Search results matching tag 'bank bailout'

Markets Reverse Tuesday Losses: LOGM IPO Refreshing

IanWyatt — Wed, 01 Jul 2009 20:51:00 GMT

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Your Daily Profit

July 1, 2009

*****Small-cap Update

*****Third Quarter Kicks Off

*****Foreclosures and Bank Profits

*****Prime Mortgages Next?

Fellow Investor,

The markets were up today sloughing off yesterday’s losses. The down closed up 57 points to 8,504. The Nasdaq gained 11 points to close at 1,845 and the S&P 500 gained 4 points to close at 923 after hitting resistance at 932 in morning trading and slowly sliding back down.

The Russell 2000, moved up just under 2% for the day to close at 517. The Russell 2000 represents the 2,027 small cap companies and contains well known companies like 1-800 Flowers.com (Nasdaq:FLWS), BankRate.com (Nasdaq:RATE), and Dominos Pizza (NYSE:DPZ). The Russell 2000 Index is up 50.7% since the market’s nadir on March 9, 2009.

Small-cap gainers were lead by Oshkosh Corporation (NYSE:OSK), up 27% after the Pentagon announced that the firm’s new blast resistant, off-road ground force vehicles were the “clear winners” in a multi-billion dollar competition. Oshkosh won the bid to build 2,244 vehicles for a deal worth $1.06 billion. The company beat out defense industry heavyweights including BAE Systems (LSE:BA.L) and General Dynamics (NYSE:GD).

A very exciting small-cap gainer today was LogMeIn (Nasdaq:LOGM), up 25% on it’s IPO. LogMeIn is an on-demand connectivity specialty service firm whose product allows computer users to access files and services on one of their computers from another computer across the Internet. For example, workers can access files resident on their office computers from home without having to attach to a corporate network or have their files stored on network servers. LogMeIn’s services are primarily directed to small and medium-sized businesses.

Other gainers included Ivanhoe Mines (NYSE:IVN), up 23%; Northeast Bancorp (Nasdaq:NBN), up 23%; and ShengdaTech (Nasdaq:SDTH), up 19% after being upgraded by Roth Capital to a Buy rating from a Hold.

Small-cap decliners were lead by CardioNet (Nasdaq:BEAT), down 41% on news that the company slashed its profit and revenue outlook for 2009. The Pennsylvania-based maker of wireless heart-monitoring devices revised its profits to a range of 30 cents to 35 cents from earlier forecasts of 69 cents to 73 cents. Investors punished the company by unloading shares started right the open and continuing through the day. Shares tumbled to $9.57 from Tuesday’s close of $16.32.

Rounding out the small-cap decliners were Repros Therapeutics (Nasdaq:RPRX), down 31% after being downgraded by Wedbush Morgan and Ladenburg Thalmann; Spartan Motors (Nasdaq:SPAR), down 27%, and Immersion Corporation (Nasdaq:IMMR), down 23%.

*****The Third Quarter is getting off to a rousing start. Economic data for the day is generally good – manufacturing shrunk less than expected and pending home sales rose more than expected. As of this writing (12:40 P.M. Eastern) the Dow is up 1.25%. Traders seem willing to forgive the larger than expected drop in private sector payrolls.

We’ll see how long that forgiving attitude lasts...

Earnings season is right around the corner. It seems that expectations are pretty low. I’ve read a few commentaries that suggest that estimates are low enough that companies should be able to meet them. Of course, what corporate America has to say about the future will be important.

Of course, I’ll be watching the banks closely.

*****A lot has gone right for the banks lately. Changes to accounting rules have allowed them enough breathing room to operate. Mortgage loan modifications have brought in fees. And trading activities have even helped some banks to boost profits.

Still, I believe there’s another banking shoe to drop.

As I reported yesterday, foreclosure sales are the majority of home sales these days. And when a bank sells a foreclosed home, it is a realized loss. That’s as opposed to a non-performing loan or a foreclosed home that has yet to be sold, which can be counted as an asset.

Further exacerbating this is that banks are not realizing as much profit on those sales of foreclosed homes as they’re all flooding the market with them and thus driving down prices.

So I expect to see higher losses affecting banks’ earnings in the future. These losses may not show up in the earnings season that’s about to begin, but they are looming.

*****It was reported today that mortgage applications fell 19% last week, another sign that foreclosures are driving the market. It also reinforces the point that once foreclosure sales slow, there may well be little demand for traditional home sales to pick up the slack.

Rising interest rates and still-falling home values are also impacting new mortgage applications. It’s a buyers market, and there’s no reason to rush in when prices are falling and loan costs are rising.

*****Bloomberg is reporting that 20 million of the 93 million homes, condos and co-ops in the U.S. are underwater as of March 31, 2009. Somebody will take these losses at some point, whether it’s the homeowner, the bank or the government/taxpayer or a combination of any or all of the three.

******We know that sub-prime mortgages were a major source of non-performing loans and foreclosures. Now, prime mortgages are in trouble. In his morning missive to his traders, TradeMaster Daily Stock Alerts’ Jason Cimpl had this to say:

Delinquencies on prime mortgages soared in the first quarter of this year. Delinquency rates on prime mortgages, the least risky category, were 661,914, a jump from 250,986 a year earlier. Two thirds of all mortgages in the U.S. are prime mortgages, so any percentage increase in delinquencies represents a huge absolute number of delinquent mortgages. Here is more proof that banks are in for a tough few years as they must monitor their loan portfolios even closer and suffer write-offs. If prime mortgages start going south in a big way, look for banks to stiffen lending standards even more. Either way, this will have a negative impact on their bottom line numbers

The evidence is building that the economy is nowhere near out of the woods. And we can also see that banks will be facing serious problems ahead. As I said yesterday, investors should be on their toes.

Also, we’re not recommending downside positions on banks – yet. But that time will come, and there will be a lot of money to be made.

*****I’m giving my staff the day off on Friday. There will be no Daily Profit that day. And I’ve cajoled Jason into giving us his video chart analysis tomorrow, so we have that to look forward to tomorrow…

If you can’t wait, check out Jason’s video from last week and get a special opportunity to try his TradeMaster service. Click here.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. Earlier I mentioned I’m not recommending shorting any U.S. banks yet, but there is one bank you should have in your portfolio as a long position. It’s an Indian bank that is immune to U.S. mortgage exposure and has seen exponential growth—economic turndown or not. Find out more about this bank in my new India stocks report. Click this link to get a copy.

