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McDonalds (MCD) Down Slightly, Unemployment Up
Markets were heading higher on Friday after the job market unexpectedly rose last month. The Labor Department announced that there was an addition of 204,000 new jobs in October, however the unemployment rate still crept up to 7.3% from September?s 7.2%. The new job data blew past the 125,000 job increase that economist were expecting. They also expected the unemployment rate to increase, but only by a tenth of a percentage point. The announcement this morning also showed there was an additional 60,000 jobs added in September than originally thought. The higher than expected data was further evidence that the 16-day partial government shutdown did not have a strong affect on the job market. Russell Price, a senior economist at Ameriprise Financial Services, said, ?Clearly what transpired was businesses viewed the shutdown as a temporary phenomenon and the economy was still growing and would continue to grow going forward.?
In a separate report released on Friday morning, the Commerce Department announced that U.S. consumer spending was up slightly. The also reported that household savings were on the rise. Spending was up 0.2% in September after a 0.3% climb in August. This was on point with the 0.2% increase that economists were expecting. There was a decrease of 1.3% in consumers purchasing of long-lasting manufactured goods. In the same report it showed that there was an increase of 0.5% in American?s income. This was the highest increase since February. The rise in September was partially attributed to the end of the government furloughs. Household savings were up to 4.9% of Americans after-tax income. This was up from 4.7% in August.
Shares of McDonald?s (MCD) were down slightly after the company missed sales expectations for October. The company announced that global sales at stores open at least a year were up 0.5%, however this was below the 0.6% analysts were expecting. Comparable store sales ales were up 0.2% in the U.S. This also fell short of the 0.7% analysts had expected. Sales took a 2.8% dive in their Asia Pacific, Middle East and Africa regions.
That?s all for the day. Have a great weekend, loyal readers!
All the best,
Jack Aubrey, Oakshire Financial
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Barchart.com's Chart of the Day - Mastech Holdings (MHH) for Nov 7, 2013
The Chart of the Day is Mastech Holdings (MHH). I found the stock by using Barchart to sort the New High List for Weighted Alpha and this stock has a WA of 265.90+. Since the Trend Spotter gave a buy signal on 9/24 the stock has gained 60.01%.
It provides Information Technology services in the disciplines which drive today's business operations. Clients turn to Mastech for comprehensive I.T. services including: I.T. Consulting; OneSource Co-Managed projects and supplemental I.T. resources. Mastech's niche focus includes Business Intelligence/Data Warehousing; Enterprise Resource Planning; Service Oriented Architecture; Web Development and I.T. Project Management. Mastech also provides Recruitment Process Outsourcing services and Brokerage Operations Staffing services through its RPOworldwide and Global Financial Services subsidiaries. Mastech is a certified minority-owned business enterprise.
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Profit From The 'Death Boom' With This Industry Leader
When I was a kid, I went to a Catholic grade school. And because our school was affiliated with a church, I volunteered to be an altar boy.
On the surface, it was a great way to make myself look good. I knew my parents would be happy. But in reality, it was just a good excuse to get out of class. I knew that every week, whether it was sunny, rainy, warm or cold, there were going to be a couple of funeral processions that would need altar boys to help celebrate Mass.
Even though being an altar boy at a funeral doesn't sound like much fun, it was an early lesson about the nature of demand -- mortality wasn't just predictable, it was undeniable.
But looking forward, that undeniable trend is accelerating. With more than 10,000 baby boomers retiring every day, the National Funeral Directors Association projects the U.S. death rate will increase from 8 deaths per 10,000 people to 10 by 2045.
That is setting the stage for a wave of demand for "death care" products and services. And there is one company ready to cash in.
This little-known market leader is one of the largest death care service providers in North America. It owns more than 1,400 funeral homes and 375 cemeteries in 43 states and eight Canadian provinces. It just announced a major acquisition of its largest competitor that is expected to produce $3 billion in annual revenue. That has driven a 72% gain in just the past two years. Take a look below.
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?We are not the mistakes of our past.?
The former boiler room king, Jordan Belfort, is ready for his closeup as The Wolf of Wall Street heads into theaters this December.
I loved his book and I had met most of the old Stratton Oakmont guys fifteen years ago during my early days in the Long Island brokerage scene. I've always said that if Jordan had used his powers and charisma for good rather than evil, he'd have been a billionaire. Guys I knew who had worked with him and gotten into trouble because of him still worshipped at the altar of Jordan years after the fact. To this day there are still thousands of brokers using the scripts and selling methods he had devised, albeit not to sling garbage house stocks (let's hope).
In a new profile at BusinessWeek, Jordan Belfort lets us in on where he is now...
Jordan Belfort, aka the Wolf of Wall Street, hates it when people describe him as a criminal. ??Convicted stock swindler??it?s like it hurts my heart,? he says, practically shuddering. ?I know it was true, but it?s not who I am. I say to my son, I say it to everybody who I try to mentor: We are not the mistakes of our past. We?re the resources and capabilities that we glean from our past. And it?s so true.?
Keep Reading:
Jordan Belfort, the Real Wolf of Wall Street (BusinessWeek)
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Friday links: IPOs as draft picks
This is an early (and incomplete) edition of the daily linkfest. We will catch back up tomorrow.
Daniel Gross, ?We should think about IPOs like draft picks in sports.? (The Daily Beast)
Market breadth has been deteriorating. (The Reformed Broker)
How are hedge funds doing this year? (FT Alphaville)
Two headlines: one story. (A Dash of Insight)
Changing dynamics in the US buyout market. (Sober Look)
There are always some investors who think ?it is different for me.? (Rick Ferri)
Did Twitter ($TWTR) really leave money on the table? (Ivanhoff Capital)
Wall Street won the Twitter IPO. (Quartz)
Small caps: active or passive? (IndexUniverse)
Investors are paying a lot for future growth. (Jack Altman)
A solid employment report. (Calculated Risk)
Rail traffic is accelerating. (Pragmatic Capitalism)
What you may have missed in our Thursday linkfest. (Abnormal Returns)
Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.
The post Friday links: IPOs as draft picks appeared first on Abnormal Returns.
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2 Stocks To Profit From A Game-Changing Medical Technology
We've all accidently cut ourselves and stuck a bandage on it to stop the bleeding, then gone about our business. Usually the wound heals after a couple of days, and all is good.
On occasion, though, a simple cut can turn complicated.
