Thursday, September 13, 2012

Martin Armstrong – Hotel U.S… You Can Check Out Anytime You Like, But You Can Never Leave – Part One

from FinancialSurvivalNet

Martin Armstrong is an iconic investor who has called more market tops and bottoms than just about anyone else out there. He believes that hyperinflation will not occur in the US so long as there’s a functioning bond market. He believes that the government will be forced to drastically cut spending and cut back benefits. Social security will be cut, along with all major government programs. The bond vigilantes won’t have it any other way. This will lead to a lost decade, with price inflation starting in 2014 and a real collapse occurring after 2015. Whether his vision will come to pass remains to be seen.

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WARNING: Sell These 3 Stocks Now

Earlier this week, I wrote about how September is historically the worst month for stocks, and that this September there are more reason than ever to expect a sell-off. Some of those reasons include a potential disappointment from the Fed on the stimulus front, continued economic slowing in China, Europe's recession, the uncertainty of the presidential election and the looming fiscal cliff.

On Thursday, we saw one big threat to the markets essentially taken off the table when the European Central Bank (ECB) announced a bond-buying plan to lower struggling euro zone countries' borrowing costs. ECB President Mario Draghi called the widely anticipated move a "fully effective backstop." This backstop prompted the markets to surge more than 2% in Thursday trade, with the Dow rallying some 250 points in the session.

Now, I like a big rally just as much as the next guy, and I was pleased that the ECB finally made good on past promises to come through with a concrete bond-buying program. And though stocks surged Thursday, I still suspect that we could see some selling off current levels in the weeks to come.

However, even if we don't get a broad market sell-off consistent with the historic September slump, there are still stocks, and especially bonds, that don't belong in your portfolio any longer. Here are three investments to sell now:

# 1 Intel (NASDAQ: INTC)

If you've owned big-cap technology stocks this year, and especially if you've owned a basket of Nasdaq 100 stocks such as the PowerShares QQQ Trust (NYSE: QQQ), you've likely done very well. The Qs are up about 22% year-to-date, but not all of its biggest components have shared in the upside. Shareholders of Intel Corp. know this quite well, as the chipmaker's shares are down about 1.2% so far in 2012.

INTC Chart

Today, the company issued a drastically reduced fiscal third-quarter sales forecast citing a "challenging macroeconomic environment" that put a damper on PC demand worldwide.

Intel now expects to see third-quarter revenue of $12.9 billion to $13.5 billion, well below its previous forecast for revenue of $13.8 billion to $14.8 billion. The disappointing guidance also is well below the $14.2 billion Wall Street was expecting. And the company withdrew its full-year guidance, a move that signals extreme uncertainty, and that has justly caused shares to plunge.

If you own INTC, now is the time to reboot and sell.

#2 Pfizer (NYSE: PFE)

Drugmaker Pfizer is a giant of a company that has generated giant profits off of its cholesterol-reducing cash cow Lipitor. Unfortunately, the company's U.S. patent has expired, and the loss of that exclusivity has really impacted its business.

In May, Pfizer reported a 19% drop in earnings from $2.22 billion to $1.79 billion during fiscal Q1, and not surprisingly, the company said results were heavily impacted by the loss of the Lipitor patent.

PFE Chart

Now to be certain, Pfizer isn't lying down and playing dead. The company has introduced several new popular drugs, including the pain relief medication Lyrica, and the bacterial infection vaccine Prevnar. But despite a strong start to these new drugs, there is still nothing yet that's replaced Lipitor's revenue stream, and nothing is likely to do so in the near future.

If you own PFE, now is the time to sell and move on to healthier stocks.

#3 Long-Term Treasury Bonds

Treasury bonds have been one area of the market that's seen plenty of capital inflows, particularly during the past six months. The uncertainty in Europe prompted a lot of money to seek shelter in what is still the safest place to wait out a fiscal storm, and that's long-term debt issued by the United States.