New Form of Mortgage-Backed Security Losses Ahead

IanWyatt — Wed, 10 Jun 2009 19:54:00 GMT

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Your Daily Profit

June 10, 2009

*****“The Worst is Yet to Come”

*****MetLife’s Gamble

*****Newsletter Advisors Wednesday

Fellow Investor,

“The worst is to come…”

That’s what MetLife’s (NYSE:MET) Chief Investment Officer Stephen Kandarian told Bloomberg this morning.

He was talking about commercial mortgage defaults. He notes that “[t]ypically there’s a lag between when the economy softens and when the defaults actually occur.”

Bloomberg also cites a study from Real Estate Econometrics LLC that forecasts default rates for commercial real estate may hit 4.1% by the end of the year.

What does commercial real estate have to do with an insurance company? Plenty…

*****Insurance companies take in cash in the form of the premiums we pay. They then invest that money in order to pay off claims down the road. As their investment returns compound, they profit.

But when their investments lose money, trouble starts. And trouble is exacerbated when insurance companies sell guaranteed returns to investors in the form of annuities.

The promise of annuities forces insurance companies to seek riskier investments to boost their returns. And many have turned to mortgage-backed securities to make more money.

Whoops.

*****MetLife has a $300 billion investment portfolio. That portfolio lost 23% in the first quarter of this year. Mr. Kandarian freely admits he’s looking for higher returns to make up the losses. And he’s looking at adding securities backed by commercial mortgages, in addition to continuing to originate loans to the commercial real estate sector.

It reminds me of the gambler, who after suffering a big loss, decides to start doubling down and taking more risks to win his money back. It usually doesn’t end well.

Of course, what he should do is simply step away from the table. But MetLife and other insurers can’t -- they have to make money to meet their obligations. It’s not a sure thing, but I can imagine it ending poorly for some insurance companies.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

It’s Newsletter Advisor day and this week we’re chatting with our good friend Bryan Bottarelli of Bottarelli Research.

Every time we pull up a chair with trading expert Bryan Bottarelli, he’s sharing with us some of his most successful - and profitable - trading strategies. Today is no exception.

In the interview below, we once again ask Bryan the urgent questions what every investor wants to know, like “where’s the market going,” and “what’s the best way to profit off it?” Please take a moment to read today’s special bulletin. Trust us, it’ll be well worth your time!

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Q: Good afternoon Bryan. I reviewed your 2009 LEAPS track record and found that you’ve closed out 28 trades for the year with 24 of them as winner. That’s a 85% success rate and your average return, including winners and losers, is 58%. So let me ask, what’s your secret?

A: The secret, in a nutshell, is the ability to play the market’s “sentiment” no matter if you believe it’s true or not. For example, I personally do not believe in the sustainability of the market’s recent 3-month rally. But that doesn’t mean I won’t profit off it.

Perhaps this sounds counter-intuitive. But in a recent alert titled “Separating Truth From Nonsense,” I explained it like this:

Anyone with a brain and a sharp pencil can connect the dots between the current economic situation and the fundamentals on the current Dow chart. Those who have done this exercise, in my view, have all been short over the last few weeks. That’s where the conflict between reality and outside influence comes into play.

70% of our countries’ economic growth comes from the American consumer. And right now, we all know that a large number of American consumers are jobless, cash strapped, and without any financial reserves. What’s more, 20% of U.S. homeowners are currently “underwater” on their mortgage, which means they currently owe more on their home than it’s worth and can’t apt into that equity like they did earlier this decade.

People are just not spending right now, no matter what type of bogus statistics you hear.

The U.S. government will tell you that unemployment is still under 10%. I say “bullroar!” If you factor into the equation people who have given up looking for jobs – and also factor in those who are currently working a makeshift job below their income generating level just to make ends meet (often called the underemployed), you’ll realize that the “true” unemployment rate is closer to 20%. As a point of reference, unemployment during the Great Depression hit 24%. This is truly a modern-day depression.

BUT HERE’S THE KEY: The one trump card is the meshing of the Fed, the Treasury, and U.S. Governmental policy. Never before has the line between all three organizations been dissolved by an order of magnitude.

The fact that the market is being goosed by countless trillions of dollars has now caused a snow-ball effect that has cast major ripples throughout Wall Street. For example, I noted above that anyone with a brain and a sharp pencil can analyze the dire market situation and enter into a short position. Many of the top traders that I know have done this repeatedly over the last two months. The problem is, when the U.S. Government funnels money into the system, those short players are forced to cover their positions. They’re not going long, mind you. But rather, they’re zeroing out their ledger by covering their shorts.

As a result, this massive “short-squeeze” phenomenon translates into sudden and powerful upside market movements – which has fueled the 3-month upside move that we’ve just witnessed. In other words, the recent rally has been nothing but short-covering induced by outside market influences.

Now I admit, CNBC will bring on some talking-head with a skyline photo in the background, who tells you that the market is up that particular day because Wall Street is cheering some extraneous piece of news. One recent example was the fact that only 450,000 jobs were lost last month. You’ll hear these talking heads bellow out nonsense like, “losing only 450,000 jobs is much better than losing 600,000 jobs like last month – that’s green shoots baby!”

Common, give me a break. There’s a vast difference between a market that’s (perhaps) stabilizing – and a market that’s recovering. Right now, we might be in the very, very early states of stabilization. But until we have job growth (as opposed to fewer jobs lost month over month), we’re nowhere near recovery. Ben Bernanke tells us that the worst might be behind us. Heck, after bankruptcies at Countrywide Financial, Lehman, Bear, General Motors – and near implosions at Fannie/Freddie, Citigroup, AIG, and Washington Mutual, that’s not a gutsy statement. But I still refuse to buy into the idea that we’re poised for recovery.

I apologize for the long rant, especially on your first interview question. But my overall point is this: From a trading perspective, market sentiment now makes up 90% of your success or failure. Therefore, it’s critical that you play the market “tape” while ignoring all of the extraneous garbage. For example, you might not intuitively believe in a certain trend, but nevertheless, that shouldn’t stop you from profiting off this trend (no matter how bogus you believe that it is). This is not easy to do. In fact, not many investors can do it. But in my opinion, that’s the underlying key to successful trading right now – which has allowed us to achieve the strong returns that you referenced above.

Q: Can you give us a recent example of trading success you’ve had playing market sentiment in this manner?

Sure, our trade from Tuesday, June 3^rd was a good example of this philosophy. I personally don’t believe that oil prices will move lower over an extended time frame, but that didn’t stop us from hitting a quick downside winner on the Oil Service Holders (NYSE:OIH).