Say I've cut my finger and it begins to fester. I go to a doctor's office and have a blood sample drawn and shipped to a lab for analysis. The doctor makes an educated guess as to which antibiotic might clear the infection and prescribes a 10-day supply.
By the time your blood has gone through the routine tests to identify the infection and determine the correct antibiotic, five days have passed.
But after a few days -- and pills -- you feel better. This time the doctor guessed right, averting a possible crisis. However, more than 250,000 people die from sepsis -- the spread of bacteria from a point of infection -- every year. A simple infection from a cut, or pneumonia, or any number of sources can quickly turn to sepsis -- which can be deadly without prompt and proper treatment.
Until recently, doctors had to rely on antiquated tests that took days to deliver results and accurate treatment. Without a quick way to differentiate between bacteria and viruses, prescribing the right antibiotic is little more than a crapshoot.
Last year saw the emergence of a new breed of molecular diagnostics -- known as in-vitro or IVD -- that involves tests that identify a patient's nucleic acids or proteins (blood or urine) or foreign objects outside the body.
These devices can diagnose sepsis and identify the proper antibiotic -- right in the doctor's office. The process takes just 2 1/2 hours after a positive blood culture and requires only five minutes of a technician's time, with greater than 95% accuracy.
This technology truly has life-saving potential -- and it's a potential moneymaker for investors.
The global in-vitro diagnostic market was valued at $49.2 billion in 2012 and is expected to reach $69.1 billion by 2017. It is forecast to be the highest-earning segment in the $455 billion medical technology industry throughout those five years.
Right now, two companies are battling it out in this arena: One is a good investment for today, Cephid (Nasdaq: CPHD), the other possibly for tomorrow, Nanosphere (Nasdaq: NSPH).
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Most Innovative Under 40 List
This is so cool! Probably the only time I'll ever appear on a list with Banksy and the President of Cinnabon...
From Business Insider:
We're constantly amazed by revolutionary new companies, products, and ideas ? especially when they're launched by young people.
We found the most inspiring innovators and entrepreneurs under the age of 40.
Whether they're in finance, tech, sports, entertainment, media, science, food, or retail, these people are introducing amazing new products and ideas and shaking up their industries forever.
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Dave Landry's Market in a Minute - Friday, 11/8/13
Random Thoughts
You can't argue with a market making new highs but you also can't take them at face value.
As you know, lately I have been concerned about the action in sectors like Biotech that could be rolling over. I've been concern about the alarming amount of debacle de jours-stocks that have been getting whacked. And, I've also been concerned about the lack of forward progress the indices (sans the Dow).
Even though Thursday's action didn't surprise me in the least, it still caused quite a few F bombs to be dropped in my office.
Let's look at what happened on Thursday.
The Ps peeped up to nearly all-time highs but unfortunately, they found their high and began to sell off hard-losing 1 1/3% for the day.
The Quack was hit even harder. It lost nearly 2% for the day. This action has it breaking down out of its shorter-term sideways trading range.
Keep an eye on 1725 in the Ps and 3800 in the Quack. Those are the previous breakout levels.
It is not a line in the sand but it would be a level(s) where you certainly should consider pulling in your horns.
Speaking of previous breakout levels, the Rusty (IWM) was also disappointing. It lost nearly 1 ?%. This action puts it back below its prior breakout levels-circa 108 in the IWM.
With the Rusty down big it is no big surprise that internally it was ugly. Weaker areas like Biotech continue their slide. Areas that have been trading sideways at best like the Semis came in hard. Areas like Shipping that were just breaking out came right back in. I can go on and on. As you would expect, there were also quite a few debacle de jours.
So, tell me something good Big Dave. Well, I did just save a lot of money on my car insurance. Something good? Reminds of Viking ship joke when the captain says "Good news, we finally get to change our underwear. Okay, you change with him, and you change with him, and you....." Seriously, if, and that's a big if, the market rallies and takes out Thursday's high, I think it would be off to the races. It would suggest that Thursday's action was just a shakeout/fakeout. In fact, I'm seeing buy setups in the inverse Q shares. They have a Double Top Knockout look to them (email me if you need the pattern).
So what do we do? Honor your stops on your longs. If this thing gets ugly, you'll be taken out of your longs and all you'll be left with is shorts. This is part of the portfolio ebb & flow I often discuss (see webcasts). I hope, and I hate to use the word hope, this does not happen. I'd much rather be stopped out of my shorts for a loss but have my longs more than make up for it. I'm still not seeing a lot of new meaningful setups. Again, this actually might be a good thing. It could be the database, (continuing to ) tell me to let things shake out a bit.
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Did Icahn Blunder With This Refiner? Not So Fast
Legendary activist investor Carl Icahn has had a tremendous run. In recent years, he's made a quick fortune on many of his investments, thanks to a combination of savvy stock-picking and occasional cage-rattling.
But even Icahn has an off day.
Earlier this year, he bought 6 million shares of oil refiner CVR Refining (NYSE: CVRR) just as the entire refinery industry was at a multi-year peak. Shares were trading above $30 when Icahn bough CVR, though as I cautioned in this mid-summer article, refinery stocks subsequently took it on the chin as pricing spreads narrowed between Brent crude and West Texas Intermediate (WTI) crude.
Although other refiners such as Valero (NYSE: VLO), HollyFrontier (NYSE: HFC) and Marathon Petroleum (NYSE: MPC) have stabilized or risen since I wrote that piece, Icahn's pick has really fallen out of bed. The fund manager is now sitting on a 28% loss on CVRR.
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The thing about bank loan funds
From January through May I had wholesalers from all the big ETF and mutual fund shops in my office pitching us bank loan funds as a diversifier and an interest rate hedge for our income-focused models. State Street rolled one out as an ETF with Blackstone / GSE doing the portfolio management. iShares had one too, then DoubleLine launched one, etc.
Bank loans, in securitized form, tend to offset rising rates because they roll over frequently at ever-higher interest rates to the borrowers. Thus, if you own the interest stream on a portfolio of loans, as rates rise, theoretically, so should the income you're pulling in. The loans in the portfolio mature and new loans are struck with borrowers at ever-higher rates. And, as Christine Benz at Morningstar explains, they do a really good job at diversifying you as well, with a very negative correlation to long-term treasurys.
But there's a catch (when is there not?) - bank loans are highly correlated, for a bond asset class anyway, to US stocks. This is a risk-on asset class, after all, and will trade lower based on the threat of defaults picking up across the economy, just like junk bond ETFs will. Eventually.
