5 Silver Stocks To Watch : EXK, PAAS, SLV, SLW, SVM

During periods of crisis, investors often flee risky asset classes and invest in assets or commodities that they feel will hold value. Silver is a prime example.

Silver is relatively rare and it is respected across borders; therefore, unlike currencies, it is believed to hold its value over time. While silver is not as popular as gold as a store of value, it has signifcant usages in various industries. It is this industrial demand that have convinced some that silver may be stronger investment than gold in the long term. The question is, what's the best way to invest in it?

Investing in Silver
While collecting jewelry with a high silver content or silver coins is the method preferred by some, there are downsides to consider. For example, there is the issue of finding a safe place to store such merchandise. Finding a buyer for a particular piece may also be difficult. Plus, there is sometimes a very big markup on certain pieces.

But there is an alternative for investors who want to gain exposure to silver: the stock market. Check out these five simple silver stock plays.

Company/ETF	Market Capitalization	Year to Date %
Silver Wheaton Corp (NYSE:SLW)	14.1B	33.29%
Silvercorp Metals Inc. (NYSE:SVM)	1.3B	16.09%
Endeavour Silver Corp. (NYSE:EXK)	0.97B	10.4%
iShares Silver Trust(ARCA:SLV)	11B	27.6%
Pan American Silver Corp. (Nasdaq:PAAS)	2.7B	16.41%

The Risks
The price of silver can fluctuate widely. In 2008, the price of silver had risen to about $21.44 an ounce, a huge increase given that just a couple of years prior it was trading around $11. But not too long after that spike, silver lost its luster, and the price floundered to $8.40. However, today, silver has popped up to above $30.

Bottom Line
Investors tend to flock to precious metals (like silver) in times of market crisis. Widespread international acceptance and recognition of this circumstance makes it likely that this trend will continue in the future.

CHART OF THE DAY: The Housing Triple Dip

A little more perspective on that bummer of a Case-Shiller report.

Housing has now done what could arguably be called a triple dip.

Since housing really began to tank, there have been two notable bumps, which each time seemed, perhaps, to represent the start of an uptrend in housing.

But ... still no dip. We've now had three dips, including the big one.

Martin Armstrong: The 13 Year Curse

Martin Armstrong: The 13 Year Curse


click here to read in pdf

Time to Add the VIX to Your Equity Portfolio?

The interim solving of the debt crisis in Greece has restored calm in the markets, with the CBOE S&P 500 Volatility Index (VIX) settling at 17.3 compared to its long-term average of 20.0. The big question now is whether the VIX will return to the low levels of 1991-1996 and 2004-2006.

Sources: CBOE; Plexus Holdings.

But why is it important? The two periods mentioned coincided with sustained strong rising equity markets. Let us take a look at the period 2004 to end 2006. The VIX fell to an average of approximately 13 over that period, while valuation levels as measured by Robert Shiller’s PE10 increased significantly. Please note that in the graph below I used the inverse of the PE10, which is in fact the earnings yield or EY10. The period was marked by strong steady global economic growth on the back of China’s fortunes, strong corporate profit growth and a significant increase in risk appetite.

Sources: Robert Shiller; CBOE; Plexus Holdings.

At this stage the market’s rating reflects the VIX, but where to now? While similar strong economic growth etc. may await us further down the road the same cannot be said for the next two years, let alone this year, as the weak global economic environment (a much weaker Chinese economy, the Eurozone’s continued woes and the relatively weak U.S. economy) is likely to persist. I am therefore of the opinion that a VIX of around 20 and a PE10 of 22 can be seen as fair value. These compare with the current VIX of 17.3 and PE10 of 22.6. Yes, optimism may drive the VIX down to 15 again and the PE10 to 25 but to me that will indicate a significant selling opportunity. Similarly, the more regular occurrence of black swans has led to a significantly changed investment environment. Yes, it has led to the VIX being more volatile than in the past.

So much for volatility, but what about the underlying economic fundamentals? I have often referred to the relationship between consumer confidence and market valuation. Consumer spending is the backbone of the U.S. economy and is therefore the reason why consumer confidence gauges are closely watched by the major market players. At this stage it is evident that the S&P 500 Index (SPX 1367.59 ↑0.00%) at a PE10 of 22.6 is fully reflecting the Conference Board Consumer Confidence Index and therefore the underlying economy as it stands.

Some may argue that the employment situation in the U.S. remains dire and is likely to lead to another fall-off in consumer confidence. Well, my research indicates that consumer confidence in fact leads the U.S. unemployment rate by approximately nine months. With the Conference Board Consumer Confidence Index at 61.1 in January, it points to an unemployment rate of approximately 8% in the third quarter of this year compared to 8.3% in January this year.

Sources: I-Net; FRED; Plexus Holdings.

The valuation levels of the S&P 500, or PE10, lead the unemployment rate by approximately six months and are currently pointing to an unemployment rate of below 8% in the third quarter of this year.

I still hold the view that consumer confidence will improve to approximately 80 through end 2012 and that the valuation of the S&P 500 Index will improve to a PE10 of 25, meaning further upside of approximately 10% from the current levels. The going will be tough, though, as I think volatilities will remain high, resulting in the VIX ranging between 15 and 30 and the PE10 between 20 and 25.

Time to add the VIX to your equity portfolio? I think so.

Jay Taylor: Turning Hard Times Into Good Times

2/28/2012: A Royal Reversal of the American Revolution

Dan Norcini: Silver Shorts Literally Panic, Gold Shorts Now Worried

from King World News:

With silver breaking above the $37 level and gold trading $20 higher, today King World News interviewed legendary Jim Sinclair’s chartist Dan Norcini. Norcini told KWN what we are seeing today is a major breakout in the silver market and panic from the shorts: “Today we are seeing a strong move higher in silver and in gold, but particularly the silver market, which is up over 4%. Once silver took out $35.50 in a strong push, they ran a huge number of stops to the upside. There were a lot of shorts covering, Eric, there was literally a panic among the silver shorts.”

Dan Norcini continues: Read More @ KingWorldNews.com

This Is What Happens To The Stock Market After Rallying 15% In 3 Months

For all the bears crying foul over the current market rally, Bespoke Investment Group has some interesting research: market rallies of 15 percent or more are more often than not followed by greater gains.

