Solid U.S. and euro zone data and an upbeat assessment on the economy from Federal Reserve Chairman Ben Bernanke over the weekend earlier pushed investors to take on riskier investments at the expense of the the low-yielding yen and dollar.

“Conventional wisdom suggests that major currencies should trade within their recent ranges until liquidity improves after the Labor Day holiday,” said Wells Fargo currency strategist Vassili Serebriakov. “However, there is plenty of data in the U.S. and elsewhere to change that this week, with consumer-related numbers likely to be watched closely.”

Investors are looking ahead to upcoming U.S. and European data to confirm hopes that the world economy is improving.

The dollar was last up 0.1 percent at 94.49 yen while the euro slipped 0.1 percent to $1.4304 . Against the yen, the euro was unchanged at 135.20 yen .

The euro trimmed losses against the greenback after data showing much higher-than-expected euro zone industrial orders in June.

Sterling fell 0.6 percent on the day at $1.6405 .

The euro , meanwhile, hit an 11-week high against sterling at 87.27 pence, according to Reuters data.

Traders said the euro was pushed past a key options barrier at 87 pence, setting up further gains in the pair, while analysts said expectations for persistently low UK interest rates were weighing on the British currency.

The Federal Reserve’s Jackson Hole meeting over the weekend offered a variety of opinions about the global economy, with Fed Chairman Ben Bernanke acting as the cheerleader for growth.

But traders are keen to see how the euro zone economy fares, especially after higher-than-forecast purchasing managers’ index readings last week. Germany’s Ifo survey of business sentiment will be key this week, analysts said.

The U.S. Conference Board will release its August consumer confidence index on Tuesday, followed by the Reuters/University of Michigan consumer sentiment snapshot on Friday.

Nouriel Roubini, professor at New York University’s Stern School of Business and one of the few economists who accurately predicted the magnitude of the current crisis, wrote in The Financial Times on Monday that there’s still a “big risk” of a double-dip recession.

Allan Meltzer, a political economy professor at Carnegie Mellon University, also told Reuters that the flood of money the Fed and Treasury have injected into the banking sector and economy since the crisis began will soon threaten the dollar.

“Will the Chinese continue to buy the trillions of dollars worth of debt that the Treasury intends to put out every year? We don’t know, but if not, the pressure will be on the Fed to keep buying it, and my guess is that’s going to be inflationary over the next couple of years, and the dollar will suffer,” he said.

Aug 24 (Reuters)

• China’s exports fell 2.2% and imports plummeted by 17.9% in November, pushing its trade surplus to a record $40.09 billion, Bloomberg reported. “The figures are horrifying,” Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai, said. “Plunging imports show that on top of faltering global demand, domestic demand is also shrinking as the economy cools.”

• Global mining leading Rio Tinto PLC (ADR: RTP) announced it would slash 14,000 jobs (or 13% of its workforce), sell more assets and halve its capital spending. “Drastic times call for drastic measures… They’ve definitely gone into survival mode, which is appropriate given the market circumstances,” Tim Schroeders, portfolio manager at Pengana Capital in Melbourne, told Reuters.

• Despite ascending unemployment numbers, Wells Fargo & Co. (WFC) Chief Executive John Stumpf said Wednesday he is seeing signs of a bottom in the U.S. housing market. “My suspicion is there is some more to go. But we’re starting to see some early signs that maybe we’ve reached the bottom in housing or close to it,” Stumpf said at Goldman Sachs Group Inc.’s (GS) U.S. Financial Services Conference, Reuters said.

• Egypt’s Orascom Telecom Holding landed a contract to provide mobile phone services in North Korea, a company source told Bloomberg. The deal marks the first foreign telecommunications deal on the recluse Communist country’s turf.

• Office Depot Inc. (ODP) will close about 9% of its North American stores and cut 2,200 jobs over the next three months, The Associated Press reported yesterday (Wednesday). The plan to close 112 stores will reduce the chain’s base to 1,163. Office Depot will close 45 stores in the Central United States, 40 in the Northeast and Canada, 19 in the West and eight in the South.