You see, the OIH is a basket of oil service companies that includes powerful companies like Diamond Offshore Drilling (NYSE:DO), Halliburton (NYSE:HAL), Schlumberger ( NYSE:SLB), and Transocean (NYSE:RIG). In my honest opinion, this collection of companies represents one of the strongest – and most profitable – sector groups on the entire market. But on Monday June 2^nd, I go the indication that the bullish sentiment on the OIH was overdone. After all, the OIH had moved from $95.00 up to $110.00 over five trading sessions, which was a 15.7% move. There was also an upside gap at the $105.00 level. Combining the over-bought sentiment with the technical gap, I noted that the OIH was due for a quick fall. So on Monday, I recommended OIH June 110 Puts (OIH RB) for $4.40 per contract. The very next day, the OIH dropped $5.67, and these puts traded as high as $8.11. That’s an 84% return in one day, simply correctly playing the market’s sentiment.

Q: Nice trade. But where is the market going and what’s the best way to profit from it?

Right now, the market internals clearly indicate that the major market averages are due for a fall. But despite these indications, the market has been rallying. Therefore, from a trading perspective, you must throw out the technical readings and play alongside the upside pattern. In the most simplistic tactical advice imaginable, you should buy into the dips. And do this until it stops working.

In terms of specific companies, I’m currently recommending longer-dated call options on

Coeur d’Alene Mines Corporation (NYSE:CDE), which explores, develops, and mines silver, gold, lead, and zinc properties in South America, the United States, Australia, and Mexico. Much has been made about gold’s recent upside push toward $1,000 per ounce, but not too many investors realize that silver has completely out-performed gold this year. Silver’s year to date gain of just under 50% is far superior to gold’s 12% return. And for less than $15.00 per share, CDE offers you exposure to both sectors. Combine their strong presence in gold and silver with their attractive share price, and you can see why I consider CDE one of the most promising metals plays you can buy.

Over on the bearish side, I currently own longer-dated put options on United Parcel Service (NYSE:UPS). The rationale here is simple. As I mentioned above, the U.S. consumer is on lock-down. He’s not spending. This reduced the profitability of UPS. At the same time, oil and gasoline prices are rising. That means UPS’ largest operational cost is also cutting into their profitability. It’s a double-whammy which will eventually lead to lower stock prices. Therefore, in terms of a bearish play, I expect UPS to move lower.

Thanks Bryan for a great interview and some truly outstanding trading recommendations. I’ll be following up on those myself.

Bryan’s got a great track record going and if you have a minute, I strongly recommend that you check out his service HERE.

He’s agreed to cut a break on his subscription rate for Daily Profit readers. Right now, you can get 9 months of service for the price of 6. That’s a $700 savings! To take this special offer, click the link below, and select the special 9-month offer (noted with a red star).

https://www.bottarelliresearch.com/subscribe/leaps/offer/362B5B3651/

Before doing that however, use the link below to find out more about the service. Then when you’re ready come back to this email and click the link above. It’s got the special pricing for Daily Profit Readers.

http://www.bottarelliresearch.com/leaps/offer/362B5B3651/

Bernanke and Geithner String Along Investors and the Rally

IanWyatt — Tue, 09 Jun 2009 15:04:00 GMT

Your Daily Profit

June 9, 2009

*****Masterful Performance

*****Recovery Illusion

*****The Brilliant General

Fellow Investor,

Bravo. The government’s handling of the financial crisis and recovery should be recognized as a masterful performance. At least, so long as you don’t look too deeply into the numbers…

Bernanke and Co. have managed to restore confidence to the point that economist Paul Krugman has joined the ranks of those who think we are only a couple months away from actual GDP growth.

And they’ve accomplished this remarkable feat by stringing investors along with one carrot after another…

*****The first carrot was bailouts and stimulus packages. There was a time when stimulus spending was going to save or create 3.5 million jobs. Now, states are wondering where the stimulus money is. And the president is now promising 600,000 jobs will be created by stimulus spending.

But layoffs have slowed considerably according to the most recent non-farm payroll report. And Americans, feeling more secure in their jobs, may not notice that stimulus jobs won’t be there, even if they need them.

*****The Public-Private Investment Program (PPIP) was supposed to remove toxic assets from bank balance sheets. Never mind that the banks probably never had any intention of selling at fire-sale prices and investors weren’t thrilled with paying unreasonable prices, no matter how much of the transaction would be funded by the Treasury.

Geithner’s “stress tests” resulted in banks raising their capital bases. That has helped remove the incentive to dump those toxic assets.

And as for the $74 billion banks have raised so far, do not misunderstand all the talk of “green shoots”. These green shoots were not economic recovery per se. Rather, the green shoots were the banks stock prices shooting higher after accounting rule changes allowed them to show a profit where there was none.

In other words, the economic recovery is something akin to an illusion -- those inflated stock prices have allowed the banks to raise enough capital to appear healthy and last a little while longer…

*****Now that investors have breathed a sigh of relief that the problems with the auto industry are being resolved, the Chrysler sale to Fiat has been put on hold. Funny, I would swear a couple weeks ago, Chrysler would go bankrupt and millions would lose their job if Fiat didn’t buy Chrysler right away.

*****And then there’s TARP – the $700 billion boondoggle. Some banks have been asking to repay the money for months. But ever-sensitive to the all-important timing element of a good comedy, the Treasury has been unwilling to accept payment.

After all, why spoil the party by letting all the good news out at once? Why not wait until the rally is looking weak to release the news that, hey, maybe we’ll accept TARP repayments after all? And maybe those payments will be more than anyone expects?

But let’s make sure we string the announcement out as long as possible and let the threat of good news keep the bears at bay…

*****Of course, you can only fool all of the people for a while. Eventually, without a real pickup in economic activity, the millions of Americans who are barely keeping their head above water will sink. And then all the issues the “stress tests” glossed over (higher unemployment, rising foreclosure rate, etc.) will cripple the banks once again.

As economist Joseph Stiglitz of Columbia University recently told Bloomberg: “There’s a chance that it might work...If it does, then they’ll look like the brilliant general. But all these efforts also bank on the economy recovering and housing prices not falling too much further. Those are not safe assumptions.”

