Trade 100 ETFs FREE at Ameritrade – Full List

October 10th, 2010

With pressure mounting amongst trading outfits to reduce commissions and offer free services and trading, Ameritrade has announced that it will now offer commission-free trading on 100 ETFs covering a broad spectrum of asset classes ranging from Emerging Markets and Commodities to Bonds and Select Sectors.  Being able to trade ETFs with no commissions can make certain strategies a success, especially when amounts traded are smaller – like how the market gains more on the first day of the month than the rest of the month combined (see ETF Strategy and data).  Here is the current list in one nice table as provided by Ameritrade (their table makes you click through several tabs to see all offerings – [source]):

AOA    iShares S&P Aggressive Allocation ETF

AOK    iShares S&P Conservative Allocation ETF

AOM    iShares S&P Moderate Allocation ETF

AOR    iShares S&P Growth Allocation ETF

IJH    iShares S&P MidCap 400 Index Fund

IJR    iShares S&P SmallCap 600 Index Fund

IJS    iShares S&P SmallCap 600 Value Index Fund

IVE    iShares S&P 500 Value Index Fund

IVV    iShares S&P 500 Index Fund

IWB    iShares Russell 1000 Index Fund

IWC    iShares Russell Microcap Index Fund

IWD    iShares Russell 1000 Value Index Fund

IWF    iShares Russell 1000 Growth Index Fund

IWN    iShares Russell 2000 Value Index Fund

IWO    iShares Russell 2000 Growth Index Fund

IWP    iShares Russell Midcap Growth Index Fund

IWS    iShares Russell Midcap Value Index Fund

IWV    iShares Russell 3000 Index Fund

MGK    Vanguard Mega Cap 300 Growth Index Fund

VB    Vanguard Small Cap ETF

VBK    Vanguard Small Cap Growth ETF

VBR    Vanguard Small Cap Value ETF

VIG    Vanguard Dividend Appreciation ETF

VO    Vanguard Mid Cap ETF

VOE    Vanguard Mid Cap Value ETF

VOT    Vanguard Mid Cap Growth ETF

VTI    Vanguard Total Stock Market ETF

VTV    Vanguard Value ETF

VUG    Vanguard Growth ETF

VXF    Vanguard Extended Market ETF

VYM    Vanguard High Dividend Yield Index Fund

RWO    SPDR Dow Jones Global Real Estate ETF

RWR    SPDR Dow Jones REIT Fund

VNQ    Vanguard REIT ETF

AGG    iShares Barclays Aggregate Bond Fund

BIV    Vanguard Intermediate Term Bond ETF

BLV    Vanguard Long Term Bond ETF

BND    Vanguard Total Bond Market ETF

BSV    Vanguard Short Term Bond ETF

BWX    SPDR Barclays Capital International Treas Bd ETF

CIU    iShares Barclays Intermediate Credit Bond Fund

CSJ    iShares Barclays 1-3 Year Credit Bond Fund

EDV    Vanguard Extended Duration ETF

GVI    iShares Barclays Intermediate Govt/Credit Bd Fd

ICI    iPath Optimized Currency Carry ETN

IEI    iShares Barclays 3-7 Year Treasury Bond Fund

ITM    Market Vectors Intermediate Municipal Index ETF

JEM    Barclays GEMS Index ETN

JNK    SPDR Barclays Capital High Yield Bond ETF

LQD    iShares iBoxx $ Inv Grade Corporate Bond Fund

MBB    iShares Barclays MBS Bond Fund

MUB    iShares S&P National Municipal Bond

PCY    PowerShares Emerging Markets Sovereign Debt Port

SHM    SPDR Nvn Barclys Cptl Shrt Trm Mncpl Bnd

SHY    iShares Barclays 1-3 Year Treasury Bond Fund

TFI    SPDR Nuveen Barclays Capital Municpl Bnd

TIP    iShares Barclays TIPS Bond Fund

TLT    iShares Barclays 20+ Year Treasury Bond Fund

VCIT    Vanguard Intermediate Term Corporate Bond ETF

VCLT    Vanguard Long Term Corporate Bond ETF

VCSH    Vanguard Short Term Corporate Bond ETF

VGIT    Vanguard Intermediate Term Government Bond ETF

VGLT    Vanguard Long Term Government Bond ETF

VGSH    Vanguard Short Term Government Bond ETF

VMBS    Vanguard Mortgage Backed Securities ETF

WIP    SPDR DB International Government Inflation Protected Bond ETF

AAXJ    iShares MSCI All Country Asia ex Japan Index Fund

ACWI    iShares MSCI ACWI Index Fund

BKF    iShares MSCI BRIC Index Fund

EFG    iShares MSCI EAFE Growth Index Fund

EFV    iShares MSCI EAFE Value Index Fund

EPI    WisdomTree India Earnings Fund

EWA    iShares MSCI Australia Index Fund

EWC    iShares MSCI Canada Index Fund

EWG    iShares MSCI Germany Index Fund

EWI    iShares MSCI Italy Index Fund

EWJ    iShares MSCI Japan Index Fund

EWP    iShares MSCI Spain Index Fund

EWQ    iShares MSCI France Index Fund

EWU    iShares MSCI UK Index Fund

EWX    SPDR S&P Emerging Markets Small Cap ETF

EWZ    iShares MSCI Brazil Index Fund

FEZ    SPDR EURO STOXX 50 ETF (Duplicate)

FXI    iShares FTSE/Xinhua China 25 Index Fund

GUR    SPDR S&P Emerging Europe ETF

GXC    SPDR S&P China ETF

ILF    iShares S&P Latin America 40 Index Fund

IOO    iShares S&P Global 100 Index Fund

RSX    Market Vectors Russia ETF

RWX    SPDR DJ International Real Estate ETF

SCZ    iShares MSCI EAFE Small Cap Index Fund

VEA    Vanguard Europe Pacific ETF

VEU    Vanguard FTSE All World ex US ETF

VGK    Vanguard European ETF

VSS    Vanguard FTSE All World ex US Small Cap ETF

VT    Vanguard Total World Stock ETF

VWO    Vanguard Emerging Markets ETF

DBC    PowerShares DB Commodity Index Tracking Fund

DBO    PowerShares DB Oil Fund

DJP    iPath Dow Jones-AIG Commodity Idx TR ETN

DPU    PowerShares DB Commodity Long ETN

If you can’t find the ETFs you trade in this list, check out these other ways to Trade ETFs Free.

Commodities, ETF, Real Estate

Recent Market Profile Insights about the SP500 SPY

October 9th, 2010

I was playing around with a new indicator in TradeStation that shows a similar style of Market Profile (Time, Price, Opportunity) charts and wanted to show the recent progression of the big move up recently in the S&P 500 (SPY).

Let’s take a look at the chart and see what the “profile” reveals:

(Click for larger image)

You’ll almost certainly need to click for the full-size image – as the chart image is large.

The first thing that jumped off the chart at me – in terms of “Market Profile” concepts – is the unique bounce-move up off the August lows.

Students of MP techniques will note that the “Value Area” (the vertical dark black line I highlighted) continuously rose during this bottoming-period.  This type of pattern is common at rotation price bottoms ahead of a big move – which is what we got.

MP Students would also note the “Excess” or rejection tails (highlighted) at the $114 level (the “Bs” and the “As”) which represent buyers rushing in to buy the ‘excess’ or long tail of the price extension lower that failed to generate lower prices.

A popular statement is:

“The market auctions lower to shut-off selling” – and in this case it did so with three ‘rejection’ tails.

