It is hard to be a hater this week. As I told TFN Strategic Trader subscribers a couple of hours ago, the banks are at the helm. Their earnings reports and latest health assessments are driving the markets.

You may be jealous of the average $800,000 salary over at Goldman Sachs (NYSE:GS) or the billion dollar profits recorded at companies recently saved with the tax money pulled out of your paycheck every two weeks, but it is impossible to deny investors are little wealthier this week because of the money made by the nation’s banking industry.

For the most part, the equities market has been on the rise over the past month thanks to the surprisingly upbeat reports from the nation’s top investors and lenders. Goldman started the trend and just about every other firm since has reinforced it.

Today, it is American Express (NYSE:AXP) doing the heavy lifting and preventing the markets from selling off going into the weekend.

On sentence from the company’s CEO, Ken Chenault, sums it up best:

“Although it is still too early to point to any sure signs of an economic recovery, the number of cardmembers who are falling behind in their payments, the volume of bankruptcy filings and the level of loan write-offs were better than we had expected.”

It is nearly the same sentiment from every bank reporting over the past couple of weeks.

For investors smart enough to keep on investing while the markets sagged, Wall Street’s recent attempt to fix its mistakes is paying off handsomely.

In fact, if you followed my advice and took advantage of one of those free picks we are always boasting about, you are sitting on profits of about 20% thanks to Discover’s (NYSE:DFS) recent surge above the $12 level.

Time to sell?

After the recent running of the bulls, lots of investors have a nervous finger on the sell button.

In fact, I got some pressure (I won’t name the source) earlier in the week to unload the Discover position and lock in gains of just over 10%.

I didn’t cave and the move paid off. Here’s why:

Remember all of that money sitting on the sidelines last spring? As the markets collapsed last fall, just about everybody reduced their exposure to the equities markets. Bond prices soared as investors went nuts protecting their wealth.

With the first real glimpse of economic recovery not seen until last week, much of that money remains on the sidelines. Folks still have their unopened 401(k) statements scattered across their desk reminding them of the recent pain.

But as more and more positive news hits the Street, those investors will follow the money and increase their appetite for risk once again.

As huge amounts of money return to the equity world, demand will outstrip supply, forcing prices higher. Just think of it as the opposite of a run on a bank. As the fear subsides, the greed will take over.

With that, I say we let our gains ride. Let the “new” money push the markets even higher before we make our move.

Even with the Dow above 9,000, the top is much further away than the bottom. There is plenty of room left for the bulls to run.

Source: Cowboy Up: How Long Can We Stay On?

• Microsoft Corp.’s (Nasdaq: MSFT) Bing search engine has gained market share from rivals Google Inc. (Nasdaq: GOOG) andYahoo! Inc. (Nasdaq: YHOO) just weeks after its launch. The Redmond, Wash.-based software giant grabbed 12.1% of total U.S. Internet searches for the workweek of June 8-12, according to market research firm comScore, Inc. (Nasdaq: SCOR). That was up from the previous week’s share of 11.5% and May’s share of 8.2%. While the start is good for Bing, Microsoft Chief Executive Officer Steve Ballmer was cautiously optimistic. “We have had some very good initial response,” Ballmer said. “I don’t want to over-set expectations. We are going to have to be tenacious and keep up the pace of innovation over a long period of time.” comScore did not offer the share numbers for Google or Yahoo in the same periods, but said it would have a bigger picture for the entire month when the final tallies are in.

• Natural gas reserves in the United Stats are much bigger than once thought, according to a report released yesterday (Thursday) from the Potential Gas Committee. The country possesses a resource base of 1,836 trillion cubic feet (Tcf) and a total available future supply of 2,074 Tcf. Some, such as Texas oilman T. Boone Pickens, are pushing hard for natural gas as an alternative fuel for transportation. “I launched the Pickens Plan a year ago to help reduce our dangerous dependence on foreign oil, and using our abundant supply of natural gas as a transition fuel for fleet vehicles and heavy-duty trucks is a key element of that plan,” Pickens told The Associated Press. “On the same day this report is going out, diesel prices are again on the rise, squeezing the trucking industry. Now more than ever we need to take action to enact energy reform that will immediately reduce oil imports.”

• Shares of Carnival Corp. (NYSE: CCL) closed up more than 7% yesterday (Thursday) following news that the cruise line operator beat Wall Street earnings estimates and discounting is starting to abate. Carnival’s net income fell 32% to $264 million, or 33 cents per share for the quarter ended May 31. That compares to a net income of $390 million, or 50 cents per share. Average analyst estimates compiled by Bloomberg News had Carnival earning 29 cents per share. Executives called the rise of fares on some itineraries since the end of March “encouraging.”

• Prices of Treasury bonds fell for a second day as the U.S. government said note sales will increase to a record $104 billion next week and other reports showed the deepest recession since the Great Depression may be coming to an end.  Yields on ten-year notes, which move in opposition to prices, touched the highest in almost a week amid concern President Barack Obama’s record borrowing will overwhelm demand, Bloombergreported.  The yield gap between two- and 10-year notes widened to 2.56%, the most in over a week. “There’s so much focus on the borrowing amounts Treasury will face over the next couple of years,” said Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. (NYSE: DB) in New York. Deutsche is one of 17 primary dealers that trade with the Federal Reserve. “There’s evidence that the economy may be turning the corner. That’s pushing yields up.“

• General Electric Co. (NYSE: GE) may have to consider the government’s new stance on regulatory reform when it restructures its giant GE Capital finance unit.  The possibility that the Federal Reserve might gain regulatory authority over the unit arose when President Barack Obama this week unveiled his proposal for the most sweeping overhaul of U.S. financial regulations since the 1930s.   He proposed the central bank oversee not just banks but “other large firms that pose a risk to the entire economy in the event of failure.”  GE investors said the label could apply to the U.S. conglomerate’s finance business, a major commercial lender. “I could definitely see that potentially becoming an issue if companies like GE and their finance arms came under more scrutiny,” said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan, told Reuters.

