round of trade setups. Keep position sizes small as the market remains overbought and a sharp correction could happen at any time. Until then, keep trading with the trend.

Disclaimer: I own shares of SPY and MRO.V

Get My Daily Pre-Market Trading Videos, Daily Updates & Trade Alerts Here: www.TheGoldAndOilGuy.com

Chris Vermeulen

Read more here:
SPX’s Running Correction, Gold’s Setup, Oil Explodes!




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities

A Personal Story with Huge Profit Implications

November 7th, 2010

Larry Edelson

Larry here, with a personal story that may help you understand just how explosive the right investments can be in this new world of money printing gone wild.

It’s why a lot of our readers are making so much money in this environment. And it’s why the new presentation Martin and Monty just uploaded to the Web is so darn timely. (Click here to view it before markets open tomorrow.)

Here’s my story: Fourteen months ago, I bought a new home here in Thailand. The other day, I learned that my property has appreciated 20% in terms of the local currency. Plus, the dollar has fallen 20% against the Thai Baht.

Combined, that means my investment has gained a whopping 40% — in just 14 months.

But please understand. I’m not recommending you fly out to Bangkok to buy real estate. I’m just trying to make an important point — that we are in an environment of explosive profits in all of the asset classes we’ve been recommending: Emerging markets. Foreign currencies. Precious metals. Natural resources.

The key driver: U.S. dollar is collapsing. And the Fed is doing everything in its power to accelerate its decline! Think the Fed’s $600 billion of newly printed money is big? Think it’s going to trash the dollar? Ha! That’s just their first down payment.

Normally, the Fed’s money printing would NOT be good news for other countries because the falling dollar makes it harder for their exports to compete. So as you might expect, all the politicians here in Asia are publically complaining that the dollar’s going down too fast.

But the truth is, they’re doing nothing about it! Why? Because all those newly created dollars are flooding into Asia right now: Pushing emerging market stocks higher … precious metals higher … farm prices higher … and more!

Needless to say, local companies are loving it. Investors are loving it. And how can you blame them? The fact of the matter is that doing nothing in these kinds of markets is probably the biggest threat of all to your wealth!

THIS is why I’ve been urging you all along to diversify in all five major asset classes. With the Fed now printing money like there’s no tomorrow — and with the $600 billion it says it’s printing only the tip of the iceberg needed to get the U.S. economy going again …

We’re looking at massive asset re-inflation across the board. World stocks … gold and the other precious metals … bonds … and of course commodities — especially food — are ALL set to deliver huge gains in the months ahead!

Monty Agarwal — the renowned hedge fund manager who’s investing Dr. Weiss’ $1 million “Rapid Growth” account — has already invested in these areas.

He just posted a brand-new presentation to help you grab YOUR share of the huge profit potential in these markets.

The goal of this presentation: To show you how to get the most mileage out of the tremendous new wealth that the Fed’s money printing is creating right now in gold, silver and platinum … foreign currency ETFs … emerging markets and more.

Click this link to view it before markets start taking off again, possibly as early as tomorrow morning!

Best wishes,

Larry Edelson

Related posts:

  1. Personal Finance Corner
  2. New home sales at 1963 levels, but that’s only part of the story
  3. Profit from the Falling Dollar With ETFs

Read more here:
A Personal Story with Huge Profit Implications

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

Economic Recovery: The View From Bernanke’s Helicopter

November 6th, 2010

This week, the world caught a glimpse of what Henry Hazlitt might have called the “seen” – the primary, most conspicuous consequence of a preposterous economic policy. Of course, it is the “unseen,” what comes next, that we ought to be worried about.

We are referring here to the dawning of the QE2 era. In the shadow of the midterm elections, Federal Reserve Chairman Ben “full steam ahead” Bernanke announced the second round of quantitative easing, or, for us non econo-scholars, “money printing.”

In a nutshell, Bernanke committed the Fed to purchase $600 billion in Treasuries over the next 8 months. In addition, those nasty mortgage securities the Fed gobbled up during operation QE1 will continue to be rolled over into Treasuries. All in, the total price tag comes to $875 billion brand spankin’ new dollars…with the option to open the spigots further should inflation (the CPI version) come in under what the Fed deems as “healthy.”