Flash-forward through the rally – notice the Value Areas continued to climb – to the present.

Though other indicator charts show all sorts of bearish negative divergences, the profile=style chart above reveals a stable and rising Value Area in the context of the current price consolidation.

Whatever your bearish thoughts may be, that’s somewhat bullish from this chart perspective – value is rising.

Prior to our current stabilization and Value Area distribution and price rotation around the $116 level (in the SPY – 1,160 in the S&P 500), we had a similar multi-day Value Area stabilization region just under the $115 (1,150) area.

That was a known price resistance level that the market recently broke – and value is now congregating above that level.

So, unless we see a sudden price move back under the $115 (1,150) value area, the profile style chart may be hinting at even higher prices to come.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

(note – “Market Profile” is a registered trademark of the CME Group/CBOT)

Read more here:
Recent Market Profile Insights about the SP500 SPY

Uncategorized

Recent Market Profile Insights about the SP500 SPY

October 9th, 2010

I was playing around with a new indicator in TradeStation that shows a similar style of Market Profile (Time, Price, Opportunity) charts and wanted to show the recent progression of the big move up recently in the S&P 500 (SPY).

Let’s take a look at the chart and see what the “profile” reveals:

(Click for larger image)

You’ll almost certainly need to click for the full-size image – as the chart image is large.

The first thing that jumped off the chart at me – in terms of “Market Profile” concepts – is the unique bounce-move up off the August lows.

Students of MP techniques will note that the “Value Area” (the vertical dark black line I highlighted) continuously rose during this bottoming-period.  This type of pattern is common at rotation price bottoms ahead of a big move – which is what we got.

MP Students would also note the “Excess” or rejection tails (highlighted) at the $114 level (the “Bs” and the “As”) which represent buyers rushing in to buy the ‘excess’ or long tail of the price extension lower that failed to generate lower prices.

A popular statement is:

“The market auctions lower to shut-off selling” – and in this case it did so with three ‘rejection’ tails.

Flash-forward through the rally – notice the Value Areas continued to climb – to the present.

Though other indicator charts show all sorts of bearish negative divergences, the profile=style chart above reveals a stable and rising Value Area in the context of the current price consolidation.

Whatever your bearish thoughts may be, that’s somewhat bullish from this chart perspective – value is rising.

Prior to our current stabilization and Value Area distribution and price rotation around the $116 level (in the SPY – 1,160 in the S&P 500), we had a similar multi-day Value Area stabilization region just under the $115 (1,150) area.

That was a known price resistance level that the market recently broke – and value is now congregating above that level.

So, unless we see a sudden price move back under the $115 (1,150) value area, the profile style chart may be hinting at even higher prices to come.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

(note – “Market Profile” is a registered trademark of the CME Group/CBOT)

Read more here:
Recent Market Profile Insights about the SP500 SPY

Uncategorized

Global Food Crisis: 6.8 Billion Served…and Counting

October 9th, 2010

Paper is out; stuff is in. That’s what the markets are telling us right now. The dollar, that esoteric, floating abstraction upon which the financial world erects its sandcastle economies, plumbed a new seasonal low this week, with the dollar index flirting dangerously with its support level of 77. “Stuff,” as measured by the CRB Commodity Index, meanwhile, soared to within reach of the psychological 300-point milestone.

Indeed, everywhere we look, stuff is on the march.

Gold opened to another record above $1,365 on Thursday, then retraced a bit to around $1,345 as of this writing. Oil shot through $84 a barrel this week and copper busted the $3.75 mark, reaching ever closer to the 2008 high of $4.08. Not to be outdone, silver climbed to a fresh 30-year high, topping $23 per ounce by Friday morning.

The message from Mr. Market, in anticipation of the Fed’s QEII program (second round of quantitative easing – fancy jargon for “money printing”) is clear: Increasingly, investors are coming to prefer the sober, welcoming embrace of physical materials to the unrelenting, drunken currency abuse perpetrated by the world’s central bankers.

In actual fact, there’s not a whole lot that hasn’t been rallying in dollar terms lately…except, of course, the reputation of those responsible for destroying its credibility.

While the dollar index plummeted 12.4% from early June to the end of September – even as headlines persisted about a shaky euro – everything else has benefited. Our mates over at The 5 sketched up this neat little chart, which really puts the story in perspective:

Dollar Index vs. Other Indexes

One particularly notable – and worrying – component of the skyward global commodity trend can be found in the agricultural sector. The story here is part weak dollar and part supply-demand dynamic. Unlike metals or energy, however, the agricultural component of the commodity complex is not typically a “dollar diversification” tool for the emerging market’s growing middle classes, or for the 1.2 billion (according to UN data) hungry souls around the world. For them, food is a necessity, not an investment strategy. The demand for dietary staples, therefore, does not enjoy the same price elasticity as does, say, an iPod or a spiffy new electric can opener. And, as the global population swells to 9 billion by mid-century, you can bet this is a trend with marathon legs.

Partly due to this reality, farm commodities – or “ags” – have staged a remarkable rally this year.

Wheat, for its part, is climbing back toward its 2008 crises levels. Prices have risen some 75% since June as the Black Sea region suffers through the most severe heat wave in nearly half a century. The affected area ordinarily produces roughly one quarter of the entire global output. Consequently, experts forecast Russia’s harvest will come in around 60 million tonnes this year, well shy of the 75 million tonnes consumed domestically. Moscow has since implemented a ban on grain exports until late 2011.

Chris Weafer, chief economist at Uralsib Financial, recently told The Financial Times that, even allowing for the country’s emergency stockpile of 9.5 million tonnes, “We think Russia faces shortfall of 17 million tonnes and will have to import next year.”

Of course, supply shocks have been around as long as Mother Nature herself. Extreme weather patterns probably spawned the Biblical concept of the “seven fat years followed by seven lean years.” Droughts in Australia, floods in Pakistan, heat waves around the Black Sea and cold snaps across the south all collude to hinder global production, and have done, in one form or another, for millennia. But now, more than ever, global population growth and the emergence of the middle classes in developing markets are trimming that critical margin for error.

As Javier Blas reports in the FT, “…the most important underlying trend is the rise of emerging markets, where there are not only a growing number of mouths to feed, but where people with rising incomes want to eat higher-quality food – notably chicken, pork and beef. That in turn increases global demand for grain for animal feed.”

Corn, for example, is up more than 40% since June as global stock levels, with a “stock to usage ratio” of a paltry 12%, dipped to their lowest levels in almost four decades. Unfavorable weather patterns in the US kicked the rally off, but it was the revelation that China, feeding the fastest growing middle class on the planet, imported a record 432,000 tonnes in August that really kicked it into overdrive. This trend is all the more alarming, at least from a geopolitical perspective, when one considers that the US diverts a little over one third of its entire crop production to ethanol for fuel, a boondoggle that led one wry commentator to declare the program a blatant act of “unsustainable, government-sponsored food burning.”

To be sure, the hand of the state is always a dead weight on production, but when it comes to food, the matter quickly transforms from one of mere-to-moderate inconvenience to one of severe-to-apocalyptic life and death.

Moreover, if analysts like John Clemmow of UBS are correct, what’s on tap in the months to come could dwarf even the epic food crises of ’08.

“Clemmow maintains that despite riots and rationing at the time, there was no rice shortage in 2008,” relayed The 5 earlier this week. “The shortage two years ago was the result of governments panicking over supplies.”

