It’s the same way for politicians. Give them some cash and they’ll have it spent in no time flat, even if they can’t find anything worth buying.

Take, for example, the infamous Troubled Asset Relief Program, TARP in informal nomenclature. Passing the $700 billion program was a matter of financial and economic life and death according to Washington.

They gave us the same panicky “must-have” arguments as a six-year-old in the toy aisle.

But once they got what they wanted, their “toy” sits unused in the corner. As I write, TARP has over $140 billion in uncommitted funds and $300 billion that has yet to be spent.

Yep, they really need that money, didn’t they?

But the story gets even better. Fully expecting a miraculous recovery by the end of this year, our policymakers set TARP to expire on the final day of the 2009. They figured Obama would certainly prop all 300 million of us on his shoulders and carry us to safety by year’s end.

Now that the economic situation is not nearly as rosy as Obama promised a year ago, Washington is crying once again how badly it needs the money. It’s just how little Johnnie cries and moans when little Janie plays with the toy truck he hasn’t touched in months.

Geithner and his team have hundreds of billions of borrowed money up their sleeves with few viable ways of spending it. But now that we are asking for the money back, they say they need it… at least through next October (definitely not through November elections).

Do we ever grow up? It’s like a bunch of kids playing with very expensive toys in Washington.

*** Have you noticed a lot of Washington’s “economic recovery” programs are up for renewal these days?

TARP, the housing stimulus and all sorts of unemployment benefits have been or will be extended. I’m surprised we haven’t seen the resurgence in Cash for Clunkers.

There’s even a bill that would tax Wall Street to the tune of $150 billion annually to help create new jobs. It’s called, get this, “Let Wall Street Pay for the Restoration of Main Street Act of 2009.”

All these extensions and new programs are a surefire signal that all is not grand in the economic world and Washington had absolutely no idea what it was getting itself into as it spent nearly three trillion dollars to supposedly prop up the nation’s economy.

With Congress continuing its reach into the chest of the domestic economy, its no wonder gold prices are hitting new records day after day. By the time Washington is done, nothing “American” will have any intrinsic value left.

But just as I said yesterday about investing in the dollar’s downturn, be cautious of jumping on the golden bandwagon. It could be trouble.

So far this year, gold’s Street value has increased by 32%. It’s a strong gain when compared to historic moves, and it beat’s the S&P 500’s year-to-date climb of 22%, but how far will the bulls take it before they say enough is enough and the bottom falls out once again.

After all, gold really isn’t worth a lick.

You can’t eat it. It won’t fuel your truck. It won’t give you shelter and it won’t protect your house (unless you’ve got a good arm). When the dung really hits the fan, gold’s only strongpoint is it’s more valuable than a fancy certificate that says you own 1,000 shares of XYZ.

But even then, it’s only valuable because we say it is.

Let’s be flat-out honest with each other here. What are the chances of full-on economic calamity? I mean the kind of situation where you will dig your gold out from beneath the old oak tree and take it to the grocery store to buy a slab of bacon.

In other words, what are the chances you will actually use gold for its “emergency” purpose?

Slim to none, and I’m more pessimistic about this economy than any Roubini-following perma-bear.

Gold’s a trap, especially for the folks buying at today’s prices and actually paying to store the rare metal in some vault.

If you absolutely have to own gold, keep your ownership to a minimum, a few grand worth of coins or so. Nothing more.

Better yet, take advantage of the gold rush of ’09 and invest in the world’s gold miners. They are the ones fleecing the bandwagon riders and creating the ultimate market-beating profit potential.

In this market it is more important than ever to not be a clueless sheep merely following the herd.

Be the shepherd and lead the lambs to slaughter.

*** As options investors we love to lead the pack. That’s why over at TFN Strategic Trader, we are all smiles today. After locking in gains of 400% last week, we sold another set of call options for quick-and-easy gains of 60%.

On Friday I sent out a buy alert. This morning I said sell. Traders that followed my advice locked in three-day gains of 60%. Way better than gold.

With the global economy taking off without us and foreign interest rates already on the rise, the Fed is desperate to look bullish while acting bearish.

Anybody that has ever tried to prove the existence of Santa Clause or the Tooth Fairy to a six year old knows what Bernanke is trying to do. At this point, he’ll do anything to change the subject and focus the attention on something else.

