This from Sovereign Society:

One year from now, will the stock market be higher or lower than it is today? “I really have no idea,” Market Analyst David Newman admitted, “nor does anyone else.”

“I could argue either side,” he said, “I could give you excellent data supporting both sides of the debate. I could shower you with charts, graphs and analysis, but in the end, trying to guess where the markets will be one year from now is really impossible.”

David felt particularly discouraged after the Institute for Supply Management released its latest numbers. Bad news, but the markets ended the day up by 258 points. “Maybe it’s not the markets that are confused,” he said, “maybe it’s just me. I would have thought we would see a decline.”

“Trying to guess the direction of the markets on a day-to-day basis is a losing game, but like I said earlier – every market offers up opportunities and this market is delivering us some really great ones.”

“When I’m not sure what direction the market might take in any given day, yet I have money on the sidelines I’d like to put to work, I tend to narrow my research on one or two criteria.”

“If I can find quality stocks that are paying a high dividend and have a low P/E, then I may have found a gem in these markets. When the deal is good enough and I know the company will be around tomorrow… well, then confused markets be damned, I’m in.”

David shared one of his favorite picks for this kind of confused marketplace… “General Electric Corp. (NYSE:GE) – GE is one of only six U.S. industrial companies with a AAA-rated balance sheet and, with 32 consecutive years of dividend growth, it’s always on my radar screen…but now more then ever.”

“Today with GE’s share price at about $17, its dividend yield is a whopping 7.33% and its P/E ratio is just 8.25, much less then the trailing and future S&P 500 P/E predictions. Receiving this steady 7.33% dividend check gives me the luxury of sitting back and waiting for the shares to appreciate. I don’t have to be in any hurry.”

Source: Confused Markets…who cares?

This from Sovereign Society:

We’ve just learned that President-elect Barack Obama’s economic team is considering an economic-stimulus program that will be far larger than the two-year, half-trillion-dollar plan under consideration last week.

Obama aides and advisers now say US$600 billion over two years is “a very low-end estimate”. The final number is expected to be significantly higher, possibly between $700 billion and $1 trillion over two years.

I wonder what the number will be next week…two trillion?

Today I want to talk about some of the other sectors that will benefit big when Obama is sworn in next month, and how you can benefit from one simple investment as this money begins flowing.

Obama said the package will include an initial tax cut and a massive infusion of funds for a number of things; roads, bridges, water systems, school repair, spreading broadband access, promoting health-care information technology, improving energy efficiency in buildings, renewable-energy projects, and assisting struggling state and local governments.

While campaigning, Obama often pledged, “To renew our information superhighway”.

By following through on this promise – which I believe he will – he can help stimulate the national economy, inject capital in the struggling state and local coffers and appease his “green constituents”.

Check, check, check…three more off his list.

Let’s start with increasing our broadband access. This would include huge projects to bring broadband into many rural areas of the U.S., funding for new computers for schools and technologies that can help reduce medical costs.

Broadband expansion is likely to be a priority for Obama’s administration. Although the U.S. currently has about 75 million broadband users, it is a pitiful 15th out of 30 industrialized countries on broadband adoption. In a recent speech, Obama called the level of access in the U.S. “unacceptable,” going on to say:

“Here, in the country that invented the internet, every child should have the chance to get online, and they’ll get that chance when I’m President – because that’s how we’ll strengthen America’s competitiveness in the world.”

The plan’s overall cost is expected to be in the hundreds of billions of dollars, so the amount of money that will be made available for IT-related investments could be quite large.

Obama also said he wants to ensure that every hospital and doctor in the U.S. “is using cutting-edge technology and electronic medical records, so that we can cut red tape, prevent medical mistakes and help save billions of dollars each year.”

“In addition to connecting our libraries and schools to the internet, we must also ensure that our hospitals are connected to each other through the internet. That is why the economic recovery plan I’m proposing will help modernize our health care system – and that won’t just save jobs, it will save lives..”

Remember, the printing presses are primed and running. He has told us all that deficits will just have to wait a few years, stimulating this economy is the most important thing.

“We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving,” Obama said last week on “Meet the Press.” Even with the country $1 trillion in debt, Obama said, “We can’t worry short-term, about the deficit.”

