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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

  • Investing in Silver Still a Shiny Option After the U.S. Federal Reserve's announcement last week that it would keep doing Operation Twist, silver prices dropped 4% the following day.

    Adding to the white metal's decline was weakening in U.S. manufacturing, a declining Chinese factory sector and worries about the Eurozone.

    It wasn't a great week.

    Jeffrey Sica, chief investment officer of SICA Wealth Management LLC, said to Reuters, "When you see slowdown in China and in the United States and the debt crisis accelerate in Europe, it leads people to believe that we will have significant depreciation, especially when commodities and precious metals prices have been so tied into the monetary policy."

    Since last week's decline, silver prices have been mixed and yesterday (Wednesday) they closed down 0.13% to $26.91.

    The markets have a slew of economic data to review and mull over this week along with the two-day European Council meeting that begins Thursday in Brussels.

    Despite last week's slump, there's still reason to be investing in silver. Its prices in the first quarter fared better than the other precious metals.

    As legendary investor Jim Rogers told a financial advisor summit Wednesday, the likelihood of more central bank action around the world is bullish for silver.

    "Governments print money - that's all they know," said Rogers. "So own real assets like silver... and you'll survive."

    Rogers said of all the precious metals if he had to buy just one, it would be silver.

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  • Election 2012: President Obama at the Mercy of U.S. Economy U.S. President Barack Obama's chances for re-election in 2012 are increasingly tied to the fate of the U.S. economy, poll results show.

    Meanwhile, presumptive Republican nominee Mitt Romney hasn't gotten as much benefit from the weak economy as one would expect - a sign of his inability to connect with voters.

    The past month has not been kind to the U.S. economy - or President Obama's standing in the polls.

    The barrage of bad news has included:

    "The economy is going through a rough patch, and that more than anything is going to determine President Obama's future," said Ipsos pollster Chris Jackson in comments on a Reuters/Ipsos poll taken in early June. "People's unhappiness with the economy carries over pretty directly to the president's numbers, and we see those weakening."

    In that poll, President Obama's job approval rating slipped from 50% in May to 47%, and those saying the country is on the wrong track jumped 6 points to 68%.

    Meanwhile, Romney gained 6 percentage points in the head-to-head matchup, making the Election 2012 race a statistical dead heat (Obama 45%, Romney 44%).

    Although President Obama's argument that he inherited economic problems too severe to fix in three years resonates with his liberal base, the moderates and independents likely to decide who sits in the Oval Office next year aren't so sure.

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  • Fiscal Cliff 2013: How Investors Can Prepare Late science fiction writer Ray Bradbury wasn't referring to investors when he said, "you've got to jump off cliffs all the time and build your wings on the way down," but he might as well have been referring to the upcoming fiscal cliff in 2013.

    The fiscal cliff is a real crisis looming at year's end. The fragile U.S. economy could face an unparalleled fiscal punch of as much as $720 billion if the scheduled changes go through as planned. They include the Bush-era tax cuts set to expire Dec. 31 and billions of dollars in programmed federal spending cuts.

    U.S. Federal Reserve Chairman Ben Bernanke has warned that shocks from such changes will most likely cause the economy to contract, causing a recession.

    And without cooperation from Congress, there's no alternate route for the U.S. economy to take.

    Ernie Gross, Ph.D., MacAllister Chair and professor of economics at Creighton University, told Forbes, "The fiscal cliff is an almost 100% certainty."

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  • Gold Prices: Begging for QE3 The Fed's Operation Twist announcement Wednesday slammed gold prices, and the yellow metal fell 2.5% Thursday.

    Gold for August delivery ended last week down 3.8% to about $1,570 an ounce, well below its 2011 high of $1,920.30.

    Before the two-day FOMC meeting, gold was up 4% year-to-date. Gold rose at the beginning of the week on hopes that the Fed would announce accommodative moves.

    In the last round of easy-money moves back in January, gold rallied as high as 15% as investors flocked to the asset for protection. Since then, gold has dropped numerous times from a lack of additional news of more easing.

    Gold was once again disappointed last week when the Fed said it would keep twisting, and the lack of a more aggressive maneuver failed to give a needed gold rally.

    "To get gold really moving, you need a definite QE3," Sterling Smith, commodity analyst with Citi Institutional Client Group, told Kitco News. "Operation Twist is not nearly the food for a gold bull that outright QE is."

    Gold Prices and Operation Twist

    On Wednesday morning, the Fed announced the extension of its long-term government bond holdings by $267 billion to decrease borrowing costs while selling an equal figure of short-term securities to keep its $2.9 trillion balance sheet.