With all of this talk about an increasingly deadly carry trade bubble, it is beyond obvious that American interest rates need to rise. If it doesn’t happen, soon enough all of America’s money will be invested in some high rise in China’s Guandong province… or Saudi oil.

But we all know Bernanke would commit career suicide by lifting a headliner like short-term rates even by a quarter of a percent. The blame for any upcoming financial downturn will be squarely on his shoulders.

For the youngsters in the room, he’ll be blamed for outing Santa Clause.

So what’s the guy to do? He’s already doing it.

The Fed is unraveling its plans to buy a whopping $1.25 trillion worth of mortgage-backed securities and $200 billion worth of other mortgage-related notes.

By March, the Fed’s massive buying spree will be over, once again letting the markets deal with a massive amount of very “un-transparent” securities. The same lion that brought the bull down is once again about to be un-caged, hungrier than ever.

If you thought the market had a hard time swallowing so many mortgage defaults, wait until $1.45 trillion dollars runs straight into 10% unemployment and a real estate market worth a fraction of what it was even a year ago.

And here’s the kicker, just by refraining from hitting the “buy” button, Bernanke effectively raises mortgage rates by as much as 100 basis points.

Let’s see… 10% unemployment, a weakened currency, deflating home prices and inflating borrowing costs. It’s a recipe for disaster.

At least Bernanke gets to keep his job and he gets the keen realization that he would not be in this bind if he never would have meddled with the markets in the first place.

We all knew the day would come when the Fed had to clean up its mess. That day has come.

***As if the markets have not shown enough contempt for government intervention, Uncle Sam is once again trying to throw sand into the gears and cogs of American business.

This time they want us to pay workers for not showing up to the job.

Thanks to a representative from California (there’s a surprise), legislation is working its way through Capitol Hill that would force employers to pay an employee for up to five days worth of sick leave if the worker is diagnosed with ANY infectious disease.

The rational side of my brain says there is absolutely no way this is going to make it the White House. The harm it would do to production is simply too immense to deny, even by politicians.

But the irrational side of me can already imagine the last-minute phone calls. “Sorry boss. I can’t flip burgers today. Got herpes. See you on Friday to get paid.”

Gotta love where we are headed.

Prepare for the worst. Hope for the best. That’s the motto of the nation’s retail industry these days.

With consumers stitching their wallets shut and retailers slashing their margins in an attempt to attract the few Americans left that are willing to spend, expectations are not high for stores setting up shop in the nation’s malls.

But with low expectations come big surprises.

With the first batter of the latest earnings season, Alcoa (NYSE:AA), hitting a triple last night, optimism is on the rise. Thanks to some better-than-expected same-store sales figures this morning, the high hopes are raising the mood for the retail industry.

The morning’s leader board is filled with the names of clothing sellers once tossed aside to the ravens of Wall Street.

Tandy Leather Factory (AMEX:TLF) is taking its shareholders on a ride to new yearly highs after it announced a September sales figure significantly larger than expected. Compared to last year’s figures, comparable monthly sales rose by 14%.

The surprising action has sent shares of the leather retailer up by double-digit proportions so far today, adding to the triple-digit gains already created as the stock more than doubled in value from its March lows.

Better than nothing

While the news from Wet Seal (NASDAQ:WTSLA) is not quite as positive, word of better-than-expected shares has created a profit opportunity for its shareholders.

As a player in the women’s specialty market, Wet Seal has plenty of competition as it fights for what’s left of the nation’s discretionary spending. That’s why analysts were expecting a sales decline of 7.8% from last September’s figures.

But now that the company tells us the figure was actually a decline of just 4.5%, investors are wondering if this is a good buying opportunity. With shares up by over 5% on the day, its obvious plenty of investors are increasingly bullish.

Finally, while the 30% surge from Liz Claiborne (NYSE:LIZ) has little to do with past sales figures, it has everything to do with the company’s future sales growth.

Shares of the clothing designer and marketer are surging on the news the company has signed an exclusive deal with J.C. Penney (NYSE:JCP). The word is J.C. Penney will have sole access to the Liz Claiborne and Claiborne brands.

The contract is good news for the cash-strapped firm as it includes guaranteed minimum profit sharing, royalty payments and design service fees.

