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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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Keith Fitz-Gerald- Money Morning - Only the News You Can Profit From.

  • Why Wall Street Can't Escape the Eurozone

    Despite all of its best hopes, Wall Street will never escape what's happening in the Eurozone.

    The 1 trillion euro ($1.3 trillion) slush fund created to keep the chaos at bay is not big enough. And it never was.

    Spanish banks are now up to their proverbial eyeballs in debt and the austerity everybody thinks is working so great in Greece will eventually push Spain over the edge.

    Spanish unemployment is already at 23% and climbing while the official Spanish government projections call for an economic contraction of 1.7% this year. Spain appears to be falling into its second recession in three years.

    I'm not trying to ruin your day with this. But ignore what is going on in Spain at your own risk.

    Or else you could go buy a bridge from the parade of Spanish officials being trotted out to assure the world that the markets somehow have it all wrong.

    But the truth is they don't.

    EU banks are more vulnerable now than they were at the beginning of this crisis and risks are tremendously concentrated rather than diffused.

    You will hear more about this in the weeks to come as the mainstream media begins to focus on what I am sharing with you today.

    The Tyranny of Numbers in the Eurozone

    Here is the cold hard truth about the Eurozone.

    To continue reading, please click here…

  • Stock Market Volatility: How to Beat the Market at its Own Game

    Many investors are convinced the market is stacked against them.

    It is…. but not for the reasons you might think.

    Dismal returns actually have very little to do with super computers, research, insider information or access to the trading floor.

    The real issue comes down to something very simple – the difference between how individuals and professionals approach stock market volatility.

    Most investors head for the hills when volatility rises.

    Successful traders, on the other hand, embrace it because they know stock market volatility represents an opportunity.

    I find this especially ironic considering how often I hear individuals tell me they invest because they want the "big gains."

    Because most of the time they choke at the very moment when the upside potential is highest. Instead of buying when prices are low, they head for the exits.

    This costs them big time.

    The Perils of Stock Market Volatility

    A 2011 study from DALBAR, a Boston-based research firm, shows that investors achieved a mere 41.9% of the S&P 500's performance over the 20 years ended December 31, 2010.

    In other words, investors left 58.1% on the table.

    The DALBAR study also shows that the average investor achieved only 3.8% a year versus the 9.1% annualized returns of the S&P 500 because they tended to jump in and out of the markets at the worst possible moments.

    Adding insult to financial injury, Berkeley Finance Professor Terrance Odean's analysis of more than 10,000 retail brokerage accounts shows that the stocks investors sell tend to outperform the ones they buy.

    In fact, Odean found that winning stocks went on to gain an average of 3.4 percentage points more in the year after they were sold than the losers to which investors clung.

    The pros have a very different view.

    To continue reading, please click here…

  • Is Apple Stock (Nasdaq: AAPL) the Short of a Lifetime or the New Widow Maker?

    I have a confession to make.

    I believe Apple stock (Nasdaq: AAPL) is going to be world's first trillion-dollar company yet I want to short the snot out of it.

    Am I being compulsive?…impulsive?….or foolish?

    Perhaps it is all three considering that Apple has risen more than 3,000% in the last ten years, turning almost any attempt to go against the grain into a "widow maker" trade.

    I say almost because I am one of the lucky ones.

    A few weeks ago I recommended my Strike Force subscribers purchase put options on Apple, effectively shorting the stock. That resulted in a 47% profit in less than 24 hours for anyone who followed along, excluding fees and commissions.

    I'm not alone in my thinking.

    Uber investor Doug Kass, general partner of Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP, tweeted recently that he had covered "half his short" on Apple following the announcement of their dividend and buyback plan.

    Given that the stock had run up to nearly $608 a share before the announcement, presumably Kass had banked some gains, too.

    To continue reading, please click here…

  • 2012 Financial Crisis: Wall Street's Latest Scheme Uses Your Bank Account to Create the Next Crash

    In 2008, reckless credit default swaps nearly obliterated the global economy. Now comes the next crisis – rehypothecated assets.

    It's a complicated, fancy term in the global banking complex. Yet it's one you need to know.

    And if you understand it, you will get the scope of the risks we currently face – and it's way bigger than just Greece.

    So follow with me on this one. I guarantee that you'll be outraged and amazed – and better educated. You'll also be in a better position to protect your assets at the end of this article, where I'll give you three important action steps to take. So follow along…

    Click here to continue reading…

  • Time: It's How Savvy Investors Build True Wealth

    Most investors think of time as an enemy, a predator that stalks them all of their lives. They never feel they have enough of it so they are constantly trying to outwit it.

    Trying to beat time, they become irrational and make unpredictable, impulsive decisions to "get ahead" or hit the proverbial "home run."

