Sales of existing homes rose for a third consecutive month in June to an annual rate of 4.89 million, which was better than the forecast of 4.84 million that most economists were expecting. May’s figure was actually revised down to 4.72 million from the original posting of 4.77, so the month on month rise came in much higher at 3.6% than the expected 1.5% increase. June is traditionally seen as one of the busiest months in the real estate market as families try to make the adjustment in between school years so it wasn’t exactly a surprise to see better than expected numbers.

Lower borrowing costs, foreclosure driven price declines, and tax incentives also contributed to these higher numbers. This is certainly good news to hear and I hope the bottom has already passed us by or is near, but as I mentioned yesterday, I won’t get too excited until unemployment gets back to a supportive level and the full backing of the consumer underpins this move. If anything, this may end up being a protracted bottom and a slow road to normalized levels.

We also had the weekly initial jobless and continuing claims released yesterday but was overshadowed by the positive housing numbers that came out. The initial jobless figure came in 30,000 higher than last week to 554k but continuing claims backed off a bit to 6.23 million from last week’s revision up to 6.31 million. Bernanke said earlier this week that job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. With that being said, it still looks like we have plenty of breakers to get through before we reach the safety of calmer waters.

Today doesn’t bring us much in the way of reporting as the only data due out is the final printing of the U. of Michigan consumer confidence number for July. The preliminary figure was released a couple of weeks ago and fell more than forecast to 64.6 from June’s 70.8 reading. This generally isn’t a big market mover but its expected to settle in a tad higher at 65. This one is a tough call as the stock market has risen quite a bit in that time period but we’ll see if job and income concerns keep this month’s number grounded. Since this is all we get today, it will be interesting to see how much attention the markets give this report.

Just as we saw the Dow hit the 9000 mark for the first time since January and the euphoria of the housing market has gained momentum, well respected economist Nouriel Roubini, had a different take on things. In a report released today, concern was expressed that a perfect storm of fiscal deficits, rising bond yields, soaring oil prices, weak profits, and a stagnant labor market could blow the recovering world economy back into a double dip recession. He went on the to say that its getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented. I guess the moral of the story here is to proceed with caution and buckle your seat belt because the ride could get bumpy.

Moving on to currencies, the Swedish krona and the Canadian dollar both posted 1% gains yesterday while the Japanese yen, New Zealand dollar, and Swiss franc rounded out the bottom. The two currencies at the top of the list had much different reasons for ending the day where they did as the krona traded higher primarily on the back of risk appetite. As investors feel more comfortable with buying riskier assets, the thinner traded currencies like the krona, benefit even though Sweden’s unemployment rate rose for a second month in June to 9.8%.

The Canadian dollar, on the other hand, rose to a 7 week high as the central bank said the recession is nearing an end brought on by higher commodity prices and consumer confidence. The central bank kept rates at the record low of .25% a couple of days ago and reiterated they will stay there for a while unless inflation becomes a problem. Since Chuck is across the border in Canada right now, it’s a perfect time to get our daily dose:

“I was reading the local paper the other day, and the business section had a big story on the Bank of Canada’s (BOC) Gov. Carney and how he vows he will intervene to keep the loonie from going higher… In the last two days since that story appeared, the loonie has done nothing but gain vs. the green/peachback… 91-cents it traded through yesterday! I can’t help but think that traders are beginning to believe that Central Bankers are imitating the boy who cried wolf… We had the Brazilian Central Bank, the Swiss National Bank, and now the BOC… They all are giving verbal warnings about traders taking their currencies higher…

The Central Bankers do this under the disguise of “we don’t want deflation in our economy” opting for the weaker currency to introduce inflation… I think this is all a smokescreen! I think this is a coordinated effort to keep their currencies from going hog-wild VS the dollar… The Central Bankers all know that the dollar is teetering, and without speed bumps we could see a mad exit for the door for dollar holders… Just what I think… Nothing more, nothing less… Just my thoughts… ”

Thanks again Chuck, its always great to get your insight. Since we’re already talking about central bank intervention, I saw a report today that has some looking for the Swiss National Bank getting back into the game. According to the Big Mac index, which is a purchasing power parity figure using the cost of a Big Mac as the measure, the Swiss franc is the second most expensive in Europe. Its just a fun little tid bit I thought would be good to break the monotony. Anyway, the Swiss franc is largely influenced by the euro and risk appetite so while the SNB may step in, there’s really no way to stop the moving train. As Chuck has said many times before, the markets have much deeper pockets than a central bank.

