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  • Earnings Fuel Stock Market Gains – Dow Jones Soared More than 100 Points Midday Yes, Friday was all about the earnings.

    The stock market rallied Friday thanks to a roaring round of positive earnings reports - with a little help from positive news out of Europe.

    Just after noon, the Dow Jones Industrial Average climbed 113 points, the Standard & Poor's 500 jumped 9 points and the Nasdaq gained 22.

    With little on the economic calendar to close out the week, and no major reports due, market participants focused on encouraging first-quarter results from a spate of several large and market-influencing firms.

    "There's been a wrestling match all week long between strong earnings and weak economic data. At the moment earnings are winning," Lawrence Centura, portfolio manager at Federated Investors told the Associated Press.

    Strong Earnings Push Stock Market Gains

    To date, quarterly earning has been pleasantly strong.

    "The number of companies reporting positive surprises is much higher than it typically is at this stage in the game," Fred Dickson, chief market strategist of D.A. Davidson & Co. told CNN Money. "They're only beating by a little, but it's still a significant number of companies and that's the wow factor."

    Of the 212 companies in the S&P 500 that have reported, better than 80% have exceeded expectations, according to Thomson Reuters. During a typical quarter, the percentage of companies that top forecasts is 60%.

    Here are some recent highlights:

    • Tech giant Microsoft (Nasdaq: MSFT) lead Friday's gains in the broad-based rally after beating expectations late Thursday, reporting sales growth of 6% thanks to its Window and Office products. MSFT gained 4.55% Friday to close at $32.42.
    • Investors also ate up better-than-expected numbers from fast-food king McDonald's Corp. (NYSE: MCD), which ended the day up. The company proved it remained a worldwide favorite with same-store sales up 8.9% in the U.S., 5% in Europe and 5.5% in Asia-Pacific, Middle East and Africa. Revenue rose 8% (excluding currency fluctuations).
    • Robust earnings from General Electric (NYSE: GE) pushed its stock up 1.15% to $19.36. GE narrowly beat expectations with quarterly profit of 34 cents a share, a penny higher than expected, and revenue of $35.18 billion compared to a forecast $34.7 billion.
    • Meanwhile, traders traded E*Trade (Nasdaq: ETFC) up some 6% on better-than-expected first-quarter results. E*Trade's first-quarter profit rose 38% from a year earlier.
    • Technology manufacturer Honeywell (NYSE: HON) beat on both earnings and revenue, sending the honey pot buzzing. First-quarter income climbed 17% from a year earlier, and the company raised its 2012 forecast.
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  • Bank of America (NYSE: BAC) May Never Fully Recover Bank of America (NYSE: BAC) has been working hard to regain its profitability and stature, but a better-than-expected earnings report isn't enough.

    On Thursday the company reported earnings of 3 cents a share. Revenue came in light at $22.28 billion.

    Although analysts were looking for 12 cents a share, several weighed in saying that a $4.8 billion charge known as debt valuation adjustment (DVA) complicated the earnings report. Some say BofA actually beat core earnings expectations.

    Evercore analyst Andrew Marquardt wrote, "Our initial view of core is closer to 26 cents."

    Return on average equity of 11.05% beat fourth-quarter results, but was less than the 15.41% return the bank posted for the first quarter a year ago. BAC succeeded in reducing its credit-loss provisions to $2.42 billion from $3.81 billion in the fourth quarter.

    "You had very favorable tailwinds in the fixed-income markets and so trading revenues are very strong for this universe right now," Charles Peabody, an analyst at Portales Partners LLC in New York, said in a Bloomberg Radio interview. "There's no question the earnings that are being reported are very good -- the question is the sustainability."

    Despite beating estimates with its first-quarter earnings, BofA has struggled more than its counterparts in the wake of the financial crisis. The damage may be too much to allow the bank to grow to as big as it once was.