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. I normally don’t like to be the guy who says “I told you so”, but for today I will. Back when the PPIP was first floated by the Treasury my diligent research in my Top Stock Insights advisory service spotted three stocks that would profit big time if the PPIP went through and profit modestly even if it did not. We did it. In a matter of weeks – not months or years – we profited on Legg Mason (NYSE:LM) for 8.16%, BlackRock (NYSE:BLK) for 9.1%, and AllianceBernstein (NYSE:AB) for 12.77%. Top Stock Insights readers booked these gains DESPITE the collapse of Geithner’s PPIP plan. To find out how you can see steady and consistent gains no matter what happens, check out Top Stock Insights at http://www.topstockinsights.com/.

Housing Bottom: Lead to Double-Dip Recession?

IanWyatt — Thu, 28 May 2009 16:13:00 GMT

Your Daily Profit

May 28, 2009

*****A Bottom for Housing

*****Double-Dip Recession

*****19% on BlackRock, Inc (NYSE:BLK)

Fellow Investor,

Yesterday, it was reported that median home prices fell to $209,700 from $246,400 in April 2008. That’s a steep year-over-year correction, even though prices were up from March 2009.

Today, we hear that that new home sales posted a gain, though not as big as expected.

The housing market is bottoming. How long will the bottoming process take? Common sense would say it will take a while, probably a couple years, to work off the inventory and get current delinquent loans back on track.

Persistently high unemployment rates will not help speed the recovery in housing. But at least we’re seeing signs that the housing market is stabilizing. We should expect to see swings in the data, one good month could easily be followed by a bad month. It will be interesting to see how much the stock market moves on housing data going forward. I would suspect that only extreme readings would move stocks significantly.

*****The Mortgage Bankers Association reported that 9% of mortgages are delinquent. Throw in mortgage holders that are in foreclosure and it’s 12%. That’s a huge percentage. It’s also the highest since data was tracked, starting in 1972.

It’s easy to see why the numbers are so ugly – as the unemployment rate rises, fewer can afford their mortgages. And in some areas of the country the unemployed can’t move to find a job because they can’t sell their home. So it’s no wonder that more and more economists expect a “double-dip” of recession.

74 percent of economists responding to a National Association for Business Economics survey believe the U.S. economy will grow in the 3^rd Quarter. But the growth won’t be strong or lasting.

A growing number of economists, including Dr. “Doom” Nouriel Roubini, believe it’s likely that the U.S. economy will go back into recession in the second half of 2010, when government stimulus wears off.

*****The economic recovery is facing two major speed bumps – rising energy prices and rising interest rates. As the economy recovers, energy prices will rise, soaking up excess household funds and leaving less for discretionary spending. We’ve seen oil prices practically double so far this year and OPEC has announced that it feels that RIGHT NOW oil should be valued at $80 a barrel: meaning another 27% from today’s $63. That’s going to hurt at the pump even more. Here at the Washington, D.C. offices we’re already up 40% since December with a regional average of about $2.39.

As the government continuer to sell Treasury bonds to fund the budget shortfall (over $1 trillion for 2009, and counting) and pay for stimulus initiatives, bond yields will rise, making it more expensive for consumers to get a loan. That will affect the market for big-ticket items like cars and new appliances, not to mention homes.

*****All this will have important consequences for your investments for the foreseeable future. First and foremost, it will be important to follow sector trends. Energy will remain strong, but sectors like retail, housing and consumer goods will probably remain volatile. There will be some quick, isolated opportunities here and there in those sectors, but the broader trend is not positive.

Also, risk management will be critical to success. Investors should have exit strategies in place for their investments. This is not a time to be thinking “buy and hold.” Rather, if you have gains, don’t be afraid to take the money and run.

*****Speaking of taking your money…just this morning I advised my Top Stock Insights advisory service members to take their 19% gains on BlackRock, Inc. (NYSE:BLK) today. BlackRock was my feature recommendation for profiting from the Treasury’s Public-Private Investment Program (PPIP) to remove toxic assets from banks’ balance sheet.

Several important aspects of the plan have been removed, and I suspect Treasury Secretary Geithner will abandon it altogether soon. The PPIP is simply not going to work, and for many of the reasons I’ve stated here in Daily Profit.

First and foremost, banks simply don’t want to sell. And Geithner blew his opportunity to gain some leverage over the banks through his “stress tests.” And all the bailout money didn’t exactly convince banks they were in danger of failure and needed to sell.

At least Top Stock Insights readers managed to turn a profit on Geithner’s failed plan. Now, we’re setting our sights on India. The recent election there has set the stage for massive economic reform and jumpstart to growth.

Despite a huge jump for Indian stocks in the wake of the election results, not many investors are considering India right now. But I think that gives us a distinct advantage as India could be one of the great growth stories this year and going into the next several years. If you’re interested, you can find out how to get my Special Report 3 India Stocks Set to Soar in 2009 by clicking HERE.

That’s it for today; I’ll talk to you tomorrow. As always, you can drop me a line at editorial@247investor.com

Ian Wyatt

Editor

Daily Profit

Stress Test Rally Over?

IanWyatt — Mon, 11 May 2009 21:00:00 GMT

Your Daily Profit

May 11, 2009

*****Stress Test Rally

*****Obama’s Economic Numbers

*****China

Fellow investor,

The “Stress Test rally” didn’t last long. Bank stocks had a good day Friday. In fact, they had a good week. Bank of America (NYSE:BAC), for instance, went from $8.70 to $14.17, a +62.8% gain. With that type of one-week gain, it’s not too surprising that banks backed off today as investors look to take profits.

There’s no doubt that the major indices are extended. Some kind of pullback is on order. But Jason Cimpl, technical analyst at TradeMaster, is in “buy the dips” mode.

Even though prices might be extended, we are still looking at an economy and a stock market that is in recovery. And that means current levels, like 8,400 on the Dow or 1,700 on the Nasdaq, have room for upside.

I’ll keep you posted on what Jason’s looking at and where he thinks certain stocks are going.

*****As if right on cue, the Obama administration revealed its forecast that the U.S. economy will be growing at a 3.5% annualized clip by the end of the year.

If true, that would be great news and may underscore the suggestion that stocks remains attractively valued. But that 3.5% is also more than twice what most economists are expecting. Blue Chip Economic Indicators survey, which was released on May 10^th is calling for 1.8% growth by year’s end and 3.2% next year.

Recall that the Treasury also used 7.9% as its “worst case scenario” for unemployment when conducting its stress tests on banks. Unemployment has already exceeded that number, and will certainly go higher before improving.

I understand part of the government’s role is to boost confidence in the economy, but throwing out ridiculous economic numbers isn’t going to do it. As I like to say, I might be dumb but I’m not stupid. These numbers won’t fool anyone and have the potential to subvert whatever confidence I might have. They also have the power to undercut any confidence in “official Washington” numbers over the long term.