• Tourism in Mexico took a severe hit from the swine flu scare as Cancun, Cozumel, Los Cabos and other destinations reported fewer foreign tourists since the outbreak that began in April killed 108 people, the Mexican Health Ministry said. Cancun’s hotel occupancy plunged as low as 20% in May, when 13 inns with 5,200 rooms shut down, Bloombergreported.  It rebounded to 45% in the first week of June and is forecast to reach 60% next month, said Rodrigo de la Pena, president of the Cancun Hotel Association. That’s still down from 80% last July. “We’re recovering quicker than we thought,” de la Pena said. “The hotels have almost all their workforce back and tourists are arriving.” To fend off unemployment, the government rolled out a $91 million campaign urging Mexicans to vacation at home and encouraging hotels and restaurants to cut prices.

• Discover Financial Services (NYSE: DFS), the fourth-largest U.S. credit card network, reported a smaller-than-expected quarterly loss as it cut costs and bad loans weren’t as bad as forecast, sending its shares up more than 4%. The company’s expenses fell 10% after it cut 500 jobs and trimmed marketing costs.  Credit card default rates also remained well below levels of its bigger rivals. The Riverwoods, Ill.-based company posted a net income of $226 million, or 43 cents per share for the quarter ended May 31. That compares to a net income of $234 million, or 48 cents per share in the same period last year.

Source: Investment News Briefs Friday, June 19, 2009

• A day after posting better-than-expected quarterly earnings, Goldman Sachs Group Inc. (GS) sold $5 billion in stock to repay federal bailout money. All totaled, Goldman sold 40.65 million in shares at $123 a piece, 5.5% below Monday’s closing price, Reuters reported. Goldman received a total of $10 billion from the Troubled Asset Relief Program.
• Amsterdam-based Royal Phillips Electronics NV (PHG) said its cost-reduction program will save the company more than 500 million euros ($664 million) this year, Bloomberg reported. The announcement came with its quarterly earnings report, in which Europe’s largest consumer-electronics maker reported its second-consecutive loss.

• First quarter earnings for pharmaceutical and health care retail giant Johnson & Johnson (JNJ) fell, but beat estimates by cutting costs, Reuters reported. The company $3.51 billion, or $1.26 a share, in the first quarter compared with $3.6 billion, or $1.26 a share, in the first quarter last year. Johnson & Johnson reaffirmed its 2009 profit forecast of $4.45 to $4.55 a share.

• Singapore’s economy may shrink 6% to 9% this year, the government said in its third reduced forecast this year. To counter contraction, the government will adjust the trading range of the Singapore dollar. “The situation is really dire and the central bank’s policy will improve sentiment and help the economy,” Vishnu Varathan, an economist at Forecast Singapore Pte., told Bloomberg.

• Discover Financial Services (DFS), will cut 500 jobs in May, or 4% of its workforce, Reuters reported, citing company sources. Discover, the fourth-largest U.S. credit card network, last month posted a deeper-than-expected quarterly operating loss, cut its dividend and set aside more money to cover bad loans as defaults increase.

• In a sign bankers are gaining confidence that the worst of the financial crisis is over, the London inter-bank offered rate (LIBOR) for three-month dollar loans is dropping at the fastest pace since January, Bloomberg reported. Debt strategists at Credit Suisse Group AG (ADR: CS) Societe Generale SA (ADR: SCGLY) and Royal Bank of Canada (RY), three of the 16 banks that provide the data that sets Libor each day, say the declines will continue.

• Weak demand and a supply glut could cloud the coal industry’s prospects for the rest of the year, even as U.S. coal miners are likely to show strong quarterly profits this month, Reuters reported. But big U.S. coal producers should weather the economic downturn because they sold much of this year’s production at higher prices negotiated before the recession hit last September. Coal prices are expected to stay low throughout 2009 until production cuts by major miners begin to restrict the coal supply.

• Madoff Securities International Ltd., filed for bankruptcy protection in Florida under Chapter 15 of the federal bankruptcy code. The code is designed to block U.S. lawsuits against foreign companies reorganizing overseas that have U.S. operations, Bloomberg reported. Bernard Madoff pleaded guilty last month to 11 counts including fraud and money laundering for directing the largest Ponzi scheme ever.

Source: Global Investment News Briefs Wednesday April 15, 2009

• FedEx Corp. (FDX) mixed bad news with good in its latest quarterly report. After posting a profit for its second fiscal quarter, the package delivery giant also said it’s suspending pension contributions, freezing new hires, cutting its CEO’s pay by 20% in order to cut $800 million by the end of its fiscal 2010, Reuters reported.

• Wal-Mart Inc. (WMT) store representatives told Bloomberg that the world’s largest retailer would begin selling Apple Inc.’s (APPL) iPhones by the end of the year. The move is seen as positive for both companies, as it gives Wal-Mart a hot new item and Apple a gigantic new sales outlook.