As I got to the office yesterday, the euro was hovering around 1.42 and climbed just shy of 1.43 to 1.4291 before we saw the profit taking drag it down to 1.4150 on my out the door. I saw a report where the euro had established a base at 1.4050 and calls to buy on dips, which is certainly a strategy that would be consistent with our views. As I touched on above, the Asian and overnight markets have run things right back to the levels from yesterday but as the European traders hand the books to those in New York before heading out for the weekend, the dollar is still getting sold. Don’t look now, but I see the euro at 1.4250…hopefully we can hold on to this and finish the week on a positive note. It looks like the euro is also getting some help from within as reports showed the contraction in European manufacturing and services slowed more than expected and German business confidence improved.

While I’m talking about Europe, we had some positive new come out of the UK as retail sales quadrupled the estimate and surprised the markets with a June gain of 1.2%. Year over year sales are actually up 2.9% and has economists looking for a near zero GDP figure in the second quarter. HSBC actually raised their forecast for the pound from 1.60 to 1.75 by year end 2010 and justified the call by saying the likelihood of an interruption in the asset buying program from the BOE could be as soon as next month. They also feel rates will rise before the Fed but this is a long way off and a lot can happen. Just like the US, I don’t see enough at this point to be comfortable buying this currency, but hey, we’ve been early on some calls too.

One of our newest multi-currency CDs, the Global Power Shift CD, has also been keeping the phones busy lately. With commodities and commodity based currencies leading the charge, it seems like we talk about at least one of them everyday, so I thought I would give it a mention. This CD combines the Australian dollar, the Brazilian real, the Canadian dollar, and the Norwegian krone into one instrument and just provides you with a little bit of everything…not a bad way to provide that hedge against a weakening dollar and gain exposure to commodities at the same time. Well, its about that time and I need to wrap it up so on to the big finish…

Currencies today 7/24/2009: A$ .8170, kiwi .6573, C$ .9214, euro 1.4230, sterling 1.6462, Swiss .9353, rand 7.7236, krone 6.2308, SEK 7.4710, forint 188.04, zloty 2.9538, koruna 17.9280, yen 94.86, sing 1.4407, HKD 7.7500, INR 48.2750, China 6.8316, pesos 13.1903, BRL 1.8991, dollar index 78.686, Oil $67.25, Silver $13.7850, and Gold… 952.86

That’s it for today…its your Friday!! I just wanted to send congrats toward St. Louis native Mark Buehrle, pitcher for the Chicago White Sox, as he became the 18th player to throw a perfect game…truly a remarkable feat. Our office has a team in a local kickball league so I wonder if our pitcher, Tim Smith, was able to match that performance…lol. It was a rough go this morning as the words just didn’t come all that easy for me but hopefully I was able to make some sense of it all. Alright, its really getting late so I need to get going here. Have a great Friday and a wonderful weekend…Until next time.

Source: Today’s Pfennig Friday, July 24, 2009

The biggest news to hit the markets yesterday was the Treasury Department’s report that the deficit in June totaled $94.3 billion. This monthly deficit pushed the deficit for the fiscal year to over $1 trillion dollars for the first time, and we still have another quarter to go until the fiscal year ends in September. It comes as no surprise to readers that the deficit is above $1 trillion, but what is a bit unnerving is the speed at which the red ink is flowing.

According to the Treasury department’s report, spending in June surged 37 percent to $309.7 billion while revenue fell 17 percent to $215.4 billion. June is typically a good month for revenues, and the reported deficit was the first since 1991. Individual and corporate tax receipts are falling while unemployment continues to rise. But the revenue picture isn’t nearly as bad as the other side of the ledger. The administration is just starting to ramp up the spending from the $787 billion stimulus package President Obama signed into law in February. And as Chuck has reported, the administration has already started to lay the groundwork for another big stimulus package.

