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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…

  • Stock Market

  • What Skirt Lengths Tell You About The Stock Market Over the years I've written a number of articles about trading indicators.

    They have ranged from the commonly used variety - like moving averages, crossovers, the VIX, death crosses, and Bollinger Bands - to the esoteric, including the tallest buildings, Big Money Polls, financial astrology and, more recently, magazine covers.

    You'd think the tools market technicians typically use would generate the most interest. But inevitably, it's the more unusual indicators that people are most attracted to.

    Why?... I have no idea. I am not a social scientist.

    But I can tell you this - having spent tens of thousands of hours computer modeling almost every indicator you can conceive of, the most consistent and best performing indicators are almost always behaviorally-based.

    What I mean by that is that there is inevitably an element of human behavior that is either: a) responsible for the indicator itself; or b) contributes significantly to how it functions and why it's relevant.

    My grandmother, Mimi, a seasoned successful investor in her own right after being widowed at a young age, used to chalk this up to what she called the "complexity problem" - as in, if it's too complex for me to understand, it's a problem.

    She didn't use the term like I do today in a non-linear sense. She simply reasoned that if something was too complex to explain to her, it wasn't worth her time or her money.

    Skirt Chasing and the Stock Markets

    And that brings me to women's skirts.

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  • Beware the Distorted Reality of the Stock Market Money Morning's Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." this morning (Friday) and offered his take on whether the markets are ignoring economic and social moods.

    He was asked about stocks that in a way represent the American Dream and if these stocks' recent rise is disconnected from reality.

    "Four stocks suggest the American Dream is alive and well in the markets," said today's host Charles Payne. "What do you make of it? And, is the market a leading indicator?"

    Keith offered up a unique way to assess the current situation....

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  • Don't Expect the Obamacare Ruling to Calm the Markets Even before the Supreme Court decision on Obamacare was handed down yesterday the markets were selling off hard.

    They were tanking on news that the latest European summit was unlikely to be a game-changer, that U.S. gross domestic product was a paltry 1.9% in the first quarter, and a New York Times story that JPMorgan Chase's derivatives loss could top $9 billion.

    Then came the long-awaited decision from the country's highest court on the divisive healthcare law, the Patient Protection and Affordable Care Act, which unhinged markets further.

    The Court's historic decision shook the markets for several reasons.

    But the single overriding effect of the mixed-bag decision will be its impact on markets going forward.

    That's because the divided decision further fuels partisan politics going into the November elections and sets the stage for an all-or-nothing battle between Republicans and Democrats.

    The chances of there being any compromise anywhere on any divisive issues before the elections is now mathematically zero, where before it was somewhere between slim and none.

    The Bigger Issues Behind the Obamacare Ruling

    What the markets now face aren't just healthcare, tax and spending issues.

    As a result of the Court's stunning decision, we face something much bigger -- Constitutional issues of the highest and deepest order.

    The High Court, with Chief Justice John Roberts unexpectedly siding with the Court's four liberal justices, rendered a 5-4 victory for President Barack Obama's prized legislation.

    The ruling upholds the "individual mandate" that requires citizens to either pay for "minimum essential" health insurance or pay a "penalty" through the IRS as a "tax" towards offsetting the shared costs of national healthcare.

    But the Court also struck down the Act's provision allowing the Federal Government to effectively "hold a gun to the head" of states if they failed to increase Medicaid benefits, largely expanded under the new law.

    In its original form, states could lose all Federal funding of Medicaid for non-compliance with Federal demands.

    By its decision the Court effectively admitted that the Commerce Clause argument underpinning the individual mandate's Constitutionality was null and void.

    But while they said that the individual mandate that "forced" citizens to buy health insurance wasn't intended as a "command" that fell under the Commerce Clause, they incongruously flipped the argument on its head and agreed (by a one-vote majority) that the mandate was legal under Congress' authority to "tax" citizens for the benefit of the nation.

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  • The Best of the Best Dividend-Paying Stocks Over the past few years there have been unprecedented swings in the major indexes, scaring some investors out of the markets altogether.

    What people don't realize is that successful investing is a matter of continuous performance, not instantaneous performance.