• General Motors Corp. (GM) denied a report yesterday (Thursday) that the company reopened merger talks with Chrysler LLC. The report first appeared in The Wall Street Journal. “We have had no talks with them since we announced during our third-quarter earnings call that the talks had been suspended,” GM spokesman Tony Cervone said, Reuters reported.

• Credit card firm Discovery Financial Services (DFS) added itself to the list of companies applying to become a bank holding company, thus making it eligible for federal TARP money. The company also reported a $432 million profit in its fiscal fourth-quarter, up from a $56 million loss the previous year, MarketWatch reported.

• The Labor Department said yesterday (Thursday) that the number of filings for initial jobless benefits fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. Still, claims remain near the highest level since 1982.

• Goldman Sachs Group Inc. (GS) has agreed to share its 29% in Sanyo Electric Co. Ltd. (OTC: SANYY) to Panasonic Corp. (ADR: PC) for at least $6.4 billion, Reuters reported. The purchase will make Panasonic Japan’s No. 2 electronics manufacturer after Hitachi Ltd with $120 billion in annual sales. Goldman had previously rejected two other offers from Panasonic.

• The U.S. economy will begin to rebound late next year or early in 2010, IMF Managing Director Dominique Strauss-Kahn told Spanish newspaper Expansion. He based this view on the likelihood that the housing market will soon bottom and demand will follow the recent wave of fiscal stimuli. Though he added: “We recognize, however that the possibility of a recovery is plagued with uncertainty.”

• Carnival Corp. (CCL), the world’s largest cruise operator, reported a 4% rise in fourth-quarter earnings yesterday (Thursday), but lowered its 2009 outlook as consumers will likely cancel or delay vacations for the next year. The company’s quarterly revenue rose 6% to $3.3 billion.

Source: Global Investing Roundups Friday, December 19th, 2008

This from Money Morning:

U.S. consumers are already losing their jobs at an accelerating rate.

The same thing is now set to happen to their credit lines.

But with so many Americans already losing their main source of income – their jobs – at an ever-spiraling rate, will an economy that derives two-thirds of its power from consumer spending end up mired in its worst funk in decades because those same consumers are now losing their charge accounts?

Before you dismiss the possibility, consider this: The U.S. economy weakened across all regions since the middle of October as it became tougher to get loans and demand for credit shrank, the U.S. Federal Reserve said in its regional economic survey report yesterday (Wednesday). The so-called “Beige Book” report – published just two weeks before central bank policymakers are to meet and consider interest-rate changes – said that retail sales, tourism spending and manufacturing declined in most places, labeled housing markets as “weak” and concluded that the commercial real estate sector “weakened broadly,” Bloomberg News reported.

“We are looking at an economy that is not only in a recession, but a recession that is deepening rapidly,” former Fed Governor Lyle Gramley, now senior economic adviser at Stanford Group Co.,
told Bloomberg Television. “It certainly is a gloomy report, but not, I guess, worse than what you would expect given the data [we’ve seen] coming in.”

The United States has already been in a recession for a year, the National Bureau of Economic Research (NBER) reported this week. This economic one-two punch could generate a much-bigger financial crisis “aftershock” than many experts realize. Only two of the last 10 recessions to take place since the Great Depression have lasted a full year. But this one could last well into 2010.

$2 Trillion in Credit Lines on the Chopping Block

More than $2 trillion in consumer credit could be cut in the next 18 months, as credit-card companies pull back credit lines in anticipation of credit funding problems and regulatory changes, said Meredith Whitney, an Oppenheimer Holdings Inc. (OPY) banking analyst who’s well-known for her gutsy and prescient (and ultimately correct) market calls.

Throughout the week, Whitney has warned that the entire mortgage market will contract for the first time ever in the months ahead. More importantly, however, Whitney says the credit card market will be 18 months behind, as credit-card companies pull back more than $2 trillion in credit lines, taking away consumers’ second major source of liquidity, following jobs.

“What you haven’t seen yet digested by the market is banks pulling lines from consumers,” Whitney said in an interview with CNBC. “And across the board you saw the big banks that command so much of the market share of key products like mortgages and credit cards start to pull lines in the third quarter and that’s going to continue in the fourth quarter. And that’s going to continue into 2009.”

Although some experts note that consumers reduce their spending during recessionary periods — and, needless to say, after they lose their jobs — it’s important to not confuse spending and credit. During dire times, many consumers can boost their use of credit even as they cut overall spending, using the credit cards, home-equity lines and other forms of borrowing as a lifeline to tide them over. For those consumers, a credit line cut can be disastrous personally, and can aggregate into an even-steeper downturn in spending.

Roughly 70% of U.S. households have access to credit cards, and 90% of those people use those credit cards as a cash-flow management vehicle, or revolve payments at least once a year, Whitney says.

A surprisingly small number of national companies dominate the major lending arteries – including credit lines, mortgages and credit cards – that have sustained the U.S. consumer for so long, including mortgages and credit cards. Mortgages have already hit a wall with the collapse of the U.S. housing market and wave of subprime defaults. But credit cards could be next as companies raise interest rates, tighten lending standards, cut credit lines, and even close millions of accounts in an effort to insulate themselves from consumer defaults.

Bank of America Corp. (NYSE:BAC), Citigroup Inc. (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM) – which controlled more than half of U.S. credit-card lines at the end of the third quarter – have all discussed reducing their credit-card exposure or scaling back growth, according to Whitney.