Bespoke tallied three-month returns back to the late 1920s and found after a market rally in excess of 15 percent, the following three months were positive 77 percent of the time, averaging a 3.2 percent increase.

The S&P 500 has only run up 15 percent in a three month period 36 times, including the current rapid ascent.

Left, a look at the S&P rallies.

Eric Sprott: Investment Outlook (February 24, 2012)

By Eric Sprott & David Baker

2012 is proving to be the ‘Year of the Central Bank’. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.

The first major maneuver took place on November 30, 2011, when the world’s G6 central banks (the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank [ECB], the Swiss National Bank, and the Bank of Canada) announced “coordinated actions to enhance their capacity to provide liquidity support to the global financial system”.¹ Long story short, in an effort to avert a total collapse in the European banking system, the US Fed agreed to offer unlimitedUS dollar swap agreements with the other central banks. These US dollar swaps allow the other central banks, most notably the ECB, to borrow US dollars from the Federal Reserve and lend them to their respective national banks to meet withdrawals and make debt payments. The best part about these swaps is that they are limitless in scope – meaning that until February 1, 2013, the Federal Reserve is, and will be, prepared to lend as many US dollars as it takes to keep the financial system from imploding. It sounds absolutely great, and the Europeans should be nothing but thankful, except for the tiny little fact that to supply these unlimited US dollars, the Federal Reserve will have to print them out of thin air. (more)

Inflation Protection For Your Portfolio : FXC, TIP, UDN

While the runaway inflation that had previously gripped countries like Zimbabwe and Argentina is not currently at the forefront on the fear list for investors in U.S, but inflation should not be forgotten. It is a silent danger as a result of the additional billions employed in government bailouts.

A combination of currency and inflation-protected ETFs may be able to protect an investor portfolios if the inflation expectations become real.

Bearish on the U.S. Dollar
The PowerShares DB US Dollar Index Bearish (ARCA:UDN) is up 1.48% so far this year. UDN's value increases when the US dollar index is falling. If the US dollar index drops as a result of economic issues, this ETF will provide you with some downside protection.

In Defense of Rising Consumer Prices
The iShares Barclays TIPS Bond Fund (ARCA:TIP) is up about 2.18% in 2012. The TIP fund is linked to a measure of inflation known as the Consumer Price Index (CPI or CPI-U). The CPI measures the prices wage earners, clerical workers or basically 90% of the entire U.S. population pay for a variety of expenses including food, transportation, energy and medical care. With oil prices near $110 per barrel, the increase in fuel prices may cause a jump in inflation, which may cause investors to start buying in anticipation of a fuel cost run up.

Currency Exchange Consideration
The Canadian Dollar has continued to be strong against the US dollar in 2011. As the Canadian dollar has been trading above par. The CurrencyShares Canadian Dollar Trust (NYSE:FXC) has gained around 1.19% so far in 2012. Further weakening in U.S. dollar will have a positive effect on the FXC fund.

Final Thoughts
Rampant inflation in not a certainty, but the ETFs mentioned do offer protection should investors notice that prices are beginning to rise once again.

Chart of the Day - Limited Brands (LTD)

The "Chart of the Day" is Limited Brands (LTD), which showed up on Monday's Barchart "All Time High" list. Limited on Monday posted a new all-time high of $47.03 and closed up 1.30%. TrendSpotter has been Long since Jan 24 at $41.82. In recent news on the stock, Limited on Feb 22 reported Q4 adjusted EPS of $1.50, above the consensus of $1.46. The company also announced a new $500 million share repurchase program. Limited Brands, with a market cap of $13 billion, operates specialty stores in the United States and its brands are sold in company-operated and franchised additional locations worldwide.

Is That A Bell I Hear Ringing?

by Bill Holter, JSMineset.com:

Attached is a chart (www.stockcharts.com) for the HUI index going back 3 years on a weekly basis. I usually do not talk or write about charts because they can and are “painted” to make a picture that the “planners” want us to see. In my opinion, they have painted themselves into a corner where the mining stocks are concerned. So what does this mean to you? It means that IF you have endured and held on to your mining shares and not been scared out, you will FINALLY get paid and get paid BIG! Let me explain.

If you look at the chart, you will see the MACD at the bottom (moving average convergence divergence), these are the two squiggly red and black lines that keep crossing over each other. Whenever the black line crosses over the red line from a high point or low point, it usually tells you the direction of the index for the next couple of months or so. You will notice that the highest crossover point where black crossed red to the downside was back in 2009 (after the ’08 crash). Each successive rally reached a lower height on the MACD’s and the low point crossovers were successively lower. This, while the HUI index is just a little bit higher but has been basically “marking time”. During this period, Gold has outperformed the shares in a huge way. Another way of saying this is that the shares are now more undervalued vs. Gold than they have been over these 3 years. In fact, the shares have only been this undervalued twice since the bull market began, 2001 and 2008.

Read More @ JSMineset.com

How To Profit from Rising Oil Prices

The U.S. consumer remains in a precarious state. Wages are rising at a slow pace, keeping many workers from boosting their earning -- and spending -- power on an inflation-adjusted basis. In fact, consumers may start to feel that they are losing ground if gasoline prices hit $4 a gallon this spring, as many economists now expect. The price of West Texas Intermediate Crude (WTI), the benchmark for U.S. oil prices, has been surging lately, and seasonal effects imply "pain at the pump," come this spring.

I've been thinking about oil prices as I review the holdings in my $100,000 Real-Money Portfolio. Stocks such as Ford (NYSE: F), Alcoa (NYSE: AA) and Hasbro (NYSE: HAS) could all be vulnerable to rising oil prices if consumers start to retrench.

To hedge against such a possibility, it's time to add exposure to crude oil. If prices do indeed rise, then an oil producer is likely to see its stock rise by a significant amount, as was the case in the oil "Super-Spike" of 2008.

Of course, I could simply look to acquire shares of an "oil major" such as ExxonMobil (NYSE: XOM) or ConocoPhillips (NYSE: COP). But I've got my eye on an oil stock with potentially much more upside. Best of all, this company's stock looks undervalued even if oil prices pull back by a moderate amount.

I'm talking about Marathon Oil (NYSE: MRO). The company got its start back in 1887 (known then as the Ohio Oil Co.), was acquired by U.S. Steel (NYSE: X) in 1982, and was spun off as an independent company in 2002. Marathon has recently completed a pair of transactions that help establish broadly-diversified regional exposure, while setting the stage for robust free cash flow in coming years. Against that backdrop, shares are quite inexpensive, trading for less than four times projected 2012 EBITDA.