• Solar cell maker JA Solar Holdings Co. (ADR: JASO) yesterday (Wednesday) cut its fourth-quarter revenue and production outlooks as a result of declining demand. The China-based company lowered its revenue forecast to $124 million, from an earlier estimate $191 million to $220 million. The company also cut its estimates for 2008 production output to between 250 and 260 megawatts from 310 megawatts.

Source: Global Investing Roundups Thursday, December 11th, 2008

The cuts are on top of the 23,000 jobs eliminated so far this year. Chief Executive Officer Vikram Pandit plans to whittle the company’s workforce down to 300,000. By the time Pandit puts down the machete, he’ll have lopped off about 20% of the company’s headcount since Citigroup’s peak.

Just last week, Citigroup announced the release of 10,000 employees in addition to hiking interest rates an average of 3% for about one-in-five of its credit card holders.

Since the subprime market caved in last year, bank and brokerage firms around the world have shed nearly 160,000 jobs, Bloomberg reported. Citigroup’s plan to let go 50,000 is the largest workforce reduction in the U.S. financial industry since it first started to unravel.

Since the crisis started in June 2007, Citigroup’s shares have dropped like an anchor, falling more than 83%.

Still, that’s not enough to shake Pandit’s confidence that his executions will produce results and redeem the company’s stock. Last week, Pandit and another top manager scooped up about 1 million shares between the two of them. Pandit bought 750,000 shares at prices between $8.92 and $9.45, Dow Jones reported.

In Citigroup’s presentation, the company pointed out that it has the lowest exposure to U.S. consumer mortgage market of the country’s top four banks. Citigroup has $218 billion in U.S. mortgages, Bank of America Corp. (BAC) has $461 billion, Wells Fargo & Co. (WFC) has $340 billion, and JPMorgan Chase & Co. (JPM) has $302 billion.

Other banks are expected continue cutting jobs. The London Times reported over the weekend that JPMorgan is planning to cut thousands. Goldman Sachs Group (GS) is planning to cut 10% of its workforce.

Fidelity Investments, the world’s largest mutual fund manager, plans to shed 1,700 jobs in the first quarter – in addition to the 1,300 it cut last week.

Source: Citigroup Whacks Another 50,000 Jobs; Cuts Expenses by 20%

Healthcare? It’s an excellent investment area during tough economic times, due to the essential nature of drugs and medicine that produces plenty of repeat business. But that’s not it either.

No… the answer is the financial sector. Large insider purchases have occurred at some of the following companies:

Wells Fargo (NYSE: WFC) *
Bank of America (NYSE: BAC) *
Wachovia Bank (NYSE: WB)
Fifth Third bank (Nasdaq: FITB)
American Express (NYSE: AXP)
Genworth Financial (NYSE: GNW)
Colonial National Bank (NYSE: CNB)

* Market Purchases by Existing Holders like Warren Buffett’s Berkshire Hathaway.

But for all the strong insider buying, financial shares have endured a beating.

What gives? Insider buying is one of the best market indicators. Always has been. But could all these insiders be wrong? And if they are, the question is: If the guys running these companies can be so wrong, what chance do ordinary investors have? After all, these are the people involved in the day-to-day operations and privy to details that will never be public. Are they just plain stupid? Let’s find out…

Short Versus Long

In the investment world, there are two types of investors:

Short-term: These guys look to be in and out of a stock in a matter of weeks, sometimes days. They’re looking for trading opportunities, not necessarily value.

Long-term: These investors look past the daily market noise and hype, focusing instead on the next 12-18 months for a return on their capital.

Insiders definitely tend to have a longer-term outlook. Insider buying is historically a very early indicator. For example, insiders cannot buy shares on Monday, knowing there will be good news on Friday, because they can’t trade on material information.

Instead, they buy shares on anticipation and optimism that their company is poised for future success. In addition, insiders can’t sell shares for a good length of time after buying them.

So when it comes to the current financial sector pain, the insiders who bought shares in their own companies are suffering just like regular investors.