While I am weary of the long-term sustainability of today’s surge forward, there is no denying the surprisingly good figures are a sign that the devastated retail industry still shows signs of life.

A lot of innings remain to be played in the current earnings season. So far, the bulls are ahead. But the game is far from over.

Source: Retail Industry is Getting Attractive

And so it begins. Just yesterday, we here at the TFN offices got into a late-day discussion about the fate of the nation’s natural gas markets.

With prices remaining low and entirely removed from the recent commodities bonanza, the nation’s expanding natural gas drilling industry is headed for trouble.

Today we got the news that proves our theory.

ConocoPhillips (NYSE:COP), the third largest of the nation’s Big Oil players, announced it is cutting its capital spending budget by nearly 10% and is selling some $10 billion worth of assets.

Why the drastic moves? Thanks in part to stubbornly low natural gas prices, the company needs to make the cuts to shore up a leveraged balance sheet.

If you recall, just last week the company warned Wall Street to expect reduced earnings figures thanks to a 67% reduction in natural gas prices.

There was similar news yesterday from nation’s second-largest producer, Chevron (NYSE:CVX). The California-based company quietly announced all drilling has stopped at its Piceance Basin facilities in Colorado.

I bet you can guess why they plugged the well. Yep, you betcha, low natural gas prices.

Drill, baby, drill

So if the natural gas price conundrum is having this effect on the nation’s largest companies and their multi-billion dollar cash flows, what is it doing to the tiny, marginal players?

Early last month, Trident Resources gave us a glimpse of what is likely to come. Citing liabilities of nearly a billion bucks and assets worth just $10 million, the Canadian gas driller was forced to walk into bankruptcy court and ask for protection from its creditors.

Indeed, the same companies investors were pumping their money into when gas was soaring to record highs are now failing under the weight of massive debt.

Here’s the kicker that is really going to tear the gas industry apart.

That massive debt that was picked up over the past few years doesn’t simply go away now that prices have plummeted. Drillers still have to pay their bills. That means any bit of cash flow available is direly needed.

That is how we got to where we are today, with natural gas inventories across the country at record high levels and growing by the minute.

With bills to pay, drillers simply refuse to close the valves on their producing wells. If they do, they’ll go bankrupt. But until they slow the flow, the price they get for that gas will sink lower and lower.

Eventually, prices will get so low the weak will be shaken out of the market whether they like it or not. They won’t be able to produce enough gas even to make their weekly payroll.

One of many

I could pick on dozens of small drillers that are facing gale-force headwinds, but since Rex Energy Corp. (NASDAQ:REXX) recently expanded its drilling in the Marcellus Shale formation, which is the chief cause of the current market glut, I will put their issues in the spotlight.

With $70 million in liabilities, the $330 million company is one of the better positioned drillers in its category. But much of that debt is focused on bringing the company to the Marcellus Shale region. If the move does not pay off, Rex could be forced to pay on a dud for quite some time.

Common estimates put the break-even price for Marcellus Shale drilling somewhere around $3.70 per 1,000 cubic feet of gas. Right now, drillers are able to get that price from the futures market, but the overfilled spot market is not willing to spend so much.

With nearly $1.50 difference between spot and future prices, something has got to give. With inventories about to overflow, the spot price won’t budge an inch.

The common argument throughout the market is that typical winter demand will reduce supplies and bring the markets back in equilibrium. But remember, the markets rarely go with the crowd.

The speculators have gas prices going higher over the next two months, but the facts and economic laws show prices will be going lower.

If it happens, it won’t be good for drillers. ConocoPhillips knows it. Now so do you.

Source: Natural Gas Industry Braces for Impact

Even though the “Merger Monday” trend is not continuing this week, we have a Monday morning filled with positive news and upgrades. The action is putting new wealth into the pockets of plenty of investors.

One of the morning’s biggest movers comes close to the form of a merger. With the news the Swiss technology company Kudelski has raised its tender offer price for OpenTV (NASDAQ:OPTV) to $1.55, shares of the American digital-television software manufacturer have surged ahead by nearly 20%.

Earlier this year, Kudelski offered to purchase the 87% of the company it does not own for $1.35. But a shareholder committee bulked at the offer and the Swiss backed out.