A cleaner story

Oil production is a very profitable business. Yet many oil-related businesses such as petrochemicals and refining are not always consistent money-makers. That's why Marathon spun off Marathon Petroleum (NYSE: MPC), it's oil refining division, last July. Yet it's a move made a month earlier that has really altered Marathon's trajectory...

In June 2011, Marathon announced plans to acquire Hilcorp Resources Holdings for a hefty $3.5 billion. At the time that seemed to be a stiff purchase price, representing the most-richly valued purchase in the Eagle Ford shale on a per-acre basis. Half a year later, some still question the wisdom of the move, noting that EOG Resources' (NYSE: EOG) production in Eagle Ford appears to be a lot higher than Marathon's Hilcorp acreage.

What those detractors may be missing is that EOG had a two-year head start in plunking down wells. With each passing quarter, Marathon's output in the Eagle Ford shale should rise ever higher. That acreage complements Marathon's already strong presence in the Bakken shale.

But this isn't just another shale play. The charm of this business model is that Marathon is exposed to oil (60% of current production) and gas (about 40%), and has operations in the United States and abroad. This insulates the company from the vagaries associated with oil and gas prices, while removing country-specific risk. And Marathon actually derives more than half of its $51.6 billion in 2011 sales were from foreign projects in places like Norway, Poland, Kazakhstan and Libya. (Production in Libya, of course, took a hit in 2011, but should be back to full output later this year.)

Perhaps the greatest appeal is the relative maturity of the company's operations. Marathon is spending heavily in 2012 to ramp up output in the acquired Eagle Ford acreage, but otherwise has relatively fewer capital requirements in most of its other regions. And the company's various acreage plays appear to have an extended usable life, perhaps into the latter part of this decade, so Marathon's production isn't likely to drop due to well depletion, as is the case with some other energy firms.

And that sets the stage for ongoing robust free cash flow generation. A spike in capital spending, from about $3.4 billion in 2011 to about $4.8 billion in 2012, is likely to push free cash flow in 2012 down to around $1.5 billion, from $3.5 billion in 2011. But that figure should rebound to the $2.5 billion to 3.0 billion-level for 2013 and stay there for an extended period, assuming energy prices stay constant. This means Marathon sports a free cash flow yield in excess of 10% based on 2013 and subsequent projected results.

Note that phrase "assuming energy prices stay constant." Management uses a benchmark price of $85 per barrel of West Texas Intermediate (WTI) crude (and around $100 for the pricier Brent crude oil) in its forecasts. Notably, the spot market is already $15 to $20 above that figure and could head up another $15 if global economic activity picks up in coming years or tensions in the Middle East rise further.

Simply put, I like this stock with that West Texas oil price at $85 -- I really, really like it at $100, and I absolutely love it at $115. As a point of reference, analysts at JP Morgan recently boosted their WTI forecast to $111 a barrel by the end of 2012. (It's important not to confuse this with Brent Crude, which is often $10 to $20 per barrel more expensive.)

The Downside Protection --> Shares likely have tangible support at current levels, trading at around four times projected EBITDA, which assumes $85 for a barrel of WTI crude. If the U.S. economy slumped anew and oil prices fell back to levels seen in 2009 and 2010, then shares would likely fall from the current $35 to a range of $25 to $30.

Upside Triggers --> Management appears to have set a fairly conservative tone in terms of expected output in the United States and abroad. All signs point to Marathon exceeding the production targets it has laid out. Assuming $85 WTI crude and production output that looks quite attainable (but above the low guidance), this stock could move up from the current $35 into the low $40s. If WTI stays near $100 for the rest of 2012 and into 2013, then shares are likely to approach $50. If WTI keeps rising up toward $115, then shares could hit $60. The downside appears well in place, and the potential upside appears to be significant.

Frankly, if crude oil prices fail to rally, then the rest of my $100,000 Real-Money Portfolio will be on more solid ground. So look at a position in Marathon Oil as portfolio protection, and not just another potentially winning trade.

Philadelphia Fed president notices that Fed is rigging markets

That makes two U.S. central bankers:

http://www.gata.org/node/10839

“Market intervention is exactly why central banking was invented. Intervening in markets is what central banks do. They have no other purpose.”

– A high school graduate at GATA’s Washington conference, April 18, 2008. (http://www.gata.org/node/6242)

* * *

Plosser Says Fed MBS Purchases May Be Breach Into Fiscal Policy

By Joshua Zumbrun
Bloomberg News
Friday, February 24, 2012

http://www.bloomberg.com/news/2012-02-24/plosser-says-fed-mbs-purchases-…

Philadelphia Federal Reserve Bank President Charles Plosser said that central bank purchases of mortgage-backed securities may be an inappropriate foray into policy that should be conducted by the U.S. Treasury.

“When the Fed engages in targeted credit programs that seek to alter the allocation of credit across markets, I believe it is engaging in fiscal policy and has breached the traditional boundaries established between the fiscal authorities and the central bank,” Plosser said according to prepared remarks of a speech he’s giving in New York today.

Federal Reserve Chairman Ben S. Bernanke and the Federal Open Market Committee are debating a new round of mortgage bond purchases to help boost the housing market and the economy.

“Central banks and monetary policy are not and cannot be real solutions to the unsustainable fiscal paths many countries currently face,” Plosser said on a panel at the University of Chicago’s Booth School of Business 2012 U.S. Monetary Policy Forum. “The only real answer rests with the fiscal authorities’ ability to develop credible commitments to sustainable fiscal paths.”

READ MORE

5 Water Stocks To Tap Into : 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.

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:

Company	Market Capitalization
American Water Works Company, Inc. (NYSE:AWK)	5.95B
Aqua America Inc. (NYSE:WTR)	2.94B
California Water Service Group (NYSE:CWT)	783.23M
American States Water Company (NYSE:AWR)	697.50M
SJW Corp. (NYSE:SJW)	453.25M
Data as of 02/27/2012

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.

Silver Prices Rising: Traders Are Betting Big

By now it's no secret that Silver has wildly outperformed the major indexes and it's fully-precious big brother, Gold, so far in 2012. The question, naturally, is whether or not it's too late to get on board.

