The Sentiment Tide

(Kirkreport)After yesterday’s gap reversal, the market struggled to find its footing today.

While we started the day off strong, S&P 1,090 proved to be very strong overhead resistance. News that China is reviewing its Euro holdings certainly didn’t help matters. Yet, we now will get to see if that possible right shoulder of the inverse H&S pattern can form over the next couple of trading sessions as we close out May.
For what it is worth, most of the traders who I spent a lot of time with today are convinced that if the market doesn’t hold Tuesday’s lows at S&P 1,040 then all long bets are off. Indeed, we have a nervous market out there at the moment with traders unwilling to give long positions much rope if any. In fact when you see these intraday reversals, it is a clear sign that traders aren’t willing to even hold overnight for fear of being caught in a negative gap the following morning.

As Good As Paper?

Our turnaround yesterday inspired strength in world equity markets, especially in Europe, which had gained about 3%. That buoyancy helped fuel a rally of about 1.5% in the first hour here, but the next hour saw those gains nearly evaporate. Another rally was attempted. It fizzled, and with an hour to go the market was just fractionally higher for the session. The last hour saw lots of selling and the indices lost 0.75% or so, closing on the lows.

If . . .
Today's action was pathetic, as the market just couldn't hold a bid. So, while yesterday's reversal looked okay, it meant little. Now we'll need to see if those lows from yesterday get taken out. If they do, it's gonna get pretty ugly pretty fast.
If not, and the market lows have been seen for now (which could still be the case), then the next order of business is to find out how far the rally can carry and what it looks like. My expectation is that the rally will fail (below the April highs) at some point down the road and there may be an attractive opportunity to set up shorts, but I don't want to get too far ahead of myself.
Away from stocks: The dollar was mixed, with the euro the worst major currency on the planet as it sank against essentially everything. Piggys were lower, oil gained about 3%, and silver added 2% to gold's 1%.
On the subject of gold, I would like to make a few points. It's really interesting to me that there is so much angst concerning gold, given that it has been the longest-surviving monetary asset by a factor of almost 100, versus the short lifespan of the average paper-currency regime.
It is also interesting that the lexicon is riddled with references to gold as being a very desirable asset to possess. People talk about such-and-such being "as good as gold" (never "as good as colored paper"); or they'll describe some great business as "a gold mine"; or, they'll talk about "the golden rule" as though it's an ironclad law. Yet, most people continue to treat gold like dirt, or worse.

Gold has been an asset that's helped protect and deliver gains vs. paper money for the last 10 years running, yet the popular press heaps nothing but scorn on it. Even people who own gold seem to suffer angst regularly, based on the questions I continually receive in Ask Fleck. Meanwhile, Bubblevision and other media outlets persist in telling you how great stocks are, although this asset class has cost people money for a decade.

The current level of skepticism is nicely illustrated by the recent short-interest surge in the GLD exchange-traded fund. It's now doubled, standing at about 30 million shares (around 3 million ounces). Meanwhile, when the gold market recently fell out of bed, ETF holders at the margin liquidated no ounces; and in the last couple days, they added a whopping 50 tons (a phenomenon occurring in other places around the planet as well). Thus, as a wise commodity-trading friend said many years ago, you can be with the trend and still contrary.
While I don't believe that gold is a totally contrary concept, it is contrary from the standpoint of there being so few avid believers though the list of high-quality investors who now hold gold has become quite impressive.
I keep waiting for the day when folks realize that if you invest in the shares of a goldmining company, you basically own a piece of "the money-creation machine." It's sort of like owning a central bank that isn't staffed by losers. In any case, at some point I expect to see the masses rabidly bullish about gold and goldmining companies, though obviously we're a long ways from there.
Index Close % Change
Dow 9974.45 -0.69
S&P 500 1067.95 -0.57
Nasdaq 2195.88 -0.68
Nasdaq 100 1796.47 -1.06
Russell 2000 642.62 +0.41
Sox Index 343.78 -0.21
Bank Index 49.13 -0.2
Dow Transports 4247.28 +1.14
Dow Utilities 354.59 -0.39
Nikkei 225 9522.66 +0.66
Gold - Front Month 1213.6 +1.15
Silver - Front Month 18.08 +1.68
Crude Oil 70.69 +2.82
Dollar Index 87.22 +1.01
Euro Spot 1.22 -1.4
Long Bond 20-year 124.78 -0.37
FOTM - Yen Spot 89.93 +0.33
5/26/2010 4:15 PM

AONE at these levels is a steal

This stock has been beaten into a sad pulp since its ipo levels.

NFLX gets an upgrade

NEW YORK (AP) -- Rivals' shuttered rental stores and its new application for streaming-enabled mobile devices puts Netflix Inc. in "the sweet spot of its growth phase," an analyst said Tuesday, raising his price target and profit estimates for the online movie rental company.
The success of Netflix's application to stream video on Apple Inc.'s new iPad tablet computers will continue to drive subscriber growth, FBR Capital Markets analyst Heath Terry wrote in a note to investors. The application will eventually be available for the iPhone and iPod Touch.
Meanwhile, Movie Gallery, the nation's second-largest movie rental chain, is in the process of closing its 1,050 remaining stores after filing for Chapter 11 bankruptcy protection.
"As fewer neighborhoods are able to support retail stores, renters will be increasingly pushed to other options: kiosks, (video-on-demand) and Netflix," Terry said, lifting his price target on Netflix's stock to $130 from $100 and maintaining an "outperform" rating on the stock. Terry also raised his estimate for 2011 earnings to $2.7 billion from $2.6 billion.
The company will offset the price of adding and improving content by streaming video, which costs about 5 cents per film compared with 90 cents to $1 for DVD fulfillment, Terry said.

Auriga upgrades FSLR to buy

WE ARE UPGRADING SHARES of First Solar (ticker: FSLR) to Buy from Hold.
The recent selloff has created an attractive entry point, and even with our reduced estimates, we forecast 21% upside to our current price target of $138. We attribute the recent decline in share price to the depreciation of the euro relative to the dollar, and not because of fundamental change with regard to supply/demand within the solar industry. With the recent announcement of First Solar pushing project business into 2011, our model recognizes that more module sales will be denominated in euros in 2010.

That said, we also recognize and credit First Solar's aggressive currency hedging activities and about 15% natural hedge from manufacturing in Germany to buffer the effect of a weakened Euro. Our new price target of $138 is 20 times our 2011 earnings-per-share estimate of $6.89. Our old price target of $147 was 19 times our prior 2011 EPS of $7.74.
In our recent initiation report, we highlighted that First Solar's business model is highly sensitive to the euro/dollar exchange rate. We recognize that the rapid depreciation of the euro will limit profitability despite the company's hedging efforts. The recent strategy shift to sell more modules in 2010, rather than projects, will likely result in roughly 85% euro denominated revenues compared to the 66% that we originally estimated. We are now modeling a euro/dollar exchange rate of 1.25 for both second-half 2010 and 2011, and are providing a sensitivity analysis to 1.15. Our previous model assumed a 1.35 exchange rate.
In addition to the lower euro/dollar exchange rate, we made one material change to 2011. With the push-out of the project business into next year, we have increased our dollar-denominated revenue to 30%; this change slightly offsets some of the effect of the weaker euro. We note that First Solar has hedged out 52% of its 2010 euro-denominated sales at a rate of 1.39.
-- Mark W. Bachman

Gold Stocks Are "Golden"

Last week's rout around the world continued yesterday and last night, with many markets declining 3% plus or minus. U.S. indices, after having opened almost 3% lower, were off "merely" 2% or so an hour into the day (and by midday had trimmed the losses almost in half), with only gold stocks bucking the undertow, along with gold.
So, for all the times that gold stocks have served as whipping boys, they were the port in the storm today (until the last hour). Also, for what it's worth, gold stocks currently have a triple "threat" working in their favor: oil prices aggressively lower; plus both the dollar and gold higher -- the sum of which benefits their earnings, cash flow, etc.
A Greenspan Thesis Is Shredded Though many people read the recent weakness as a sign that we must crash soon, I see it somewhat differently. (Which doesn't mean we couldn't . . . it's just not my view.) Markets collectively have demonstrated that they are in fact bigger than the central banks -- a message that Alan Greenspan tried to prove wrong for 20 years. He and other charlatan central bankers everywhere have wreaked massive havoc on the world for two decades. The sooner they're seen for the clueless incompetents that they were/are, the sooner the world can start thinking about how best to pursue sounder policies, including a new gold standard. But in the meantime, in some ways world stock markets are now on their own, as central banks have used up a considerable amount of their ammo in the last two years, with rates still nearly zero almost everywhere.
And, even if quantitative easing is restarted (or, should I say when), it's not clear to me how that will boost psychology as it did in 2008/2009, when QE was part and parcel of lowering rates. Now, there's no real ability to lower rates in the Western world (though the potential outcome of more moneyprinting has not been lost on gold).