Here's Christine:
Bank-loan funds' correlation with high-quality bond funds is also pretty low. That's perhaps not surprising when you consider that bank loans are typically beneficiaries when rates rise (their yields tick up to keep pace with LIBOR), whereas high-quality bond funds get hurt. During the past decade, bank-loan funds have exhibited a slightly negative correlation with the Barclays Aggregate Index and an even lower correlation (-0.35) with long-term Treasuries. The 10-year correlation with short-term bonds is higher (0.57) and higher still for equities (0.61) and high-yield bonds (0.87).
Thus, even though bank-loan investments may help mitigate the pain in a rising-rate environment, investors expecting these funds to provide ballast in an equity market shock might not get it here. In 2008, the typical bank-loan fund lost 30% of its value, though higher-quality offerings such asFidelity Floating Rate High Income (FFRHX) held up substantially better.
Like all products, strategies or asset classes, bank loans can work if used appropriately and with the right understanding of their idiosyncrasies and risks. But to just toss them into a portfolio as part of the bond category would be a mistake. There's nothing bond-like about them in a recessionary environment or during an equity market sell-off. They will not be your safe assets in an economic crisis.
Understand that while you're mitigating one risk (interest rates), you're taking on another one.
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It's Time To Sell These 3 Well-Known Stocks
I like buying stocks, not selling stocks -- unless, of course, I am selling them for a big profit.
And while I suspect that this market is headed higher over the next couple of months, and that you should be buying the "air pockets," I also think there are certain stocks that need to be jettisoned from your holdings due to a lack of upside catalysts in the short and/or intermediate term.
One of the stocks I think is headed lower is tech giant Cisco Systems (Nasdaq: CSCO). The network equipment maker has long been a stalwart in the tech space, and I've been buying and selling CSCO shares with very good results since the late 1990s. So far this year, Cisco shares are up 20.5%. Unfortunately, over the past three months, the stock has tumbled more than 11%.
The trouble with CSCO shares started midway through August, which not coincidentally was when the company reported fiscal fourth-quarter earnings. Although it managed to beat earnings expectations, Cisco's sales were less than impressive.
Perhaps more importantly, Cisco announced plans to slash about 5% of its workforce, presumably in an effort to maintain profit margins in the wake of soft sales. The laying off of some 4,000 workers was read as a warning sign by Wall Street. Since that time, CSCO has been downgraded by Credit Suisse and MKM Partners.
Given Cisco's recent sell-off, as well as its softening business, this is one tech stock that you should consider getting rid of.
Another high-profile stock that deserves to be on the chopping block is homebuilder Lennar (NYSE: LEN). Despite very strong earnings in its most-recent quarter that showed EPS jumping 35% year over year and easily besting expectations, the stock has traded poorly.
Fear of a tapering of the Federal Reserve's $85 billion-a-month bond-buying program caused interest rates to rise over the summer, and that's caused many traders to bail out on homebuilder stocks.
LEN is down 11% this year, and though the stock has edged a bit higher over the past two months, there certainly doesn't seem to be any substantive catalysts going forward for this homebuilder's shares. The housing market recovery may not yet be over, but right now, Lennar doesn't seem to be riding that wave.
Fear over the aforementioned Fed tapering and rising interest rates has also hurt the commodities space, as gold and copper prices have come under increased selling pressure.
And that puts Newmont Mining (NYSE: NEM) in a tough spot. As one of the biggest gold and copper miners in the world, Newmont is being hurt by falling gold prices and a lack of demand for copper. Gold prices are in a bear market, and although global growth is taking place, industrial demand for copper has been uncharacteristically soft.
Also plaguing the miner's shares was the recent downgrade of the company's credit rating by rating agency Standard & Poor's. Newmont's credit was reduced to BBB from BBB+, largely as a result of weak third-quarter revenues that missed analysts' expectations. Weakness in the company's gold business was cited as the reason for the revenue miss.
The bottom line here is that NEM is likely to continue its downward spiral, and that means more pain added to the stock's year-to-date drop of more than 40%.
Action to Take --> If you own any of these three stocks, it's time to move on. You might consider re-entering these stocks once they sink to more-attractive
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The Party is Just Getting Started With the Japanese Yen
?Oh, how I despise the yen, let me count the ways.? I?m sure Shakespeare would have come up with a line of iambic pentameter similar to this if he were a foreign exchange trader. I firmly believe that a short position in the yen should be at the core of any hedged portfolio for the next decade.
To remind you why you hate the currency of the land of the rising sun, I?ll refresh your memory with this short list:
* With the world?s structurally weakest major economy, Japan is certain to be the last country to raise interest rates. Interest rate differentials are the greatest driver of foreign exchange rates.
* This is inciting big hedge funds to borrow yen and sell it to finance longs in every other corner of the financial markets.
* Japan has the world?s worst demographic outlook that assures its problems will only get worse. They?re not making enough Japanese any more.
* The sovereign debt crisis in Europe is prompting investors to scan the horizon for the next troubled country. With gross debt well over a nosebleed 240% of GDP, or 120% when you net out inter agency crossholdings, Japan is at the top of the list.
* The Japanese long bond market, with a yield of only 1%, is a disaster waiting to happen.
* You have two willing co-conspirators in this trade, the Ministry of Finance and the Bank of Japan, who will move Mount Fuji if they must to get the yen down and bail out the country?s beleaguered exporters.
When the big turn inevitably comes, we?re going to ?110, then ?120, then ?150. That works out to a price of $200 for the (YCS), which last traded at $62. But it might take a few years to get there.
If you think this is extreme, let me remind you that when I first went to Japan in the early seventies, the yen was trading at ?305, and had just been revalued from the Peace Treaty Dodge line rate of ?360. To me the ?83 I see on my screen today is unbelievable. That would then give you a neat 17-year double top.
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November 8, 2013 ? Quote of the Day
?If you?ve lived long enough on Wall Street, you know that we shoot our wounded and eat our young,? said Brad Hintz, an analyst with Sandford Bernstein.
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Twitter IPO Post-Mortem
I don't really like the term "post-mortem" because nothing actually died today or whatever. But it's late and I'm tired, having spent three straight days running back and forth from the floor of the NYSE into meetings and conference calls. Also, the life insurance company just told me they want a colonoscopy done, sick perverts.