In the attached clip Jon Najarian and I discuss how the "smart money" is playing silver and what it means for individual investors trading in the pits or at home via the wildly popular iShares Silver Trust etf (SLV).

In addition to the industrial function of silver making the metal a semi-appropriate way to play an economic recovery Najarian says the metal represents, "a cheaper way to play the flood into precious metals." Regardless of silver's 27% run year-to-date and positioning near heavy resistance at $35 an ounce, Najarian still "likes silver a lot."

In no small part what the TradeMonster.com co-founder is seeing are notoriously short-term thinkers in the options pits buying the $35 calls out to June, a stunningly long view for the quick-trigger set.

Also supporting the notion of options players' bullish stance on silver, at least according to Najarian, is the trading activity in a lesser known Proshares UltraShort Silver (ZSL) --a double-inverse trading vehicle designed to move $2 higher for every $1 drop in silver.

"If you thought silver was going to break (lower) people would start buying ZSL calls," Najarian says.

In other words, traders would be levering up their bet in multiple ways by using calls to ramp up risk on an ETF that's levered in the first place. I wouldn't touch such a play with my worst enemy's cash but it is a decent reflection of how the bold traders are positioned.

Relatively lower risk silver bulls are buying the aforementioned calls in massive size, Najarian says. Big as in "monster," as in $10 million wagers that silver will go not just higher, but much higher between now and options expiration in late June.

Why Investors Should Get Off the Sidelines

The long trend in fear finally broke last month.

For seven straight months, investors ran from stocks. Month after month, they pulled money out of stock-based mutual funds [2].

But right now, the tide is turning. We're back at the beginning of the cycle. And we should see many more months of gains in stocks...

For years, I've been watching "the crowd" through the data on how much money is flowing into and out of stock-based mutual funds...

#-ad_banner-#

For long stretches, investors keep putting new money into the market [3]... Then, months after the trend began, the market peaks. After stocks begin to drop, investors sell for long stretches... Then, months after that trend began, we hit a bottom.

Earlier this year I noted, "It's like watching the tide. There's no guarantee [4] the flow of money out of stocks will end this month or next. The important thing is to recognize where we are in this cycle."

Where we are right now, I believe, is at the beginning of a long period of investors pouring money into stocks, which will push stock prices higher.

Last month, investors pushed $16.8 billion into equity funds. That may sound like a lot, but it's a drop in the bucket compared to the $177 billion that rushed out of stock-based mutual funds since May 2011.

Some investors may feel like they missed the boat if they weren't buying at the bottom a few months ago. The truth is, investors almost never "catch the bottom."

And there are huge gains to be had following the trend. If history is any indication, we're likely to see a lot more money boost the market during the first half of 2012. Take a look at the last two bull markets...

Keep in mind, these performance numbers DO NOT assume you caught the bottom and sold at the top. This is how investors did if they bought at the end of the first month that "fund flows" went positive, and then simply rode the uptrend.

I don't expect stocks to go up in a straight line from here – trends always have dips. For traders, the market looks "overbought" right now, as my colleagues Jeff Clark and Brian Hunt noted recently.

Longer term, however, I'd be looking to buy over the next few weeks and months. The Russell 2000 returns show how small-cap stocks tend to do better than large caps during a bull market [5], so I suggest concentrating on that sector.

"The crowd" is just starting to wake up to the fact that the world isn't ending. History shows that these uptrends last for months as investors move their money back into stocks.

You should take advantage.

Gold & Silver’s Perfect Breakouts

by Warren Bevan – Precious Metals Stock Review
Published : February 27th, 2012

The week was interesting as we basically stalled out for the most part with many US indexes and stocks, especially coming onto the end of the week. This may be a sign that a top is nearing but then again volume is low as we’re not moving higher which is good and we’ve seen these little bases and then runs higher since late 2011.

Now with most of the Greek issue behind us there is no real reason we can’t run higher. One other significant thing I’ve been seeing for a while now is that many of the Dow stocks which are normally sleepers are really perking up and moving faster out of nice bases which is very encouraging overall.

While the markets were sleepy, the precious metals were on fire, well maybe not on fire, but they have broken out decisively and are moving higher. It’s when we say, and mean, that they are on fire that it will be time to be looking for the exits.

On that note let’s check out the excellent looking charts of gold, silver and platinum especially.

Please sign up for free to receive my free weekly letter along with any relevant info or articles I write.

READ MORE

This High-Yield ETF Could Move +20% Higher

By Dr. Melvin Pasternak,
With rock bottom interest rates, Mr. Market remains on the prowl for high-yielding securities. As a result, I've focused several recent Trade of the Week articles on finding secure blue chips with healthy, rising yields.

For traders willing to accept more risk, I've tuned to one of the hottest segments of the market: junk-bond ETFs.

BlackRock Investments reports that inflow into global fixed-income ETFs hit an all-time high of $9 billion this January 2012, up 34.3% from the previous record high of $6.7 billion in January 2009.

According to a recent Wall Street Journal report, in 2011, high-yield bond ETFs saw a 68% inflow increase from the previous year. Traders are likely rushing in for several reasons. First, the Fed has stated interest rates are likely to remain low, until at least 2014. Second, the default rate on junk-bond companies remains at historically low levels.

Risk appetite also seems to be on the rise with upbeat domestic data showing the economy may be starting to mend. For example, January's jobless claim numbers just hit a nine-month low. Lastly, yield spreads -- the difference between the yield on "risk-free" treasuries and junk bonds on comparable term maturities -- are contracting. Since yields and bond prices move inversely, contracting yield spreads means rising bond prices.

Because of its strong chart and bullish technical outlook, my favorite high-yield bond ETF is the SPDR Barclays Capital High Yield Bond ETF (NYSE: JNK).

With a basket of 223 holdings and $11.1 billion in assets, JNK's bonds are primarily allocated in the industrial sector (85.4%). A smaller percentage of holdings are in the utility (7.9%) and financial sectors (6.2%). Top holdings include HCA Holdings (NYSE: HCA) bonds, maturing in 2020, Sprint (NYSE: S) notes maturing in 2018, and First Data bonds maturing in 2021.

As defined by their status as sub-investment grade, all bonds carry a debt rating of "BB" or lower. The "BB" or "junk" status denotes that the companies which issue these bonds carry high debt levels and, therefore, present a greater probability of default or bankruptcy.