Markets rejoiced over the news, sending the major indexes up 2…3…4%. Gold rallied to within $3 of the $1,400 per ounce mark yesterday. Silver leapt out of the gates too…as did just about everything else priced in dollars. Oil made a charge towards $90 per barrel and the “ags,” already on a blistering run this year, continued to soar.

Behind the scenes, the dollar took it firmly on the chin. Our mates over at The 5 provided the following chart, showing the once-mighty greenback’s response to Bernanke’s systematic currency debasement:

Quantitative Easing

The dollar is now more or less at parity with the Canadian loonie (CAD), the Aussie dollar (AUD) and the Swiss franc (CHF).

But not everyone was pleased with the Fed’s magic monetary potion.

Brazil’s central bank president, Henrique Meirelles, said “excess liquidity” in the US economy is creating “risks for everyone.” The Chinese, who hold an uncomfortably large quantity of ever-depreciating dollars, were equally miffed. Vice Foreign Minister Cui Tiankai said, “many countries are worried about the impact of the policy on their economies.” Tiankai went on to say that the US “owes us some explanation on their decision on quantitative easing.”

Bernanke defended his position to a group of college students in Jacksonville, Florida, on Friday. “Our first objective, the first goal that we have, is to meet our mandate to get price stability and maximum employment in the United States,” he said. “A strong US economy, a recovering economy, is critical not just for Americans but it’s also critical for the global recovery.”

Has Bernanke stumbled upon the ultimate formula for wealth everlasting? Has the man who once said he would drop money from helicopters if the need arose cracked the code to eternal, effortless prosperity? Just print money and be happy?

“If this were true,” ventured Bill Bonner earlier this week in his essay “Plumbers Crack”, “it was a giant step forward for humanity, at least equal to discovering fire, creating Facebook or blowing up Nagasaki. Jesus Christ multiplied loaves and fishes. But He had something to work with. The Federal Reserve multiplies zeros…creating money – out of nothing at all. If it can really do the trick, we are saved. The legislature can go home. It no longer needs to worry about raising taxes or allocating public resources. Government can now buy all the loaves and fishes it wants.  And give every voter a quart of whiskey on Election Day.”

Readers may feel a healthy welling of skepticism here. To be sure, a strong economy, a recovering economy, is important…but debasing the nation’s currency won’t get you there. If a country could grow rich and prosperous by simply allocating printed money to troubled sectors of its economy, Zimbabwe would be the jewel of the African continent and there would be a statue of Gideon Gono, her former central banker, in Harare’s town square. If the Weimar Republic had been able to make WWI reparations in 50 billion mark notes, the world may have avoided the unmitigated catastrophe of WWII. And, to belabor the point, if the Romans were allowed to finance their foreign escapades by simply handing out I.O.U.s, Edward Gibbon’s classic, The Decline and Fall of the Roman Empire, might seem a little odd on the bookshelf of history.

For the moment, the markets have awarded Bernanke’s stimulus plans a vote of confidence. That is the immediate, seen, effect. Like an athlete on steroids, they are looking to break records, to rewrite their own history books. The Fed has them off to a flying start, but pretty soon the effect of the drug will wear off. Reality will kick in. It is then that the “unseen” effects of trying to cheat the system will come into plane view. The global economy, built on the back of a strong, stable world currency, will once again come to realize that history makes no excuses and does no man any favors.

Regards,

Joel Bowman
for The Daily Reckoning

Economic Recovery: The View From Bernanke’s Helicopter originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Economic Recovery: The View From Bernanke’s Helicopter




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Buy These Beaten Down Shares and Then Watch Them Soar

November 6th, 2010

Buy These Beaten Down Shares and Then Watch Them Soar

So many stocks are having a great year. Oil refiner Sunoco (NYSE: SUN), for example, has shot up more than +47%. Southern Copper (NYSE: SCCO) has spiked +38% and its competitor Freeport-McMoRan Copper & Gold (NYSE: FCX) has gained about +27%. Many broad indexes are looking good, too, like the Russell 2000, which has risen +16%, and the S&P 500, up almost +11%.