Congress seems to be turning a blind eye to the deficit, why let some red ink keep them from accomplishing all they set out to do? Just this morning, the day after we surpassed the $1 trillion deficit mark for the first time, the democrats have unveiled their long awaited health care reform. The program, by most estimates will add another $1 trillion to the deficit over the next several years. Sure, I think we all would like to see an improvement on the current health care system, but what a time to try and shove it through congress! I’m sure you will start to hear a chorus of ‘deficits don’t matter’ by the media; as they try to convince all of us that these new programs are just too important to let a little thing like red ink keep them from passing.

But deficits do matter! Other than the fact that someone is eventually going to have to pay all of this debt off, financing this shortfall is going to continue to get more difficult. Interest rates will certainly rise from their current low levels, and for the fiscal year to date, the interest expense on the government’s outstanding debt was $320.7 billion. As rates rise, this interest component will also rise, chewing up a larger percentage of our overall spending. Rising interest payments will continue to push out spending for other, more productive programs and force either a reduction in government services, or a dramatic increase in government revenues. Look out for some dramatic tax increases!

The huge deficit continues to worry our foreign investors, who have thus far financed all of our free wheeling spending. China, Russia, and some of the oil rich Arab states have all expressed their concerns regarding the security of US debt and the stability of the US$. Japan’s opposition party, leading in polls ahead of next month’s election, is the latest country to question the long term viability of the US$ as the global reserve currency. Japanese investors are the biggest foreign holders of US Treasuries after China, so the talk of diversification away from the US$ could have a big impact on the currency markets. “In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” said the opposition party’s finance minister in an interview. “Many countries are starting to diversify their reserves.”

The biggest currency gainers vs. the US$ yesterday were the commodity currencies of the Canadian dollar, Brazilian real, New Zealand dollar, and the Australian dollar. Yesterday Chuck let everyone know he had finally put the finishing touches on our latest index cd. It just so happens that the new index combines three of these top performers. The new index CD, named the Global Power Shift Index is a combination of the Australian dollar, Canadian dollar, Brazilian real, and the Norwegian krone. Chuck designed this new index CD to take advantage of commodity price increases which are bound to occur as the global economy starts to recover. Call the desk for more information on this newest addition to our stable of offerings.

The Australian dollar got a boost from the business sentiment which turned positive in June for the first time since December of 2007. This should help convince the central bank to keep interest rates stable as the Australian economy starts to show signs of a recovery. The kiwi also got a boost as Reserve Bank Governor Alan Bollard said “Early signs of a global recovery have now emerged.” Rates in New Zealand will likely remain stable as the commodity driven economies turn the corner.

Today and tomorrow will bring us a plethora of data, with PPI, Advance Retail sales, Business Inventories, and the ABC consumer confidence numbers today followed by the release of the CPI numbers, Empire manufacturing, Industrial production, Capacity utilization, and the minutes of the June 24 FOMC meeting to be released tomorrow. Thursday we will get the weekly jobs data along with the TIC flows and Philadelphia Fed index. We will close the week out on Friday with news on the US housing market with the release of Housing starts and Building permits. All of this data could bring some excitement to the currency markets, which have settled into a fairly stable summer trading pattern.

Currencies today 7/14/09: A$ .7878, kiwi .6336, C$ .8742, euro 1.3983, sterling 1.6317, Swiss .9227, rand 8.1989, krone 6.4653, SEK 7.8388, forint 197.26, zloty 3.1216, koruna 18.6183, yen 93.14, sing 1.4590, HKD 7.7505, INR 48.84, China 6.8328, pesos 13.654, BRL 1.9782, dollar index 79.97, Oil $61.10, 10-year 3.45%, Silver $12.935, and Gold… $926.19

That’s it for today…The home town favorites, Albert Pujols and Ryan Howard couldn’t quite get it done at the derby last night, but it sure looked like everyone had a great time. Three of the guys on the desk went down to the derby last night, and I actually saw both Mike Meyer and Tim Smith in the right field bleachers scrambling for one of Cecil Fielder’s 16 homers. My wife and I were lucky enough to get invited to tonight’s game by a good friend. I’ve heard we will have to be heading down a bit earlier than normal with President Obama in town to throw out the first pitch. Should be a great time; I just hope the rain holds off. Should turn out to be a Terrific Tuesday! Let’s go National League!!

