Thursday, December 30, 2010

Two Utilities for a Short-term Holiday Profit

We have one more week to go in 2010. It has been a great year. The S&P 500 is up nearly 13% and my systems are telling me that 2011 could be much better. A lot depends on the economy, of course. The financial issues in Europe are significant and could become a global contagion. Too much, I am afraid, is dependent upon what the Federal Reserve does with regard to QE2 and beyond (I have much more to say about this in my Mastering the Markets letter this week).

There is a bit of a Santa Claus rally going on at the moment, and if you are not one of the unlucky unemployed, it is likely you are feeling pretty good about the economy and your lot in life.

I have a couple of picks for the upcoming week that have a strong market forecast to support the trades. Let me show you what I mean...

Below is my MarketProphet chart of the Utility Index: (more)

5 “red hot” dividend stocks to buy now

According to Standard & Poor’s, 2009 was the worst year on record for dividend stocks. The rating’s agency calculates that dividend cuts in U.S. traded common stock cost investors over $58 million in income last year, and the year saw the fewest number of companies increasing dividends and the most decreasing dividends since S&P began keeping track of the measure in 1955. Well, what a difference a year makes.

This year, 247 of the S&P 500 companies increased dividends in 2010. That equates to $207 billion, or an increase of 5.6% over the S&P 500 dividends paid out in 2009. The good news here is that number is expected to continue climbing in 2011.

So, with the renewed dividend fervor on Wall Street, it’s no wonder that dividend-paying equities are red hot among investors. But just which dividend-paying stocks should you buy now?

Here are five of our favorite dividend stocks to buy now. (more)

McAlvany Weekly Commentary

The Best of 2010

Margin Debt Soars to Highest Levels Since September 2008

Margin debt is one measure of the amount of optimism or pessimism in the stock market. Rising margin debt generally correlates to a rising stock market. Margin use has soared to the highest level since September 2008.

Margin Debt Data is from NYSE Factbook Securities Credit

ZeroHedge discussed margin debt in NYSE October Margin Debt Jumps To Highest Since Lehman Failure As Investor Net Worth Is At Lowest Since April Highs
It is not just the stock market that is at the highest levels since Lehman. Probably just as importantly, NYSE margin debt has surged to $269 billion, an increase of $13 billion from the prior month, and the highest since September 2008 when it was at $299 billion.

We are confident that NYSE cash in November will be at the lowest level of the year, not to mention December, as hedge funds leveraged everything they could, in some cases hitting as much as 3-4x gross leverage, in pursuit of beta, now that unleveraged alpha strategies have ceased to work. Which means that with retail stubbornly missing from the picture, the only beneficiaries of the HFT and Fed facilitated melt up are the 1000 or so hedge funds, where average net worth is in the 6 digits, that will be profitable this year. (more)

DBB: Buy-and-Hold Investment More Useful Than Gold

PowerShares DB Base Metals Fund (NYSE: DBB) — Commodities should generally outperform the market in 2011, with industrial-use metals leading the group. Since DBB is the largest fund composed of futures contracts on some of the most widely used metals, such as aluminum, zinc and copper, it is a candidate for a powerful move higher in the new year.

Where gold has risen as a safe haven priced only on investor demand, base metals are priced on a combination of investor demand and industrial use.

For example, the market for copper is very tight with a flat supply and increasing demand from China, Europe and the United States. The price of copper has risen about 50% in the past six months, and according to industry analysts, there is no top in sight.

Buy DBB now and hold. The long-term price objective for this ETF is $30-plus.

Underneath the Happy Talk, Is This As Bad as the Great Depression?

The following experts have - at some point during the last 2 years - said that the economic crisis could be worse than the Great Depression:
How could that possibly be, when the stock market has largely recovered? (Let's forget for a moment that the stock market rallied after 1929, but then crashed in a double dip).

