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How to Rent a Fortune

With a 37% gain in The Blackstone Group LP (NYSE: BX) since late July, we’ve done really well with our targeted investment in real estate.

And with very quick gains of 9% in Brazilian-food processor BRF SA (NYSE ADR: BRFS), 5.2% in South American agricultural play Adecoagro SA (NYSE: AGRO) and 1.6% in high-tech agribusiness player  Neogen Corp. (NasdaqGS: NEOG), we’re doing well with our plays on (pockets of) accelerating U.S. inflation.

Today we’re going to combine the two concepts and employ a very simple formula we believe will add to your profits…

January 2012 Archives - Money Morning - Only the News You Can Profit From- Money Morning - Only the News You Can Profit From.

  • Amazon.com Inc. (Nasdaq: AMZN): Growth Phase Pinches Profits, but Investors Should Ride it Out

    Internet retailer Amazon.com Inc. (Nasdaq: AMZN) reported soaring revenue and limited profits today (Tuesday) – but investors shouldn't be discouraged by the low earnings as the company invests in future growth.

    Amazon.com reported net income of $177 million, or 38 cents a share, compared to net income of $416 million, or 91 cents a share, for the same period the previous year – a 58% plunge. Revenue jumped to $17.4 billion, a 34% rise from the $12.95 billion in 2010's fourth quarter.

    While revenue fell slightly short of Wall Street's expectations, earnings were more than double the predicted 17 cents a share. Amazon.com had given fourth-quarter guidance with a revenue range of $16.5 billion to $18.7 billion.

    Amazon.com revenue got a healthy boost from sales of Kindle Fire, the tablet and e-reader running Goolge Inc.'s (Nasdaq: GOOG) Android software. Total sales of the Kindle Fire and other e-reader devices increased 177% in the nine-week 2011 holiday season compared to the same period in 2010. The company reported that Kindle Fire is the No. 1 selling product available on Amazon.com since it was introduced in November.

  • Case-Shiller Home Price Index: U.S. Housing Market Nearing Bottom in 2012

    The S&P/Case-Shiller Home Price Index showed another decline for November 2011, its third straight monthly loss, as the U.S. housing market trends toward a bottom this year.

    Home prices in both the 10-city and 20-city measures of the Home Price Index fell 1.3% from October. Prices fell 3.6% and 3.7% from November 2010, respectively.

    The Case-Shiller Home Price Index has fallen steadily since September. Prices in October fell 1.1% and 1.2% from the month before for the 10-city and 20-city indices.

    The home price report was on par with what economists expected, as they see this year bringing an end to drastic price declines.


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  • Not Much of a Debate: Inflation is Part of the Plan

    Forget about lost decades. Forecasts that we'll be turning Japanese couldn't be further from the truth.

    Here's why.

    It's simple, really. Deflation is not in the interest of anybody in power, so it's very unlikely to happen.

    The U.S. Federal Reserve's policy move to target inflation last week just re-emphasizes this point.

    That's not to say deflation is a bad thing for everybody.

    For savers and those living on fixed incomes, deflation would be a very good thing indeed.

    Their income would gradually increase in real terms, and their savings would become steadily more valuable. Holders of Treasury bonds would also gain mightily from deflation.

    However, the very people who would gain from deflation are not in power.

    The People's Bank of China can't vote in the U.S. (yet!), Ron Paul is not president, and there is not an organized and powerful savers' political movement. After all, this is not Germany or Japan!

    Meanwhile, in the real world, the U.S. government is spending far more than it takes in, and its debt is rising to dangerous levels. This has been happening on a bipartisan basis since at least 2001.

    The Tea Party may have elected a Congress committed to reducing spending, but none of the battles of 2011 actually reduced spending – they just slowed the rate of growth somewhat.

    Since much of the debt is borrowed long-term at low interest rates, the best way to reduce its burden on future generations is to encourage inflation.

    Savers may lose out on the deal, but to those in Washington, the idea of inflating our way out of debt is irresistible.

    Of course, sometimes we can depend on an independent central bank to resist this temptation. But at present, Fed Chairman Ben Bernanke is committed to near-zero interest rates in his fight against deflation.

    Now you don't have to be a conspiracy theorist to realize that, if the power structure is committed to at least moderate inflation, inflation is what you are going to get.

    In fact, it is already brewing.

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  • Three Luxury Companies That Can Bring You Closer to the Good Life

    A lot of consumers are hurting right now, but you wouldn't know that looking at the earnings of major luxury companies.