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  • Stock Market News: Best Buy CEO Quits; Here's What the Next Leader Needs to Do (NYSE: BBY) Former Best Buy Co Inc. (NYSE: BBY) CEO Brian Dunn resigned from the struggling electronics giant after just three years at the helm, the company announced yesterday (Tuesday), and just two weeks after announcing a major restructuring plan.

    According to Bloomberg News there was "no disagreement on any matters relating to operations, financial controls, policies or procedures." Dunn's departure was "part of a mutual agreement of the necessity to address the challenges that face the company."

    Dunn was with the company for 28 years, starting as a store assistant. Board member G. Mike Mikan will take over as interim chief executive.

    Despite Dunn's decades-long commitment to the company, he might not have had what's needed to dig Best Buy out of the hole into which it's sinking. The ailing retailer is in the midst of revamping its stores and overhauling its business model, attempting to attract customers - and more importantly, get them to buy.

    "[Dunn] grew up in the store. His specialty is the stores," Stacy Widlitz of SW Retail Advisors told The Financial Times. "Was he the right guy for the chief executive? In this environment he was probably not the ideal candidate."

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  • How to Use Options to Hedge Against a Stock Market Correction Stocks have been mostly higher the past five months, with the Dow Jones Industrial Average recently topping 13,000 for a few days and the Nasdaq Composite touching the key 3,000 mark on the final day of February.

    However, the markets have turned erratic the last week or so, and big moves like last Tuesday's plunge have left many investors to worry about a looming stock market correction.

    Normally, that would send options-savvy investors in search of protective puts so they could lock in profits on their long stock positions.

    In doing so they essentially are buying an "insurance policy" that would pay off should prices indeed turn lower in the next couple of months.

    But, as readers who checked out Money Morning writer Don Miller's Wednesday article on the VIX Indicator, which measures trading activity in options on the Standard &Poor's 500 index - and, by association, options on individual stocks comprising the major indices - last week's jump in volatility sent put prices sharply higher.

    In fact, the VIX Indicator itself jumped from just 16.83 on Feb. 23 to a reading of 20.84 on Tuesday.

    And, though it has pulled back a bit since, the volatility means merely buying protective puts at this time would be a fairly costly proposition.

    As an example, assume you hold 100 shares of stock in Las Vegas Sands Corp. (NYSE: LVS), having happily watched as the market's rally carried its price from an Oct. 3, 2011, level of $36.71 to a March 1 high of $56.82.

    However, the $3.33 decline by LVS last Monday and Tuesday leaves you little doubt the stock would be vulnerable in any upcoming stock market correction.

    And even though the stock rebounded to $55.29 by Thursday's close, you still feel like you need a little protection for your paper profits.

    So, what do you do?

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  • You Asked, He Answered: Shah Gilani on China, Ben Bernanke, the Fed and Much More…
    Thanks for flooding my email inbox. I asked for it...

    Let's start off with some comments and questions about Ben Bernanke and the Fed....

    Q: I see no distinguishable difference in the relationship that government has with the Fed/Banking Systemand some individual getting involved with a ruthless loan shark. ~ James M.

    A: The Fed has a no-interest rate policy, while loan sharks charge an arm and a leg. That's one difference. There may be others, but I can't think of any right now.

    Q: Shah I beg to differ with you re: your feelings towards Mr. Bernanke. Like you, he understands the... Read More...
  • Five Minutes with Fitz: Should You Buy This Stock Market Dip? The market's recent 45-day rocket ride was the longest uninterrupted climb without a triple digit decline since 2006 - until Tuesday when the Dow lost 203 points.

    The sell-off begs the question: Should you buy the stock market dip?

    First things first. The sky isn't falling even though there are a lot of investors who believe the worst after two tough days on Monday and Tuesday.

    In fact, if you remember your recent history, we used to eat declines like these for breakfast. Two-hundred-point days were not uncommon. For that matter, neither were 400-point swings only a few years ago.

