4 Reasons to Buy the Bank Stock Everyone Hates

November 18th, 2010

4 Reasons to Buy the Bank Stock Everyone Hates

Imagine hearing this from your financial advisor: “I've got a great stock for you. It's down -20%, the company lost $7 billion this year, and its reputation stinks.”

You'd probably get up and walk out the door, right?

But what if, just before you slammed it shut, the advisor managed to blurt out, “Wait, this stock is on sale for half price and could more than double your money”?

You just might go back, sit down and listen to the rest of the pitch.

And you'd hear a bunch of things, some good, some bad. The bad part, in addition to the tanking stock and hefty losses, is the company helped precipitate the financial crisis and got billions of dollars in bailout money.

More recently, it admitted to signing off on thousands of foreclosures without even reviewing them — the “robo-signing” scandal you've probably heard about. The recession spurred such an avalanche of loan defaults that some big-name banks resorted to simply pushing foreclosure documents through just to keep up, regardless of whether foreclosure was actually warranted.

The culprit I'm referring to is the largest consumer bank in terms of assets in the United States, Bank of America (NYSE: BAC).

After all the bad press, it would be easy just to dismiss BofA as unworthy. But since the point of investing is to make money, I suggest looking past the ugliness for a moment and considering why this might actually be a great stock for the long-term.

I've got four good reasons for you…

1. The company's turning over a new leaf. New President and CEO Brian Moynihan has been trying to salvage BofA's image since taking over the company in January 2009. For example, he has publicly backed financial industry reform and consumer protections, openly agreed that banks shouldn't be considered “too big to fail” and looked for ways to improve service, such as scaling back penalty fees. He has also become known for consulting frequently with front-line employees to get first-hand reports of what customers are saying.

Regarding the robo-signing situation, Barbara Desoer, President of Mortgage, Home Equity and Insurance Services at BofA, has said the bank will improve its foreclosure procedures by doing a better job of gathering accurate information on each case and of selecting and monitoring the law firms it uses to process foreclosures. In the meantime, it's reviewing and resubmitting affidavits for more than 100,000 foreclosures it had previously initiated.

2. There's still big earnings potential. During the next five years, analysts predict BofA will post annual earnings growth of +9% to +13% from sources like the company's wealth management services through Merrill Lynch, its investment banking division and, of course, its gigantic deposit base and loan business. The strong presence of the company's consumer banks in high-growth areas like California, Florida and Texas will help earnings immensely. I should also note that the earnings estimates I've reported incorporate a -$2 billion decrease in annual revenue starting in the third quarter of 2011, which

Uncategorized

Negative Divergences On The Dollar Forecasted Trend Change

November 18th, 2010

Last week I warned that the US dollar was reaching three-year lows and to expect a dollar bounce. The dollar has bounced higher as risk aversion has returned with Ireland on the verge of needing a bailout and China raising interest rates to combat rising inflation. There are growing concerns of the Fed needing to raise interest rates ahead of schedule. The previous euphoria in commodities appears to be waning and the technicals are demonstrating the fundamental challenges facing commodities.

There are negative divergences of momentum and price on both the dollar and gold to indicate counter trend reversals may be developing. I have alerted to be 100% defensive since the November 9 high volume reversal. (See Fed Creates Parabolic Move in Gold, Silver)

Understanding momentum gives a trader clues that the trend may be changing ahead of the actual trend breakdown. Divergences in momentum signals the enthusiasm may be receding and the attitude of the crowd is changing.  At the beginning of a new trend there is a lot of excitement, but as the price continues higher demand weakens to the point where a major reversal occurs. Just like when you throw a ball into the air, the initial force wears off until it reverses direction and falls back. This loss of upward or downward momentum is being signaled in both the dollar and gold. Momentum changes trend often ahead of price.

A new low was made in the US dollar after the election and the Federal Reserve’s QE2 announcement. However, the momentum didn’t confirm the new low made as it made a higher low on the RSI and MACD. This signals that the downtrend may be ending and that may have been an intermediate low.

Negative divergence between momentum and price forecast further weakness for gold. Unexpected by many, the dollar is appearing to be the winner of the QE2 trade. Jesse Livermore said, “The smarter they are the easier the market fools them.” At the top in gold and the bottom in the dollar, the smart and easy trade was the wrong trade. Being long the dollar at a time when $900 billion is poured into the market is highly counterintuitive.

The dollar has bounced higher as risk aversion has returned with Ireland on the verge of needing a bailout and China raising interest rates to combat rising inflation. There are growing concerns of the Fed needing to raise interest rates ahead of schedule as Treasury prices have had a bearish reaction. The previous euphoria in commodities appears to be waning and the technicals are demonstrating the fundamental challenges facing commodities as momentum deteriorates.