    While scheduled to end this month, the Fed extended the Operation Twist program until the end of the year.

    Operation Twist is derived from a Federal Reserve program that "twists" the yield curve or sells short-term securities from its holdings and buys longer-term ones in an effort to drive down longer-term yields.

    Market watchers had been mixed about this happening.

    Barclay's Capital saw Operation Twist as "the most likely outcome," saying it would provide additional time for the Fed to sift through and mull soft data that is "payback" from the additional warm winter hiring or a potentially lengthier prolonged slowdown, reported Kitco.

    But since Operation Twist was considered the least the Fed could do, markets had priced it in already.

    Jeffrey Wright, managing director and research analyst with Global Hunter Securities, said to Kitco he expected limited gains for gold on the heels of the "Twist," possibly to the $1,650 range, as the market has already been adding in the possibility for Fed action.

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  • Today's FOMC Meeting: Fed Votes Operation Twist to Continue Today's FOMC meeting - which started Tuesday - ended in a widely expected manner.

    The Fed announced it will extend Operation Twist, which was set to expire at month's end, until the end of 2012, in an effort to keep interest rates low.

    The Fed will expand Operation Twist, which replaces short-term bonds with longer-term debt, by $267 billion.

    In a statement, the FOMC said the prolongation of Operation Twist "should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

    The Fed pointed to the U.S. economy's poor recovery as reason for more "twist."

    "Growth in employment has slowed in recent months and the unemployment rate remains elevated," the Fed reported. "Household spending appears to be rising at a slower pace than earlier in the year."

    The lack of more intense stimulus, namely a third round of quantitative easing, sent the Dow Jones, which had been flat all day, plummeting some 50 points in just seconds. All three major indexes treaded lower following the report. Gold, hoping for QE3, sold off some $25 an ounce.

    The yield on the 10-year Treasury note rose to 1.67% just after 1 p.m. in New York from 1.62% late yesterday.

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  • Stock Market Today: All Eyes on the Fed It's clear what's moving the stock market today. The market was basically flat all morning until the U.S. Federal Reserve made its highly anticipated policy announcement.

    The Fed announced that it would expand Operation Twist by $267 billion through the end of the year.

    "This continuation of the maturity extension program (Operation Twist) should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative," the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.

    The committee stated that economic growth has been "expanding moderately" this year but warned that "growth in employment has slowed in recent months, and the unemployment rate remains elevated."

    Meanwhile, Greek formed a coalition government consisting of New Democracy, socialist party Pasok and the Democratic Party of the Left. Antonis Samaras, leader of the New Democracy party, was sworn in as prime minister earlier today.

    "Greece has a government ... that is the message that we need to send abroad," said Evangelos Venizelos, leader of Pasok.

    The embattled country had gone 223 days without an elected government. One of the new regime's first tasks will likely be renegotiating its bailout terms with the European Union and International Monetary Fund.

    Stocks opened slightly lower awaiting the Fed's decision, but following its announcement the market took a sharp dive before heading back upward as many investors had hoped for QE3 rather than more "Twist."

    There are two companies that are leading stocks downward today, The Procter & Gamble Co. (NYSE: PG) and Adobe Systems Inc. (Nasdaq: ADBE).

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  • FOMC Meeting: Will Ben Print? Most investors expect Federal Reserve Chairman Ben Bernanke to announce more stimulus when the FOMC meeting concludes tomorrow (Wednesday).

    But what if he doesn't?

    Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business' "Varney & Co." Tuesday to discuss this outcome with host Stuart Varney.

    "Keith, what happens if Ben doesn't print any money, makes no such announcement, and the Germans don't agree to let Europe print any money," asked Varney. "What happens?"

    To hear what Keith said investors can expect from the Fed, and the market reaction, watch this video.
    Keith also analyzed the Microsoft Corp. (Nasdaq: MSFT) announcement that it will release a tablet to compete with the Apple Inc. (Nasdaq: AAPL) iPad. Read More...
  • Stock Market Today: This Bank Stock Faces More Backlash The Greek elections did not generate any significant movement in the stock market today, which is especially bad news for one particular bank stock that's taking a lot of heat from investors.

    Greece decided not to leave the euro Sunday as the pro-bailout New Democracy party narrowly won elections tallying just over 30% of the vote. Investors had feared a win by an anti-austerity movement could lead to a breakup of the euro and possibly the European Union.

    That's all good news except stock markets opened lower Monday following the announcement.

