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Two Safe Ways to Profit From the "Alibaba Shockwave Effect"

In the mid-1990s, I was fortunate to meet and start working with an Upstate New York money manager named Anthony M. Gallea.

The relationship began when I attended and wrote stories about some of the investment seminars he periodically held for prospective and existing clients. He then became a “source” for some of the investment stories I periodically wrote for Gannett Newspapers. And we ultimately collaborated on a pretty successful book about “Contrarian Investing” that was published by Prentice Hall.

Along the way, Tony shared some pretty important snippets of investing wisdom…

  • Federal Reserve

  • QE4 is Coming; Will Inflation Follow? Many observers expect the U.S. Federal Reserve to announce another round of quantitative easing, or QE4, this afternoon following the Federal Open Market Committee (FOMC) meeting.

    The consensus is that the Fed will purchase an additional $45 billion of bonds from the secondary market each month.

    That means the Fed would replace the monthly $45 billion used to swap short-term Treasuries for long-term Treasuries under Operation Twist, which expires at the end of this month, with outright bond purchases.

    In addition to the $45 billion a month used in Operation Twist, the Federal Reserve Bank has been purchasing $40 billion of mortgage-debt securities monthly in its continued effort to boost growth.

    In total, the market expects the Fed to continue to purchase $85 billion worth of bonds on the secondary market each month for the foreseeable future.

    Now some investors fear the Fed with QE4 will seal the deal on skyrocketing inflation - but it takes more than increased money supply to raise prices.

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  • This Week's FOMC Meeting: Why to Expect More Stimulus Investors should expect welcome news from the U.S. Federal Reserve Wednesday at the end of this week's two-day FOMC meeting.

    As central bankers gathered Tuesday for the last policy meeting of the year, expectations were high that Fed Chief Ben Bernanke and his cohorts will announce a large scale asset purchase plan to replace the soon-to-end Operation Twist, introduced in September 2011.

    The Fed hopes additional stimulus will finally boost growth and the employment level. With the current unemployment level at an elevated 7.7% -- a number that economists say will be revised higher in the coming weeks - the weak labor market remains a grave concern.

    At recent meetings, the Fed indicated that it will continue QE3, the policy of buying $45 billion in mortgage-backed securities each month until it sees a significant and sustained improvement in the employment scene - which is unlikely to come anytime soon.

    Together with Operation Twist, the two programs added some $85 billion in long-term bonds to the Fed's balance sheet each month.

    The aim, the Fed said in a statement, "should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

    The central bank has also stressed it would employ its other policy tools "if the labor market does not improve substantially."

    While the Fed did not elaborate on what those tools are, it maintains it still has plenty of ammo left and stands ready to pull the trigger when and if necessary.

    It looks like now is the time.

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  • The Bare, Naked Truth About The Federal Reserve's Socialist Agenda The top line story, according to the FDIC's latest Quarterly Banking Review, is that the majority of U.S. banks are in better shape today than they have been in years.

    The untold story is that when the Federal Reserve is done transitioning the United States from capitalism to socialism, the few dozen banks that remain in America will all be profitable until they need bailing out again, but will never die and live on in infamy.

    Is that just hyperbole or some wild conspiracy theory? It's neither. Unfortunately, it's the bare, naked truth about the Fed.

    It doesn't matter that you didn't know the Federal Reserve System was the brainchild of a handful of the world's most powerful bankers.

    Or that all of them took a secret train from New Jersey to Jekyll Island, Georgia (owned by J.P. Morgan) in 1910 aboard Rhode Island Senator Nelson Aldrich's private car to devise and orchestrate the creation of the Federal Reserve.

    Or that Aldrich was an investment associate of J.P. Morgan, that his son-in-law was John D. Rockefeller, Jr., or that he was the political spokesman for big business and banking interests in Congress.

    It doesn't matter if you don't know who the powerful bankers are today that run the Fed's twelve district banks. Or that the Fed's New York Bank conducts all its open market operations with a bunch of favored big banks it protects (Case in point, MF Global).

