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While Washington Stews, You Can Cash In on the Biggest "Tax-Inversion" Deal in History

Back in June 2012, we recommended that you pick up shares of Big Pharma player Abbott Laboratories Inc. (NYSE: ABT). The reason: Abbott was planning to split in two at the end of the year, meaning folks who took our advice would end up with stakes in two companies for the price of one.

There was more than bargain-basement thinking at work here.

You see, these corporate breakups – known as spin-offs – have a habit of turning into market-beating profit plays. And the newly minted spin-off firms often end up as takeover fodder – also at big profits.

Abbott followed part of that blueprint.

  • Stock Market

  • 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?...

    To continue reading, please click here...

  • 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.

    To continue reading, please click here...

  • This Could Kill the Market Rally .
  • Profit From a Market Misstep with Valero Energy Corp. (NYSE: VLO) The latest stock market pullback has given value investors a chance to go shopping again - and Valero Energy Corp. (NYSE: VLO) is a great example of the kind of steals that are available.

    That is, Valero's assets are worth significantly more than what the market is currently pricing them at.

    At its core, the company is a vertically integrated, independent crude refiner with ethanol production that can be blended into the feedstocks of its own network of gas stations.

    Right now is the perfect time to be grabbing assets on the cheap, and Valero is giving us an opportunity that's too good to pass up.

    So it's time to buy Valero Energy Corp. (**).

    Click here to continue reading...

  • Shah Gilani on U.S. Markets' Reaction to the Disaster in Japan ... Read More...
  • Stock Market 2011: Fed Policies, Inflation Concerns Make For Bearish Investors

    U.S. stocks have been on the march. Last year's market rally drove stocks up to levels not seen for two years - and many prognosticators believe that higher highs are still to come.

    The U.S. Standard & Poor's 500 Index posted its best December performance in 19 years, and that bullish sentiment carried into the start of 2011.

    The S&P 500 rose more than 1.1% on the New Year's first trading day to close at 1,271.89. It traded as high as 1,276.17, a 52-week high and its high-water mark for the last two years.

    "More people have joined the bullish bandwagon for 2011 because individual investors are ready to purchase stocks for the first time in a long time," said Ned Riley, chief investment strategist for Riley Asset Management.

    The latest economic reports have further buoyed investor bullishness. U.S. factory goods orders in November unexpectedly rose 0.7%, and U.S. construction spending rose for the third consecutive month in November.

  • Your 2011 Stock Market Leaders Stocks drifted quietly in the past week, seemingly satisfied with the status quo and in no hurry to get to their next destination. The Dow Jones Industrial Average, Standard & Poor's 500 Index and Nasdaq Composite Index all clocked in tandem for a loss or gain of +0.1% to -0.1%.

    Overseas stocks were the only major winners, with developed markets outside the United States up 1.4% and emerging markets up 2.2%.

    Looking back at all of 2010, here are a few stats that stick out:

    To find out which stocks will lead the market higher in 2011, read on...

  • Stock Market Analysts and Insiders Wave Caution Flags After $20 Billion GM IPO General Motors Co. (NYSE: GM) yesterday (Thursday) raised $20.1 billion in an initial public offering (IPO) that moves the company closer to paying back the taxpayer funds it received in a bailout last year.

    However, GM's journey doesn't end there. Even after all of the IPO money changes hands, the company will still owe the federal government more than $26 billion. And the challenges that drove the company into bankruptcy to begin with – union payouts, tougher competition, and higher gas prices – are still relevant.

    Ford Motor Co. (NYSE: F), Honda Motor Co. (NYSE ADR: HMC), and Toyota Motor Co. (NYSE ADR: TM) remain as well, having avoided bankruptcy all together.

  • Buy, Sell or Hold Special Report: How Retail Investors Should Play the GM IPO If you are one of the millions of retail investors who found themselves totally out of luck on the General Motors Co. (NYSE: GM) initial public stock offering, don't fret.

    Although the GM IPO is over, the profit opportunity has just begun.

    The incredibly oversubscribed GM IPO may well have been the biggest stock offering in global history. But I believe that this stock has plenty of room to run.

    In fact, I believe this is a stock that you'll want to buy in the aftermarket - provided that you follow some very strict guidelines for share prices and timing.

    Let me explain...

