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[Joshua Brown]

Markets were up slightly on Friday after U.S. factory output increased in October for the third month in a row. The Federal Reserve announced that manufacturing output was up 0.3% in October, following a 0.1% increase in September. Factory output accounts as the largest factor in industrial production. Industrial production, however, fell in October which was largely attributed to the mining sector. There was a decrease of 1.6% in oil and gas drilling after six straight months of gains. The saving grace in output has been the factory sector. They have been stepping up hiring in the past three months. The increasing growth at factories is partially due to a growing demand overseas and the stronger housing market has increased demand for furniture and other wood products. Paul Dales, a senior economist at Capital Economics, said, ?As long as the overseas recovery continues and the domestic fiscal drag fades, output should continue to grow at reasonable rates.?

The United Sates Postal Service announced that they have lost a total of $5 billion over the last year. This will mark as the seventh straight yearly loss for them. The agency said that they have been trying to keep up with the decreasing amount of mail along with $5.6 billion yearly payments for health care costs for future retirees. They also said this should underscore the urgency for Congress to allow them to cease mail delivery on Saturdays and reduce payments for their retirees health benefits. There was, however, a growth in package delivery of 8%, but this is not nearly enough to offset the losses they have accrued. This year?s loss does show quite a substantial improvement over last year?s loss. This time last year the agency reported a loss of $15.9 billion. This year operating revenue came in at $66 billion, while operating expense were reported at $72.1 billion. Joseph Corbett, chief financial officer at the Postal Service, said, ?It?s the first growth in revenue since 2006.?

Berkshire Hathaway, who is owned by the famous Warren Buffett, disclosed that they have purchased a $3.45 billion stake in Exxon Mobil Corp (XOM). This attributes to a total of 40.1 million in shares of the oil company. This stake totals about 0.8% of Exxon. Despite such a seemingly small share of the company, this purchase speaks volumes. Pavel Molchanov, an energy analyst at Raymond James & Associates, said, ?When Warren Buffett gives his seal of approval to any company, that is never a bad thing.? Shares of Exxon were trading higher after the announcement. Fadel Gheit, a senior oil analyst with Oppenheimer & Co, said, ?He likes buying big, established global brand names, and Exxon is a good flight-to-quality stock. The stock has also lagged the market in the last three to five years. That makes it a typical Warren Buffet holding.?

That?s all for the day.

[Joshua Brown]

The Great Depression is an era few of us would choose to revisit.

Though the economy isn't especially perky these days, key measures of joblessness, poverty and hunger are nowhere near the levels seen back in the 1930s.

But by one key measure, the economy is actually in worse shape. From 1930 until 1933, the U.S. economy grew less than 3% each year. That was the longest such streak of the 20th century -- and we've already broken it in the 21st century.

We're on pace for a sixth straight year of sub-3% GDP growth, and signs are pointing continued anemic growth in the years ahead (which I'll expand upon in a moment).

Frankly, anything near 3% GDP growth would be welcome. We appear to have approached that level in the third quarter, hitting 2.8%. But almost a full percentage point of that was due to a buildup in inventories, and such gains tend to reverse in the following quarter. Translation: Get ready for 2% GDP growth -- at best -- in the fourth quarter. The recent government shutdown means we may end up closer to 1.5%.

Of course the stock market seems to be simply ignoring the economic travails. As I noted in a recent column, the Wilshire 5000 has risen 68% since the end of 2009 -- yet the economy has grown just 17%.

If you don't want to believe that the Federal Reserve's liquidity-inducing quantitative easing (QE) programs haven't been the main catalyst behind this impressive multi-year stock market rally, then you must believe that today's share prices reflect better economic days ahead. To be sure, if the economy began to grow at a 3% pace for several years, all of the market's recent gains would be justified, and stocks would likely rise much more from here.

So it's a huge question, especially in light of the fact that the Fed's QE programs are reaching the late innings.

How To Get To 3%
There are a few simple markers to assess an economy's growth potential. The first is population growth.

[Joshua Brown]

There's a long-standing argument between finance academics and investors.

Most academics assert that the market is efficient and there is very little edge available for traders and short-term investors. When challenged with long-term success stories of traders who consistently beat the market, the academics say those individuals are presently the statistical outliers. In other words, they are simply lucky -- just like the folks who win the lottery several times or consistently succeed at any game of "chance."

I am fortunate to be married to a woman who holds a doctorate in finance and is a great resource when it comes to programming trading strategies and understanding market microstructure.

