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Cash in as the "Alibaba Shockwave" Creates the World's First Trillion-Dollar Company

How many times have you been reading about a long-ago historical event – or been watching a documentary about it on the History Channel – and thought to yourself: “Wow, it would’ve been really cool to have actually been there to see this happen.”

I couldn’t agree more: As a big history buff myself, I find myself making that statement on a regular basis.

  • Featured Story

    The Greatest Criminal Enterprise in the World

    From the Editor: Shah Gilani is one of the few people who can show you how it really is. In this case, he's going to show you the real reason the Fed chose not to taper. If you're overly idealistic, don't read this. It will only anger you. That, of course, is why Shah's naming names today...

    Ben Bernanke is the don of the greatest criminal enterprise in the world.

    And yesterday his made monsters, the Five Families, lined up to kiss his ring, again.

    By not "tapering" or reducing the $85 billion a month ($45 billion in Treasuries and $40 billion in agency mortgage-backed securities) the Fed is buying from banks, the Fed is saying to its hit men, "We are family, and as long as Johnny Law is coming after you, we've got your back."

    The "legal and litigation costs" (that means lawyers and fines) racked up by America's Five Families since the credit crisis gently (not) ushered in the Great Recession is over $103 billion, by some estimates. That doesn't include actual losses from related activities.

    The Five Families, according to the Federal Reserve, are big, very big bosses in their territories, which means America and a good part of the world.


    Let's name names... and then I'll tell you the REAL reason the Fed didn't taper yesterday
  • SEC

  • How SEC "Revolving Doors" Protect Wall Street's Fraudsters Wall Street takes care of its own through the Securities and Exchange Commission. Capital Wave Strategist Shah Gilani reports on this sham. Read More... Read More...
  • Dark Pools of Liquidity Are a Big Problem for Free Markets hands in cuffs

    by Greg Madison, Associate Editor, Money Morning

    Everything runs on liquidity. Unless you know something I don't, that dollar bill in your pocket is just as likely to buy a can of Pabst Blue Ribbon today as it was yesterday, and will be tomorrow.

    Or you could sell 1,000 lbs. of gold - if you have that lying around - without fear of completely scuttling the global gold market. Your bank has to have cash, liquidity, lying around somewhere in the back if it wants to stay in business.

    And in many cases, it's easy to see or verify this liquidity. It helps everyone feel better about doing anything.

    But there are markets where this liquidity is kept off the open exchanges, where it can be used to juice up huge deals. Or it can prevent these huge deals from having the impact that they "should" have, keeping the hands of large traders hidden.

    These are the sinister-sounding dark pools of liquidity.

    Dark liquidity is generated and stored in a variety of ways, most of which are possible due to the huge variety of trading venues, electronic and traditional.

    With dark pools, neither the size of the order nor the entity making that order can be known until the order is completed. Rosenberg Securities Inc. estimates that fully 15% - trillions of dollars - of all trades occurring on American exchanges, every day, utilize dark pools.

    Not Playing Straight Poker

    And the markets, like nearly everything else, operate on the wide availability and transparency of good, reliable information. A poker game gets its lurid thrills from the partial presence of that information, or the possibility that the information could be faulty. You wouldn't want to play with all your cards face-up. You just don't know, and that's why it's fun to play poker.

    But the markets, despite some inkling to the contrary, can't function with true optimum efficiency if good information isn't available to the widest possible group of participants.

    It's not that a player has to have the information, but it should be available to the player if things are going to work the way they should. One is a vying, gambling game, and the other is a free market. We should be able to tell the difference.

    To continue reading, please click here...

    Read More...
  • How to Buy Penny Stocks Of all the investment vehicles out there, few offer greater potential than penny stocks. Yet penny stocks are not for the faint of heart.

    That's why a clear understanding of how to buy penny stocks is essential before diving in to the market.

    You see, behind the potential for large gains is the indisputable fact that many of today's most dynamic companies were once little more than penny issues themselves.

    That means that at least a few of tomorrow's market leaders are currently lurking among stocks listed on the Over-the-Counter Bulletin Board (OTCBB) or the so-called "Pink Sheets."

    Penny Stocks That Hit it Big

    As proof, consider just three examples.

