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Mobile Computing Patent Wars Could Cost Google $2 Billion Annually

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

A mobile computing patent war launched by powerful tech rivals could snatch revenue away from Google Inc.'s (Nasdaq: GOOG) Android platform – and possibly threaten its viability as a free alternative operating system.

The threat to Android endangers as much as $2 billion in annual revenue for the search titan.

Google's rivals – which include such tech giants as Microsoft Corp. (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL) and Oracle Corp. (Nasdaq: ORCL) – have filed 48 patent infringement lawsuits against the Mountain View, CA company and many of its hardware partners.

Google rarely countersues, the most common way of battling patent lawsuits, because of its relatively paltry patent portfolio. Google has only about 700 patents, compared to about 4,000 for Apple and more than 17,000 for Microsoft.

So it stung particularly badly when Google lost the most recent patent wars battle by failing to win the auction for bankrupt Nortel Networks Corp.'s (PINK: NRLTQ) 6,000 patents earlier this month.

Instead, a consortium of its mobile computing competitors – Apple, Microsoft, Research in Motion (Nasdaq: RIMM), Sony Corp. (NYSE ADR: SNE) and LM Ericsson (Nasdaq ADR: ERIC) – won the Nortel patents with a bid of $4.5 billion.

"In the patent wars that are raging in the mobile computing world, this could turn out to beGoogle's Waterloo," observed The Financial Times.

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The Outlook for Gold and the Dollar Make Newmont Mining Corp. (NYSE: NEM) a "Buy"

By , Money Morning - • Print | Email

Newmont Mining Corp. (NYSE: NEM) is one of the largest mining companies in the world. And like Goldcorp Inc. (NYSE: GG), which I discussed last week, it stands to profit handsomely from any additional monetary stimulus enacted over the next few months.

So let's buy Newmont Mining Corp. (**), and hold on for as long as Federal Reserve Chairman Ben S. Bernanke is allowed to debase the U.S. dollar to help his friends in the banking industry.

Gold is hitting record-high levels in almost every fiat currency.

This bull market move up in gold hasn't gone unnoticed, either. There is a major buyer of gold future calls in the options market. The buyer of these calls is an extremely deep-pocketed buyer.

The size of this trade and the potential profits would be staggering if the price of gold breaks above $1,600 an ounce. I have seen estimates of $100 billion profit potential.

I honestly believe that only a central bank or one of the largest hedge funds has the capital and mandate to take this kind of risk.

If this trade starts to come into the money, and it is nearly there now, I expect that the senior gold producers will find a real market bid.

So let's talk about Newmont.

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Keith Fitz-Gerald on the Jack Bouroudjian Radio Show

By , Money Morning - • Print | Email

Keith Fitz-Gerald recently appeared on the Jack Bouroudjian Show to discuss, among other things, the shifting global wealth picture. Most importantly he named several companies that are poised to profit from this evolving trend. You can listen to the full interview below.

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Dropping Expectations Point to Rocky Earnings Season

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

With more companies issuing warnings about their results in recent weeks, investors may see more than a few disappointments in the second-quarter earnings season.

Companies faced many sources of pressure on their bottom lines over the last quarter, including persistent unemployment, the disruption of the global supply chain from the Japanese earthquake and tsunami, and high commodity and energy costs.

"This is where we can get down to the fundamentals of this market and finally see how companies are actually doing in this economy," Jack Ablin, chief investment officer at Harris Private Bank, told CNN Money.

Once-lofty expectations for the second quarter have been slipping for weeks. The Standard & Poor's 500 share-weighted earnings estimate has dropped four weeks in a row, from $232.5 billion on June 9 to $222.9 billion last week.

Of greater concern is that 84 companies – 17% of the S&P 500 – have given negative preannouncements, while just 33 have given positive preannouncements, according to Thomson Reuters data.

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New Products and Cheap Shares Mean It's Time to Buy Google Inc. (Nasdaq: GOOG)

By , Contributing Writer, Money Morning - • Print | Email

Google Inc. (Nasdaq: GOOG) has fumbled some moneymaking initiatives over the past six months, but now it's time I give them credit.

The company finally appears to be on the path toward shaping up its many facets, giving advertisers more reason to promote on the network – and putting more money in Google's fat pockets.

It helps when a company is challenged by a fierce rival or two, and right now Google's getting a motivating push from Facebook Inc. and Microsoft Corp. (Nasdaq: MSFT). I am particularly impressed with Google Plus (Google+), the search giant's new attack on Facebook. It is a rethink of the social web that looks like it could actually gain traction in coming months and years.

There is a huge opportunity in the social web for people who don't quite get Facebook, which is a large percentage of the population over age 25. For my teenage kids, Facebook practically is the Internet. They do all their messaging, e-mailing and photo-sharing there in one great big group hug; what's made available to one friend is made available to all.

But there are hordes of people who would never want to share their lives with all their friends, and compartmentalize their lives between work, neighborhood, old high school buddies and the like. For them, the social media team at Google+ has created the concept of "circles," which allows you to share some photos and links with one group of friends to the exclusion of others. And all of your Google contacts can easily be interwoven into a larger conversation in a way that escapes the confines of instant messaging or e-mail.

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Netflix Inc. (Nasdaq: NFLX)Chases Hot Profits in Latin America

By , Associate Editor, Money Morning - • Print | Email

Netflix Inc. (Nasdaq: NFLX) delivered big news this week to those doubting its stock can keep up its meteoric rise: It's going global.

The online video service announced Tuesday it will expand into 43 countries in Latin America and the Caribbean, giving investors another reason to bet on its long-term growth.

The move means Netflix has access to a brand new avenue for profit, instead of focusing solely on the developed North American market.

