This from Taipan Daily:

It’s certainly no challenge finding stocks under $10 these days. Unfortunately, many of them used to trade for at least twice that much. To make matters worse, in most circumstances, these sad sacks deserve this ignominious fate.

Take your pick: Homebuilders who put up pasteboard shacks alongside highway interchanges and called them “mini-mansions”… banks that sold mortgages to undocumented workers… brokerage houses that bought and sold worthless bonds… retailers who based their business model on the idea that folks could spend twice what they earned forever… credit card companies that figured if they could just charge enough interest, it wouldn’t matter if no one paid off the principle…

Deadbeats, crooks and idiots one and all, each one thoroughly deserving of the punishment the recession has doled out.

Deeper and Longer

Because it is a recession, and not one of those quickie two-quarter deals like we saw around the turn of the century. No, this bout is showing every sign of running deeper and lasting a good bit longer.

As recently as last July, the Pollyannas at the Federal Reserve were still calling for 3% growth per annum as far as the eye could see. Now they have done a complete 180-degree turnaround. Their current estimate for GDP growth in 2008 is now between 0.3% and just plain zero. For 2009, they are now calling for a possible loss of 1.1%.

And they are the optimists in the house. At a recent meeting of Major League Baseball team owners (oh, the sordid places you have go to find the truth!), former Fed Chairman Paul Volcker warned that the recession was a greater threat than had been previously understood, and would in all probability impact even this venerable institution’s bottom line.

Unemployment Scrapes 10%

What threatens to empty baseball’s bleachers? Employers cut another 533,000 jobs in November. Jobless claims haven’t been this high since July 1992, when the U.S. had already been in recession for two quarters. Worse yet, the number of workers still collecting unemployment benefits has risen to over 4 million and has held at this level for three consecutive weeks.

As the economy grinds to a halt, state and local governments are staring at massive deficits totaling some $40 billion. New York and California have already approached Washington D.C. for bailouts that could dwarf anything we have paid to Wall Street.

While annual numbers are not in yet, New York is already complaining of a massive shortfall, with forward deficits through 2010 as high as $14 billion. Nor is the Empire State alone in its misery: just across the bridge and tunnels, New Jersey is already logged in a $258 million deficit in the first four months of the new fiscal year.

Cities Shut Down

As tax receipts collapse, states and cities are shutting down programs willy-nilly: California has already laid off 10,000 part-time and temporary state workers… Ohio is closing two mental health facilities… Rhode Island can’t afford to help out pensioners with discounted electricity and heating oil – just as temperatures dive below freezing… New Jersey is welching on promised property tax breaks… Georgia is closing library branches and denying fire departments new fire trucks.

Does such a dismal forecast as this mean that there are no opportunities about? Nonsense! In bad times, those with both cash and nerve can rule the roost. For example, this very breakdown in both employment and public services offers us a unique opportunity.

When times get this hard, crime skyrockets. And yet local government can do very little to prevent or protect this inevitable wave of both personal and property crime. At best, they can simply record the victims’ stories for the next begging trip to Washington.

Defend Yourself

However, there are private companies that are quite willing to provide citizens with the means of protecting themselves, their families and their property. For example, TASER International Inc. (Nasdaq:TASR) is well known for its easy-to-operate electrical stun devices.

TASER offers two distinct product lines: one for law enforcement, military, corrections and professional security agents, as well as a convenient series of personal protection devices roughly the size of a cell phone that can drop a mugger twitching and writhing to the curb in the most satisfying manner.

These units are the darling of most every police department in the country, as they can be used in circumstances where the safety of officers is at stake without risking the inevitable lawsuits and lost hours that result from firearm discharge.

Shocking Gains

Even better (for TASER anyway), while their professional models can be used over and over again, the personal systems require that you abandon the deployed unit after each use. Who would not replace a tool that just saved your life?

Talk about your permanent market!

But the best part is yet to come: much like virtually every other small tech stock, TASR has been punished mightily in recent days. Since the market collapse began a year ago, shares have been slashed from $19.10 to under $6 today.

Now normally I use stock options to leverage megacap stocks’ relatively small moves into triple-digit gains. However, this time around, I believe that this technique is both unnecessary and limiting.

As crime rises, I am forecasting TASR shares to return to their $20 range. For this opportunity, why risk time decay on a call option contract when simply buying shares of TASR offers one the same sort of triple-digit gains – many times over – during the next 18-24 months?

Source: Shocking Gains From Shocking Times

The people of the United States of America prayed for a political messiah. Now that he has stepped forth, we are left to wonder, what next?

Politics is not really our beat here at the Rude Awakening, so we won’t be offering up any four-legged sacrifices for the promise of financial salvation. In the harsh light of economic reality, miracles are hard to come by, even for those claiming to posses the kind of optimistic foresight that defies rational explanation.

A cursory glance toward the economic horizon reveals some perilous obstacles ahead. As we walk through the valley of 5-year market lows, the shadow of the death of consumer spending looms particularly large. American consumers, upon the backs of whom almost two-thirds of the world’s largest economy rests, cut spending by an annualized 3.1% for the third quarter. For perspective, that marks the first quarterly decline since 1991, as well as the largest quarterly decline in 28 years, according to the U.S. Commerce Department.

Meanwhile, prices of goods and services purchased by US residents jumped 4.8%. That’s on top of a 4.2% increase in the second quarter. Even excluding food and energy, prices were still up by 3.1% in Q3.

As the consumer-driven economy grips the emergency brake and higher prices put the squeeze on employers, jobless rates continue to skyrocket. The Department of Labor is expected to announce the loss of 200,000 jobs for the month of October when it meets on Friday. That would drive unemployment to 6.3%, up 0.2% from September.