TLT Chart

On Thursday, bond prices fell as European investors pulled money out of Treasuries and put it back into euro area bonds, and into so-called "risk on" equities, hence the big surge we saw in U.S. markets. After the ECB announcement, it appears to me as though this once-blazing sector is forming a top, and that the buying fuel in bonds has just about been exhausted.

That means if you own long-term Treasury bonds in an ETF such as the iShares Barclays 20+ Year Treasury Bond (NYSE: TLT), a widely held proxy for the longest maturity U.S. government debt, you should sell those holdings now.

In fact, if we start to see an increase in the sector sell-off, it could be time to short bonds via an ETF such as the ProShares UltraShort 20+ Year Treasury (NYSE: TBT), a fund that moves twice as fast in the opposite direction as TLT.

McAlvany Weekly Commentary

Interview with Jose Antonio Ocampo

About This Week’s Show:
-Leadership void: G20 is actually G-Zero
-Developing countries still dependent on industrial world
-High food prices are crushing the poor

About the Guest: José Antonio Ocampo is director of the Economic and Political Development Concentration at and a fellow of the Committee on Global Thought at Columbia University. In 2008-2010, he also served as co-director of the UNDP/OAS Project on “Agenda for a Citizens’ Democracy in Latin America”, and in 2009 a Member of the Commission of Experts of the UN General Assembly on Reforms of the International Monetary and Financial System.

‘Best climate' Don Coxe has ever seen for gold price increases

Global commodities strategist Don Coxe declares now "is the best climate I have ever seen for an increase in gold prices."

During an address to Denver Gold Forum conference, Coxe urged fund managers, mining analysts, and mining executives to prepare for significantly higher gold prices and higher gold mining stock valuations.

He believes a "lustrous" rally in gold mining stocks will happen before a year passes. "The opportunities ahead are the best I've seen," Coxe declared.

Although Coxe admitted the stock market could be better for junior mining and exploration companies, he feels a new gold rush is ahead for investment in gold mining stocks.

While capital cost over-runs and project financing concerns are, at times, making things difficult for mining companies in their relationships with investors, Coxe suggested the mining industry is regrouping and rebuilding and will be prepared to capitalize on higher gold prices.

Indicators Are Bullish for This Bad News Stock: FTE

The best time to buy is often when the news is at its worst. A recent example was in early 2009, when U.S. stocks were more than 50% off their highs. Many traders were selling stocks and moving to cash. In hindsight, we know that buying an index fund of U.S. stocks while the news was at its worst would have delivered large gains. Some individual stocks did even better.

Among the hardest hit stocks was Apple (NASDAQ: AAPL), which had fallen to about $82 a share and was trading with a price-to-earnings (P/E) ratio of 9. Traders who ignored the news and bought AAPL were rewarded with a gain of more than 730% in a little more than three years.

There's a similiar opportunity in the market right now... but not in the United States.

Europe is now the source of some of the worst financial news. Greece and Spain are flirting with economic slowdowns that might be thought of as depressions. Analysts are also warning of problems in Italy and France. Traders can consider ETFs for any of these countries, or they can look deeper into the components of those ETFs and seek out the best trading opportunity in those countries.

France Telecomm (NYSE: FTE) seems to be among the best choices for low-risk stocks in a high-risk environment. Telephone companies are fairly safe in any economic environment. Earnings are generally steady because phones are a necessity. FTE is likely to maintain profitability no matter how long the European crisis lasts, but traders seem to have factored their worst fears into the price of FTE. Shares are trading at a forward P/E of 8, less than half its 7 year average of 18.

Like most European companies, FTE pays an (earnings-based) dividend twice a year. Based on current earnings estimates, the stock could provide a yield of 8-10% over the next twelve months. Generating income is not the goal of this trade, but it could be a bonus if shares are held long enough to capture a dividend.

Turning to the technicals, there are a number of reasons to buy FTE. Starting with the monthly chart, we can see that the stock offers a great deal of potential. It has been in a trading range for most of 2012 and appears to be bottoming.

The price target based on the trading range is $18.96, almost 40% above the recent price. The Intraday Intensity Index (III), an indicator that quantifies the bullishness or bearishness of volume and can be calculated for any time frame despite its name, is bullish.