This morning OpenTV shareholders are glad they shook off the last potential deal. Kudelski’s offer is doing what the markets could not accomplish, raise the share price above $1.55 and keep it there.

While it is too soon to know for certain, I’m thinking the deal will be finalized this time.

Food? Where’s the value?

Another company worth paying attention to today is Manitowac (NYSE:MTW). Thanks to an upgrade by the folks over at Deutsche Securities, shares of the crane manufacturer and foodservice operator are up by nearly 15%.

Interestingly, the upgrading analyst does not cite the company’s heavy-manufacturing exposure as the catalyst for earnings growth. Instead, he feels the foodservice division will “dominate” over the next couple of years, providing some 45% of Manitowac’s revenue and 65% of its pre-tax earnings.

The chief reason for the predicted boost in profitability is a sizeable increase in margins, a theme certainly not prevalent in a “de-inflationary” economic environment.

It will be interesting to see how this one works out. After surging by nearly 300% from its March lows, I am not expecting this stock to soar much further anytime soon.

Finally, we have all heard the fairly decent news out of the nation’s computer manufacturers over the past couple of months. Now it is trickling down the supply chain.

After a four-fold share price increase over the past seven months, Ultra Clean Holdings (NASDAQ:UCTT)was the recipient of a late-inning upgrade from Needham this morning. The equity research team switched their outlook from “hold” to “buy.”

Better late than never?

Again, potential investors may be a few months late if they want to get in on the big money potential.

Shares of the $120 million company, which specializes in subsystems for the semi-conductor industry, are just shy of 52-week highs, fully recovered from the meltdown of the past 12 months.

While it is easy to sit behind my desk and pick on analysts for being late to the party, there are plenty of investors reliably profiting from investing contrary to analyst upgrades or downgrades.

After the ultra-bullish quarter we just put into the books, this looks like as good of a time to investigate the strategy as ever. The more top-heavy this market becomes and the faster it moves, the more smart investors will look at downside strategies.

OpenTV investors are likely to sell their stakes at today’s offering price in order to lock in gains. I would be surprised if Manitowac and Ultra Clean investors do not follow in kind over the next week or so.

It won’t take much for investors to start selling once again.

Source: Three Big Movers to Start the Week

Yesterday evening, I had the courage to do something I have not done in a long time. I opened my 401(k) statement. It was a brave, bold move that made me ponder doubling up on my blood-pressure medicine before ripping the seal off the envelope.

In the end, my ticker was fluttering with beats of joy: up 33% so far this year.

My decision to overweight the small-cap sector in March paid off.

Even with those strong gains, the long-term trend line shows my heart is going to have to keep pumping for a couple extra years before my wife and I are going to retire in paradise. Most retirement accounts, mine included, are nowhere close to where they were 24 months ago.

As the recipient of a defined-contribution plan, my retirement savings are in my hands. That is not the case for the folks still holding defined-benefit plans. These pensions, once considered a low-risk path towards a reliable retirement income, are becoming far riskier than many workers ever imagined.

As corporate balance sheets crumble under the weight of massive debt loads and reduced revenues, many companies are having a tough time coming up with their required pension payments.

Read through the financial rags and you will see companies are unleashing new shares of stock just to cover their obligations, skipping payments and backing out of pension obligations all together. It is not good news for the folks that depend on the funds to put food on their table.

It is also equally not good for those of us that rely on the equities markets.

More trouble ahead

Look at it this way. Institutional investors are responsible for about 20% of total equity assets. Out of that $20 trillion or so, pension funds are responsible for 40% of the trades. That is a lot of cash.

Unfortunately, many corporate and government plans are underfunded, meaning they have some major catching up to do.

A recent study shows over 20% of funds have “significantly higher” required contributions coming up. In many of those cases, the obligations add up to an increase of 50% or more.

That’s a big problem when many of those companies and governments are fighting just to make their weekly payroll.

There is no doubt we will see a wave of payment defaults in the near future. That means less money – much less money – will flow into the nation’s equity markets.

It is still too early to tell just how badly this will impact the markets, but there is no question it will be significant.

Dow 14,000 once again? Not anytime soon if corporation pensions fall apart.

Source: Ready to Retire? Think Again

There is a rare bit of good news for the newspaper industry this morning – and it’s a whopper!