    Many luxury companies like LVMH Moet Hennessey Louis Vuitton SA (PINK: LVMHF), Burberry Group PLC (PINK: BURBY), Hermes International SCA (PINK: HESAF), and Coach Inc. (NYSE: COH) had a stronger-than-expected 2011 campaign.

    Better still, they're set to expand on that success this year.

    U.S. sales are regaining momentum and emerging markets – led by China – have been an outright boon for luxury companies.

    Although you may not have realized it, China is now the world's second-largest market for luxury goods, behind Japan. And it could become the largest as soon as this year.

    China's National Statistics Bureau says that there are now more people living in the country's towns and cities than in the countryside – making China a predominantly urban nation for the first time in history.

    Worker pay is rapidly rising in China, with officially mandated base wage minimums up an average of 22% in 2011. And a new class of workers as well as a wealthy elite are driving luxury sales globally.

    Two good examples of this are Burberry and Compagnie Financiere Richemont (PINK: CFRUY).

    Luxuriating in Success

    Burberry, the U.K's largest luxury-goods maker, reported third-quarter sales that beat analysts' estimates, and said it sees no reason to change full-year forecasts even in light of a "challenging" economy.

    Burberry's revenue in the three months ended Dec. 31 climbed 22% to $882 million (574 million pounds). Asia-Pacific sales climbed 36%, while sales in Europe surged 20%. Sales rose 4% in the Americas and 31% in the rest of the world.

    The company said it can weather any fallout from Europe's sovereign-debt crisis because Chinese consumers will help offset losses.

    Chinese customers alone account for 10% of Burberry's total sales.

    Swiss-based luxury goods group Compagnie Financiere Richemont also has benefited from China.

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  • Facebook IPO: Where's the Love, Mark Zuckerberg?

    The long-awaited Facebook IPO is finally arriving – and it's time for Mark Zuckerberg to share the love.

    But most of Facebook's 800 million users won't get a chance to grab a piece of the multibillion-dollar deal.

    Instead, the shares will be reserved for the wealthiest investors, not the loyal users who have fueled Zuckerberg's rise to riches.

    Before Facebook, Zuckererg was just a college student….

    Today, Zuckerberg's net worth is $17.5 billion and he's ranked No. 52 on the Forbes list of billionaires – No. 22 in the United States – and No. 9 on the Forbes list of powerful people.

    "Zuckerberg made history with Facebook – and now he's the king of social media and social networking – the man with the Midas touch," said Money Morning Capital Waves Strategist Shah Gilani. "But now it's time for him to give some of the gold that he's earned as the head of Facebook back to the people who helped make that happen. They're the ones who have brought his company to the forefront. They're the ones who should be participating in this."

    So, how could Zuckerberg use the Facebook IPO to give back to those who've helped him become an Internet legend?

    Gilani has a plan for that…

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  • Monday's STOCK Act Vote Could End a Major Congressional Perk

    Members of Congress could be one step closer this week to losing one of their most profitable perks, thanks to the STOCK Act (Stop Trading on Congressional Knowledge Act).

    The Senate will hold a procedural vote today (Monday) on a bill that prohibits Congress members from using nonpublic information to make stock transactions – known as "insider trading" when conducted by corporate insiders. Today's vote could put a time limit on passing the bill, which the Senate will continue debating this week.

    Congress has faced increasing backlash lately for its growing list of financial advantages over the Americans it represents. A CBS News' "60 Minutes" program in November 2011 exposed Congress insider trading – elected representatives trading stocks related to hot topics being debated in Congress before information had been disclosed to the public.

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  • Who Wins with the Facebook IPO

    Money Morning Capital Waves Strategist Shah Gilani joined Fox Business' "Varney & Co." to talk about the Facebook IPO. The social media giant is rumored to be filing Wednesday for an IPO-but most retail investors won't be able to get a piece of the action until the secondary market, meaning they're locked out of profits. Gilani shared with host Stuart Varney who the IPO shares will go to, and what CEO Mark Zuckerberg should do to include the average investor in the profits. Gilani discusses what the IPO will mean for the tech industry in 2012.

    Gilani also talked about how a win for Mitt Romney in the Florida primary election Jan. 31 would affect U.S. markets.

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  • Buy, Sell or Hold: 100 Billion Reasons To Buy Apple Stock

    Apple Inc. (NASDAQ: AAPL) is one of the world's largest companies based on market capitalization.

    Cupertino, CA-based Apple just released one of the best earnings reports in the history of capitalism.

    In short, they crushed it-sending Apple stock to a fresh 52-week high.