Gold Stocks Get an Upgrade
On the subject of gold, an important development occurred today: Finally, a dead fish (pulling a page from past cycles in other industries) raised his target on gold for 2011/2012 and upped his opinion on a handful of large gold stocks -- which is a potentially meaningful change in psychology that I expect to see prospectively. I have repeatedly said that part of what has held back gold stocks has been folks' angst that the price of gold is ultimately (or sooner) headed way back below $1000; and that when that view changed, gold stocks might "perform" better.
I don't want to make too much out of a single data point. But I believe that today's dead-fish upgrade (the firm was UBS -- not a small bucket shop) may be a harbinger of future action, as the naysayers embrace gold at some point. That will be a sight to behold.
Back to the action: The last 90 minutes saw the market drive higher and recover essentially all its losses. If we don't see a big collapse tomorrow, my guess would be that we see a decent rally attempt from these levels.
Away from stocks: The dollar was on fire once again (ex the yen). Oil lost 1.5%. The piggys were predictably higher. Silver lost a fraction while gold gained 0.5%.
Index Close % Change
Dow 10043.75 -0.23
S&P 500 1074.03 +0.04
Nasdaq 2210.95 -0.12
Nasdaq 100 1815.68 +0.02
Russell 2000 640.02 -0.19
Sox Index 344.51 +0.58
Bank Index 49.23 +1.03
Dow Transports 4199.57 +0
Dow Utilities 355.99 -0.7
Nikkei 225 9459.89 -3.06
Gold - Front Month 1198 +0.34
Silver - Front Month 17.78 -0.78
Crude Oil 68.75 -2.08
Dollar Index 86.46 +0.3
Euro Spot 1.24 +0.27
Long Bond 20-year 125.25 +0.7
FOTM - Yen Spot 90.39 -0.18
5/25/2010 4:31:38 PM

Promising Chinese Medical Stock

When markets are dealing out losses left and right, as they are now, it’s a good idea to pull in your horns and keep lots of cash in your account. But that doesn’t mean you can just put your feet up and enjoy a refreshing beverage.
The construction of a Watch List of likely stocks is, itself, a dividend-paying investment.
My candidate for further observation is a small (market cap of $328 million), thinly traded (130,000 shares per day, on average) Chinese biopharmaceutical company called China Biologic Products (CBPO). The stock uplisted to the Nasdaq exchange just last November, and it has been performing well despite a challenging market environment.
The company’s lead product is human albumin, a blood protein that accounted for half of 2009 revenues, and various forms of immunoglobulin. Albumin is vital during medical emergencies and immunoglobulin can prevent and treat many diseases.
The company’s 2009 sales were up 155% over 2008, and Q1 results showed a 27% gain in earnings on a 28% jump in revenues, with a 27.1% after-tax profit margin. Expansion is coming via both M&A activity and construction of new plasma collection stations.

This is a great stock for your watch list, and when the market turns up again it may provide your portfolio with a real shot in the arm.

Stocks Hammered In Final Minutes Of The Day

On Friday, things were looking mixed until the final moments of the day, and then stocks surged. Today, it was the reverse. After only being down modestly, stocks really got hit hard in the final 15 minutes of trading.
But first, the scoreboard:
Dow: -126 (-1.24%)
S&P 500: -14 (-1.29%)
NASDAQ: -15.49 (-0.7%)

And now to the day's top stories:
* Today's markets were characterized by calm selling, which is a departure from last week's panic selling, but also indicative of a new mindset that when there's no major news, the default is to sell. And then of course, the markets dove in the final minutes. See Deutsche Bank's cause for bullishness here >
* Financial stocks were hit the hardest, as banking fears grow, and questions about financial reform linger. Losers included Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) Click here to see the hedge fund managers getting hammered >
* An issues that's been of concern for some time -- Spanish debt and the health of its banking system -- is starting to come into the fore. This weekend Spain seized one bank, and today investors were unnerved by an organized merger of four weaker institutions. For more on the Spanish banking crisis see here >
* The oil leak in the Gulf continues to spew unabated. Towns in Louisiana are already seeing a major hit to real estate. See what Grand Isle Louisiana, arguably ground zero, looks like now >
* One notable winner today was gold which, after selling off last week, rebounded nicely today.
Index Close % Change
Dow 10193.84 +1.25
S&P 500 1087.72 +1.51
Nasdaq 2229.04 +1.14
Nasdaq 100 1822.77 +1.26
Russell 2000 649.49 +1.48
Sox Index 349.12 +2.5
Bank Index 50.39 +3.98
Dow Transports 4241.59 +1.95
Dow Utilities 361.8 +0.55
Nikkei 225 9784.54 -2.45
Gold - Front Month 1176.8 -0.99
Silver - Front Month 17.66 -0.28
Crude Oil 70.16 -0.9
Dollar Index 85.33 -0.8
Euro Spot 1.26 +0.76
Long Bond 20-year 124.59 +0.45
FOTM - Yen Spot 89.99 -0.34
5/21/2010 4:02 PM

Avoiding The Stock Market

In the wake of the stock market’s “flash crash” on May 6, there have been an increasing number of reports that retail investors (“Ma and Pa”) are pulling their money out of stocks. Beyond that, some commentators have stepped forward to speak out and advise retail investors to steer clear of the stock market, due to the volatility caused by “high-frequency trading” or HFT. One recent example of this was Felix Salmon’s video message, which appeared at The Huffington Post.



HFT involves a practice wherein firms are paid a small “rebate” (approximately one-half cent per trade) by the exchanges themselves when the firms buy and sell stocks. The purpose of paying firms to make such trades (often selling a stock for the same price they paid for it) is to provide liquidity for the markets. As a result, retail investors would not have to worry about getting stuck in a “roach motel” – not being able to get out once they got in – after buying a stock. Many firms involved in high-frequency trading (Goldman Sachs, RGM Advisors, Tradebot Systems and others) have their computer servers “co-located” in the same building as the exchange, in order to get each of their orders processed a few nanoseconds faster than orders coming from further distances (albeit at the speed of light). The Zero Hedge website has been critical of HFT for quite a while. They recently published this informative piece on the subject, pointing out how HFT firms caused the catastrophe on May 6:

.. . when the selling in size commences they all just shut down. So much for providing liquidity when it is needed.

At The Market Ticker website, Karl Denninger explained how HFT platforms often use “predatory algorithms” to drive a stock’s price up to the full extent of a customer’s limit order (a practice called “frontrunning”):

Let's say that there is a buyer willing to buy 100,000 shares of BRCM with a limit price of $26.40. That is, the buyer will accept any price up to $26.40.

But the market at this particular moment in time is at $26.10, or thirty cents lower.

So the computers, having detected via their "flash orders" (which ought to be illegal) that there is a desire for Broadcom shares, start to issue tiny (typically 100 share lots) "immediate or cancel" orders - IOCs - to sell at $26.20. If that order is "eaten" the computer then issues an order at $26.25, then $26.30, then $26.35, then $26.40. When it tries $26.45 it gets no bite and the order is immediately canceled.

Now the flush of supply comes at, big coincidence, $26.39, and the claim is made that the market has become "more efficient."

Nonsense; there was no "real seller" at any of these prices! This pattern of offering was intended to do one and only one thing - manipulate the market by discovering what is supposed to be a hidden piece of information - the other side's limit price!

The extent to which frontrunning takes place was the subject of a recent conversation between Larry Tabb of Tabb Group and Erin Burnett on CNBC. The Zero Hedge website provided this analysis of the video clip:

The funniest bit of the exchange occurs at 3:35 into the clip, when Tabb publicly discloses that front-running is not only legal but occurs all the time on open exchanges. When Erin Burnett, who unfortunately still thinks that the Deutsche Mark is used in Germany, asks who is doing the front running, Tabb says "It could be anyone."

A recent piece by Josh Lipton at the Minyanville website focused on the activity of retail investors since the recent “flash crash”:

Specifically, during the past week through May 12, your friends and neighbors pulled $2.8 billion out of US stock funds, according to the latest data from the professional number crunchers at Lipper FMI.

To put that stat in context, we called up Robert Adler, the head of Lipper FMI Americas, for a chat this morning. He tells us that’s the most investors have pulled out, in fact, since March 11, 2009.

At the same time, says Adler, investors plowed $16.6 billion into money-market funds. “That’s the first inflows money market funds have seen in the last 16 weeks,” he says.

* * *

“There was an about-face this past week by investors,” Adler says, noting that such outflows from both equity and bond funds, and a sharp reversal in money market funds, demonstrate a clear and dramatic shift in sentiment.

The analyst is quick to emphasize, however, that one week doesn’t make a trend. “We have to wait another week to see whether this was simply event driven or if this is the beginning of a new trend,” he says.

The current risk-aversion experienced by retail investors is compounded by the ugly truth that stocks are currently overvalued. Shawn Tully of Fortune made this very clear in a May 17 commentary, wherein he provided us with a sage bit of prognostication:

Here's how I see the odds. The chances are about one in three that we suffer a huge, wrenching correction in the next year or two similar to the one in 1987. That possibility is so high because stocks are so startlingly expensive. Another high probability event is that markets go on a long sideways grind, with smaller drops along the way. What's extremely unlikely is that the market rises substantially from current levels and stays there for any extended period.