    Or that one former Chairman of the New York Bank's Board, who was also and still is a Goldman Sachs board member, resigned from the Fed when it was discovered he bought $3 million worth of Goldman's stock right before the Fed made sure Goldman wouldn't have to go out of business at the height of the financial crisis.

    What matters, is that without the Federal Reserve the banking system in the United States would be more honest, more competitive and less of a risk to the economy than it is now.

    And what really matters, is understanding the Federal Reserve could never exist and do what it does in an open democracy, and that its agenda of socializing risks (making taxpayers eat bankers' losses) and privatizing their profits (letting them keep their bonuses) for the benefit of its club members (the banks) means the Federal Reserve has to transform America to a socialist model in order to maintain its own growth and ultimate power.

    Of course, it's not a stretch to see how the Fed's socialist agenda will eventually encompass most of the American economy over time.

    But to keep it simple, let's look at how the Fed has already done that to the benefit of its primary constituents: banks and bankers.

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  • The Federal Reserve Is Socialism's Insidious Tool If you think for one second that the Federal Reserve System is a Godsend that backstops America's banks and our economy in times of trouble, you'd be right for that one second.

    But if you take any time to learn how the Fed really works and in whose interest they operate, you'd make yourself sick for a long, long time.

    The truth about the Federal Reserve is that it's a dangerous, insidious socialist tool.

    Rather than allowing free markets to function as a "clearing mechanism" that rewards success and punishes failure, the Fed fosters underdevelopment of third-world nations, props up corrupt governments, protects the greedy, self-serving banking constituency it serves, and by design promotes socialism to further its mandate to enrich its masters.

    I'm sick of the Fed and their control over the U.S. Congress, the American economy, and the world order.

    It's about time the American public revolted against the Fed and our pandering Congressmen who pimp for it, abrogated their Constitutional duties to it, and get rich off it, all the while pretending they control it and it's some kind of Constitutional safeguard.

    The Untold Story About The Federal Reserve

    You see, the Fed was the brainchild of a bunch of the world's most powerful bankers and a few greedy U.S. Congressmen who were not surprisingly in the employ of banker backers.

    The history of the Fed is a fascinating story about American politics and power-broking bankers.

    The undisputed truth about the creation and mandate of the Federal Reserve System is laid bare, beautifully I might add, in G. Edward Griffin's The Creature from Jekyll Island.

    I thought I knew a lot about the Fed, and it turns out I do. But there is so much more that I didn't know, and it's all laid out in the book, with all the accompanying references and proof.

    It chilled me to my very core...

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  • Why Ben Bernanke Could Learn a Thing or Two From Mark Carney Now that President Barack Obama has been reelected, Federal Reserve Chairman Ben Bernanke's easy money policies may well be with us for the next four years.

    And even if Obama replaces Bernanke when his term ends in January 2014, he's likely to choose another soft-money acolyte like Fed Vice-chairman Janet Yellen to lead the Fed.

    For believers in sound money like me, that's something of a gloomy prospect.

    As for the rest of the world, the prospects for higher interest rates don't look too good, either.

    However, on Monday I did catch a glimmer of light when it was announced the Bank of England's new Governor is going to be Mark Carney, the former head of the Bank of Canada.

    Now I'll be the first to admit that, at first glance, Carney doesn't look too promising.

    He did, after all, spend 13 years at Goldman Sachs (NYSE: GS). And we all know the track record of Goldman Sachs has been nothing short of appalling.

    The bank itself made a bundle by shorting the housing market on the way down and persuaded its alumnus Hank Paulson to bail out its dodgy AIG credit default swaps with $13 billion of taxpayer money.

    However, the truth is Carney has been out of Goldman since 2004, and his track record at the Bank of Canada has been very good indeed.

    To Carney's credit, he didn't cut interest rates as far as the Fed and has actually raised them part of the way back. What's more, Carney only did $20 billion of "quantitative easing" bond purchases in 2009, at the height of the crisis, and has since sold the extra bonds back to the market.

    In the aftermath, Canada's economy has notably outperformed the U.S. economy over the last five years, and continues to do so even though house prices there are currently looking wobbly.

    Ben Bernanke could learn a thing or two here.