However, with this greater risk comes greater reward. JNK offers an attractive yield of approximately 7.4%. The fee, or expense ratio, of JNK is just 0.4%.

From a technical perspective, JNK appears highly bullish. Year-to-date, the fund is up approximately 7.5%, besting the performance of the S&P 500.

Rising steadily off its May 2010 low near $31, JNK met substantial resistance in mid-2011 when it unsuccessfully attempted to break resistance around the $38.75 level.

The fund tested this resistance level three times in May, August and October. Each time, the ETF faltered, retreating to support near $35. On its second breakout attempt, the fund fell to a low of $33.25, briefly breaking the Major uptrend line, before regaining ground.

However, in November 2011, shares again rose above the Major uptrend line. A steep accelerated uptrend line formed shortly thereafter and the ETF has not looked back since.
In early January of this year, JNK finally successfully broke important $38 resistance, bullishly completing an ascending triangle pattern.

The fund has slowly risen since, but, until recently, was capped by resistance near $39.
However, this past February 20th trading week, it successfully surpassed this resistance, bullishly breaking a second small ascending triangle, while hitting a two-year high, near $40.

The measuring principle for a triangle is calculated by adding the height of the triangle to the breakout level; adding the two consecutive ascending triangles together gives a price target of $42.95 ($39.92-$36.89=$3.03; $3.03+$39.92=$42.95). At current levels, this represents a 7.6% gain.

However, with no nearby resistance in sight, the fund could move higher. It's not out of the question the ETF could retest its 2008 high near $48. From current levels, this gain would give traders a 20.2% return. I don't expect this movement to happen overnight; in the meantime, however, traders collect dividends while they wait.

http://web.streetauthority.com/nprint.asp?p=s&d=6153&t=s

Housing, the Bottom Is In

Economic news this week had its moments of drama, but it was otherwise basically sedate. The markets cheered at least a temporary resolution to the Greek debt crisis. Even more importantly, a reduction in Chinese bank reserve requirements showed that the Chinese government is willing to do whatever it takes to prevent its economy from slowing too much.

Otherwise, there wasn't a lot of economic news this week except a batch of housing data that showed continued improvement. I believe the bottom in the housing market is definitely in. The main question from here is the pace of that improvement, not if there will be a recovery at all.

Corporate earnings news this week was not good. Retailers had decent quarterly sales but many of those sales came in at highly discounted prices. Target(TGT) and Kohl's(KSS) were a bit disappointing on the earnings line. On the tech side, Hewlett-Packard(HPQ) and Dell(DELL) were below expectations, but most of the damage there was self-inflicted or related to Thai flooding problems and not macro demand. That said, the disconnect between corporate earnings growth and U.S. economic growth continues to widen. Year-over-year GDP growth has been relatively stable over the past year, and actually may be accelerating. Meanwhile, S&P 500 year-over-year earnings growth decelerated throughout 2011 from double-digit levels to a mere 5%-6% in the fourth quarter.

Housing Numbers Continue Climb This Week
This week, there was a lot of housing data, all of it good. Both new- and existing-home sales looked in better shape, as did pricing data from the Federal Housing Finance Administration (lagged and averaged Case Shiller data is due next week). Not only did the January data look great, but also there were massive upward revisions to December's statistics. Last month I was puzzled when some of the originally reported housing data looked incredibly weak, especially given the positive buzz that our homebuilding analysts were hearing from the field. (more)

This little-owned commodity could be starting its first major bull market in 31 years

Sugar has not experienced a rip roaring bull market in 31 years. That is about to change.

The vast overwhelming majority of traders have no clue what a for-real bull market in Sugar is like. I have lived (and traded successfully) through the big bull moves in Sugar — and I will tell you that there nothing like them.

A bull market in Sugar is the most explosive event in the commodity markets. Whereas traders today talk about the dream of catching a big Silver move, traders in the 1980s talked about the Sugar bull markets.

Sugar bull markets have a singular characteristic. When traders who want to buy a dip finally get a big enough dip to buy, they will not like what they get. There are two ways to get aboard a Sugar bull — at the market and on huge white-knuckle breaks.

Sugar bull markets are comprised of week after week of going up every day or huge breaks that run the stops of most speculators. If you get cute with a bull market in Sugar you will find yourself up to your neck in hardening syrup.

I believe we are in the early stages of the bull market to end all bull markets in Sugar. Let’s look at previous bull markets (as well as the current bull trend that started in 2007) for guidance.

First, let me make a point to you young guns who dismiss the signficance of market behavior from your grandfather’s generation. Those that understand market behavior best are part hisotorians, part psychologists and part economists. History has much to tell us about the future in all aspects of life. Dismiss history at your own peril.

1973 through 1974 bull move

During this bull trend prices seven fold in less than a year. When prices were not going up day after day, prices were undergoing huge breaks.

The breaks were as follows:

• 24.46 to 15.90 or 856 points
• 26.05 to 19.70 or 635 points
• 37.35 to 26.70 or 1,066 points

Who among you could have withstood these breaks?

I want to focus on the last leg up in the 1974 bull run because this period is, in my opinion, the analog to our current Sugar market. That last leg up was defined by the following:

• 26.70 to 66.00, or 3,930 points
• 45 trading days
• Average gain per day = 87 points
• Only four days with a lower close
• Not a single close above the low of the high day of the move

1979 through 1980 bull market

During this bull trend prices more than five fold in about 14 months. When prices were not going up day after day, prices were undergoing huge breaks.

The breaks were as follows:

• 28.14 to 17.45 or 1,069 points
• 37.35 to 29.50 or 785 points
• 37.70 to 26.05 or 1,165 points

Who among you could have withstood these breaks?

Again I want to focus on the final leg of this bull move because I believe it is the analog to our current market.

There was one big break of 583 points in the middle of the run

Counting the big break in price but not time, the market advanced 2508 points in 11 weeks, for an average per day gain of 46 ponts.

2004 (or 2007) through ???? bull move

One reason I am as bullish as I am is that the up market that started in 2004 (or 2007) has not experienced a blow-off top. In fact, I believe we could be on the verge of entering this period.

The breaks that the market has experienced so far are as follows:

• 19.75 to 8.36 or 1,139 points
• 30.33 to 13.00 or 1,733 points
• 36.08 to 20.40 or 1,568 points
• 31.85 to 22.62 or 923 points

If I am correct in my analysis of Sugar, the mareket is done having big breaks — for now anyway. We should be entering the sweet spot of the bull run. As was the case in the bull moves in 1974 and 1980 as well as the blow off in Silver in early 2011, this final leg should not last long — maybe 13 to 16 weeks.