*****If you want growth right now, there’s only one place to look: China. As a percentage of GDP, the $586 billion that China pledged for economic stimulus is unprecedented. And it’s already having an effect. China’s GDP estimates went from 6.5% to 7.5% for 2009.

Much of this has to do with China’s stimulus money hitting the economy. In fact, George Soros went so far as to say that Asia will be the first to find its way out of the financial crisis. It’s pretty clear that this recovery is beginning with China and spreading.

I hate to give Jason Cimpl two mentions today (it might go to his head) but he just finished a great special video report on a few stocks that are breakout candidates. It’s a quick video, maybe 3 minutes, outlining one of the stocks he’s uncovered, Fushi Copperweld (Nasdaq:FSIN).

Fushi is benefiting from China’s stimulus spending, and Jason gives you a great look at the chart and price projection that could make you good money. We made a great profit off Fushi a couple years back during the copper run-up and we’re going back to the well call Fushi.

There’s a report ready with the other two breakout stocks he’s uncovered, and you can get a free 30-day trial to TradeMaster Daily Stock Alerts. Here’s the link to the special video report on Fushi and the other stocks.

That’s it for today, I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. If you’re looking for sure and steady dividend stocks, I’ve just put together a comprehensive report on five dividend stocks that pay out nicely and have big upside potential as the recovery continues. Use this link to discover how dividend stocks can help secure your retirement and to claim your copy of the report.

Buy Wal-Mart or Target?

IanWyatt — Thu, 07 May 2009 16:13:00 GMT

Your Daily Profit

May 7, 2009

*****Retail Sales
*****System of Beliefs
*****Return to Risk?

Fellow investor,

Back before Christmas, you may recall I suggested a “Mom cancels Christmas” trade. The idea was that families would attempt to save money by buying gifts for the kids only. After all, most adults learned the truth about Santa a long time ago.

For this trade, I recommending selling out-of-the-money put options on Wal-Mart (NYSE:WMT) and buying puts on the S&P Retail SPDR (XRT). It was my belief that Wal-Mart, a discount retailer, would do well as cost-conscious shoppers went bargain hunting, but the rest of retail would suffer.

I don’t have the exact totals from this trade (initiated in early November, 2008) but it did well. And the basic assumption of the trade – that Wal-Mart would outperform – is still holding true. While most retailers posted less than expected sales declines (which is good), Wal-Mart posted a bigger than expected 5% jump in year over year comps.

For comparisons sake, Target (NYSE:TGT) posted just a 0.3% improvement.

Both Wal-Mart and Target are good companies and solid stocks, but Wal-Mart has a few more things going for it, including paying a higher dividend (2.20% vs. 1.60%), more store locations throughout North America, expansion into China, pricing leverage with suppliers, and a reputation for beating all competition on price.

*****New jobless claims came in significantly lower than expected. And yes, that is absolutely related to better than expected retail sales numbers and the increase in consumer confidence we’ve seen lately.

As I’ve said, never underestimate the American consumer.

*****If you talk to a gold bug, they’ll rail against the U.S. dollar because it’s backed by faith alone. All it takes is for people to stop believing, and the currency is simply a piece of paper.

Of course, the same can be said of gold. A gold standard is still a system based on belief. People either believe it has value or it doesn’t. It’s not like water or food or gas or land that has a certain easily identifiable value.

Even though economics uses a lot of math and calculators, it is a science that measures a system of beliefs. At its very foundation, an economy is belief system. Participants must believe that their counterparties are honest and share their goals. It is when these basic beliefs are challenged that the system starts to break down. We see this both during tough economic times and interestingly in countries rife with corruption and weak laws to protect property and individual rights.

We’ve seen that dynamic in action during the financial meltdown. Banks knew they hadn’t been honest about their toxic assets, so it was an easy assumption that other banks were doing the same thing. So they simply stopped lending to each other and the global economy ground to a halt.

On an individual level, it is vital that people believe they aren’t about to be fired and that they have earnings upside. Otherwise, they won’t spend a dime. I have criticized government bailouts and TARP and stress tests and the PPIP and loans and FDIC guarantees at length in Daily Profit.

But the bottom line is that all of these steps have restored some level of confidence, of belief, in the U.S. economy. And that’s the single most important condition for a return to economic growth. (And I mean that for the entire world. No matter what the pundits say about BRIC countries and the European Union, the United States of America has had, has, and will continue to have the largest and most influential economy on the planet. Period.)

Of course, it’s not the only necessary condition. A large inventory of unsold homes must get worked off. And banks still have to clean up their balance sheets. But the feeling that we have turned a corner is palpable.

*****Private equity funds are on the prowl for risky assets that have been crushed by the financial crisis and recession. These include loan portfolios of hedge funds and, yes, the toxic mortgage-backed assets on bank balance sheets.

Several of these private equity groups are participating in the Treasury’s Public-Private Investment Program. To discover more, you might want to check out my Special Report on the subject. You can get it HERE at the Top Stock Insights home page.

*****I wrote yesterday about how the current rally has been called a “return to risk” rally. Investors are finally adding risk in the form of stocks. Especially small cap stocks. That’s part of what has propelled the phenomenal gains at my SmallCapInvestor PRO.

But I have heard from some of you that you’re more interested in getting into small caps for your retirements funds and even 401(k) options, so individual stocks are not a viable option, at this time.

Has your financial advisor been talking to you about small cap stock mutual funds?

If your financial advisor hasn’t recommended any small cap funds, you might want to check out what I’ve done in my Recovery Portfolio (as a Daily Profit reader you’re entitled to check it out for free for 2 weeks). You’ll find some great investment ideas for your retirement panning that your financial advisor might not be sharing with you. Here’s a LINK for more details.

That’s it for today. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. My mailbox is always open for your thoughts, comments, or questions. Feel free to drop me a line at editorial@247investor.com.

Why BAC Goes Up on "Bad" News

IanWyatt — Wed, 06 May 2009 17:40:00 GMT

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Your Daily Profit

May 6, 2009

*****Uncertainty

*****Understanding Risk

*****Newsletter Advisors Wednesday

Fellow investor,

It’s often pointed out that the financial markets hate uncertainty. Makes sense – you can’t price in what you don’t know. Take the news that Bank of America (NYSE:BAC) needs to raise $34 billion to be adequately capitalized. Sounds bad, right?