    What investors need to realize is this: The stock market has come a long way in a hurry since establishing panic-driven lows on March 6, 2009.

    The S&P 500, for example, has tacked more than 100%. Compared to those gains, Monday and Tuesday's losses are just rounding errors in the big scheme of things.

    This means a portfolio worth $500,000 would be worth $1,000,000 today if it had been invested in something as plain vanilla as an S&P 500 Index fund only three years ago.

    On that basis alone, I could make the case this is the pullback everybody has been waiting for.

    But that's the problem...everybody is waiting on the same thing.

    Waiting for a Stock Market Dip

    According to various reports, most investors remain on the sidelines for reasons that are as obvious as they are self-evident - worries about debt, politics, jobs and the future dominate nearly every poll.

    You can see that if you look at stock market volume.

    It's down 50% since the financial crisis began. According to CNBC data, last Friday a mere 3.2 billion shares traded hands on the NYSE. Three years ago, that figure was 7.5 billion on an average day.

    This complicates technical analysis because it limits the statistical validity of many analytics that might otherwise be functioning normally.

    So what's a technical trader to do?...

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  • 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.

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  • Dow Closed Above 13000: What Next? The Dow Jones Industrial Average closed above 13000 yesterday (Tuesday) for the first time since May 19, 2008, as investors remain optimistic amid global economic unease.

    The Dow gained 0.18%, or 23.61 points, to close just above the mark at 13005.12.

    The Dow's been flirting with a close above 13000 for a week now. The market has climbed despite concerns surrounding Greece as well as the continued U.S. economic recovery.

    "Don't forget that it's absolutely possible to have the markets move independently of the economy, and that's what... Read More...
  • The Trend is Your Best "Friend" in the Stock Market Everybody's got an opinion about the stock market.

    That doesn't make it easy for anyone who listens to anyone else, or worse, listens to everyone else, to get a clear picture about what's really out there.

    Of course, I have an opinion too. And of course, I'm going to tell you what it is.

    But first, let me say this about that.

    I never start with an opinion. I end up with an opinion, after trying not to have one.

    That means I know I don't know what's going to happen, so I have to look at what's really going on. And I get to my opinion by pulling back further and further until I can't see anything small.

    I pull back as far as I can because I want the big picture.

    And the big picture is all about the major trend. If you're on the right side of the major trend, you can't get killed. You might take a few hits, here and there, but you make money. And while making money is great, it isn't everything.

    There's something more, something bigger than making money...

    It is not losing money, as in, not getting hit so hard that you're hurting real bad, or that you get killed and are out of the game totally.

    That's never happened to me. I always make money, every year.

    It's not that I don't have losing trades; I have plenty of those. But I make money because I mostly ride the big trends.

    Usually, my losing trades are my more speculative trades, where I try and jump on a smaller counter-trend within the major trend.

    For example, I see the big trend as positive, so I'm mostly long (I'm buying), but I might think a stock is prone to a sell-off, so I'll short it. Sometimes that's a huge winner, but sometimes I will lose on a play that is counter to the trend because the major trend eventually overwhelms everything else.

    My point here is this...

    The trend is your friend, but within the major trend there can be opportunities riding mini-trends going in the opposite direction. Just don't get greedy on those plays; the major trend will eventually consume most smaller counter-trending plays.

    So, here's what I see, and here's my opinion about what I see.

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  • The Greatest Episodes of Market Manipulation…Is Silver Next? Market manipulation has a long and storied history.

    From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors.

    And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934 - it's as American as apple pie.

    Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar.

    The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff.

    Jim Cramer, the host of CNBC's "Mad Money," said he regularly manipulated the market when he ran his hedge fund, calling it "a fun...and lucrative game."

    Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers - are most likely to be the perpetrators.

    To give you an idea of how things work, here are three notorious examples of market manipulation.

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  • Five Ways to Make 2012 Your Best Year Ever I hear it everywhere I go. I'll start investing again...