So where should we look to benefit from this huge investment in broadband and medical information technology?

iShares runs a good ETF that focus exactly on this sector – S&P North American Technology – Multimedia Networking Index Fund (NYSE:IGN) This index was created as a benchmark for U.S. traded multimedia networking stocks and includes companies that are producers of telecom equipment, data networking and wireless equipment…making it a perfect fit for this part of Obama’s plan.

The share price and performance of the fund have been less than stellar, but I believe this is finally going to change. Its top 10 holdings include: Qualcomm, Cisco, Juniper Networks, Foundry Networks, F5 Networks, Motorola, Harris Corp, Tellabs, Polycom and Corning.

These companies make the equipment and are leading providers of high-performance enterprise and service provider switching, routing and Web traffic management solutions. They are leaders in communication and collaboration, tele-presence, video conferencing, wired and wireless voice conferencing…exactly what we need to achieve Obama’s stated goals.

If President Obama is true to his word – and again, I believe he will be – then these companies will benefit from the billions and billions to be spent in their areas of expertise.

A buy at these levels could reap you huge returns in the coming year. Hold on tight, as the ride won’t be an easy one. Big money is going to flow into this area and these companies will benefit from it.

Source: Big Profits are Going to be Made… if you  Just Read Obama’s “Fine Print”

This from The Sovereign Society:

Often it’s the fine print that makes all the difference in the world. If you need any more proof of that fact, just ask the millions of Americans trapped in a sub-prime, Adjustable Rate Mortgage.

With half a million jobs lost in November alone and no one predicting an end to this recession any time soon, Mr. Obama hinted (read “fine print”) that $500 billion in spending is not out of the question.

He would like to see a plan that creates 2.5 million jobs. His interview on Meet the Press this past Sunday indicated that he wasn’t afraid of big spending to stimulate the economy, but that mindless spending should be avoided…

“We are not going to simply write a bunch of checks and let them be spent without some very clear criteria as to how this money is going to benefit the overall economy and put people back to work”. The new administration’s plans will be based on what is “going to make the biggest difference in the economy and what will have some long-term benefits.”

Obama emphasized that the spending will be on “infrastructure” – projects to build roads, modernize schools, expand Internet access, improve buildings’ energy efficiency, put better technology in hospitals.

“We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving,” Obama said in the interview. And even with a $1 trillion budget deficit, Obama said, “We can’t worry short-term, about the deficit.”

This perspective is clearly shaped by the experience of the pre-Roosevelt Depression years, when (as some economists believe) stinginess in monetary policy and a failure to effectively target government spending led to disastrous results.

Infrastructure spending has a further advantage, in that it will direct the fiscal expansion to state treasuries. Most states are required to run balanced or almost-balanced budgets. Many states, without help from the federal government, will have to cut spending or raise taxes next year. The federal fiscal stimulus needs to deliver enough help to the states to offset this.

State-directed infrastructure investments, which are “shovel ready”, are a fitting part of the mix. Last week, the nation’s governors presented $126 billion in highway, public transportation, airport and waterway ready-to-go projects to Obama.

So where should we look to profit from this huge amount of money that is going to “stimulate” the economy? Just look at the fine print…here that means all the highways, bridges, airports and waterways. These will be major construction projects that will use a lot of steel, concrete and equipment.

There are a number of good infrastructure ETFs out there, but most of them are global in scope. Reading “the fine print” you have to guess that President Obama will make sure that our public tax dollars will flow to U.S. companies. If you want an all-domestic infrastructure play, the closest you can get is the PowerShares Dynamic Building & Construction Portfolio ETF (NYSE:PKB).

The index bottomed twice last month at about $7.50 per share and has recently rallied above its 50-day moving average to about $11.50. If you were to decide to buy in, do not chase it…$10 looks to me like a price that could yield you some big returns and as always keep you stops pretty tight.

Source: Want to make Big Bucks off Obama’s Stimulus Plan? Just read the fine print…

This from The Sovereign Society:

The oil industry is a tricky business.

I know. I was a well-site geologist for many years. Just like the stock market, sometimes the best-looking prospects are your worst duds and those you were not too sure about gush profits.

It’s a gamble, but one that can pay off big if you’re right. But what if you’re wrong? Well in the old days it was watch out below… but now, I know of a strategy that can insure against some of your losses.