Source: Blood in the Streets

Fortunately for us, the report wasn’t as bad as expected. However, the job losses are still significant and still approaching historical levels.

Before I get to the historical aspects of the job losses, there’s something else to consider when looking at the job losses: where the losses are occurring.

The losses aren’t simply blue-collar workers. They are also white-collar. And the hard part for many of the individuals who have lost their jobs recently is that their jobs may never come back. So it isn’t a matter of waiting around until a new job opens up when the economy turns around. The jobs will simply never be there again. For example, last month the economy lost approximately 149,000 jobs in the manufacturing sector. Many of the plants that closed will never open again. The same goes for some of the 110,000 construction jobs that were lost last month. Even white-collar employees are facing grim prospects. Last month, professional and business services lost 122,000 jobs. Whether the company went out of business, consolidated with another one, or simply trimmed ranks, these jobs are gone for a long time, perhaps forever.

Adding to the problem, many of these workers are not easily transitioned to ‘burgeoning’ job fields. For example, an autoworker who has worked for years in plants can’t simply transition over to the healthcare sector to find employment. They need time to take classes, learn, and become proficient in their new fields. Never mind older workers who have no desire to switch jobs at such a late stage in their careers.

So how historically bad have the job losses been? It depends on the comparison.

In terms of the shear number of jobs lost, the last 16 months have been staggering. We have doubled the previous number of jobs lost in consecutive months.

However, there are simply more workers today than ever before, so for an ‘apples to apples’ comparison, let’s look at the number of jobs lost in relation to workers. To do this, I pulled up the historical data, and looked at the number of workers the month before the losses started. For example, the number of non-farm workers in November 2007 was just over 139 million. The number of jobs lost so far is 5.73 million, so the economy has shed nearly 4.13% of the workforce during the last 16 months. As you can see, we are nearly identical to the percentage of jobs lost during the 1957-1958 time period. We would only need to lose 30,500 jobs in May to eclipse the 1957-1958 period, and become the worst percentage loss ever. Unfortunately, it would take a miracle for that not to happen.

So how do the huge monthly losses we have seen stack up? Surprisingly, not too bad. To determine this number, I took the number of jobs lost and compared that to the previous months payroll figures. For example, in April, the economy lost 539,000 jobs out of the roughly 132 million jobs that were on the payrolls in March. That’s 0.55% of the jobs that were available the month before. Historically, despite the huge numbers of jobs lost recently, only January ranks in the top 10 in terms of overall percentages.

Hopefully this gives you a good frame of reference to compare the mounting job losses we are seeing right now. In terms of shear numbers and percentages we are looking at the worst or almost the worst period in history. There have been much worse monthly losses, but not extended periods.

Another record we will set very soon is the number of consecutive months of jobs lost. We currently stand at 16 months, one shy of the record. It will take divine intervention to not set the record in June.

Source: A Look At The Recent Employment Figures And How They Match Up Against Other Recessions

Needless to say, when the number of jobs lost every month is in excess of 600k, we aren’t going to see an abrupt stop. We will unfortunately set the record for consecutive months of job losses in the next few months.

Monday

Economic Reports: Pending Home Sales

The Pending Home Sales report for March comes out this morning at 10:00 am, and I am a little surprised by the expectations (flat). With all the foreclosures continuing, and prices still sliding, I think this report will show a modest increase in Pending Home Sales.

Earnings Announcements: S

Tuesday

Economic Reports: ISM Services

This could be another month of contraction in the services sector if expectations are accurate. One thing to note when the report is released is if any sectors are expanding versus contracting. Last month the only sector to display expansion was in real estate rental and leasing. In any event, until more sectors are expanding than contracting the economy will continue to languish.