    These are companies that have risen from true penny status to positions of prominence handing early and enduring investors almost unimaginable profits:

    • Green Valley Coffee Roasters Inc. (Nasdaq: GMCR) - Thanks to four splits, 100 shares purchased in October 1998 at $4.62 a share ($462) is now 2,700 shares priced at $20.45 a share, worth $55,215. But the stock actually hit $107.99 in September 2011, making it then worth $291,573.
    • Bally Technologies Inc. (NYSE: BYI) - Two splits turned 100 shares of this gaming-machine maker purchased at $1.69 a share ($169) in May 2000 into 400 shares, now priced at $45.98 and worth $18,392.
    • Jos. A Bank Clothiers Inc. (Nasdaq: JOSB) - You could have purchased 100 shares of this clothing retailer in November 1999 at $2.78 a share ($278). After four splits, that position has turned into 351 shares now priced at $41.29, worth $14,492.79. At the height in May 2011 those shares were $56.05 each, worth a total of $19,673.
    These are just a few of the better-known companies on a long list of stocks that have gone from micro-cap levels to mid- or large-cap valuations.

    It doesn't include the many penny mining stocks that exploded upward with skyrocketing resource prices or "fallen angels" like Bank of America (NYSE: BAC). A complete listing of such stocks would go on for pages.

    Of course, a listing of stocks that have gone from penny status - defined by the Securities and Exchange Commission (SEC) as "a very small company priced below $5.00 per share" - down to zero would be far, far longer. That's why these stocks are among the riskiest on the board.

    That's the challenge for investors - avoiding the big losers in the penny stock market.

    To continue reading, please click here... Read More...
  • Don't Let Mary Schapiro Tread on Your Money Market Funds!
    SEC chairman Mary Schapiro announced last week that she has set her sights on your money market funds.

    I'm sorry, but that makes no sense at all.

    Losses on money market fund investments have been trivial in the almost 40 years they have existed.

    What's more, they haven't added to the tottering instability of global finance. Not one wit.

    Her attempt to come down on money market funds is nothing more than crony capitalism at its most unpleasant.

    The regulators, who under the Obama administration simply like regulating, are just in cahoots with the big banks, seeking to eliminate their competition.

    In this case, what the banks would like to do is simply turn back the clock.

    After all, in the 1960s, banks had a very easy life, because interest rates were regulated.

    The old adage was "3-6-3" banking - borrow at 3%, lend at 6% and be on the golf course by 3 p.m.!

    It was a good deal for the bankers but not such a good deal for those forced to lend to the banks at 3%--especially as inflation rose in the late 1960s to 4%, 5% and higher.

    In fact, it was no wonder that when I first opened a U.S. bank account in 1971 that I was rewarded with a full set of bone china! Attracting savings was THAT profitable!

    But all of this changed with the establishment of money market funds.

    To continue reading, please click here... Read More...
  • Dodd-Frank Isn't Legislation; It's a Comedy In last week's Insights & Indictments, in my commentary on all the letters sent to the SEC about the proposed Volcker Rule, I not-so-casually commented that the Volcker Rule "shouldn't exist at all."

    And then I called the parents of the Volcker Rule, the Dodd-Frank Act, a "joke."

    Well, by the amount of comments I got back from I&I readers - right now, there are about 95,000 of you (and counting) - you'd think I was talking about something really controversial, like contraception, for heaven's sake.

    Talk about passionate!

    I understand that people get passionate about contraception. After all, without all that passion, we wouldn't need contraception.

    But me being passionate about the birth of the Volcker Rule, which I said should never had been conceived, apparently caused a lot of to you think I crossed some moral line.

    Not me! I'm not one to ever say anything controversial! And I'm certainly not the kind of guy to wade into the contraception debate.

    But, if I was, I'd be a strong advocate for it.

    The unwelcome birth of the Volcker Rule is a good example...

    To continue reading, please click here.... Read More...
  • Why the Volcker Rule is a Cop-Out and a Joke Right now everyone's talking about the Volcker Rule.

    For heaven's sake! What's the big deal? After all is said and done, there is only one real problem with it (and I'll get to that in a minute)...

    The 300-page draft Rule, named after its champion architect, former Federal Reserve chairman and inflation-fighting icon Paul A. Volcker, is an addition to the ever-evolving masterpiece of legislation (yes, I'm being sarcastic) known as the Dodd-Frank Act.

    Now, draft SEC rulemaking and regulatory actions are first submitted to the public for "comment." The SEC collects all comment letters and posts them on their website.

    Well, wouldn't you know it, this draft (some might call it "daft") Volcker Rule has caused a flurry of letter writing; letters were due to the SEC by no later than this past Monday evening.

    All in all, this august (not the month) regulatory body received 241 detailed comment letters (that's a lot of comment letters) and an astounding 14,479 mostly form letters, as well.

