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Shah Gilani

The Fed

Deflation Is Coming (and It's Not What You Think)

Be careful out there.

The stock market rally that started in March 2009… The one that's taken us out of the Great Recession and to new highs… The rally that's driving sentiment indicators of people who benefit from rising financial assets directly, peripherally, or because they hope all boats rise with the market…

The rally has never been loved.

The thing is, equity markets don't need love to go twice as high from here, or three times as high in the next 20 years. If they get what else they need, they'll keep going higher.

We could be on the verge of a generational bull market. That's if deficit-plagued, interconnected global sovereigns deleverage and, at the same time, re-capitalize middle and rising classes by making "recourse-sound" capital available and simultaneously reconstituting entirely the notion of taxation.

Too bad the likelihood of that happening is somewhere between slim and none.

That's one reason why I'm an increasingly reluctant bull.

But there's another reason too.

And it has to do with deflation...

The Fed

The Real "Pin" That Could Pop the Stock Bubble

Nothing goes up forever. Not the Federal Reserve's balance sheet, not global debt levels, and not stock markets… even when governments don't shut down.

Precisely because the Fed's balance sheet ballooned from $869 billion in August 2007 to over $3.6 trillion (and counting) today, and in spite of ballooning U.S. and global debt levels, U.S. equity benchmarks have been inflated to precarious heights.

"Houston, we have a bubble."

While the sky-high Fed balance sheet and rising global debt levels are their own bubbles, when they diverge – meaning, when the Fed starts to taper as global debt inflates – look out.

If the Fed-induced pump priming of financial assets isn't backstopped by strong and real global GDP growth, the increasing debt burden of the world's citizens will act as the ultimate pinprick that explodes the United States' inflated financial assets bubble… and other global bubbles.

So here's what's really happening, how to prepare for the eventual correction (or possible crash), and - more importantly - how to make money from it...


The Best Way to Ignite the Economy

The problem with the U.S. government's stimulus efforts to create jobs, and the Federal Reserve's quantitative easing to foster full employment, is that banks are the only direct beneficiaries.

There's just no good pool of jobs being formed from the trickle-down effect that first bathes bankers in bonuses, and then showers shareholders with buybacks and dividends.

There is a better way.

And, in spite of the details which additionally involve two necessary but minor structural changes that can be accomplished with the stroke of a pen, there are only two primary steps we need to take to create good-paying, long-term jobs and crank up economic growth.

Step 1 to Growth and Better Jobs

Hot Stocks

Two Stocks to Buy Now – and One to Ignore

Money Morning Capital Wave Strategist Shah Gilani offered two picks for top stocks to buy now – along with one to avoid – on FOX Business' "Varney & Co." Tuesday.

His pick to avoid: Facebook Inc. (Nasdaq: FB). Recent gains haven't been enough to sway Gilani, who remains bearish on the stock.

Stocks to Buy now, GM and Apple

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Obamacare Facts: This Doctor Tells Why He Might End Up Jobless January 1st

My good friend Mark Kot is the real Hamptons Doctor. He doesn't make house calls because his Southampton Urgent Medical Care facility is where everyone goes for the best medical care in the Hamptons.

I asked him for his take on Obamacare. Yesterday he sent me the little ditty below, and I need to share it with you today.

He got it off the Internet. Which means it's true. No, I'm not kidding. Well, at least this time I'm not kidding. This Internet ditty is true.

Before I share it with you, let me tell you why it is so true and so frightening…

To continue reading, please click here...

Banks Caught Manipulating Electricity Trading Now Face Billions in Fines

Are you FERC-ing kidding me? That's "FERC," as in Federal Energy Regulatory Commission. And they FERC-ing rock! The ostensibly obscure regulator of electricity transmission lines, natural-gas pipelines, and electricity and power trading just shocked some dirty banks into coming clean about their manipulation of the nation's electricity markets. Electricity markets? Who knew? You may remember […]

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Washington's New Jobs Strategy: Hire All the Lawyers

It's the old saw that Washington seems to have down to an art: The road to Hell is paved with good intentions.