Share prices across the downtrodden sector are soaring today thanks to word from Gannett (NYSE:GCI) that the company expects to handily beat its third-quarter earnings projections.

Gannett told its investors today to expect per share earnings (after one-time costs) in the range of 39 cents to 42 cents when the company releases its latest quarterly figures on October 19.

Before the press release, estimates pegged the figure at 28 cents per share.

Not surprising, the increase is not due to a sudden increase in subscriptions or advertising revenue. Instead, a reduction in paper costs and operational cutbacks are at work.

The news has sent shares of the $2.7 billion publisher up by more than 15%. Meanwhile, firms like the New York Times (NYSE:NYT) and Journal Communications (NYSE:JRN) are up by more than 5%.

But the industry’s big winner is Lee Enterprises (NYSE:LEE), with shares of the small cap soaring by nearly 60% on the bullish news.

Piggyback Profits

The high-flying action makes Lee an interesting stock to watch over the next few weeks, especially as third-quarter earnings figures begin to roll onto the Street.

With short-term debt of over $1.3 billion and a cash pile a mere fraction of its upcoming obligations, it is no wonder Lee’s shareholders are eager to sell at current levels. They may not get another shot.

If the company is to survive, it is going to spend a lot of time restructuring its current capital structure.

There is a good chance today’s optimistic news will be the catalyst that brings the company’s debt owners to the table in an effort to extend credit deadlines. It certainly helps to prove the newspaper industry is not dead just yet.

If you are thinking about making a move, don’t jump into the fire today. Wait for shares to give back some of the quick-found gains. More importantly, hold out for positive restructuring news or other material information.

Lee has a shot at success. Gannett’s news proves it is possible. But there is likely to be plenty of volatility ahead as the company fights to shed the dangerous weight of immense debt.

We got a rare bit of good news this morning. But will it become a trend? We’ll find out soon enough.

Source: No bailout Needed: Good News from The Rags

Could this be a sign of things to come? Earlier today, Gander Mountain (NASDAQ:GMTN) announced its two largest shareholders have made a deal to take the company private.

In an economic environment where regulations are increasing by the minute and costs are rising even faster, middle-weight companies are quickly realizing it is better business to buy their shares from the secondary market and go private.

Sure, the move is costing Gander Mountain a pretty penny – a premium of about 35% of Friday’s closing price – but the handful of investors that created the deal are certain their company will be better served without the regulations of the public market and without the ever-peering eyes of thousands of interested investors.

If you have been watching this $100-million company over the past few months, you know its share price has not taken advantage of the bullish run in the overall markets. After a wide second-quarter loss, shares of the outdoor retailer plunged by close to 40%.

The timing of today’s announcement is certainly a sign the company’s board believes the worst is over. By making the move now, the few investors that will be left in the company will get a relative bargain, even if they are paying a decent premium.

Of course, this story may be far from over. With the markets increasing in value at a rapid pace over the past few months, long-term investors may not be happy to cash out at these prices. There’s a good chance the company may have a fight on its hands as shareholders fight to get the buyout price as high as they possibly can.

Paying attention, Obama?

Really, the biggest story here is not the overnight surge and the potential for more gains. The big news is stories like this are likely to happen more and more often in the near future.

We have all heard of the fallout from the semi-recent Sarbanes-Oxley infusion of oversight and regulations. Scores of the world’s largest companies are doing all they can to remain out of tightly regulated American markets.

But now that the Obama administration has its eye on everything from executive pay to corporate travel, you can bet a slew of firms have their bean counters figuring out the most effective way forward… public or private?

In the long run, the trend will be detrimental to American investors. But in the short-term, as the markets add a premium to all companies that may be tempted to bail out of the realm of publicly traded shares, investors will prosper.

If you are on a hunt for companies ready to make the move, look for firms with well-established businesses and small market values. Gander Mountain with its limited growth ability and low market cap is a perfect example.

This should be a glaring clue for any politician or regulator that the world of business is uneasy with current actions. Forcing businesses into an unregulated shell will not be good for the nation’s economy.

Source: Gander Mountain: Going Private, Sending a Message

Battles for dominate, market-accepted technology are rarely good for the companies mired in the fight. Sony’s (NYSE:SNE) torturous foray in the VHS versus Beta battle is a perfect example.