But “Unlike in 2008,” says Clemmow, “there is now a possibility that with export bans in place, production problems in Pakistan and the strong suspicion that China and the Philippines will be importing in large quantities, we could be in for a fundamental squeeze.”

“Rice is the new iron ore,” Clemmow concludes, “and corn the new gold.”

As the food crises of 2008 illustrated all-too-clearly, the world’s dietary consumption habits seems to be approaching an important inflexion point, where a hungry emerging population literally eats into the market’s ability to absorb supply shocks. It would be foolish, and immoral, to blame the hungry for demanding their daily bread…and equally blind to assume they’ll ever be satisfied without it.

Regards,

Joel Bowman

For The Daily Reckoning

Global Food Crisis: 6.8 Billion Served…and Counting 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:
Global Food Crisis: 6.8 Billion Served…and Counting




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

China’s Currency War: Enemy #1 for Global Economy

October 9th, 2010

Bryan Rich

When Brazil’s finance minister said the world was in a currency war, it came as big news to many people — a surprising “new” economic threat. But there’s nothing new about a currency war. China has been waging a war — an economic war — with its currency for a long time.

Over the last 14 years, China’s economy has grown four times as fast as the U.S. economy, and it has quickly soared to become the world’s second-largest. The key to China’s success has been a weak yuan — it’s method of manipulating a sustained advantage over its competitors in global trade.

This strategy of manufacturing an artificially weak currency to corner the world’s export market has led to a massive imbalance in global trade. It was a key contributor to the current economic crisis, and it’s proving to be a key barrier to a sustainable global economic recovery.

Put simply, these global trade imbalances have proven a recipe for more frequent boom and bust cycles.

That’s why the G-20, the IMF, the OECD — all of the major institutions and central banks of the world have been harping on the importance of repairing global imbalances. And all along they’ve been speaking directly to China.

Yet after all of the negotiations, threats from U.S. Congress and concessions China is said to have made, it has managed to gain an even bigger trade advantage through the three years of global economic crisis!

Consequently, we’re seeing the rise in currency market interventions from some of China’s key trade competitors as a way to combat their damaging currency disadvantage.

This is a clear sign the team effort pledged by G-20 members to combat the economic crisis is falling apart …

Last March, when the G20 assembled during the depths of the worst economic crisis, they broke camp with a vow to fight the battle together — to act in coordination.

Central bankers slashed interest rates. Governments rolled out fiscal stimulus packages, and the world economy started producing what many thought was an impressive recovery.

But it turned out to be nothing more than a stimulus-induced flop.

Now leaders around the world are seeing the writing on the wall — a long period of deleveraging, littered with more economic pain and shocks. And the vow of coordination is giving way to every man for himself.

Growing Divisions

On September 15, the BOJ took a desperate move.
On September 15, the BOJ took a desperate move.

Japan stepped in last month to weaken the yen with its biggest daily intervention on record, buying more than $23 billion in the open market. Historically intervention in a major currency is a coordinated event, supported by other major central banks. But this time Japan went in alone.

South Korea, Thailand and Singapore have been consistently intervening to stem the tide of strength in their currencies in recent months.

And Brazil has been doing the same, plus tacking on additional taxes on foreign capital to deter the influx of hot money flooding through its borders — i.e. currency controls.

Take a look at the chart below and you’ll understand why …

chart1 Chinas Currency War: Enemy #1 for Global Economy

You can see the strong rise in Asian currencies over the past year — with one exception, the Chinese yuan. China’s manipulation of the yuan has consistently allowed it to corner the lion’s share of global exports.

But now its trade competitors are fighting back through currency manipulation of their own. Consider these growing responses to the weak yuan the early warning signs of a spreading …

Threat of Protectionism

I’ve said in past Money and Markets columns that ultimately, the rest of the world will have to choose action over diplomacy in dealing with China. And now we’re starting to see it.

The next steps will likely be imposing sanctions on China and trade restrictions on Chinese goods — an effort that is already progressing through Congress.

But the problem with protectionist activity is that it tends to bring about retaliation, and it becomes contagious. That’s exactly what happened in the Great Depression. And it’s what brought global trade to a standstill.

Today, with unemployment sustaining high levels, the political support to act is there. Many would think that “standing up to China, is standing up for us.”

With about 15 million Americans out of work, the demand for protectionism is soaring.
With about 15 million Americans out of work, the demand for protectionism is soaring.

Of course, when jobs are tight the perception by most workers towards globalization becomes more negative. And studies show that during these times, the number of people who favor the idea of higher tariffs on imported goods rises considerably.

As it becomes increasingly evident that China will not play ball on allowing its currency to appreciate to a fair value, geopolitical tensions are bound to elevate, and protectionism will likely follow.

And given the sovereign debt crisis that’s already underway, protectionism is yet another risk to the global economy that increases the probability of another bout with recession.

In fact, protectionism has historically put fragile economies in a deeper and more prolonged crisis …

Take a look at this chart of the S&P 500 from the Great Depression years. It gives you a clear understanding of why protectionism is so dangerous.

chart2 Chinas Currency War: Enemy #1 for Global Economy

You can see that the stock market topped in 1929 and fell 45 percent in just three months. Then, it had a sharp correction, recovering 47 percent from the November ‘29 low.

In June 1930, two U.S. Congressmen, Smoot and Hawley, championed a bill to slap a tariff on virtually every foreign good. And that was the catalyst for the second leg down … a massive plunge in the stock market and arguably the catalyst for the Great Depression.

As an investor, it’s always important that you anticipate plausible scenarios. If a China conflict scenario plays out, you can expect the outcome to be bad for global growth and bad for global financial markets.

Regards,

Bryan

P.S. I’ve been showing my World Currency Alert subscribers how to use exchange traded funds to profit from rising and falling currencies, like the Japanese yen, the Chinese yuan and the U.S. dollar. Click here to discover more.

Related posts:

  1. China’s Currency Manipulation: About to Cause a Global Explosion?
  2. China Has a Painful Surprise for the Global Economy
  3. Is China’s Currency Manipulation Coming to a Head?

Read more here:
China’s Currency War: Enemy #1 for Global Economy

Commodities, ETF, Mutual Fund, Uncategorized

This Hot IPO is Headed for Trouble

October 9th, 2010

This Hot IPO is Headed for Trouble

On a recent trip to Boulder, CO, I stood outside a Tesla Motors (Nasdaq: TSLA) showroom ogling its sports cars with lust in my heart. A few weeks later, when a Tesla roadster whooshed silently past me on a New York City street, my heart skipped a beat. Tesla makes the kinds of cars that auto enthusiasts lust after. Then again, I have a short attention span. Minutes later, a Porsche 911 zoomed past me with its inimitable throaty growl, and my lust was re-directed.

My fickle tastes highlight a real problem for Tesla. The company is aiming to crack two auto market niches, though success looks like a long shot in each. The car faces heady competition in a crowded sports car field, and the electric car market is also about to get crowded.

Investor message boards are filled with Tesla's vitriolic detractors and even more rabid supporters. So I won't weigh in as to whether Tesla builds the world's coolest cars or simply overpriced go-karts. The truth lies somewhere in between.

Others suggest that Tesla isn't a car company, so much as a technology development company. Hogwash. This is a car company, plain and simple, and investors need to focus on the economics of the auto industry. In this business, the odds of success are so overwhelming that it's impossible to see how Tesla will ever reach positive cash flow.

Volume is everything
Tesla wisely decided to first focus on a halo car, the Tesla Roadster. The company established its cred with the “money-is-no-object” crowd, as nearly 500 consumers paid six figure sums to be the first in the neighborhood to own an electric sports car. In the auto world, it's far easier to move down market than up market. Hyundai is trying to do so after many years of effort. Volkswagen tried with the Phaeton and failed miserably.