“You’re going to start to see the consumer get really strained on their credit card lines,” said Whitney. “People think the next shoe to drop is the credit card credit costs – the charges going up. No, it’s the credit card lines being pulled by bank lenders in anticipation of worsening credit funding problems, and then regulatory changes on the horizon.”

Whitney expects the credit-card market to begin to shrink by mid-2010, a time when the unemployment rate could be as high as 9.0%.

“Just when the consumer is losing their job that’s their first source of cash, their first source of liquidity, then they lose their second big source of liquidity, which is their credit card line,” she said.

Indeed, as unemployment rises, so too will credit-card delinquencies. David W. Nelms, chief executive of Discover Financial Services (DFS), told Reuters that card write-offs could be in the mid-5% range in the fourth quarter and near 6% in the first quarter of 2009.

Delinquencies “will tend to track with unemployment,” Nelms told Reuters after a speech to the Executives Club of Chicago. “Most agree that things will tend to get worse next year.”

Lenders, still reeling from losses tied to subprime mortgages, can’t afford another round of defaults on credit cards. So they’ve begun pulling lines of credit, leaving the consumer out in the cold. And it’s only going to get worse, Whitney says.

Crisis Expert Sees Change in Consumer Psychology

Investment expert R. Shah Gilani – a retired hedge fund manager who’s been chronicling the credit crisis as a Money Morning contributing editor – isn’t surprised by Whitney’s predictions.

“This is already happening in a big way,” Gilani said referring to Whitney’s assertion that credit lines have been put in jeopardy. “I have already talked to people who have had their credit lines reduced, even cut in half. So I wouldn’t be surprised if $2 trillion turns out to be an accurate figure.”

And according to Gilani, the evaporation of $2 trillion in credit could be the death knell for the American consumer.

“A number that high makes you gasp, just considering the quantitative effect on consumer spending,” Gilani said. “There’s a strong chance that the American consumer is not just down on the canvas, but has been knocked out of the ring.”

American consumers cut spending by 1% in October, the biggest drop since the last recession in 2001, the government said last week.

U.S. retail sales plunged 2.8% in October – the largest monthly drop since the Commerce Department began tallying monthly retail sales in 1992. The sales drop marked the fourth consecutive monthly decline and the first retrenchment since 1992. And few have any hope left for the Christmas season as consumer confidence is also waning. The Reuters/University of Michigan consumer sentiment index clocked in an ultra-low 55.3 for November, down from 57.6 the month before.

The reading fell well short of the projected 57.7, Reuters said, and – even worse – had deteriorated since the middle of the month, even though lower gasoline prices were seen as a bright spot for consumers. The University of Michigan confidence index dates back to 1952. Its record low was 51.7, which it hit in May 1980.

Once again, jobs, liquidity and confidence were the key issues, the survey report said.

“Consumer confidence fell in the last half of November due to mounting job losses, falling incomes and the evaporation of household wealth,” the report said. “Consumers were unanimous in their recognition that the economy was in recession, and nearly three-in-four expected the recession to deepen in the months ahead.”

However, Gilani, who is also editor of the Trigger Event Strategist – a trading service specifically designed to help investors maneuver through this economic malaise – also believes that what investors are witnessing is yet another “aftershock” of the ongoing global financial crisis.

“What is actually taking place is a shift in consumer psychology that has been driven by factors such as the socioeconomic climate – as well as the environment – and that’s now being compounded by credit conditions,” Gilani said. “This is about banks and credit companies de-leveraging and forcing the American consumer to do the same.”

The trouble is, he said, this can become a cycle that’s hard to stop once it takes hold.

“Whether Americans have lost confidence in the market or simply can’t afford to repay loans, money flows have simply dried up” Gilani said. “So banks have been forced to raise their lending standards to a point that many Americans are now unable to meet. It becomes a vicious cycle.”

PS. This is an excerpt from the latest installment in Money Morning series on the “financial aftershocks” of this crisis.

Source: Will the Loss of Consumer Credit Serve as the Next Economic Aftershock to Further Fuel the Financial Crisis?

• U.S. sales in November fell 31% for Ford Motor Co. (F) and 34% for Toyota Motor Corp. (ADR:TM) Every line of Ford vehicle posted falling sales, and the company responded by slashing first-quarter North American output for 38% to 430,000 vehicles, Bloomberg reported.

• Crippled by global slowdown, British Airways plc (OTC:BAIRY) said it is in merger talks with Australian airliner Qantas Airways and Spain’s Iberia, Reuters reported. Should the three mesh together, it would create the largest airline company.

• U.S. conglomerate General Electric Co. (GE) said it is looking for ways to cut costs, including job cuts and its finance and industrial units, in order to reach the low end of its fourth-quarter profit forecast. “Obviously the macro environment remains very challenging,” Keith Sherin, GE’s chief financial officer, said in a briefing with investors, Reuter reported. “We know that we have to reduce our cost structure in this environment.”

• In the midst of a dour holiday shopping season, Sears Holdings Corp. (SHLD) posted a wider-than-expected third-quarter loss, as its Sears and K-Mart stores took a beating from the U.S. recession. The company also announced it would close more stores and buy back as much as $500 million of its stock, MarketWatch reported.