Here's me and Doctor J in Twitter Country today, btw:
Anyway, $TWTR did pretty much what I'd guessed it would on the first day - opened huge, rallied a bit from the opening tick and then settled back down at about where it began the day. I got filled on a small amount in my personal account but truthfully I hope they crush this thing a la Facebook in the coming months so I can really be a part of it long term.
Art Cashin told us that floor rumors suggested 75% of the IPO's shares went to the 25 largest accounts in the country. Which is at it should be - you didn't think they were paying all those trading commissions for execution in the year 2013, did you? Certainly not for the research either, get real.
In the meantime, Twitter's basically priced as though they've already achieved their goals, but in reality they haven't even begun. At its current valuation, it would be the 137th largest stock in the S&P 500 and larger than General Dynamics, Yahoo, Time Warner, Kraft, General Mills and another 300-something companies that all earn money and mostly pay dividends. At 45 bucks, this is the ultimate leap of faith.
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Buffett's Favorite Market Tool Is Flashing Red
In the go-go days of 1999, Warren Buffett grew very concerned.
Not because his value style of investing had grown unpopular, but because investors were becoming delusional in their zeal for further gains.
In a speech he made to friends, as recounted in a 1999 article in Fortune magazine (that was published just a few months before the market peaked and then plunged), Buffett warned that "once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks."
A simple test of how much stocks were loved: The aggregate value of the largest 5,000 U.S. companies (as measured by the Wilshire 5000) exceeded the GNP of the U.S. economy. In fact, a market melt-up took this ratio up to 150% by early 2000 (meaning the Wilshire 5000 was 50% larger than the U.S. economy), which set the stage for one of the most painful corrections ever for investors.
This ratio eventually dipped well below 100%, which for Buffett, has been seen as a time of deep value for stocks. "If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you," he told Fortune in a 2001 follow-up.
Indeed stocks went on to deliver solid gains into that decade, but by 2007, Buffett's handy ratio again flashed red. Stocks were becoming so frothy that this measure once again exceeded 100%. The resulting market blow-off in 2008 was another painful lesson for investors, but at least put the market deep into value territory, setting the stage for the bull market we've been enjoying ever since.
Yet as we head towards the end of 2013, investors need to once again tread cautiously, because Warren Buffett's market valuation tool is again in the red zone.
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Profit From A 'Monopoly On The Internet' With 45% Upside
There are few legal monopolies.
One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives -- including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don't have a choice?
But what if there were a legal monopoly that embodied "customer captivity"? Imagine a company that has agreements that give it unrivaled power. And imagine that this same company operates in the fastest-growing industry in the world -- the Internet.
That company is VeriSign (Nasdaq: VRSN), which has a virtual monopoly on Internet domains.
This company has a high level of customer captivity, meaning that its customers rely heavily on its services and cannot get said services elsewhere. VeriSign offers domain name registry services. What this means is that VeriSign operates the authoritative directory of dot-com, dot-net, dot-cc, dot-tv and dot-name domains.
The company saw a sizable pullback in late 2012, after the Internet Corporation for Assigned Names and Numbers (ICANN) approved its agreement as the primary registry for dot-com domains but disallowed the company's request for pricing increases. So dot-com domain fees will remain flat through 2018. The market initially took this as bad news but soon realized that VeriSign still has a monopoly on the domain registry industry. VRSN is now back on an upward trend.
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Carter Worth: Breadth Has Been Deteriorating
There are a million different ways to observe market internals and breadth, but only a few important ones. Measuring the amount of stocks above a given moving average makes sense - as the broader market makes keeps making new highs, the last thing you want to see is leadership narrowing and less stocks in their own individual healthy uptrends. Unfortunately, as the S&P has been pushing into record territory, we've seen a bit of a divergence for its 500 components - although the overall numbers themselves are still healthy.
Oppenheimer's well-respected technician, Carter Worth, has been bearish for a while now, having issued his now notorious one-word research report over the summer, which simply said "Sell". Bulls would argue that he's possibly biased and is looking for things to confirm that earlier view.
That being said, he's got a very good point here in a research note from November 4th:
Specifically, if one tracks stocks in the S&P 500 above their respective 150-day moving average and measures "breadth" based on this method?based on trend (stocks in healthy uptrends typically don?t fall below their 150-day moving average while stocks that are deteriorating do just that)... then one gets a much different picture.
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The Dividend Boom Is Far From Over For These 4 Stocks
When I was 14, my grandmother gave me 200 shares of a small insurance company called Statesman Group, which eventually became American International Group (NYSE: AIG).
The certificates were buried somewhere in my father's law office, but dividend checks appeared in my mailbox every three months. (I remember they were usually for about $50. That was big money for a teenager in the early 1980s.)
I always thought -- and still do -- that that was the neatest thing in the world: getting paid just to own stock.
Historically, many equity investors have felt the same way -- especially after the drubbing of the dot-com bubble burst, the 2001-'02 bear market and the most recent bear market resulting from the financial crisis and Great Recession. Companies that have consistently paid and increased their dividends tend to perform well in times of market uncertainty. The iShares Select Dividend ETF (NYSE: DVY) is proof positive of that sentiment.
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Thursday links: the quiet period Quote of the day Bill Hambrecht, ?The quie
Thursday links: the quiet period
Quote of the day
Bill Hambrecht, ?The quiet period is stupid.? (Fortune)
Chart of the day
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Attention, Growth Investors: 4 High-Upside Small-Caps
There are two major concerns facing investors right now. First, the global economy is not yet showing signs of a long-awaited upturn. Indeed, the U.S. is shaping up to be on much more solid footing than its peers (at least as evidenced by U.S. corporate profit growth in the current earnings season). That argues for companies that more squarely focused on the U.S., which usually means small-cap stocks.
Second, the rising market tide has lifted many boats, and it's getting harder to find true bargains. But they still exist.
I went scanning for GARP (growth at a reasonable price) stocks among the S&P 600 (small-cap index) and found more than a dozen stocks that are poised for robust profit growth in 2014, while trading at reasonable earnings multiples. (I only included companies with a market value between $250 million and $1 billion to exclude micro-caps or mid-caps that may be hiding in this small-cap index).
A quick review of the list reveals no clear themes. We don't find a cluster of stocks in any given industry, and instead need to look at these companies on a case-by-case basis. Here's the select group.
GARP Small Caps
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Twitter Debuts on the NYSE
pic via @AnthonyQuintano
The stock has yet to open as of this posting but opening price chatter is north of 40 per share. This would be a substantial print if it happens, a victory for both the company and the underwriters. And then we see if it holds.