I call it “PPS” and it has helped me out many times in the past. Let me explain…

Right now I’m looking again at the oil, gas and the service industry. They’ve been beaten up pretty badly. As the price of oil has dropped from $147 a barrel to below $40 last week, any company that is even remotely associated with the industry has seen it share price tumble.

The major oil companies like ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) have seen their stock prices pull back as much as 50% from their 52-week highs. Schlumberger (NYSE:SLB), which traded as high as $111.95 this year, is now at $41.91. Baker Hughes (NYSE:BHI) down from $90 to $30 and Transocean (NYSE:RIG) has fallen from $163 all the way down to $55.

These are great companies in great industries. And no matter the environmentalists want you to believe, they won’t be going away for a long, long time.

They have war chests full of profits from the recent run-up in oil prices. They don’t need much outside financing and can wait out the economy. They’ll invest in themselves just as they’ve always done. They’ll push the limits of technology and invest in people.

And if President elect Obama has his way, and I believe he will, then we’re also going to see massive infrastructure construction projects begin next year. As we put people back to work, as money again begins to flow oil prices should begin to drift higher.

So if you want to profit as the industry turns up you should look at the iShares Dow Jones US Oil & Gas Index ETF (NYSE:IEO) and the HOLDRS Oil Services ETF (NYSE:OIH). These two ETFs will give you broad exposure across the industry.

Then to protect your downside I suggest you look at my “PPS” or Protective Put Strategy. Using this strategy, you’re going to buy one put for every 100 shares of these ETF’s. Now, to keep your cost down look to buy in the nearest month or two and look at the put options about 20% below your share purchase price.

As an example – if the HOLDRS Oil Services (OIH) were trading at about $70 per share like it was today and I was going to use this strategy I would buy 100 shares of OIH and then immediately buy an OIH protective put. I would buy the Jan OIH 55 symbol OIDMK for about $2.35.

This strategy cost a little more then just buying the long position but I’ll tell you, do it and you will sleep better at night. It’s the same as paying $72.35 for the shares and if they take off (like I think they might) the extra $2.35 becomes almost irrelevant…but if I’m wrong I’ve covered my assets.

Source: Striking it rich on Oil…without getting Burned

More from David at The Sovereign Society:

Dividend-paying stocks used to offer a way to “play it safe.” Especially during bear markets, the regular paychecks could help “soften the blow.” But not anymore.  The truth is; dividend investors are getting hammered.

The Wall Street Journal calculated that 36 companies in the Standard & Poor’s 500-stock index have cut or suspended dividends this year, removing $33.3 billion from investors’ pockets.

And of the 7,000 or so publicly traded companies that report dividend information to the S&P, 138 decreased their dividends during the third quarter… a 15-fold increase from the same period last year.

And since these floodgates have been flung wide-open, many more companies will now join the trend and feel it’s alright to cut their dividends. Remember, stock dividends are not contractually guaranteed. So with a wave of a CEO’s hand, they can disappear.

The Secret of “Guaranteed Dividends”

But today I’m going to teach you how you could get those same companies to “guarantee” to pay you a dividend. And not just 4% or 5%… but 10%, 15% even 30%.

Better yet these “dividends” will be paid to you not quarterly or semi-annually but monthly. Cash will be delivered to your account on the same day every month, month after month… “Guaranteed”.

What I’m talking about are Structured Investments and specifically a widely used product in the financial industry known as Reverse Convertible Notes.

For those of you not familiar with Reverse Convertible Notes (RCN’s), they’ve been around for years. Widely used in Europe but usually offered to only the wealthiest of U.S. investors, RCN’s are now finally available to the retail investor.

Reverse Convertible Notes are securities that offer individuals a predictable, steady stream of income. They pay a high coupon – much higher than the return you would receive on fixed income securities.

Here’s an example…

Let us suppose you like General Electric (NYSE:GE). The stock is currently trading at about $15.00 per share, which you think is a steal. Even if the stock market drops further and pulls GE down with it, you’re OK with a $15 purchase price plus its 8.2% dividend yield.

But what if I told you I could get you a better deal on GE? I can offer you a “cash dividend yield” of 19.3%… and if the stock falls all the way back to $9.75… you could care less. You didn’t own the shares anyway.