Earnings Announcements: KFT, UBS

Wednesday

Earnings Announcements: CSCO

Thursday

Earnings Announcements: GM, VRSN

Friday

Economic Reports: Non-Farm Payrolls, Unemployment Rate

Earnings Announcements: TM

Source:Employment Numbers Are About To Get Historically Bad

But what is bad for the economy and terrible for the market does not have to wreak havoc on your portfolio. By employing the right strategies, you can multiply your wealth safely in just about ANY market. In fact, there are a number of investment strategies that have never been as safe and profitable as they are today.

Here are several strategies you should strongly consider right now:

• Selling Covered Calls

Selling (also called “writing”) covered calls is one of the safest ways to generate extra income from your portfolio, especially in today’s market. Due to the fear and volatility in the market, option premiums are much higher than their historical averages. As a “seller” of options, that works in your favor. This is a strategy that could easily and safely generate 20% annual income.

Selling covered calls is probably the lowest-risk form of options trading. In fact it is less risky than simply buying stocks. The strategy involves buying a stock and then selling someone else the right to buy it from you in the future. For this privilege, the option buyer pays you cash up front, thus lowering your cost basis for the shares you purchase.

Here’s a hypothetical example of how it works…

Let’s assume stock ABC is trading for $10 and the July call options on this stock, with a strike price of $11 are selling for $1.00. To initiate a covered call, let’s assume you purchase 100 shares of ABC. Then you sell one call option on ABC, representing 100 shares. You would immediately receive $100 in your account, therefore your cost basis on this transaction is $900 ($1,000 – $100).

There are three possible outcomes to this trade:

• If ABC is trading for any amount over $11 at the option expiration date, the buyer would exercise his right to purchase the stock from you for $11. In this case, you would make 22%, based on your cost basis of $9.

• If ABC is trading for less than $11 but greater than $9 at expiration, you would still own the shares at a gain, and you would pocket the cash you received up front. You could then start the process all over, to generate another round of income.

• If ABC is trading for less than $9 at options expiration, you would be holding the shares at a loss. But the income you received up front would offset the loss. And you could repeat the process again to recoup some of the loss and generate additional income.

The key to this strategy is to write covered calls on stocks that you would like to hold for the long term. These could be stocks you already own or new positions. The stocks you select should be those that you believe to be very safe and cheap. And you should employ this strategy at a time when option premiums are large – as they are now. Ideally, you will be selling options that expire within three to five months.

When the strategy works out in your favor (and it will if you employ the rules above), you can generate better than 20% annualized income on a conservative portfolio of stocks. On the occasions when the stocks fall below your cost basis, you would own a stock that you wanted to own anyway… but at a much lower cost than if you had just purchased the shares.

By writing covered calls on high quality dividend-paying stocks you can get an extra bonus. Best case scenario, you will keep the option premiums, you’ll keep the dividends, and you’ll keep the stock too!

• Selling Puts

Selling puts is another strategy that can generate an annualized yield in the neighborhood of 30% – 50%. When executed properly, a put selling strategy can be highly profitable and carry very low risk. This is especially the case in a market like we have today, where fear is high and option prices are elevated.

You can also sell puts with the goal of generating income. In this case, you want the put to expire worthless so you can capture the option premium. To accomplish this goal, you sell puts that are out of the money on stocks you believe to have very little downside risk… and which you would be willing to purchase at a much lower price, if necessary.

Here is an example…

Let’s assume that stock XYZ is selling for $13. We’ll also assume the stock has already fallen a significant amount (not too hard to find in today’s market) and you believe the rock bottom liquidation value of the company is $8.

With the stock trading at $13, the July $10 put option is well out of the money and selling for $1.50. You decide to sell these puts. When the trade closes, $150 will automatically show up in your account for every contract you sold.

The only way you could lose money on this trade is if XYZ trades below $8.50 ($10 – $1.50) on or before the option expiration date in July. That is a 35% drop from the depressed level the shares of XYZ are trading today.

And in the unlikely event that you were obligated to purchase those shares, you should still come out okay. After all, the liquidation value of the company is $8 a share and your cost for those shares is just $8.50. So the downside risk should be very small.

Remember, this strategy should be employed on stocks where you believe the downside risk to be minimal. And you should only employ this strategy on stocks that you would be GLAD to own at a price below where you sell the put.