And once again, in an effort to help get the wheels of the US economy turning more briskly, the government has managed to grease the axle and flatten the tires at the same time.

Thanks to the JOBS Act (Jumpstart Our Business Start-Ups), issuers pushing things like start-ups, established companies, and more importantly venture funds, private equity investments and hedge funds can advertise for investors if they want.

Yes, by altering restrictions in existing rules and regulations, the Securities and Exchange Commission is going to allow hedge funds and the like to advertise their wares.

The grand intent is that more small businesses will get funded, and more struggling companies will be able to raise capital to keep their doors open.

Unfortunately, it's likely that the jobs the JOBS Act is most likely to create will be for lawyers; lawyers to protect investors, lawyers to sue issuers, lawyers to keep issuers from regulatory shackles and for lawyers to fight the lawyers with new jobs.

Wall Street

The Big Banks On Trial, Again

You want to know why the entire global financial system almost collapsed in 2008?

There seems to be a simple answer. Not encouraging, but simple: The European Commission is exploring the possibility that there was a conspiracy among 13 of the world's major banks that colluded to keep the entire house of cards a secret.

In a press release Monday the European Commission announced it sent a "statement of objections" to Bank of America Merrill Lynch (BAC), Barclays (BARC), Bear Stearns , BNP Paribas (BNP), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), HSBC (HBC), JP Morgan (JPM), Morgan Stanley (MS), Royal Bank of Scotland (RBS), UBS (UBS) as well as the International Swaps and Derivatives Association (ISDA) and data service provider Markit.

This statement of objections is a formal step in EU investigations that charges the banks, the dealers' association, and the swaps pricing agent and index controller of "colluding to prevent exchanges from entering the credit derivatives business between 2006 and 2009."

The companies are then expected to answer the charges.

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Investing Tips

How to Play the New Normal: Spiking Volatility

Strap on your seat belts…and get ready for a ride…a very bumpy ride.

After having assumed US equities would keep chugging higher with little deviation from "up," things are starting to look a bit different.

Have you been watching Japan? It's a cautionary tale that is about to play out in the US, and globally.

Massive monetary easing in Japan since January tanked 10-year JGB (Japanese government bond) prices and the yield on their 10-year bonds doubled. On top of that, Japanese stocks soared 32%, only to see a series of huge one-day drops and a few smaller-bounce upside rallies.

The volatility has been unprecedented.

The question for investors now is: How do you make money now that the Fed has signaled the beginning of the end of quantitative easing that has stimulated global markets higher?

Here's the first thing you need to know.

The Ugly Truth About the Promise of the JOBS Act

Last week I wrote about how the Jumpstart Our Business Startups Act (the JOBS Act) can be a pathway to funding brand new businesses as well as small operating companies to further American entrepreneurship and create jobs.

I even called the legislation, signed into law on April 5, 2012, a "light at the end of the tunnel" in terms of its potential to stimulate the economy.

But I also warned you there are elements of the Act that are bad, if not downright ugly.

So, let's take another look at the JOBS Act to see if that light in the tunnel is a freight train headed straight for us.

First, it's instructive to learn that the JOBS Act came into being, not as an original piece of legislation, but as an amalgamation of six House bills, four of which had strong bipartisan support.

What began as a series of bills proposed to facilitate "access to capital" and "capital formation" and incorporated those terms in their former titles, eventually were cobbled together to become the Jumpstart Our Business Startups Act, whose title highlighted this year's election mantra: it's about jobs, jobs, jobs.

Too bad there isn't anything in the JOBS Act that says anything about hiring anybody.

The Masquerade Behind the JOBS Act

Some of you might call me cynical for this, but another way to look at what the JOBS Act amounts to is to see it as a deregulatory push masquerading as a job creation scheme.

And therein lies the problem.

It's all well and good to make raising capital easier for startups and small operating businesses, but altogether disquieting to clear that path by weeding out investor protections that have been on the books for decades.

It's like déjà vu all over again.