The dollar broke through its five-month downtrend as investors are concerned of an Ireland bailout and emerging markets raising rates to combat imported inflation. Now we’re seeing political opposition to the Fed’s last move to pump $900 billion into the economy.

Gold at the time of the QE2 decision was perceived as indestructible as investors worried about a currency devaluation war. As targets were being reached I issued a sell signal and cautioned about getting caught up in the euphoria. I had the four-word famous response, “This Time Is Different.” It was at this point in the precious metals rally where the rain clouds began getting dark beginning in late July. As bottoms and tops take time to form, patience is required when issuing a sell or buy signal. A top is now being confirmed as trendlines are being broken.

Read more here:
Negative Divergences On The Dollar Forecasted Trend Change

Commodities

Join Corey Thursday Morning for Popped Stops Live Webinar

November 18th, 2010

I wanted to invite you to Thursday morning’s Live-Cast Webinar of my presentation at the Traders Expo in Las Vegas.

The folks at the MoneyShow / Traders Expo will be broadcasting my presentation at 11:00 EST, 10:00 CST entitled:

Popped Stops:  How to Profit When Good Trades Go Bad

Registration is free and you’ll be able to attend live from your home if you couldn’t make it to the Expo in Las Vegas.

Details below:

I will be defining the concept, discussing “Feedback Loops,” identifying the Four Components of All Trades (and how that plays into Popped Stops), and how to identify and profit from this market reality.

I’ll go over three specific “stories” of how Popped Stops played out on the larger frame and what signal that sent market participants – who were open to the new information.

Thank you to everyone at the Money Show and Traders Expo for making this available!

Corey Rosenbloom, CMT

Read more here:
Join Corey Thursday Morning for Popped Stops Live Webinar

Uncategorized

Lesson How the 30min Chart Helps Intraday Trading 5min

November 18th, 2010

While today’s intraday trading session didn’t offer stellar opportunities in the low-volatility session, those who were watching the 30min SPY chart in conjunction with the 5-min or 1-min SPY charts had a distinct information advantage today.

Let’s take a look at why that was so and learn a lesson in how to trade lower frames using higher timeframes as a reference.

Keep in mind that while this discussion is focused on the SPY as the reference, the same lesson is true in the @ES futures or in related stocks with similar patterns.

Keeping the lesson as simple as possible (as in, no discussion of other indicators), let’s focus on price and the 20 period Exponential Moving Average (an average – along with the 50 EMA – I use on all my charts).

The basic lesson is that in the context of a downtrend, price often retraces up to the 20 or 50 EMAs and then turns back down to form a new swing leg lower which is a tradeable opportunity (place the stop just above the EMA in case it breaks).

Price can form key resistance into these EMAs, turn lower, and then fall.  While that’s great to know on a higher timeframe (the same is true for the daily chart), how might it benefit you to take this new knowledge, arm yourself with it, and then trade more efficiently on a lower timeframe?

Glad you asked!

Let’s now drop to the 5-min chart of November 17th’s session to see how to trade very short-term (scalping even) with this 30min structure in mind.

While you’d be much more specific in real-time, (as in, knowing exactly what the 20 EMA was on the 30-min chart), I’ve replicated it slightly on the 5-min chart (you can’t super-impose higher timeframe EMAs in most charting platforms – you’ll just have to keep it open on a separate chart).

That being said, keeping it simple, each time price rallied up into the 20 EMA and formed a corresponding reversal candle, it was a short-sale opportunity.

The AGGRESSIVE entry is to execute as close as possible to the price reference level you expect to hold as resistance.

The CONSERVATIVE entry is to wait for a reversal candle to form then for price to break the low of that reversal candle (in each opportunity, a reversal candle formed – mostly spinning tops).

You can also combine structure to see that the 5-min upper Bollinger Band was roughly equivalent to the 20 EMA on the 30-min chart.  That alone is a lesson in dual-timeframe confluence.

The stop goes just above the prior swing high and/or the 20 EMA resistance level (remember to give a few cents of leeway in for slight breaches that then break down).

The target is usually the lower Bollinger Band on the 5-min chart or a prior swing low on the 5-min chart.

These are very quick, active ’scalp’ type trades that – while they don’t look like much – they were decent opportunities for quick profits on a day that really didn’t give much other opportunities.

Each was good for about 30 cents – which is about $300 on 1,000 shares, or about 3 points if you traded the same set-up in the @ES futures (which was about $150 per contract, as one contract is equal to 500 shares SPY).