The down-market move: Tesla's niche market roadster will soon be joined by a more mass market sedan known as the “Model S.” And when it arrives in showrooms, possibly in 2012, it will represent clear advances over the Roadster in terms of mileage range and broad market appeal. But by 2012, the Model S may already be late to the game, as cars from Ford (NYSE: F), GM, Mitsubishi, Nissan, Mini, Toyota (NYSE: TM) and others peddle impressive electric cars as well. The key distinction is that those auto makers will be able to spread development costs among more cars and will handily undercut Tesla on price.

Going instead after the Volvo/BMW crowd instead isn't necessarily a bad thing, but it's simply unclear how Tesla can compete by building cars in the thousands while its rivals build cars by the tens or hundreds of thousands. The auto industry is all about scale, and no auto maker has ever been able to sell cars for less than $100,000 in volumes below 10,000 and been able to thrive. Just ask Saab or Hummer about that.

Tesla's supporters argue that its cars will be similar to luxury sedan rivals in terms of performance, durability and comfort, while also providing cutting edge electric vehicle technology. The company believes that power storage and management will be the game-changer. Tesla has been working on its core propulsion system for more than five years and expects to squeeze an increasing number of miles out of every watt that its power pack generates. That is also the goal of every other auto maker and battery technology in the world as well. And it's simply unclear how or why Tesla will end up with the best mouse trap.

Do the math
Once the Model S production lines are at full volume, Tesla believes it will generate 25% gross margins. To get there, the company has embarked on a range of cost reduction initiatives, when compared to the Roadster, which appears to have carried miniscule or negative gross margins. As a point of reference, Ford hasn't even cracked 15% gross margins since 2004.

What has happened since then? The auto industry has become awash in far too much capacity, and auto makers have had to compete much more aggressively on price. Even BMW hasn't generated 25% gross margins in a number of years. Porsche's gross margins exceed 40%, but that's with an average selling price on its cars in excess of $75,000. The Tesla Model S is expected to be priced closer to $50,000. And Porsche makes 75,000 to 100,000 cars a year. Tesla aims to ramp up annual production to just 20,000 units by 2013, so it will have to spread unit costs over a much smaller base.

Tesla also thinks that operating margins can exceed 10%, as operating expenses will be well below industry norms. To get there, the company anticipates fewer repairs and very limited ad spending. But the company's Roadster model has been dogged by a series of defects, and even if the new Model S proves quite reliable, that's a boast that almost any major manufacturer can claim these days. And word-of-mouth marketing approach may have worked for the Roadster model, but the Model S sedan will be competing with similar offerings from other manufacturers — all of which anticipate hefty marketing budgets.

More prosaically, you have to wonder about total demand for electric cars. Many recent reviews for the Nissan leaf and the Mitsubishi i-Mev focus on “range anxiety,” the notion of the fears of running out of power and being stranded. That's led reviewers to assume that electric cars will be great second cars, used for commuting to work and other limited runs. But those second cars, the ones you see parked at railroad parking lots, are usually inexpensive economy cars. The Tesla Model S will be priced far too high for that.

Action to Take –> Be wary of bullish Wall Street reports on Tesla. The company is expected to keep raising more money after this summer's IPO, as it is unlikely to reach break-even for at least three or four years, according to optimistic Wall Street earnings models. I have my doubts that the company will ever move into the black.

If I'm right, then the end game for Tesla will be to sell itself to another auto maker that can better capitalize on industry economics. And that price would likely be far lower than the company's current $2 billion market value.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

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

This article originally appeared on StreetAuthority
Author: David Sterman
This Hot IPO is Headed for Trouble

Read more here:
This Hot IPO is Headed for Trouble

Uncategorized

Don’t Believe the Naysayers: These Auto Stocks Are a Buy

October 9th, 2010

Don't Believe the Naysayers: These Auto Stocks Are a Buy

Think the weakening auto sales trend in the United States is an omen of unpleasant things to come, economically speaking? If so, then investors may want to slice the numbers in a way the media isn't — car sales are still trending bullishly by most measures, even if nobody's talking about it.

Take last month's total car sales as an example. The media correctly pointed out September's U.S. unit sales rolled in much stronger than September 2009's total, simply because the “Cash for Clunkers” program in August of 2009 undercut the following month's potential. All told, 949,907 automobiles were purchased in the United States last month, versus only 738,285 during the prior September's post-”cash for clunkers” environment.

Most investors understood the bar was set rather low and understandably yawned at the numbers. After all, September's sales weren't even as brisk at the August 2010 total of 988,559 — suggesting the auto market is becoming sluggish again.

The problem is, that's not the case at all.

Comparing U.S. auto sales in the full third quarter of 2009 (which encompasses “cash for clunkers” as well as the following month's lull) to 2010's third quarter numbers, total vehicle sales were only down about -4.4%. That's not bad, given the artificially-induced comparable from a year ago.

That's not the only way to examine the numbers and come up with optimistic conclusions, though. For example, year-to-date sales of autos in the United States are up by more than +10%. In fact, with only one exception, each month's year-over-year sales in 2010 have been flat or better than 2009's same month. The one exception was the August month comparison, of course.

To be fair, strong fleet sales have helped. Fleet sales don't account for the bulk of the improvement, though.

So why the pessimism on the industry's stocks? In simplest terms, though hearts and minds may be certain that car sales are going to be a victim of the “looming double-dip recession,” the numbers have persistently begged to differ. And as is usually the case, some companies have done better than others at capitalizing on this growth.

Ford (NYSE: F) is one of the obvious ways to step into the obscured auto sales growth trend. More importantly, it's a smart way to do so, even if many feel the stock has more than reached its maximum upside.

Critics who have said there's no possible way the auto market can continue to supply the earnings growth Ford has been enjoying have missed out on six straight quarterly earnings 'beats' — the last four of which were all positive earnings and the first after a nasty five quarter stretch of losses. And, with a trailing price-to-earnings ratio (P/E) of about 7.1, it's not like the projected one of 7.2 isn't plausible.

Even more impressive for Ford is the recapture of U.S. market share since last year, from 2009's 16.1% to 2010's year-to-date market share of 16.8%.

That said, only one other car manufacturer has been as impressive as Ford has in terms of market share growth — Nissan (NSANY.PK). Year-to-date, its U.S. auto sales make up 7.9% of the market's total, compared to 2009's total market share of 7.4%. The numbers themselves are small, but on a relative growth basis, they're huge.

And what of Chrysler and General Motors, neither of which are publicly traded now, but both of which have initial public offerings (IPOs) in the pipeline?

Chrysler is the only carmaker that's outpaced Nissan's U.S. market share growth — it's grown by +7.8%. GM actually hasn't done much in the way of results that one of its competitors hasn't done better. And while that's a plus for Chrysler and a minus for General Motors when the public offerings are rolled out, it's still too soon to pass judgment on either — the IPO documents should give investors a better idea of how to value each stock. [Read: This Hot IPO is Headed for Trouble]

On the losing end of the sales growth scale are two unlikely names: Toyota (NYSE: TM) and Honda Motors (NYSE: HMC).

All things considered, Toyota's recall-mania from earlier in the year could have been more problematic than it was. Though the company lost market share — with a P/E in the high teens — that setback seems to be figured into the share price. As for Honda, it doesn't even have the luxury of an excuse: though sales are technically up, the improvement is paper thin and market share is down.