In the meantime, the broader markets are weak after a surprise rate cut from the ECB. It's amazing to witness simultaneous deflation fears and a tech bubble all at once.
Interesting times.
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Dave Landry's Market in a Minute - Thursday, 11/7/13
Random Thoughts
As I began writing this morning, I thought, with most indices relatively unchanged lately (sans the Dow), it's probably important not to chase your own tail.
Speaking of tales, based on Wednesday's action, it looks like we're back to a tale of two markets. The S&P plowed along its merry way, tacking on nearly ?%. This has it just shy of all-time highs.
And, speaking of all-time highs, the Dow banged out all-time highs. I'm guessing that the media had quite a field day with that one.
The Quack gapped higher but found its high in early trading and began to sell off to end slightly lower for the day. Net net, it hasn't made in progress in the last three weeks.
The Rusty (IWM) also had a strong start that fizzled. It ended down nearly ?% on the day.
The Rusty is more indicative of what's been happening mostly as of late. A few big cap stocks are leading the way, propping up the indices while internally, things have been a little mixed.
There's still some debacle de jours out there and some sectors are looking questionable at best. Biotech got clocked for nearly a 3% loss. Recently stronger areas like Shipping, and Transports overall for that matter, sold of fairly hard on Wednesday.
On a positive note, Metals & Mining, led mostly by Steel & Iron and Copper, is attempting to break out to multi-month highs. Even within the sector, things aren't all good though-Gold & Silver are lagging here.
Retail managed to close at all-time highs. Software also made new highs.
On the surface, with the indices just shy of new highs, one would think that all is good in the world.
Speaking of the world, Foreign Shares (EFA), which have been lagging as of late, came back to life, gaining nearly 1%--another mixed signal.
As I've been saying lately, there's good, bad, and ugly. It really is a tale of two markets.
So what do we do? Again, you can't go crazy bearish as long as the indices can stay at or near new highs. I do think it is okay to fire off a short or two. Of course, make sure you really like the setup(s) and wait for entries. I'm not seeing a lot of new meaningful setups on the long side at this juncture. This actually might be a good thing. The database, along with all the internal mixed signals, could be trying to tell me to let things shake out a bit.
Futures are strong pre-market. Could this be d?j? vu all over again?
Click here to watch today's Market in a Minute.
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Hot Links: No Way to Keep Up
Stuff I'm Reading this Morning...
Twitter?s Market Valuation Suggests Wall St. Sees Huge Growth Potential (DealBook)
ECB liveblog, to cut or not to cut? SURPRISE RATE CUT (MoneyBeat)
Can European stocks see even more PE multiple expansion? (DrEdsBlog)
Bitcoin is exploding in price this week... what's behind the rally? (Bloomberg)
...but it's basically a joke, says Lil Weezy (BusinessInsider)
Unfortunately to those with balanced, diversified portfolios, there was no way to keep up with the Dow Jones this year. (PragCap)
Raise your hand if you're on Wall Street and getting a 5 to 10% bump in your bonus this year. Not so fast, bond traders. (DealBook)
"Am I being responsibly patient or irresponsibly greedy?" (AllStarCharts)
How the owners of all 30 NBA teams made their money. (MentalFloss)
Jaime Alexander seems fun... (HuffPo)
What "No" really means. (SethsBlog)
REMINDER: Backstage Wall Street is now on Kindle!
The Reformed Broker
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Barchart.com's Chart of the Day - GentiumSPA (GENT) for Nov 6, 2013
The Chart of the Day is Gentium SPA (GENT). I found the stock by sorting the New High List for Weighted Alpha. Since the Trend Spotter signaled a buy on 7/15 the stock soared 573.25%.
It is a biopharmaceutical company focused on the research, development and manufacture of drugs to treat and prevent a variety of vascular diseases and conditions related to cancer and cancer treatments. Defibrotide, the Company's lead product candidate, is an investigational drug that has been granted Track Designation by the U.S. FDA for the treatment of Severe VOD, Orphan Drug status by the U.S. FDA for the treatment and prevention of VOD and Orphan Medicinal Product Designation by the European Commission for the treatment and prevention of VOD.
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Enjoy the Dollar Rally While it Lasts
Any trader will tell you the trend is your friend, and the overwhelming direction for the US dollar for the last 220 years has been down.
Our first Treasury Secretary, Alexander Hamilton, found himself constantly embroiled in sex scandals. Take a ten-dollar bill out of your wallet and you?re looking at a picture of a world class horndog, a swordsman of the first order. When he wasn?t fighting libelous accusations in the press and the courts, he spent much of his six years in office orchestrating a rescue of our new currency, the US dollar.
Winning the Revolutionary War bankrupted the young United States, draining it of resources and leaving it with huge debts. Hamilton settled many of these by giving creditors notes exchangeable for then worthless Indian land west of the Appalachians.
As soon as the ink was dry on these promissory notes, they traded in the secondary market for as low as 25% of face value, beginning a century?s long government tradition of stiffing its lenders, a practice that continues to this day. My unfortunate ancestors took him up on his offer, the end result being that I am now writing this letter to you from California?and am part Indian.
It all ended in tears for Hamilton, who, misjudging former Vice President Aaron Burr?s intentions in a New Jersey duel, ended up with a bullet in his back that severed his spinal cord.
Since Bloomberg machines weren?t around in 1790, we have to rely on alternative valuation measures for the dollar then, like purchasing power parity, and the value of goods priced in gold. A chart of this data shows an undeniable permanent downtrend, which greatly accelerates after 1933 when Franklin Delano Roosevelt took the US off the gold standard, banned private ownership of the barbarous relic, and devalued the dollar. Gold bugs have despised him ever since.
Today, going short the currency of the world?s largest borrower, running the greatest trade and current account deficits in history, with a diminishing long term growth rate is a no brainer. But once it became every hedge fund trader?s free lunch, and positions became so lopsided against the buck, a reversal was inevitable. We seem to be solidly in one of those periodic corrections, which began two weeks ago month ago, and could continue for months, or even years.
The euro has its own particular problems, with the cost of a generous social safety net sending EC budget deficits careening. Use this strength in the greenback to scale into core long positions in the currencies of countries that are major commodity exporters, boast rising trade and current account surpluses, and possess small consuming populations.