Yet I'm going to suggest you buy a stock that's been doing just the opposite. It's down almost -20% this year, -23% off its one-year high and -39% shy of its five-year peak. With shares of so many other companies posting big gains, why should you bother considering this firm?

Investors have bid down the company's stock over concern about reduced demand for one of its key products, which accounts for more than half its sales. But I believe the setback is short-lived and the stock will soon be delivering well above-average returns. From its current price of about $29 a share, it could return an average of +17% to +27% a year for the next few years or more. In absolute terms, it should rise by +90% to +150% from now through 2015.

For one thing, so many of us rely on this firm even if we do take it for granted. Its software loads every time we boot up, and most of us have used that software to create, print or send files. The company has long been entrenched in the market for software used to produce content for the Internet, TV and print media, and it's expanding into new high-growth areas.

I'm referring to Adobe Systems (Nasdaq: ADBE). Investors have been punishing its stock because of slipping sales for its flagship Creative Suite (CS) software that artists, desktop publishers and others use for design and illustration. The latest version, CS5, drove a +37% increase in fiscal third quarter sales to nearly $550 million at Adobe's Creative Solutions division. Adobe expects the division's revenue to be roughly the same in the fourth quarter, again with CS5 as the main driver.

The problem: At current levels, Creative Solutions' revenue appears to be tailing off from its $571 million peak in the fourth quarter of 2007, when CS3 generated the lion's share. The concern is that, from here on out, it'll be progressively more difficult to sell each new upgrade, causing sales of that crucial product line to continue eroding — hence this year's poor stock performance.

It's a valid concern, but management isn't just going to sit back and watch it happen. They're already aggressively pursuing other avenues and recently made a key acquisition, announcing on October 29th that Adobe bought Swiss software maker Day Software Holding for $250 million. Day's CQ5 online marketing and communications platform should be a profitable addition to the stalwarts that make up Adobe's CS package, such as Photoshop, Acrobat, Illustrator and Flash Player.

Also, on September 15th of last year, Adobe began moving into the rapidly growing field of web analytics — the measurement of website traffic and activity — by acquiring Omniture, a firm specializing in that area. Omniture already accounts for about 10% of Adobe's total revenue (which should hit about $3.7 billion by year's end).

Established products still have plenty of earning potential, too, provided Adobe continues to provide high-quality updates. Flash Player, for example, is the foundation for YouTube and many other video websites. Acrobat and Flash Player combined are on more than 600 million PCs and other computers. And once people have learned how to use them, they're not usually that quick to switch to competing software.

I therefore agree with projections for revenue growth at Adobe of +10% per year and earnings growth of +12% to +14% annually, on average, through 2015. That's with all the potential headwinds like competition from rivals such as Microsoft (Nasdaq: MSFT), any issues with the ongoing integration of Omniture, and progressively greater difficulty selling CS upgrades.

Action to Take –> If you've got cash and a spot in your portfolio for a high-quality, established software firm, buy Adobe for its market-beating return potential. Importantly, main rival Microsoft probably won't be able to compete like it could if it didn't constantly have to fend off antitrust complaints from competitors and government officials.

Also, I haven't heard of any notable problems with the integration of Omniture other than its CEO resigning last July, less than a year after Adobe acquired the company. Overall, the integration seems to be going smoothly and hasn't saddled Adobe with any financial burdens it can't handle.


– Tim Begany

Tim Begany has worked at several financial planning and investment advisory firms. He also holds a Series 65 investment consultant license. Read more…

Disclosure: Neither Tim Begany nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: Tim Begany
Buy These Beaten Down Shares and Then Watch Them Soar

Read more here:
Buy These Beaten Down Shares and Then Watch Them Soar

Uncategorized

Buy These Beaten Down Shares and Then Watch Them Soar

November 6th, 2010

Buy These Beaten Down Shares and Then Watch Them Soar

So many stocks are having a great year. Oil refiner Sunoco (NYSE: SUN), for example, has shot up more than +47%. Southern Copper (NYSE: SCCO) has spiked +38% and its competitor Freeport-McMoRan Copper & Gold (NYSE: FCX) has gained about +27%. Many broad indexes are looking good, too, like the Russell 2000, which has risen +16%, and the S&P 500, up almost +11%.