Well that’s the power of Reverse Convertible Notes.

Here’s another great example:

Goldcorp (GG) – You want yield, you need cash every month and you’re a gold bug. We’ll there’s an RCN currently being offered that will pay you a 20.80% annualized cash “dividend check” for the next three months. Worst case… you’ll own the shares of Goldcorp at this incredibly depressed price and still get the dividend.

That’s pretty much a win-win deal if you ask me.

The Disclaimer

Now before you get excited and rush out to buy the first RCN you can get your hands on, I must tell you that these products can sometimes be complicated. You have to be careful with your issuers, and I’ve seen a 60-page prospectus on a single RCN before. So you always want to do your homework, and – most of all – make sure you get some good advice on which of these RCNs is the best investment for you.

For example, it’s taken me a solid 14 months of research to get to the bottom of this little-known income-boosting market. But it’s starting to pay off. Just last week, I found a way to squeeze a fat 10% return out of Wal-Mart – without buying a single share of stock. And that’s the lowest return I’ve encountered so far!

And if you want to be able to capture this kind of profit without all the time and energy leafing through prospectuses and talking to brokers, then I’ve got something for you. It’s called Accelerated Income, and it’s a service that I started to make the whole process easier on you the investor.

In Accelerated Income I tell you about some of the best values in the marketplace and how you can get them. I cut through all the finance-speak and tell you about the product’s advantages and disadvantages in plain English. Despite their best efforts, these investments aren’t rocket science… and they don’t have to seem like it.

Source: Don’t Get Burned by Wall Street’s “Cut-and-Run” Routine

This from The Sovereign Society:

I found this chart online and thought it was such a good representation of what is going on that I just had to share it with you. (Thanks to the folks at http://frigginloon.com/ )

As I’ve written about before, this is really just the beginning of the flood of bad news we’re going to continually hear about over the next few months.

As you look back over this list, you’ll notice that none of the emerging market countries are on there just yet. And when they do appear, I’m afraid there will be more red X’s added to the list.

But now countries like Ukraine, Pakistan and Argentina are proving to be almost as vulnerable as Iceland. They borrowed money without real collateral to back those loans. And the industries responsible for making the payments are collapsing.

It seems as though another country is added to the growing list of nations on the verge of collapse almost daily.

Emerging Market Opportunities?

Having just accepted aid from the IMF, Hungary barely avoided sliding into national bankruptcy. And only a $15.9 billion IMF rescue package – bolstered by billions more from the European Union and the World Bank – prevented it from happening.

Analysts at Morgan Stanley estimate that capital flows to emerging economies could fall to $550 billion in 2009 from around $750 billion in 2007 and 2008. Such a sharp drop would hit economies that rely heavily on foreign finance: more than 80 developing countries are likely to run current-account deficits of more than 5% of GDP this year.

Countries do go bankrupt. Iceland is not the first (and will not be the last). Russia was declared bankrupt in 1998, Argentina in 2001 and Germany has a history of going more than once…

The problem is national bankruptcy would probably lead to massive inflation. This is demonstrated by the central bank of Iceland, which increased its prime rate by six points to 18 percent last week. Venezuela, where inflation is also high, is now offering 20 percent to stimulate interest in its government bonds.

And Argentina – having seized some US$29 Billion in private pension funds – has bond offerings yielding upwards of 30%! It’s worth noting; however, that the last time bond yields were this big in Argentina was in the aftermath of an epic bond default in 2001.

In the coming months, you’ll see more and more countries offering these huge double-digit bond yields. Most of these bonds will be coming from emerging markets that are already in trouble due to stifled capital flow.

Don’t do it!

I know your portfolio is probably looking pretty bad right now but this is not where you need to be investing. There’s just way too much risk in these emerging market bonds right now.

Not to mention that some more-developed countries are offering competitive bond yields as well. Sure they pale in comparison to 30% yields in Argentina, but at least you know you’ll get that money back.

On paper, 20-30% fixed-income returns look great. But I doubt you’ll ever see those returns make it to your bottom line.

Source: Don’t do it…

This from The Sovereign Society:

We may — emphasis on the word may — be seeing the first glimmer of hope in the market. History often repeats itself, so it would be wise to keep your eye on this number.

