Friday, January 11, 2013

Facebook May Finally Live Up to the Hype… and Return Double-Digits

In the 1980s there was a famous rap music anthem titled, "Don't Believe the Hype." Well, I borrowed that admonition frequently last year when the overblown hype over the Facebook (NASDAQ: FB) IPO reached a fever pitch. Nearly every retail investor I knew wanted to own FB stock, and it became a symbol of the groupthink mentality that's so often infects both Wall Street and Main Street.

The hype got so bad in May 2012 that I actually had a friend ask me if they should borrow money on his home so that he could buy FB shares. Sadly, many people (thankfully not my friend) recklessly scrambled to buy FB shares immediately following the stock's public debut, and many of those investors are still sitting on a losing position.

I won't go into the epic fails on the part of Wall Street over the pricing of FB shares, nor will I get into the details of Facebook's hand in the mispricing affair. From a trading standpoint, these flubs are ancient history. Today, smart traders would be remiss in ignoring the recent buying momentum and potential upside catalysts that could drive FB stock significantly higher over the next several months.
Since the beginning of 2013, FB shares have spiked more than 11%, and they were up 5.26% in Wednesday trade alone. More importantly, the stock has now breached the psychologically significant $30 level. This is the first time the shares have been in the $30s since embarking on their major sell-off in July.
FB Stock Chart
The buying in FB Wednesday was prompted by an invitation -- and I mean that literally.
On Wednesday morning, Facebook sent out invitations to industry watchers and the tech and financial press to an open house of sorts. The event will be held on Jan. 15, at 10 a.m., at Facebook's Menlo Park, Calif., headquarters.

Anticipation has been running high over just what is likely to be unveiled at this event. Surely, founder and CEO Mark Zuckerberg wouldn't invite the press over to kick the Facebook tires without having something new reveal. Most pundits, including me, think Mr. Zuckerberg is much smarter than that.

Now the speculation is on as to just what the famous billionaire has up his unkempt hoody's sleeve.
One theory is that FB is going to venture into the hardware business, possibly with a smartphone of some sort. I don't think this is too likely, as even Zuckerberg has distanced himself from the idea. Then there is the speculation about some type of tablet PC designed specifically with Facebook's social networking software in mind. Again, this is a long shot, at least in my view.

What is much more likely to come out of next week's FB presser is some type of new partnership or acquisition, which builds on the company's prodigious social networking base. Some have suggested that FB could enter into a deal with Twitter. Others have speculated that FB will make a move to enter the music delivery business like a Pandora Media (NYSE: P), or even the movie industry like a Netflix (NASDAQ: NFLX).

We'll find out precisely what's unveiled next week, but one thing is for sure this week: Facebook has succeeded in unveiling a whole lot of buzz surrounding the company's next move -- and that's been great for traders betting on the long side.

I suspect that if there is an announcement next week that's viewed as a positive, both by the tech press and the financial press, we could see FB shares surge to $35 over the next 8 to 12 weeks. That's more than 14% upside from current levels -- and that's certainly a reason for traders to, as they say, "Like" FB shares.

Recommended Trade Setup:
-- Buy FB at the market price
-- Set stop-loss at $27.90
-- Set initial price target at $35 for a potential 14% gain in three months

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Peter Schiff Interviews Marc Faber On What Will Happen in 2013

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Get Yields of Up to 10% from these International Banking Giants

Financial stocks have been out of favor for much of the period since the financial crisis. In the United States, the S&P 500 Financials Index rallied just 9% between the end of 2008 and the end of 2011 even though the S&P 500 soared 50% during the same time period. (The same has been true in Europe as well.)
Investors have been understandably wary of wading back into the group. The financial crisis left some of the world's largest and oldest financial institutions on the brink of failure. Clearly, many of these institutions failed to control their risk and ended up far too exposed to the U.S. residential property market bust and to the more recent European sovereign debt crisis.

But the tide is starting to turn.

In 2012, the S&P 500 Financials Index was the top-performing sector in the entire market. The Bloomberg European Financials Index soared nearly 26%, compared with a 14.5% gain for the Bloomberg European 500.
The U.S. residential property market is not robust by any stretch of the imagination. But after five years of plummeting home values and soaring foreclosures, prices are showing signs of bottoming out in many markets. Foreclosed homes typically sell at 30% or larger discounts to homes in similar neighborhoods that aren't distressed. But the shadow inventory of homes -- homes still moving through the foreclosure process -- is beginning to dwindle, putting less pressure on home values. There are even some signs of speculation developing in some once-hot markets, such as Miami and Phoenix, as short-term investors buy and sell homes on the cheap to generate a quick profit.(more)

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Gold Is Worth $20,000 Per Ounce According To The Bretton Woods Calculation

The global monetary system rests on a fragile foundation of trust. Thanks to the actions of central banks, pressure on the system will keep growing.

Paper U.S. dollars sit at the heart of the global monetary system. Dollars are liabilities of the Federal Reserve. Just as houses are collateral for mortgages, Treasuries and mortgage bonds are collateral for U.S. dollars.

A central bank’s balance sheet is essentially a self-reinforcing feedback loop: Government bonds are the collateral for dollar liabilities, and bonds are streams of future dollar payments. So the dollar is backed by the promise of more dollars…

As more dollars are printed, their value inevitably falls. As the dollar falls, the Fed responds with more printing. The Fed uses weak excuses to explain higher prices; it blames anything but itself. Weather, geopolitics, and emerging market growth are classic scapegoats for higher prices. Few bother asking how those events would impact consumer prices without the influence of a swelling money supply.

Now introduce permanent zero interest rates into this system and the system becomes even more fragile…(more)

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Harry Dent ~ The Market will Crash in The third quarter of 2013


 Harry Dent of HS Dent Investment Management explains why he predicts a market crash in the third quarter of the year and that the U.S. is headed towards bankruptcy. Ed Butowsky, Chapwood Investments; Carol Roth, author of “The Entrepreneur Equation”; and CNBC’s Rick Santelli, weigh in.Economy will Crash, our Debt will sink us, Europe is failing, China is lying, an insightful conversation. "America is on a crack high" says Dent. "All politicians have to lie to keep confidence."

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Deluxe Corporation (NYSE: DLX)

 Deluxe Corporation, together with its subsidiaries, provides printed products, forms, and marketing solutions to small businesses and financial institutions primarily in the United States, Canada, Europe, and South America. The company offers checks; printed forms, including billing forms, work orders, job proposals, purchase orders, invoices, and personnel forms, as well as computer forms, deposit tickets, and check registers; and accessories and other products, such as envelopes, office supplies, stamps, and labels, as well as retail packaging supplies and checkbook covers. It also provides marketing solutions, which include Web design, hosting and other Web services, logo design, search engine marketing, and digital printing services for the sales and marketing needs of small businesses, business cards, greeting cards, brochures, and apparel. In addition, the company offers fraud protection services; payroll services; and financial institution profitability, regulatory, and compliance programs. It markets its products through printed and electronic sales forces, referrals from financial institutions and telecommunications clients, purchased search results from online search engines, and independent distributors and dealers.

To review Deluxe's stock, please take a look at the 1-year chart of DLX (Deluxe Corporation) below with my added notations:
1-year chart of DLX (Deluxe Corporation)
DLX has made its way higher since bottoming in April. For the last 3-4 months though, DLX formed a 52-week high resistance level at $32 (navy). Last week the stock broke through that resistance and hit a new 52-week high. A pull back could provide a nice long entry on the stock.

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