Granted, it’s not much to write home about, but nothing to sneeze at either.

Take this lesson and incorporate it on future days and in individual stocks – incorporating a higher timeframe “idea” that you execute with corresponding entry signals on the lower/intraday frame.

This is the type of logic and explanations I detail to members in the “educational” section of the Idealized Trades Report each evening.

The more you see these setups and the more you learn these lessons with real-world examples, the better you’ll be able to recognize then act on real-time opportunities as they develop intraday.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
Lesson How the 30min Chart Helps Intraday Trading 5min

Uncategorized

Lesson How the 30min Chart Helps Intraday Trading 5min

November 18th, 2010

While today’s intraday trading session didn’t offer stellar opportunities in the low-volatility session, those who were watching the 30min SPY chart in conjunction with the 5-min or 1-min SPY charts had a distinct information advantage today.

Let’s take a look at why that was so and learn a lesson in how to trade lower frames using higher timeframes as a reference.

Keep in mind that while this discussion is focused on the SPY as the reference, the same lesson is true in the @ES futures or in related stocks with similar patterns.

Keeping the lesson as simple as possible (as in, no discussion of other indicators), let’s focus on price and the 20 period Exponential Moving Average (an average – along with the 50 EMA – I use on all my charts).

The basic lesson is that in the context of a downtrend, price often retraces up to the 20 or 50 EMAs and then turns back down to form a new swing leg lower which is a tradeable opportunity (place the stop just above the EMA in case it breaks).

Price can form key resistance into these EMAs, turn lower, and then fall.  While that’s great to know on a higher timeframe (the same is true for the daily chart), how might it benefit you to take this new knowledge, arm yourself with it, and then trade more efficiently on a lower timeframe?

Glad you asked!

Let’s now drop to the 5-min chart of November 17th’s session to see how to trade very short-term (scalping even) with this 30min structure in mind.

While you’d be much more specific in real-time, (as in, knowing exactly what the 20 EMA was on the 30-min chart), I’ve replicated it slightly on the 5-min chart (you can’t super-impose higher timeframe EMAs in most charting platforms – you’ll just have to keep it open on a separate chart).

That being said, keeping it simple, each time price rallied up into the 20 EMA and formed a corresponding reversal candle, it was a short-sale opportunity.

The AGGRESSIVE entry is to execute as close as possible to the price reference level you expect to hold as resistance.

The CONSERVATIVE entry is to wait for a reversal candle to form then for price to break the low of that reversal candle (in each opportunity, a reversal candle formed – mostly spinning tops).

You can also combine structure to see that the 5-min upper Bollinger Band was roughly equivalent to the 20 EMA on the 30-min chart.  That alone is a lesson in dual-timeframe confluence.

The stop goes just above the prior swing high and/or the 20 EMA resistance level (remember to give a few cents of leeway in for slight breaches that then break down).

The target is usually the lower Bollinger Band on the 5-min chart or a prior swing low on the 5-min chart.

These are very quick, active ’scalp’ type trades that – while they don’t look like much – they were decent opportunities for quick profits on a day that really didn’t give much other opportunities.

Each was good for about 30 cents – which is about $300 on 1,000 shares, or about 3 points if you traded the same set-up in the @ES futures (which was about $150 per contract, as one contract is equal to 500 shares SPY).

Granted, it’s not much to write home about, but nothing to sneeze at either.

Take this lesson and incorporate it on future days and in individual stocks – incorporating a higher timeframe “idea” that you execute with corresponding entry signals on the lower/intraday frame.

This is the type of logic and explanations I detail to members in the “educational” section of the Idealized Trades Report each evening.

The more you see these setups and the more you learn these lessons with real-world examples, the better you’ll be able to recognize then act on real-time opportunities as they develop intraday.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
Lesson How the 30min Chart Helps Intraday Trading 5min

Uncategorized

That’s One Surefire Way to Boost Spending

November 18th, 2010

Two reports just released, the Deloitte Consumer Spending Index and the Booz & Company consumer spending report, both arrive at the same conclusion… US shoppers keep holding back and putting off big purchases.

If Bernanke has his way, this will change. His master plan of gently stoking inflation is intended, in part, to show consumers — the hard way — that if they don’t rush out and buy what they can today those very same goods will be more expensive tomorrow. Unfortunately, not everyone has the same perks as Mrs. Bernanke.

That’s One Surefire Way to Boost Spending 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:
That’s One Surefire Way to Boost Spending




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

Bonds, Dollar, SP500 & Gold Have Changed Direction – Are You Ready?