    Or, worse they pretend they have all the time in world and do nothing with it.

    Later they find themselves playing a costly game of catch-up they cannot possibly hope to win without taking huge risks.

    Unfortunately, that's exactly where many investors find themselves today. They are sitting on the sidelines faced with the daunting task of making up the time they'll never get back.

    As a seasoned investor, I prefer to think of time as a constant companion– one that is willing to work with me every day if I harness it properly.

    Rather than trying to cheat it, I work with it so that I tip the scales in my favor. This ensures that time becomes my ally rather than my enemy.

    It's What You Don't Know About Time That Kills Your Returns

    Let me illustrate.

    Which action do you think will earn you more money over the next 20 years?

    • Investing $12,000 in a single lump sum today; or
    • Investing a total of $24,000 in increments of $100 a month?

    Most people chose b – investing $24,000 in increments of $100 a month.

    And for one highly logical reason – you would be investing two-times more principal.

    The truth, though, is that putting away $12,000 right now is actually the more profitable choice.

    We have been conditioned to put a little away each month on the assumption that this will add up over time. But that's only half the story.

    To continue reading, please click here…

  • Steak, Hamburger and Dog Food: How the Government Lies About the Real Inflation Rate

    More experts are saying what most Americans have suspected for years – the real inflation rate is much higher than the government is willing to admit.

    Officially, the U.S. Bureau of Labor Statistics (BLS) says the inflation rate, or Consumer Price Index (CPI), for 2011 was 3%.

    But a report issued last week by the non-profit group American Institute for Economic Research (AIER) says the U.S. inflation rate for 2011 is far higher – 8%.

    AIER used criteria based only on common daily expenditures to more accurately reflect how inflation affects consumers. Their index excluded less-frequently purchased items, like automobiles.

    Economic consultant John Williams, an outspoken critic of the government's economic statistics, contends things are even worse.

    Using the government's old methodology from 1980 – before politicians started to monkey with the formula – he calculates the real inflation rate is north of 10%.

    That's more than triple the government's figure.

    Among the few in government who see this as a problem is Republican presidential candidate Rep. Ron Paul, R-TX.

    "You know this argument that the prices are going up about 2%, nobody believes it," Paul bluntly told U.S. Federal Reserve Chairman Ben Bernanke during a hearing last week. "People on fixed incomes – they're really hurting, the middle class is really hurting because their inflation rate is very much higher than the government tries to tell them and that's why they lose trust in government."

    Changes to the Real Inflation Rate

    Over the years, the government has made a series of adjustments to how it calculates the CPI, ostensibly to make it more accurate.

    However, critics like Williams say the inflation rate formula has been changed to serve political ends.

  • Hydrokinetic Power is the Next Wave in Cheap Energy

    In an era of cheap capital, emerging technology companies could provide investors the biggest bang for the buck we've seen in years.

    The key is finding a market that already has billions of dollars in pent up demand – like cheap energy.

    Of all the cheap alternatives available to us today, I'm most excited by hydrokinetic power systems for the simple reason that the oceans contain enough energy to potentially support more than 50% of US demand alone, according to the US Department of Energy.

    In case you are not familiar with the term, hydrokinetic systems produce power from the water's kinetic energy. It's quite literally power from the motion in the ocean.

    Critics charge there are limits involved because the technology we need to make, transmit and store wave-based energy is primitive and prohibitively expensive.

    And they're right… it is, or at least has been to date.

    That's why despite years of effort and billions of dollars in government-sponsored financing, there are a mere 5 megawatts of wave-generated energy being created worldwide.

    According to Forbes Magazine, that's only enough to light 4,000 U.S. homes.

    Yet studies estimate that two-thirds of the world's economically feasible hydropower has yet to be exploited. Perhaps not surprisingly, much of this untapped energy is concentrated in South America, Asia and Africa.

    That's my kind of opportunity – but it will require a sea change in our thinking (pun absolutely intended).

    The Rising Tide in Hydrokinetic Power

    That's because traditional "alternative" power choices tend to evolve in terms of how applications like solar, hydro, thermal and gas production ties into the grid. As such, they're dependent on environmental variables that come and go.

    On the other hand, hydrokinetic systems really are the grid. By placing turbines, bobbers and impellers into large bodies of water, they become part of the very system they're tapping into.

    And it's a whopper of a system.

    To continue reading, please click here…

  • Apple Inc. (Nasdaq:AAPL): When to Buy the World's Hottest Stock

    Shares of Apple Inc. (Nasdaq: AAPL) are taking a breather, leaving many investors wondering if they've made an iBoo-Boo.

    The hottest stock on the Nasdaq has fallen more than 4.6% as I write this since hitting a new intraday high of $526.29 on February 15, 2012.

    Does that mean it's time to sell?

