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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…

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Jason Simpkins- Money Morning - Only the News You Can Profit From.

  • Mainstream Media Finally Recognizes Zombie Threat

    An article on TIME magazine's Website currently poses the question: Is Bank of America a Zombie?

    Well Money Morning Global Investment Strategist Martin Hutchinson told readers two years ago that it was.

    And more recently, on June 13 of this year, Global Macro Trends Specialist Jack Barnes issued a "Sell" call on the company, citing its poor prospects. That was three months before the U.S. Federal Housing Finance Agency sued BofA and 16 other banks over the lousy mortgage securities these institutions created in the run-up to the financial crisis.

  • Gold Prices Hit Another Record – But Silver is the Play to Make

    Gold prices had another record-breaking day yesterday (Monday), with gold for December delivery climbing 2.1% to close at another all-time high of $1,891.90 an ounce on the Comex.

    But as impressive as gold's run has been, silver may be the better bet.

    Silver prices rose 2.5% yesterday to settle at $43.47 an ounce.

    Make no mistake: Gold prices are headed higher, but silver, since it took a spill earlier this year, actually has more upside at the moment.

    This is no secret to "insiders."

    The latest CFTC data for the week ended Aug. 16 revealed tactical investors increased their exposure to every precious metal with the exception of gold. Net fund length in Comex Gold fell by 3,500 lots. Speculative length in Comex Silver, on the other hand rose.

    The fear is that gold prices, which have been on an absolute tear through the month of August, have gotten ahead of themselves. Gold is up 16% this month, which means its set for its best monthly gain since 1999.

    To continue reading, please click here…

  • Safety Stocks: Three Ways to Profit From Market Mayhem

    There's never been a better time to invest in "safety stocks."

    The Dow Jones Industrial Average is down 14% since July 22 and the Standard Poor's 500 Index is down 15% in that time. The U.S. economy is grinding to a halt, and a double-dip recession could be in the offing. Meanwhile, the U.S. Federal Reserve continues to undermine the dollar with expansive monetary policy.

    Indeed, with so much bad news and chaos, there's never been a better time to stock up on the essentials – gold, guns, and cheap food. These are the things people turn to when the going gets tough – and the companies that provide these bare necessities shine the brightest when everything else seems to be falling apart.

    That said, here are three safety stocks that are worth a look:

    • Newmont Mining Corp. (NYSE: NEM).
    • McDonald's Corp. (NYSE: MCD).
    • And Sturm, Ruger & Co. Inc. (NYSE: RGR).

    Let's examine each in a little more detail.

    Newmont Mining Corp.

    Gold has been the can't-miss profit play of the past three years.

    The yellow metal settled at yet another record high yesterday (Tuesday), surging 1.7% to $1,743.00 an ounce on the Comex division of the New York Mercantile Exchange (NYMEX). And Money Morning Contributing Editor and global resources specialist Peter Krauth says it could more than double from there.

    "I expect gold to reach $5,000 before this bull market peaks," said Krauth. "I'm very open to the possibility that gold could correct from here, but I'd expect that to be nothing more than a short-term pullback."

    To continue reading, please click here…

  • Why the U.S. Credit Rating Downgrade Could Cause a Full-Fledged Market Crash

    That Standard & Poor's finally downgraded its U.S. credit rating surprised no one – the agency said weeks ago that it would require a deficit-reduction agreement of around $4 trillion to affirm its AAA rating on the United States.

    But what the ratings agency doesn't realize is that it's playing with fire. Because what we've seen over the past few weeks has been a massive sell-off in the stock market that suggests Wall Street's biggest players are scrambling to bolster their net capital positions.

    And it's entirely possible that this already-stiff correction will snowball into a full-blown market crash.

    For months, years even, many of these firms have leveraged their Treasury securities to borrow more money to buy more government bonds and other – more speculative – investments. But since Treasury bills, notes, and bonds can no longer be considered "risk free," institutions are being forced to recalculate their net capital positions to accommodate the added risk.

    In industry parlance, this is called a "haircut," and it's exactly what Money Morning Contributing Editor Shah Gilani warned about back in July.

    "After studying everything that could happen due to a downgrade of the United States' top-tier AAA credit rating, and the potential default on its debt, we found a scenario that would result in forced asset sales that are so widespread that global stock-and-bond markets would plunge — and economies around the world would crash," said Gilani.

    Gilani now says that we could be seeing the beginning of a "global margin call" that will continue to ravish global markets.

    The Dow Jones Industrial Average plunged more than 631 points, or 5.52%, yesterday (Monday), after falling 6% last week.

    "The sell-off itself got uglier later in the day as margin calls likely triggered more liquidations when there was no bounce after the opening downdraft," Gilani said in an interview. "This is very worrisome. If we don't get a bounce Tuesday morning, but instead see a bad opening, margin calls will ramp up and the effect of rolling collateral and margin calls could turn this correction into a full-fledged crash."

    To continue reading, please click here…

  • Is This the Worst Congress Ever?

    A growing body of evidence suggests that our current crop of representatives in Washington have, in fact, formed the worst congress… ever.