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  • Stock Market Today: Who to Avoid, Who to Consider In a volatile trading session two companies are making news in the stock market today (Thursday): mobile phone provider Nokia Corp. (NYSE ADR: NOK) and supermarket chain The Kroger Co. (NYSE: KR).

    Nokia Corp. (NYSE ADR: NOK) struggles continue: On Thursday Nokia announced it would cut 10,000 jobs, or one out of five workers, worldwide by the end of the year. It also warned of lower-than-expected financials for the second and third quarters.

    The Finnish company had been the leading cell phone maker for 14 years and just last year was the leader in smartphones. Competition from rival companies, especially in the smartphone sector, has been a driving downward force for Nokia.

    "The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," Ben Wood, head of research at CCS Insight, told Reuters.

    Prior to this announcement Nokia stock had taken a beating, down more than 50% in the past three months and has been down more than 15% today.

    The stock's performance looks even worse going back three years. In June 2009 it traded around $15 a share, and has now fallen below $2.40.

    Nokia's CEO Stephen Elop hopes these cuts can turnaround the company's prospects as many investors worry about Nokia's ability to stay afloat amid their cash problems.

    "These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Elop said in a statement.

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  • Stock Market Today: What Investors Can't Miss Companies making headlines in the stock market today include Dell (Nasdaq: DELL), Johnson & Johnson (NYSE: JNJ), and JPMorgan Chase (NYSE: JPM).

    After Tuesday's closing bell Dell (Nasdaq: DELL) gave shareholders good news: it will begin paying a dividend later this year.

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  • Will the Facebook Stock Price Overcome This Latest Concern? Facebook (Nasdaq: FB) and its struggling stock price have been in the spotlight since the company's IPO, but rarely for good news. This week started no differently.

    Besides its poor stock performance, Facebook already has been blamed for halting this year's IPO market. There hasn't been an IPO since Facebook debuted on May 17.

    Facebook also is taking heat for wreaking havoc on Nasdaq's reputation after technical glitches marred Facebook's debut. Nasdaq revealed last week that it will pay out $40 million in compensation damages to brokerages that lost money during the IPO fiasco.

    Finally, many investors claim they were misinformed on Facebook stock's first-day potential, and have initiated a class action lawsuit against the underwriters.

    Now the most recent bad news has cast even more doubts over whether or not Facebook can perform as well as investors expected.

    Has Facebook's Growth Reached a Ceiling?

    Over the weekend The Wall Street Journal ran a report on Facebook's growth slowdown, especially in the United States.

    Citing market research firm comScore Inc. (Nasdaq: SCOR), the report indicated unique visitors to the Facebook Website in the United States increased just 5% in April from a year earlier.

    That was the lowest U.S. user growth rate since comScore started tracking the data in 2008. It compared very poorly to the data from the past two years, down from 24% growth in April 2011 and 89% in April 2010.

    The amount of time Facebook users spend per month on the site increased, but also at a slower rate than before. Facebook users' time-on-site was up 16% from a year earlier, compared to a 23% increase in 2011 and 57% in 2010, according to comScore.

    "The assumption that Facebook can maintain the 100% growth it reported Q2 2011 is no more plausible than the 45% growth it reported [earlier this year," said Money Morning Chief Investment Strategist Keith Fitz-Gerald after the stock started trading in May. "Google couldn't. Apple couldn't. And both of them are real businesses."

    It may be a matter of numbers limiting Facebook's growth rather than a changed perception or heightened dislike of the company. Facebook is estimated to have already captured 71% of the 221 million U.S. Internet users, leaving little room for U.S. growth.

    That is troubling as the U.S. accounts for approximately 56% of Facebook's 2011 ad revenue of $3.1 billion, according to the company's regulatory filings.

    Morningstar analyst Rick Summer stated that Facebook cannot expect to have the same post-IPO growth as Google Inc. (Nasdaq: GOOG), due to the fact that Facebook already has a dominant market share of its industry and a very high number of Internet users.

    Summer suggested that increased ad pricing could drive future growth.

    "Facebook is already a dominant Web platform and they've got significant Internet penetration today," said Summer. "Ad pricing is clearly going to be where their growth is going to come from."

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  • The Five Questions You Need to Ask Your Financial Advisor Right Now If you have a financial advisor you need to read this-especially if you are one of the 99%.