    Almost all of the form letters to the SEC, many of which were "personalized" by submitters, were strongly in favor of the Volcker Rule and called for strengthening it and not watering it down by allowing any exemptions.

    How do I know that? (No, I didn't read them all.) They resulted from an e-alert campaign to activist supporters of the Americans for Financial Reform group and Public Citizens, who posted appeals on their websites.

    Other notable comments in favor of the Rule, and weighing-in in more detail, came from Paul Volcker himself and Senators Carl Levin (D-MI) and Jeff Merkley (D-OR), who championed the Volcker Rule in the Dodd-Frank legislation and in their comments called the draft too "tepid."

    The lengthiest comment letter in favor of the Rule (and of tightening it significantly) came in the form of a 325-page love letter from the Occupy Wall Street movement.

    However, of those 241 detailed comment letters, most of them came from detractors.

    Detractors like individual banks (who normally let their dogs and lobbyists do their biting) and industry groups, such as the Securities Industry and Financial Markets Association (Sifma) and the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce.

    Powerhouse law firm Davis Polk was itself drafted by several banks and Sifma to help draft at least 10 letters on behalf of the cause ("cause" banks want to keep making big bonuses).

    Detractors of the Volcker Rule warned of dire consequences for American capital markets, American corporations, the American economy, the world, and the universe beyond even our own little constellation, if the Rule is allowed to curtail their most coveted and conscientious shepherding of their clients' best interests.

    Prop Trading, Market Making and the Volcker Rule

    The Volcker Rule comes down to this: To continue reading, please click here... Read More...
  • The New Money Market Fund Rules You Could Face The U.S. Securities and Exchange Commission (SEC) plans to unveil new money market fund rules that could drastically change the industry - even end it, if investment companies' claims are true.

    The SEC is designing new rules to stabilize money market funds. The investments should be secure and easily accessible, but the SEC says a Greek debt default threatens that safety.

    "Money-market funds remain susceptible to runs and to a sudden deterioration in quality of holdings, and we need to move forward... Read More...
  • High-Frequency Trading Could Cause Another Flash Crash The threat of another flash crash caused by high-frequency trading is as great as ever.

    And the next flash crash could be much worse than the one that shocked investors in May 2010.

    Although the Securities and Exchange Commission (SEC) has taken some steps to prevent another flash crash caused by high-frequency trading (HFT), some experts question whether the additional disclosure and "circuit-breakers" designed to prevent big, sudden price moves will make a difference.

    "Those things won't prevent another flash crash - they can't," said Money Morning Capital Waves Strategist Shah Gilani. "All they will do is soften the move."

    The real issue, Gilani said, lies with the computers that execute the trades - thousands of them in milliseconds.

    HFT has changed the nature of the stock market since these trades now account for between 60% and 70% of the transactions on the U.S. stock exchanges.

    "You can't stop a flash crash unless you stop the computers from doing what they're programmed to do. And that's not being addressed," Gilani said. "The SEC is looking at keeping the ship from sinking, not stopping it from hitting icebergs."

    HFT's heavy volume and high speed made it the prime suspect in the flash crash of 2010, when the Dow Jones Industrial Average plunged more than 600 points in five minutes, before recovering almost as quickly.

    Mini Flash Crashes

    Since then, the frequent occurrence of mini flash crashes - when a single stock or exchange-traded fund experiences a steep and rapid drop in price that quickly reverses - have served as nagging reminders of the vulnerability of the system to such events.

    "It's like seeing cracks in a dam," James J. Angel, professor at the McDonough School of Business atGeorgetown University told The New York Times. "One day, I don't know when, there will be another earthquake."

    To continue reading, please click here...

    Read More...
  • By Yanking the Teeth Out of Dodd-Frank Act Ratings Rules, SEC Blunts Hope for Real Financial Reforms Make no mistake: The Dodd-Frank Wall Street Reform and Consumer Protection Act is a slippery political football.

    But this early attempt at reform is actually just the kickoff for a political skirmish that will pit legislators, lobbyists and other hired guns against one another on the post-financial-crisis gridiron.

    These ongoing reform efforts will turn into a long affair whose outcome is far from certain.

    But investors can bet on this: The millions of dollars in lobbying money that's thrown at legislators every year in an attempt to influence the regulatory rulebook will certainly influence that outcome.

    To understand the risks that a lack of reform resolve brings, please read on... Read More...
  • GM's IPO Filing Reveals Challenges That Could Discourage Investors  When General Motors Co. filed registration papers for an initial public stock offering (IPO) on Wednesday, it also revealed the formidable challenges it faces - some of which may give pause to investors considering taking a stake in the venerable automaker.