Whatever happens in the next couple of years, the odds are overwhelming that investors who buy stocks today will reap puny returns for 10 years. For example, if you'd purchased shares at today's PE of 22 in early 2003, you would have gotten a return of around 3% a year, barely enough to compensate for inflation, let alone buy the blood pressure medication you'd need to survive the scary ride of stock ownership.

Now let's look out a decade or two. The evidence is extremely strong that price matters, and matters a lot: except in rare cases, buying stocks when they are pricey -- when the Shiller PE exceeds 20 -- leads to puny returns ten years later.

Not that you'd ever know that from the happy talk from Wall Street. So screen the noise out, and follow the numbers. They'll eventually get better for investors. But to get back there, we may revisit October of 1987.

Considering the unlimited number of awful news events unfolding in America and around the world right now, we could be headed for a market crash much worse that that of October, 1987. Cheers!

The Fund of a Magyar Says Yes to Some Miners

It turns out that George Soros's fund now owns about nine smaller gold stocks. Obviously, he sees the potential for the gold bull market to do something exciting and thinks that these junior miners may be a good place to have some exposure. Since I agree with him about that, I hope he's right.

As for the stock market itself and what to expect, Jason Goepfert and Mr. Skin have similar ideas: For the time being, the 1100 level on the S&P may be tough to break through on the downside, so we could be in for a period of rangy action between that and 1180 before getting some resolution of what the market wants to do. They seem to feel like the market's got a decent shot at attempting something higher, after going through a period of digestion first, even if that rally turns out to be a failing rally down the road and we ultimately break 1100 on the downside. But now I'm getting too many steps ahead of myself. Personally, I am choosing to do nothing about stocks generically. I would prefer to continue with my idea of attempting to capitalize on moneyprinting and its consequences.
Index Close % Change
Dow 10510.95 -1.08
S&P 500 1120.8 -1.42
Nasdaq 2317.26 -1.57
Nasdaq 100 1887.06 -1.48
Russell 2000 682.75 -1.86
Sox Index 348.85 -2.93
Bank Index 51.24 -3.72
Dow Transports 4420.38 -1.31
Dow Utilities 375.49 -1.05
Nikkei 225 10242.64 +0.07
Gold - Front Month 1221.7 -0.52
Silver - Front Month 19.04 +0.93
Crude Oil 69.19 -1.27
Dollar Index 87.09 +1.08
Euro Spot 1.22 -1.51
Long Bond 20-year 122.91 +1.21
FOTM - Yen Spot 92.22 +0.4
5/18/2010 1:15 PM

Germany Shoots the Messenger

Overnight markets were higher as the world appeared to take a deep breath after the recent bashing of global equities. The Spooz loved that and the market opened almost 1% higher, before giving up the entire rally in the first hour. From there the market kept grinding lower all day and closed with a loss of about 1.5% (though the Dow fared a bit better).

Today's big story (which created the major undertow for stocks and euros) was the move by Germany to ban the short-selling of the stocks of bankers and insurers, as well as CDSs on government bonds. Speculation as to the reasons why they did that centered on a potential breakdown in the recent bailout accord due to Germany's inability to pass the required legislation.

Inquiring minds want to know, what's next? Capital controls? The problem is not the market -- the problem is the flawed constructs and bad ideas that are now being exposed.

Away from stocks: The dollar was strong and the euro fell out of bed again, losing 1.5% and tanking to a new low. Oil dropped 1%. Bonds were higher, even when stocks were, too (just the opposite of what we saw yesterday), and they surged when stocks sank. As for the metals, silver was a bit higher and gold lost 0.5%.

Rally runs out of gas

On the back of our strength yesterday, Asia was higher last night, as was Europe for the most part. As for our equity market, the early going was spent flopping around unchanged, with no particular theme. At midday the market drifted a bit lower, led by the Nasdaq, and with about an hour to go when I had to leave, the indices had lost about 0.5% and looked to be headed lower, still.
All in all, there just wasn't a whole heck of a lot to say about today. However, the next handful of sessions may be informative as we see whether or not the market "fails" around these levels, and if so, what the next decline looks like.
Away from stocks: The dollar was mixed but the euro closed at a new low for the year. Oil declined 1.5%. The piggys were lower. The metals lost 1%-ish.
Index Close % Change
Dow 10780.91 -1.06
S&P 500 1157.25 -1.23
Nasdaq 2394.36 -1.26
Nasdaq 100 1945.52 -1.52
Russell 2000 709.58 -0.91
Sox Index 364.94 -2.7
Bank Index 55.03 -1.54
Dow Transports 4571.43 -1.86
Dow Utilities 382.62 -0.58
Nikkei 225 10620.55 +2.18
Gold - Front Month 1232.2 -0.88
Silver - Front Month 19.42 -1.24
Crude Oil 73.93 -2.27
Dollar Index 85.36 +0.62
Euro Spot 1.25 -0.63
Long Bond 20-year 120.78 +0.39
FOTM - Yen Spot 92.75 +0.53
5/13/2010 4:05 PM

IBM charge

IBM Chief Executive Officer Sam Palmisano said operating earnings at the world’s largest provider of computer services will increase to at least $20 a share by 2015 from $11.35 or more this year, helped by cost savings and software demand.
Guy Adami said on CNBC's "Fast Money" TV show said the trade going forward is in tech, especially IBM(IBM), which he said stood for "Investors Buying More." He said the company, whose CEO is projecting $15 in earnings per share in 2015, is doing "everything right."
Cisco Systems, the biggest maker of networking equipment, reported third-quarter profit that topped analysts’ estimates after corporate customers added gear to handle surging video and Internet traffic.
Index Close % Change
Dow 10896.91 +1.38
S&P 500 1171.67 +1.37
Nasdaq 2425.02 +2.09
Nasdaq 100 1975.58 +1.81
Russell 2000 716.1 +2.96
Sox Index 375.08 +2.84
Bank Index 55.89 +1.47
Dow Transports 4657.86 +2.12
Dow Utilities 384.86 +0.64
Nikkei 225 10394.03 -0.16
Gold - Front Month 1239.1 +1.54
Silver - Front Month 19.52 +1.2
Crude Oil 75.39 -1.28
Dollar Index 84.84 +0.44
Euro Spot 1.26 -0.27
Long Bond 20-year 120.16 -0.52
FOTM - Yen Spot 93.17 -0.56
5/12/2010 4:05 PM

A secular bull market in precious metals

This sector, especially gold, has been on a tear the last couple of years and is showing no signs of slowdown.
As you know, since I think the stock market is headed to new lifetime highs and that the US Dollar will remain strong there hasn't been a need or interest for me to get into precious metals.
It's not like I see more people use more gold or buy more gold (other than transferring the asset back and forth at a higher and higher premium, sort of like comic books).
Rather, gold is an inflation and currency hedge (counter to the declining dollar) and runs on perceived value.
Buying gold is like buying insurance to me, as insurance is also a form of hedging.
So I don't really see gold as a true investment but as a hedge.
With that said, you can still make money, potentially lots of it in the years ahead if Jim Rogers is correct, by "investing" in gold and silver.
Take a look at the gold etf GLD:

The silver etf SLV is also bullish, though it hasn't been quite as bullish as gold:

Here are some specific companies.
Goldcorp Inc. (GG):

Silver Wheaton Corp (SLW):

INTC set for double digit growth

SANTA CLARA (MarketWatch) -- Intel Corp. Chief Executive Paul Otellini offered an upbeat view of the chip giant's future to a crowd of Wall Street analysts on Tuesday, saying the company is poised for major growth in earnings and sales over the next few years.

Otellini said Intel /quotes/comstock/15*!intc/quotes/nls/intc (INTC 22.32, +0.04, +0.18%) sees its revenue and earnings growth rates improving from single digits per year to low double digits in the next few years on average, amid continued growth in its core personal computer market and in other arenas, such as smart phones and smart TVs.
"We're on top of a growth engine and we intend to deliver," Otellini said during the company's analyst day at the chip giant's headquarters in Santa Clara, Calif.
The company did not formally raise its guidance for the current quarter. Shares of Intel were last trading up 0.6% at $22.69.

Otellini said PCs continues to be "a growth industry," especially with the rapid expansion of computing and the Internet in emerging markets, led by China, India and Brazil.

The laptop market is bound to continue its growth, he said. "We see nothing on the horizon that is going to change that," Otellini said.
Meanwhile, the netbook market, a space Intel helped to pioneer with its Atom chip, remains a key new arena for the company.
Otellini also noted the rise of the tablet PC arena, underscored by the success of Apple Inc.'s /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 255.20, -1.32, -0.52%) iPad. But he downplayed speculation that tablets may hurt other markets, particularly notebooks and netbooks.

"I don't think they will take away market share away from other devices," he said, adding that tablets and netbooks offer additional usage models to consumers, but will not likely replace such devices as notebooks. Intel's chips are not currently in the iPad.

Otellini said the company is also eyeing opportunities in the consumer electronics market, citing new products that are geared to more sophisticated televisions, dubbed smart TVs. "TVs starting this year will get smart," he said.