Unfortunately for the BAC shorts, there’s no uncertainty to $34 billion. It’s a real number. And it’s also been demonstrated in no uncertain terms that government considers BAC too big to fail. Why would anyone doubt that BAC will be able raise that $34 billion?

For an easy answer, check the stock price: it’s up 8% as I write this morning…

*****The bigger picture problem for individual investors is that you often don’t know what you don’t know. And the news flow from the financial media and Wall Street analysts that purport to be authoritative sources, are, in reality, often responding to price movements based on uncertainty. So in a sense, they make their own news, though not by design.

For instance, they’ve been good at explaining what happened as a result of sub-prime mortgages and credit default swaps, but the few warnings that came ahead of the meltdown, like those from Meredith Whitney who, in the fall of 2007, forecast a dividend cut at Citigroup, were voices in the wilderness. Poor Ms. Whitney got pilloried for it, until it happened. Then she was the toast of Manhattan. So much for the “experts” on Wall Street.

So what does one do? Actually, the hardest part has been done, I think. Investors now understand just how risky investing can be. And I’m talking about the kind of risk that long-term 401(k)/retirement investing implicitly minimizes. The fact that stocks rise over the long-term is no guarantee that you won’t suffer through a market crash. It’s exactly that anomalous event that “buy and hold” investing ignores. And there’s no way to model or otherwise quantify a crash.

*****Some have called the rally we’re been enjoying a “risk” rally. That simply means that investors finally feel comfortable taking on risk. And really, what’s the risk of buying stocks when the S&P 500 is at 700, or 800?

The crash has happened. That doesn’t mean stocks won’t head lower, but at least now when know what we didn’t know in the first half of 2008: that risk was building as stock prices went higher. It gives you a new appreciation for down-home wisdom like Buffett’s “Be fearful when others are greedy.”

*****Finally, I want to share a note from one of my Top Stock Insights subscribers. Paul writes:

All I can say is "Thank you".

I subscribed to your publication last year and it has been the best thing I've done since the market went bad. I am a novice when it come to investing in stocks and traditionally used a broker but I decided to try investing myself through an online broker. I figured I couldn't do any worse than they have. Your reports have been right on and your sell warnings have been dead on. I've invested a small amount of money on stocks that you recommended through my online account and I must say I'm having fun! My current overall return has been 25%.

One stock in particular that you recommended, GE, I bought in March at $7.43 and it's now at $13.04. I've got 6 other stocks that you had recommended and they all are doing exceptionally well. I've recommended your service to all my friends. Thanks again. Respectfully, Paul T., Colorado

Thank you, Paul. I’m really glad to hear of your success.

If you’re interested in finding out more about Top Stock Insights and the kind of fun and profits that Paul’s enjoying, I invite you to visit www.topstockinsights.com. You’ll find information about the service and my newest report that treats the very subject of bank profits and losses.

Here’s that link: www.topstockinsights.com

Now, on to our Newsletter Advisors interview for the week…

Ian Wyatt

Editor

Daily Profit

Amy Calistri is an investment strategist and editor of StreetAuthority’s Stock of the Month premium newsletter. Her investment strategy is the simplest way to make money in today's market. She focuses on just one great idea every month -- no matter which way the Dow moves. So far this strategy has served her well. She's up +22% in this bear market. Go here to get more of her secrets -- like the government indicator that tells you which direction the markets will take.

Last year was devastating for most sectors, if not most companies. Were you able to find any pockets of strength?

Over the decades, I've faced some difficult markets, but perhaps none as unforgiving as we saw last year. In the summer of 2007 I was concerned about the spread of the subprime crisis and put a sizable amount of my personal portfolio in cash and the iShares Barclays 7-10 Year Treasury ETF. For a few months, I wondered if I was being overly cautious. But then 2008 happened, taking the babies with the bathwater, and it convinced me that it would have been hard to have been too conservative.

Gold, as another safe haven, was a pillar of strength last year. And the biotechs were unbelievably robust. It was certainly encouraging to see the amount of M&A activity in the pharmaceutical sector, especially given the tight credit environment. The StreetAuthority newsletter, Market Advisor, had Genentech in its "Aggressive Growth" Portfolio and I know they were happy to close out their position with a 97% gain when Roche bought them out.

Once some sense of normalcy resumes in the financial world, what sector(s) do you think will lead us out of the bear and why?

The tech sector is rallying now and I'd love to think it is the harbinger of a bull market. But I suspect we're in for a long summer, where we'll probably see as much bear as bull. And sure, some sectors will outperform when the bear finally hibernates. But I think it’s the "babies from the bathwater" that will finally lead us out of this market. When fundamentally sound companies and securities got uniformly punished last year, it shook investors. No one wants to invest in an unpredictable market. Once good companies start being rewarded in the market for good performance, I think the money on the sidelines will start to flow again.

Name a stock you would buy today and why?

Right now, I'm focused on American Depository Receipts (ADRs). Foreign company ADRs, trading in U.S. dollars on U.S. exchanges, got spanked with the relative strengthening of the U.S. dollar. Last year's flight to safety drove investors into dollar-denominated U.S. Treasuries and just crushed currency valuations around the world. In fact, the British pound hit a 25-year low against the dollar. But that trend is starting to unwind, and foreign currencies have been clawing their way off their lows since January.

One stock I bought recently was the London-based alcohol distributor, Diageo (DEO). It's a company with strong brand names that include Guinness, Tanqueray, and Johnny Walker. It's a nice defensive play for this environment. People's drinking habits seldom change with the economy. Drinkers also have very strong brand loyalty, sometimes spanning generations. Consumers may "brand down" in the cereal aisle, but you won't find too many Guinness drinkers that will switch to Bud.

Diageo isn't just a defensive play. They have done an excellent job expanding their brand presence and market share in places like Africa and Asia. And of course I love the fact that the company is based in London. As the British pound strengthens, my ADR shares rise with it.

If you were face-to-face with President Obama, what unique perspective could you give him regarding the markets and challenges facing investors?

I think we've all seen the downside of insufficient regulation. As investors, we both want and need regulated markets and businesses. But finding the right regulatory balance is challenging; bad regulation can be just as damaging as no regulation. I'd tell President Obama that he absolutely has to work with businesses to understand the benefits and consequences of different regulatory frameworks. But they can't be the only voices he listens to, no matter how much money their lobbies bring to the table. Investors' voices -- and by that I mean 401K investors and retirees, not the Wall Street machine -- need to be represented. Every regulation should be viewed using an individual investor's benchmark -- how much it improves transparency and levels our playing field.

What areas of the market do you perceive as most safe today?