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  • The Stage Has Been Set For Another Credit Crisis If you think yesterday's market action was something to worry about, you ain't seen nothing yet.

    President Barack Obama getting re-elected sets the stage for another credit crisis.

    When the president came into office in 2008 he had a mandate to fix the banking system, which consisted of too-big-to-fail banks holding America and its economy hostage to their greedy schemes.

    He swept that mandate under the door of Congress and the Federal Reserve.

    The president has no position on the big banks, and it seems he likes it that way.

    By lightening up on his already watered-down rhetoric about making banks toe the line, he got campaign money from them. So did Congressmen. That money came from the Federal Reserve.

    Now that the president has won a second term, he's not about to fight Congress over their pandering to the big banks, since he's got other things to fight with them over; rather, he's going to advocate a lite-touch going forward to allow banks to continue to strengthen their balance sheets so they can fuel an American recovery.

    It seems to be all happening under the cover of darkness. And, it's not going to work.

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  • Thanks to the Fed, It's All Proceeding According to "The Plan" If you've been reading the headlines, you know Bank of America Corp. (NYSE:BAC) is in trouble. It could be in really big trouble.

    Thank goodness they're so big!

    Thank goodness all the big banks in America are all much bigger now than they were a few years ago, before the financial crisis brought them to their knees, by their own doing, of course.

    Don't you just love it when a plan comes together?

    Yeah, it's all part of "The Plan" to eliminate pesky banking competition.

    Let me show you how nicely it's working...

    The Fed's 100-Year Plan

    The Plan was hatched a long time ago. Back in 1913, as a matter of fact.

    That's when Congress devised the Federal Reserve System for eliminating competition and making sure U.S. taxpayers would be the lender of last resort to big bankers.

    It has taken a while, 100 years, in fact. But it is working.

    The first sign it was working came in the 1980s and '90s, when the savings and loans got into serious trouble playing the greed game.

    They weren't covered by the Federal Reserve System. So they were shut down, or rolled up by government-backed insiders (Congress' puppet-masters), and later sold to big banks for sweet profits.

    Anyway, they're gone. No more pesky competition from S&L associations.

    Now look who's next on the chopping block...

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  • Ben Bernanke's Misguided Focus on Housing is Like a Bad Joke It's a little early for April Fools, but Ben Bernanke might just be a prankster at heart.

    I say this because he recently told the Economic Club of Indiana in Indianapolis that the Fed's plans for QE3 would help create more economic activity and higher home prices. Then he added, almost as an afterthought, that this would help many more savers than it would hurt.

    I was waiting for the punch line...or the laugh track...or maybe an old bada-boom from Paul Schaeffer's band offstage. Only it never came.

    It's like he was making a bad joke, "but QE is good for savers. No, really! I swear..."

    Why the Fed chief keeps linking housing prices to savings and, by implication, to an economic recovery defies logic.

    No matter how hard he tries, he can't solve our nation's economic woes by making the same mistakes all over again.

    Part of the reason housing blew up in the first place is that people began to view rising home prices as personal ATM machines. Now Bernanke is simply putting a new face on the same monster.

    Think about it...

    We already have a multi-year oversupply in homes on the market and ridiculous amounts of construction are still going on in parts of the country where there are quite literally no buyers. If you've been to Las Vegas or parts of Florida you know exactly what I'm talking about.

    How many homes do we really need at a time when values remain 30%-50%, and in some places even 70% below their peak?

    Certainly not the millions of new homes that Bernanke thinks we do while unemployment remains high and actual buying power has been dramatically reduced.

    And millions of strapped American families two paychecks away from bankruptcy surely don't care.

    Bernanke's False Bottom

    Now I know the media is very excited about recent data showing a recovery in housing prices, but let's take a deep breath. Seasonal demand accounts for a good portion of the bump. So does bargain hunting.

    This suggests a new round of speculators has entered the game -- and those folks are buying with cash, making mortgages irrelevant.

    As a result, prices are being bid up even though overall demand remains relatively constant.