To find out, we'll look at a couple comparisons to get an idea of what is going on in the rest of the economy. And then we'll compare the government's efforts in the 1930s to today. (more)

Bob Chapman: Adding Fuel to the Financial Fire. Deepening Crisis. Bogus Economic Statistics Used as a Coverup

Mr. Bernanke, Chairman of the Federal Reserve, a private corporation, would have us believe that, quantitative easing is the only way to save the US economy and to reverse the unemployment problem. He conveniently forgets to tell you that he authored a paper in 1988 with Mr. Michael Baskin that concluded that what Mr. Bernanke is doing with QE does not work. He told watchers of “60 Minutes” that the jobless rate would have been far higher; something like it was in the “Great Depression” at 25%. If Mr. Bernanke had taken time to have his minions do the research, he would have found that U3 at the peak of the “Great Depression” was 25.2% and U6 was 37.6%. As we write U3 is 9.8% and U6 is 17%. If you strip out the bogus birth/death ratio, real unemployment on a U6 basis is probably close to 22-3/8%, as yet, considerably less than in the 1930s, but impressively unacceptable. As those interested now know over the past three years the Fed has bailed out financial firms and many other corporations with funds provided indirectly by the US taxpayer. Little of this largess has fallen into employment and as a result unemployment has risen. It lies in the face of reality for Mr. Bernanke to tell was that QE2 will create employment when QE1 certainly did not.

What Mr. Bernanke has done is add fuel to the fire, which has given us one of the greatest financial scams of all time.

Part of the Fed’s cover is the fiscal irresponsibility of government, which in 2010 created $2 trillion in net liabilities, as federal benefits rose. That was the result of the Financial Report of the US, which rightly applies corporate-style accrual accounting. That includes interest on debt and federal benefits payable when they are incurred. This method illustrates the mounting liabilities of government entitlement programs, such as Medicare, Medicaid and Social Security. 2010’s cash budget may have narrowed to $1.294 trillion from $1,417 trillion in 2009, but the real number was $2,080 trillion. (more)

Stocks down slightly as investors lock in 2010

NEW YORK -- Stocks dipped Thursday as investors locked in their positions at the end of the year.

While U.S. markets fell slightly, stocks are set to end 2010 on an upbeat note: The S&P 500 index and the Dow Jones industrial average are both up 14 percent for the year, after dividends, thanks to record corporate profits. The Dow is back to levels last seen in August 2008, prior to the heat of the financial crisis, while the S&P might just eke out the best December in 20 years.

Some investors are taking the last week of the month to sell and notch their profits. Others are selling stocks or funds that have lost money in order to reap the tax benefits.

The Dow Jones industrial average was off 15.67 points, or 0.1 percent, to 11,569.7. The S&P 500 edged down 1.9, or 0.2 percent, to 1,257.88. The technology-focused Nasdaq composite index fell 3.95, or 0.2 percent, to 2,662.98. (more)

30 Downtrend Stocks Being Snapped Up by Institutional Investors

The following is a list of stocks in a downtrend, i.e. trading below the 20-day, 50-day and 200-day moving averages. All of these stocks have seen significant institutional buying over the last three months.

The smart money seems to think the recent weakness in these shares present a buying opportunity. What do you think? Full details below.

Moving average and short float data sourced from Finviz, institutional data sourced from Reuters.

The list has been sorted by the change in institutional ownership over the last three months.

1. Cninsure Inc. (CISG): Insurance Brokers Industry. Market cap of $746.8M. The stock is currently -8.66% below its 20-day MA, -24.15% below its 50-day MA, and -31.97% below its 200-day MA. Institutional investors currently own 30,658,752 shares vs. 22,585,147 shares held three months ago (+35.75% change). Short float at 10.67%, which implies a short ratio of 4.39 days. The stock has lost -20.96% over the last year.

2. Harry Winston Diamond Corporation (HWD): Nonmetallic Mineral Mining Industry. Market cap of $950.22M. The stock is currently -10.55% below its 20-day MA, -10.92% below its 50-day MA, and -5.59% below its 200-day MA. Institutional investors currently own 52,751,266 shares vs. 40,603,769 shares held three months ago (+29.92% change). Short float at 0.34%, which implies a short ratio of 1.33 days. The stock has gained 16.62% over the last year. (more)

Dow posts 2-year high in quiet trading

( -- Stocks crept to yet another two-year record in quiet trading Wednesday, as traders look to end the year on a high note.

At the closing bell, the Dow Jones industrial average (INDU) was up 10 points, or 0.1%, at 11,585 -- it's highest point in two years. The S&P 500 (SPX) rose 1 point, or 0.1%; and the Nasdaq (COMP) ticked up 4 points, or 0.2%.

With no economic reports on the calendar, stocks eked out the slight gains as investors are eager to end the year on the upside.

"The market's going to drift higher for the remainder of the year, as we come into the beginning of January," said Rich Ilczyszyn, market strategist with futures broker Lind-Waldock. (more)