November 18th, 2010

There have been some major trend changes recently and it looks as though more investments are about to follow. The real question though is… Are You Ready To Take Advantage Of It?

It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.

Below are a few charts showing some possible money making trade ideas in the weeks ahead.

TBT 20+ Treasury Note Inverse Fund

This fund moves inverse to the price of the 20yr T.N’s also known as bonds. Looking at the chart you can see the recent reversal which took place. We had a great entry point shortly after this reversal took place using my low risk setup strategy.

Falling bond prices are considered to have a negative impact on equities because it implies that interest rates may start rising which means more investors will pull money out of stocks and put that money into a safe interest earning investment. You will typically see bonds change direction before equities. That being said the chart below is an inverse fund, so when this bond fund goes up, it means actually indicates bond yields are falling. I will admit these inverse funds really throw my brain for a loop at time… I prefer the good old days, buying long and selling short… so simple and clean…

UUP – US Dollar Index Fund

This fund moves with the dollar and allows equities traders to take advantage of currency trading. This chart below shows a possible trend reversal for the dollar. If the dollar continues to rally then it’s also a good sign that interest rates could be rising in the near future and it also means more downward pressure on equities.

SDS – Inverse SP500 Index Fund

These bear funds make it possible for traders and investors to profit from a falling market using a regular buy and sell strategy. They can also be traded in retirement accounts making them a golden investment for those willing to play a falling market.

This chart moves the same as the SP500 index only flipped. As the SP500 falls this fund rallies.

The strategy we just used to play the recent rally is the same strategy we will use during a bear market, but instead of trading the SPY, we are trading this fund.

It is important to note that while bull market rallies tend to drag out; bear markets typically have faster movements. Fear is much more powerful than greed which is why the stock market drops quicker than it goes up.

GLD – Gold Exchange Traded Fund

Gold also looks to be topping and could actually be starting to form a Head & Shoulders reversal pattern.

Mid-Week Trend Trading Conclusion:

In short, understanding inter-market analysis is crucial for traders/investors to know. Not understanding how they affect one other can be very costly in the long run. Remember that volatility and volume rise together at the end of a trend. You can view the recent volatility index (VIX) to see its price action also. Volatility changes also make for great low risk options trades if options are your thing. Focus on trading with the trend, bounces in a down trend are typically muted or trade sideways making is very difficult to make money buying in a falling stock market.

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

Chris Vermeulen

Read more here:
Bonds, Dollar, SP500 & Gold Have Changed Direction – Are You Ready?




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, ETF, OPTIONS

Bonds, Dollar, SP500 & Gold Have Changed Direction – Are You Ready?

November 18th, 2010

There have been some major trend changes recently and it looks as though more investments are about to follow. The real question though is… Are You Ready To Take Advantage Of It?

It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.

Below are a few charts showing some possible money making trade ideas in the weeks ahead.

TBT 20+ Treasury Note Inverse Fund

This fund moves inverse to the price of the 20yr T.N’s also known as bonds. Looking at the chart you can see the recent reversal which took place. We had a great entry point shortly after this reversal took place using my low risk setup strategy.

Falling bond prices are considered to have a negative impact on equities because it implies that interest rates may start rising which means more investors will pull money out of stocks and put that money into a safe interest earning investment. You will typically see bonds change direction before equities. That being said the chart below is an inverse fund, so when this bond fund goes up, it means actually indicates bond yields are falling. I will admit these inverse funds really throw my brain for a loop at time… I prefer the good old days, buying long and selling short… so simple and clean…

UUP – US Dollar Index Fund

This fund moves with the dollar and allows equities traders to take advantage of currency trading. This chart below shows a possible trend reversal for the dollar. If the dollar continues to rally then it’s also a good sign that interest rates could be rising in the near future and it also means more downward pressure on equities.

SDS – Inverse SP500 Index Fund

These bear funds make it possible for traders and investors to profit from a falling market using a regular buy and sell strategy. They can also be traded in retirement accounts making them a golden investment for those willing to play a falling market.

This chart moves the same as the SP500 index only flipped. As the SP500 falls this fund rallies.

The strategy we just used to play the recent rally is the same strategy we will use during a bear market, but instead of trading the SPY, we are trading this fund.

It is important to note that while bull market rallies tend to drag out; bear markets typically have faster movements. Fear is much more powerful than greed which is why the stock market drops quicker than it goes up.

GLD – Gold Exchange Traded Fund

Gold also looks to be topping and could actually be starting to form a Head & Shoulders reversal pattern.