    Take a look:

    In a record setting first quarter, Apple sold an astounding 73 million devices, including:

    • 5.2 million Macs.
    • 15.4 million iPods.
    • 37 million iPhones.
    • And 15.4 million iPads.

    Keep in mind that's just devices. Apple also takes a 30% cut of all the music, apps, movies and books sold in the online iTunes Store, and its retail operation is a gem within itself.

    All told, it's a remarkable growth story – and one that's far from over.

    But that is only part of why you should buy Apple stock. Its balance sheet boasts 100 billion more reasons showing the company is a solid "Buy."

    Ironically, Apple has so much cash its stock could actually be considered cheap.

    Apple reported $97.6 billion in cash, but given the rate the company was selling products in the fourth quarter, that figure is surely higher now.

    Today, Apple's cash-on-hand has to be around $100 billion. This mounting pile of cash has been the source of much speculation in recent years, and the issue was again raised by analysts last week during the earnings conference call.

    Judging from Chief Financial Officer Peter Oppenheimer's response, it was clear the company has plans for it.

    According to Oppenheimer:

    "We're examining all uses of our cash balance, what we might do in the supply chain, what we can do from an acquisition perspective and otherwise. Since I don't have any perspective to share with you today, specifically on dividends or buybacks, other than again, we are actively discussing the cash balance."

    It's my expectation Apple will…

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  • Congress' Next Bad Idea Would Destroy the Shale Boom

    Last week, six Members of Congress, led by Rep. Dennis Kucinich (D-Ohio), introduced the "Gas Price Spike Act."

    With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a "Reasonable Profits Board" that would control the profits of oil and gas companies.

    Under the bill, this board – made up of unelected bureaucrats – could apply a "windfall profit tax" on the sale of oil and gas at rates of 50% to 100%. These taxes would take aim at corporate profits that the board feels are "unreasonable" or "unfair."

    Congress would then appropriate the money raised to subsidize electric vehicles and mass transit.

    Now you may want to take a second and breathe, because this is no satire.

    Oh, and the proposed bill offers no specific guidance on how the board would determine what represents a "reasonable profit." How do we even begin to define this term? Are some profits more unreasonable than others? And who decides what is "reasonable?"

    Apple Inc. (Nasdaq: AAPL) last week shattered earnings expectations. The electronics company has a profit margin north of 20%; meanwhile, the oil and gas industry has a sector-wide margin a little less than 10%.

    And though the price of oil and gas will rise in the future – and despite the name of the bill – a reasonable profits board would do nothing to improve consumers' plights at the pump.

    In fact, it would only make things worse for people like you and me.

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  • How Online Gamers Can Give Biotech Investors Big Gains

    A group of online gamers are onto something big. Very big.

    So please don't think these "hobbies" are a complete waste of time and energy.

    An online game called Foldit has actually helped to deliver a medical breakthrough that could change the future of biotech research.

    How are these two connected?…

    It starts with proteins, which are essential to every aspect of our daily lives.

    As it turns out, medical research has revealed that serious ailments like Alzheimer's and Parkinson's are linked to proteins – specifically to improperly folded proteins.

    Here's why: Think of proteins as tiny biochemical machines that assemble themselves to do certain jobs. The process by which proteins take the shape that governs their activity is called "folding."

    Now just imagine how much healthier the human race would be – and how much longer we could all live – if we could make improperly folded proteins fold properly.

    It would change the face of medicine.

    How Foldit Could Help Change the World

    No, the Foldit players didn't go that far. But they did push biotech in an exciting new direction.

    Foldit allowed the gamers to "play" at arranging proteins on their home computers. The goal was to win the game by finding the best-scoring combinations, those that used the least amount of energy.

    An article in the Jan. 22 online edition of the scientific journal Nature noted that researchers kept the game interesting by posting new multicolored puzzles for the gamers to solve.

    In video interviews the players reported a near-obsession with the game.

    Not to mention pride in the outcome – they helped the researchers redesign a protein with a nearly 1,700% increase in activity.

    This is a classic example of the type of technology that will transform our lives in the Era of Radical Change.

    It means that in homes and apartments around the world, gamers could go online to help create The Next Big Biodrug.

    For investors that means a new field with lots of opportunities in the near future when scientists begin to work directly with proteins to repair or eliminate damaged cells that can cause disease.

    Who knew curing cancer could be so much fun?

    They may be able to design personalized and more-precise drugs. They could even stop a deadly flu epidemic in its tracks.

    But don't take my word for it…

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