Archives for June 2012

June 2012 - Page 8 of 16 - Money Morning - Only the News You Can Profit From

FOMC Meeting: Will Ben Print?

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Most investors expect Federal Reserve Chairman Ben Bernanke to announce more stimulus when the FOMC meeting concludes tomorrow (Wednesday).

But what if he doesn't?

Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business' "Varney & Co." Tuesday to discuss this outcome with host Stuart Varney.

"Keith, what happens if Ben doesn't print any money, makes no such announcement, and the Germans don't agree to let Europe print any money," asked Varney. "What happens?"

To hear what Keith said investors can expect from the Fed, and the market reaction, watch this video.

Keith also analyzed the Microsoft Corp. (Nasdaq: MSFT) announcement that it will release a tablet to compete with the Apple Inc. (Nasdaq: AAPL) iPad.

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How Shorts on Gold ETFs are Nearing a Big Squeeze

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There has been an increasing number of investors taking short positions on gold exchange-traded funds (ETFs) – but they better watch out for what's ahead this summer.

In fact, each day that passes brings us closer to what could be the day of reckoning for those holding massive short positions on the ETFs for gold, silver, copper and related investments.

You see, the Federal Reserve Bank of Kansas City in late August will host an economic policy symposium in Jackson Hole, WY. Speaking at the conference, as he did in August of 2010 when he introduced the second round of quantitative easing, will be Federal Reserve Chairman Ben Bernanke.

There is much to believe that QE3 – if not declared sooner – could be announced at Jackson Hole. Should this happen, the prices of gold, silver and copper will likely soar like back in 2010.

That means anyone holding shorts on gold ETFs or similar investments could find themselves scrambling to cover their positions.

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These Teen Geniuses are on a Path to Change the World

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He's barely old enough to shave… but Jack Andraka is already hard at work helping America win the war on cancer.

Just last month, the Baltimore-area whiz kid took top honors at a key contest hosted by Silicon Valley legend Intel Corp. (NasdaqGS: INTC). He invented a low-cost, cutting-edge cancer screen that could save thousands of lives every year.

Andraka now ranks as a rising star and radical change agent who could have a huge impact on high tech and medicine. He also pocketed a cool $100,000 in prize money.

And all at the ripe old age of 15…

He's one of the reasons why I say it pays to remain upbeat about America's future. He and these six other youngsters I'm about to tell you about demonstrate how much innate talent we have in this country, and I believe that's one reason why we can't help but succeed in the long run.

Don't get me wrong. America faces big challenges – rising debt, chronic job losses, and political gridlock, to name but a few.

Yet we're also the one country that steadily produces bright young entrepreneurs who change the world around them. Where others see obstacles, these teens see opportunities.

They go on to launch the Googles, Apples, and Microsofts of the world, and they leave a trail of wealth behind them.

As investors, we want to spot this talent before others do. That's how we maintain the inside edge that vaults us ahead of the pack when new investment opportunities come along.

Fact is, kids today may not be any smarter than the Edisons and Fords of their day. But in the Era of Radical Change, they have the tools – sensors, computers, software and more – that scientists of old could only dream about.

Today, I want to introduce you to the seven young geniuses who are pushing the limits of science and high tech.

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How To Spot Money-Making Opportunities-Even in Down Markets

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"What it comes down to, Bill, is this: Investors who want to survive the market volatility, uncertainty and downdrafts that absolutely are headed our way must drastically shift the way they think about the capital markets."

That was the point that Shah Gilani kept coming back to over and over during our most recent chat. Shah, a retired hedge-fund manager and Capital Wave Forecast editor, was in town for a couple of days for a series of strategy sessions.

In the three years since he's joined us, I've found that during Shah's visits to our offices, work eventually stops; the longer he speaks, the bigger his audience tends to get. So, as is our custom, we stole away from the meetings to talk about the markets.

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What is the "Fiscal Cliff"?

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Now that we've explored the dangerous repercussions of the looming Taxmageddon, investors have another important question: What is the "fiscal cliff"?

Fiscal cliff anxiety has increased since May 22 when the Congressional Budget Office spread some gloom and doom by citing a potential 2013 recession.

As we reach 2012's midpoint, we still have November's presidential election and a ticking clock for Congress and the president to reach an agreement on policy issues by year's end.

The likelihood of this doesn't look good. That's why now's the time to prepare for the potential effect from the fiscal cliff.

What is the Fiscal Cliff?

You can thank Federal Reserve ChairmanBen Bernankefor coining the phrase.

Fiscal cliff refers to the coinciding action of tax increases and spending cuts that will activate on Jan. 1, 2013 unless Congress and the White House agree and take some action to either delay or change them.

Should these two actions marry, you'll watch $7 trillion tagged onto the nation's debt over the next decade, or about $500 billion next year, according to CNN.