Yet I'm going to suggest you buy a stock that's been doing just the opposite. It's down almost -20% this year, -23% off its one-year high and -39% shy of its five-year peak. With shares of so many other companies posting big gains, why should you bother considering this firm?

Investors have bid down the company's stock over concern about reduced demand for one of its key products, which accounts for more than half its sales. But I believe the setback is short-lived and the stock will soon be delivering well above-average returns. From its current price of about $29 a share, it could return an average of +17% to +27% a year for the next few years or more. In absolute terms, it should rise by +90% to +150% from now through 2015.

For one thing, so many of us rely on this firm even if we do take it for granted. Its software loads every time we boot up, and most of us have used that software to create, print or send files. The company has long been entrenched in the market for software used to produce content for the Internet, TV and print media, and it's expanding into new high-growth areas.

I'm referring to Adobe Systems (Nasdaq: ADBE). Investors have been punishing its stock because of slipping sales for its flagship Creative Suite (CS) software that artists, desktop publishers and others use for design and illustration. The latest version, CS5, drove a +37% increase in fiscal third quarter sales to nearly $550 million at Adobe's Creative Solutions division. Adobe expects the division's revenue to be roughly the same in the fourth quarter, again with CS5 as the main driver.

The problem: At current levels, Creative Solutions' revenue appears to be tailing off from its $571 million peak in the fourth quarter of 2007, when CS3 generated the lion's share. The concern is that, from here on out, it'll be progressively more difficult to sell each new upgrade, causing sales of that crucial product line to continue eroding — hence this year's poor stock performance.

It's a valid concern, but management isn't just going to sit back and watch it happen. They're already aggressively pursuing other avenues and recently made a key acquisition, announcing on October 29th that Adobe bought Swiss software maker Day Software Holding for $250 million. Day's CQ5 online marketing and communications platform should be a profitable addition to the stalwarts that make up Adobe's CS package, such as Photoshop, Acrobat, Illustrator and Flash Player.

Also, on September 15th of last year, Adobe began moving into the rapidly growing field of web analytics — the measurement of website traffic and activity — by acquiring Omniture, a firm specializing in that area. Omniture already accounts for about 10% of Adobe's total revenue (which should hit about $3.7 billion by year's end).

Established products still have plenty of earning potential, too, provided Adobe continues to provide high-quality updates. Flash Player, for example, is the foundation for YouTube and many other video websites. Acrobat and Flash Player combined are on more than 600 million PCs and other computers. And once people have learned how to use them, they're not usually that quick to switch to competing software.

I therefore agree with projections for revenue growth at Adobe of +10% per year and earnings growth of +12% to +14% annually, on average, through 2015. That's with all the potential headwinds like competition from rivals such as Microsoft (Nasdaq: MSFT), any issues with the ongoing integration of Omniture, and progressively greater difficulty selling CS upgrades.

Action to Take –> If you've got cash and a spot in your portfolio for a high-quality, established software firm, buy Adobe for its market-beating return potential. Importantly, main rival Microsoft probably won't be able to compete like it could if it didn't constantly have to fend off antitrust complaints from competitors and government officials.

Also, I haven't heard of any notable problems with the integration of Omniture other than its CEO resigning last July, less than a year after Adobe acquired the company. Overall, the integration seems to be going smoothly and hasn't saddled Adobe with any financial burdens it can't handle.


– Tim Begany

Tim Begany has worked at several financial planning and investment advisory firms. He also holds a Series 65 investment consultant license. Read more…

Disclosure: Neither Tim Begany nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: Tim Begany
Buy These Beaten Down Shares and Then Watch Them Soar

Read more here:
Buy These Beaten Down Shares and Then Watch Them Soar

Uncategorized

5 Great Stocks Under $10

November 6th, 2010

5 Great Stocks Under $10

There's a balance between performance and stability when it comes to stock prices. Equities priced under $5 per share can offer huge percentage returns, but are generally volatile. Stocks priced more than $10 are generally more predictable, but offer a muted upside. In between $5 and $10 though, stocks offer the best of both worlds. Here are five sub-$10 stocks to consider today…

1. Boise Inc. (NYSE: BZ): Paper and forestry stocks have been one of the market’s recent-but-quiet big winners, and Boise Inc. has been blazing the trail every step of the way. Shares are up about +46% in the past 12 months, while the forestry indices are up about +28% in the same period. The overall market, by comparison, has only gained about +14% in the same timeframe.