Index Close % Change
Dow 10748.26 -0.34
S&P 500 1155.79 -0.34
Nasdaq 2375.31 +0.03
Nasdaq 100 1940.48 -0.11
Russell 2000 695.48 +0.85
Sox Index 364.73 -0.75
Bank Index 55.08 +0.31
Dow Transports 4561.05 +0.56
Dow Utilities 382.4 +0.2
Nikkei 225 10411.1 -1.14
Gold - Front Month 1233.2 +2.7
Silver - Front Month 19.36 +4.36
Crude Oil 75.9 -1.17
Dollar Index 84.48 +0.39
Euro Spot 1.27 -0.84
Long Bond 20-year 120.69 -0.13
FOTM - Yen Spot 92.73 +0.6
5/11/2010 4:07 PM

BIDU splits 10:1 on Wednesday

This company is growing phenomenally and is now virtually a monopoly in China.
So if I'm interested in China, this is the stock I would definitely own.
I've been calling this stock to $1,000 for several years now and booyah it's almost there.

Big gap up

The market was due for a bounce Monday because the internals had fallen to extremely low levels. There are only 27 stocks within the S&P 1500 above their 10-day MA and only 51 above their 20-day – I can’t remember seeing readings that low…especially considering just a week before there were over 1000 stocks above their 10-day. On Friday, only 3 stocks made a new 52-week high and only 7 made a new 10-day high. And 3 of the last 4 trading days saw decliners out-number advancers by at least 10-to-1. Then I logged on to check the futures and saw they were up 40 – wow. I’ve see big gap downs when bad news hit, but I can’t remember such a gap up. Right now S&P futures are up almost 50 and Dow futures are up 370.
The reason for the gap up –>> Europe agreed to a nearly $1 trillion rescue plan and the US Federal Reserve said it would provide loans overseas. So what else is new – capitalize the gains, socialize the losses. Whether it’s AIG headed for bankruptcy or Greece following the same path, if they do well, they get to keep the money; if they don’t do well, the losses are spread out to everyone. Bad behavior continues to get rewarded, so there’s no sense following the rules or being responsible. I wonder what is being taught in top business schools.
The news of Helicopter Ben flying over Europe isn’t small and insignificant. Here’s the S&P daily. There’s no sense drawing trendlines. That blue line is where the index will open today (as of the futures indications right now).

Buying the Dips' a Fallacy?

Karl Denninger, a bear of bears, goes on a rant about how "buying on dips" is a bad strategy.
Basically, what it comes down to is... this guy is challenging the highly successful methods of folks like Warren Buffett.
It's a foolish endeavor but it doesn't stop occasional chestnuts from trying.
source:

One of the common "chestnuts" is that when one is in a "bull market" one should simply "buy all dips."
Really?
Let's look at a simple table, assuming you had $60,000 to invest in March of 2009. We will examine two possibilities:

1. We put the entire $60,000 in at the low, all at once.
2. We "buy the dips" in equal $10,000 increments.

Now I'm going to pick on a weekly chart and use approximate prices for each buy, because (1) you're never going to get the top or bottom tick, and (2) we're assuming you actually go to work and thus can't be watching every second of every day.
So these results look reasonably typical versus the so-called "top-ticking" and "bottom-ticking," which are usually employed by the pump monkeys.
For simplicity we will just use the S&P 500, and only from the March lows to now.
Here's the table.
Date

SPY

Dollars In

Shares

Owned

Value
3/1/2009 66.6 10000 150.15 150.15 $10,000.00
5/9/2009 87.9 10000 113.77 263.92 $23,198.20
7/6/2009 87.6 10000 114.16 378.07 $33,119.02
9/28/2010 102.6 10000 97.47 475.54 $48,790.09
10/26/2009 103.3 10000 96.81 572.34 $59,122.96
2/6/2010 103.9 10000 96.25 668.59 $69,466.37

10/1/2010 66.6 668.59 $44,528.01
Note that 10/1/2010 is a possibility, of course - a return to the lows. Let's analyze.
At today's prices, you would own 668.59 shares of SPY, which right now are worth $79,324.21. Not bad you say, in that you spent $60,000 and have an asset worth nearly $80,000, for a gain of 32%.
But the index is up 78%, which means you have underperformed by more than half ... That's not very good.
What's much worse, however, is what happens if the price collapses back to the 666 low. In that case, You lose 25% of your money.
If, instead, you simply "stuck it all in" at 666, convinced that we had a new bull market, you would have the entire retrace back down to 666 to change your mind before you lost a single penny, and right now you would be up 78% on your investment.
Before listening to the "useful idiots" on the Internet talking about "accumulation" strategies for what they claim is a "new bull market," get out EXCEL and run some of their BS cock-and-bull games through the hard truth of mathematics.
Here's reality:

The only winning strategy "for the long haul" is to be fully committed to the market when it is rising and economic fundamentals support that direction, and to be entirely out at all other times.
Such a strategy also allows you to make wrong calls on re-committing to the market at bottoms and not get materially hurt. If you instead try to "scale in" or "accumulate" and are wrong you are going to get destroyed.

You will quickly understand why I sneer at the "useful idiots'" so-called "advice" and why, if you listen to them, you're staring at an account statement that have a number at the bottom that is a lot smaller than it should be.
By the way, Jack Bogle of Vanguard sees this much the same as I do, less the advice of trying to match economics and markets. I think he's got the right general idea, but you cannot divorce your investing from an analysis of the fundamentals, or you will eventually find yourself investing in a market that is rising on crappy and deteriorating fundamentals (such as in 2006 and 2007) and see half or more of your money disappear.

What Business is Wallstreet In?

Mark Cuban is always a great read, and he is right on target when questioning the direction of WallStreet.

My last two posts were designed to stimulate discussion. But lets talk the real problem that regulators, public companies, investor/shareholders and traders face. The problem is that Wall Street doesn’t know what business it is in. Regulators don’t know what the business of Wall Street is. Investor/shareholders don’t know what business Wall Street is in.
The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It’s a platform to be exploited by every technological and intellectual means possible.
The best analogy for traders ? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.
I recognize that one is illegal, the other is not. That isn’t the important issue.
The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days ?
I started actively trading stocks in 1992. I traded a lot. Over the years I’ve written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.
Over just the past 3 years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game than I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.
The Pimco (who I think are the smartest guys on the Street) guys talk about a new normal as it applies to today’s state of the world economy. I think just as important is the new normal as it applies to Wall Street. Wall Street is now a huge mathematical game of chess where individual companies are just pawns. This is money in the bank for the big players like Goldman, Morgan, etc. Why ? Because the game of chess is far too complicated for 99pct of the institutions out there investing money. So to keep up, they turn to Goldman, Morgan and the like to invent products for them. “You don’t know how to play the housing boom, let us show you”. “You think the housing boom is about to crash, let us show you how to play that”. “You think that PIIGS are in trouble because they can’t print money to pay debt holders, let us create a product to allow you to play that game” The big houses have the best hackers in the business and they put together the games and sell them to the many, many institutions managing Billions and Billions of dollars. They are the ultimate Hackers selling their attacks to the highest bidder, regardless of which side they are on. That is a new normal.
Again, I’m not passing judgement one or the other. I’m just recognizing what is going on in the financial world today.
It’s rare for companies to go public these days. Just as rare for secondary offerings. The only thing that keeps me in the market is that most of the stocks (not all) pay dividends or some other sort of cash payout. For the first time in my life, I bought outside the United States. I bought Australia in a big way because it is becoming increasingly hard to find new domestic investments that are not influenced by the “hackers” and the games being played on a macro level. It’s hard to believe, but evaluating countries as an investment is now easier than evaluating companies . Even with all the unrest in Europe. Or maybe because of it.
So back to the original question. What business is Wall Street in ?
Its primary business is no longer creating capital for business. Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn’t shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which i think are always a mistake), then flows into companies in the form of equity.
My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether its through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won’t come from traders trying to hack the financial system for a few pennies per trade.
And solutions won’t come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.
Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks they make will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the US and World Economy nearly enough for the risk of collapse they introduce into the system.
Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The Government needs to create incentives for this business and extract compensation from the traders/hackers for the systemic failure level of risk they introduce.
There will be another crash, because there are too many players looking for the trillion dollar score. They can’t all win, yet how many do you think wouldn’t risk everything, even what is not theirs, for that remote chance to score big ? Put another way, there is zero moral hazard attached to any trade. So why wouldn’t traders take the biggest risk possible ?

Dow Closes Above 11,000 for First Time Since September 2008

The Dow Jones industrial average closed above 11,000 points on Monday for the first time since the start of the financial crisis.
The move above 11,000 was the latest milestone in a rally that has brought Wall Street back from the brink of economic collapse. It came as investors welcomed a long-awaited rescue plan for Greece and amid signs that American companies were poised to report strong first-quarter profit, with earnings season beginning in earnest this week.
The Dow ended the day at 11,006.19, rising about 9 points or 0.08 percent. It last closed about 11,000 in September 2008.