Mid-Week Trend Trading Conclusion:

In short, understanding inter-market analysis is crucial for traders/investors to know. Not understanding how they affect one other can be very costly in the long run. Remember that volatility and volume rise together at the end of a trend. You can view the recent volatility index (VIX) to see its price action also. Volatility changes also make for great low risk options trades if options are your thing. Focus on trading with the trend, bounces in a down trend are typically muted or trade sideways making is very difficult to make money buying in a falling stock market.

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

Chris Vermeulen

Read more here:
Bonds, Dollar, SP500 & Gold Have Changed Direction – Are You Ready?




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, ETF, OPTIONS

A Cluster of Support

November 18th, 2010

Last week in Looking for SPX Support Levels, I introduced a chart which highlighted two areas in which stocks had traded in a narrow range for about two weeks before breaking the deadlock and moving higher. I referred to these two areas as congestion areas and highlighted them in red ovals in the cart below.

The higher of the two congestion areas, which spans roughly SPX 1175-1185, represents what I consider to be the first of two tipping points. Last week I described 1175-1185 as a “line of demarcation between a minor pullback and a bearish counter trend.” So far this area of congestion has managed to muster sufficient support to halt the decline, but has yet to inspire enough buying to turn stocks back upward.

The chart below updates the two congestion areas through today’s closing data. Note that the 50-day moving average of 1167 is about to come into play as well, even as technical factors take a back seat to issues in Europe and China.

Related posts:


Uncategorized

A Cluster of Support

November 18th, 2010

Last week in Looking for SPX Support Levels, I introduced a chart which highlighted two areas in which stocks had traded in a narrow range for about two weeks before breaking the deadlock and moving higher. I referred to these two areas as congestion areas and highlighted them in red ovals in the cart below.

The higher of the two congestion areas, which spans roughly SPX 1175-1185, represents what I consider to be the first of two tipping points. Last week I described 1175-1185 as a “line of demarcation between a minor pullback and a bearish counter trend.” So far this area of congestion has managed to muster sufficient support to halt the decline, but has yet to inspire enough buying to turn stocks back upward.

The chart below updates the two congestion areas through today’s closing data. Note that the 50-day moving average of 1167 is about to come into play as well, even as technical factors take a back seat to issues in Europe and China.

Related posts:


Uncategorized

4 ETFs to Benefit from the World’s Nuclear Power Needs

November 18th, 2010

Since typical retail investors can’t take custody in Uranium and other fissile materials (nor would they want to), the next best thing to play on the future need for nuclear power would be in the companies involved in nuclear power generation and nuclear material mining companies.

(URA) – Last week saw the launch of the most concentrated Uranium-themed ETF, Global X Uranium.  With an expense ratio of 0.69%, URA will seek to capitalize on demand for the nuclear material itself by way of holding shares in leading miners.  URA has holdings in just 23 companies, with over 3/4 of the companies located in Canada, Australia and the US.  Top holdings include Cameco (CCJ), Uranium One (UUU.TO) and Paladin (PDN.TO).  These names are surely familiar to investors seeking the best Uranium plays in the past, but with this newly launched ETF, there’s now a relatively low-cost option to diversify risk across companies and regions.  URA is not off to a very good start, off about 10% since launch, following the downtrend in commodities miners globally.

(NLR) - The Market Vectors Nuclear Energy – With an expense ratio of 0.63%, NLR seeks to replicate the DAX Global Nuclear Energy index which holds some of the larger generation names you’re probably familiar with in addition to miners like Exelon (EXC), Constellation Energy (CEG) as well as some lesser known names like Fronteer Gold (FRG) and USEC (USU).  NLR is up 2% YTD.

(PKN)PowerShares Global Nuclear Portfolio ETF – With an expense ratio of 0.75%, PKN seeks to replicate the return of the WNA Nuclear Energy Index – focused more so on Uranium miners.  Primary holdings include Areva (CEI.PA), Shaw Group (SHAW) and surprisingly, Thermo Fisher (TMO) given their expertise in instrumentation for the nuclear industry. PKN is up 7% YTD.

(NUCL) - iShares S&P Global Nuclear Energy Index – With an expense ratio of 0.48%, this ETF holds 24 companies, but has a heavy reliance on Japan and the US.  In recent trading, the volumes have been quite thin, thus leading to a high bid/ask ratio.  Given the other more liquid ETFs, this one may not be worth pursuing.  NUCL is off 2% YTD.