However, here’s why you should pay attention to these trends…

Putting Their Money Where Their Mouths Are

More often than not, insider buying is a very accurate indicator – especially when a certain company’s insiders buy shares in a cluster pattern. They’re right more often than they’re wrong – and usually by a very wide margin.

You have to remember that insiders buy thousands of shares with several thousand, sometimes millions, of their own dollars. It’s not just a few hundred bucks here and there.

Ask yourself why anyone would bet the farm like this just to lose it. It may happen occasionally, but rarely when insiders buy with such gusto and such size. Such heavy buying usually signals some serious optimism.

And with the financial sector, there’s another factor at work…

A Unique Opportunity In A Mammoth Sector

In terms of financial sector shares, many insiders realize that that the current battering gives them a unique opportunity: To buy high quality stocks at very discounted levels.

This is a real “kitchen sink period” for financials – companies want to announce all their ugly losses to the market at once and get the pain over with quickly.

Financial stocks with heavy insider buying look extremely attractive now. They may look even more attractive next week. But I’d say that a year from now, they will look much less attractive from an investing standpoint.

So what’s the best way to follow the insiders?

The All-Important “Insider Window”

The key to following insider trades is timing.

If you’re looking to hop on the bandwagon with these astute folks (and remember, they know more about their companies than anyone else), you want to buy after the insiders buy.

That means you want to buy in a 3-6 month window after the insider buying has taken place. Why? Because insider buying as a forward-looking indicator is usually not confirmed by the market for a period of at least 6-9 months in the future.

You must be patient. Don’t fall into the trap that many ordinary investors do – that is, they do all the hard work by following the trends and buying shares, but then get antsy and sell at a loss within that 6-9 month period because “nothing” happened.

They then watch as the shares begin to move up in “miraculous” fashion.

But it’s not a miracle at all. It was the insider buying indicator working in time-tested fashion: Buy shares when they’re cheap and hold them until they are expensive.

Believe me, insiders also have an uncanny knack for selling at (or near) the top. Right now, they’re not selling in the financial sector; they’re buying like there is no tomorrow. We’ll check back at the end of the year to see if their strategy has worked or not. But you could do a lot worse than buying some financial sector shares now.

Talk to you again soon.

Karim

P.S. As Marc mentioned here on Tuesday, I’ll be part of a new Western Caribbean Investment Tour this June. While many investors continue to worry about the health of the US markets and look overseas in order to diversify, very few consider the Caribbean to be a hotbed of profitable opportunities.

But I’m personally inviting you to join me and my colleague Barbara Perriello, Director of Agora Travel, to a world of luxury that you need to see to believe.

We’ll be heading to the Bay Islands of Honduras from June 14-21 to explore the remarkable opportunities to grow your wealth, buy superb, cheap property, and protect your retirement funds outside the U.S. For example, some property bargains are one-third less than elsewhere in the Caribbean. What’s more, the country boasts a stable government that encourages foreign investment and English is the primary language.

A luxurious and cheap lifestyle… a Free Tourist Zone that eliminates sales tax and customs import duties and a 4% capital gains tax makes it excellent for land ownership and business ventures… reliable, professional medical care… retiree legislation that allows you to bring in your car and goods duty-free and receive your Social Security and pension income tax-free.

Come and join me. Get more details here: http://www.agoratravel.com/bayislands/mv. Or call Agora Travel at: 561-243-6276 / 800-926-6575.

What we saw on Wednesday amounted to a surprising display of strength from the bulls. Just think about what they had to contend with: Oil futures hit a record $115 a barrel; the dollar continued to dive; gold picked up fresh strength; and JP Morgan and Wells Fargo delivered a grim-faced outlook for the rest of 2008.

And yet, in the face of all that, stocks powered higher. That’s resilience (or determination, or foolishness, or some such thing).

The technical picture has shifted, too. After Friday’s GE-inspired drubbing, stocks looked ready to head back down. The ceiling appeared to be too much. (Note how the Dow failed twice in Feb, in roughly the same area it hit last week.)