    To hear the best strategy for buying GM shares in the aftermarket, please read on... Read More...
  • Stock Market Faces Critical Test This Week Stocks rose gently like heat waves off a radiator over the past week, as traders guessed, assessed and processed the results of the midterm elections and the Federal Reserve's decision to try to light a fire under the U.S. economy by buying a $75-billion pile of fresh, new Treasury bonds every 30 days for the next eight months.

    The major indexes rose 3.5% amid a set of sessions when banks finally found footing, as they were the best performing group, up 1%. Laggards were industrials and utilities, ending flat. Breadth was positive, favoring advancers by 2-1. And the number of new highs swelled to 1,200 while new lows also rose, to 80.

    Click here to read why the market is at a critical juncture... Read More...
  • We Want to Hear From You: What Stock Market Moves Will You Make After Midterm Elections? Now that the hotly contested midterm elections have been decided, U.S. voters will watch to see if newly elected officials will deliver on promises to lift the nation out of its economic morass.

    Many voters made their decisions out of frustration over current economic conditions. Government spending, ineffective stimulus measures and stubborn unemployment were the biggest issues among voters this year. And given the potential for change in U.S. economic policy, investors are eager to see what the stock-and-bond markets will do in the months to come.

    Although there is unlikely to be any quick decision making in Washington, investors will hope for the status quo in at least one area - a continued market rally, which is the norm for midterm election years.

  • Will the Mid-Term Elections Drive the Market Into High Gear? The past five days added more hues to the emerging snapshot of U.S. economic growth that is sluggish and top-heavy, but still rolling forward -- kind of like a tank that can't get out of first gear. New data shows that U.S. GDP is back to 70% of its pre-recession strength, but jobs have recovered only 9%. It's this disconnect between output and employment that has made the current "recovery" seem so anemic.

    That was fine for investors, who bid up risky assets in the past week just as they had the previous three weeks. TheS&P 500rose 2%, theNasdaq 100rose 3.5%, overseas large caps rose 3.3%, and emerging markets rose 2.5%.Goldrose 1.7%,silverrose 3%,crude oilrose 2.1%, and evenbondsrose 1.5%. Among the overseas markets we care most about,ishares MSCI Thailand Index Fund (NYSE: THD) rose 5.6%,Wisdom Tree IndiaEarnings Fund (NYSE: EPI) rose 3.3%, and ishares MSCISingaporeIndex Fund (NYSE: EWS) rose 2.4%.

    To find out why the mid-term elections are important to the market read on...

  • Buy, Sell or Hold: It's Time to Park Harley-Davidson Inc. (NYSE: HOG) Harley-Davidson Inc. (NYSE: HOG) may well be the ultimate U.S. corporate icon.

    The company's motorcycles are certainly American cultural icons: Big, squat, slathered in chrome, they're essentially functional pieces of fine art. Each motorcycle emits a deep, staccato bark at idle, a signature sound that prompted aficionados to christen Harley bikes as "hogs."

    The fact that "Hogs" have been owned and ridden by such celebrities as Elvis Presley, Malcolm Forbes Sr., Jay Leno, Mickey Rourke, Tina Turner, Arnold Schwarzenegger and Elizabeth Taylor helped imbue the Harley brand with an aura of desirability and exclusivity.

    Little wonder the company has historically generated 5% of its revenue just from the licensing of its logo alone.

  • Leaders Emerging as the U.S. Economy Shakes Off Its Stupor The past five days added more color to the emerging picture of U.S. economic growth that is slow and unsteady -- but still in gear. Investors decided that was good enough, and bid up risky assets. TheStandard & Poor's 500 Indexrose 1.4%,emerging marketsrose 1.8%,goldrose 2.2% andbonds fell.

    Underlying breadth modestly weakened, as the market is primarily being propelled now by a withdrawal of sellers -- not an increase in buyers. News late in the week typified the entire span, as it mostly favored bulls.

    Indeed, the U.S. economy faces an uphill climb but some companies are emerging as market leaders.

    To find out which companies are dragging the economy forward read on...

  • Buy, Sell or Hold: Hewlett-Packard Co. (NYSE: HPQ) – It's Time to Sell This High-Tech Stalwart Now's not the time to own Hewlett-Packard Co. (NYSE: HPQ).

    Long one of the bluest of blue chips in the U.S. high-tech sector, H-P has been in the spotlight and under the gun since its early August ouster of Chief Executive Officer Mark Hurd.

    And while Hurd's unceremonious resignation following an internal sexual harassment investigation has been dominated the headlines when it comes to stories about H-P, the... Read More...