However, we are often at odds when it comes to the viability of active trading. I love to prove her ideas wrong by showing her papers by respected academics who take my side. I am certain she gets the same vicarious thrill when my market ideas are proven inaccurate.

The one thing my wife and I agree upon is the wisdom of long-term dividend investing. (In that respect, we're also in agreement with regular readers of Amy Calistri's Daily Paycheck advisory, which emphasizes the portfolio-growing power of dividends.)

My wife recently pointed me to academic research that adds support to the no-nonsense power of dividend stocks. This research zeroes in on non-U.S.-based small- to mid-cap dividend payers -- and what it discovered is mind-blowing.

Heartland Advisors, investment advisor to the Heartland International Value Fund (Nasdaq: HINVX) in collaboration with the University of Wisconsin, will soon publish a paper asserting that international small- and mid-cap dividend-paying stocks significantly outperform their non-dividend paying counterparts.

The results of the study are nothing short of amazing. They researched the rolling average 12-month returns from 1993 to 2013 for the universe of non-U.S. stocks with market caps between $100 million and $5 billion. The average rolling 12-month return for these stocks was just over a respectable 6% -- but the highest dividend yielders returned 16.3% over the same time. It's great to see academic-led research confirming what long-term dividend investors have known for years.

International stocks may lie outside many investors' comfort zones -- but in today's global economy, the search for returns and yield often leads to foreign lands. While there are many unknowns with international stocks, that's no reason to avoid them. One key to success in the markets is to step outside your comfort zone to embrace opportunities with high potential returns, wherever they may lie.

One way to gain quick exposure to and earn high dividend-powered returns from international small-cap stocks is through the Wisdom Tree International Small Cap Dividend Fund ETF (NYSE: IDV). This exchange-traded fund is an ideal tool for gaining diversified access to the small-cap international dividend paying market. It has returned more than 20% this year and has a 12-month yield of just under 5%. (Here are the details of the ETF's holdings, sectors and countries invested.)

[Joshua Brown]

It's official... the United States is about to become the largest energy producer in the world (if it's not already).

According to the Energy Information Administration (EIA), the U.S. is currently producing about 22 million equivalent barrels of oil and natural gas a day -- up from 18 million barrels in 2008. While no one knows the actual figures for Russia (the largest producer for the past several years), estimates out of Moscow are forecasting the country will produce 21.8 million barrels a day in 2013.

Think about that for a second...

Just five years ago, lofty energy prices in the U.S. nearly crippled the state of the overall economy. Back then there was so much demand for energy -- and such little supply -- that companies like Cheniere Energy (NYSE: LNG) were working day and night to build natural gas import terminals to take advantage of cheaper prices overseas.

Today, the landscape in the American energy market has completely changed. Thanks to new developments in horizontal drilling and hydraulic fracturing ("fracking"), the U.S. has unlocked waves of oil and gas reserves that were once thought unrecoverable.

As you'd expect, the optimism surrounding this "shale boom" has made American energy stocks some of the best places to put your money over the past several years.

[Joshua Brown]

The technicians spent the year watching to see which direction the ?Japanese Trade? would resolve itself toward after a blow off top in the spring followed by six months of consolidation.

For the uninitiated, the Japanese Trade is short Yen, long Nikkei, based on the alignment of the Japanese political establishment and the BoJ in the urgent need for cyclical growth.

It looks like this week we may have gotten the answer as to how that consolidation is resolving ? and it?s to the upside. Full disclosure, we?ve been long this trade all year and have added to it in Q3.

[Joshua Brown]

Much virtual ink has been spilled on how difficult it is for individual, and even professional, investors to generate alpha in the capital markets. Ray Dalio of Bridgewater Associates the largest hedge fund operator in the world said as much this week at the Dealbook conference:

?I think the most important thing for an investor is to create a proper balance of those investments,? he said. ?In other words, I think that going forward, most investors are not going to be able to produce alpha,? a measure of outperformance.

[Joshua Brown]

$142 million for a Francis Bacon triptych. $120 million for a pastel by Edvard Munch. $106 million for an oil painting by Picasso.

After a slow 2012, the fine-art market is back. Stock market gains worldwide and growing wealth in Asia have lifted prices to new all-time highs. That includes the recent $142 million for the Francis Bacon triptych, eclipsing last year's record $120 million for Munch's "The Scream."

The fine-art market is trading just like the stock market. Buyers are stepping out and lifting the bid. That's putting a lot of cash into the pockets of investors with rare collections.

But art connoisseurs aren't the only ones cashing in. I want to tell you about a global leader in the auctioneer business that is also cashing in on these nine-figure masterpieces.