Shrugging off all these annoying statistics, however, the market continue to mount a herculean rally. After posting its worst month since 1987, the Dow surged an impressive 300 points Tuesday in anticipation of Obama’s victory, topping off double-digit gains for indexes across the board last week.

Could we be witnessing a miracle in the making here? Is it possible that a new tablet of financial commandments might render the age-old saws of saving and producing nothing more than outdated or even, dare we say, profane?

We wouldn’t dare offend any divine and future superintendent of the financial universe by asserting otherwise…but we reserve the right to remain unconvinced.

In the absence of proof that what goes up need not come down, we will continue to seek our financial guidance from within the “boring” confines of reality. And so, we turn to the inimitable Rude Readership for the results of our latest Group Research Project.

A couple of weeks ago, we asked readers to submit their favorite “chicken longs.” Put simply, we wanted to know what stocks readers would like to have in their portfolio should the heavens open up and curse the earth with a great financial flood. Such stocks might derive their buoyancy by paying a large dividend, enjoying a competitive position in a relatively “high ground” sector or through some other means of protection.

We have no clue as to whether the President Elect will perpetuate the current state of fiscal delusion or merely usher in a winter of slightly milder discontent…but it is probably best to be prepared for either scenario.

Reader “Bradbarb69″ kicks off our newest Rude Awakening Group Research Project with the following cheerful suggestion:

“I like prison stocks. There will never be a shortage of lawbreakers at any level, and governments must maintain prisons for the public good. As crime rises (as it inevitably will) these stocks will be good holdings. I also like [the cemetery operator] Stonemore Partners L.P. (NASDAQ:STON) for its high dividend and for the fact people will always die no matter what the economy does. Personal protection stocks are also on my list of “buy at the right price.” I’m thinking in particular of Smith & Wesson (NASDAQ:SWHC) and Taser International (NASDAQ:TASR).

[Editor's Note: Although Bradbarb69 did not provide any specific names in the prison sector, a couple that come to mind are Geo Group (NYSE:GEO) and Corrections Corp. of America (NYSE:CXW).]”

Reader Tom Winstanley recommends Weir Group, a Scottish company that trades in the U.S. over-the-counter market under the symbol, (PINK:WEIGF).

“This company makes boring old pumps,” Tom explains. “Energy and Water are two areas that simply will not wait upon the recovery of the world economy. Come hell or high water, governments know that if they cannot keep the lights on, provide as much fresh water as their people are used to having available and treat waste water to high standards, then they will be more trouble than they can handle. Pumps might be boring but try getting by without them – whatever the state of the economy!” [Editor's Note: Weir trades for less than eight times estimated earnings and yields 4%].

Reader Susan Vander Voet likes the Brazilian oil giant, Petroleo Brasileiro (NYSE:PBR), also known as Petrobras. The stock was trading around $21 when Susan submitted her email to us. Today, the stock is around $30.

“I’ve been watching this company for about a year,” Susan writes, “and the reasons for my recommendation are:

1. Active and with interests in several Latin American countries (Brazil, Ecuador, Chile, Peru) in exploration, production, distribution and retail;
2. Huge offshore resources discovered in Santos Basin;
3. Active in several African countries (Angola, Tanzania);
4. Stock is trading well below the moving average, which has trended upward for 5 years;
5. As oil prices are projected to recover (in 2009), I see this stock at least doubling its current value ($21).”

Reader David Myrhre identifies Harvest energy Trust (NYSE:HTE), a Canadian investment trust, as his “current fave.” The stock, which was trading below $8.00 when David submitted his email to us, is now north of $11. But even at the current quote, the stock is well below the $18 price tag it fetched in September. What’s more the indicated yield on the stocks is a whopping 27%.

“I’ve heard worries that the dividends will go down because oil prices have gone down,” David explains “But these oil producers sell on annual and multiyear contracts.  Dividends didn’t go up when spot oil prices spiked and they won’t go down just because spot prices did.”

Elsewhere in the Canadian investment trust sector, reader Greg McLean highlights Peyto Energy Trust (PINK:PEYUF), a stock that yields about 14%. Greg also likes Hanfeng Evergreen, “HF” on the Toronto Stock Exchange. “Hanfeng is a small Canadian company that makes slow release rice fertilizer in China,” explains Mr. McLean. “Hanfeng has decent earnings and cash, little debt and is trading close to book. I feel confident betting China will continue to grow rice.”

Another high-yield energy stock is Atlas Pipeline (NYSE:APL), which is a stock that reader Don Gish favors. “My favorite bear market stock is Atlas Pipeline (APL),” Gish writes. “The sudden drop of the energy market and other market sell-off factors have driven APL unrealistically down.  [At the current quote, the stock yields about 20%].  I believe APL’s focus on natural gas pipelines with no exploration/development costs and long term contracts has created an excellent long term dividend with significant potential for future stock price upside.  I love this position, so I have to resist my desire to buy more.”

Lastly, reader Scott Lovinghood writes: “I have a suggestion for a chicken long: Blackrock Municipal Income Closed End Fund (NYSE:BKF).  It is primarily invested in tax free municipal bonds.  At current prices the yield is just a hair under 8% TAX FREE!!  The fund covers many different states and markets.  California is the largest concentration at only 11% of the fund.  The majority are longer dated bonds, so unless municipals are totally wiped out, the monthly pay outs should continue.  The shares were hammered recently due to the credit freeze. The stock’s NAV is $10.15.  But the stock is only $9.20…Not a bad deal.”

And so concludes Part I of our newest Rude Awakening Group Research project.

Source: Chicken Longs