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Welcome to Money Morning - Only the News You Can Profit From.


Wednesday's "Earnings Beat" Makes This The Perfect "Bad-Market" Tech Stock

In last week’s Private Briefing report Our Experts Show You the Stocks to Pick in a ‘Stock-Picker’s Market’,” Money Map Press Chief Investment Strategist Keith Fitz-Gerald identified SanDisk Corp.(NasdaqGS: SNDK) as one of three stocks to buy in the face of the stock market sell-off.

And now we see why…

  • U.S. Economy

  • What's In Store for U.S. Stocks in Light of Greece's Tragedy? The recent month of February was quite interesting for U.S. stocks, because while the Dow Jones Industrial Average rose 2.6%, it didn't exactly take a direct route to those gains: There were eight separate triple-digit moves in the Dow, both up and down.

    At the root of that volatility were political and economic developments that challenged the rationale for the huge rally out of the March 2009 low. Bulls were basically rethinking their beliefs that the home-price plunge had abated, employment was on the verge of a big turnaround, governments could cut taxes and boost spending without end, and that interest rates would remain at zero for years.

    I had prepared subscribers for much of this turmoil. Back in early November, I highlighted signs of trouble in the market for government debt well before the troubles in Dubai and Greece came to a head. In December, we started a dialogue on what to expect as the U.S. Federal Reserve withdrew liquidity from the economy and lifted interest rates. The upshot was a series of letters detailing why you should expect the first nine months of the year to trade flattish with a lot of volatility.

  • A Year After the Bear-Market Bottom, Investors Must Still Pursue Profits – Without Ignoring Risk With the Standard & Poor's 500 Index up nearly 70% from the post-financial-crash low it set on March 9, 2009, U.S. stocks on Tuesday recorded their second-strongest showing ever for the first 12 months of a bull market.

    But that near-record-setting performance brings to light two key issues.

    • First, despite the numbers that stand as evidence of the market's stunning surge, many still-shell-shocked investors refuse to label this as a true "bull market."
    • And second, no matter how great a market's performance has been, the real question to answer is "where do we go from here ... and how do I position myself to maximize possible returns while mitigating risk as much as possible?"
    Money Morning turned to several experts - including Money Morning Chief Investment Strategist Keith Fitz-Gerald, and respected market researcher Bespoke Investment Group LLC - for some perspective on both these topics.

  • The Dividend Stock Recovery: Get Ready for a High-Yield Bonanza It's been a tough time for income investors lately.

    Ten-year Treasuries pay less than 4%. The Standard & Poor's 500 Index yields just over 2%. Money market fund returns are microscopic, paying an average of just 0.05%. (At that rate, it will take your money one thousand years to double.)

    What should you do?

    Take a look not at the stock market, but inside it. The S&P 500 may yield 2.1%, but many individual stocks are yielding far more. In addition, yields are about to arch higher.

  • Which Stocks and Sectors Will Shine as Market Fear Subsides? A lot of my commentary lately on the markets has been relatively short-term oriented. Today let's take a moment to pan back and consider the weekly perspective, which is rather benign, even positive.

    From this point of view, stocks are broadly recovering from their most oversold condition since March of last year -- and the release of the energy stored up then persisted at near-full strength for three months.

    To find out which stocks are positioned for profit, click here.

  • AIG Could Seek Another Bailout as it Struggles to Return to Profitability American International Group Inc. (NYSE: AIG), the insurance giant that received billions in federal bailout money, on Friday reported an $8.9 billion fourth-quarter loss. AIG dismissed the loss as part of its rebuilding process, but it also acknowledged that it may require even more government financing.

    The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble - the biggest quarterly loss in corporate history - but at $65.51 a share, it's still much higher than analysts predicted.

    Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.

  • Weak Job Market and Low Inflation Stall Fed's "Exit Strategy" Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.

    Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.

    The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions -- including low rates of resource utilization, subdued inflation trends, and stable inflation expectations -- are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.

  • It's Time to Tackle Government Pay It's fairly well known that the U.S. public sector is paid more than the private sector. What's less well known is that the gap between federal-employee pay and benefits and private-sector pay and benefits is increasing - by about 18% over the last decade.

    Given the current level of U.S. unemployment and the size of the budget deficit, it would appear that some economies could be made. In short, it's time to tackle government pay.

    After all, if Greece can economize, so can the United States...

    To see why government pay cuts are justified, read on... Read More...
  • Is it Time For Investors to Beware of the Bear? With U.S. stocks down about 5% from their 2009-2010 rally peak, investors basically want to know one thing: Is this just a correction, or are they looking at a potentially long bear market?

    That's no small question. U.S. stocks could be experiencing one of three scenarios at present. They could be:

    • Undergoing a short-term "correction" of its 2009 gains.
    • Beginning a multi-month "pause."
    • Or starting a new bear-market cycle.
    These aren't just arbitrary labels. For instance, a typical "correction" lasts but a month or two, with average declines of 8.5% to 10% on the Standard & Poor's 500 Index. A multi-month pause, by contrast, could last eight to 15 months, and involve an S&P 500 decline of 10% to 18%.

    But a new bear market is an entirely different animal. A bear-market cycle could last as long as two years and could be marked by a decline of 20% or more.