Yet now, like a tough old boxer who just caught his second wind, the market looks ready to fight again. Yesterday’s sharp turnaround, which fully erased Friday’s decline, was the equivalent of the bulls peeling themselves off the mat. That they did so in the headwind of bad news is all the more impressive. The same picture applies for the S&P, the Russell and the Nasdaq; index shorts put out on Monday and Tuesday may soon be quickly covered. (That is, if they haven’t been already).

A lot of technical analysis is mumbo jumbo. The part worth its salt applies mainly at pivot points, when there’s a clear battle being fought between the bulls and the bears. It’s hard to tell who will win in the early going… and so the longer the battle gets dragged out, the more important any big reversal becomes. This latest turn of fortunes could mean something.

All About Expectations

Wednesday’s action in JP Morgan (JPM:NYSE) highlights another key point: The market responds to investor expectations rather than straight-up news.

On the JP Morgan earnings call, CEO Jamie Dimon reported that profits were cut in half by the credit crunch. The results were ugly by any measure, and Dimon pulled no punches. But since those ugly results were expected — and because the news could have been worse — the stock went up, rather than down.

In contrast, the sin of poor General Electric was to catch investors unaware. No one expected GE to miss as badly as it did, which is why the stock got crushed.

Both JP Morgan and General Electric were hit hard by the credit crunch — Morgan arguably the harder — but the bad news was “priced in” for one and not the other.

Technology stocks helped buoy the market on Wednesday, too. Good news from IBM and Intel seemed to counter GE’s mojo. If the tech blue chips are okay, the rationale seemed to go, then maybe a global slowdown isn’t in the cards.

How the Mighty Have Fallen

The jury is still out on how much longer the credit crunch will last. Wall Street CEOs now talk of a long and difficult slog, rather than a quick recovery. That’s progress. At the same time, they are happy to imply that the worst has passed.

So is the low point already in? Optimists take the view that “it’s always darkest before the dawn.” To which the pessimists respond, “it’s always darkest before it goes pitch black.”

To get an idea of just how rough things have been, consider Citigroup (C:NYSE). About six weeks or so ago, Taipan Daily called Citi a “poster child” for the credit crunch. The big bank took beating after beating as the full scope of its folly was revealed.

As a result of those beatings — and the market value lost — Citi is now smaller than Apple (AAPL:Nasdaq). Imagine that… The company that makes iPhones and iPods has a larger market cap than the banking behemoth that was, at one time, the second-largest financial institution in the United States.

Thanks to the credit crunch, hundreds of billions in shareholder value has gone up the flue. Lumbering giants like Citi have been cut down to size, and calls for a breakup are getting louder. General Electric is hearing the breakup calls, too, after seeing $55 billion wiped off its market cap in one trading day. (The brokers and the banks have written off less than $250 billion in losses so far; if you add market cap shrinkage into the equation, the carnage is much, much greater.)

General Electric was one of the 12 original Dow components back in 1896. A breakup of such a venerable old stalwart is hard to imagine… but then so is the idea of Citigroup being worth less than Apple.

• Myron Ullman, the chief executive officer of department store company J.C. Penney Co. Inc. (JCP), said that he doesn’t intend to provide annual financial guidance at this time, as the market is too cloudy to predict a forecast, Reuters reported. “I’ve been in the business 39 years. I don’t think I’ve ever seen an environment that was as unpredictable as the current environment,” he said.

• Wells Fargo & Co. (WFC) emerged from the first quarter with analyst-beating results, posting an 11% decline in profits but a 12% increase in revenue and 1% decline in expenses. “Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter,” Chief Executive John Stumpf said in a statement.

• China’s economy grew by 10.6% in the first quarter of 2008, only slightly less than the 11.2% expansion in the final three months of 2007. The country was able to maintain double-digit growth despite complications stemming from the U.S. credit crunch, the Chinese New Year and the worst ice storm the country had seen in decades.

• General Electric Co. (GE) plans to invest up to $2 billion in acquisitions and other deals in China over the next three years as part of a strategy to double its revenues in the country, the Financial Times reported. The world’s biggest industrial company, which stunned investors last week when it announced its worst quarter in five years, is looking to hire a team of 20 “in-house investment bankers” to conduct the deals in China.