Not only does the company generate big commissions from conducting auctions for the world's rarest art and wealthiest individuals, it enjoys a duopoly with just one competitor, is protected by high barriers to entrance, is highly leveraged against growth in Asia and also pays a quarterly dividend.

That has fueled an outsize gain of 80% in the past two years. Take a look below.

[Joshua Brown]

Random Thoughts


The Ps had a decent day, taking on nearly ?%. This action has them continuing to breakout out of their high level consolidation/Double Top Knockous-ish Pattern. And, this action keeps them at all-time highs.

The Quack didn't set the world on fire but it did manage to close in the plus column, continuing its rally out of the recent Double Top Knockout Pattern. This was enough to keep it at multi-year highs.

As I preach, you can only predict the short-term when it comes to the markets with any degree of accuracy. The Ps and Quack have triggered a buy signal and have so far followed through. So far, so good but as usual, continue to take things one day a time.

I'm not complaining but it was a mostly a big cap affair. The Rusty ended flat on the day.

With the Ps and Quack at new highs, overall, the day scores as a positive.

It is no surprise that many sectors like Ps and Quack managed to close at new highs. Some of these include Brokerages, Insurance, Defense, Health Services, Manufacturing, Retail, Chemicals, Transports, Conglomerates, and Consumer Non-Durables.

Even some areas such as Drugs which have recently rolled over have turned back up and are now making new highs.

Every day that the market makes new highs is a day when you shouldn't fight it. What is, is. As long as it continues to do this, go with the flow.

So what do we do? Nothing has changed: I'm still seeing a few shorts setting up. No worries though. This is perfectly normal since the rising tide is lifting all boats (i.e. weaker stocks are pulling back). Again, with the market at new highs you certainly do not want to fight it. Since there aren't a lot of meaningful longs, now would be a good time to trail stops and look to take partial profits in any existing longs in your portfolio as the initial profit targets are hit. If this thing turns into the real deal, then you'll still have a partial position and participate. And, if it don't, then you scratch out of the remainder of the position for a better-than-a-poke-in-the-eye trade. Honor your stops on any leftover shorts. This money and position management plan-stops, trailing stops, taking partial profits-will keep you in the game a long time. It creates a portfolio ebb and flow. This helps to keep you on the right side of the market during trends and mostly out of the ma rket during choppy conditions.

Click here to watch today's Market in a Minute.

Best of luck with your trading today!

Dave
omgmachines.com/ericx
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Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.

Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few second

[Joshua Brown]

In a fairly rapid time, the solar power industry has been able to tackle two major challenges that threatened to decimate the industry.

First, far much too capacity led to rapidly falling prices, which pushed the industry's weakest players into bankruptcy and has left a few more of them struggling to stay afloat. Restrained capacity growth has become the theme of 2013, enabling demand to catch up, and prices on solar panels are no longer plunging at a rapid clip.

Second, the steep fall in solar panel prices has pushed this technology a lot closer to "grid parity," compared to fossil fuels. If natural gas prices had not also plunged as well in recent years, demand for solar would really be booming.

But gas prices have fallen, and it's unlikely they will spike higher in coming years. Gas drillers will simply boost output any time prices rise, which is OK with an industry that has learned to become profitable with natural gas at $3.50 to $4 per thousand cubic feet (Mcf). Even as gas rallied to $5 per Mcf, solar still couldn't compete, at least not without government tax credits (that are set to expire in the U.S. in 2016, have been sharply rolled back in Europe and remain firmly in place in China).

Meanwhile, the improving backdrop for solar has kicked off a furious rally, led in part by short sellers who are getting trampled. The average move up from the 52-week low exceeds 500% for this group.

[Joshua Brown]

When chip equipment maker Applied Materials (Nasdaq: AMAT) surpassed $10 billion in annual revenue for the first time in fiscal 2011, its competitors could only sigh. The company's industry leadership was never in doubt, but a series of acquisitions gave it such a broad suite of offerings that rivals wondered if they could ever take market share again.

Applied Materials' massive market presence eventually led its two biggest rivals, Lam Research (Nasdaq: LRCX) and Novellus Systems to join forces in 2011, but even that combined entity has yet to crack the $5 billion annual revenue barrier.

KLA-Tencor (Nasdaq: KLAC) is also in Applied Materials' rearview mirror, with only $3 billion in annual sales. And a handful of smaller companies bring up the rear, none of which have even $1 billion in annual revenue. (Note: Only U.S. companies have been considered here.)