But a divided market is not always bad.

Just ask Sonic Solutions (NASDAQ:SNIC) shareholders. As the entertainment industry slowly figures out if DVDs or Blu-ray technology will dominate the video world, Sonic’s shareholders had the chance to rake in a fortune.

Shares of the $175 million company have soared by 1,050% over the past six months as the global economy rebounds and Blu-ray production increases.

As the go-to firm in Blu-ray production technology, Sonic is embarking on an era of strong growth. Earlier this week, the company announced a list of nearly two dozen European firms that are now using Sonic platforms.

European growth?

The growth comes as authoring facilities increase their Blu-ray production to meet the split demands of the world’s consumers. Until one platform becomes the accepted winner, Sonic will benefit from the dual revenue streams.

Investors interested in this company should be aware of several factors before making the leap.

The first should be obvious. After such a remarkable six-month climb, any negative news event could instantly erode recent growth. In the software industry a new competitor or the advancement of stronger technology can easily send even the strongest of players to the end of the line.

Shares of the company are up by nearly 20% this week, making it a good time to sit back and wait for a better buying opportunity.

Another important variable for the company and its shareholders is the next set of quarterly earnings figures.

Shares surged in August when the company announced a solid quarter (it lost just $1.8 million). If the momentum is not carried through the current period, investors will quickly lose their willingness to pay a premium for the position.

Room for more

When a stock starts to get top heavy, as an options investor, one of the first things I look at is the possibility of a covered call position.

Sonic is ripe for the taking.

As I write, savvy options investors could have a shot at low-risk gains in the neighborhood of 45% by selling out-of-the-money calls and using the premium to buy the underlying stock. It is a relatively safe play (by selling options, you are creating a layer of insurance), with a strong upside.

As the Dow approaches 10,000 and the third quarter comes to an end, volatility and resistance will be on the rise. Now is the time to lock in a smart strategy to take advantage of the situation.

Source: Sonic Solutions: Easy Options Opportunity

Whether the action can be accredited to the greatly debated Cash for Clunkers program or if it is merely the effect of natural economic forces, there is good news out of the auto industry these days… finally.

First, there is word from General Motors (NYSE:GRM) that it plans to expand production at three of its manufacturing facilities. For the nearly 2,400 workers that will be invited to work on the third-shift line, the news is the best they have heard in a while.

It is a similar story at cross-town rival, Ford (NYSE:F), except few American workers will be clocking in for the new shifts. The company is widely expected to announce its plans for a third major production facility in China later this week.

Ford’s news is strong evidence of Asia’s long-term growth potential, especially for American car manufacturers dealing with a weak currency back home.

A bit further down the supply chain, Dana Holding Corp. (NYSE:DAN), a major automotive industry supplier,  is adding to its spectacular six-month run today as its shares surge by nearly 30%.

The stellar gains come as the company kicks off a public offering of 27 million shares. The sale, which is likely to bring in close to $200 million, will be used to repay the company’s massive debt.

While $200 million won’t pull the company out of debt, it will help. The heavy load created by over a billion dollars in debt was one of the driving forces that took share price as low as $0.19 over the last year.

With shares of the company trading for close to $7.30 today, investors who got in at the bottom are sitting on gains of more than 3,700%. Not a bad profit for six months.

Room for more gains?

Over on the retail side of things, the situation is nearly as optimistic.

CarMax (NYSE:KMX) shareholders are smiling today as their company’s value has surged by double-digit proportions on news that the company’s second-quarter sales were better than expected.

Thanks to the crowds awakened by the Cash for Clunkers incentive program, the massive car retailer raked in a record-breaking profit of $103 million over the past three months.

Now the big question on everybody’s mind is will the profitability and growth be sustainable?

Already, there are signs the industry is beginning to slow. Some reports have new-car showrooms even emptier than before the massive incentive program. If that is the case, those recalled workers may be back in the unemployment line all too soon.

If you are a long-term investor, you can afford to keep your shares in the game. Eventually, today’s prices will look cheap.

But if you can’t stand some short-term volatility or are sitting on a hefty pile of profits, now would be a good time to pull some chips from the table.

Detroit has found safety in a calm meadow, but it is not out of the woods yet.
Source: Detroit Update: Finally Some Good News?