    Maybe investors really wanted the worst to happen concerning Greece, insuring more action by the Federal Reserve when they meet later this week. QE3 is still a possibility but it seems that some are disappointed by the Greek elections, which could just be a postponement to Greece's eventual "Grexit" from the euro.

    European markets rallied following the election results, but by the time U.S. markets opened investor sentiment had become neutral. It seems that until the Fed's meeting concludes on Wednesday investors will be stuck waiting for more news out of Europe to guide them.

    One sector that has been vilified recently is financial stocks, and today's headliner is Morgan Stanley (NYSE: MS).

    The Wall Street Journal this morning highlighted Morgan Stanley for its leading role in Facebook's IPO debacle.

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  • The Eurozone Bailout: Prepare for What's Next Q: What will happen in Europe?

    Greece chickens out. The G20 has its hands out and wants to have Germany's standard of living. Germany should leave the EU and preserve its economy. There is no reason it should sacrifice itself to pay for the malfeasance and incompetence of everybody else.

    Politicians will kick the can down the road while hoping rumors of future action will carry the day.

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  • Why Gold Prices are Ready to Rally Gold prices hit a four-week high last week as the market waited for the highly-anticipated congressional testimony by Federal Reserve Chairman Ben Bernanke.

    But gold bulls were pushed aside Thursday after Bernanke, in a speech to Congress, failed to deliver a definitive answer on monetary easing.

    Deutsche Bank analysts wrote in a Friday research note via Dow Jones, "The past week has demonstrated how expectations [toward] quantitative easing can have a powerful effect on the gold price."

    Now investors need to wait for the June 19-20 FOMC meeting for more clarity on what the Fed could do this year and how metals prices will be affected.

    Gold prices have recovered since then, and on Tuesday the yellow metal pushed above the $1,600 an ounce mark. The weekend's news about the Spanish bank bailout and lingering concerns over the Eurozone debt crisis has increased alarm about the global economy, making gold more attractive.

    But news from Europe and Fed policies aren't the only factors that can move gold prices. Here's what else is affecting the metals market now.

    The Biggest Factors Moving Gold Prices

    #1: Central Bankers are Buying Gold

    For the first time since 1965, central bankers are purchasing gold.

    According to World Gold Council, the central banks have increased their gold collections by 400 metric tons or almost 2,205 pounds in the last 12 months through March 31.

    This is a rise from the previous year's 156 tons.

    Look for this to continue from the central bank as the council noted it "is now confident that central banks will continue to buy gold and has added official-sector purchases as a new element of gold demand," according to Austin Kiddle in a Sharps Pixley report.

    Jeff Christian, founder of New York-based commodities consulting firm CPM Group, told Barron's that central banks "will probably be continuous buyers of small volumes of gold for the foreseeable future," accounting for roughly 10% of the gold supply.

    Christian noted that central bankers will avoid buying any quantity that dramatically affects the price of gold. Yet steady buying of 10% of annual supply is certain to help buoy gold prices.

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  • Silver Prices: Market Loses $90 Million to Ponzi Scheme Silver prices this week dipped after U.S. Federal Reserve Chairman Ben Bernanke failed to confirm that more economic stimulus is on the way. Silver prices hovered below $29 an ounce Friday.

    Meanwhile, millions of dollars that would have been invested in physical silver it turns out were instead held in a $90 million Ponzi scheme orchestrated in South Carolina.

    The Commodity Futures Trading Commission (CTFC) reported Thursday it charged Ronnie Gene Wilson and Atlantic Bullion & Coin, Inc., both of Easley, S.C., with offering contracts on silver sales, but never actually purchasing any metal.

    The CTFC maintains in a filing Thursday in U.S. District Court in South Carolina that Wilson and Atlantic Bullion & Coin violated the Commodity Exchange Act and CFTC regulations by operated a Ponzi scheme dating back over a decade and continuing through Feb. 29 of this year.
    Wilson and Atlantic Bullion & Coin fraudulently obtained at least $90.1 million from some 945 investors, the CTFC alleges.

    The CFTC received jurisdiction over the entities from Aug. 15, 2011, to Feb. 29. During that time, Wilson and Atlantic Bullion & Co are accused of deceptively obtaining at least $11.53 million from at least 237 investors in 16 states under contracts of sales to buy silver, without buying or delivering the white metal.

    According to the CTFC charges, Wilson and Atlantic Bullion issued fake account statements to unknowing investors who believed they had invested in silver.

    The CFTC is after compensation for scammed investors, a return of illegal gains, civil monetary penalties, trading and registration bars, and permanent injunctions against further violations of the federal commodities laws if successful in its suit.