    That's everybody who isn't a gazillionaire. You may know a few people who fit this bill.

    Being a 99-percenter just means that you want to do better.

    In that regard, you're no different than the 1%. They just have more money and by extension more freedom than you.

    That doesn't mean they are any smarter.

    I know plenty of uber-rich people who are financially inept. You probably do, too.

    What sets people apart sometimes, though, is as simple as the questions they ask. True 1-percenters have this down pat-even if they don't have a gazillion dollars.

    Here are five things you need to ask your financial advisor today if you want to join them.

    If you do, you'll profit more consistently, reduce your risk and invest with greater peace of mind.

    And I have no doubt that you will join the real 1%.

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  • Dow Jones Erases 2012 Gains – What's Next? The "sell in May and go away" approach panned out this year as the month was not merry for markets.

    U.S. equities experienced a steep drop during May, enduring the worst monthly declines in two years. The Dow Jones Industrial Average fell 6.2%.

    A good part of May's decline was blamed on the ongoing European sovereign debt crisis that has swelled of late and shattered investors' confidence. But things on the home front are far from ideal.

    The flight from stocks flowed into the first day of June. The Dow plunged 274 points Friday, erasing all of the year's gains. Fueling Friday's fall was May's dreadful U.S. jobs report, which showed employers added just a trifling 69,000 in payrolls, less than half the expected 150,000.

    The Standard & Poor's 500 Index and Nasdaq both plummeted more than 2%. The Nasdaq has given back more than 10% since its late-March peak.

    Traders consider a 10% drop to be a market correction. Meanwhile, the S&P 500 is just a mere point above correction territory.

    Just 17 of the 500 companies in the S&P index ended higher on Friday.

    "The big worry now is that this economic slowdown is widening and accelerating," Sam Stovall, chief equity strategist at market research firm S&P Capital IQ, told the Associated Press.

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  • This is the Stock Market to Invest in Now Rumors are flooding Wall Street that a global economic slowdown is upon us. Europe is headed for a recession and the euro had its worst week in over a year against the dollar.

    If there is a slowdown, what does this mean for investors – and more importantly, where investors’ should put their money?

    Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business’ “Varney & Co.” Friday to tackle these questions. Check out this clip to find out if indeed the global economy is headed for a halt, which assets are best for your money, and which country’s stock market is the best place for investors to go... Read More...
  • Stocks Have You Worried? Here's What You Do Last Tuesday, USA Today ran a long Page 1 story under the headline "Invest in Stocks? Forget About It."

    The story's message was loud and clear: U.S. stocks have risen more than 100% from their March 2009 bear-market bottom - including 25% since October and 9% so far this year - but most retail investors still wouldn't touch them with a 10-foot pole.

    And with the Standard & Poor's 500 Index now on a losing streak - it's down about 5% from its April 2 high, according to Bespoke Investment Group LLC - you can bet that this "keep-stocks-away-from-me" sentiment has only intensified.

    I mentioned this to Keith Fitz-Gerald, our chief investment strategist, during a private briefing last week.

    True to form, Keith quickly said out loud what I had already been thinking.

    "BP, those investors are making the mistake of their lives," he said. "In fact, I'll wager that they're actually compounding an already-huge mistake. They missed out on the most-powerful stock market rebound since the Great Depression - and they did that after having sold out at the very bottom of the bear market that preceded it, meaning they locked in some of the most-horrific market losses most investors have ever seen."

    If you're in that group, don't fret: You can recover.

    In fact, Keith helped me lay out a game plan just for you - one that will let you take charge, put the odds in your favor and even capitalize on approaching opportunities that Wall Street will be slower than you to see.

    Let's take a look ...

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  • What Magazine Covers Really Say About the Stock Market Will Rogers once said that "good judgment comes from bad experience, and a lot of that comes from bad judgment."

    If he only knew.

    Then again, as one of America's famous humorists and social commentators, I suspect he "knew" all too well that history rarely works out the way people think.

    Take the late 1990s, for instance.

    As capital markets liberalized and the Internet Age began in earnest it was a time of great hope.

    Companies that had very little other than a ".com" after their name suddenly became worth hundreds of millions of dollars. Boo.com, Pets.com, and Kozmo.com are a few that come to mind.