On the other hand, Honda's shares are in a strong uptrend, at least partially fueled by this year's projected P/E of 16.6, and with a nice earnings increase expected for next year.

Regardless, the overarching reality is clear when looking beyond the anecdotal, month-to-month numbers: car sales are still improving, even if it's hard to believe. And, the same sales growth evident in the United States is equally evident outside the country.

Action to Take –> While Ford may feel a little obvious (the “too good to be true” syndrome), it really is one of those long-term opportunities that can be taken at face value. Its stability and domestic nature can be rounded out by adding Nissan to the mix — an overseas manufacturer that doesn't garner nearly as much attention as rivals Toyota and Honda, but should, based on its strong market penetration.

While the prospect of IPOs from General Motors and Chrysler is drawing a crowd, it may be best to steer clear. Preliminary evaluations of both IPOs suggest a lukewarm response is in store. Moreover, given the lack of supporting numbers for those would-be stocks, jockeying to own those new shares is a coin-toss proposition at best.


– James Brumley

James brings a wide degree of experience in the investment industry, including being the Director of Research of a trading newsletter. James' work has appeared in major investing sites such as Motley Fool and Investopedia. Read more…

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

This article originally appeared on StreetAuthority
Author: James Brumley
Don't Believe the Naysayers: These Auto Stocks Are a Buy

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Don’t Believe the Naysayers: These Auto Stocks Are a Buy

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3 Stocks for the Small Business Rebound

October 9th, 2010

3 Stocks for the Small Business Rebound

Voters across the political spectrum can agree on at least one thing: the long-term health of the U.S. economy absolutely depends on jobs being created by the private sector. So Friday's report that 64,000 private sector jobs were created is a hopeful sign, though clearly not enough.

The chart below shows the depth of pain being experienced by small businesses.

But even as Friday's jobs report may not yet signal a big upturn in hiring, a few other items in the news on Friday suggest that the private sector may create higher amounts of new jobs in the months ahead.

First, the Treasury Department has just announced plans to provide states with $1.5 billion to help promote small business job creation. States have to prove that the funds are being matched with much higher levels of bank lending, so the whole economic boost is hoped to be closer to $15 billion. And just last week, the Small Business Jobs Act went into effect, creating a $30 billion small business lending fund for community banks and offering tax cuts for small businesses.

Those efforts may help a trend that is already underway, if little-known ScanSource (Nasdaq: SCSC) is any indication. This company sells a range of telephone, barcode scanning and point-of-sale equipment to small and medium-sized businesses. Large companies buy these wares direct from the manufacturer. Thousands of smaller companies need to go through middlemen like ScanSource. At the end of every quarter, the company discusses recent sales trends — and right now, business is doing quite well.

Sales in the first fiscal quarter rose to around $625 million from $488 million a year ago, well ahead of the $567 million consensus forecast. That's pushing shares up +7%, close to a 52-week high, which makes me hesitant to recommend shares of ScanSource in particular. But it's a clear sign that other companies selling into the small and mid-sized business (SMB) sector have increasing reason to cheer. Here are three names I like as SMB plays:

Office Depot (NYSE: ODP)
The tough economic environment has been brutal for this office supply chain. Adding insult, rival Staples (Nasdaq: SPLS) has been a far more nimble player, stealing away market share. Office Depot's stock has fallen from $35 in 2006 to a recent $4.50, but as I noted recently, that seems like too deep of a punishment. [Read more on why I like Office Depot here]

Make no mistake, Office Depot has its work cut out for it. The retailer needs to further pare debt, figure out a way to retake market share, even as firms like Walmart (NYSE: WMT) step onto its turf, and weather the effects of the downbeat economies in Florida and California, where the store base is heavily concentrated. But I'm heartened by recent insider buying, improving working capital metrics, very cheap valuations and, as noted above, a possible strengthening in the SMB sector. And as I noted in this article, retailers only need to show modest sales gains to post outsized cash flow gains.

Mitel Networks (Nasdaq: MITL)
This $14 IPO is now a $6 busted IPO. Shares are now quite cheap, trading for less than seven times projected fiscal (April) 2012 profits. The dead-on-arrival IPO came public in the wrong year, as it's a play on the SMB sector, which up until now, has been in a funk. Mitel sells phone systems and usually sees demand when companies are hiring, with new desk set-ups. But even with sales at depressed levels, Mitel can still be counted on to earn $0.75 to $0.90 a share. If SMB spending really picks up, per share profits could exceed $1.

Vistaprint (Nasdaq: VPRT)
The big slowdown in SMB spending really hurt this company, which provides printing and marketing services to companies that are too small to handle their printing needs on an in-house basis. Shares plunged in early August, which looked to me to be a severe over-reaction. [Read: Panic Selling Creates Potential for +35% Gains . . . At Least]

Analysts at Kaufman Bros. see shares rebounding back from a recent $37 to $50 as the company's sales problems this summer prove to be short-lived. “Vistaprint is currently facing a perfect storm, with small business weakness, adverse (foreign exchange) impact and recent execution issues. We note that all these factors are temporary, and should reverse themselves in the future,” notes Kaufman's analysts. They predict that shares, which currently trade for 13 times next year's profits, will trade up to a price-to-earnings (P/E) multiple of 20 once these near-term concerns abate.

Action to Take –> Spending at small businesses is likely to rebound only slowly into 2011 and perhaps more robustly into 2012. But investors need to look ahead, and these stocks could start to appreciate handsomely, simply on the expectation that SMB spending will eventually rebound — and the three stocks I mentioned above are good places to start.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

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

This article originally appeared on StreetAuthority
Author: David Sterman
3 Stocks for the Small Business Rebound

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3 Stocks for the Small Business Rebound

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Profit as Millions of Chinese Start to Play the Stock Market

October 9th, 2010

Profit as Millions of Chinese Start to Play the Stock Market

It's little secret that China is one of the fastest-growing countries in the world. It already boasts the world's largest population of nearly 1.4 billion citizens, and through the first half of this year, its economy grew by +11.1%, which comes despite a global slowdown brought on by the credit crisis. In other words, China stands out for the vastness of its consumer base and track record for rapid growth. The country is a star compared to more developed markets that are struggling with housing bubbles and high unemployment coupled with crimped consumer spending.

China recently overtook Japan as the second largest economy in the world, and it shows few signs of slowing down. Exports are driving much of the current growth and there is incredible potential for Chinese citizens to become consumers and drive another exciting round of economic expansion.

Along with increasing wealth and consumerism, a Chinese market of individual investors has vast growth potential. The interest in investing has, so far, mirrored the ups-and-downs of China's stock market. Growth in the past two years has been more subdued, but it opens the door for savvy investors to find ways to profit from this growing market.

Current statistics put the number of investors in China at around 50 million. Most of this is made up of individual investors, as the institutional market is even less developed. By these estimations China Finance Online (Nasdaq: JRJC), the leading finance portal in China, can already count 40% of the market as registered users, though a small fraction are currently paying subscribers. The ability to further gain market share coupled with an overall market that can at least double in size means serious upside for years to come.

China Finance Online bills itself as the leading provider of financial information in China. Given its growth in China and the large and growing number of registered users, the company can also lay claim as one of the largest financial portals in the world. The features are what you would expect for a financial information portal: the ability to find stock quotes and financial information for companies relating to their common stock, bonds, as well as derivatives and more exotic securities.