Vertical bars highlight two oversold extreme lows in the III. In 2010, that sell-off marked the beginning of a 45% rally. The more recent sell-off, which reached a deeper oversold level, has seen a small move higher but leaves significant potential profits for traders looking at entering the trade now.

On a daily chart below, the Bollinger Band Impulse indicator is also signaling a buy. This indicator measures the one-day rate of change in the width of the Bollinger Bands. It is not a widely followed indicator, possibly because it rarely offers signals. It is mostly flat with very occasional spikes. Those spikes generally signal buying opportunities.

FTE Daily Chart

Another bullish consideration for FTE is that the stock is likely to benefit from the flurry of news that will accompany the next European leaders' summit meeting in October. Buying now makes sense based on the chart, the low P/E ratio and the potential income. Although the dividend is likely to be cut, FTE still offers better-than-average income.

Weekly Bollinger Bands can define the risk for the trade. A close below the lower Band, at about $13.13, offers a stop with less than 4% risk.

Another way to manage risk on the trade is to buy a call option, which limits the risk to the price of the option. FTE calls expiring in November with a strike price of $12.50 are trading at about $1.38 (the midpoint between the bid and ask price). If FTE moves above $13.88, then the calls would have some intrinsic value. It could take several months to reach the price target of $18.96, but a 10% move based on news out of the October summit seems very possible given the market volatility that occurred with previous summits.

A 10% increase would push FTE to $14.72 and the $12.50 call option would be worth at least $2.22 at that price, which is about 61% higher than the recent trading level. Traders buying the call below $1.48 would enjoy a profit of at least 50% if the price target is reached.

FTE looks like a stock that could be bought for the long term. Or you could use inexpensive November calls for a low-risk trade on the European summit.

Chart of the Day - Canadian National Railway (CNI)

The "Chart of the Day" is Canadian National Railway (CNI), which showed up on Tuesday's Barchart "All-Time High" list. Canadian National Railway on Tuesday posted a new all-time high of $94.01 and closed +0.99%. TrendSpotter just turned long again last Friday at $92.09 after taking a profit two days earlier on a 2-month-long trade. In recent news on the stock, FBR Capital on Sep 7 initiated coverage on Canadian National with an Outperform and a target of $115. FBR Capital also initiated coverage on the railroad sector as a whole with an Overweight rating due to expectations for cyclical growth over the next several years and an improvement in railroad market share in the transportation sector due to improved service offerings. Canadian National Railway, with a market cap of $40 billion, operates the larger of Canada's two principal railroads and the only coast-to-coast railroad network in North America. The company's rail network serves major ports in Canada and includes strategic connections to the United States through the Chicago gateway, Detroit and other major cities.


John Williams – Sell-Off in Dollar Should Evolve into Hyperinflation

by Greg Hunter
USA Watchdog

The Federal Reserve is talking about “unlimited QE,” or money printing, to boost employment. Economist John Williams says, “That’s absolutely nonsense. The Fed is just propping up the banks.” Williams says, “You’re likely going to see a dollar sell-off . . . That should evolve into hyperinflation.” Williams, “Doesn’t see the current system holding together without hyperinflation beyond 2014.” He contends the real annual deficit is “$5 trillion per year” and says, “That’s beyond containment.”

Williams predicts, “Hyperinflation is virtually assured because the Fed doesn’t have any options left.” Williams says people should get prepared because we are facing a “man-made disaster.” Join Greg Hunter as he goes One-on-One with John Williams of

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Rob Arnott – Major Defaults, German Court Decision & Inflation

from King World News

On the heels of the German high court ruling, today King World News interviewed five time Graham & Dodd Award Winner, Rob Arnott, who oversees more than $100 billion as the Founder & Chairman of Research Affiliates. Here is what Arnott had to say about the ruling and what is facing investors going forward: “Well it’s not unlike the US Supreme Court ruling on Obamacare. Courts tend to be reluctant in areas of gray, to overrule choices made by the elected populace. So in effect what we have is a green light for a European policy of extend and pretend.”

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