Archives for August 2012

August 2012 - Page 17 of 20 - Money Morning - Only the News You Can Profit From

Sorry...Facebook (Nasdaq: FB) is Still Only Worth $7.50 a Share

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The technorati took me to task. So did Wall Street.

They were agitated by an article I wrote in May explaining why the world's most hotly anticipated IPO, Facebook (Nasdaq:FB), was worth a mere $7.50 a share at best.

"Out of touch," one of the critics said. A "luddite" charged another.

"Doesn't grasp the significance of so many users," one Wall Street insider opined–who happened not coincidentally to work for one of Facebook's investment bankers.

Since then the social media darling has fallen another 31% to nearly $22 a share. Ten weeks later, Team Hoodie hasn't done much to merit an upgrade either.

Sorry guys…Facebook is still only worth $7.50 a share – likely less.

Here's why.

The Cold, Hard Facts for Facebook

At the time I reasoned that Facebook's valuation simply didn't merit the 100 times earnings IPO price of $38 a share based on comparable figures from Google (Nasdaq: GOOG) and Apple (Nasdaq: AAPL).

But there were a host of other factors as well.

I cited falling revenues, a lack of control over the mobile market channel, increasing distrust from customers who were voting with their feet and the concurrent departure of major advertisers like GM which will cost Facebook an estimated $10 million a year in revenue alone.

I also posited the assumption that Facebook would be unable to maintain the 100% plus growth that many investors believed was baked into the proverbial cake.

Google couldn't. Apple couldn't. And both of them are real businesses.

That's the key…real businesses.

Fact is, Facebook still hasn't figured out what it wants to be when it grows up.

Despite the fact that CEO Mark Zuckerberg does have some excellent advisors, the company isn't going to be able to hide the fact that its "business" is nothing more than a colossal time-wasting collection of personal interest items for much longer.

Other problems abound, too. All of them point to a lower share price.

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What EROEI is - and How to Use It

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In Friday's Oil & Energy Investor, I began a discussion about the importance of a metric known as Energy Returned on Energy Invested (EROEI).

As our research disclosed in the "Your Future: The Ultimate Pyramid Scheme" documentary, the factor is becoming a substantial element in the availability and cost of energy in general.

But oil is the most critical energy source in this discussion.

Our research has found that the situation will not be improving. We will be reaching a point when our need for exponential growth in energy, the environment, and the economy will become unsustainable. From there, we will experience a tipping point, and then a major collapse.

This will require that each of us change the way we structure our investments, secure our assets, and provide for our families.

However, in the interim, there will also be some amazing opportunities to make unparalleled profits in the energy sector.

And, in all of this, EROEI will be figuring in important ways.

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Fiscal Cliff 2013 Fears Already Stifling U.S. Economy

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Fiscal cliff 2013 remains poised to throw the struggling U.S. economy into recession when tax increases and spending cuts kick in Jan. 1 – which has scared companies away from spending any more money than they have to this year. Even worse, the country's fiscal cliff fears have increased as a bevy of fresh data […]

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Maxwell Beats EPS, Meets Revenue - Analyst Blog

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Energy storage and power delivery products maker, Maxwell Technologies Inc. (MXWL) reported second quarter 2012 adjusted earnings (earnings before non-recurring items, but including stock-based compensation expense) of 9 cents per share, higher than the Zacks Consensus Estimate of a penny. Results also came above the year-ago quarterly earnings of 4 cents per share. On a […]

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Summer Slump in Silver Prices Closer to an End

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Silver prices have suffered this year as the white metal has lost its luster as a safe haven investment, but the pullback has slowed and may be bottoming out.

Cash has gained some allure over metals, but according to FX Empire, as bullion prices near support levels buying interest has been on the rise.

In July, silver prices broke out from a three-month price slump and closed up 1.1% to $0.302.This came after fourth months of consecutive losses: 0.5% (June), 10.5% (May), 4.5% (April) and 6.2% (March).

Silver prices ended last week on a positive note, up $0.54 to $27.69. Futures and options players made bullish bets at the end of last week on the commodity based on speculation for additional stimulus from the Federal Reserve.

This week, silver prices have continued their rise. The metal's up 0.3% to $27.84 an ounce.

Can this uptrend continue? Here's what to expect from silver prices in the near term.

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Jim Rogers Issues Dramatic Warning

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In a riveting interview on CNBC, legendary investor Jim Rogers warned Americans to prepare for "Financial Armageddon," saying he fully expects the economy to implode after the U.S. election.

Rogers, who for years has been an outspoken critic of the Feds policies of "Quantitative Easing," says the world is "drowning in too much debt." He put the blame squarely on U.S. and European governments for abusing their "license to print money." In the U.S. alone, the national debt has surged to nearly $16 trillion, that's more than $50,000 for every American man, woman and child.

"[They] need to stop spending money they don't have," Rogers said. "The solution to too much debt is not more debt… What would make me very excited is if a few people [in the government] went bankrupt…" Rogers added.

Rogers also charged Obama and German Chancellor Angela Merkel with promoting dangerous policies that create the illusion the economy is stable… but are really only intended to buy time before their upcoming elections.

"Mrs. Merkle has an election next year," Rogers said. "Mr. Obama has an election in November. The Americans and the Germans – they want to do everything they can to hold the world up until after the next election."

"It's going to be bad after the next election."

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We're Not Saber Rattling, We're Simply Connecting the Dots

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I love it when our readers take the time to drop us a note. It's tells me they're not only reading but actually care enough to be engaged.

A Money Morning subscriber named Peter M. is one of those folks.