• Oil prices fell to a 3-year low yesterday (Tuesday) as mounting job losses and fears of a protracted recession continued to weigh on investor confidence. Light, sweet crude for January delivery fell $2.32 – more than 4% – to settle at $46.96 a barrel on the New York Mercantile Exchange. Prices touched $46.82 earlier in the day, the lowest level since 2005.

• U.S. credit card write-offs will continue to increase in 2009, as the unemployment rate continues to climb from the 6.5% reached in October, the top executive at Discover Financial Services (DFS), said yesterday (Tuesday) according to The Associated Press. David Nelms, Discover’s chief executive, said write-offs could be near 5% in the fourth quarter and 6% in the first quarter of 2009.

Source: Global Investing Roundups Wednesday, December 3rd, 2008

This from Today’s Financial News:

All across America, huge companies are selling at deep discounts. One of those companies is General Electric (NYSE:GE). It is one of the most prominent, well-known and successful companies in the world, yet its shares are selling for prices just shy of half what traders were getting one year ago.

In fact, GE has not been this cheap in over a decade. The last two times shares of General Electric were this cheap, investors more than doubled their money in the following few years.

Imagine having the opportunity to purchase shares of the company for just $22 this time last year when shares were peaking at $42.

Investors would have pushed their own mothers out of the way for that kind of opportunity.

Let’s face it. General Electric has been in business for a long, long time. And it will remain in business for an even longer period of time. Because the company is such a diversified mega-conglomerate it has the power to withstand immense turmoil.

A Wall Street panic like the one we saw recently is nothing new to this Blue Chip. GE has endured huge price declines many times in its past. Each and every time it did, share price rebounded dramatically higher than where it started.

As I write, GE’s fundamentals are in ranges we have not seen in a very long time. With a reading of just 9.6, the company’s price-to-earnings ratio is insanely low. It should be twice that figure, at least. The downturn has created the ultimate value play.

That is why Warren Buffett recently wrote the company a check for $5 billion so he could get his hands on the profit potential. You do not become the nation’s richest person by paying too much for something. Follow his lead.

Shares of GE are priced at levels we should not see except during the most catastrophic economic events. We are nowhere close to that situation. Granted, the company’s earnings will suffer over the next few quarters. But the decline will not be anywhere close to justifying this huge share price decline.

General Electric is oversold. Warren Buffett knows it. I know it. Now you know it.

Buy shares of the company and wait for the rebound. In just a year or two, when shares are once again trading for $40 and more, you will be very, very glad you did.

Discover what it is like to be rich

Since we are following in the footsteps of Buffett, how about we take another piece of his sage advice…

Buffett is constantly discussing his investment philosophy: buy what you know and use. This theory is why Campbells Soup and McDonalds have remained relatively unscathed by the credit crunch.

To learn about the next undervalued superstar, all you have to do is open your wallet. I bet you have a few credit cards stashed in there.

All of the major credit card companies – names like Visa (NYSE:V), Mastercard (NYSE:MA), and American Express (NYSE:AXP) – have seen their valuations drastically reduced during the recent bear market. None of them are as undervalued as Discover Financial Services (NYSE:DFS) and its powerful Discover Card brand.

Selling for less than $11, down from over $32 less than two years ago, shares of the company are a downright steal.

Again, this company and its products are in a very strong position. No matter what happens in this economy, people will still use their credit cards. And even if every American cuts their cards to shreds, Discover still has a strong network in 184 other countries.

Like I mentioned above, all of the major credit card companies have been hit hard in recent weeks. And all of them have created fantastic buying opportunities. But only Discover adds a powerful technical investing layer to the mix.

Over the next few weeks and months, we are bought to hear the mainstream media discussing record-breaking delinquency rates. More people than ever will be late with credit card payments as the economic machine grinds to a halt.

For the nation as a whole, folks that cannot afford to pay their credit card bills is a terrible thing. But for credit card companies, like Discover, that are allowed to charge huge annual interest rates and levy fees for just about everything, late payers create a wealth of revenue streams.

Shares of the company are trading right at all-time lows. It means no investors have ever bought shares of this company at prices this cheap. It also means if anybody wants to sell, they would have to do it at a loss. It puts a solid floor under share price and is a phenomenon technical investors love.

Even if the economy were to take a strong downward slide, Discover’s firm price floor would help avoid any serious share-price decline. It will also create a catapulting function as the market and the economy rebound.

As long as you buy shares below $12, your position should create some fantastic profits.

The coal industry cannot die

While we are on the subject of investing in what we know and use, let’s discuss another product that we are both using right now, electricity.

Electricity is the commodity this world depends on every second of every day. And chances are the electricity your computer is using as you read this report was created by coal. It is a good bet because about 50% of this nation’s electricity is generated by burning coal.

If you have heard any of the presidential debates, coal is going to be a major energy focus over the next four or eight years. Both candidates are pushing for increased growth in the clean-coal industry.

That means coal is not going away anytime soon. But if an outsider were to look at the prices for the raw material or the share price of the companies mining and selling the indispensable fuel, they may be inclined to believe coal’s days are numbered.

They would be dead wrong.

Coal will play a vital role in the global economy for decades, if not centuries, to come. Thanks to new technologies, coal can be burnt in an ultra-efficient, super-clean process. It can even be used to make the fuels that power our cars, trucks, trains, and planes. Coal is the next “super fuel.”

One company poised to take advantage of any growth in the coal-producing industry is James River Coal Company (NASDAQ:JRCC). It is yet another company with shares trading for just a fraction of what they were a few months ago.