Buried in the news yesterday [Wednesday] was a little note from the National Association of Realtors. They reported an index of sales contracts on previously owned homes rose 7.4% in August from the prior month. The NAR’s pending home sales index was designed to try and measure which way the housing market is going in the future.

Often the industry that crashes first in a financial crisis is the first to recover. If history does anything well it repeats itself. So I’m keeping my eye on real estate.

This index has been long known as a LEADING INDICATOR and this is critical. As a “Leading Indicator,” it’s forward looking; like a crystal ball for the housing industry. Perfect? No, but it’s not bad either. And that’s why I see this as the first glimmer of hope.

The index was also up 8.8% from August 2007. They recorded gains of 18.4% in the West, 8.4% in the Northeast, 3.6% in the Midwest and 2.3% in the South. Even July’s pending home sales index was revised up, to a decline of 2.7% from a prior estimate of a 3.2% decrease.

Karl Case, the “Case” of The S&P/Case-Shiller Home Price Indices (one of the best-known measures of the residential housing market) said in September that he “thinks that the housing market may be near a bottom.” If he’s right, financial firms may be able to breathe a sigh of relief.

And in a paper presented before the Brookings Institution in Washington, D.C. that same month, Mr. Case argued that there is cause for optimism. He noted that of the 20 metropolitan areas covered by the Case/Shiller index, nine have shown prices slightly improving in recent months. He noted that the relationship between incomes and home prices has neared a level seen at the end of past housing slumps.

Buyers are finally coming to the table. Prices have dropped significantly in many areas; Fannie and Freddie have been stabilized. Pent up demand is letting off some steam.

Now, please don’t get the impression that I’m bullish on the U.S. Real Estate Market, but I’m looking, I’m watching, I’m following the data.

There will be huge opportunities again to be made in real estate. History will repeat itself…again. And I want to be there when it happens this time.

Source: A Turning of the Tide?

This from The Sovereign Society:

Recently so much talk has been made about whether the global economy is coupled, decoupled…re-coupling, decoupling, or who knows what. Do individual countries economies move alone or are they all intertwined in one big global economic cesspool?

For example, if I showed you a chart of two indexes, but didn’t tell you what they were… you could tell me if they track each other just by looking at them.

Here we’ve got two indexes that over the last year seem to be following the same pattern. While they’re not exact… they track each other pretty well. The two lines on the chart represent the S&P 500 index and the iShares MSCI EAFE Index Fund (a broad measure of 21 individual country indexes).

Are these coupled, do they move together? Well in simple investing terms, the answer is yes. The S&P 500 index over the last year is down 22% and the MSCI EAFE Index is down about 26%. So are global markets coupled?

Well the answer isn’t always as clear as the example seems…some are and some aren’t.

Just because the broad U.S. markets have been heading south all year and the larger more familiar international countries’ markets have also been on a year-long losing streak…don’t think that every market is following lock-step.

There are opportunities out there in the global markets. Not everyone is facing the same crises as the United States. Some South American countries, the Middle East, parts of Africa and others offer intriguing opportunities.

Source: Does the Entire World All Dance to the Same Tune?

Today I’ll tell you how to secure your long-term safe money and earn quick short-term profits. Up until now these ingenious investments were really only used by elite, professional Wall Street investors.

Welcome to the world of structured products…

Structured products can generate huge “guaranteed cash dividends” as high as 10%, 20% and more while limiting your risk. They come with downside protection, usually 20% – 30% or more and can be held within your IRA.

These structures are issued by many AA/Aa1 rated banks and brokers, who guarantee the “cash dividend.” You see you never own the underlying stock, commodity, or index. And you get your ‘cash dividend’ no matter what the underlying stock does.

Now I know they’re not the usual run of the mill investments – but in these wild markets you have to look for innovative solutions.

And structured products are just that solution. I’ll be back here in the A-Letter in the next few weeks to tell you more about my favorite way to make guaranteed returns – even when stocks go absolutely nowhere.

Source: Adapt Your Portfolio to Profit, Rain or Shine

Of course, oil prices control more than just stocks. I don’t have to tell you what US$150 does to the overall economy and more specifically to your own personal wallet. I know I changed my spending habits since gas climbed above US$4.10 a gallon.