Index Close % Change
Dow 11005.97 +0.08
S&P 500 1196.48 +0.18
Nasdaq 2457.87 +0.16
Nasdaq 100 1995.65 +0.06
Russell 2000 705.05 +0.3
Sox Index 378.97 +0.85
Bank Index 55.97 +1.19
Dow Transports 4520.7 +0.29
Dow Utilities 386.14 +0.32
Nikkei 225 11251.9 +0.42
Gold - Front Month 1155.2 -0.58
Silver - Front Month 18.19 -0.88
Crude Oil 84.27 -0.77
Dollar Index 80.59 -0.36
Euro Spot 1.36 +0.64
Long Bond 20-year 116.22 +0.49
FOTM - Yen Spot 93.24 -0.06
4/12/2010 4:04 PM

SPX Not Bearish

We're chugging along just fine.
I don't see anything bearish about the charts.
The breakout at SPX 1150 is similar to the one at SPX 950.
The target is SPX 1300.... then 1450, then 1600.... and eventually 3,000.

Greek Banks: Problem Contained?

Overnight markets were weaker, especially in Europe, which was impacted by the nasty battle that has engulfed Greece. The country's interest rates continue to climb, as 2-year government debt now yields about 8.3%. Apparently, there's a good deal of difficulty within Greece's banking system, as the Lord of the Dark Matter noted in a couple of emails to me late yesterday:

"Yep. International banks cut off unsecured lending to Greek banks months ago, and some of them stopped anything other than overnight repo (secured) trades with Greek banks. Now even the overnight repo deals with Greek banks are being cut off. Basically the Greek private sector is being strangled to death when it comes to funding. If the ECB doesn't blink big time at their meeting tomorrow, then Greece could blow by the end of this week, causing significant ruptures in Europe."

Based on Trichet's comment this morning -- "that default not an issue for Greece" -- it doesn't appear as though the ECB has done much blinking, or that the ECB has broadened the collateral it accepts. Thus, it would appear, based on the Lord of the Dark Matter's vantage point, that things are liable to get quite ugly for the Greek banking system. Which will have knock-on effects for other banks in countries like Germany, for instance.

If You Can't Pay Your Union Dues Of course, the market will then turn its attention to other EU problem children. Greece, comprising roughly 2% of the euro community, isn't the problem -- it's the fear of future problems, i.e., the PII(G)S. Perhaps at some point, those countries (which probably should never have been in the euro to begin with) will be kicked out, and the euro will be a really strong piece of paper. Then again, maybe the ECB will blink, and it will be just like the dollar.

Due to all the moving parts in this exercise, it's not possible to know how it will turn out. But I think the entire world is realizing that paper currencies are problematic, as they continue to put a bid in the gold market -- thus breaking down the alleged correlations of markets that are supposed to "tell gold what to do."

As for the stock market, the early going saw a decline of about 0.5%, but by midafternoon the market was sporting a gain of 0.5%, before a late-day selloff trimmed the advances to what you see in the box scores.

Away from stocks, oil and the piggys were slightly lower, ditto the metals, along with the dollar.

In other currency-related news, the Chinese appear to be signaling that the yuan will be revalued higher in the not-too-distant future. Now obviously they didn't come out and say that, but to me their body language suggests that that will happen sometime in the next couple months. As to the ramifications, I really don't know, but the longer they indicate the move is coming before it actually occurs, the better-discounted it will be.

Index Close % Change
Dow 10927.07 +0.27
S&P 500 1186.44 +0.34
Nasdaq 2436.81 +0.23
Nasdaq 100 1980.73 +0.17
Russell 2000 699.63 +0.02
Sox Index 371.47 -1.44
Bank Index 55.06 +0.97
Dow Transports 4456.7 +1.38
Dow Utilities 382.65 -0.41
Nikkei 225 11168.2 -1.1
Gold - Front Month 1151.3 -0.15
Silver - Front Month 18.07 -0.74
Crude Oil 85.5 -0.44
Dollar Index 81.55 -0.08
Euro Spot 1.34 +0.04
Long Bond 20-year 115.47 -0.19
FOTM - Yen Spot 93.35 +0.01
4/8/2010 1:05:14 PM

Stocks finish with losses

NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday following a report that consumer borrowing fell and General Motors said it lost billions of dollars during the second half of 2009.

The Dow Jones industrial average (INDU) lost 72 points, or about 0.7%, to end at 10,897.52. The S&P 500 index (SPX) fell 7 points, or 0.6% to 1,182.44. The Nasdaq composite (COMP) also fell 6 points, or 0.2% to 2,431.16.
The blue-chip Dow has bumped against the important mark lately. On Monday, the index rose to within 11 points of 11,000. The Dow last closed above that level on Sept. 26, 2008.

Trading on Wall Street was muted Tuesday, but the Nasdaq and S&P 500 edged higher to finish at 1-1/2 year highs.

"With such a strong runup, you're going to hit resistance eventually," said Alan Lancz, president at Alan B. Lancz & Associates. "The market needs a catalyst to get investors to buy at these levels."

Lancz said it would be difficult to break barriers at the 11,000 mark on the blue-chip Dow index and 1,200 for the S&P.

Companies: Shortly after the start of trade, General Motors posted a $4.3 billion loss for the July-December period of 2009, during which the company emerged from bankruptcy protection.

In its annual report released Wednesday, Goldman Sachs (GS, Fortune 500) defended employee bonuses and its multi-billion dollar relationship with AIG (AIG, Fortune 500) while downplaying its short-selling in the mortgage market.

The market is in a "wait-and-see" pattern, Lancz said, as investors look ahead to next week and the quarterly corporate results season.

Earnings reports have been generally upbeat recently, and the trend is still upward, but Lancz said he worries about upcoming quarters.

"Later in 2010, year-over-year comparisons will be difficult," Lancz explained. "We'll also have the headwinds of increased interest rates, and higher commodities costs. I think that's going to slow further progress."

Economy: With one hour left in the session, the Federal Reserve reported consumer credit fell at an annual rate of 5.6% in February to $2.448 trillion, after increasing for the first time in a year during the previous month.

That was much worse than expected, as analysts expected a drop of only $0.7 billion. The Dow fell more than 122 points immediately following the report's release then pared losses ahead of the market's close.

"That is definitely disappointing, as it shows a lack of confidence in buying," Lancz said. "Investors are going to be jumpy on any kind of negative data."

Lingering concerns about the debt woes brewing in Europe also weighed on stocks, Lancz said. Greece denied reports Tuesday that it was uncomfortable with accepting assistance from the International Monetary Fund.

The Financial Crisis Inquiry Commission began a three-day hearing, focusing on the causes behind the mortgage meltdown. Former Fed Chief Alan Greenspan testified at Wednesday's hearing, saying that while steps can be taken to limit the impact of another shock, regulators can't fully prevent another crisis from happening.

Outlook: Dave Hinnenkamp, chief executive of KDV Wealth Management, said mixed economic reports have left investors a bit nervous.

"Overall, depending on what you look at, there's good news and bad news," Hinnenkamp said. "But if you look at corporate balance sheets, companies are sitting on a lot of cash as they wait for recovery. That bodes well for down the road."

Beyond corporate earnings and the unemployment rate, investors are also looking at the impact of winding down federal purchase programs, Hinnenkamp said. Last week, the Federal Reserve stopped buying securities backed by pools of mortgages.

World markets: Britain's FTSE 100, France's CAC 40 and Germany's DAX all ended slightly lower.

In Asia, markets ended mixed. the Hang Seng in Hong Kong climbed 1.8%, and Japan's Nikkei posted slight gains. Shares in China, however, slipped 0.3%.

Other markets: U.S. Treasurys rose, with the yield on the benchmark 10-year note falling to 3.63%. Bond prices and yields move in opposite directions.

Earlier this week, the yield topped 4% for the first time in 18 months amid optimism about the economic recovery. Wednesday's auction of 10-year notes was part of an $82 billion offering this week of U.S. debt.

Oil prices dipped, with crude for May delivery settling down 96 cents to $85.88 a barrel. The government's weekly oil inventories report said crude oil supplies rose about 1.1 million barrels last week.

COMEX gold for June delivery settled at $1,153 an ounce, up $17 from the previous day.

The dollar managed gains against the euro and British pound, but it slipped against the yen.
Index Close % Change
Dow 10897.52 -0.66
S&P 500 1182.45 -0.59
Nasdaq 2431.16 -0.23
Nasdaq 100 1977.3 -0.23
Russell 2000 699.45 -0.29
Sox Index 376.89 +0.36
Bank Index 54.53 -0.38
Dow Transports 4395.99 -0.8
Dow Utilities 384.21 -0.9
Nikkei 225 11292.83 +0.09
Gold - Front Month 1149.6 +1.2
Silver - Front Month 18.15 +1.22
Crude Oil 85.72 -1.29
Dollar Index 81.56 +0.21
Euro Spot 1.34 -0.33
Long Bond 20-year 115.59 +1.04
FOTM - Yen Spot 93.33 +0.49
4/7/2010 4:05 PM

Salesforce Breaks Out

CRM is one my favorite secular growth technology plays.
It looks like many companies are increasingly getting more comfortable with cloud computing.
CRM was upgraded this morning to $100.
Could this company be the next Oracle? Well, I think they have a decent shot.

Plug MPG into the system

I recommended using a small amount of cash on a small cap stock.
Here is a decent stock to try: Maguire Properties (MPG).
With the economy turning around and the housing market stabilizing, the commercial property market should bounce back.
If the company doesn't go belly up, the stock is headed to $12-15.