While such outperformance has often been followed by matching underperformance in the past year and a half, for paper stocks — and Boise in particular — a continued uptrend may be more than merited.

Skyrocketing materials costs through 2007 nearly brought the paper and corrugated box industry to its knees. For better or worse, the recession that began at the end of that year solved the problem. Though materials costs were up on a year-over-year basis for Boise last quarter, they’re still well under 2007’s stunning levels, despite the mild economic rebound since then. The result? Boise just posted record-breaking third-quarter operating income of $0.44 per share, and the sustainable balance between materials costs and paper demand remains intact.

2. Aircastle LTD (NYSE: AYR): While it may feel too late to tap into the revival of the airline industry, it’s not. The back door is still open, via Aircastle.

The company arranges sales and leases of commercial jet aircraft, which was admittedly a lousy business to be in through 2009 while air passenger traffic was declining. In 2010, a light appeared at the end of the tunnel. Though bottom lines haven’t actually rebounded yet, but they’re expected to in 2011 on a year-over-year as well as on a sequential basis.

Besides, with a trailing as well as a projected price-to-earnings ratio (P/E) just above 8.0, it’s not like value is a question mark with Aircastle.

3. American Axle & Manufacturing (NYSE: AXL): The initial reaction to last quarter's earnings for American Axle & Manufacturing wasn’t a kind one. Despite topping analyst estimates of $0.39 by actually bringing home $0.52 per share, the company dropped from a high of $10.15 to an ultimate low of $8.84 thanks to a “disappointing” full-year revenue forecast in the $2.2 billion to $2.3 billion range.

While the actual numbers may have been shy of estimates, valuations here are also teetering on being ridiculous. American Axle shares are priced at a mere 8 times earnings on a trailing basis in the last four quarters, and even if earnings shrink per current EPS estimates of $1.35 for 2011 (which isn’t likely), the stock’s still priced at about seven times forward-looking forecasts. The market seems to have caught its mistake though; the stock has bounced back to $9.96.

Bottom line: this stock has far more upside potential packed into its future.

4. Celestica (NYSE: CLS): A stock that rallies on good news makes sense. A stock that rebounds despite bad news may not make much sense, but in many regards it speaks volumes more about how investors view the company.

After the electronics manufacturer announced last week it would likely be posting income under analysts’ estimates of $0.25 per share for the current quarter, shares fell from $8.84 to a low of $7.96 — for half of a day. Now it’s even higher than where it started that journey.

So the company countered the bad news with a rebound catalyst? No. It’s just that Celestica is (1) still consistently growing earnings on a year-over-year basis, and (2) is still bargain-priced at less than 10 times 2011’s anticipated earnings.

5. Excel Maritime Carriers (EXM): Finally, there’s a difference between “based in Greece” and “dependent on the Greek economy.” Excel Maritime Carriers is only guilty of the former, but the stock has taken several lumps in the past few months, suggesting investors are assuming the latter.

That’s not to say the company escaped the global recession unscathed — Excel Maritime did indeed dip into the red throughout most of 2009. In the last three quarters though, operating profits have not only improved, they’ve been positive, and the company appears to be coming out of the storm. In fact, the company topped last quarter’s EPS estimate of $0.10 with a per-share profit of $0.11.

While one — or even three — solid quarters don’t mean everything, the plausibly forecasted (2011) P/E of 8.8 goes a long way toward that end.

Action to Take –> Investors don't have to choose strictly between stability and performance. The narrow band of stocks priced between $5 and $10 offer a very rewarding balance of both. These five names are among the picks of that particular litter, and could serve as a well-balanced addition to almost any portfolio.


– James Brumley

P.S. –

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