It was a real mind blower for both of us to fathom the profound meaning of these disappearing earnings. Mr. Gordon (he is a tiny bit older than I am) subsequently e-mailed a confirming chart my way:

Turn Away if You Suffer from Vertigo

Please grab a sickness bag. While many investors follow the Dow, the S&P 500 provides the most accurate measure of the status of the overall US market. As Andy reported, S&P earnings have “nosedived from $80 to $7 – the biggest drop ever recorded.” Both Andy and I are putting an exclamation point on this pathetic event.

You, also, should be extremely wary. This chart indicates that the earnings on one of the world’s most important stock indices are pitiful and plummeting. Little wonder corporate insiders are selling their company stock en masse.

Without earnings stock prices are temporarily levitating. Earnings have gone up in smoke! Isn’t that the life you’ve personally experienced over the last year as budgets are reigned in and unemployment has become pervasive? The S&P index has traded sideways within a range for the past few weeks, but it is still extremely overbought.

Personally, I have been shorting the S&P, but it’s hard to glean any satisfaction from making money from this catastrophe. There is no reason to hold stocks without sufficient earnings. I continually claim we’ve long been in depression mode and this ugly chart screams the truth. A picture (chart) can be worth a thousand words.

What should you do about it? I’m afraid you’re going to have to escape the CNBC, Wall Street and nightly news cheerleaders. These are all inside the box players and you will never regain your lost wealth or become rich following these puppets.

It’s a major stretch to believe you can randomly buy the general market and make 10% per year, though that is a common misconception. Factor inflation into the equation and you clearly see the folly. Most investors will never regain their lost wealth from the 2008 historic carnage. Only those of you wise enough to seek unique and highly profitable investment earnings will become whole again. The opportunity for enviable riches is also present.

Your IDE pundits are, to a person outside the box, offering commentary and services designed to protect and enhance your wealth. You cannot buy general stocks with miniscule earnings and expect to do anything but lose more money. No earnings directly equates to no capital gains.

Nor can your portfolio sit idle as it will end up looking like the nasty graph you just inspected. Ninety nine percent of us must have income or capital gains especially in a hyperinflationary environment.

As you may know, I’m primarily a resource stock investor. I’m also utilizing the incredible IDE brain trust in all of my financial decision making processes. You should be as well. I like and have confidence in each of these experts. We offer a very diverse range of worthy services that are designed to enhance your profits and assist you in escaping the failing financial matrix.

Check them out and see which of us best fits your investment temperament. We cover the total investment spectrum from bonds, blue chip stocks, options and natural resource speculations. The S&P index is down approximately 4% year to date but the last 14 picks I recommended in my Resource Windfall Speculator are up an average of 44%. All of your IDE editors are dead serious about bringing heady profits your way.

You simply must find the right escape hatch out of this historic mess.

Invest Resourcefully,

Rusty

Source: Neither You or the Economy Can Survive Without Earnings

And despite that robust performance, the Dow was the laggard among the three major U.S. stock indices. The tech-laden Nasdaq Composite Index soared 10.6% while the broader Standard & Poor’s 500 Index edged it with a weekly gain of 10.7%.

Fuel for the rally came from several sources. Stocks had sold off sharply coming into last week. But then such beleaguered banks as Citigroup Inc. (C), Bank of America (BAC) and JP Morgan Chase & Co. (JPM) started to talk somewhat bullish about earnings.

The rally was a confluence of forces. There was a significant sell-off coming into this week, as well as a dearth of positive news, then Citigroup, Bank of America, and JPMorgan Chase started talking about earnings and Washington was supportive on a couple of levels.

Investors also were encouraged by comments made by National Economic Council Director Larry Summers, who in a rare public appearance contended consumer spending appeared to have stabilized, according to TradeTheNews.com.

But the question now becomes: Where do we go from here?

Art Hogan, chief market strategist at Jeffries & Co. (JEF), said that “what’s important is we haven’t retraced any of the week’s moves. Even if it’s a bear market rally, the good news is the duration.”

The stock market is a discounting mechanism, meaning it prices assets according to what will happen, as opposed to what is happening right now.

But whether this is a kind of “dead-cat” bounce – with more bloodletting to come – or is the start of a sustained rally that signals a turnabout in the U.S. economy – is just too early too early to call.

Some key things to watch this week:

• The continued analysis of this weekend’s G20 meeting and subsequent recommendations.
• U.S. Federal Reserve policymakers meet Wednesday; although they cannot cut interest rates any more, investors will watch to see what other moves the central bank could make and – just as importantly – what policymakers will have to say. Some analysts are speculating the central bank may choose to purchase long-term Treasury bonds or even additional Fannie Mae (FNM) or Freddie Mac (FRE) debt.
• Investors also will be getting insights into the economy’s health with reports on jobless claims, housing starts, industrial production and inflation at both the consumer and wholesale level.