You should also have a reasonable understanding of the true valuation of the company. For this reason, I would exclude most financial and insurance companies from this category, as very few people (including the insiders) have any idea how much these companies are worth or what is on the books.

In today’s market, you can expect a well executed put selling strategy to generate an annualized yield of 30% to 50% with limited risk. Selling puts in this environment and following the rules above can put big odds in your favor.

By selling put options, you could buy super-high quality stocks as much as 50% cheaper than today’s historically low prices. PLUS you’ll get cold, hard cash deposited in your account instantly… adding to your annual income!

Where You Can Learn These Strategies… and a Lot More!

By no means are these the only strategies that can be highly profitable in today’s market. We are also seeing a once-in-a-generation opportunity in high quality corporate bonds. Invest in the right bonds and you can see significant capital gains plus income… without taking stock market risk.

This is also an excellent market for shorting stocks. But you should not go out and just short any stock. The inevitable bear market rallies could put you in the poorhouse. The lowest risk opportunity is to short those stocks that are almost certainly going to zero – companies with an impaired business model and a massive debt load. There are dozens, if not hundreds of these companies out there.

Now for some even better news: you don’t have to do all of this on your own…

In June, at the Turnberry Isle Resort & Club in Miami, Investor’s Daily Edge and Mt. Vernon Research have asked nine top investment experts to share their number one strategy and top recommendations that are making a fortune in today’s market. Of course, all of the above topics will be covered.

To learn more about this conference and the once-in-a-lifetime opportunities we’ll be discussing, click here.

Source: Two Strategies Perfect for Today’s Market

But their paychecks are shrinking.

More and more Americans have become involuntary part timers. Some of these half-fortunate workers looked for full time work, but were only able to find part-time employment. Most of them are still in the same job but working less. Goodbye to the rich time-and-a-half overtime work. These involuntary part-timers are even losing straight-time hours.

An involuntary part-timer, also known as an “underemployed” person in the statistics, is someone who wanted a full-time job but works 35 or fewer hours per week. In the past 12 months, involuntary part-timers have increased 62% to over 7 million U.S. workers.

The Bureau of Labor Statistics keeps the records. Once a month, BLS reports the employment conditions and we’re all made instantly aware of part of the story—how many people are unemployed and whether that number rose or fell. The unemployed are headline news. The underemployed are doubly forgotten, slipping behind the economic race and unnoticed by most newscasters.

In addition to underemployment, BLS also keeps track of the number of workers compared to the number of working age people. That ratio spells trouble, too. In December 2006, the employment-to-population ratio was 63.4%. It was down to 61.6% in the latest data, for November 2008.

Coming out of a recession, as work and orders pick up again, employers are still cautious. They are apt to expand current employees’ working hours and grant more overtime…they hesitate to take on additional employees too soon.

If you’d like to avoid the industries and parts of the economy that are most adversely affected by these trends, it’s pretty easy. Retail, restaurants and construction are the hardest hit areas.

And if you think you can escape it all by beefing up your non-U.S. investments, you could be fooled. Manpower’s global employment outlook predicts lower hiring rates in India, Singapore and Taiwan.

Manpower surveys 71,000 international CEOs to come up with its employment outlook. Thus the survey gives a very broad picture. If you plan to diversify globally, it might be a good idea to take note of where the outlook is strongest. Employers most likely to increase hiring in the coming quarter are found in Peru, Costa Rica, Canada, Romania, Colombia, South Africa, Australia, Poland, the United States and China.

Looks like sticking close to home is again a good idea. As the world follows the U.S. into recession, it is likely to follow the U.S. out as well this time around.

Source: Unemployment Is Only Part Of The Problem, What About Underemployment?

This from Taipan Daily:

I’d like to talk to you about prison for a moment.

Now, don’t start panicking or checking your Rolodex for your attorney’s number. I am not looking to prosecute anyone (nor be prosecuted myself for that matter) any time in the near future.

It’s just that jails have been cropping up a bit as I look about the investing scene these days. Sort of a theme, as it were.

The Smartest Guys in the Room Get Burned

For one, there’s that fellow Bernard Madoff.