Indeksy on Tuesday

Index Close % Change
Dow 10969.99 -0.03
S&P 500 1189.44 +0.17
Nasdaq 2436.81 +0.3
Nasdaq 100 1981.95 +0.21
Russell 2000 701.45 +0.54
Sox Index 375.52 -0.62
Bank Index 54.74 +2.43
Dow Transports 4431.42 +0.36
Dow Utilities 387.68 +0.72
Nikkei 225 11282.32 -0.5
Gold - Front Month 1135.3 +0.13
Silver - Front Month 17.98 -0.73
Crude Oil 86.75 +0.15
Dollar Index 81.33 +0.29
Euro Spot 1.34 -0.59
Long Bond 20-year 114.56 +0.16
FOTM - Yen Spot 93.73 +0.68
4/6/2010 4:05 PM

Get Ready: Tomorrow May Bring The End Of The Fed's Famous "Exceptionally And Extended" Language

Fresh Fed minutes are coming out tomorrow, and for the first time in a while, Bernanke may not simply cut & paste what he wrote last time.



Tomorrow the FOMC minutes from the March 16th meeting will be released. At the time of that meeting, we noted we expected now to be an appropriate time for the Fed to begin to lay the groundwork to change the “exceptionally and extended” language. In doing so, it will put the FOMC in a position to make a formal language change at this month’s meeting on April 28th. In altering the language, the FOMC will still not be expected to tighten monetary policy until October or November at the earliest. As economic data improves, if the members want to leave themselves the room to move in 2010 if necessary, the language will need to change soon. A very first gradual shift may have already occurred. Last Thursday, New York Fed President and FOMC Vice Chair Bill Dudley invoked the “exceptionally and extended” language in reference to the March minutes, but more importantly, he referred to the recovery as sustainable. “We have been very aggressive in providing support to the economy, and it now appears that a sustainable recovery is underway.” Dudley is squarely in the dove camp, and is quick to rattle off the litany of headwinds to the recovery. Therefore, such a notable statement could signal this early transition is occurring. We will be looking to tomorrow’s release for additional signs.
If this happens, there's a good chance the dollar will go nuts.Another reason to think Bernanke will get in the raising mood soon: All those industrial commodities going nuts >

WSJ: Inflation, Don't Worry, Be Happy

For once, the market's response to the nonfarm payroll number was exactly as it should have been, i.e., nothing happened. (Of course, that was because the market was closed.) Given its noise level and the regular revisions, far too much is made out of this particular statistic, and why it's such a favorite speculative catalyst I do not know. Thankfully (at least last Friday), the markets weren't roiled by what is essentially a nonevent.

There was absolutely nothing surprising in the data, as it was about as expected. On the other hand, beneath the surface the growth in jobs was less than expected: About one third came from census workers, another half contributed by the birth/death model, and only the remaining from actual job creation.

Turning to today's action, by midday the S&P and the Nasdaq had gained about 1% and the Dow about half that. From there the indices drifted sideways for the rest of the day.
Away from stocks, the piggys were weaker once again (as they're in desperate need of some QE from Bennie). The dollar was mixed. Oil gained 2%. The metals gained 1%.

Yellen: Barking Up the Wrong Tree
Regular readers know my view about inflation, and today the Wall Street Journal took pains to let us know why we needn't worry (which I'll get to in a minute). But first, in a column headlined "Inflation Fears Cut Two Ways at the Fed," Jon Hilsenrath explains a particular mindset:

"The Federal Reserve's decisions to keep interest rates near zero and to flood the financial system with credit are sparking fears of an eventual outbreak of inflation. But inside the Fed, an influential [my emphasis] band of policymakers is fretting over the opposite: that the already-low rate of inflation is slowing further." One Fed head who champions that view, Janet Yellen, is quoted as follows: "Underlying inflation pressures are already very low and trending downward."

This is what the Fed really thinks, in my opinion, regardless of its slightly more hawkish rhetoric occasionally. Bennie has one goal: He is committed to not making the mistakes he feels the Fed made in 1937-38, when he claims it tightened too soon and sent America back into depression. (He doesn't really understand the root cause of the Great Depression, but that isn't today's topic.) Thus, I believe that at some point he will feel compelled to try to stop the rise in interest rates -- being caused by an out-of-control Federal government budget deficit -- and ride to the rescue in some version of QE.

Hush-a-Bye, Don't You Cry About the CPI
The Journal's main story was aimed at letting folks know why they needn't worry: "Consumers Not Likely to Feel Commodity Costs Rise." Even though the paper notes that the prices of many commodities are heading higher, it adds that "little if any of this will filter through to the consumer in the form of higher prices for things such as cars and dishwashers." Their line of reasoning: We just aren't going to see higher prices because the raw materials component is so small and because demand is too weak. They believe that there is just too much excess capacity or "slack," as they call it. Therefore, any price increases will just be eaten by businesses.

While some businesses may be willing to absorb a portion of the price hikes for a little while, that won't last long. In fact, we're starting to see this in far too many areas. In Ask Fleck today, a longtime businessman within the hardwood industry notes that prices have leapt dramatically in the last year. One of the reasons why prices are being pushed higher is because so many mills have gone out of business. So, when moneyprinting meets industries that have been hammered, price increases do result.

I don't know when inflation will show up in the CPI, as I pointed out in my book, because it's so badly skewed by statistical manipulation, via hedonics and substitution. But an increase in inflation is coming our way. I think you can take that to the bank.

Index Close % Change
Dow 10973.55 +0.43
S&P 500 1187.44 +0.79
Nasdaq 2429.53 +1.12
Nasdaq 100 1977.83 +0.93
Russell 2000 697.65 +2
Sox Index 377.86 +2.98
Bank Index 53.44 +1.91
Dow Transports 4415.41 +0.52
Dow Utilities 384.92 +0.5
Nikkei 225 11339.3 +0.47
Gold - Front Month 1132.1 +0.53
Silver - Front Month 18.1 +1.2
Crude Oil 86.72 +2.18
Dollar Index 81.13 -0.06
Euro Spot 1.35 -0.19
Long Bond 20-year 114.38 -0.44
FOTM - Yen Spot 94.32 +0.31
4/5/2010 4:10 PM

Time to pick up some trash

Almost time to back up the truck on RSG, a waste management company that is growing at a quick pace.
Both Bill Gates and Warren Buffett own shares.
And here's a cup-and-handle (or inverted head-and-shoulders if you prefer) ready to breakout:

Poor RIMM set for reaming?

I dunno how RIMM is going to be able to defend its market position in the future, especially when the iPhone, and recently the Google Android phones, is gaining market share.
And who wants a physical keyboard anyway?
I got news for RIMM -- nobody wants a micro keyboard on a smartphone!
Once you go touchscreen, you never go back.
In the smartphone space, there will likely be only one to two eventual winners, and the rest will slowly bleed to death.
Right now, it seems like the momentum lies with the iPhone and the Androids.
Unfortunately for RIMM, I think it'll stay that way for a long time.