I?m talking about the Canadian dollar (FXC), the Australian dollar (FXA), and the New Zealand dollar (BNZ), all of which will eventually hit parity with the greenback. Think of these as emerging markets where they speak English, best played through the local currencies
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7 Stocks With Growing Revenues And Yields Up To 9%
As a rule, most investors are utterly preoccupied with earnings.
That's understandable, of course. At the end of the day, the goal of any business is to turn a profit. The problem comes when we focus on the bottom line to the exclusion of everything else.
At best, this offers an incomplete view of how a company is performing. At worst, it can mask underlying weakness.
In response to the last recession, businesses of all shapes and sizes streamlined their operations to cut costs and preserve cash. Many did an outstanding job of erasing red ink from the books. The deeper they slashed, the more money they pocketed.
At first, this delighted investors. They saw growing earnings each quarter and cheered. But eventually, they began to realize that the phantom "growth" was nothing more than belt-tightening. In many cases, revenues were actually flat or sometimes even falling.
You can boost your household disposable income by eliminating the $100 weekly maid service and the $100 weekly lawn care service -- but you'd much rather get a $200 weekly pay raise.
The same rings true in the business world, where you'd much rather attract new customers or increase prices. There's a limit to how much a company can cut. Plus, you have to look at what you're giving up.
Suspending all research and development (R&D) expenditures might look great for a while, until the company begins to fall a few steps behind competitors. Likewise, eliminating the marketing department might save millions, but end up costing even more when customers stop coming in the door.
As they say, you must spend money to make money.
Now, there is absolutely nothing wrong with cost-cutting initiatives. There's something to be said for a lean operation. But a business can't expand by contracting.
So if you want to find thriving companies that are in a position to distribute more cash to investors, then it all starts on the top line.
After all, before you turn the first dollar of profit, somebody has to come in the door and buy something.
With all this in mind, I went out in search of healthy companies with strong -- and, in some cases, accelerating -- sales growth. Specifically, I screened for businesses with annual revenue growth of at least 20% in each of the past two fiscal years and a healthy outlook for the remainder of 2013.
Of course, you can't look at sales in isolation either. So I also looked for 8% or better growth in operating income and a minimum 3.5% dividend yield. Here are a few notable finalists.
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Warning: Avoid These 4 High-Yielding Stocks At All Costs
Short sellers love to focus on major themes, and one of their favorite themes involves unsustainable dividends. The shorts know that any time a dividend must be cut or eliminated, shares can drop sharply as the primary appeal of such high-yielders disappears.
Case in point: Frontier Communications (NYSE: FTR), which currently has a short position in excess of 200 million shares. (I recently discussed this telecom's impending dividend woes.)
But Frontier's not alone. A few of its peers in the telecom industry are also at risk of a painful dividend cut, and it's unwise to focus on their current unsustainable dividend yields.
1. Consolidated Communications (Nasdaq: CNSL)
Current yield: 8.3%
This local and long-distance phone company has supported an impressive $1.55 a share annual dividend since 2006. Trouble is, over the years, business has steadily deteriorated as its client base slowly defects to large wireless service providers. In years past, Consolidated typically generated around $15 million in annual operating cash flow, which was just enough to support the dividend. But operating profit fell 40% in 2012 to below $10 million, and of greater concern, free cash flow turned negative for only the second time in the past eight years.
Though Consolidated's year-over-year growth looks impressive thanks to acquisitions, organic growth remains negative. And as is the case with Frontier, this company carries a hefty amount of debt ($1.2 billion as of June), and an eventual rise in interest rates will lead to surging interest costs. Management would be wise to conserve cash now by slashing the dividend before that happens.
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Wednesday links: enlightened strategies
You can keep up with all of our posts by signing up for our daily e-mail. Thousands of other readers already have. Don?t miss out!
Quote of the day
John Picerno, ?(Q)uite a lot of what appears to be a good deal in the exploding list of ?enlightened? strategies in the land of ETFs and mutual funds is just an excuse to charge more for something that can be accessed less expensively and more efficiently through other means.? (Capital Spectator)
Chart of the day
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Twitter Prices its IPO: Live from the NYSE
The big moment has finally arrived: Twitter is expected to price its initial public offering tonight after the bell tonight. Your boy will be live from New York Stock Exchange from 3pm on CNBC's Closing Bell with Maria Bartiromo and Bill Griffeth for live coverage and all the breaking news.
My Twitter born-on date was March 2nd, 2009 - the week the market bottomed and the end of the bear market. Correlation? Causation? LOL
Find your Twitter born-on date here, btw:
http://twbirthday.com/
In the early days, Twitter was really just another broadcast tool for links to my blog. Then I started making friends and contacts from around the limited investor and trader community that had sprouted up. Then I started interacting with some of my favorite financial reporters and by the end of 2009, the crew had come together. Back in the day it was me, Joe Weisenthal, Heidi Moore, Kelly Evans, Epicurean Dealmaker, smithy Salmon, Phil Pearlman, Justin Paterno (zerobeta), Howard Lindzon, Stacy-Marie Ishmael, Jordan Terry (aka The Analyst), Dan Primack, Katie Rosman, John Carney, Dasan, Brian Shannon and a bunch of others. We were the Financial Twitter OGs - back before anyone else even cared that what we were doing even existed.
But my how things have changed - for the better! Now just about everyone is on Twitter, under a real name or an alias. Buffett's on, Icahn's on, Bloomberg is crating us, the world is paying attention to the stuff we chatter about. It's so cool to have connected with so many of you - traders, investors, reporters, bankers and analysts - over the years, an opportunity that could never have arisen if not for blue bird.
Anyway, it's been a long road toward an IPO for the revolutionary social messaging service, but things really kicked into high gear once Facebook's stock price had regained its IPO level, see: There Are No Coincidences in Banking.
Anyway, tune in as we get the offering price and whatever other tidbits should happen to surface, see you there!
Follow me on Twitter here: @reformedbroker
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Profit From A 'Monopoly On The Internet' With 100% Upside
There are few legal monopolies.
One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives -- including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don't have a choice?
But what if there were a legal monopoly that embodied "customer captivity"? Imagine a company that has agreements that give it unrivaled power. And imagine that this same company operates in the fastest-growing industry in the world -- the Internet.
That company is VeriSign (Nasdaq: VRSN), which has a virtual monopoly on Internet domains.