Peter was so struck by what I had to say about the escalating controversy in the South China Sea he decided to leave the following comment:

    "Seems like Money Morning is saber rattling. Not a word about the heat & drought in the Midwest and Great Plains? Seems some discussion about our rapidly changing climate might be a better discussion."

First, let me say that Peter's note was well received. But I'd be remiss if I didn't take the time to delve into what Peter viewed as "saber rattling" because I just don't see it that way. As always, my goal is to simply connect the dots.

The thing is, the South China Sea is just one of them.

Here's my response…

Dear Peter,

Thanks for the taking the time to comment. We've found that folks like you who take the time to post a comment — and who actually contribute some thoughts of their own to the posting – tend to be very well informed folks.

And believe me when I tell you that we like and respect that a lot.

I zeroed in on your comment in particular because I agree with part of it – the part about the importance of the drought. I've written a number of columns about that issue in Private Briefing over the last month or so, including one in back in June that that warned readers that the crop numbers were going to be a lot worse than the government was saying.

In recent weeks, that's just what's happened. (Fortunately, we also showed readers how to protect themselves).

So, again, you and I are on the same page when it comes to the drought.

Now, as far as this business about our South China Sea coverage being "saber rattling," I have to say that I very much disagree.

Part of the problem is that this escalating disagreement isn't getting much coverage in the mainstream U.S. media (and I spent more than 20 years as a mainstream media journalist, and spent time abroad, so I understand this very well).

What's happening in the South China Sea is a tinderbox just waiting for the right spark. And believe me when I tell you that this scares the hell out of our government. We could very well end up being caught in the middle.

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Warning: Hidden Obamacare Taxes Will Cost You More Than You Think

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The bill for Obamacare is on its way, and guess what? It's addressed to you.

You see, all those great benefits included in the Affordable Care Act don't come cheap, which is why the new healthcare law includes a barrage of new "Obamacare taxes."

And don't believe for a second the new Obamacare taxes will hit only the "rich" or those making over $250,000.

Some do, but you'd be surprised at how many of these new taxes also hit the middle class.

Worse still, many of these new measures are disguised as taxes on businesses. The bulk of these "stealth taxes" will be transferred to consumers via higher prices for drugs and health insurance.

"The legislation imposes more than $569 billion in new or increased taxes, the vast majority of which will fall on businesses," writes Michael Tanner in a 2011 Cato Institute report on the impact of the healthcare law. "Many of those taxes, especially those on hospitals, insurers, and medical device manufacturers, will ultimately be passed on through higher health costs."

Even still, few realize just how many new taxes lurk within the law's 2,500-plus pages because most of the talk about the Affordable Care Act focused on the constitutionality of the individual mandate.

Of course, according to Supreme Court Chief Justice John Roberts, even that turned out to be a tax.

Obamacare Taxes You'll Pay Directly

In addition to the hidden Obamacare taxes, which we'll get to shortly, the law reaches directly into your pocket in several ways:

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Three Places to Find the Highest Dividend Paying Stocks

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Income investors are on a never ending search for the highest dividend-paying stocks but most of them don't know where to look.

They either settle for dividends that are far too low and may never grow a penny…or they take on way too much risk.

But there's a simple solution if you're looking to boost your income stream.

Fact is, there are at least three sectors right now where investors can safely build a fortune in high paying dividend stocks.

Here's why.

The Highest Dividend-Paying Stocks that Outperform

History shows that investors who hold great dividend-paying stocks can outperform every other major sector– including gold, silver, T-Bills, or bonds–by a wide margin.

From 1972 through 2007, dividend-paying stocks returned between 8.9% and 10.9% on average every year, according to a recent study by Ned Davis Research. Meanwhile, non-dividend paying stocks brought in a paltry 2.5% gains.

In other words, high dividend stocks provide 4.5 times greater wealth building power than non-dividend payers!

Here are three market sectors that are chock full of the highest dividend-paying stocks that offer growth potential and a measure of safety to boot.


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Q&A: Shah Gilani on Financial Regulation, Central Banks and More...

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I got hundreds of questions and comments this month from you about my stance on regulations. Let's see why.

Q: I agree with you on the need for financial regulation. However, they must be simple and clear… How would you write the regs? ~ Cory B.

A: Cory, all the regs I would write would be one-liners. That's no joke.

Q: What we need is a hammer. Not the kind carpenters use, but a judicial hammer which treats serious crime seriously. No more civil trials for criminal offenses, such as the debacle surrounding Richard Fuld. These thugs know how to weigh odds, and most of them will gladly risk 15 months in a white-collar prison at hard tennis for, say, a few million in ill-gotten gains. You can't fix fraud, but you should be able to make the punishment so severe that only the dumbest of the dumb would give it a try. ~ Ron S.

A: That's what I've been saying. How come so many of you say it so much better than me? I'm always learning from you all.

Q: To put faith in regulation and the regulators is to assume they can't be bought. They can always be bought. Whaddya gonna do? Reform the existing corrupted agencies? Get rid of the Gensler/Goldman-run CFTC and replace it with something else? And who would run that? Somebody from JPMorgan? ~ fallingman

A: I want teachers (grade school and junior and senior high school teachers) to be our regulators. They obviously aren't about the money and they obviously are civic and civil minded. Why not?

Q: Who is going to put the "black and white" rules in place, the regulators? lol! Regulators are currently paid by the banks they regulate, umm, but, isn't that a conflict of interest, or, am I just stupid?~ Domina L.

A: Stupid is as stupid does. If we go back to the way regulators regulate, we're all stupid. We need a new breed of regulators. Expecting that we'll ever get them to come down from Olympus is proof that I am stupid. But a boy can dream, can't he?

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