Market Matters

Citigroup announced that its first quarter would actually show positive earnings and other financials followed with similar projections. Citi Chief Executive Vikram S. Pandit stated that the one-time megabank has been profitable for the first two months of the year and JP Morgan Chase’s top exec echoed the cheerleading on his own institution’s behalf.  Not to be outdone, Bank of America’s Kenneth D. Lewis claimed that his bank should not need any additional government capital.

Freddie Mac lost $24 billion last quarter and needs another $30 billion in bailout funds; Merrill Lynch & Co. Inc. stands accused by the New York Attorney General of misleading Congress (and investors) about its bonuses.

Oil rose late in the week to close above $46 a barrel as traders speculated that the Organization of the Petroleum Exporting Countries could limit production even more at its weekend meeting after an energy agency cut demand projections by another 200,000 barrels a day.  Investors welcomed news that Citi’s situation may not be quite as dire and continued buying on rumors that the Financial Accounting Standards Board (FASB) may suspend mark-to-market rules.

Financials led the rally and healthcare climbed as well on the merger news concerning deals involving, first, Merck & Co. Inc. (MRK) and Schering-Plough Corp. (SGP), and, second, Roche Holding AG (ADR: RHHBY) and Genentech Inc. (DNA).

Economically Speaking

On the heels of the upcoming G-20 meeting, U.S. President Barack Obama suggested a more coordinated stimulus effort to help revive the worldwide downturn. His remarks were not very well-received by some of his trading partners, who felt that Obama insinuated the Europeans weren’t doing enough to jumpstart their respective economies.

Meanwhile, China lashed out at U.S. officials about the outlook for the domestic economy and, in particular, U.S. Treasuries [For a related story in today's issue of Money Morning, please click here]. As America’s largest creditor nation, China remains concerned about its investments in U.S. securities in light of the mass spending on domestic issues.

While the economic calendar was relatively light, the actual numbers offered a tad bit of “promising” news. Retail sales dropped 0.1% in February, but actually climbed once auto activity (rather inactivity) was dropped from the equation. In fact, businesses as diverse as furniture, electronics, and attire all experienced sales increases last month. The revised January retail number depicted the best increase in level of activity in three years.

The U.S. trade deficit shrank for the sixth straight month in January and now stands at its lowest level since October 2002. Declining imports and exports revealed further contraction in the global demand for goods and services. The weaker labor market remained quite concerning as claims for unemployment benefits have set records in six of the past seven weekly releases.

Weekly Economic Calendar

Source: Will Last Week’s Rally Carry Over?

While we have been getting roughed up to the tune of almost a 50% drop in the stock indices, corporate bonds have been as solid as stone, with a few exceptions.

Right now, you can earn as much as 15-17% per year on investment grade corporate bonds with very short maturities. So why are we taking risks in the stock market and getting killed?

Simple, most people know less about bonds than any other investment. Too many moving parts, too many new terms to understand, so they stay within their comfort zone.

Yield to maturity, current yield, yield to call, mandatory calls, sinking funds, coupon, treasury spreads, accrued interest, it’s enough to drive anyone mad. Just when you thought you had stocks mastered.

Here is an idea that will help get you out of the line of fire of the stock market and into a safer, saner investment that will beat the stock market’s long-term return. I can’t explain it any simpler.

Alcoa has a bond that is really cheap right now. All bonds are offered at $1000 each, or there about, and all mature at $1000, but you can buy them on the secondary market cheaper if the business has a slow down, as Alcoa has.

You can buy this particular bond for about $830, which means you get a capital gain at maturity of $170 in addition to the interest it pays which is 6.5%.

The bond matures in June 1, 2011, that’s a holding time of 27 months. That’s considered an ultra short maturity. On June 1, 2011, you will receive your last interest payment of $32.50 and $1000 at maturity, even though you only paid $830 for the bond.

Here’s how to figure your annual return. Most people really have trouble with this part of bonds.

You will receive interest payments on or about June 1, 2009 and 2010, and on January 1, 2009, 2010, and 2011. That’s five interest payments of $32.50 (half of 6.5% annually or $65.00/2).

You get $162.50 in interest and capital gains of $170 at maturity, for a total of $332.50 for an $830 investment.

You have something called accrued interest, which deducts about $10 from your total. Don’t ask, it’s one of those bond things that I don’t have time to explain, which leaves you with $322.50.

You divide your total of $322.50 by your purchase price of $830. Your total return for a 27-month hold is 38.85%.

To get your annual return divide your total return, 38.85% by 27, the number of months you held it, for .014, and multiply that by 12, because there are twelve months in a year, or 17.2% per year.

Alcoa is an investment grade bond, not a junk bond. Investment grade bonds, according to Moody’s records, have a 99% success ratio for an 80-year period. That means they pay off 99% of the time.

Many investment grade bonds will pay you this much per year and more. The question you should be asking yourself is, “why am I getting killed in the stock market when I could be doing this?”

A return of 15% per year and a 99% success ratio for an 80-year period. Think about it and take a look at the Bond Trader. We do this every week.

Source: A Safe 15% Per Year, No Sweat