    Then there are the banks. All of them claim they want to lend money, yet find every excuse not to. While they will claim otherwise, practically speaking they're saying one thing and doing another.

    This, too, speaks to a massive disconnect.

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  • Could QE3 Really Do Less for the Economy Than the iPhone 5? Investors are eagerly waiting to hear if U.S. Federal Reserve Chairman Ben Bernanke will announce QE3 this week. Bernanke speaks Thursday at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting and many expect him to announce some form of stimulus to revive the struggling U.S. economy.

    But there's another huge event scheduled this week, one that could provide a tool other than printing money for boosting U.S. gross domestic product (GDP).

    Believe it or not, analysts at JPMorgan Chase & Co. (NSYE: JPM) estimate that the Apple iPhone 5, expected to be unveiled tomorrow (Wednesday) afternoon and on sale by the end of this month, will raise GDP by 0.5% in the fourth quarter of this year.

    Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." program Tuesday morning to discuss the possibility of this iPhone effect and what it implies.

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  • QE3 Still on Table, Bernanke Says in Jackson Hole Speech The Federal Reserve is looking at more action to prop up the lagging U.S. economy, including a third round of quantitative easing (QE3), Fed Chairman Ben Bernanke said in a speech today (Friday).

    Much of the speech, delivered at the Fed's annual retreat at Jackson Hole, WY, made a case for the effectiveness of the central bank's easy-money policies since 2007, including "nontraditional" actions such as QE1, QE2, and Operation Twist.

    The Fed chairman said that the stimulus purchases "have provided meaningful support to the economic recovery while mitigating deflationary risks."

    And in a hint to expect more of the same -- namely, QE3 -- Bernanke said that the costs of such policies, "appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant."

    Bernanke also voiced concern over the sluggish economic recovery, and in particular the "painfully slow" improvement of the U.S. unemployment rate, which has changed little in 2012.

    That's the sort of bad economic news that has pushed the Fed to take action in the past.

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  • Today's FOMC Meeting Too Early for Action There is little doubt that the struggling U.S. economy could use some goosing, and the U.S. Federal Reserve is in a position to deliver a good boost.

    But, a move isn't likely at the conclusion of today's (Wednesday) Federal Open Market Committee (FOMC) meeting.

    While a fresh spate of data suggests new steps from the central bank are warranted, many economists warn that the economy doesn't need immediate action - especially since the prior moves from the Fed haven't been very effective.

    Growth has clearly slowed and unemployment remains elevated, but the sluggish pace of the U.S. economy may not be slow enough to compel the Fed to make an impactful move today, and any Fed decisions will be pushed to later in the year.

    Today's FOMC Meeting: Not Ready for QE3

    The U.S. Commerce Department last week reported that the U.S. economy grew at a paltry 1.5% annual rate in the second quarter, down from 2% in the first. Plus, the Labor Department reported initial jobless claims ticked up in the latest week while the unemployment level remains at a sickly 8.2%.

    Fed chief Ben Bernanke maintains that his team is prepared to take further action if unemployment stays high, but he remains vague on what action might be taken.

    With the reeling recession in Europe and a slowdown in stalwart China, global growth has been severely dented and is weighing on the U.S. economy. Those factors increase the odds of a third round of quantitative easing (QE3), but the Fed may not pull the trigger Wednesday.

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  • QE3 is on Its Way – Here's How to Prepare Federal Reserve Chairman Ben Bernanke spoke to the U.S. Senate Tuesday and yesterday (Wednesday) in his two-day biannual meeting with Congress - and failed to make any promise to institute more stimulus measures.

    He did leave the door open for the Fed to do something - even if it won't commit to what that will be.

    The markets rallied, although investors were disappointed that the Fed chief couldn't deliver a bigger commitment.

    But make no mistake - quantitative easing, or QE3, is coming.

    That is assured for one simple reason.

    The U.S. government can find few buyers for its debt at current low interest rates. And as Bernanke has stated publicly, low interest rates will remain in place until at least 2014.

    That means the Fed will have to continue its role of financing the budget deficit of the U.S. government through the inflation of its balance sheet.