Right now, you can get your hands on shares for just less than $20.

In June, they would have cost you over $60. This time next year, they will likely cost you at least that much.

There are two important facts to understand about the coal industry.

First, there is a global coal shortage. Demand far outstrips supply no matter where in the world you go. China, India, Australia, and Russia are desperate to get their hands on more fuel. Fortunately, the United States has over a quarter of the world’s coal supply in our own backyards. Finally, we have the power in our hands.

The second thing you need to know is that once a coal-fired generating plant goes online, it cannot afford to shut down. It will need a continuous supply of coal for decades to come. It is just the opposite of nuclear-operated facilities. A nuke plant only needs fuel every twenty years or so. Coal plants are addicted to fuel.

Combine a nearly constant demand stream with a lack of supply and every economist will say you have a perfect recipe for profits. Throw in a stock price that has been unduly beaten down because of unfounded fears of an industry slowdown and you have an opportunity to score big time as share price rebounds.

James River Coal Company is trading well below dirt-cheap territory. Take advantage of Wall Street’s mistakes and buy shares under $22 while you still can.

An American classic

Finally, there is one more all-American company investors absolutely must know about. This one is truly a Blue Chip selling at penny-stock prices.

Take a look at a chart of Ford Motor Company (NYSE:F) and you will see a history of ups and downs. The company is in the heart of a highly cyclical industry constantly expanding and contracting. But no downturn has ever been as big as this one.

A decade ago shares of Ford were selling for over $37. Today, you can get them for less than $3.

It is the price of a mere cup of coffee at Starbucks and is a price Ford shareholders have not seen since the Reagan administration.

Granted it may be a long time before the company sees shares trading for over $35, but it certainly will not be long until we see them at $10 or even $15.

The domestic auto industry has reached its bottom. It is impossible to argue any other way.

Just look at the deal General Motors (NYSE:GM) and Chrysler are working to create. Obviously, if it can get its hands on Chryslers strong Jeep and minivan lineup, plus billions of dollars in desperately needed liquidity, General Motors will be a major benefactor. But so will Ford.

The auto industry will consolidate. There will be one less major competitor. Prices will begin to rise and margins will increase substantially. This is a deal that could save Detroit and make a lot of smart investors rich along the way.

But there is even better news.

Just recently, Congress handed Detroit automakers its own version of a rescue package. It came in the form of $25 billion in loans. The deal gives the automakers an insurance policy that will ensure they make it through this latest cyclical downturn. After all, no politician will ever let Ford go belly up on their watch.

Experts agree by 2010, the nation’s car industry is going to embark on a serious upswing. The cars that Americans bought during the last boom cycle will be wearing out, Detroit will have a new, high-tech product lineup, and customers will once again be walking into showrooms with pockets full of cash.

You can wait for the company to start making big headlines and get shares at $10 or more. Or you can invest at penny-stock prices and hold onto the shares as Ford gets back on its feet.

In less than 24 months, we will be entering the fourth-quarter of 2010. This credit crunch and recession talk will be in the history books. Most importantly, your shares of Ford will be worth three or four times more than they are right now.

Investors have an exciting road ahead. We have made it through the worst of the market turmoil. The economy is going to slow but it is finally back to fundamental investing. No longer will we see wild swings wiping out entire sectors. Now the weak will be eliminated and the strong will flourish.

Invest in the strong companies while their prices are dirt cheap and watch your profits grow as Wall Street figures out how to fix this mess. In just a few years, the credit crisis will be behind us and some huge profits will be in your pockets.

Source: Blue chips at penny stock prices

• Visa Inc. (V) and MasterCard Inc. (MA) have settled an antitrust suit with Discover Financial Services Inc. (DFS) rather than go to trial, sending Discover shares up almost 13% yesterday (Tuesday). Discover had filed a lawsuit against the two credit card processors seeking $6 billion in damages. The suit alleged that MasterCard and Visa prevented member banks from issuing Discover cards, Reuters reported.

• Daimler AG (DAI) yesterday (Tuesday) announced it would cut 3,500 jobs and close two North American plants in response to declining sales growth. The German automaker also plans to discontinue its Sterling-brand truck line, MarketWatch reported. The plant closures will affect Daimler’s St. Thomas, Ontario and Portland, Oregon plants.

• Apple Inc. (AAPL) will for the first time sell a MacBook for less than $1,000 during the coming holiday season, Chief Executive Officer Steve Jobs announced yesterday (Tuesday). “Demand is going to be good,” Jobs said of the MacBooks, Bloomberg News reported. “We’re making a lot of them.”

• Johnson Controls Inc. (JCI) yesterday (Tuesday) projected a 16% decline in earnings over the next fiscal year. The Milwaukee-based company manufactures car batteries and seats and has suffered as auto sales declined in the United States and abroad. “While we believe recent economic weakness was clearly partly priced in, our sense from management is that automotive on both sides of the Atlantic is proving much tougher than expected,” JPMorgan Chase & Co. (JPM) analyst Himanshu Patel said in a research note Tuesday, The Wall Street Journal reported.

• Light, sweet crude for November delivery yesterday (Tuesday) fell $2.56 to settle at $78.63 on the New York Mercantile Exchange, amid signs of dwindling world energy demand. Gasoline prices have followed oil’s precipitous decline, falling 23% from the record average of $4.14 a gallon reached July 17 to $3.163, according to auto club AAA.

