Thursday, October 20, 2011

Invest In Water : AWK, AWR, CWT, SJW, WTR

Usually when the talk shifts to resources where demand outstrips supply, the focus is oil or precious metals, but there is another resource that is finding its way into these discussions - clean water.Two-thirds of the Earth's surface is covered by water, but only a fraction of that is potable. While desalinization efforts may help satisfy some of the demand, increasing population and pollution has made water a very fragile and important resource. (Discover ways to invest in this scarce resource, check out Water: The Ultimate Commodity.)

Another factor to consider is the high cost to tap sub-surface water supplies, and to create the infrastructure necessary to transport it to remote areas. Unfortunately, this makes accessing and distributing water quite difficult for struggling economies. Companies that treat waste water are also important because they play a major role in keeping our environment clean and preventing transmittable diseases. Investors may get in on the demand for clean water by investing in this resource.

Water Stocks to Know
The following is a list of larger, better known public companies that provide water services or wastewater treatment:


Market Capitalization

American Water Works Company, Inc. (AWK)


Aqua America Inc. (WTR)


California Water Service Group (CWT)


American States Water Company (AWR)


SJW Corp. (SJW)


Data as of 10/19/2011

Bottom Line
The growing world population means that companies that process, deliver and/or transport water will always be in high demand. The stocks covered here are definitely worthy of follow up research for investors looking to capitalize on the attractive long term fundamentals that exist with water.

The Easiest Way I Know to Make Money in Stocks

I call it the "apple tree" loophole. I think it's one of the best ways I know to make money in the market, especially if you don't want to fuss over your investments every day.

But before I tell you what the loophole is, let me first tell you what it's not...

It's not illegal. It's not confusing. And it's not a get-rich-quick scheme.

When used properly, this loophole can greatly reduce the risk of losing money in any market.

But before I go on, I must say that there are a few caveats to how you use it. First, you have to follow this simple strategy exactly as I'll outline below. Second, it only works with high-yield stocks and funds.

It all started with a simple saying I heard years ago…

"The best time to plant a tree was 20 years ago. The second-best time is today."

That saying has stuck with me. And if you hadn't noticed, it's talking about a lot more than planting a couple of apple trees in your backyard and enjoying the fruit later.

The real lesson here is this: It's the moves we make today that deliver the greatest payoff down the road.

And that's the perfect analogy for investing in consistent, high-quality dividend payers. I firmly believe the high-yield stocks we buy today -- those with steady and increasing dividend payments -- are the ones that will end up paying us the most in the long run.

Just imagine if you had bought no more than a handful of the market's top dividend payers just 10 years ago.

  • Altria (NYSE: MO) pays 5.9%, has increased the dividend 41% in the past three years, and has returned 331% in the last 10 years thanks to all the dividends paid.
  • Realty Income (NYSE: O) brags of being the "Monthly Dividend Company" and returned 347% in ten years, thanks in part to its 5.5% yield.
  • Magellan Midstream Partners (NYSE: MMP) has returned 504%, thanks in part to its 5%-plus yield and the fact that it has increased payments 437% since 2001.

As you can see, thanks to dividends each of these investments easily returned triple digits in the past decade. Compare that with the paltry 28% return by the S&P 500 in the same period, and the power of dividends becomes apparent.

But the benefits don't stop there. If you were to hold those stocks for a longer period, then the difference would be even more pronounced.

And that's the premise for the loophole. Every time you're paid a dividend, the risk of losing money on that position gets smaller. And over time, those steady -- and increasing -- dividends can add up to unlikely returns, even from "boring" companies. Hold your stocks for long enough and eventually you're collecting pure profit with each dividend payment.

Of course, because it takes a while to make any dent if you're only being paid 2-3% a year, this strategy works best with high-yield stocks that pay 5% or more.

Now, with investing there is never a surefire thing. I can't guarantee success with the "apple tree" strategy, or any other investing strategy. But one thing you can't deny is that every dividend you receive makes it that much more likely that you will see a winning position.

Action to Take -- > And in a market that's keeping investors up at night, I can't think of a better way to make money without worrying over your investments every day.