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  • Fiscal Cliff: Bernanke Urges Congress to Take Action U.S. Federal Reserve Chairman Ben Bernanke on Tuesday once again reiterated Congress' need to prevent the economy from succumbing to the "fiscal cliff" that as of now will hit taxpayers and the country in 2013.

    The fiscal cliff refers to the numerous tax increases and steep spending cuts slated to go into effect Jan. 1, and will throw the already struggling U.S. economy back into a recession.

    In his semi-annual monetary report to the U.S. Senate, the chief voiced his concerns. What was missing though was what Congress should actually do to hammer out a budget deal that would prevent a fiscal cliff.

    "I don't have a specific recommendation, other than to think not just about the individual policies, but of the collective impact. Congress is in charge here," Bernanke said.

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  • Bernanke Keeps the Stock Market Waiting for QE3 Strong earnings reports could only lift the stock market today up so much as U.S. Federal Reserve Chairman Ben Bernanke would not give in to the cries for more stimulus.

    Speaking to the Senate Banking Committee Bernanke gave his semi-annual monetary policy testimony and predicted slow growth for the U.S. economy. Bernanke said that reducing unemployment is going to be "frustratingly slow."

    Bernanke repeated the Fed's mantra that if conditions deteriorate they will take appropriate measures when necessary. Some are beginning to wonder if QE3 will ever happen and how much worse things have to get before we see it.

    The chairman did specify that if the labor market doesn't improve the central bank is prepared to act to boost growth.

    Bernanke also commented that the looming "fiscal cliff" and the possibility that Europe's debt crisis will worsen remain significant risks.

    He mentioned the Libor manipulation scandal and called the rate-setting system "structurally flawed." However he offered no explanation as to why the Fed didn't become more involved when it learned in 2008 that Barclays Plc (NYSE: BCS) was reporting false numbers.

    Bernanke will speak again tomorrow morning before the House Financial Services Committee.

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  • Three Cheap U.S. Stocks with Huge Profit Potential Bargain-hunting investors this year have been able to feast from a market buffet of cheap U.S. stocks.

    Reports have surfaced in the past few months about how the Standard & Poor's 500 is offering the lowest-priced stocks in years based on price/earnings ratios.

    Bloomberg in March reported that companies in the S&P 500 were trading at 14.1 times earnings, the lowest valuation of all 34 peak periods since 1989.

    Then in May former U.S. Federal Reserve Chairman Alan Greenspan declared that "stocks are very cheap."

    Again just last week Bloomberg noted that the S&P 500 is trading 16% below its average valuation since the 1950s.

    Now, after the S&P 500 recorded its best June since 1999, investors want to know if it's still the time to buy or if the party's over. With the Eurozone debt crisis still looming and a spate of recent gloomy U.S. economic reports, market optimism has thinned.

    But there are still bargains to buy.

    How to Find Cheap U.S. Stocks

    First, to determine if a stock is undervalued with high profit potential, and not cheap and going nowhere, investors need to scrutinize the driving factors of why a stock's price has fallen.

    For instance, you must look at what's happening to the stock's sector - is there a macroeconomic or cyclical reason for the stocks to slip?

    Then look at the company - is it in healthy financial shape? What are its future prospects?

    Some stocks like Bank of America (NYSE: BAC) may seem undervalued when looking at tangible value, which tells us BAC is worth almost double what it is trading at now. But the company posted negative earnings per share last quarter. Analysts expect it to post a positive EPS of 16 cents this quarter and give it a forward P/E just above 8, which is cheap - but it's a stock that comes with a lot of volatility, so its low price is risky.

    Others have had a long slide and may be at a bottom, such as tech struggler Hewlett Packard (Nasdaq: HPQ). CEO Meg Whitman is trying to turn the company around, but HP has lost more than half of its market value over the past year. With its forward P/E less than 5 it seems like a bargain, but there isn't a strong case for why this stock could rally.

    And finally look at General Motors (NYSE: GM) or Ford Motor Co. (NYSE: F). Both currently have P/E ratios below 6 and even though the auto industry has been one of the hardest hit U.S. sectors over the past few years it looks to be on the upswing now.

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