The macro case for nuclear power generation and materials procurement is strong.  Much of the world is emerging from obscurity into modern living and fossil fuels simply cannot satiate the appetite of the new demand coming on line.  Green energy and renewable energy are unproven and can’t handle the capacity needed as well.  While it may be years until governments and societies start to overcome the “not in my back yard” mentality, reactors are already going up rather quickly in China and Europe is more reliant upon nuclear energy than many assume as well.  Since markets anticipate future demand years in advance, it may be high time to consider nuclear ETFs as a secular alternative investment.  This map demonstrates global status of nuclear reactor use and new builds:

source: Wikipedia

With the launch of URA and the recent fanfare associated with the new Rare Earth Metals ETF, the demand for common equity shares of miners especially, should remain strong.  It shouldn’t come as a surprise to continue to see more similar ETFs launched and funds flow in that direction as we see the bond bubble bursting, gold losing its luster, and deficit fears rattling markets.  Who knows, if the global economic expansion in the developing world continues and fossil fuels become further constrained, perhaps nuclear will be the Black Swan Investment of this decade?

Disclosure: No position in any ETFs or equities referenced in this article.

Commodities, ETF

4 ETFs to Benefit from the World’s Nuclear Power Needs

November 18th, 2010

Since typical retail investors can’t take custody in Uranium and other fissile materials (nor would they want to), the next best thing to play on the future need for nuclear power would be in the companies involved in nuclear power generation and nuclear material mining companies.

(URA) – Last week saw the launch of the most concentrated Uranium-themed ETF, Global X Uranium.  With an expense ratio of 0.69%, URA will seek to capitalize on demand for the nuclear material itself by way of holding shares in leading miners.  URA has holdings in just 23 companies, with over 3/4 of the companies located in Canada, Australia and the US.  Top holdings include Cameco (CCJ), Uranium One (UUU.TO) and Paladin (PDN.TO).  These names are surely familiar to investors seeking the best Uranium plays in the past, but with this newly launched ETF, there’s now a relatively low-cost option to diversify risk across companies and regions.  URA is not off to a very good start, off about 10% since launch, following the downtrend in commodities miners globally.

(NLR) - The Market Vectors Nuclear Energy – With an expense ratio of 0.63%, NLR seeks to replicate the DAX Global Nuclear Energy index which holds some of the larger generation names you’re probably familiar with in addition to miners like Exelon (EXC), Constellation Energy (CEG) as well as some lesser known names like Fronteer Gold (FRG) and USEC (USU).  NLR is up 2% YTD.

(PKN)PowerShares Global Nuclear Portfolio ETF – With an expense ratio of 0.75%, PKN seeks to replicate the return of the WNA Nuclear Energy Index – focused more so on Uranium miners.  Primary holdings include Areva (CEI.PA), Shaw Group (SHAW) and surprisingly, Thermo Fisher (TMO) given their expertise in instrumentation for the nuclear industry. PKN is up 7% YTD.

(NUCL) - iShares S&P Global Nuclear Energy Index – With an expense ratio of 0.48%, this ETF holds 24 companies, but has a heavy reliance on Japan and the US.  In recent trading, the volumes have been quite thin, thus leading to a high bid/ask ratio.  Given the other more liquid ETFs, this one may not be worth pursuing.  NUCL is off 2% YTD.

The macro case for nuclear power generation and materials procurement is strong.  Much of the world is emerging from obscurity into modern living and fossil fuels simply cannot satiate the appetite of the new demand coming on line.  Green energy and renewable energy are unproven and can’t handle the capacity needed as well.  While it may be years until governments and societies start to overcome the “not in my back yard” mentality, reactors are already going up rather quickly in China and Europe is more reliant upon nuclear energy than many assume as well.  Since markets anticipate future demand years in advance, it may be high time to consider nuclear ETFs as a secular alternative investment.  This map demonstrates global status of nuclear reactor use and new builds:

source: Wikipedia

With the launch of URA and the recent fanfare associated with the new Rare Earth Metals ETF, the demand for common equity shares of miners especially, should remain strong.  It shouldn’t come as a surprise to continue to see more similar ETFs launched and funds flow in that direction as we see the bond bubble bursting, gold losing its luster, and deficit fears rattling markets.  Who knows, if the global economic expansion in the developing world continues and fossil fuels become further constrained, perhaps nuclear will be the Black Swan Investment of this decade?

Disclosure: No position in any ETFs or equities referenced in this article.

Commodities, ETF

Investments, Pensions and Government Guarantees

November 17th, 2010

Back to Venezuela. Yesterday, we noted that old Hugo is promising to give investors guaranteed returns from government owned industries (including those recently expropriated from private owners).