    Perhaps, but first you should ask yourself why.

    If you're a long-term investor, there's a lot to look forward to. Apple is much more than a brand; it's a lifestyle. People tattoo the company's iconic brand on their rear ends for crying out loud.

    Always the innovator, Apple has barely scratched the surface with regard to new devices and has hardly tapped into ways to use them.

    People line up thousands-deep to buy newer versions of the company's most basic products every year -whether they need them or not.

    That is something no other tech company has figured out how to do.

    Plus Apple's market share is growing overseas, with a particular emphasis on the Asian Rim.

    In China alone, for instance, there's the potential for another 30-50 million iPhone sales in the next 12 months that could add another $4-6 in EPS to Apple's bottom line.

    I remain convinced that Apple could be the world's first trillion-dollar company and I'm not alone in my thinking. Since I first voiced that highly controversial opinion a few years ago, many other firms and analysts have joined me.

    How to Play the Short-Term Apple Top

    But in the short term, Apple's chart now looks like a classic blow-off top- and technically speaking it is.

    Last Wednesday, we saw the stock close near the lows of the day after making a quick run up and a high volume, hi-speed failure midday.

    The chart tells the story.

    Take a look To continue reading please click here

  • The Real Reason Mark Zuckerberg is Paying $2 Billion in Taxes on the Facebook IPO

    As the much-ballyhooed Facebook IPO looms closer, there's a mountain being made out of a molehill.

    Turns out 27-year-old founder and CEO Mark Zuckerberg may have a $2 billion tax bill that, according to a variety of sources, he intends to pay in full.

    He seems like a regular guy…or is he?

    To say I'm skeptical of his intentions would be an insult to actual skeptics. I think the "Zuck" is a great guy, but a regular guy? No way.

    He didn't build from scratch a business that has 845 million customers by being stupid.

    Zuckerberg goes to great lengths to project an aw-shucks kind of image. But in reality, this move is about as down-to-earth as Kim Kardashian's wedding. And it's every bit as sophisticated a play as I would have expected out of Larry Ellison or the late Steve Jobs.

    Zuckerberg (and presumably his advisors) knows that the stakes couldn't be higher than they are at the moment, which is why he wants to pay this tax bill and reinforce the illusion that Facebook is part of Middle America – instead of being built upon its back.

    He knows that successfully doing so will help him monetize your information when Facebook goes public.

    I say this because it's important to remember the only reason Facebook is worth anything is because users – people like you – have voluntarily, with no compensation whatsoever, assembled the greatest single collection of marketing data in recorded history. That's right. Your data is going to make him rich.

    So where are all the privacy advocates now?

    I'd love to see what Facebook's proposed valuation would be if 845 million people suddenly decided they really don't want to share their most intimate moments with friends or decide they don't really want to "like" anything.

    And why hasn't the Occupy Wall Street crowd or the Tax the Rich bunch latched onto this?

    Because evidently none of them can spell h-y-p-o-c-r-i-s-y. And many are probably too busy using Facebook to "meme" about their activities to pay attention anyway.

    But that's really beside the point.

    A Zuckerberg Tax? …Give me a Break

    There should be a huge amount of backlash, but there isn't. Well, unless you count any number of proposals like the "Zuckerberg Tax" advanced last Tuesday in a New York Times OpEd piece by tax lawyer David Miller.

    Miller advocates allowing the government to claw back money from the ultra-wealthy. He believes that individuals earning more than $2.2 million in income or having more than $5.7 million in securities should have their stocks marked to market and taxed even if they haven't sold their investments.

    That's asinine.

    To continue reading, please click here…

  • Fuzzy Math, Greater Fools and the Facebook IPO

    I have several friends who think the Facebook IPO is the next Microsoft.

    I think it's more likely the next Research in Motion.

    Or perhaps the next Sony, Kodak, or Eastern Airlines–all of which were once world-class brands that got sideswiped by hungry new competitors.

    Facebook…you may as well buy a lottery ticket.

    Don't get me wrong. In just a few short years, Facebook has accumulated an unprecedented 845 million users representing 12.07% of the world's population.

    But does that merit an offering worth as much as $100 billion?

    Maybe to a lot of people, but not to me.

    Think about the numbers.

    There are 7 billion people on the planet today, 5.15 billion of whom live on $10 or less a day. Of that group, roughly 3 billion people live on less than $2.50 a day.

    That means if you remove those who live on less than $10 a day because theoretically they can't afford a computer or don't have enough disposable income to be monetized, that leaves roughly 1.85 billion potential Facebook users.

    In a perfect world where a company could capture 100% of its target market, that would cap Facebook's potential user growth at 118.93%.

    But we don't live in perfect world. As far as I know, no company has ever captured 100% of its target market. Not once.

    To continue reading, please click here…