    The 734-page document GM filed with the Securities Exchange Commission (SEC) paints a picture of a company that is alternately confident about its progress since it nearly failed last year and cautious about the future.

    The IPO raises the stakes for taxpayers who own 61% of GM and will be at least partially repaid based on its success.
    ... Let's name names... and then I'll tell you the REAL reason the Fed didn't taper yesterday
  • Goldman Joins Chorus of Big Banks Reporting Weaker Earnings Goldman Sachs Group Inc. (NYSE: GS) joined a chorus of big banks reporting weaker earnings for the second quarter as a weakening economy led investors to refrain from making deals.

    Goldman's earnings plummeted 82% in the second quarter, hammered by the investment bank's settlement of Securities and Exchange Commission (SEC) fraud allegations and the U.K. tax on bank executive bonuses.

    Strong trading and bond underwriting had bolstered the company's first-quarter results. But markets began to gyrate in April, and investor nervousness increased after the "flash crash" in May. Volatility has continued to rock the markets throughout the summer with investors' ongoing concerns about economies in Europe and fears that the U.S. recovery might be stalling.

    Read More...
  • What Really Caused the Stock Market 'Flash Crash' Just when you thought it was safe to get back into U.S. stocks, you think you see a shark.

    If you are searching - like the regulatory lifeguards and all the political beach bums - to pinpoint and kill the menacing shark that took a huge bite out of investor confidence when the Dow Jones Industrial Average tanked 1,000 points in a just a few minutes late in the day on May 6, don't bother to scan the horizon looking for the dorsal fin of some lurking predator.

    The threat you fear isn't under the water: It is the water.

    We're talking about market liquidity.

    For the full story of the stock-market flash crash - and for some cautionary steps to take - please read on... Read More...
  • Question of the Week: Readers Respond to Money Morning's "Flash Crash" Query The May 6 1000-point drop in the Dow Jones Industrial Average triggered a roar of theories on the cause of the "flash crash." Was it a "fat finger" that entered an incorrect trade, leading automated trading systems to hit a high-frenzied sell mode? Did the initial sell-off fuel panic that escalated sales before manual corrections could be implemented?

    As the New York Stock Exchange slowed trading, orders were routed to electronic exchanges that were not operating under the same safeguards and some companies' stocks were briefly valued at just pennies.

    The exchanges have agreed to revise circuit breakers designed to stop trading during periods of extreme volatility, and to develop standards for handling erroneous trades. Almost all exchanges admitted that the markets' varying policies on halting trading contributed to the roller coaster ride.

    Read More...
  • We Want to Hear From You: How Has the Market's "Flash Crash" Affected Your Investment Behavior? Thursday's Dow Jones Industrial Average 1000-point drop triggered a roar of theories on the cause of the "flash crash." Was it a "fat finger" that entered an incorrect trade, leading automated trading systems to hit a high-frenzied sell mode? Did the initial sell-off fuel panic that escalated sales before manual corrections could be implemented?

    As the New York Stock Exchange slowed trading, orders were routed to electronic exchanges that were not operating under the same safeguards and some companies' stocks were briefly valued at just pennies.

    "I still haven't heard a satisfactory answer as to what happened and what could be done about it," Frank C. Boucher, the head of a Virginia-based financial planning firm, told Bloomberg on Monday - four days after the market's drop.

    Read More...
  • SEC, Major Exchanges, Working on New 'Circuit-Breaker' Rules to Avoid Another 1,000-Point Plunge in the Dow In response to the wild ride U.S. stocks endured Thursday, executives from six U.S. stock exchanges yesterday (Monday) agreed on a framework for "strengthening circuit breakers and handling erroneous trades," the U.S. Securities and Exchange Commission announced.

    NYSE Euronext (NYSE: NYX), Nasdaq OMX Group Inc. (Nasdaq: NDAQ), Bats Global Markets, Direct Edge Holdings, International Securities Exchange Holdings Inc. and CBOE Holdings Inc. (Nasdaq: CME) met with SEC Chairwoman Mary L. Schapiro on Monday morning.

    The SEC's Schapiro, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and officials from the various exchanges were also to meet later yesterday with U.S. Treasury Secretary Timothy Geithner. Officials from the CME Group Inc. (Nasdaq: CME), the largest U.S. futures exchange, also were to attend that meeting - after having met earlier in the day with CFTC leaders, The Wall Street Journal reported. Read More...