Well, if you want to make a lot of money by investing in foreign markets you should put your money where blood flows in the streets. And maybe Venezuela is getting close. It is the most mismanaged economy in the Western hemisphere – with the possible exceptions of Haiti and Cuba. In the past 12 years, it has exported nearly half a trillion dollars’ worth of oil. Yet, by all indications, the Venezuelan economy is falling apart.

Chavez has not been able to deliver on his promises. Key indicators – poverty rate, literacy, etc. – have generally improved, but not as much as in Mexico and other Latin American countries. And expropriations and continued rabble-rousing has scared off foreign investment.

Voters seemed to turn against Chavez in last month’s legislative elections, so the man has turned on the heat. More expropriations. More threatening rhetoric. More nonsensical policies.

We have not followed prices on the Venezuelan stock market, but brave investors might want to have a look.

But hey, if Hugo Chavez can guarantee investment returns, why not the US government?

It’s coming, dear reader.

Once again, we are grateful for the opportunity to see in real time such spectacularly stupid things as must make the gods weep. Or laugh.

When governments become desperate for money, they take it wherever they can get it. It’s probably just a matter of time before they begin to eye the American retirement system. They’ve been living on “excess” Social Security contributions for many years. That is, people paid more into the system than they got out of it. Until this year. Now the system is in deficit.

So, they’re bound to look at 401(k) and other retirement programs.

It was reported in the press that there was a proposal to seize these private retirement plans. Not so. But on October 7th, Teresa Ghilarducci, a professor at the New School for Social Research in New York, proposed to Congress that they introduce a program where workers could “swap their 401(k) assets…for a Guaranteed Retirement Account…that would be composed of the equivalent of government bonds that pay a 3% real return.”

How about that? A guaranteed return of 3%. Wait, is that AFTER inflation? Hmmm. Yep. That’s what the proposal calls for.

Another crackpot idea…but just wait. The feds will pitch it as a solution to the problem of negative returns in 401 k plans. After inflation, deflation, maybe even hyperinflation, and a bear market…these GUARANTEED returns will sound like a good deal. A guaranteed 3% ain’t bad.

This is, effectively, what Argentina did. It nationalized private pension plans to protect retirees! Could the US do it too? You bet.

Regards,

Bill Bonner
for The Daily Reckoning

Investments, Pensions and Government Guarantees 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:
Investments, Pensions and Government Guarantees




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

Investments, Pensions and Government Guarantees

November 17th, 2010

Back to Venezuela. Yesterday, we noted that old Hugo is promising to give investors guaranteed returns from government owned industries (including those recently expropriated from private owners).

Well, if you want to make a lot of money by investing in foreign markets you should put your money where blood flows in the streets. And maybe Venezuela is getting close. It is the most mismanaged economy in the Western hemisphere – with the possible exceptions of Haiti and Cuba. In the past 12 years, it has exported nearly half a trillion dollars’ worth of oil. Yet, by all indications, the Venezuelan economy is falling apart.

Chavez has not been able to deliver on his promises. Key indicators – poverty rate, literacy, etc. – have generally improved, but not as much as in Mexico and other Latin American countries. And expropriations and continued rabble-rousing has scared off foreign investment.

Voters seemed to turn against Chavez in last month’s legislative elections, so the man has turned on the heat. More expropriations. More threatening rhetoric. More nonsensical policies.

We have not followed prices on the Venezuelan stock market, but brave investors might want to have a look.

But hey, if Hugo Chavez can guarantee investment returns, why not the US government?

It’s coming, dear reader.

Once again, we are grateful for the opportunity to see in real time such spectacularly stupid things as must make the gods weep. Or laugh.

When governments become desperate for money, they take it wherever they can get it. It’s probably just a matter of time before they begin to eye the American retirement system. They’ve been living on “excess” Social Security contributions for many years. That is, people paid more into the system than they got out of it. Until this year. Now the system is in deficit.

So, they’re bound to look at 401(k) and other retirement programs.

It was reported in the press that there was a proposal to seize these private retirement plans. Not so. But on October 7th, Teresa Ghilarducci, a professor at the New School for Social Research in New York, proposed to Congress that they introduce a program where workers could “swap their 401(k) assets…for a Guaranteed Retirement Account…that would be composed of the equivalent of government bonds that pay a 3% real return.”

How about that? A guaranteed return of 3%. Wait, is that AFTER inflation? Hmmm. Yep. That’s what the proposal calls for.

Another crackpot idea…but just wait. The feds will pitch it as a solution to the problem of negative returns in 401 k plans. After inflation, deflation, maybe even hyperinflation, and a bear market…these GUARANTEED returns will sound like a good deal. A guaranteed 3% ain’t bad.

This is, effectively, what Argentina did. It nationalized private pension plans to protect retirees! Could the US do it too? You bet.