Every day in the market is a day living with risk. That's the nature of investing. But as ugly as last year's market was, it did create some areas that now have limited downside risk. As I mentioned above, I think foreign companies and funds that trade on U.S. markets have less currency risk than they've had in a long time.

I also think that some, but not all, commodities have been oversold and represent positions with limited risk. I don't like gold or the precious metals right now, but I do like other hard assets. I also like agriculture for the same reason.

And probably for the first time ever, I'm starting to look at the convertible bond market. The spreads on bonds are high and tempting, and I think we're still a good year away before we have to worry about interest rate or inflation risk. But I'd hate to miss out on the appreciation of a recovery rally. I'm wondering if a convertible might not be a way for me to have my cake and eat it too.

What do you say to people who are tempted to buy technology, even financial stocks at these low, low prices?

If financial stocks continue to run, I'm just going to have to miss out. I think there could be some opportunities there, but the sector's current lack of transparency is an issue for me. There is still no credible pricing mechanism for toxic assets and the recent change of the mark-to-market rule has made me even less comfortable with what I see on a balance sheet. And I don't think the stress test is going to reveal much to reduce my personal level of stress over the sector. It's just hard for me to invest in something I can't evaluate. I guess I'm just Old School that way.

I do think there are some opportunities in the tech sector. But even as cheap as I am, I wouldn't focus on price as a criterion. Some of these companies have demonstrated viable growth engines, even in this economy. For instance Google and Apple just turned in nice first quarter numbers. Also, a number of tech companies have little debt and healthy balance sheets. I think as the downside risk to the economy starts to wane, you'll see these companies start to loosen up and make some strategic acquisitions. I think Oracle's acquisition of Sun was just the beginning. But in the end, I don't think tech is a value play. You have to play it for fundamental growth.

What fundamental strategy do you follow for buying portfolio positions?

I tend to take a very macroeconomic approach to investing. I think about buying a portfolio position like a director casts a movie. There are a lot of great actors out there, but some are better for a role than others. There are a lot of great companies out there, but some are better for the prevailing economic conditions and variables. So I definitely consider things like commodity prices, currency valuations, GDP, consumer spending, and government policy when I'm making my selection. Macroeconomic factors can really affect margins, and there's a lot of money to be made at the margin.

What investment advice would you give to someone with a 5-year horizon?

My advice to someone with this kind of time horizon has more to do with process than any specific investment idea. Stay engaged.

A lot of investors couldn't bear to look at their portfolios last year. I'm going to guess there were a lot of brokerage statements that ended up in a bottom drawer, with envelopes intact. And then there were the investors who got overwhelmed. They spent copious hours every day, listening to analysts and researching ideas. In the end, they got burnt out.

Keep it simple. One good idea is enough to transform a losing portfolio to a winner -- or a good portfolio into a great one. Try to come up with just one good investment opportunity each month. It doesn't even have to involve a purchase. Your best idea may be to sell an underperforming asset. After all, minimizing losses can be just as important as maximizing gains.

But the most important thing you can do for your portfolio is to manage it. If you let things slide last year, now is the time to get your portfolio back in control. And start thinking about your next good idea.

Bank Stress Test Results

IanWyatt — Tue, 05 May 2009 17:01:00 GMT

Your Daily Profit
May 5, 2009

*****Stress Tests are a Joke
*****The New Bailout
*****How to Profit from Toxic Assets

Bank Stress Test Profits
The Feds continue to leak info about the Stress Test on banks. Some will do fine, others will be forced to sell off mortgage assets for pennies on the dollar. Find out who's going to profit from this fire sale and how you can get in on it...
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Fellow investor,

The Treasury’s stress tests are now, officially, a joke …

First, the outcome looked as if all banks would need to raise capital. Then it was reduced to just three. Now it “might” be “about 10” of the 16 banks subjected to the Treasury’s toothless stress tests that may need to raise additional capital to withstand further weakness in the economy.

And the report isn’t even supposed to be out until Thursday. The Obama administration is doing its level best to make sure the market is perfectly prepared for the results of the stress tests.

While it’s probably wise to consider the impact of the stress tests on the financial markets, I can’t say I approve of rigging the tests to achieve a preferred outcome.

*****Bloomberg reports that financial stocks made their biggest gains in a month yesterday on “optimism about the tests.”

That “optimism” is better described as the realization that the stress tests are fundamentally flawed and the government is prepared to handle the capital issue by letting the banks convert the preferred stock the government owns from TARP loans into common stock.

So basically, the government is saying that banks don’t have to repay TARP loans. The banks can just issue more stock. It’s appropriate that shareholders should bear the risk here. It’s completely inappropriate that taxpayers have to accept bank stock in lieu of cash.

This is really just another bailout.

Converting preferred shares to common stock gives the banks a convenient way top boost “tangible common equity.” It’s basically an accounting trick. But since there’s only $110 billion left in TARP, and Congress almost certainly won’t approve any more funds, it’s a convenient solution.

*****The stress tests are supposed to establish a bank’s viability if the economy gets worse. But apparently the worst-case scenarios that underpin the stress test are nowhere near worst-case.

For instance, for the current period, regulators reportedly used 7.9% unemployment. Current unemployment is 8.1%. For 2010, the stress tests use 10.3% unemployment. But at current rates, unemployment will hit 10.3% this year, not next year.

Of course, it could be a moot point if the economy improves. But what if things do get worse? Geithner is playing a dangerous game here.

*****Right now, the toxic asset plan (PPIP) hasn’t been getting much discussion. But this plan, complete with loans from the Fed, is another way banks can raise money. And it would be much better for the economy.

Our analysis shows that some publicly traded private equity groups could make tremendous profits by participating in the Public-Private Investment Program. Our top “toxic asset” recommendation is already up 18%. To get my full report in the subject click HERE.

That’s it for today, I’ll talk to you tomorrow.

Ian Wyatt
Editor
Daily Profit

P.S. Quite a few readers have recently asked about options trading and a couple of you specifically asked about options on banks undergoing the recent "stress tests". And you know those results come out on Thursday. I recently interviewed options expert Bryan Bottarelli from Bottarelli research on what he sees as the best options trading opportunities going forward. Click this link to find out more about his service and how investors can make profits from options trading.