The Technology That Will Replace 148 Billion Barrels of Oil

Most investors didn’t notice when, in September 2008, Warren Buffet paid $230 million for a 10% stake in Hong Kong-based battery maker BYD Co. Ltd. (HKSE:1211.HK).
Now, of course, we all wish we’d been paying attention…
In the 18 months since, BYD share price has increased by upwards of 900%, from $8.01 before the announcement to $75.05 today. And the value of the investing icon’s portion of shares increased to $2 billion.
But Buffet’s interest in this little-known Chinese stock isn’t the main story here. He simply helped to focus a beam of light onto an industry that could serve as a major profit play for years to come.
The real story is a technology market that’s heating up in a big way: batteries. The market for rechargeable batteries alone is expected to zoom to $51 billion by 2013.
And yet the battery gets far less attention than solar and wind power, its higher-profile (but less technologically advanced) cousins.
Modern battery technology is the keystone of the global push to find an energy alternative to oil. In fact, one specific new category of rechargeable batteries is a breakthrough technology with the potential to replace as much as 148 billion barrels of oil over the next 50 years, a savings of $10.4 trillion – even at current prices.
And as supplies diminish, we’re certain to see oil prices blast well above the current level of $82.08 a barrel.
What these numbers don’t tell you is that there’s a powerful catalyst at work, one that’s behind the big push to achieve energy independence: the electric – or “hybrid” – car.
Billions Bet on “Third Element” Technology
The July 2008 record oil price of $147 a barrel served as a wake-up call for the car-driving consumer. But it was also the jolt that shifted the plug-in-auto industry into high gear.
In response to surging oil prices, U.S. President Barack Obama promised to invest at least $150 billion into alternative energy during his term of office. And a big chunk of the $787 billion stimulus bill will finance development of new, rechargeable battery technology for Plug-in Hybrid Electric Vehicles (PHEVs).
The technology in question is lithium-ion.
Sometimes referred to as the “Third Element” – because of its No. 3 position on the Periodic Table of Elements – lithium is the lightest metal in existence. Scientists believe it was one of the few elements synthesized in the “Big Bang” that created the universe.
Lithium carbonate is a very refined form that packs four times the energy punch of lead-acid batteries and twice that of nickel-metal hydride batteries. Until recently, it was a minor commodity used mostly in glass and mood-stabilizing drugs.
But not anymore.
Now it’s a key ingredient of the new class of rechargeable batteries needed to jump-start the plug-in car market. The other ingredient, of course, is capital.
President Obama’s American Reinvestment and Recovery Act allocates $2 billion to the development of battery systems, components and software for advanced lithium-ion batteries and for hybrid electric systems. Another $300 million will support a pilot program for Alternative Fueled Vehicles.
And that’s just a down payment.
The $25 billion Advanced Technology Vehicles Manufacturing Loan Program will make sure the industry itself continues to develop.
While these allocations will nurture the development of lithium-ion technologies, other programs will make the hybrid-vehicle market bloom.
You see, hybrid and electric vehicles currently cost more than gas-guzzlers, due to expensive and heavy batteries and multiple engines.
So starting this year, U.S. buyers of commercial PHEVs are eligible for a federal tax credit of up to $7,500, plus a separate $2,000 credit for installing a home charging unit.
There’s growing investment at the state level, too: The California Air Resources Board just announced $3.7 million in rebates for buyers of zero-emissions and hybrid auto purchasers.
That should help cut down fears about affordability... and just in time, too.
According to a report by Pike Research, the lithium-ion transportation battery industry will grow from $878 million in 2010 to nearly $8 billion by 2015.
Automakers have seized lithium-ion battery technology as the road to the future. Right now, nearly every automaker on the planet is gearing up to flood the market with some form of electric-powered car:
• Daimler AG (NYSE:DAI) launched a hybrid version of its S-Class sedan last year, and the entire Mercedes lineup soon will be available in hybrid. Daimler is teaming up with BYD to develop electric cars for the flourishing Chinese market.
• Nissan Motor Co. Ltd. (OTC:NSANY) retooled its Smyrna, Tennessee, factory to produce pure electric vehicles. Nissan expects to sell as many as 50,000 units of the hybrid 2010 Altima in its first year. But what’s got everyone talking is the Nissan Leaf, its first lithium-ion car. The hatchback will debut later this year in Japan, Europe, and the U.S.
• Ford Motor Co. (NYSE:F) is rolling out the all-electric Transit Connect commercial fleet van in 2010 and plans to invest $550 million to retool a Michigan truck plant to manufacture an electric Focus in 2011.
• General Motors Co. (OTC:MTLQQ) is counting on lithium-ion batteries to power the Chevy Volt, its revolutionary and much-hyped PHEV, set to debut in November 2010. The vehicle will cost about $40,000.
• Toyota Motor Corp. (NYSE:TM) plans to begin retailing a lithium-ion powered plug-in Prius in late 2011 and a short-distance all-electric car in 2010.
• Mitsubishi Motors Corp. (TYO:7211) has been developing EV technology since the 1970s. Its environmental-award-winning i-MiEV will be available in April for about $51,000.
• Honda Motor Co. Ltd. (NYSE:HMC) just announced plans to introduce a lithium-ion powered hybrid Civic within the next several years, as well as Acura luxury cars and other models. February 2010 sales of the Honda Insight and Civic Hybrid increased 54% and 37% over the previous month.
• Even Volkswagen AG (VOW.DE), which has stayed out of electric vehicles, plans to convert 3% of sales by 2018.
A Global Power (and Profit) Play
For further confirmation that PHEVs are more than just a passing fad, look at the dozens of governments across the globe pouring massive amounts of capital into related markets.
The British government just stated it will extend $581 million of grants and loan guarantees to Ford and Nissan for green auto plants and operations in Britain. Not to mention cash payments to consumers to offset the relatively high price of electric vehicles.
In France, Renault is partnering with a utility company to build a nationwide network of automobile charging stations. The French government pledged to contribute 400 million euros to the project.
Even the Middle East is getting involved. Aabar Investments PJSC, an investment company wholly owned by the Abu Dhabi government, recently became the largest shareholder in Daimler AG. With Abu Dhabi Water and Electric Authority, it plans to set up charging points for electric-powered cars.
And here’s the real kicker: Aabar Investments is using Abu Dhabi oil revenue to finance its foray into lithium-ion battery technologies.
Worldwide demand for batteries of all types – both standard and rechargeable – is projected to advance at roughly a 7% annual clip through 2010, reaching $73.6 billion, according to a study published by market research firm The Freedonia Group.
The “World Batteries” study, not surprisingly, predicts that China will post the largest gains, while also expecting strong sales increases in India, Indonesia, South Korea, Poland, South Africa, Brazil, and Russia.
But it’s the China market that promises to put a real charge into the global battery business.
On the home front, Beijing is pushing its assault on battery power through its “20% by 2020” campaign – in 10 years, 20% of China’s power needs will be served by renewable-energy technologies.
From a global standpoint, China is using its big advantage in labor costs to establish a leadership position in the worldwide battery market. It already has more than 50 factories cranking out product.
It’s an aggressive plan, to be sure, but it’s also cohesive and complete. And Beijing has the cash to make it happen.
By Horacio Marquez
Editor, Money Map Report

The 10 Best And Worst Regarded U.S. Companies

BOSTON (Reuters) - These are the 10 most admired U.S. companies, according to a Harris Interactive Inc survey of 29,963 people conducted from Dec. 29 though Feb. 15. The survey considers the 60 best-known companies:
MOST ADMIRED: prior rank
1. Berkshire Hathaway Inc 11
2. Johnson & Johnson 1
3. Google Inc 2
4. 3M Co 9
5. SC Johnson & Son Inc n/a
6. Intel Corp n/a
7. Microsoft Corp 7
8. Coca-Cola Co 4
9. Amazon.com Inc 6
10. General Mills Inc 8
LEAST ADMIRED:
1. Freddie Mac n/a
2. American International Group Inc 1
3. Fannie Mae n/a
4. Citigroup Inc 6
5. Goldman Sachs Group Inc n/a
6. Chrysler 4
7. General Motors 3
8. JPMorgan Chase 12
9. Bank of America Corp 14
10. Delta Air Lines Inc n/a
n/a = Company not rank among 60 most visible U.S. companies in last edition of survey

The Luckiest Day Of My Life

Warren Buffett says that one of the luckiest days of his life was when he was 19-years-old and happened to have picked up Benjamin Graham's book, The Intelligent Investor.
That book changed his investment philosophy and his whole life. He says that had it not been for the book, he would've been a different person at a different place.

Jobs turning the corner

So we have 162,000 jobs added in March.
Ain't that something?
Just when the bears are grasping for their last straw, the jobs number gives them another smackdown!

WASHINGTON (AP) -- The nation added jobs at the fastest pace in three years last month as factories, stores, hospitals and the census all brought workers on board -- the surest sign yet that the worst employment market in a generation has finally snapped back.
The unemployment rate stayed at 9.7 percent for the third month in a row, the Labor Department said Friday. Economists actually consider that a hopeful sign because it means more people are encouraged and starting to look for work.
"This recovery is for real," said Chris Rupkey, economist at the Bank of Tokyo-Mitsubishi.

RIMM Versus GOOG + AAPL

The land of Oz last night provided some fireworks for those of us who care about the goldmining sector when Newcrest made a hostile bid for Lihir Gold at a better-than 25% premium to the price it closed at the day before. (For what it's worth, PAAS paid over a 40% premium to acquire Aquiline.) Lihir rejected it and saw its stock price close about 4% higher than the Newcrest bid price.

I think that this is a harbinger of many more deals. That, as companies continue to turn to acquisitions because it's often a cheaper way to increase their reserves -- since it's so darned hard (and expensive) to find new deposits.

Continuing around the globe, I note that China was higher last night and has managed to climb back over its 200-day moving average. From an elementary technical basis, that market may be inclined to thwart the bubble bears, at least for the time being. Meantime, Europe was firmer last night as well, as were the Spooz, and in less than half an hour's time the indices had gained 1%, plus or minus, across the board.

Familiar Soundtrack from the Boise Boys
Turning to two corporate-earnings announcements that I was interested in, Micron indeed was successful at beat-the-number and the company waxed poetically as they made 38 cents vs. expectations of about 23 cents. And, the company did its usual shtick regarding how tight the DRAM market was going to be, etc., etc.

RIMM was unsuccessful at beat-the-number. It looks like they had to pull a few levers even to get to the number they reported. Revenues and earnings were on the light side, though margins expanded. Which led me to conclude that perhaps some reserves were reversed out and also confirmed my suspicions regarding last quarter, that they stuffed the channel to get to those numbers. They did manage to keep the guidance more or less in line, but I think that might prove to be a bridge too far this quarter.

Serial-Miss Mode
RIMM has been missing numbers on a regular basis and I believe that they're about to go into serial-miss mode. But for the most part, the dead-fish community drooled all over itself to try to rationalize the troubles for the quarter just reported as some sort of one-off problem, which of course it is not. The battle now shapes up as RIMM versus GOOG + AAPL -- which side would you like to bet on?

Turning back to the tape, the early afternoon saw sellers get the upper hand, and with 30 minutes to go the gains had mostly evaporated. But a late-day rally rescued the session, with the S&P gaining about 0.6% (though the Nasdaq was flattish).