I am hearing a singular message from folks by email: “Sugar is overbought…what kind of a break can we get?” Wrong question for a Sugar bull market.

John Williams: Warning – Monetary Base Spikes to Historic Level

John Williams just issued a warning regarding the Monetary Base vaulting to a historic high. Williams, who founded ShadowStats, also stated the reason for the expansion is directly related to a deepening systemic solvency crisis. Here is what Williams had to say about the situation: The seasonally-adjusted St. Louis Fed Adjusted Monetary Base just jumped to an historic high level in the two-week period ended February 22nd, as shown in the (above graph). The movement here largely is under direct control of the Fed’s Federal Open Mark Committee (FOMC) and is suggestive of a deepening systemic solvency crisis.”

John Williams continues:

“Adding liquidity to the system usually is contrary to the action that would be taken if the Fed were trying to reduce inflation. Indeed, the Fed is not trying to reduce inflation—despite inflation running significantly above its 2.0% inflation target—instead, the U.S. central bank continues its efforts to provide liquidity to a still severely-impaired U.S. banking system.

READ MORE

Dan Norcini: Strong weekly close in Gold

Gold was able to close the week out on a very strong note, although some traders did decide to cash in some profits ahead of the weekend, after getting a nice run of some $65 off of last week's close as of Thursday's peak price. Even in spite of the light round of profit taking, gold still managed to put in a very solid WEEKLY close surrendering only about $15 off its best level of the week and closing within striking range of $1800, the top of the heavy resistance zone noted on the price chart.

Take a look at the weekly chart shown below for an intermediate term view of the market. Note how the chart resistance near the $1800 level can clearly be seen. Gold did not challenge this level this week but from a technical standpoint, it does stand a very good chance of so doing next week.

If you notice the pattern I have marked as a "bullish pennant" or a "bullish flag" you will see the flagpole and the pennant or actual flag. These patterns occur often enough that they should be noted as they generally portend a strong move in the direction of the flagpole which can be used as a gauge of where price might be expected to run in the near future. The length of this flagpole which extends from the bottom near $1535 to the top of the pole coming in near 1765 is $230.

Once you get a brief period of consolidation, which is exactly what we have had the last three weeks prior to this one just completed, a fresh upside move which takes out the HIGH OF THE FLAGPOLE then gives us the potential for a move of some $230 higher. Some technicians will add this to the top of the flagpole giving a projection of $1995. Others whom are a bit more conservative (put me in that category) will add the length of the flagpole to the BREAKOUT POINT of the downtrending line forming the top of the flag. That price point came in near $1725 which yields a projection of $1955. Either way it gives us gold at a brand new all time high.

An ideal technical price action will be, in the event of any subsequent price reaction lower, to see gold find buying coming in along the line that marks the top of the flag which then causes the price to rebound and begin moving higher. It is just another way of demonstrating that buyers are eager to buy dips and see value at this new, higher level. They are not willing to risk sitting on the sidelines in the hope of purchasing the metal even lower. If you do break below the bottom of the flag itself, the formation will generally be void although that does not mean that price has peaked. It merely means that the bullish flag formation projection is not going to be reliable.

For a bit of a longer-term perspective, I am including a monthly chart of the metal. Note carefully the clearly defined uptrending channel that can be seen going back into the bottom in gold in late 2008, when the Quantitative Easing programs were first announced. Gold has tracked within this channel very closely with the brief one month exception when it got a bit overheated and frothy later last year. That sharp parabolic rise was met with selling that corrected the overbought reading and took price back within the channel.

Here is the significant point to make -this month's price action has thus far taken the price to the top of this channel once again. I think it is no coincidence that we did see some selling therefore arise late Thursday and into Friday's session particularly as gold approached the $1800 level which just so happens to be very close to the top of this channel. It is both a logical and a technical chart selling point.

If, and this is a big "IF", the metal pushes through the top of this channel and closes the month above it, odds would then favor an acceleration of the trend higher and perhaps a new and steeper uptrending price channel being formed. I would especially want to see a second consecutive monthly close ABOVE this old channel coming at the end of March to confirm this however to avoid another one month wonder.
If we were to get that, I do not think it would be very long before we revisit the all time highs above $1900.

What this would be telling us fundamentally is that gold is now convinced beyond all shadow of a doubt that the near world-wide currency debauchment by the Central Banks is not going unnoticed.
That environment, which is simply another way of stating NEAR-ZERO interest rate policy, is generating genuine fears of currency debasement and the subsequent strong inflationary impact that inevitably arises from such a policy.

We would also get a confirmation by a strongly rising Continuous Commodity Index.

Why Uranium Could Go To $200 And Beyond

As I noted in my previous article entitled, "6 Ideas for Where the Next Bubble Will Be," I believe uranium prices are ripe to go much higher. There is an imminent supply demand imbalance due to the coming end of the Megatons to Megawatts program, as well as an abundance of new nuclear reactors set to come on board over the next 15 years, that I think will drive this market.

So the question: How high can uranium prices go? In that regard, I think it helps to first observe historical prices. See the chart below.

I think a re-test of previous all-time highs - more than double current uranium prices - is likely. The fundamental factors (i.e. supply/demand imbalance) are even stronger now, and central bank monetary policy is even more inflationary which will likely make markets as a whole more volatile and more prone to bubbles. Because I expect uranium prices to more double, I expect the same - even more so - for most uranium mining companies. Purchasing Cameco (CCJ), the largest North American uranium miner, or the uranium ETF (URA) are easy ways to play this. (more)

UK has run out of money

In a stark warning ahead of next month’s Budget, the Chancellor said there was little the Coalition could do to stimulate the economy.

Mr Osborne made it clear that due to the parlous state of the public finances the best hope for economic growth was to encourage businesses to flourish and hire more workers.

“The British Government has run out of money because all the money was spent in the good years,” the Chancellor said. “The money and the investment and the jobs need to come from the private sector.”

Mr Osborne’s bleak assessment echoes that of Liam Byrne, the former chief secretary to the Treasury, who bluntly joked that Labour had left Britain broke when he exited the Government in 2010.