    But were any of them worthy of all the hype?

    I was one of the few who didn't think so. Many people considered me a Luddite because of it.

    I wasn't trying to be difficult. I just reasoned that when everybody "knew something" that the end was near.

    How did I know?

    Well I didn't...exactly. But, I had a good idea thanks to something my grandmother, Mimi, used to call the "country club" test.

    After being widowed at a young age Mimi was a seasoned, successful global investor in her own right. She reasoned that when an investment or a trend began making the rounds over drinks, it was time to move on.

    And if she heard something around the poker table, she'd actually bet in the other direction.

    One day, I asked what her secret was.

    In no uncertain terms she told me to look carefully at the world around me and, in particular, at magazine covers.

    According to Mimi, they were the next best thing to a crystal ball. Because whatever is all over the covers is what's on top of the mind on the cocktail circuit -- not to mention fodder for the masses...who are usually wrong.

    Frankly, I thought Mimi had consumed one too many martinis. She loved them. Then, as my own career progressed, I began putting two and two together.

    It turns out it wasn't the gin talking. Mimi was right.

    Magazine Covers and the Stock Market

    I've never forgotten Mimi's advice and still study magazine covers intently to this day because they help me latch on to important market shifts and trends that others either miss or simply don't see coming.

    I am not so much interested in the stories themselves as I am in reading into the implications of headline copy. Many times I find out that what's being said in the headline isn't as important as what's being left unsaid.

    For example, do you remember this magazine cover touting the "death of equities" from Business Week's August 13, 1979 edition?

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  • Why Investors "Sell in May and Go Away" The time-value-of-money concept forms the basic foundation for all investments.

    And like anything having to do with people, there are rhythms to the stock market that are a function of time-- whether it is the time of the trading day or a particular time of year.

    One of these seasonal rhythms is so strong it has given birth to its own adage. Every investor knows it.

    It's the admonition to "Sell in May and go away," and it's a proven strategy that results in gains for investors.

    According to Sy Harding, author of the book "The Bear: How to Prosper in the Coming BearMarket:" "Over the long term, the market makes most of its gains each year in the winter, and when there is a serious correction, it most often takes place in the summer. We've known about that pattern for decades. The pattern has been confirmed by independent academic studies."

    The Logic Behind "Sell in May and Go Away"

    There are a myriad of reasons for this, most having to do with the cash flow aspects of the business calendar.

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  • The Views from Near and Far There are always two ways (at least two ways) to look at everything, including the market. In fact, whether one looks at the market from near or far makes a big difference in what you see.

    Like most complex equations with multiple inputs, synthesizing the different inputs is critical to what comes out on the other end of your equation.

    In this case, I'm talking specifically about two inputs - the perspective from near and from far away.

    And I am talking about how they affect one's view of what's happening in the market and where it's likely going to go next.

    Thursday was a good example.

    Early in the morning (in my travels), I saw that the Dow futures were up 82, and I thought, it could be a good day and we might finally tip the scales resting on the pivot point fulcrum we've been teetering on for a couple of weeks now.

    As the morning rolled on, before the open, company after company reported earnings, and they all handily beat consensus estimates - some by huge margins.

    From a distance, if that's all you saw, you'd be inclined to think, as I did, that the market was headed for a great day.

    But that was just the far view...

    Closer to the action (which I wasn't always seeing, because I was in transit), as one after another earnings report came out, again before the opening, the futures ticked down, lower and lower.

    I didn't catch the open, so let's pretend I still don't know what happened at that moment.

    The opening is important because sometimes it sets the tone for the day, especially if the futures are up big and the market opens up strong and rises steadily from there.

    Of course, that's not always true, especially these days. But stay with me.

    Later in the day, I'm walking past a TV monitor that has CNBC on, and I see the Dow down 116. That's a far view, again.

    We ended up rallying towards the end of the day, and the Dow closed down only 68 points.

    But again, that was the view from afar.

    Sure, I see all that, and take the far view. But, I also take the near view.

    Up close, earnings look great, and the U.S. looks like it's "basing" and laying the groundwork for reasonable growth.

    All that is tentative, however, when we look closer.

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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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