• The Bush administration said yesterday (Tuesday) that the deficit for the budget year ended Sept. 30 was $454.8 billion – more than double the $161.5 billion recorded in 2007. It surpassed the previous record of $413 billion set in 2004. Some analysts believe that next year’s deficit could easily top $700 billion, according to The Associated Press.

• PepsiCo Inc. (PEP) said yesterday (Tuesday) that it would eliminate 3,300 jobs and close down six plants in an effort to save $1.2 billion over the next three years, The Associated Press reported. The announcement came as the company reported a 9.5% drop in third-quarter profit. The job cuts equate to roughly 1.8% of Pepsi’s global work force of about 185,000 employees.

SOurce: Global Investing Roundups Wednesday, October 15th, 2008

The U.S. Federal Reserve, European Central Bank (ECB), Bank of England, and the central banks of Canada, Sweden, Switzerland, and the United Arab Emirates each cut their key lending rate by 0.5 percentage points. The People’s Bank of China lowered its one-year lending rate by 0.27 percentage point to 6.93%. The Bank of Japan did not participate in the effort, but said it fully supported the action.

The Fed’s benchmark rate now stands at 1.5% and its discount rate, which was lowered by half a point, is now 1.75%. The ECB’s main rate, which was raised by a quarter point in July, is now 3.75%.

“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” the central banks said in a joint statement. “Some easing of global monetary conditions is therefore warranted.”

The credit-crisis that first began more than a year ago has hit full stride, putting a freeze on lending and driving a number of large financial institutions to ruin. The London Interbank Offered Rate (LIBOR), released before the emergency rate cuts were announced, surged a 144 basis points to 5.38% more than double the Fed’s funds rate – an indication that banks are wary of opening themselves up any further to bad assets and reluctant to lend to one another.

The $700 banking bailout passed last week so far has failed to assuage market fears and additional liquidity measures by the Fed have proved equally fruitless. After a number of cash injections, the Fed Monday said it would begin paying interest on bank deposits for the first time and double its planned auctions of cash to banks to $900 billion dollars.

The Fed followed that action Tuesday, by announcing plans to create a special fund to purchase three-month commercial paper from banks and non-financial companies.

However, those measures failed to assuage the markets, and with the both the Dow Jones Industrial Average and Standard & Poor’s 500 Index suffering immensely, rate cuts were the only ammunition Federal Reserve Chairman Ben S. Bernanke had left.

“We are now looking at the first page of the global- depression playbook,” Carl Weinberg, chief economist at High Frequency Economics, told Bloomberg News. “The only solution is to cut rates as close to zero as you dare,” pump money into the banking system “hand over fist” and increase government spending, Weinberg said.

The Dow had its biggest point loss ever Sept. 29, when it shed 777 points after Congress first rejected the bailout bill. The benchmark index is down more than 30% year-to-date. Meanwhile, the S&P 500 is suffering through its worst year ever, now that it has lost 33% of its value in 2008.

Bernanke’s Last Rabbit

Indeed, this massive coordinated rate cut may be the final rabbit Chairman Bernanke has to pull from his proverbial hat. And, yet, there are significant signs that the U.S. economy, as well as the global economy, is set for a severe recession.

U.S. economic growth slowed to just 2.8% in the second quarter, down from the 3.3% originally reported. And even that modest growth was the result of a small consumer spending bubble artificially inflated by government stimulus checks and a surge in exports, which was directly attributable to a weak dollar.

Consumer spending plateaued in August after a slight drop in July, and while the Commerce Department has yet to release its September figures, there is already evidence of a substantial drop-off.

Discover Financial Services (DFS), which surveys 15,000 adults each month about their spending habits and impressions of the economy, said yesterday that its consumer spending index fell 2.2 points from September to August.  More than 55% of those surveyed rated the economy as poor – double the level from a year ago, according to Forbes.

Wal-Mart Stores Inc. (WMT) a retail sales bellwether that typically thrives in times of economic turbulence has already reported a slightly lower-than-expected 2.4% rise in sales at U.S. stores that had been open at least a year during the month of September. Mid-price retailer J.C. Penney (JCP) posted a 12.4% drop in September sales.

Any hope that the holiday season would rejuvenate American consumers was dashed by the National Retail Federation, which forecasts a scant 2.2% increase in end-of-year retail purchases – the slowest rate of growth in six years.

Meanwhile, the broader job market continues to shed jobs, losing 159,000 jobs in September alone. General unemployment held steady at 6.1% in September, but surged 0.4% in August and is up 1.4% from a year ago.

Exports, which contributed 2.9 percentage points to second-quarter growth, won’t be much of a help going forward, either, as orders from overseas markets are beginning to falter. The Institute of Supply Management’s export gauge fell from 57 in August to 52 in September, and worse, the group’s factory index slumped to 43.5, its lowest level since October 2001, from 49.9 in August. All these figures are indicative of a severe drop in manufacturing.

With so much negative data, it’s hard to imagine a half point rate cut will do much to spare the economy from a recession, or worse, depression.

“In normal times, a rate cut would have a positive effect,” Gary Schlossberg, senior economist at Wells Capital Management told Bloomberg. “What’s troubling the market” is concern about “the solvency and losses of major institutions. The market is uneasy because it doesn’t have a lot of information on what the depth of those losses will be.”

The International Monetary Fund earlier this week said the global economy is heading for a recession in 2009 and increased its estimate of losses from the financial crisis to $1.4 trillion.