The announcement pushed Netflix shares up about 8% Tuesday. Netflix's phenomenal 1,000% price jump since 2008 – 68% this year alone – has short sellers in a frenzy, thinking the company must be due for a significant pullback.

But as we told you in May, those doubters should reconsider their stance.

Netflix has revolutionized the way people watch movies, and is transforming the way people watch TV. Now it's implementing its media innovations on a worldwide scale.

Netflix joins the growing group of U.S.-based companies like PepsiCo Inc. (NYSE: PEP) and General Motors Co. (NYSE: GM) in targeting emerging-market growth, and analysts say the ventures will pay off.

"I like the fact that Netflix is growing aggressively into emerging economies because that's clearly where the spending patterns show money is going to be," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "I think the latest estimates show that there's more than $1 trillion expected to flow into developing economies this year."

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The Stock Market Volatility Index: What the VIX is Telling Investors

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW - • Print | Email

In the early ‘80s, when I was running a hedge fund from the floor of the Chicago Board of Options Exchange (CBOE), I was a market maker in OEX options. The OEX is the Standard & Poor's 100 Index. The CBOE Market Volatility Index (VIX) was born from trading options on the OEX and from our desire to more accurately price risk.

The stock market volatility index (VIX) – or "fear gauge," as it's often called – has been giving off unexpectedly low readings in 2011.

But don't be fooled. Things aren't what they seem.

Structural dynamics are currently suppressing the VIX, and are diminishing its predictive power.

If you want to trade this as a speculative investment – or even if you just want to use the VIX to better hedge your portfolio holdings – you need to understand the forces that are working on this stock market volatility index.

Let me explain …

I Was There for the Birth of the VIX

Back during my hedge-fund days, we used Monchik-Weber machines with their built-in Black-Scholes options pricing formula to help us mathematically measure put and call-option values. The computers would provide us with the theoretical value of the options we were trading.

But it wasn't long before a gap between those theoretical values and the actual market prices drove us to find a different way to measure volatility. To calculate "implied volatility" – the estimated volatility extracted directly from bids, offers and actual prices – we looked at real-time prices as opposed to theory.

Simply put, based on actual prices for calls and puts on the OEX, we separated out implied volatility and used it as a measure of what traders were expecting to happen.

This volatility measure is the expectation of price movement over the next 30 days. The higher the reading, the more likely stocks are to move in one direction or another.

Over time, our volatility index became known as the VIX. And eventually, the VIX – not the OEX – became a measure of options-pricing volatility based on the Standard & Poor's 500 Index.

The VIX is called the "fear gauge" for a good reason: As that index rises, it's basically telling us that traders and investors are paying a greater premium to buy options, mostly because they are "paying up" to buy puts.

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Stock-Market Survival Strategies: Why Raytheon is a "Must-Own" Profit Play

By , Money Morning - • Print | Email

If you want some stock-market-survival advice, pull up a chair and spare us a couple of minutes.

From late April to mid-June, the Dow Jones Industrial Average plummeted more than 900 points. That 7% stock-market decline – which included a six-week losing streak – accelerated talks of a new bear market and a double-dip recession.

But just when it appeared the bottom was going to fall out of the U.S. stock market, the Dow did an about-face: It soared nearly 650 points in just five days and, like a vaudeville magician, seemed to make the bear-market worries disappear.

But don't be too trusting, says Money Morning's Keith Fitz-Gerald. In a market like this, stock-market survival is all about careful research, attention to detail and risk management.

"Like any investor or trader, I'll take a rally however it happens to come – and no matter why it comes," Fitz-Gerald said in an interview yesterday (Tuesday). "But I remain very concerned with what I see. It won't take much to spook this market."

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Profit From Inflation: These Six Stocks That Will Add Punch to Your Portfolio

By , Contributing Writer, Money Morning - • Print | Email

If there's one skill you need to learn, it's how to profit from inflation.

Thanks to the cheap-money policies of Team Bernanke at the U.S. Federal Reserve, the escalating levels of global sovereign debt, and other recent developments in the world economy, it's clear that we're headed for a period of steeply rising prices – inflation. If you know how to navigate this tricky stretch, you'll be fine. But those who don't are going to really feel the squeeze.

Learning how to profit from inflation is actually an easier assignment than you might expect. First, you have to invest in certain classes of stocks that have historically performed exceptionally well when inflation has raged across the land. And, second, you will enjoy maximum profits if you invest in those stocks before inflation really takes hold.

Let me use six specific stocks as examples to show you what I mean.

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Its Recent Pullback Makes Pan American Silver Corp. (Nasdaq: PAAS) a Bargain

By , Money Morning - • Print | Email

Pan American Silver Corp. (Nasdaq: PAAS) is a silver mining company that has experienced a significant pullback in price since hitting its high in March. That means patient investors have a nice chance to enter at lower prices while the market calms down.

The parabolic move up in silver prices this spring helped provide a real stimulus to the share prices in some of the mining stocks. When silver prices pulled back after the Chicago Mercantile Exchange (Nasdaq: CME) raised margin rates over and over, the share prices of silver producers were negatively impacted.

The hot money has fled the sector and won't be back for a while, with equity prices now trading in the middle of their 52-week range. This gives patient investors, who are not chasing the current money, a chance to add or increase their exposure to silver miners without paying a pretty penny.

Why Pan American Silver is a "Buy"

When I look at a mining company, there are a few things I have learned to look for: Is the company already leveraged to the gills? How leveraged is it to the upside of its sector? Is it operating at a profit? Does it have a track history of operating at a profit?

In the case of Pan American Silver Corp., the company passes the test.

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