Intel (INTC) Breaks Out of Multi-Year Trading Range

Intel's (INTC) strong earnings report yesterday after the close has the stock up nearly $1 intraday to $24.35. While this may not seem like much of a big deal, it is a big deal to those that follow or own shares of Intel stock. Intel has been trading in a sideways range for more than two years now, and it's move today has finally pushed the stock above this range. If Intel can manage to close at or above current levels, it will be a very bullish sign for the stock.

McAlvany Weekly Commentary

The Headless Horseman Occupies Wall Street: Where is Bastiat When You Need Him?

A Look At This Week’s Show:
-Those who occupy Wall Street should be looking to Frederic Bastiat’s “The Law” for guidance.
Download your free written copy of The Law at:
Download audio version of The Law at:
-Listener question: What does default look like in the United States and what is the probability it could happen?
-Listener question: How and when do I begin employing my reduction strategy?
-Listener question: Gold vs. Gold Stocks?

The Scariest Chart Ever?

There are many charts out there all of which are to some extent worth of the adjective "scary" although today's Bloomberg chart of the day may just take the prize, if only for a few days until the European hopium daze passes and reality manifests itself in the form of line and bar charts. The chart below is perfectly simple and perfectly self-explanatory...

Addressing Volatility : Mark Mobius

by Mark Mobius, Vice Chairman, Franklin Templeton Investments

With ongoing global uncertainty, I believe there are still a lot of questions surrounding the impact of market volatility in both developed and emerging markets. I recently recorded an interview discussing my views on some of these questions and want to share it with you through a video blog. I hope you like it.

5 Oversold Stocks To Watch : CSII, HSP, IFT, SMT, XRS

One of the most popular tools in technical analysis that is used to predict a shift in a stock's momentum is known as the relative strength index (RSI). This indicator's primary purpose is to determine when a given rally is becoming overbought or oversold. Generally speaking, readings below 30 suggest that the stock has been pushed to an unjustifiably low level, causing most bullish traders to start looking for a strategic entry position. On the other hand, readings above 70 are often used to suggest that the rally is getting exhausted and that the bears may be getting ready to send the stock lower.

The Basics
The indicator is plotted between a range of zero to 100 where 100 is the highest overbought condition and zero is the highest oversold condition. The RSI helps to measure the strength of a security's recent up moves compared to the strength of its recent down moves. This helps to indicate whether a security has seen more buying or selling pressure over the trading period.
The standard calculation uses 14 trading periods as the basis for the calculation which can be adjusted to meet the needs of the user. If the trading periods used is lowered then the RSI will be more volatile and is used for shorter term trades. (For more, see Ride The RSI Rollercoaster)

How It Is Used
As mentioned above, the most common method of applying the RSI is to use overbought and sold lines to generate buy-and-sell signals. In the RSI, the overbought line is typically set at 70 and when the RSI is above this level the security is considered to be overbought. The security is seen as oversold when the RSI is below 30. These values can be adjusted to either increase or decrease the amount of signals that are formed by the RSI. Let's take a look at a few stocks that have recently entered oversold territory because these could be candidates for a short-term rally when they get spotted by bargain hunters.

Company Name RSI Value
Hospira Inc. (NYSE:HSP) 23.86
Imperial Holdings (NYSE:IFT) 20.08
TAL Education Group. (NYSE:XRS) 29.26
Cardiovascular Systems Inc. (Nasdaq:CSII) 29.18
Smart Technologies (NYSE:SMT) 29.71

Bottom Line
The RSI is a standard component on any basic technical chart and is a great method of filtering stocks that could be setting up for a short-term rally. In most cases, traders will want to confirm any buy or sell signal by using other technical indicators or chart patterns to increase the probability that a predicted move will actually occur.

The Age of Bank Failures

By Greg Hunter’s

The U.S. stock market surged yesterday on news the European Union (EU) would deploy a two trillion euro rescue fund to help get its sovereign debt crisis under control. This news was so good even battered Bank of America stock jumped more than 10%. Crisis averted? Hold on, not so fast. Some big French banks are in trouble because they are up to their necks with sovereign debt. Naturally, President Nicolas Sarkozy wants action now. Yesterday, the Financial Times ( reported the French leader said, “. . . an unprecedented financial crisis will lead us to take important, very important decisions in the coming days.” Raising the sense of urgency, the French president added: “Allowing the destruction of the euro is to take the risk of the destruction of Europe. Those who destroy Europe and the euro will bear responsibility for resurgence of conflict and division on our continent.” (Click here to read the complete story.)