Source: Federal Reserve Joins Central Banks Around the World in Cutting Rates, but Is It Too Late?

The requirement was tagged onto the Housing Bill as it rushed its way through Congress. It aims to clamp down on $100 billion that the IRS claims small businesses owe in taxes.

But Mark says there might be more to this measure than just collecting unpaid taxes. What if the IRS are preparing to introduce an internet sales tax? This would raise large revenues for the state, but cause an administrative nightmare for small, online merchants.

Either way, it’s time to start saving those receipts…

If you can take the IRS at their word, then supposedly the U.S. Treasury loses nearly US$100 billion in unpaid taxes from small businesses.

That’s a big number, and I believe it’s a gross overstatement. I’ll explain why in just a moment. But in reality whatever the number is, the new housing bailout bill is designed to dramatically reduce it.

The IRS believes that America’s small businesses are evading billions of dollars in taxes through unreported credit card transactions. And for that reason, it’s long been at the top of their legislative agenda to require credit card issuers and electronic payment systems like PayPal to report sales data to the IRS.

Tax Inquisition Planned to
Bailout Deadbeat Homeowners

The housing bailout bill does just that, broken down in terms of payments to businesses accepting the cards. Essentially, the bill requires Visa (NYSE:V), MasterCard (NYSE:MA), Discover (NYSE:DFS), American Express (NYSE:AXP), PayPal, Amazon (NASDAQ:AMZN), Google Checkpoint (NASDAQ:GOOG), and virtually every other “electronic payment system” to track, aggregate, and report to the IRS, information on nearly every electronic transaction.

They must report:

• The gross amount of payment card and third-party network transactions
• The name, address, and taxpayer identification number of the participating merchant

However, the bill gives these systems more than two years to gear up for these requirements. Mandatory reporting won’t come into effect until 2011.

Basically, what the bill does is to give the IRS a way to check what a credit card company or electronic payment system is actually paying a small business compared to what the business owners are reporting on their tax returns. If the two numbers are wildly out-of-sync, then you’re likely to be audited.

eBay Powersellers, Beware!

How might this bill affect you? If you’re an eBay (NASDAQ:EBAY) Powerseller, for instance, and sell US$40,000 of cosmetics each year over the Internet, at the moment, eBay doesn’t have to tell the IRS anything about the sales.

But starting in 2011, eBay will have to send you – and the IRS – an annual report. The report would say for example that Connie’s Cosmic Cosmetics received US$40,172.13 in gross payments from eBay for that year.

And here’s where it might get very dicey with the IRS. People who operate businesses are supposed to declare their gross income on Schedule C (or a corporate tax return). Then they’re supposed to deduct all the costs of doing business to arrive at a net figure of taxable income.

However, a lot of small businesses don’t keep particularly good records. All the owners may know are what they have left at the end of the year. And that’s what they report as their income, without accounting for their gross income or their expenses. Any Internet business that takes this approach after 2011 will be in for a serious wake-up call!

The Numbers Don’t Add Up!

As I mentioned a moment ago, the IRS believes small businesses are evading taxes to the tune of US$100 billion annually. That’s the number IRS Commissioner Mark Everson dangled in front of the Senate Budget Committee in 2006.

Everson also said that if Congress unleashed the IRS against small business, it could recover “between US$50 billion and US$100 billion without changing the dynamic between the IRS and the people.”

Now, Congress has done exactly that. Only the numbers don’t add up. A more recent study from the Treasury Department says that credit card transaction reporting would net less than US$10 billion in added revenue.

And indeed, according to the Congressional Budget Office, the new provisions will raise slightly less. The Budget Office estimated they’ll raise a total of US$9.8 billion over a 10-year period.

The Hidden Agenda for Reporting Credit Card Transactions

That’s a lot of dough, although it’s a pittance for the tax-and-spenders inside the beltway.

For that reason, I don’t think matching up credit card transactions with eBay power sellers is the real reason Congress enacted this part of the housing bailout bill. Instead, I think there’s a hidden agenda for a much bigger take.

I could be wrong, but it seems to me that setting up an infrastructure that matches credit card transactions with payments to Internet merchants is a tailor-made solution to help collect sales tax.

Right now, most Internet transactions still aren’t subject to any form of sales tax. States will be chomping at the bit to get the IRS to share this data with them, so they can directly bill merchants for in-state sales. Any company that does business on the Internet, but doesn’t charge sales tax is at risk.

It’s not necessarily simple to “know what you owe,” either. In addition to the sales tax regimes in effect in nearly all 50 states, online merchants that collect sales tax must negotiate a maze of city, county, and municipal taxes.

Plus, they must file sales tax returns in the jurisdictions in which they sell goods or provide services. Small merchants that can’t justify investing thousands of dollars in software that can make the necessary calculations, and file the necessary returns, will be forced out of business.

Then there are the periodic calls for some kind of future national sales tax or value-added-tax. The infrastructure this bill creates will make this tax easy to collect. Everything will be in place, and the IRS can simply send a bill to merchants that don’t pay the tax.

Even if this worst-case scenario doesn’t come to pass, it’s quite clear that if you operate a small business, the IRS has you in its sights. And come 2011, you’d better have the data to track every dollar you spend in business expenses against the gross income reported to the IRS. And if you don’t, you can count on a tax inquisition.

Source: Small Business Owners Beware: Say Goodbye to Tax-Free Internet Sales