On Jobs Data, Some Traders Will Hit Payday
Away from stocks, the piggys were heavy. Oil was higher. The dollar was weak, presumably as folks squared their positions in front of the holiday weekend and tomorrow's nonfarm payroll number. Dollar bulls have conjured up some pretty big estimates, and with the combination of weather, birth/death adjustments, and census workers, tomorrow's number will have a lot of moving parts.

But I find it interesting that the Liscio Report expects a print of just 95,000 workers, with 75,000 contributed by the census department. (For those who don't know, almost nobody is better on the small details of the economy than they are.) In any case, if their numbers are accurate, that will likely have ramifications in the FX market (and perhaps the metals market).

Today saw the metals higher as silver tacked on 2% to gold's 1%. Even gold stocks got into the act. Maybe the Newcrest bid will cause people to question their negative views on gold stocks generically. (The Rydex data I cited yesterday was incorrect. Rydex made the following fix to its own graph after I'd looked at it: Gold-stock assets are at a low level, but not below where they were during the fall of 2008.)
Lastly, in the inflation-watch department: While today's ISM survey beat the number (59.6 vs. expectations of 57), the prices-paid component really "crushed the number" (75 vs. 67.).

Index Close % Change
Dow 10927.07 +0.65
S&P 500 1178.1 +0.74
Nasdaq 2402.58 +0.19
Nasdaq 100 1959.56 +0.06
Russell 2000 683.98 +0.79
Sox Index 366.93 +0.1
Bank Index 52.44 +0.85
Dow Transports 4392.48 +0.41
Dow Utilities 383.02 +1.11
Nikkei 225 11244.4 +1.39
Gold - Front Month 1126.5 +1.08
Silver - Front Month 17.9 +2.11
Crude Oil 85.08 +1.58
Dollar Index 80.72 -0.44
Euro Spot 1.36 +0.56
Long Bond 20-year 115.88 -0.22
FOTM - Yen Spot 93.88 -0.44
4/1/2010 1:19:26 PM

Where have all the geniuses been hiding, and why have they suddenly been popping up everywhere?

When the first quarter's performance numbers come out next week, they will likely look impressive—again. In 2009, 95% of intermediate bond funds beat the Barclays Capital U.S. Aggregate bond index, according to Lipper Inc. And 68% of diversified U.S. stock funds beat the Standard & Poor's 500-stock index. Year to date, 58% of stock and bond funds alike are earning fatter returns than their benchmarks.

So does the average fund manager—long derided as the functional equivalent of a blindfolded chimpanzee—deserve an apology and a round of applause?

With funds performance numbers doing so well, many fund managers are looking like geniuses. But Jason Zweig says not so fast. He explains to Kelsey Hubbard how indexes don't always reflect what fund managers are doing.

In a word, no.



Consider the Barclays Aggregate, the market average against which many taxable investment-grade bond funds compare themselves. It gained 6% in 2009. The average intermediate bond fund, meanwhile, was up 14%.

Why? Two-thirds of the Barclays index consists of bonds issued by the U.S. Treasury and government-related entities. Corporate bonds are only 18% of the benchmark.

According to Morningstar Inc., the average intermediate-term bond fund looks very different—with about half its assets in government bonds, nearly 40% in corporates and almost 10% in foreign debt.

Why do funds deviate from the index? Funds charge expenses; market averages don't. A fund with 1% in annual costs has to beat the index by one percentage point to justify its fee. That prods managers toward riskier bonds: longer in maturity, lower in credit quality than Treasurys, or both.

Bond managers also have gotten a boost from Uncle Sam. Now that the U.S. has issued roughly $2 trillion in new debt to bail out the financial system—including $118 billion last week—government bonds make up even more of the index. At year-end 2007, Treasury securities were 22% of the Aggregate index; today, they are more than 29%.

That has shackled the index. Ten-year Treasury bonds lost 9% in 2009—while intermediate corporate bonds gained 16% and below-investment-grade, or "junk," bonds returned more than 57%.

Deviating from Treasurys by design, the average bond fund beat the index in 2009—and continues to do so this year. Thus, "it should be getting easier for active bond managers to beat the market," says Gregory Seals, fixed-income director at the CFA Institute in Charlottesville, Va.
[Intelinvest] Heath Hinegardner
But the recent hot streak among bond funds is merely the inverse of 2008, when Treasury bonds excelled and everything else smelled. Intermediate Treasurys gained 18%, while high-quality corporate bonds broke even and junk bonds fell 30%. That year, 87% of all taxable-bond funds lagged the Barclays Aggregate index.

It is a similar story with stocks. Ever since mutual funds began in 1924, they have always favored stocks that are smaller than the market average. Managers tend to own roughly 100 stocks—versus the 500 in the S&P index—and to have more concentration in the smallest among them. Therefore, managers outperform the S&P 500 whenever small stocks do better than large.

Take 2009: The stocks that had fallen the most in the crash fared best in the recovery. Small stocks lost 26% in the fourth quarter of 2008 and 15% in the first quarter of 2009, before soaring 27% for the year. So the apparent brilliance of many managers is merely the flip side of their earlier inadequacy. In 2008, only 37% of diversified U.S. stock funds beat the S&P 500, even as the index lost more than a third of its value.

What about the longer term? As of last week, 60% of diversified U.S. stock funds had beaten the S&P 500 cumulatively over the past 10 years—a striking reversal of the historical record, since roughly two-thirds of funds have trailed the index in the long run. But if you measure the funds against an index that includes small stocks, the rate of outperformance drops to 55%. Count the track records of the hundreds of funds that went bust and the winning proportion falls below half.

So the world hasn't been turned upside-down. Fund managers haven't become a flock of Einsteins, and low-cost index funds remain the best choice for most investors.

When to sell gold

When to Sell Gold (SocGen)

The Turkey Principle

Eight years ago, Blockbuster stock was around $30.
Today: About 30 cents. So if you have 10 shares, you still have about enough to rent one last video–so long as your broker waives any trading fees.

This is a disaster movie, right next to Titanic on the shelf. But who went down with this ship? Probably not anyone who had walked into a Blockbuster video store recently and taken a good look around. You could smell the doom years ago.

(How were they ever going to compete with Netflix or the Internet? Year after year, my local Blockbuster could never even remember to order plastic bags.)

There's a message for private investors in there. Never hang on to a stock if you have a bad feeling about the company as a consumer.

Instead of investing in what you know and like, sell what you know and hate. Call this the Turkey Principle: On the stock market, it's a lot easier to spot a turkey than an eagle. The irony is that most investors waste most of their time hunting for eagles.

Blockbuster isn't an isolated example. A few days after the video store chain warned it may have to file for bankruptcy, smartphone maker Palm announced "disappointing" sales. The shares, which had risen as high as $18 last fall, slumped to $4.

To hear some people tell it, Palm "surprised," "shocked" or even "stunned" the market with the news.

Really?

This suggests no one on Wall Street had walked into a cellular store recently. Or heard of the iPhone. Or even just looked around on any street, including Wall Street, or in any bar at what smartphones people were using.

You have to wonder just who was bidding up Palm shares last fall. Palm's days have probably been numbered since Apple announced the iPhone in 2007, if not earlier. The Palm Pre, launched last year, just looked like too little, too late.

Cue the Turkey Principle.

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For two decades, many private investors have been trying to get rich by blindly buying shares in their favorite stores, restaurant chains and the companies that make their favorite products. They were following Peter Lynch's advice to invest where they shopped. Mr. Lynch, the former manager at Fidelity's Magellan fund, made this notion the cornerstone of his 1989 best seller "One Up on Wall Street."

During the bull market of the 1990s, investors did OK. But then, everything went up anyway.

In the last decade the results of following this strategy have been mixed–or worse.

People lost their shirts on hot consumer companies like JetBlue and Krispy Kreme Donuts. Those investing in everything from Gap to Amazon to Coca-Cola to Sony suffered huge losses, sometimes for years. Even if the stock did, eventually, turn, many had already sold in disgust.

It's not enough to like a company's products. If you want to make money betting on a stock, you need to understand a lot more about it–from the valuation to the fundamentals, including the balance sheet and the cash flow.

So when does a consumer have an edge over Wall Street? When it comes to spotting a turkey.

After all, it's easier for companies to lose money than to make it.

And the professional investors on Wall Street are constantly being snowed by corporate investor relations machines. Companies, analysts and advisors are busy putting the best positive spin on things. Consumers who never hear from the I.R. team, but who walk past the stores every week, may get a clearer view of what's really going on.

Investors who "sold where they no longer shopped" got out of turkeys from Circuit City to General Motors to Sprint long before Wall Street.

There are ways for ordinary investors to take this a step further, and actively bet against the next Blockbuster, if they want to.

You can buy "put options" on many stocks, for very little money, through any broker. A put option is simply a bet that the stock will fall below a certain price by a certain time: In other words, it offers a leveraged bet on a stock collapsing. If you bet right, a small stake can turn into big profits. If you bet wrong, all you can lose is the (small) stake.

But for most people, just making sure to keep the turkeys out of your portfolio is achievement enough.
Source: WSJ