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How to Profit From Wall Street's Biggest Gaffe in Decades

I was perusing the newswires a few weeks ago when the following Reuters news story headline all but physically grabbed my attention.

It stated: “Exclusive: Morgan Stanley Rebuilds in Commodities Trading.”

Most folks probably looked at this and tossed it off as just another of the endless machinations of Wall Street.

But I knew better…

January 2011 - Page 2 of 10 - Money Morning - Only the News You Can Profit From- Money Morning - Only the News You Can Profit From.

  • Oil Companies Pumping Profits as Crude Continues to Climb

    Despite political fallout from the Gulf oil spill, drilling and oil services companies made big waves in the waning months of 2010. And they're likely to carry that success through 2011 as higher oil prices and political gridlock keep the profits pumping.

    Baker Hughes Inc. (NYSE: BHI), Halliburton Co. (NYSE: HAL), Helmerich & Payne Inc. (NYSE: HP), and Occidental Petroleum Corp. (NYSE: OXY) are among the oil companies that produced outstanding results in the final three months of 2010.

    Occidental, the largest onshore crude producer in the continental United States, reported a 29% increase in fourth-quarter profit. Net income climbed to $1.2 billion, or $1.49 a share, from $938 million, or $1.15 a share a year earlier.

  • S&P Slashes Japan's Credit Rating


    Standard & Poor's
    yesterday (Thursday) reduced Japan's long-term sovereign debt rating for the first time in nine years, saying Tokyo lacked a plan to deal with its mounting debt and persistent deflation.

    The agency cut Japan's rating by one notch to AA minus, the fourth-highest level, citing the country's political gridlock for undermining efforts to reduce an $11 trillion (943 trillion yen) debt burden.

    "The downgrade reflects our appraisal that Japan's government debt ratios – already among the highest for rated sovereigns – will continue to rise further than we envisaged before the global economic recession hit the country and will peak only in the mid-2020s," the firm said.

  • Taxpayers Ring Up $12.3 Billion Profit on Citigroup Bailout

    The U.S. Treasury on Monday will complete the sale of warrants of Citigroup Inc. (NYSE: C), allowing it to realize a $12.3 billion profit from its bailout of the banking giant.

    The United States will record a net $312.2 million from the sale of its final 465.1 million warrants to purchase common shares of Citigroup, the Treasury Department said Wednesday. Last year, Treasury sold its 34% stake in Citigroup common shares.

    The warrant sale is the latest step in disposing of the bank's assets after the government lent the company $45 billion in Troubled Asset Relief Program (TARP) funds during the height of the financial crisis in 2008.

  • Commodities, "BEE" Markets and Multinational Stocks Are Best Investments For 2011

    The U.S. recovery will continue this year, and U.S. stocks will continue to advance, though investors can expect whipsaw trading patterns and must beware of the point when the U.S. Federal Reserve ends the cheap-money mindset that's fueling the advances, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

    But uncertainty also brings opportunity, and Fitz-Gerald sees tremendous profit potential for those who are willing to remain invested – and who have the courage to make opportune choices. Commodities of all types, so-called "BEE" (Big Emerging Economy) markets and the stocks of companies that derive a major portion of their sales from these fast-growing overseas economies should be on everyone's investment menu.

    And don't ignore multinational stocks from your own backyard: While it might surprise many investors to discover this, many U.S.-based companies are major players abroad, Fitz-Gerald says.

    "I see the markets generally rising until mid-2011, which is when the reality of stimulus spending, the looming budget battle and fiscal follies set in. I believe that 15% is not out of the question, though not all in a straight line and not all at once," says Fitz-Gerald, a former professional trade advisor and best-selling author who is a regular contributor to Money Morning.

    In a wide-ranging interview with Money Morning
    Executive Editor William Patalon III, Fitz-Gerald assessed the health of the U.S. and global economies, provided his outlook for the U.S. stock market, and for commodity prices, and even offered a fix-it plan that Washington would do well to take note of.