Jim Rickards of Tangent Capital says you have to distinguish between the bonds, banks and the euro. He said recently in an interview on King World News, “The bonds are definitely going to crash and burn. The bonds are toast. . . . The banks own the bonds, and if the bonds are toast, the banks are toast. . . . But that doesn’t mean the currency is toast.” (Click here for the complete King World News interview with Mr. Rickards.) Rickards expects the euro currency will survive, but many banks will not.

Reggie Middleton of says the reason for the coming bank failures is simple—high debt loads. Middleton says many European banks have 40 to 1 leverage. He recently explained how dangerous this was by saying, “I take a dollar and I borrow $39, and I go out and buy something with it. All you need is a 2% move to totally wipe you out—100%. And we all know a lot of sovereign bonds have moved a whole lot more than 2%.” (Click here to see more of Middleton on the Middleton is expecting more European bank runs as the crisis picks up speed.

Dr. Martin Weiss of is also predicting “European megabanks will collapse.” In a recent post, Dr. Weiss said, “Sovereign debt defaults will trigger more bank failures. More bank failures, in turn, will precipitate more sovereign debt defaults. This vicious cycle will cut off the flow of credit to businesses and households, sink the global economy into a depression, and perpetuate the vicious cycle. Ultimately, we will see an extended period of great economic hardship for billions of people on every continent.” (Click here for the complete report.)

The risks associated with the European sovereign debt crisis are not overblown. Some of the top government financial officials know all too well the real world consequences of a daisy chain of out-of-control debt defaults. Just last month, Bloomberg reported Treasury Secretary Tim Geithner’s warning to the EU. The report said, “. . . Geithner pressed European policy makers to intensify their efforts to end the 18-month sovereign debt crisis and avoid the “threat of cascading default, bank runs and catastrophic risk.” In his strongest public push yet for Europe to step up its crisis-fighting, Geithner said strains in the euro-area’s budgets and banks are the “most serious risk now confronting the world economy.” (Click here for the complete Bloomberg report.)

The EU can’t save all the banks, but that is not going to stop them from printing money to pick and prop up winners. As we all know, every bank cannot be a winner. The problem is so big that European banks are allowed to lie about the value of their assets to project the image of solvency. The same is true for American banks. When European banks start failing, there is no way U.S. banks will be able to avoid being sucked into a vortex of default. For anyone who thinks this crisis can be resolved with a pain free plan—forget it. Welcome to the age of bank failures.

James Paulsen: Investment Outlook (October 2011)

Consumer Cyclical Stocks Suggest Too Much Economic Pessimism!??

by James Paulsen, Chief Investment Strategist, Wells Capital Management (Wells Fargo)

Financial markets often give conflicting signals regarding the economic outlook. Today is no exception. In the last couple months, some market signals suggest upcoming economic challenges including the collapse of stock markets about the globe, a ballooning of junk bond yield spreads, and a massive decline in the 10-year Treasury bond yield to record lows. Alternatively, other market signals suggest economic conditions are not nearly as dire. U.S. 10-year Treasury swap spreads remain very low (implying the likelihood of a European crisis contagion flying the pond is remote), one of the most economically sensitive stock sectors, technology, continues to lead the stock market and the price of gold has recently declined seemingly losing its safe-haven bid and suggesting the worst may be over.

Consumer Cyclical Stocks Lead the Way!

One of the most interesting financial market messages, however, is coming from the U.S. consumer— specifically from consumer cyclical stocks. Chart 1 shows the relative price performance of the S&P 500 Consumer Discretionary Stock Price Index. This index has not only been leading the overall stock market throughout this recovery (even during the recent economic soft patch) but has recently risen to an “all-time” record relative price high!

The U.S. consumer has long been the epicenter of economic worry in this recovery. Supposedly the consumer is struggling under a mountainous debt burden, lacks sufficient savings, and faces a job market which is widely perceived as comatose. If this accurately describes reality, why are the most cyclical consumer stocks—those driven by “discretionary” consumer spending—leading the overall stock market? At a minimum, Chart 1 implies that recent widespread expectations for an imminent U.S. recession are probably overstated. The shaded bars in this chart illustrate recessions. Every recession in the last 50 years (admittedly, not by much prior to the 1982 recession) has been preceded by a significant decline in the relative stock price performance of consumer cyclical stocks. By recently achieving a new all-time record high, consumer discretionary stocks suggest a U.S. recession is likely still some ways off. Better Job Creation Coming?