    Cases like this are why choosing where to buy silver is a decision requiring research - which we've done for you in our special report, "How to Buy Silver."

    However you choose to buy physical silver, gold or other precious metals, the most important rule is to deal only with reputable dealers who have proven experience in the business and clearly stated policies and warranties - especially if you're purchasing by phone or online.

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  • Why to Buy Dividend Stocks Now Before the financial crisis, prudent investors counted on CDs, U.S. Treasuries and savings accounts to provide them with decent interest income for their retirement.

    But thanks to Federal Reserve Chairman Ben Bernanke's zero interest rate policy, prudence has become a tough way to fund your golden years.

    With few places to find refuge and income, these cautious investors have been forced to look elsewhere-namely at dividend stocks.

    Dividends, long used to pad portfolios with income, are no longer a risk-on or a boring way to invest.

    Not only do dividends add value, but with a careful selection across several sectors, an investor can build a nice portfolio covering a broad range of industries.

    What's more, dividend-paying stocks provide reliable returns at regular intervals, offer growth potential, and are not typically as economically sensitive as other high-beta and volatile companies.

    Another bonus is that when the economy wanes and stock markets fall, dividend stocks pay investors to wait it out until things improve.

    And since cash dividends are paid from a corporation's current earnings and profits, dividend investors have the added prospect that they may see their dividend payments raised as things improve.

    That's why dividend stocks have been a long-term bright spot with investors clamoring for higher yields.

    Nick Lawson, head of synthetics, macro and cross-selling for Deutsche Bank, told the Financial Times, "We've had a lot of people from fixed income coming into equities. I think it is straight yield. We have all been forced up the yield curve."

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  • U.S. Economy Showdown: Krugman vs. Bernanke Nobel Prize winning economist Paul Krugman has some critical words for how Team Bernanke is handling the U.S. economy.

    The Princeton University professor suggested on Bloomberg Television's "Street Smart" program Monday that U.S. Federal Reserve policy makers, under the guidance of Chairman Ben Bernanke, are "reckless" for refusing to pursue inflation.

    Krugman argues that higher inflation could lower the staggering U.S. employment rate that has lingered for more than four years.

    "The reckless thing is to allow mass unemployment to continue," Krugman said Monday. "We have had a massive failure of our political system that has come to accept that 8% unemployment is the new normal and there is nothing that can be done. We're in a low-key version of the Great Depression."

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  • Today's FOMC Meeting To Bring Little Change While the U.S. Federal Reserve will have an abundance to say about the economy today (Wednesday) when it concludes its two-day FOMC meeting, little is expected in the way of change.

    The Federal Open Market Committee meeting will conclude Wednesday afternoon with a statement, revised forecasts and Chairman Ben Bernanke's news conference. The Fed will most likely reiterate that it will keep short-term interest rates at record-low levels through 2014. The Fed is not expected to commence any new program to lower longer-term rates unless the economy weakens.

    That would diverge from the Fed's stance just three months ago when the January FOMC meeting ended with indications that Team Bernanke was leaning toward a third round of bond buying (QE3) to pump more cash into the troubled economy. More Fed bond purchases have been proposed as a means to drive down long-term rates to encourage borrowing and spending.

    Since then, data on the U.S. economy has indicated a gradual strengthening, and the ongoing European sovereign debt crisis appears less ominous than it looked at the start of the year. Those developments argue against additional Fed bond buying.

    "This will be a wait-and-watch meeting," David Jones, chief economist at DMJ Advisors, told the Associated Press. "Despite all the theatrics with a Bernanke press conference and new economic forecast, I think we will get a very predictable outcome-no change in policy."

    That portends the Fed will retain its plans to keep its benchmark interest rate, the federal fund rate, at record lows until at least late 2014. The Fed planted that expectation at its January meeting and said nothing to change that hope when it met in March.

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  • Bank Stress Tests and the All-Clear-to-Rally Signal Earlier this week I repeated that I've been cautiously bullish (too cautious, I also said) since October.

    I also told you I was optimistic that all the major indexes would break through the important psychological, headline, and large-round-number resistance levels they started flirting with two weeks ago.

    Boy, was that an understatement.

    On Tuesday, markets blew the lid off of any impediments in their way.

    In fact, the price action was so fast and furious you'd have thought the Federal Reserve said something about keeping interest rates low, or maybe that some good news about bank stress tests had leaked out.

    And to think, only one week earlier, markets had a steep fall from grace on account of Fed Chairman Ben Bernanke not saying anything about another round of quantitative easing.

    What a difference a week makes.

    In case you missed the psychology of the market, it went like this...

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