Sales growth at China Finance has been blistering, though it started from a pretty small initial level. The official commercial launch was in 2001, but things didn't really take off until late 2004 when it acquired the rights to its main website, jrj.com. Sales in 2005 were only $7.5 million, but they have since jumped more than seven-fold to $53.6 million in 2009, its last full year. This year, sales should reach more than $61 million and grow more than +14%.

Profit trends have been more murky, which isn't all that surprising given the firm has essentially been a start-up and has had to invest in its infrastructure and marketing to build brand awareness. In the past five years, profitability has been reached only one time in terms of earnings — back in 2008, when diluted earnings came in at $0.17 per diluted share.

Negative earnings actually mask the fact that China Finance has been cash flow positive for some time now. (Last year, operating cash flow came in at $16.2 million.) Subtracting out $4.5 million resulted in free cash flow of $11.7 million, or nearly 13 cents per diluted share, current year expectations call for only a few cents in bottom-line earnings, but cash flow trends should be much stronger.

Total growth trends also remain impressive. Management expects to end this year with +43% more registered users that should push the total to 20 million. It pointed out that this is +82% higher than 2008's 11 million total. Paid subscribers are only a fraction of the registered user base, but grew +27.2% during the most recent quarter to reach just under 140,000 individuals. A strategic alliance with China Telecom, one of the largest broadband Internet access providers in China, has brought its web portals to China Telecom's 40 million broadband customers and could propel further growth.

Compelling organic growth prospects and a healthy acquisition program suggest the company will continue picking up users and lucrative subscribers at a rapid pace. China Finance has acquired several rivals in the past few years, including CFO Genius, which serves institutional Chinese firms. It also bought Stockstar Information and Daily Growth Securities to beef up its website and brokerage capabilities. Activity has slowed along with the stock market in the past couple of years, but should pick up again going forward.

Action to Take —> Given the growth of China's economy and that new investors are born every day in the country, China Finance Online's potential remains huge. Despite the rapid adoption of Internet usage and investing in China, it still considers the market for online financial data underdeveloped and highly fragmented. As a result, its first-mover advantage in the space gives it a big leg up on the competition. It is also shielded from foreign competition, as China limits foreign ownership of Internet companies to 50%.

The stock, which traded as high as $47 a share before the global financial meltdown, is in the bargain bin at around $7 a share. Current earnings metrics don't properly reflect China Finance Online's profit potential, but other metrics, including a price-to-book ratio (P/B) of less than 2.0 and a price-to-sales (P/S) multiple just over 2.0, imply that the market is not giving the stock much credit for the compelling growth potential the company has.

– Ryan Fuhrmann

A graduate of the University of Wisconsin and the University of Texas, Ryan Fuhrmann, CFA, adheres to a value-based investing viewpoint that successful companies…

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After China, the Fed’s Now the Largest Owner of US Treasuries

October 9th, 2010

Just this week an inevitable milestone came to pass, the Federal Reserve surged ahead of Japan as the second largest owner in the world of US debt… second only to China. Of course, the funds used to generate that massive debt position have only been made possible through the smoke and mirrors of quantitative easing. Zero Hedge notes this, and two other generally under-reported US debt facts, in a recent post.

Here’s the short version:

“#1: The US Fed is now the second largest owner of US Treasuries… Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago…

“#2: ‘There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.’ [...] the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit… So we’re talking about TRILLIONS of old debt coming due in the next decade…

“#3: The US will Default on its Debt… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years… Obviously that ain’t going to happen…”

The last point should be no surprise to any regular Daily Reckoning reader… but the extent to which the Fed has been purchasing Treasuries is appalling, as is the maturity of the Treasuries. You can read a more detailed description of these three issues in Zero Hedge’s coverage of three horrifying facts about US debt.

Best,

Rocky Vega,
The Daily Reckoning

After China, the Fed’s Now the Largest Owner of US Treasuries 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:
After China, the Fed’s Now the Largest Owner of US Treasuries




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

After China, the Fed’s Now the Largest Owner of US Treasuries

October 9th, 2010

Just this week an inevitable milestone came to pass, the Federal Reserve surged ahead of Japan as the second largest owner in the world of US debt… second only to China. Of course, the funds used to generate that massive debt position have only been made possible through the smoke and mirrors of quantitative easing. Zero Hedge notes this, and two other generally under-reported US debt facts, in a recent post.

Here’s the short version:

“#1: The US Fed is now the second largest owner of US Treasuries… Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago…

“#2: ‘There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.’ [...] the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit… So we’re talking about TRILLIONS of old debt coming due in the next decade…

“#3: The US will Default on its Debt… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years… Obviously that ain’t going to happen…”

The last point should be no surprise to any regular Daily Reckoning reader… but the extent to which the Fed has been purchasing Treasuries is appalling, as is the maturity of the Treasuries. You can read a more detailed description of these three issues in Zero Hedge’s coverage of three horrifying facts about US debt.

Best,

Rocky Vega,
The Daily Reckoning

After China, the Fed’s Now the Largest Owner of US Treasuries 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:
After China, the Fed’s Now the Largest Owner of US Treasuries




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

The Mogambo Golden-Real Estate Project

October 8th, 2010

Japan has taken an interesting approach to preventing people from accumulating so much debt that they default; The Wall Street Journal reports that Japan has a new law “restricting total loans from all lenders to one-third of a borrower’s income.” Hmmm! Criminal penalties for accumulating too much debt? Wow!

In effect, the Japanese are not allowing creditors to sustain a loss by not allowing debtors to amass so much debt that they default so that the government gets less tax revenue, the deadbeat’s credit is ruined, he loses everything, his girlfriend leaves him, he can’t borrow any more money, and he lays around the house all day watching TV and whining about how life is unfair until his own parents throw him out of their house, screaming, “Get a job and get a life, you Lazy Mogambo Moron (LMM)!”

And the ripple effects of default are worse, mostly about how the government gets less tax revenue when the creditor nets this loss against (all things being equal) lower gains at tax-time, which does not even start to get into that whole inflation thing, where the money that was borrowed had the effect of increasing the money supply when it was borrowed, and now the default has the opposite effect, namely, shrinking the money supply when the money disappears when the debt disappears. Yikes! A falling money supply!

So there are lots and lots of reasons why nobody wants debtors to get into financial trouble because of excessive debt, and I have heard them all when creditors turn me down.

And they have more reasons besides those, like that time the bank loan officer said, “No! And get out of my bank, you freaking lunatic!” when he thought I wanted to borrow enough money to buy up all the houses around me for a quarter of a mile in any direction.

The reason that I wanted to buy everybody’s house is so that I would create a “free-fire” zone around the Fabulous Fearful Mogambo Bunker (FFMB), taking a stupid residential area full of stupid people who are not smart enough to buy gold, silver and oil when their government is deficit-spending so much money, which is not to mention the despicable Federal Reserve creating the money that the government borrows, and turning this hotspot of dimwitted, residential lowlife troglodytes into a flat, deserted wasteland, completely barren and free of trees, shrubs, or cover of any kind, depriving my enemies, both real and imagined, of concealment of, again, any kind if they dared approach the aforesaid FFMB.

What the stupid loan officer misunderstood is that I don’t want to borrow the money to buy the houses, but to borrow the money to buy gold, which will rise so much in value when compared to the houses, and to the original loan used to buy the gold, that I can use the gold at its much higher price to both buy the houses and pay off the debt used to buy the gold in the first place, with more gold left over! Whew! What a plan! What an amazing plan! What an Amazing Mogambo Plan (AMP)!