    ...when the debt problem is fixed.

    ...when the markets pull back a little.

    ...when the EU crisis is over.

    ...when the elections are over.

    Chances are you've said some of these same things to yourself.

    Yet, waiting is exactly the wrong thing to do. Time is something you never get back.

    And when it comes to consistent investment returns, time is the one thing you always have to capitalize on - without fail.

    Besides, waiting makes it harder to get back in the game. Ask anybody who missed the S&P 500's 99.53% run up off March 2009 lows that carried things until April 2011.

    Or the 87.26% run up through July 2007 following the low set in 2003. Or the 569.25% move from November 1987 (shortly after Black Monday) through January 2000.

    No. The way I see it, the thing to do is to begin investing the moment you decide you want to. That way you pique your imagination, your motivation and your returns.

    Five Ways to Get Better Results in 2012

    Here are five tips to help you get started:

    To continue reading, please click here...


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  • 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."

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  • Better Than Brazil: How to Invest in a Colombian Safe Haven What's an investor to do?...

    The Eurozone is about to collapse. The United States is struggling out of the deepest recession since World War II. And the IMF forecasts global growth will drop from 5% in 2011 to 2.6% in 2012.

    How about investing in a safe haven far away from all of these troubles - one where you can actually watch your money grow?

    I have found one in Colombia. Let me tell you why.

    It is because Colombia is no longer a place controlled by drug kingpins or ripped apart by civil war. Colombia is a country on the comeback.

    This revival began in 2002 when former president Alvaro Uribe decided to take on both the leftist guerillas and the drug barons. Since then, his successor Jose Santos has followed up on those policies, and they have worked.

    In 2011, Colombia's homicides dropped by 5% to 14,746 and its murder rate dropped to 33 per 100,000 of population.

    Admittedly, that's still five times the U.S. level, but these things are relative - it's half the level it was just four years ago.

    Foreign investors have noticed, and last year, foreign investment in Colombia was up 56% to $14.8 billion.

    Colombia Beats Brazil

    In fact, according to the World Bank's "Doing Business" survey, Colombia ranked 42 out of 183 countries.

    That was near the top spot in Latin America and far above Brazil's appalling rank of 126. Only Chile was higher with a rank of 39.

    Stock market investors have noticed this, too - in the second half of 2011 Colombia had $4.9 billion of initial public offerings, the most in Latin America - and yes, again ahead of Brazil!

    On the macroeconomic side, Colombia is sound, with public debt at just 45% of gross domestic product (GDP), a modest budget deficit, inflation just over 3% and the central bank base rate at 4.75% -- no Ben Bernanke nonsense of zero interest rates!

    Colombia has also gotten a boost by a surge in oil production, with exploration now possible in areas that had been "no go" for foreign investors for decades.

    In November 2011, oil production was 920,000 barrels/day, up 17.5% from the previous year. Oil and minerals were responsible for 82% of Colombia's 2011 foreign investment, so the potential for investors is immense.

    However, the real reason why Colombia is so attractive [To continue reading, please click here...]

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  • Don’t Be A Wall Street Patsy You want to know the truth? The truth is that Wall Street has stacked the deck against you.

    That's why you need to understand how the game is played. Otherwise you'll end up a Wall Street patsy.

    So, here's the truth along with some lessons that will help you play the game like a pro.

    First, though, we'll need to debunk a few myths...

    Let's start with the myth that the Street lowered brokerage charges for the benefit of retail investors. At one time, these fees used to be obscenely high and fixed.

    But, on May 1, 1975, fixed commissions were abolished after brash upstarts like Charles Schwab and disgruntled investors decided to attack The Street's price-fixing schemes.

    The negotiated commissions regime that followed lowered the cost of access to the stock market, essentially ushering in the era of the "individual investor."

    The influx of these individual investors, many of whom didn't have enough money to create diversified portfolios, soon became a boon for mutual funds - which have since grown like weeds in an untended sod farm.