He left David Laws, his successor, a one-line note saying: “Dear Chief Secretary, I’m afraid to tell you there’s no money left”.

Mr Osborne is under severe pressure to boost growth, amid signs the economy is slipping back into a recession.

The Institute of Fiscal Studies has urged him to consider emergency tax cuts in the Budget to reduce the risk of a prolonged economic slump.

But the Chancellor yesterday said he would stand firm on his effort to balance the books by refusing to borrow money. “Any tax cut would have to be paid for,” Mr Osborne told Sky News. “In other words there would have to be a tax rise somewhere else or a spending reduction.

“In other words what we are not going to do in this Budget is borrow more money to either increase spending or cut taxes.”

The strongest suggestion of help for squeezed family budgets came from the Chancellor’s claim that he was “very seriously and carefully” considering plans to help lower earners by raising the personal allowance for income tax, a proposal that has been championed by Nick Clegg, the Deputy Prime Minister.

But he implied there would be no more help for motorists struggling with record petrol prices this spring. “I have taken action already this year to avoid increases in fuel duty which were planned by the last Labour government,” he said.

The Chancellor’s tough words were echoed by Liberal Democrat Jeremy Browne, the foreign minister, who warned that Britain faced “accelerated decline” without measures to tackle its debt and increase competitiveness.

In an article published today in The Daily Telegraph, he writes that Britain’s market share in the world used to be “dominant” but was now “in freefall” compared with the soaring economies of Asia and South America. “This situation has been becoming more acute for years,” he adds. “It is now staring us in the face. So we need to take action.”

Mr Browne writes that reform of pensions, welfare and defence is essential to stop the departments “collapsing under the weight of their own debt”. “Just because the spending was sometimes on worthy causes does not in itself mean it was affordable,” he says.

“Doing nothing when your prospects are at risk of declining is not the safe option. More of the same may be superficially more popular in the short-term but that does not make it right.”

Amid warnings that Britain urgently needed to adopt a more pro-business outlook, senior Conservatives have urged the Government to get rid of the 50 pence top rate of tax.

Figures from the Treasury last week suggested the policy was not raising the expected amount of revenue and was threatening to drive leading business people and entrepreneurs away from Britain. Dr Liam Fox, the former Conservative Defence Secretary, yesterday argued for the top tax rate to be scrapped, but added that cutting taxes on employment was even more important.

“I would have thought the priority was getting the costs of employers down and therefore I would rather have seen any reductions in taxation on employers’ taxation rather than personal taxation,” he told the BBC’s Sunday Politics show.

Any efforts to scrap the rate this parliament would face severe opposition from within the Coalition.

Simon Hughes, Liberal Democrat deputy leader, said yesterday that keeping the current 50p rate was “the right thing to do”. He told the BBC: “I represent people in a pretty solid working-class community. What they’re concerned about is what happens to ordinary people out of work and where they get jobs.”

Last night, Labour argued Mr Osborne needed to take a more proactive stance on boosting growth by increasing public spending.

Chris Leslie MP, the shadow Treasury minister, said it was wrong of the Chancellor to argue that Britain was broke and to rely on business alone to create economic growth.

“George Osborne can’t complacently wash his hands and claim the lack of jobs and growth in the economy is nothing to do with him,” he said.

“He needs to realise that government has a vital role to play in creating an environment where the private sector can grow and create jobs.”

Harriet Harman, Labour’s deputy leader, urged Mr Osborne to cut VAT.

Meanwhile, the Chancellor made it clear he was resisting pressure to hand over up to another £17.5billion in taxpayers’ money to help bail out struggling European Union countries.

He said Europe had not “shown the colour of its money” by taking measures to help itself tackle its debt problems.

Until that happens, Britain will not give any extra funds to the International Monetary Fund.

The Chancellor was speaking as finance ministers from the world’s 20 most powerful economies met in Mexico.

Mr Osborne said: “While at this G20 conference there are a lot of things to discuss; I don’t think you’re going to see any extra resources committed (to the IMF) here because eurozone countries have not committed additional resources themselves, and I think that quid pro quo will be clearly established here in Mexico City.”

IS IT TIME TO BUY JAPANESE EQUITIES?

There has long been a strong correlation between the Nikkei and the US Dollar/Yen. A similar version of this correlation is that of the Nikkei and US interest rates. The thinking is rather simple. As a trade surplus nation the rising Yen puts downward pressure on profits and Japanese equities. Unfortunately, the calls for a bottom in the USD/Yen have been made for years on end. But Credit Agricole thinks the time could be now and that that’s bullish for Japanese equities, This argument would be reinforced if one believes interest rates in the USA are bottoming (which, if you take the Fed’s 2014 forecast seriously means Credit Agricole might be right in the short-term, but is wrong in the longer-term):

“Our argument is different. If the story of the rebalancing of growth – with an inflationary bias – within the global US$ area is as powerful as we suspect then the greatest potential beneficiaries should be ultimately the most distressed parts of the
world equity landscape. The world’s cheapest major equity zone is the euro area – and Japan.

It is time to reassess Japan, once again. The Bank of Japan has just announced an unexpected supplement of quantitative easing of a rather more authentic kind than that practised by the ECB. But nobody seems excited, because it’s Japan, and
everybody thinks that it has all been attempted before without success.* However, the context has become more favourable to the Japanese stock market: policy relaxation in the emerging world, a more stable US$ and improved expectations for global growth.

The point is that there is a tangible catalyst for the revival of Japanese equities: the exchange rate. If the “end of reflation” in America really does imply a more stable US currency then, sooner or later, the downward trend in US$/Yen will reverse. We suspect that this is what we are witnessing. We will have the confirmation when the US$ trades above Yen 81/82.”