• Toyota Kirloskar Motor Private Ltd., the automotive joint venture between Japan’s Toyota Motor Corp. (TM) and India’s Kirloskar Group is set to invest $350 million on a new plant in Bangalore. The plant will follow Tata Motor Corp’s (TTM) lead by producing “a strategic new small car” by 2010, IBTimes India reported.

• Qualcomm Inc. (QCOM) announced it would invest in India-based start-up technology companies that offer “innovative technologies and services that enhance wireless communications and semiconductor ecosystems,” The Financial Express reported. San Diego-based Qualcomm’s first investment will be in India’s Tessolve Services Pvt. Ltd., a firm that provides solutions and platforms for semiconductor testing, packaging, qualification and failure analysis.

• The U.S. Department of Justice has approved the $810 million deal that allows Russia’s largest steel producer Severstal OAO to purchase the Sparrows Point steel mill from ArcelorMittal (MT). The DOJ demanded the sale of the Baltimore County, Md.-based plant after the merger between India-based Mittal and Luxemburg-based Arcelor to enforce anti-monopoly laws.

• General Electric Co. (GE) former chief executive Jack Welch demonstrated his frustration yesterday (Wednesday) with his successor, Jeffrey Immelt, after GE’s profit fell 6% in the first quarter. “I’d be shocked beyond belief and I’d get a gun out and shoot him if he doesn’t make what he promised now,” Welch said in a CNBC interview, a cable station owned by GE, The Associated Press reported. “Just deliver the earnings. Tell them you’re going to grow 12% and deliver 12%.”

Among the Dow components reporting are Citigroup and JPMorgan Chase. The importance of these earnings reports cannot be stressed enough as investors look for any kind of sign that the credit crisis is over or at least coming to a close. There are a number of other financial companies due out this week: Merrill Lynch, Washington Mutual, Wachovia, and Wells Fargo to name a few.

I know expectations for the financials have been brought down over the last five or six months, but have they been lowered enough? I don’t think they have. When I look at the chart of the S&P Select Financial Spyder, and the rally over the last four weeks, I question whether or not the expectations meet the reality. In fact, the rally simply brought the XLF back up to its downward-sloped trend line and back up to an overbought level.

This is just covering the financials, but there are seven other Dow components reporting this week. Johnson & Johnson (JNJ) reports on Tuesday, along with Intel (INTC). Wednesday, Coca Cola (KO) and IBM (IBM) both report, and on Thursday, we will hear from Pfizer (PFE) and United Technologies (UTX). The lone Dow component reporting on Friday is Caterpillar (CAT).

There was a clue sent out last week about what we should expect in the earnings. Did you see the clue? You probably did and may not have known it was a clue. When UPS issued an earnings warning last week, that was your clue.

For consumer products companies like Johnson & Johnson, Intel, Coca Cola, and IBM, having UPS come out and announce that the demand for package shipping is down, is an ominous sign. If UPS’s services are not needed to ship products, are products selling? More than likely, the products are not selling like they were a year ago.

While the sentiment towards the overall market has grown more pessimistic over the last three months, in the last three weeks the bearish sentiment has slipped from its peak in mid-March. I am basing this on the 21-day moving average for the CBOE Equity Put/Call Ratio and Investor’s Intelligence. The moving average for the put/call ratio peaked out on March 20 at 0.93 and has since slipped back down to 0.81. The bearish percentage on the Investor’s Intelligence report peaked at 44.7 on March 19. It is now down to 38.5.

What this tells us is that the overall sentiment, while still bearish, it has slipped a little over the last 3-4 weeks. Are investors looking for the earnings season to rescue the market?

If they are, I have the feeling they are going to be disappointed. And in the words of Ozzy Osbourne, we may be “going off the rails on a crazy train.”

Good luck and good trading,

Rick

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

[Ed. Note: Subscribers to Rick’s KISS Investing service recently closed out gains of approximately 150% on Continental Airlines and 175% on the Diamonds Trust. Click here to learn more about KISS Investing]