This company has a high level of customer captivity, meaning that its customers rely heavily on its services and cannot get said services elsewhere. VeriSign offers domain name registry services. What this means is that VeriSign operates the authoritative directory of dot-com, dot-net, dot-cc, dot-tv and dot-name domains.
The company saw a sizable pullback in late 2012, after the Internet Corporation for Assigned Names and Numbers (ICANN) approved its agreement as the primary registry for dot-com domains but disallowed the company's request for pricing increases. So dot-com domain fees will remain flat through 2018. The market initially took this as bad news but soon realized that VeriSign still has a monopoly on the domain registry industry. VRSN is now back on an upward trend.
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Own A Piece Of The Empire State Building With This IPO
Manhattan is the most exclusive real estate market in the world.
The tiny, 34-square-mile island is home to Wall Street, the global headquarters of the United Nations and some of the most powerful and influential companies in the world.
That exclusivity has driven big gains for one of Manhattan's most prized properties. Since going public in the spring of 2010, Madison Square Garden (NYSE: MSG) is up a market-crushing 198%.
But if you missed out on that impressive run, don't worry. The most exclusive real estate market in the world is setting the stage for another big winner.
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Map: The United States of Corporatism
via Mother Jones:
we mapped which industries gave the most to state-level campaign donors for the 2012 election (ballot initiatives and party PACs excluded) and limited our search to the top business in each state. We also excluded unions, law firms, and nonprofits, since political giving from these entities can be associated with a variety of industries.
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Barchart.com's Chart of the Day - China Sunergy (CSUN) for Nov 5, 2013
The Chart of the Day is China Sunergy (CSUN). I found the stock by sorting the New High List for Weighted Alpha and this stock has a WA of 848.00+. Since the Trend Spotter signaled a buy on 9/3 the stock is up 321.40%!
It is a manufacturer of solar cell products in China. They manufacture solar cells from silicon wafers utilizing crystalline silicon solar cell technology to convert sunlight directly into electricity through a process known as the photovoltaic effect. China Sunergy sells solar cell products to Chinese and overseas module manufacturers and system integrators, who assemble solar cells into solar modules and solar power systems for use in various markets.
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Dave Landry's Market in a Minute - Wednesday, 11/6/13
Random Thoughts
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The market sold off a bit but then recovered. The Quack actually made it back to the plus column, albeit slightly.
Even though the Rusty ended off a bit, internally, the market seemed okay. Most stocks ended flat at worse.
The indices have been a little sideways as of late. On a net net basis, the Ps are relatively unchanged over nearly the last 2 weeks. Ditto for the Quack. In fact, it is relatively unchanged for over 2 weeks.
Even though they haven?t made must forward progress shorter-term, both the Ps and Quack are just shy of all-time and multi-year highs respectively. As a trend guy, I?m not going to argue with a market hovering around its old highs.
Futures are strong pre-market so we could see those highs challenged, at least in early trading.
Getting back to the internals, several areas managed to bang out new highs including, but not limited to Restaurants, Retail, Shipping, and Defense.
All isn?t great in the world though. Several areas such as Biotech and Banks have lost momentum as of late.
Speaking of the world, the EFA (EFA) have lost some momentum as of late too, trading back to their recent breakout levels.
Bonds (TLT) were hit fairly hard. They remain stuck in a low level sideways range.
So what do we do? I think the plan remains mostly the same. As a trend follower, you don?t want to argue with new highs. Therefore, as long as the indices can stay at or near new highs, don?t become crazy bearish. Do continue to look for clues internally. Based on some recent internal weakness (see column archives, click on the calendar on the upper right of this page), I wouldn?t completely ignore the short side just yet. Do make sure you wait for entries. That, in and of itself, might keep you out of new trouble. In fact, as mentioned recently, use liberal entries while the market finds its way. This has helped us to avoid more setups than we?ve taken over the last few weeks. I?m still bullish on Solar and other Alternate Energies (we are long TAN) and I think selected Metals & Mining have potential (we are long SLCA).
Click here to watch today's Market in a Minute.
Best of luck with your trading today!
Dave
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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 seconds.
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The Hottest Market In Europe: Still a Bargain?
With a 23% spike since Labor Day, the Spanish stock market may be the hottest in the world right now.
Considering that Spain has one of the world's highest unemployment rates (exceeding 25%), and that its economy that grew a scant 0.1% this summer, the euphoria is simply unexpected. But investors are often well-served by focusing on distressed assets that may have hit bottom.
In fact, three of the world's richest men (Warren Buffett, Bill Gates and Mexico's Carlos Slim) are taking the plunge. They're not buying Spanish companies because business conditions are good. They're doing it because Spanish assets are quite cheap in relation to both the money that has been invested in them already, and in comparison to other European assets.
News of an emerging Spanish revival among global investors was triggered by a $150 million purchase by Gates' investment firm of Fomento de Construcciones y Contratas (FCC), which is not traded on U.S. markets. The company has cleaned up its balance sheet and diversified its country exposure, but more than half of sales are tied to Spain, mostly in cement-making. Yet Spain, like China, has a massive glut of unsold homes that were built at the height of the bubble, and construction-related plays may not be the safest way to such a rebound.
Indeed any investments that depend on Spanish consumer confidence look risky. High levels of unemployment have been exacerbated by a sharp drop in wages. That's great news for corporate profits, but bad news for consumer spending.
Following the moves of Buffett and Slim is also challenging. They each invested in a set of assets (life insurance policies and bank branch leasebacks, respectively) that most investors simply can't do.
But that's no reason to ignore this opening. That's because in recent years, the Spanish government has enacted tough policies that led to short-term suffering but set the stage for a healthier long-term economic foundation. For example, labor laws have been loosened; provincial and municipal debt loads are starting to come down, thanks to a sharp drop in sp
ending. Other rays of hope:
Monthly retail sales turned positive in September for the first time in more than three years
? Foreign direct investment (FDI), a key measure of global interest in Spanish assets, is on track to hit 30 billion euros (about $40 billion) this year, roughly twice the levels seen in 2012
? Spanish bond yields are dropping, reflecting higher confidence that the risk of a major financial meltdown is receding.
Meanwhile, Spanish assets remain fairly inexpensive. The average Spanish stock, for example, trades for 1.38 times book value, which is near the bottom of the range of European markets (with Italy being the most inexpensive market). Spain's average dividend yield is also well above the pack.
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Beware This Costly Form Of Portfolio Insurance
Derivatives are simply investments that trade based on the price of something else. In other words, the price of a derivative is "derived" from something else.