I devised this plan modeled on the heights of the Weimar Hyperinflation in Germany, where one ounce of gold – one ounce! – was supposedly enough to buy up 4 square blocks of prime, downtown-Berlin commercial property!

So, with that kind of massive buying power of gold, I was talking about how much gold am I going to need, at the end of the coming American Hyperinflation, to buy all the houses around me for miles in any direction so that I could tear them down so as to provide any intruder with enough unobstructed firepower to turn them into sudden red clouds of blood and tiny bits of cellular material exploding in all directions?

I was telling him that I won’t need much gold, I figured, because of the treachery of the Federal Reserve creating too, too much money for too, too long so that they federal government could deficit-spend too, too much money, when he suddenly jumps to his feet and acts all upset, shouting, “I’ve heard enough! This is insane! Get out! Get out of my bank, you Raving Mogambo Lunatic (RML)!”

On my way home, I angrily concluded that this shows why banks are in trouble; they won’t loan money to do the only reasonable thing to do, which is to buy gold, silver and oil when your stupid government is stupidly and massively deficit-spending trillions of dollars and your stupid Federal Reserve is stupidly creating trillions of dollars of new money.

As I helpfully told the loan officer on the way out of his office, “You are making a Big Freaking Mistake (BFM), you half-witted lowlife banker trash!”

In the meantime, I will continue to buy gold, silver and oil, and I will continue to urge others to do so, too, and if they don’t, then I know they are as stupid as bankers and neighbors, because the last 4,500 years of history shows that the obvious thing to do is to buy gold, silver and oil, and it’s so easy and obvious that even the laziest, most worthless, low-IQ bum in the whole world, which is either me or someone very much like me, would have to agree, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The Mogambo Golden-Real Estate Project 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:
The Mogambo Golden-Real Estate Project




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.

Real Estate, Uncategorized

The Mogambo Golden-Real Estate Project

October 8th, 2010

Japan has taken an interesting approach to preventing people from accumulating so much debt that they default; The Wall Street Journal reports that Japan has a new law “restricting total loans from all lenders to one-third of a borrower’s income.” Hmmm! Criminal penalties for accumulating too much debt? Wow!

In effect, the Japanese are not allowing creditors to sustain a loss by not allowing debtors to amass so much debt that they default so that the government gets less tax revenue, the deadbeat’s credit is ruined, he loses everything, his girlfriend leaves him, he can’t borrow any more money, and he lays around the house all day watching TV and whining about how life is unfair until his own parents throw him out of their house, screaming, “Get a job and get a life, you Lazy Mogambo Moron (LMM)!”

And the ripple effects of default are worse, mostly about how the government gets less tax revenue when the creditor nets this loss against (all things being equal) lower gains at tax-time, which does not even start to get into that whole inflation thing, where the money that was borrowed had the effect of increasing the money supply when it was borrowed, and now the default has the opposite effect, namely, shrinking the money supply when the money disappears when the debt disappears. Yikes! A falling money supply!

So there are lots and lots of reasons why nobody wants debtors to get into financial trouble because of excessive debt, and I have heard them all when creditors turn me down.

And they have more reasons besides those, like that time the bank loan officer said, “No! And get out of my bank, you freaking lunatic!” when he thought I wanted to borrow enough money to buy up all the houses around me for a quarter of a mile in any direction.

The reason that I wanted to buy everybody’s house is so that I would create a “free-fire” zone around the Fabulous Fearful Mogambo Bunker (FFMB), taking a stupid residential area full of stupid people who are not smart enough to buy gold, silver and oil when their government is deficit-spending so much money, which is not to mention the despicable Federal Reserve creating the money that the government borrows, and turning this hotspot of dimwitted, residential lowlife troglodytes into a flat, deserted wasteland, completely barren and free of trees, shrubs, or cover of any kind, depriving my enemies, both real and imagined, of concealment of, again, any kind if they dared approach the aforesaid FFMB.

What the stupid loan officer misunderstood is that I don’t want to borrow the money to buy the houses, but to borrow the money to buy gold, which will rise so much in value when compared to the houses, and to the original loan used to buy the gold, that I can use the gold at its much higher price to both buy the houses and pay off the debt used to buy the gold in the first place, with more gold left over! Whew! What a plan! What an amazing plan! What an Amazing Mogambo Plan (AMP)!

I devised this plan modeled on the heights of the Weimar Hyperinflation in Germany, where one ounce of gold – one ounce! – was supposedly enough to buy up 4 square blocks of prime, downtown-Berlin commercial property!

So, with that kind of massive buying power of gold, I was talking about how much gold am I going to need, at the end of the coming American Hyperinflation, to buy all the houses around me for miles in any direction so that I could tear them down so as to provide any intruder with enough unobstructed firepower to turn them into sudden red clouds of blood and tiny bits of cellular material exploding in all directions?

I was telling him that I won’t need much gold, I figured, because of the treachery of the Federal Reserve creating too, too much money for too, too long so that they federal government could deficit-spend too, too much money, when he suddenly jumps to his feet and acts all upset, shouting, “I’ve heard enough! This is insane! Get out! Get out of my bank, you Raving Mogambo Lunatic (RML)!”

On my way home, I angrily concluded that this shows why banks are in trouble; they won’t loan money to do the only reasonable thing to do, which is to buy gold, silver and oil when your stupid government is stupidly and massively deficit-spending trillions of dollars and your stupid Federal Reserve is stupidly creating trillions of dollars of new money.

As I helpfully told the loan officer on the way out of his office, “You are making a Big Freaking Mistake (BFM), you half-witted lowlife banker trash!”

In the meantime, I will continue to buy gold, silver and oil, and I will continue to urge others to do so, too, and if they don’t, then I know they are as stupid as bankers and neighbors, because the last 4,500 years of history shows that the obvious thing to do is to buy gold, silver and oil, and it’s so easy and obvious that even the laziest, most worthless, low-IQ bum in the whole world, which is either me or someone very much like me, would have to agree, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The Mogambo Golden-Real Estate Project 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:
The Mogambo Golden-Real Estate Project




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.

Real Estate, Uncategorized

A Tojo Moment

October 8th, 2010

“This week, Tokyo’s central bankers rediscovered a modicum of their old mojo,” The Financial Times told the world on Wednesday. Typically, the FT reports the dialogue correctly but misunderstands the plot action. But we can correct the sentence with a single capital letter. For what they really discovered was a modicum of their old Tojo.

Japan’s Co-Prosperity Sphere expanded greatly in the ’30s, as the Imperial army marched through Asia. But as its supply lines stretched, Japan became more and more vulnerable to interdiction by the US navy. Rather than restrain its ambitions, Tojo Hideki bombed Pearl Harbor.

One of the eternal puzzles of history is why smart people do such silly and stupid things. We have no answer, but we’re happy to see the Central Bank of Japan, the US Federal Reserve and the European Central Bank swing into action. It should be entertaining. Bankers tend to be boring, prudent and cautious. They hold their pants up with belts and suspenders too. “On one hand this…on the other hand that…” they say, hedging their bets. And every one of them has two arms! What a delight to see these timid pedants take decisive, bold and foolhardy action.

Japan’s economy has been taking on water for the last 20 years. They must be getting tired of it. In the heavy seas following the crash in 1980, they flung out life preservers to its businesses, heaved aboard thousands of soaked enterprises and submerged banks, flushed the seawater out of their lungs, and crowded them onto the lower decks. Then, Japan used all its monetary and fiscal tools to keep the boat above water – including quantitative easing, QE. While the economy never fully recovered, neither did it sink.