As illustrated by Chart 2, the relative stock price performance of consumer cyclicals has not only provided an early recession warning, but has also proved a good leading indicator of future job growth. This chart overlays the annual growth in nonfarm payroll employment (solid line) with the detrended relative Consumer Discretionary Stock Price Index. Since at least the early-1960s, periods of consumer cyclical stock outperformance have typically been followed (with a variable lag) by accelerating private job growth. Annual private job growth has been hovering about one percent in recent months. However, the recent upside breakout in the relative price performance of consumer cyclical stocks suggest job growth may accelerate in 2012.

Are Consumer Stocks Reflecting a “Better than Perceived” Job Market?

It is hard to reconcile new all-time record highs in the relative stock price performance of consumer discretionary stocks with the widely held perception that the U.S. job market has nearly stalled this year. Could this be because U.S. private job growth has not stalled this year but rather has actually “accelerated”? Moreover, could it be because private job creation so far in the contemporary economic recovery has been far better than it was in the 2001 recovery and nearly as good as it was in the early-1990s recovery? So far this year, as shown in Chart 3, the average monthly private payroll gain has been just shy of 150 thousand compared to an average monthly gain of slightly less than 100 thousand last year. That is, the pace of private job creation so far this year is nearly “50 percent faster” than it was last year! No wonder consumer cyclical stocks are doing so well.

Finally, despite an almost universal impression the contemporary private job market recovery is the weakest ever, Chart 4 shows it actually compares quite favorably with the last two recoveries during the last 25 years. Through the first 27 months of this recovery, private job gains have risen by 1.3 percent— far better than the net job loss which was evident at this point in the 2001 recovery and only slightly less than the gain which occurred at this point in the early-1990s recovery!


Of the many financial market signals economist are monitoring for clues regarding the future of the economic recovery, we think the message provided by the relative price performance of consumer discretionary stocks may be the most interesting. The consensus view has been the economy, job creation, and consumer spending nearly flat lined during the first half of this year placing the U.S. economy on a path toward an imminent double-dip recession.

While some financial market signals do indeed suggest elevated recession risks, the performance of consumer discretionary stocks steadfastly portray the odds of an imminent recession as very remote. Rather, their performance suggests that underlying economic momentum (particularly in the household sector) may be far stronger than most perceive.

Laying the Groundwork for 8% Inflation

The terminal stage of Dr. Frankenstein-style central banking is disgorging ridiculous claims of authority motivated by reckless efforts to retain control. One such pincer attack is the Federal Reserve's purported 2% inflation target. Behind our very eyes, this fictional mandate is being raised, all the more reason that savers need to speculate, not a welcome prospect with both inflationary and deflationary influences expanding and bound to burst.

A certainty of this age (post-Western-Civilization) is the ease with which libertine policies escalate to fantastic proportions even as they are failing. The Federal Reserve mumbles its 2% inflation target while the "economic literature" has sown the garden for an 8% inflation rate, in the name of "price stability."

To be more precise, "inflation" to the Federal Reserve is conveniently defined as the consumer price index - without including food and energy. This 2% or 8% target should be understood as a negative interest rate. The Federal Reserve will (through its current policy, although this will boomerang at some point) hold Treasury yields at zero-percent. It will target inflation at 2% to 20%.

In The Beginning, at least in this short narrative, a Harvard economist told a Senate committee the United States must accept a 2% inflation rate as the cost of prosperity. That was in 1957, a very good year to wrap such a career-advancing declaration inside a Cold War mandate. "Growth" would defeat the Soviet Union.

Federal Reserve Chairman William McChesney Martin did not agree. On August 13, 1957, Martin warned that recent inflationary pressures had risen from a period of strong economic growth fostered by "'imbalances in the economy' in which 'rising costs and prices mutually interact upon each other over time with a spiral effect.' . . . The person most likely to be injured in the inflationary cycle was the 'hardworking and thrifty...little man' on fixed income who could protect neither his income nor the value of his savings." (more)

China on U.S. Treasurys: No Thanks