How will investors be impacted?

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Stock Market Today: This Bank Stock Faces More Backlash

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The Greek elections did not generate any significant movement in the stock market today, which is especially bad news for one particular bank stock that's taking a lot of heat from investors.

Greece decided not to leave the euro Sunday as the pro-bailout New Democracy party narrowly won elections tallying just over 30% of the vote. Investors had feared a win by an anti-austerity movement could lead to a breakup of the euro and possibly the European Union.

That's all good news except stock markets opened lower Monday following the announcement.

Maybe investors really wanted the worst to happen concerning Greece, insuring more action by the Federal Reserve when they meet later this week. QE3 is still a possibility but it seems that some are disappointed by the Greek elections, which could just be a postponement to Greece's eventual "Grexit" from the euro.

European markets rallied following the election results, but by the time U.S. markets opened investor sentiment had become neutral. It seems that until the Fed's meeting concludes on Wednesday investors will be stuck waiting for more news out of Europe to guide them.

One sector that has been vilified recently is financial stocks, and today's headliner is Morgan Stanley (NYSE: MS).

The Wall Street Journal this morning highlighted Morgan Stanley for its leading role in Facebook's IPO debacle.

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Eurozone Bailout Package: What's Next for Greece

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The question regarding whether or not Greece will stick with the Eurozone got at least a short-term answer after the country's elections Sunday, when the conservative, pro-bailout New Democracy party narrowly won the crucial vote.

But Greece's trials and tribulations are far from over, and the relief is temporary. Concerns are increasing over the global cost of a Eurozone bailout package as the mounting woes in Spain and Italy persist.

Citizens of Greece are clamoring for change, but many recognize that the election results are no quick fix. There was no cheering in Greece and global markets reacted cautiously following the vote.

Borrowing costs across Europe rose with Spain taking the lead. The yield on Spain's 10-year bonds spiked to a euro-era high of 7.18%. A reading above 7% raises a red flag that a nation may be approaching the need for a bailout.

Italian bonds also sold off on fears that if Spain is in need of a bailout, an Italy bailout package might not be far off. Italian bonds' 10-year yields are around 6%.

While the Greek election results staved off a calamity, they failed to fix the wider problems facing Greece and its struggling neighbors.

Moody's Analytics' chief economist Mark Zandi told USA Today, "We dodged a bullet, but they've got more bullets coming."

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How to Short Stocks Along With Four Good Candidates

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With Europe on the ropes and the U.S. economy in shambles, it's important to remember that there are two sides to every trade.

Tapping into upward momentum alone is not the only way to profit. Markets can and do head south on a regular basis. Investors who fail to grasp this are leaving a lot of money on the table.

How much?

Nobody knows for sure. But stories about famous traders like George Soros who broke The Bank of England and reportedly scored a cool $1 billion profit abound.

People also speak in awe of John Paulson who made billions off the housing crisis and about Doug Kass of Seabreeze Partners who is about as gutsy as they come when it comes to making hay when the sun doesn't shine.

If you've never heard the term before – and many investors still haven't – shorting stocks involves selling stocks before you buy them and profiting as they drop.

Why would you do that?

Shorting overvalued stocks can lead to profits when others are crying in their beer. It's a way to keep you fully invested or otherwise in the game, especially when the markets are as unsettled as they are right now.

But you have to be careful. Despite the fact that shorting stocks can be a quick path to riches, not all stocks are the same when it comes to betting against them.

In that sense, short selling (at least the way I encourage investors to practice it) is no different than regular upside investing.

You want to diversify your holdings and use very strict risk management to control your exposure by not having more than 2.5% of your assets in any one position or 20% of your holdings in any given sector.

You want to short stocks in conjunction with the rest of your holdings, not in lieu of maintaining a properly concentrated portfolio. Despite what you may think, shorting stocks is not a game for market-timers or an exercise in timing.

As for how you select your target, that's not really different either.

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Options Trading Strategies: Taking the Mystery Out of Puts and Calls

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The hardest part of learning about options trading strategies is getting used to the language. Once you nail that, you're most of the way there.

Here are the terms you are going to need to learn to understand and use options. Keep in mind that the best way to master jargon is by applying it in real situations.
Let's jump right in by first explaining puts and calls.

These are two of the key fixed ingredients of an option – fixed, meaning they never change. They tell us what the option stands for and what it is worth.

A call is a contract that gives its owner the right to buy 100 shares of stock at a fixed price (known in advance). A put is just the opposite, and completes the transaction. It's a contract giving its owner the right to sell 100 shares of stock.

These concepts are the keys to exactly what an option is.

An option is a contract granting you as buyer control over 100 shares of stock. This is always the case – one option per 100 shares.

So when you buy a call, one major benefit is that you control 100 shares. This means that:

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