In the West, the storm blew up only 3 years ago. Lehman went down. Trillions of dollars worth of assets were washed overboard. But tempest-toss’d and weary, the great ship of modern, degenerate, state-managed capitalism is still bobbing up and down…kept afloat – as in Japan – by pumps and chumps.

And now, their barks riding lower in the water than ever, the admirals grow desperate. The Japanese have vowed to use their QE more aggressively. The amount pledged so far – $60 billion – is trivial. But they say they’re going to target a wider range of financial assets…drive the key lending rate even closer to zero…and keep at it until deflation is defeated. The ECB is committed to spend $63 billion on QE too. It was forced to spend $1.4 billion of it last week to buoy up poor little Ireland, which is in danger of slipping beneath the Atlantic waves at any minute. And Ben Bernanke has told America that it should expect a more muscular approach to QE after the Fed meets on November 2nd.

“Central banks open spigot,” proclaimed The Wall Street Journal.

What else could they do? They think they face a choice: it’s the devil or the deep, blue sea.

The politicians didn’t hesitate for a minute. They passed their stimulus bills in a panic. And now they claim success. Steven Rattner, former advisor to the US Treasury secretary, argued in the FT that TARP “did more to keep America’s financial system – and therefore its economy – functioning than any passed since the 1930s.” Were it not for TARP, he says, AIG, Citigroup and Bank of America would have certainly sunk. Maybe GM and Chrysler too. And the recession would have “spiraled downward.”

Maybe he’s right about that. Even so, it seems like a small price to pay. Besides, how do Rattner, Geithner, Bernanke et al know who should survive and who shouldn’t? The trouble with degenerate, state-managed capitalism is that it lets politicians and policy makers decide these things. Why should a bank survive if it can’t weather a foreseeable storm? Why should an automaker stay in business if it can’t make cars at a profit? Why can’t willing buyers and sellers decide these things for themselves? That’s just how it’s supposed to work. It blows up gusts from time to time and sinks the unworthy and the unprepared. That’s what the deep, blue sea was made for.

But the interveners are neither poets nor philosophers. They’re men of action. In Japan, there is little room for more fiscal stimulus. Japan’s government already owes twice the nation’s GDP. In Europe, the big spenders cannot overcome opposition from the tightwad Germans. The Americans are blocked by politics too. Voters rarely have any idea what is going on. But the TARP plan – which just expired on Sunday – was seen for what it was, a payoff to the bankers at everyone else’s expense.

“You can take your stimulus and shove it,” is the message being sent to the US Congress.

Not only that, the paralysis in Congress could prevent an extension of Bush’s tax cuts. This will be the equivalent of raising taxes during a recession, a repeat of the mistake of 1937, when Roosevelt’s pact with the devil led to higher taxes, more regulation and trade barriers.

Everyone claims to favor the democratic process, but few people want to abide the decisions of the yahoo masses. Fewer still will put up with an honest economy. So, it’s up to the central bankers. Bonzai!

Regards,

Bill Bonner
for The Daily Reckoning

A Tojo Moment 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:
A Tojo Moment




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.

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A Tojo Moment

October 8th, 2010

“This week, Tokyo’s central bankers rediscovered a modicum of their old mojo,” The Financial Times told the world on Wednesday. Typically, the FT reports the dialogue correctly but misunderstands the plot action. But we can correct the sentence with a single capital letter. For what they really discovered was a modicum of their old Tojo.

Japan’s Co-Prosperity Sphere expanded greatly in the ’30s, as the Imperial army marched through Asia. But as its supply lines stretched, Japan became more and more vulnerable to interdiction by the US navy. Rather than restrain its ambitions, Tojo Hideki bombed Pearl Harbor.

One of the eternal puzzles of history is why smart people do such silly and stupid things. We have no answer, but we’re happy to see the Central Bank of Japan, the US Federal Reserve and the European Central Bank swing into action. It should be entertaining. Bankers tend to be boring, prudent and cautious. They hold their pants up with belts and suspenders too. “On one hand this…on the other hand that…” they say, hedging their bets. And every one of them has two arms! What a delight to see these timid pedants take decisive, bold and foolhardy action.

Japan’s economy has been taking on water for the last 20 years. They must be getting tired of it. In the heavy seas following the crash in 1980, they flung out life preservers to its businesses, heaved aboard thousands of soaked enterprises and submerged banks, flushed the seawater out of their lungs, and crowded them onto the lower decks. Then, Japan used all its monetary and fiscal tools to keep the boat above water – including quantitative easing, QE. While the economy never fully recovered, neither did it sink.

In the West, the storm blew up only 3 years ago. Lehman went down. Trillions of dollars worth of assets were washed overboard. But tempest-toss’d and weary, the great ship of modern, degenerate, state-managed capitalism is still bobbing up and down…kept afloat – as in Japan – by pumps and chumps.

And now, their barks riding lower in the water than ever, the admirals grow desperate. The Japanese have vowed to use their QE more aggressively. The amount pledged so far – $60 billion – is trivial. But they say they’re going to target a wider range of financial assets…drive the key lending rate even closer to zero…and keep at it until deflation is defeated. The ECB is committed to spend $63 billion on QE too. It was forced to spend $1.4 billion of it last week to buoy up poor little Ireland, which is in danger of slipping beneath the Atlantic waves at any minute. And Ben Bernanke has told America that it should expect a more muscular approach to QE after the Fed meets on November 2nd.

“Central banks open spigot,” proclaimed The Wall Street Journal.

What else could they do? They think they face a choice: it’s the devil or the deep, blue sea.

The politicians didn’t hesitate for a minute. They passed their stimulus bills in a panic. And now they claim success. Steven Rattner, former advisor to the US Treasury secretary, argued in the FT that TARP “did more to keep America’s financial system – and therefore its economy – functioning than any passed since the 1930s.” Were it not for TARP, he says, AIG, Citigroup and Bank of America would have certainly sunk. Maybe GM and Chrysler too. And the recession would have “spiraled downward.”

Maybe he’s right about that. Even so, it seems like a small price to pay. Besides, how do Rattner, Geithner, Bernanke et al know who should survive and who shouldn’t? The trouble with degenerate, state-managed capitalism is that it lets politicians and policy makers decide these things. Why should a bank survive if it can’t weather a foreseeable storm? Why should an automaker stay in business if it can’t make cars at a profit? Why can’t willing buyers and sellers decide these things for themselves? That’s just how it’s supposed to work. It blows up gusts from time to time and sinks the unworthy and the unprepared. That’s what the deep, blue sea was made for.

But the interveners are neither poets nor philosophers. They’re men of action. In Japan, there is little room for more fiscal stimulus. Japan’s government already owes twice the nation’s GDP. In Europe, the big spenders cannot overcome opposition from the tightwad Germans. The Americans are blocked by politics too. Voters rarely have any idea what is going on. But the TARP plan – which just expired on Sunday – was seen for what it was, a payoff to the bankers at everyone else’s expense.

“You can take your stimulus and shove it,” is the message being sent to the US Congress.

Not only that, the paralysis in Congress could prevent an extension of Bush’s tax cuts. This will be the equivalent of raising taxes during a recession, a repeat of the mistake of 1937, when Roosevelt’s pact with the devil led to higher taxes, more regulation and trade barriers.

Everyone claims to favor the democratic process, but few people want to abide the decisions of the yahoo masses. Fewer still will put up with an honest economy. So, it’s up to the central bankers. Bonzai!

Regards,

Bill Bonner
for The Daily Reckoning

A Tojo Moment 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:
A Tojo Moment




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

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