Often that something else is an index, a stock or an exchange-traded fund (ETF). While derivatives can be customized and complex, there are also "plain vanilla" derivatives, and this variety includes ordinary call options and put options on stocks and ETFs.
An option is a derivative because the price of the option is based on the price of the underlying stock or ETF. Options give buyers the right to buy (in the case of a call option) or sell (with puts) a stock or ETF at a predetermined price (the strike price) before the option expires.
Options are typically used to leverage a move in an underlying stock or ETF, and they can potentially be used to provide portfolio insurance for individual investors.
In order to understand the costs and potential benefits of portfolio insurance, we will use an example.
Imagine an investor with an account worth $10,000 invested entirely in the stock market. If the investor believes that stocks are likely to fall 10% or more in the next year, the investor could attempt to hedge with an ETF like the ProShares UltraShort S&P 500 (NYSE: SDS). This inverse ETF is leveraged to go up twice as much as the S&P 500 Index falls on any given day.
SDS is rebalanced daily, so it will not follow the index exactly over longer periods, but it has moved in the same general direction as the underlying index.
SDS is currently trading at about $33.35. Buying 100 shares of SDS would require $3,335 and would reduce the exposure to the stock market to $6,665. If the rest of the account rose 20% and SDS fell 40%, your total account value would be about $10,000, while an account without SDS would be worth $12,000. So, buying SDS would hurt your account in a bull market.
If stocks fell 20% and SDS rose 40%, your account balance would also be about $10,000.
Instead of buying SDS, you could buy a call option with a strike price of $30 expiring in January 2015 that is trading for about $5.90. Buying call options is generally thought of as a bullish strategy, but when you buy a call option on a leveraged inverse ETF like SDS, you are actually making a bearish bet and therefore hedging your portfolio.
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Hot Links: Be Wrong, Get Rich
Stuff I'm Reading this Morning...
The 2-and-20 era is over. (FocusOnFunds)
Tesla gives investors a "reality check." (ValueWalk)
More signs that the Japanese economy is ready to break out. (BusinessInsider)
The supply of Twitter shares is set to increase dramatically in the months following the company?s IPO. (Quartz)
How should we think about Twitter's economic moat? (Morningstar)
How Dennis Gartman got rich by being wrong. (CrosshairsTrader)
Who are the top candidates for the Microsoft CEO gig? (Reuters)
Greggy: "this is thetime to tell Peter Schiff to go F? himself, sell your Gold and buy Stocks." (DragonflyCapital)
The biggest little secret in money management. (CapitalSpectator)
What the domestic energy revolution could mean for your portfolio. (BlackRock)
Twitter's users are young and super into news consumption. (journalism.org)
Mercedes Benz sales explode 15% in October, nearing new record. (Reuters)
Great parallel for investors: Hollywood still believes there is a tried-and-true formula to produce winners. (SethsBlog)
Why Eminem matters right now. (TheAtlantic)
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check The Great Race for Battery Technology
One hundred years from now, historians will probably date the beginning of the fall of the American Empire to 1986. That is the year President Ronald Reagan ordered Jimmy Carter?s solar panels torn down from the White House roof, and when Chinese Premier Deng Xiaoping launched his secret ?863? program to make his country a global technology leader.
Is the End Near for the US?
The big question today is who will win one of the biggest opportunities of our generation.
Some 27 years later, the evidence that China is winning this final battle is everywhere. China dominates in windmill power, controls 97% of the world?s rare earth supplies essential for modern electronics, is plunging ahead with ?clean coal?, and boasts the world?s most ambitious nuclear power program.
It is a dominant player in high-speed rail, and is making serious moves into commercial and military aviation. It is also cleaning our clock in electric cars, with more than 30 low cost, emission free models coming to the market by the end of 2013. Looking from a distance, one could conclude that China has already won the technology war.
Not if Tesla?s (TSLA) Elon Musk has anything to say about it. Our only serious entrant in this life or death competition is the Tesla Model S-1, which has been on the market now for a year. At $80,000 per vehicle for the long range version that accounts for 90% of sales, production is now ramping up to a modest 40,000 units a year.
My Model X SUV won?t be delivered until January 2015. Elon tells me that he plans to bring out a $40,000, 300-mile range ?Next Gen? vehicle by 2018, which will reach 500,000 in annual production. And they will all be 100% ?Made in the USA.?
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Profit From The Big Apple With This Real Estate IPO
Manhattan is the most exclusive real estate market in the world.
The tiny, 34-square-mile island is home to Wall Street, the global headquarters of the United Nations and some of the most powerful and influential companies in the world.
That exclusivity has driven big gains for one of Manhattan's most prized properties. Since going public in the spring of 2010, Madison Square Garden (NYSE: MSG) is up a market-crushing 198%.
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Do Your Mining Stocks Have The 'Death Gene'?
Have you heard about the "death gene"?
Not to worry -- I'll tell you about an antidote in a moment, but first consider this...
The death gene is the genetic variant that apparently can determine -- with disconcerting accuracy -- your likely departure time from this planet.
Researchers in Boston inadvertently made the discovery in the aftermath of a study that looked at sleep patterns. The scientists found that subjects with one particular genetic arrangement died just before 11 a.m., while another group with a different makeup passed away around 6 p.m.
Dave Forest, Chief Investment Strategist for StreetAuthority's Junior Resource Advisor, recently discovered a new kind of death gene.
It may not predict the demise to the hour like the Boston findings do, but it does tell us to the year -- and even the month -- when some of the biggest companies in the market might suddenly implode, and perhaps even cease to exist.
This potential terminal switch is something investors have grown so accustomed to that few think of it as a problem. But I believe it's going to rear its ugly head soon and perhaps often -- destroying billions in shareholder value, as formerly vibrant businesses are swiftly and suddenly rendered paralytic and inoperable.
In this instance, the Grim Reaper is debt.
The thing about debt, of course, is that sooner or later it comes due. And if a company doesn't have the cash to pay back maturing obligations or the ability to otherwise extend or "roll" the debt, the maturity date "is also the time when debt can turn into a death gene, wreaking havoc on firms that may appear to be healthy," Dave writes.
Dave pays particular attention to natural resource companies, a sector in which many of the big players -- along with some of the smaller ones -- are going to be facing potentially challenging payback issues over the next few years.
That's because falling commodity prices are squeezing cash flow and impeding the ability of borrowers to service or pay off their debts, according to Dave.