Regards,

Bill Bonner
for The Daily Reckoning

Investments, Pensions and Government Guarantees 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:
Investments, Pensions and Government Guarantees




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

Buying Gold for Buoyancy as US the Credit Rating Sinks

November 17th, 2010

Alvaro Vargas Llosa is quoted in The Independent Institute’s newsletter, The Lighthouse, as saying that the new “$600 billion in 6 months” QE2 program (and $900 billion with re-investments) of the evil Federal Reserve is, “The biggest load of stinking monetary policy crap in the history of the United States, and we should all follow the lead of the Incredible Mogambo Guru (IMG) and buy gold, silver and oil in those few, rare moments when we are not Screaming Our Guts Out (SOGO) in anger at the Federal Reserve for its treachery, and likewise not Screaming Our Guts Out (SOGO) in fear of the inflationary horror that is guaranteed – guaranteed! – to befall us because this Federal Reserve monetary insanity is to – as ridiculous as it sounds – enable the despicable federal government to monstrously deficit-spend $2 trillion a year, every year from here on out, to enlarge its suffocating self and expand its long roster of dependents which total, currently, half the freaking population of the Whole Freaking Country (WFC), and thus will be constantly expanding the money supply as this new money pours into the economy at rates of growth even beyond the horrifying 14% rate that is happening right now, which is the raw feedstock of the ‘inflationary horror’ mentioned earlier in this very wonderful sentence of mine.”

Okay, I admit that he did not write that. I wrote that. And I lied when I said that he wrote it. And I wrote it because I am a pathetic loser who craves attention, and if I don’t get it, then I’ll lie to make other people look as stupid and crazy as I am.

Mostly, however, I wrote it mostly because I have sunk down to the clogged drains in the sub-basement of ethics, where my very soul rots from the anger, and the hatred, and the outrage, and the fear of a horrible, terrifying, inflationary “unknown” where all that is known is that it is unknown except for that it will be inflationary, and it will be horrible and terrifying in a sinister kind of non-specific way that makes it all the scarier.

And if you are one of those neo-Keynesian dorks who thinks that deflation is So, So Bad (SSB) that you would rather have inflation, then prepare to be instructed to the contrary, moron: Already commodities are rising 20%, 30% – and some more than 100% in the last year! – and soon these wholesale price increases will fully seep into retail prices, so that when you go to the grocery store, the place is crowded with mobs of looters and desperate, starving people, and things are on fire, and shots are ringing out, and all you wanted was some Italian bread and some milk, but they only had the un-sliced bread left, which means you have to slice it yourself, which is such a hassle, just adding to the overall misery, as you can probably imagine for yourself.

And it won’t stop, either, because the torrents of new money necessary to make inflation roar will not stop, as we see when we read what Mr. Llosa actually said. The quote was, “The United States is doing what every protectionist government does – trying to make its economy competitive by devaluing the currency, a perverse mechanism for making what comes in artificially expensive and what goes out artificially cheap.”

And with import prices rising, it will be highly inflationary since we already have a merchandise trade deficit of $57 billion, and a trade balance deficit of $621 billion over the last 12 freaking months!!

Mr. Llosa makes no mention of the use of double exclamation points ending the previous sentence or any of the many ramifications of such punctuation, and instead notes, “The many protests heard around the world on the eve of the G-20 meeting in South Korea signal the strong possibility that other major powers will eventually respond in kind.”

Perhaps like Dagong Global Credit Rating Co downgrading US debt from AA, to A+, and with a “negative outlook” commentary attached?

Then, from marketnews.com we learn that “Moody’s Investors Service upgraded the Chinese government’s bond rating to Aa3 from A1 and is maintaining its positive outlook.” Hahaha!

I was not surprised that nothing was reported about the bad news contained in the new report from the Mogambo Investors Service (MIS) that “Ah-oogah! Ah-oogah! Dive! Dive! This is an emergency bulletin to buy gold, silver and oil, as much as you can, as often as you can! Stragglers will be eaten alive by inflation, or maybe by ravenous wolves, or sharks, but eaten by something, nonetheless, and maybe all three!”

The only “good news” was found later in the MIS bulletin, where it read, “Those who do buy gold, silver and oil, as much as they can, as often as they can, will not be eaten, but will eat, and indeed wax prosperous while happily exclaiming, ‘Whee! This investing stuff is easy!’”

The Mogambo Guru
for The Daily Reckoning

Buying Gold for Buoyancy as US the Credit Rating Sinks 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:
Buying Gold for Buoyancy as US the Credit Rating Sinks




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

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