Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

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

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

Category: Stocks

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

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

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

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

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

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

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

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

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

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

Category: Stocks

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

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

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

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

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

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

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

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

Category: precious metals

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

Category: Stocks

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

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

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

Category: Stocks

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

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

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

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

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

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

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

Category: Stocks

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

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

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

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

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

Category: Stocks

The big news in financial markets last week was Bank of America’s proposed $4 billion acquisition of Countrywide Financial. Let's call it the pied piper of reckless mortgage-lending practices. It encouraged brokers to push the limits on subprime, interest-only, and negative amortization mortgages. It provided the raw materials for Wall Street’s mortgage-backed security machine. And it now faces a choice between bailout and bankruptcy. Countrywide shareholders are lucky Bank of America is bailing them out.
The same can’t be said for Bank of America. I expect B. of A. shareholders will regret this investment. Rather than buying just a division of Countrywide, or waiting to scrounge through the post-bankruptcy rubble, B. of A. is acquiring it outright. This package includes Countrywide’s assets and liabilities. B. of A. executives believe the low purchase price -- about one-third of Countrywide’s book value -- will compensate them for the risk.
I don’t agree that book value is an accurate gauge of Countrywide’s intrinsic value; a mere 7% drop in Countrywide’s fishy assets would wipe it out completely. Countrywide’s assets ballooned during the housing bubble, having doubled since December 2003.
B. of A. is taking a huge leap of faith that this mortgage portfolio is worth anything close to $80 billion. This portfolio may be hard to value, but if the housing market remains stubbornly weak, it won’t be worth $80 billion much longer.
“Bankruptcy litigation is among a list of potential legal liabilities Bank of America may inherit,” notes today’s Wall Street Journal . “These include inquiries from the Securities and Exchange Commission and several state attorneys general, as well as shareholder lawsuits tied to Countrywide’s financial decline and other class action and individual suits brought by borrowers for alleged abuses by the company.”
Countrywide CEO Angelo Mozilo, already under investigation for his suspiciou