    To read the text of Keith Fitz-Gerald's interview, please read on…

  • Federal Budget Deficit Climbing Dangerously Higher on Continued 2011 Government Spending

    On the heels of U.S. President Barack Obama's State of the Union address – during which the commander in chief highlighted the need for investment in innovation – a steep federal budget deficit projection yesterday (Wednesday) showed the harsh reality of the U.S. government's spending spree.

    In the Congressional Budget Office's (CBO) economic outlook report, the nonpartisan body estimated the budget deficit would reach $1.5 trillion in 2011, or 9.8% of gross domestic product (GDP). The report cited the Bush-tax-cut extension, low production, and a weak labor market as key factors for reducing revenue, increasing spending and pushing the deficit higher in fiscal 2011.

    This year's federal budget deficit is up from $1.3 trillion in 2010 and $1.4 trillion in 2009. The deficits, when measured as a percentage of GDP were the largest since 1945, reaching 8.9% in 2010 and 10% in 2009.

  • Hidden Inflation: Food Prices Flying Under the Fed's Radar

    Soaring food prices have been, perhaps, the most pressing global issue of the past two years – yet the U.S. Federal Reserve has taken a "hear no evil, see no evil, speak no evil" approach to the global crisis.

    Instead, the Fed has dutifully maintained its focus on so called "core inflation" in the United States – even as Americans suffer the consequences of the "hidden inflation" the government refuses to account for.

    The Federal Reserve excludes food and fuel prices from its preferred gauge of inflation because they are often influenced by erratic weather patterns and political turmoil. That at times has been the case over the past few years.

  • State of the Union: Why You Should Fear America's "Sputnik Moment"

    In his State of the Union Address yesterday (Tuesday) evening, U.S. President Barack Obama said the United States is experiencing another "Sputnik moment."

    For a free marketer like myself, that's deeply depressing rhetoric: It reflects the reality that President Obama believes that this crisis – like others that came before it – is best solved by still more government action.

    In short, while President Obama employed the language of bi-partisanship, the picture he painted was that of Big Government digging in. Just like at the time of Sputnik.

    To understand why you should fear this rhetoric, please read on…

  • Apple Inc. (Nasdaq: AAPL) Without CEO Steve Jobs Shakes Some Investors' Confidence

    This isn't the first time Apple Inc. (Nasdaq: AAPL) Chief Executive Steve Jobs has given investors a scare.

    And each time before, Apple has navigated the crisis – and soared to even greater heights.

    Will that pattern repeat itself again? Or has Apple's fortunes soured this time around?

  • IMF Global Economic Forecast Revised Up on Emerging Market Growth & U.S. Tax Cuts

    The International Monetary Fund (IMF) yesterday (Tuesday) raised its 2011 global economic forecast based on strong growth in emerging markets and stronger U.S. output fueled by tax-cut extensions.

    The world economy will expand by 4.4%, more than the 4.2% the IMF projected in October, while growth in 2012 is expected to be 4.5%, unchanged from October, the agency said in an update to its World Economic Outlook report.

    But even though the world's economies continue to recover, stubborn unemployment in developed countries, along with risks posed by sovereign debt and the financial sector in Europe, could threaten global stability, the IMF said.

    "The world economy is recovering, but it is a two-speed recovery," IMF chief economist Olivier Blanchard said in comments posted on the fund's website. "Our forecast is that next year growth will be roughly the same as this year. That's not going to be able to make a big dent to unemployment."

  • What Do You Think of President Obama's 2011 State of the Union Address?

    U.S. President Barack Obama spoke to the country Tuesday night in the annual State of the Union address, an assessment of the nation's biggest issues, and a presentation that is usually draped heavily in rhetoric.

    Before the speech, many analysts were afraid President Obama would make broad optimistic statements – while offering no concrete plans for improvement.

    White House Senior Adviser Valerie Jarrett said Tuesday morning that one of President Obama's main messages would be to highlight the new "bipartisan spirit" in Washington.