Treas. Sec. Geithner's "Lucy" Moment

IanWyatt — Tue, 21 Apr 2009 17:25:00 GMT

Your Daily Profit

April 21, 2009

*****Geithner’s “Lucy” Moment

*****Pandit Feels Our Pain

*****Where the S&P 500 Heads Next

Fellow investor,

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Treasury Secretary Tim Geithner is having his “Lucy” moment today. Yes, he’s got “a lot of explaining to do …”

He’s speaking before Congress today to answer questions as to how the Public-Private Investment Program will actually remove toxic assets and protect taxpayer money at the same time. Also up for explanation is how the remaining $110 billion in TARP money is enough to fund any future bank rescues.

I don’t envy Geithner one bit. That’s because there’s no way he can adequately answer these questions:

If TARP’s $110 billion is sufficient, why is the government talking about accepting equity in return for as much as $200 billion in bailout funds?

How can you provide loans to private investors to minimize the risk of toxic asset purchases, pay the banks a premium for those assets and still believe that taxpayers can make off the deal?

There’s no way everybody can make money of these deals. The taxpayer is taking on the most risk and has the most to lose.

*****No word on why Geithner thinks $110 billion is sufficient to keep the bailouts rolling. Goldman Sachs mortgage analysts think another $400 in bank write-offs is coming. And the International Monetary Fund just doubled its estimates of U.S. losses from the financial meltdown to $2.7 trillion.

I think, however, we understand why future bailouts are still being discussed. Wall Street has Geithner in its back pocket. He will not make the tough choices, but instead continue to give Wall Street what it wants: money.

*****Citigroup (NYSE:C) shareholders vote on their board of directors today. Amazingly, Bloomberg is reporting that the board will likely survive the vote. Unbelievable.

At the meeting, CEO Vikram Pandit said this: “I fully recognize the loss of value” that investors have endured ...“Our own people have paid a dear and heavy price.”

How nice, he feels our pain. I wonder if, when he says “our people”, he means the confederacy of dunces that got Citi into this mess and missed their last bonus, or the secretaries, clerks and IT people who lost their jobs because of high-level incompetence?

*****Bloomberg goes on to suggest that the Treasury should act to clean house at Citi if shareholders don’t. After all, the Treasury will be Citi’s biggest shareholder once $52 billion in preferred shares is converted to common stock. That means Geithner essentially owns Citi.

Will he make the tough choice and can Citi’s board? Don’t hold you breath. But if he does, it will be very interesting to see who he puts in there to lead this poster child for all that’s wrong with Wall Street and government.

*****Can you tell I’m getting a little worked up here?

*****OK, let’s talk stock market for a minute before I sign off. Last Thursday, I shared some of Jason Cimpl’s (TradeMaster Daily Stock Alerts’ technical analyst) analysis on where the market was headed. You may recall he suggested the S&P 500 had as much as a 9% decline coming.

Well, yesterday the S&P 500 got 4.2% of that drop. What’s next? Here’s what Jason sent his readers at 9:18 this morning …

“Our [S&P 500] downside target is 779 with a chance of breaking 750. The market has noteworthy support levels between 805 and 820 so do not expect to profit overnight. Given yesterday's selloff, we expect the indices to recover some lost ground in late-day trade today, or intraday tomorrow. Unless the market can make a new high, we maintain our bearish outlook.”

*****In light of Jason’s expectations, I think we should take advantage of today’s strength and take profits on Hovnanian Enterprises (NYSE:HOV). As you might have noticed, Hovnanian is extremely volatile. And if the S&P 500 continues lower in the coming days, it will be lead by banks and housing. Hovnanian is up 31% since the $1.52 recommendation here in Daily Profit.

If you bought Hovnanian, I’d love to hear it. Write me at editorial@247investor.com.

Also, I don’t mind to continue to hold Graham. It’s volatile as well, but in accordance to oil prices. Since oil has settled into a comfortable trading range, Graham should remain above my recommended entry price.

That’s it for today. I’ll talk to you tomorrow.

Ian Wyatt
Editor
Daily Profit

Fed Move Acknowledges Recovery Will Take Longer

IanWyatt — Thu, 09 Apr 2009 14:42:00 GMT

Your Daily Profit

April 9, 2009

*****Fed Minutes

*****Wells Fargo

*****Oil Stocks

Fellow investor,

The minutes from the last FOMC meeting were released Wednesday. You might recall that was the meeting where Fed Chairman Ben Bernanke announced that the Federal Reserve would start buying $1.13 trillion worth of Treasury bills, corporate bonds and consumer debt.

Bernanke didn’t say at the time he was proposing the biggest Fed balance sheet expansion in history, but the members of the Fed lowered their estimates for economic recovery significantly.

The Fed had expected growth to return in the second half of this year and unemployment to top out around 8.8%. At the last meeting, dismal numbers from the start of 2009 prompted recovery expectations to be pushed into 2010, along with upward adjustments in unemployment number expectations.

It makes sense that the Fed took a more negative view of the economy. Why else would it take such a radical step as the balance sheet expansion? And I’ve been saying all along that unemployment will hit double digits before this recession is over.

What is interesting is what the Fed will say next. Bernanke has made some bullish comments over the last few weeks—comments that are somewhat contrary to the minutes from the last FOMC meeting. Perhaps Bernanake was just talking the market up? Or maybe the Fed overreacted to the dismal January numbers?

*****I like to use oil prices as a gauge for economic recovery expectations. And with oil locked into the $50 per barrel area, the market’s expectation seems to mirror the Fed’s: the economy may have seen the worst, but it’s not improving quickly.

Crude inventories are growing. Currently we have 15% more than last year. And while gasoline use is down from last year, it’s on the rise. Analysts are expecting relatively low prices to encourage more driving this summer, which, of course, would cause prices to rise.

Still, there is anecdotal evidence that Americans are spending a bit more money. Bed Bath and Beyond (Nasdaq:BBBY) and restaurant Ruby Tuesday (NYSE:RT) put up better-than-expected earnings numbers yesterday. Ruby Tuesday did especially well: its stock jumped 55% Wednesday.

Never underestimate the American consumer …

*****Wells Fargo (NYSE:WFC) is up 33% this morning on an earnings blowout. That’s good for stocks in general, but don’t forget, it takes money to make money and Wells got $25 billion in TARP money.

No doubt that TARP money helped Wells Fargo. But the market likes it and that’s what’s important now.

Also, bullish news should be good for oil prices. All the oil stock from the Special “Oil Shock” issue of SmallCapInvestor PRO are showing gains and should have more coming. Click HERE for details on these stocks and coming “Oil Shock” profits.

*****As always, I want to hear your questions, comments and jokes. Email me at editorial@247investor.com.

Have a great Easter weekend, I’ll talk to you on Monday.

Ian Wyatt

Editor

Daily Profit