You know the guy: former Nasdaq head and current indictee suspected of scamming $50 billion off our best and brightest. He’s put in at least an hour or two of cell time over the last few weeks.

Fortunately, Madoff was able to gin up $10 million in bail money, so now he is safely ensconced at home. They are calling it house arrest. I doubt Bernie is on anyone’s “A-list” invite-wise, so he probably wouldn’t be going out much anyway.

There’s talk about the Street that the Feds are trying to claw back cash from the folks who profited from Big Bernie’s decade-long Ponzi scheme. The idea is that these gains are as ill-gotten as any street level drug dealer’s.

Seems to me there’s a bit of a double standard there. Any “gains” Madoff delivered up are tainted, and properly belong to his victims… but the Feds are perfectly willing to accept $10 million in bond from the same purse.

The Latest Fall Guys

Actually, the whole Madoff scandal is a bit of a godsend for Washington/Wall Street. Each major collapse cycle has to have its “fall guys” – some big names that the G-men can pin to the wall so as to prove they’re on the case.

In fact, these prosecutions usually break down into two specific categories: one big company and one big name.

Last time around the big company was Enron, and the big name was Martha Stewart.

This time around, the big cheese slated for cell time is most certainly Madoff. I am betting that the celebrity name will be Dallas Mavericks owner Mark Cuban, who – much like Stewart – is in dutch with the Man for selling several grand in tech company shares ahead of bad news.

The Government Wants to Steal Up to 65% of Your Retirement Savings!

Whether you know it or not, you’re being hit with a secret “Retirement Tax” that’s taking huge chunks of your retirement portfolio away each year. Learn how you can avoid ever paying a single cent more with this FREE report, available now. This is 100% legal and could be the key to saving your retirement dreams. Learn the details now!

Forget the Raisin Still: I’ve Got Cold Mojitos

The slammer is intruding into the public conscience in all sorts of odd ways.

The red-hot Liberty Hotel in downtown Boston, for example, brags that its granite walls and barred windows were originally designed in 1849 by a famous Beacon Hill architect, Gridley Fox James Bryant… and a prominent Yale-trained penologist, one Rev. Louis Dwight.

Why the odd team? In its previous incarnation, this four-star joint was Boston’s infamous Charles Street jail.

Some things never change: a stay there still comes with a nice view of the Charles River. The bar at the Liberty claims to be booked for weeks in advance, mostly by twenty-somethings excited about drinking martinis and dancing the night away in jail. (But nursing their hangovers in the comfort of their own home.)

While I might possibly consider staying there the next time I’m booked into downtown Bean Town for a conference, I am not particularly inclined to recommend this (or any) hotel as a buy in the current environment.

When “Risk-Free” is a Bad Thing

But that doesn’t mean that we can’t pursue this thread a little further.

President-elect Obama is warning that unemployment could very well hit 10% if Congress does not authorize another massive infusion of imaginary dollars. Ten percent unemployment is a figure that has been coming up quite a bit lately, with many prominent students of such things warning of the same, and a few speculating that we may very well already be there.

It’s really quite hard to say for sure, as Washington has done its level-best to obscure the actual number of people without jobs. The trick here is to remove entire cadres of job seekers from the lists who have been out of work too long – the logic being that they can no longer expect to find jobs and are therefore no longer legitimately “unemployed.”

I tell you what: I consider myself an honest man, but if I were told such a thing, I would be sorely tempted to acquire a pistol or two and avail myself of whatever source of portable wealth I could find. Hey: we all gotta eat, eh?

Certainly there is no doubt that entrenched joblessness leads to hopelessness, and hopelessness leads to spikes in crime. When you have no hope, risk/reward becomes an inane concept. No wonder the idea of jail is cropping up so much these days – there are so many folks queuing up for a cell for a night, a year, or even a decade.

Go Directly to Jail

Readers might care to capitalize on this nascent trend by looking into shares of commercial jails. Florida-based Geo Group (NYSE:GEO) comes to mind as a prominent up-and-comer in this field of endeavor, with some 53,144 “beds under management” (a polite euphemism borrowed from the folks in health care).