US Weekly Economic Calendar

time (et)	report	period	Actual	forecast	previous
MONDAY, FEB. 27
10 am	Pending home sales index	Jan.		--	-3.5%
10:30 am	Texas manufacturing index	Feb.		--	15.3
Tuesday, FEB. 28
8:30 am	Durable goods orders	Jan.		-0.8%	3.0%
9 am	Case-Shiller home prices	Dec.		--	-1.3%
10 am	Consumer confidence	Feb.		64.0	61.1
10 am	Richmond Fed index	Feb.		--	12
Wednesday, FEB. 29
8:30 am	GDP	4Q		2.7%	2.8%
9:45 am	Chicago PMI	Feb.		60.0%	60.2%
2 pm	Beige Book
Thursday, MARCH 1
8:30 a.m.	Jobless claims	2-25		348,000	351,000
8:30 am	Personal incomes	Jan.		0.4%	0.5%
8:30 am	Consumer spending	Jan.		0.4%	0.0%
8:30 am	Core PCE price index	Jan.		0.2%	0.2%
10 am	ISM	Feb.		54.5%	54.1%
10 am	Construction spending	Jan.		0.6%	1.5%
TBA	Motor vehicle sales	Feb.		14.0 mln	14.2 mln
FRIDAY, MARCH 2
	None scheduled

MUST HEAR! Ranting Andy Hoffman: $1000 – $4000 SILVER & the Demise of the Bankster Cartel

Popular writer and pundit ‘Ranting Andy’ Hoffman from Miles Frankiln precious metals is back to talk to SGTreport. In Part 1 we talk about the fall of Greece at the hands of the IMF banksters and Silver to $50 by summer (which will help to break the backs of the criminal banking cartel). And don’t miss Part 2: $6 Trillion in seized bonds and $1,000 – $4,000 SILVER!

Eric Sprott On Unintended Consequences

2012 is proving to be the 'Year of the Central Bank'. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.

The first major maneuver took place on November 30, 2011, when the world's G6 central banks (the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank [ECB], the Swiss National Bank, and the Bank of Canada) announced "coordinated actions to enhance their capacity to provide liquidity support to the global financial system".¹ Long story short, in an effort to avert a total collapse in the European banking system, the US Fed agreed to offer unlimitedUS dollar swap agreements with the other central banks. These US dollar swaps allow the other central banks, most notably the ECB, to borrow US dollars from the Federal Reserve and lend them to their respective national banks to meet withdrawals and make debt payments. The best part about these swaps is that they are limitless in scope - meaning that until February 1, 2013, the Federal Reserve is, and will be, prepared to lend as many US dollars as it takes to keep the financial system from imploding. It sounds absolutely great, and the Europeans should be nothing but thankful, except for the tiny little fact that to supply these unlimited US dollars, the Federal Reserve will have to print them out of thin air. (more)

S&P 500 Update: Where's the Volume?

The S&P 500 closed the week at a new interim high, up 8.60% in the first 37 days of trading versus 2.69% over the same timeframe in 2011.

But what about volume? I've posted comparisons with 2011 after the first 12, 24 and 34 days of trading. Here is an updated comparison after the first 37 days.

According to the data I downloaded from my Stockcharts.com subscription, the cumulative volume so far this year is 110.3 Billion versus 135.5 Billion in the first 37 days of 2011. That is a -18.6% decline.

I continue to caution that, despite the continued superior performance of the 2012 year-to-date rally, the trading volume doesn't offer strong confirmation.

Wal-Mart Rolls On : DLTR, KR, TGT, WMT

A company as immense as Wal-Mart (NYSE:WMT) is not going to show a great deal of turbulence from quarter to quarter, but there's nothing wrong with steady growth and stepwise execution of a solid business plan. To that end, Wal-Mart shareholders have little to worry about, as management continues to balance an overseas growth strategy with a domestic operating efficiency plan. Although Wal-Mart is not especially cheap, it likely remains a reasonably good conservative play on consumer spending in the United States, tinged with some international growth.

Basically Solid Fiscal Fourth Quarter Results
Wal-Mart didn't deliver too many surprises in its fiscal fourth quarter, and investors basically have to go to the right of the decimal points to find much deviation from expectation.

Sales and revenue both rose about 6% for the quarter, with U.S. sales up a little more than 2% and international sales growing more than 13%. U.S. comps were up 1.5% on an even mix of traffic and ticket, with only apparel sales being notably weak. Sam's Club comps were up more than 5%.

Internationally, the company did well overall, with double-digit growth in Walmex and China. Operations in Japan and the U.K. saw low single-digit growth, while Brazilian comps were down a bit.

Wal-Mart chose to sacrifice a little margin to maintain growth and market share. Gross margin declined 39 basis points as the company re-emphasized its everyday low price positioning and boosted in-stock levels (inventories up almost 12%). Operating income rose about 4%, with management recouping some of the lost gross margin and minimizing the operating margin erosion to 10 basis points.

Fine-Tuning Domestic Execution
Wal-Mart knows that torrid revenue growth is not going to happen in the U.S. market anymore, so the company is keenly focused on its operational execution. To that end, the company is investing more in inventory management, holding higher stock levels and buttressing its low-price positioning.

This is hardly good news for the likes of Target (NYSE:TGT) or the extreme discount retailers like Dollar Tree (Nasdaq:DLTR), Dollar General (NYSE:DG) and Family Dollar (NYSE:FDO). Target in particular seems to be struggling to find its way; rivals like Kohl's (NYSE:KSS) have bled away its momentum in "high-end discounting," while Wal-Mart's scale and extreme efficiency make competing dollar-for-dollar a losing proposition.

Wal-Mart also seems to be building on its strengths in food retailing. This is still a somewhat new venture for the company, but the strong comps in food this quarter suggest that the company continues to widen the gap with the likes of Kroger (NYSE:KR) and Safeway (NYSE:SWY).

Ongoing Square Footage Expansion Overseas
While the U.S. business is about execution, the overseas story is still very much about growth. While it is true that many of the major cities in emerging markets like China, India, Brazil and South Africa are well-stocked with stores, it's a much different story outside of those major cities. Said differently, Latin America and China alone can continue to drive very significant growth for some time to go.

It's worth wondering if Wal-Mart's management will consider any sort of split or tracking stock to give investors a more distinct choice between the cash-rich U.S. operations and the growth-rich international business. Yes, there is Wal-Mart de Mexico (OTCBB:WMMVY.PK), but a fuller separation could be of interest to some investors.

The Bottom Line
If consumer spending in the U.S. continues to recover, Wal-Mart will see its share of the benefits, though certainly not to the same incremental extent as mall-based, specialty, or aspirational stores. Likewise, so long as consumer spending in major emerging markets continues to grow, so too should Wal-Mart's international comps.

Wal-Mart has been a market-beater over the past year and sits near its 52-week high. Though the stock is not overvalued today, neither is it cheap. Wal-Mart is a decent enough hold at today's prices, but investors buying today are looking at a pretty narrow margin of safety relative to fair value.