    Wall Street Changed the Game

    Since the commission business was no longer profitable, Wall Street moved its retail business to an "assets under management" model.

    So instead of making money on commissions the game changed to gathering as many assets as you could into a retail investor's account and charging a fee to "manage" them; in other words, just watch them.

    That's one of the reasons why Wall Street advocates a "buy and hold" strategy for retail investors. They don't want you to take those assets away from them.

    It's the same thing with mutual funds.

    And conveniently, if your broker puts you into mutual funds that are losers, it's not your broker's fault.

    Now, it's the mutual fund manager's fault. That way the broker can't be blamed if your account loses money.

    Instead, your broker can tell you, "Don't fire me, let's fire the mutual fund manager and let's find you a better fund to invest in. But, no matter what happens, we need to buy and hold and not try and time the market."

    That's what retail investors are told to do over and over and over again.

    But guess what? That's definitely not what Wall Street firms do.

    In fact, while you're being told to buy and hold, exchange specialists, market-makers, hedge funds and every trading desk at every Wall Street bank and firm are busy trading.

    Some individual investors began to see how Wall Street was really making its money and started trading themselves.

    Of course, that only increased the competition for easy trades as more retail investors traded in and out of stocks.

    To continue their advantage over the public, Wall Street fought to do away with the uptick rule. The rule was wiped out so traders could short sell any stock at any time.

    But it's the big Wall Street players who benefit from the rule change because they can use their huge capital positions and work with each other to drive down stocks they have shorted.

    Who gets hurt? The buy-and-hold retail investors who are told to buy more at lower prices are the ones who get fleeced.

    And, who is selling to them?...

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  • The Markets or the Mattress: I Know Where My Money is Going The next 1,000 points on the Dow Jones Industrial Average in either direction are going to be determined by what happens in two cities thousands of miles from our own shores...
    Athens and Berlin.

    What's more, the risks associated with Europe's redemption, or its failure, are more concentrated now than they were before the crisis began.

    There are two reasons: a) Europe won't help itself and b) Wall Street may still have $1 trillion or more in exposure to European problems.

    What makes me crazy right now is that European chatter is what's driving the markets.

    Every sound bite from Europe is critical these days. Not because there is anything relevant in the political babbling from financial ministers tasked with fixing this mess, but rather that there is a cascade of events that could take us in either direction.

    Fix this mess and the markets will take off for a 1,000 point gain that will leave anybody who is on the sidelines hopelessly behind.

    Fail and the markets could tank.

    It certainly fits the pattern established in recent months. News leaks suggesting solutions have brought on rallies, while negative leaks have caused a ripple effect that has quickly dumped stocks into the hopper.

    Yet, it's not really the numbers that matter at the moment - even with the Fed rumored to be considering another $1 trillion stimulus and reports that the European Central Bank (ECB) and International Monetary Fund (IMF) may be seeking as much as $600 billion each.

    No. The market swings we are seeing are all about confidence or, more specifically, the near complete lack thereof.

    The Mattress vs. The Markets

    A recent report from TrimTabs shows that checking and savings accounts attracted eight-times the money that stock, bond and mutual funds did from January to November 2011.

    That is a whopping $889 billion that went under "the mattresses" versus only $109 billion that went into the markets.

    In fact, CNBC is reporting that the pace of money headed for plain-Jane savings and checking accounts from September to November accelerated to nearly 13-times the average monthly flow rate of the preceding nine months from September to November.

    What's significant about this is that the money has headed for the sidelines when the markets have rallied. Usually it's the other way around. Normally money floods into the markets when they move higher.

    The other notable thing here is that, generally speaking, up days this year have had thinner volume than down days. This means that most investors just can't handle the swings. In other words, every time the markets dip, they're packing it in.

    Pessimism is the Breeding Ground of Opportunity

    Bottom line: Investors are making a gigantic mistake - especially those with a longer-term perspective.

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