Now, GEO is a bit smaller then most of the companies that I look at, with a market cap just a hair under $1 billion. But it is steadily improving itself by bringing more and more “beds” under management (14% in the last quarter alone). And, unlike so many other businesses, they are indeed thriving in this criminally competitive market.

Net income is up 25% between 2007 Q3’s $12.7 million (25 cents/share) and 2008 Q3’s $15.9 million (31 cents/share). Profits over the same stretch rose 34 cents per share, beating expectations by 4 cents.

It’s a fair bet that GEO will continue its growth without terribly much trouble, what with states coming up so short these days and need so obviously growing. The current share price as I sit to write is $18.90. Gains of 20% per quarter should be easy to maintain, and a double by summer is certainly not out of the question.

Source: Turning Prison Into Profit (Without Going to Jail)

This from Investors Daily Edge:

I don’t remember much about 1974, I turned 7-years old that year. I remember that my dad lost his job with Firestone that year and that my family almost moved to Georgia in order for my dad to stay with the company.We ended up not moving from New Castle, but ‘74 and ‘75 were tough years for my family.

So why is 1974 so important 34 years later? The last time the employment picture was this bad was in 1974.

The November employment report showed 533,000 jobs vanished from the U.S. economy for the month. This, along with a revision to October’s numbers, brings the total number of jobs lost this year to 1.8 million. This is the worst employment report since December 1974 and the fourth worst since 1939.

In December ‘74, the economy showed job losses of 602,000. That December is historical for another reason too. It marked the end of the bear market that gripped the U.S. for two years. But what happened next is the astounding part.

From December ‘74 through June ‘75, the Dow rose an incredible 42 percent. Could this be a replay? Is this a case where things look the bleakest right before a turnaround?

The market is certainly due for a bounce and the oversold levels are where they were in ‘74, so the similarities go farther than just the employment numbers. In fact, it gets downright eerie. The low in 1974 came on Friday, December 6. I don’t know whether or not the employment reports always came out on the first Friday of the following month or not, but it certainly is spooky how things are setting up almost identically.

If the next six months play out just like things did in ‘74-’75, where would it take the market? The Dow would jump from the 8300 level to approximately 11,800. From December 6, 1974 to May 9, 1975, there were only four down weeks out of 22. The market soared very quickly.

The similarities continue. From the peak in January ‘73 to the low in December ‘74, the Dow lost 46.58 percent. From the October ‘07 peak to the November low, the Dow dropped 47.53 percent.

So looking beyond June, what can we expect for 2009? Everyone seems to think the market will remain troubled for the first half of the year and then things will get better in the second half of the year. I actually think the first half of the year may be better than the second half. Should the market soar higher over the next six months, sentiment will likely get overly optimistic and then we will see a choppy second half. I look for the Dow to move back above 10,000 by the end of the summer and then move sideways through the end of the year.

I look for oil to stabilize down here in the $40-$45 range, and then it will start climbing as the economic picture starts improving. I look for interest rates to continue their downward path over the first half of the year and then they will start rising again towards the end of the year.

I think the best place to be for the first half of 2009 is in stocks. As we reach the summer months, you will need to step back and reevaluate whether it still makes sense or not.

Source: If History Repeats Itself, You Will Want To Be In The Market For The Next Six Months

Whirlpool said the drop in profit reflects significantly higher material and oil-related costs and lower industry demand. U.S. industry unit shipments of major appliances declined 11 percent in the quarter.

Whirlpool said it now expects a profit of $5.75 to $6 per share for 2008, compared with its previous estimate of $7 to $7.50 per share.

Based upon its revised earnings expectations and the glum industry outlook, the company said it now expects to generate free cash flow of $50 million or less for the full year, well down from its previous estimate of $500 to $550 million.

Because of this and the economic conditions, the company has suspended its $500 million share-repurchase program announced in April.

The job cuts include positions being eliminated from plant closings that the company already announced this year along with new reductions taking place now and through the end of next year. Whirlpool, whose brands include Maytag, KitchenAid and Jenn-Air, said it has 73,000 employees worldwide.

PS. Early in September, Taipan Daily’s Adam Lass recommend shorting Whirlpool for a minimum 30% return. Since then, the stock has been cut in half.

Read more about Adam’s stock recommendations here.