Earlier this summer, we all watched as oil steadily climbed to the once unthinkable level of US$147 per barrel. As a result, it seemed the entire country went “green” overnight. You started hearing phrases like “let’s conserve,” and “we need to find alternative sources of energy.”

But look how easily we slipped right back into our old habits as soon as oil prices slipped below the “manageable” level of US$115.

Old Oil Habits Die Hard

A few weeks ago, everyone was chattering nonstop about gas prices. Everyone was moaning about how much more each trip to the grocery store cost.

You heard friends talking about what kind of bicycle they were going to buy if gas climbed much higher. You even heard the talking heads chattering about how wind, water and nuclear power would save us from these sky-high gas prices.

Then, magically we wake up one day, and gas is down to a “reasonable” US$3.70 a gallon. Life is good again…for now.

But what happens when oil rises again? It’s worth considering because right now tropical storms (aka hurricanes in training) Gustav and Hanna are swirling around the U.S.’s main source of oil.

If they should hit us where it hurts the most – in the country’s oil reserves in the Gulf – then we’ll be right back where we were earlier this summer.

My Own Personal Connection to Our Oil Reserves

I spent almost eight years working as a geologist offshore in the Gulf of Mexico. Among other tasks, my job was drilling wildcat, exploratory oil and gas wells. So I know what it’s like to be on a drillship, hundreds of miles from the nearest piece of dry land when a hurricane is heading straight for you.

As an experienced oil driller, I can tell you there are hundreds of drilling rigs and production platforms sitting in the Gulf.

Every single one of them has to be “prepared” for the worst in case a hurricane hits. When a storm is coming, all drilling stops, wells are shut in, and all personnel are transported by boat and helicopter to shore.

With Gustav’s current projected track, I’m sure this process has already begun. Wells have stopped pumping, workers are headed home and everyone is sitting tight, with their fingers crossed and hoping for the best.

All the refineries along the Gulf Coast are also going through their emergency preparation shut-down plans. The refineries themselves are huge, complicated and potentially dangerous industrial complexes. That means they can take a long time to power down. Right now, I’m sure their fingers are on the “off” switch in preparation for what could be devastating storms.

This means, the refineries have lost one week in preparation for the storms, and another week in getting back online.

The Hits Just Keep On Coming…this Time with Hanna

And just as Gustav blows through – Hanna is sitting on its heels. Currently, Hanna looks like it may turn a little more North and run up the east coast of Florida, but there’s really no way to be sure this early.

Now if you’re in charge of the oil and gas wells, refineries and personnel for the Gulf, then you’re faced with a difficult decision. You have already stopped all drilling, pulled the drill pipe out of the hole, secured the rig and shut down in all production. The refineries are on emergency hurricane shut-in and the workers have gone home to be with their families.

So do you call everyone back as soon as Gustav passes and hope Hanna is a no-show? Or do you just plan to wait it out another week? From my experience – they’ll wait it out. It’s just too expensive and much too dangerous to risk it.

Could Russia Knock Us Out for the Count?

And then there’s Russia – and this could turn out to be the knock-out punch.

You see, as Russia occupies Georgia, the Russian oil supply becomes a real concern for all of us. The pipeline that crosses Georgia can pump slightly more than one million barrels of crude oil per day, or more than 1% of the world’s daily crude output. That 1% may not sound that bad, but in a world where we actually use more oil than we produce every single day, 1% can make a huge difference.

The 1,100-mile pipeline carries oil from Azerbaijan’s Caspian Sea fields. It’s estimated to hold the world’s third-largest reserves. This pipeline is already vulnerable. We saw that last week when it was sabotaged, apparently by Kurdish separatists.

Most of the oil is bound for Western Europe and with only so much oil to go around, what the pipeline carries affects prices everywhere.

So, what are we to do?

Well if you’re trading oil or natural gas short-term, you may just get a quick spike up in price. Take this as a gift as I believe the longer term trend for oil over the next few months is down and will settle in to US$100 per barrel +/- $10.

This won’t last forever. The hurricanes will pass. Russia and Georgia will eventually sort out their differences.

But in the meantime, look for oil to spike once again. It’s a virtual certainty with hurricanes waiting to pummel the Gulf.

DAVID NEWMAN, Market Analyst

Source: The Next One-Two Punch Coming in the Oil Markets