    To learn the warning signs of a new bear market, please read on ... Read More...
  • Latest Report Shows the Jobless Recovery Still Endures Stocks have staged surprise rebounds after seemingly poor payroll reports half a dozen times in the past year. But the one time that there was better-than-expected job news, on Dec. 5, the market tanked. Go figure - it's a great example of how upside down the logic is on Wall Street.

    To help us interpret the jobs report of last week, I turned to my favorite independent labor analysts, Philippa Dunne and Doug Henwood. Here's their view of the latest numbers, which they considered the most positive in months - despite the many problems highlighted by the latest jobs report.

  • The Five Factors That Could Rescue U.S. Stocks When the stock market is enduring as much trouble as it has been lately, it pays to remember that there are still many positive catalysts that are in place and working to buoy securities prices.

    Let's take a few moments to consider the top candidates:

    • A Friendly Fed: The current U.S. Federal Reserve under Chairman Ben S. Bernanke is the most accommodative in history and is likely to keep short-term interest rates at or near zero for the remainder of this year. Occasionally there will be rumblings of an increase - as there was in The Wall Street Journal last Monday, but they are likely just smoke screens.
    To find out about the other four factors - as well as three possible profit plays - please read on ... Read More...
  • How Banks Are "Crowding Out" the U.S. Rebound When U.S. President Barack Obama unveiled the $787 billion "stimulus" bill of extra spending and modest tax cuts last year, it became clear that the U.S. budget deficit was going to eclipse the 10% of gross domestic product (GDP) level for at least one year (and, as we now know, probably three years).

    On those grounds, I opposed the "stimulus" - a position that was a lot less popular then than it has since become. However, as I'll show you below, it now looks as if I was right - and the implications for the U.S. economy are highly worrisome.

    You see, the theory postulated by economist John Maynard Keynes holds that the extra spending stimulates additional output fails to address the question of where the money comes from.

    Government cannot create wealth - it has to borrow it. If, before the stimulus, government finances were in good shape, as was the case in China, then stimulus does indeed stimulate: The modest budget deficit that it causes is easily financed, and the extra spending creates some jobs and maybe some useful infrastructure, depending on how well targeted it is.

    In the United States, however, government finances were in a mess before the stimulus began.

    To find out how banks are blunting the recovery, read on .... Read More...
  • Four Ways to Profit From a Business-Driven Rebound Last week we learned that the U.S. economy expanded by a whopping 5.7% annual rate in the 2009 fourth quarter - the biggest jump since 2003. This was well ahead of the 4.5% consensus estimate and solidly beats the 2.2% growth rate achieved in last year's third quarter. The turnaround is the largest in almost three decades.

    The main driver of the performance was a big slowdown in the rate at which businesses were drawing down their inventories. This alone contributed 3.4% to overall growth in the quarter. Paul Ashworth at Capital Economics in London believes that inventory rebuilding will continue to boost gross-domestic-product (GDP) growth for another two or three quarters.

    But what happens after that - especially after the stimulus spending out of Washington winds down later this year? Will this rate of growth continue?

    Investors who know the answer to that question will be the best-positioned to profit.

  • CIT Taps Former Merrill Chief Thain as New CEO In a move that unites two prominent casualties of the financial crisis, CIT Group Inc. (NYSE: CIT) ended a prolonged search by naming John Thain, the former chief of Merrill Lynch & Co., as its new chairman and chief executive officer.

    Thain, who left Bank of America Corp. (NYSE: BAC) 13 months ago amid controversy over its takeover of Merrill, will have his hands full rebuilding CIT, an embattled commercial lender that nearly collapsed in 2009.

    CIT still operates under restrictions that were imposed after receiving $2.3 billion in funding under terms of the Troubled Asset Relief Program (TARP). Those measures include being banned from the commercial paper market, its traditional source of funding.

  • Buy, Sell or Hold: Paychex Inc. Offers a Chance to Profit From the Paradigm Shift in Employment The U.S. labor picture may not be clear, but investors can profit by acquiring shares of Paychex Inc. (Nasdaq: PAYX) to take advantage of the new employment paradigm.

    As the former head of credit and analysis for ADP Capital Management, the investment arm of Automatic Data Processing (Nasdaq: ADP), I know the outsourced payroll industry from the inside out. ADP - a company in which I have kept the stock I received - is the leader in the payroll sector. It focuses on the larger and more stable companies in the United States.

    Today, taking into account the latest employment dynamics, and the massive change in the structural characteristics of the U.S. economy, we are going to focus on an ADP competitor - Paychex Inc.

  • Oil Prices Set to Surge to $90 a Barrel by Midyear, Retest Record High in 2011 In its 2010 forecast series, Money Morning predicted the price of oil would reach $100 a barrel by the end of the year. And while crude prices stalled in January, a growing body of evidence suggests that call may not be far off.

    Oil prices rose above $80 a barrel for the first time ever on Sept. 13, 2007. From there they jumped 84% to $147 a barrel in July 2008. Then, in 2009, they surged more than 133% from a low of $34.03 a barrel in February to $79.39 a barrel at the end of December.

    The price of crude again topped out above the $80 a barrel mark in early January, but has since slid back down to about $75 a barrel. However, some analysts believe that this is just period of temporary cooling before prices reignite and soar to $90 by midyear, and as high as $200 a barrel by 2012.