    A new CBS News/New York Times poll last week revealed that 82% of Americans disapprove of the way Congress is doing its job – the highest disapproval rating since polling began in 1977. Just 14% approve of Congress' performance.

    The poll comes on the heels of a debt-ceiling debate that was fraught with tension and absent of any real solutions.

    Prior to the debt deal being passed last week, a USA Today/Gallup Poll in July showed that just 7% of Americans believed their representatives in Washington were negotiating in good faith. And two-thirds of respondents said elected leaders in Congress were putting their own political interests ahead of the country's interests – leaving U.S. taxpayers to suffer.

    Sadly, Americans have gotten even more frustrated since a compromise on the debt deal was reached.

    The CBS/NYT survey was taken on August 2nd and 3rd – immediately after the deal was brokered. It found that 68% of Americans disapprove of the way the Democrats handled the debt-ceiling debate, while just 28% approved.

    Republicans fared even worse. Some 72% of Americans disapproved of their approach to the debt debate, while just 21% approved. Additionally, the majority of Americans (52%) say Republicans were too uncompromising. Comparatively, 34% say Democrats compromised too little.

    To continue reading, please click here.

  • Chinese Car Companies Racing to Produce a Global Champion

    With Detroit a shadow of its former self and Japanese automakers sidelined by that country's recent disasters, Chinese car companies are racing to produce a global champion capable of competing with Western brands.

    It's something that's long been talked about and something that Nissan Motor Co. (PINK: NSANY) Chief Executive Carlos Ghosn says could happen in just five short years.

    "The Chinese government says this is a huge industry. We want to have a Chinese champion," Ghosn told Reuters. "It's logical. It's normal. We were expecting this."

    Ghosn anticipates such an emergence will take about five years, but could happen even sooner if one of the major Chinese car companies acquires a mass-market auto brand from a foreign rival.

    So who will this Chinese auto champion be?

    A short-list of serious contenders includes:

    SAIC, and Chang'an are state-owned, which makes them difficult to invest in. But Geely, Dongfeng, and BYD are open to U.S. investors, with the latter backed by Warren Buffett. At the very least, these Chinese car companies stand to profit handsomely as China takes its place as the automotive capital of the world.

    Click here to continue reading…

  • The Biggest Heist in History: U.S. Taxpayers Could Be On the Hook for Iraq's Missing Billions

    For nearly a decade, U.S. military operations in the Middle East – Iraq in particular – have been criticized as a cumbersome and costly burden on the American taxpayer.

    That accusation gained new credence this week when the Pentagon finally acknowledged that nearly $7 billion of Iraqi oil money might have been stolen.

    And what's worse is that the U.S. taxpayer could end up paying for the mistake.

    Following the March 2003 invasion of Iraq, the United States liberated, or seized, billions of dollars of assets from that country. But since Iraq had no banking system, the money – much of which came from Iraqi oil sales – was placed in an account at the Federal Reserve Bank of New York.

    From there, large pallets of shrink-wrapped cash were periodically loaded into tractor-trailer trucks, driven to Andrews Air Force Base in Maryland, and airlifted to Baghdad. Some $12 billion of cash was flown to Iraq in the months following the overthrow of Saddam Hussein.

  • With Small Businesses Sidelined, the U.S. Job Market is Headed for a Double-Dip

    After showing some improvement over the past year, the U.S. job market is now beginning a double-dip.

    The reason is simple: The number of start-up businesses has hit its lowest level since at least the early 1990s.

    Indeed, small businesses are the main drivers of job growth and no amount of stimulus can compensate for their absence.

    For instance, between the recession that ended in late 2001 and the start of the most recent recession in late 2007, businesses that employed fewer than 500 workers added nearly 7 million employees, according to ADP payroll services. Larger businesses cut nearly 1 million employees in that period.

  • Hot Stocks: Why LinkedIn Is More than Just a "Bubble"

    LinkedIn Corp. (NYSE: LNKD) has had quite a ride since its initial public offering last week.

    The stock surged 109% in its first day of trading to a peak of $122.70 a share, but has since tumbled back to close yesterday (Thursday) at $78.63.

    Optimism about the potential for new-wave social media companies and a genuine thirst among investors desperate for a serious growth play drove LinkedIn's meteoric rise. But profit-taking and fears that the stock had entered "bubble" territory led to a quick drop.

  • China's Economy Continues to Ascend – But Watch Out for Speed Bumps

    Everyone knows that China's economy is hot. The only question is whether it may be a little too hot.

    China posted yet another quarter of stellar economic growth in the first quarter of 2011, with its gross domestic product (GDP) growing 9.7%. However, analysts are worried about some of the side effects that have accompanied that growth- namely soaring inflation and the emergence of speculative bubbles.

    Inflation in China hit a 32-month high in March, and the country's real estate market is beyond scorching.

    Policymakers in Beijing insist they have the situation under control, and they've been trying to rein in liquidity and curb speculation to prove it. That's why China's economy, accustomed to double-digit growth, is only expected to grow 8% to 9% this year.