Wednesday, July 4, 2012
The Great Crash Ahead with Author Harry Dent
Economist Harry S Dent provides a brief outlook for 2012 and talks about America's economy and where we may be heading in the near future . Harry Dent is the founder of economic advisory firm and author of "The Great Crash Ahead," , he is One of the world's leading experts on global financial markets, He is warning of a global "economic tsunami" in 2012 Harry Dent the markets will crash in 2012 , Harry Dent told Bloomberg recently that he predicts the S&P 500 to Fall by 30 to 50 Percent in 2012 .Harry also makes a specific prescription for surviving the coming crash and even thriving through it.He also shares his predictions as to where the U.S. economy is headed in the next year.Harry Dent predicts the next crash. Understand how the European Debt crisis will hit the American, Chinese and global economies.
Is the S&P 500 Closing in on a Top?
Friday’s strong move to the upside caught a lot of traders on the wrong side of the market. Regardless of whether financial pundits refer to it as a short-squeeze or simply panic level buying is largely irrelevant. Time and price are always the final arbiters of financial markets. Price on Friday was clearly telling us that too many market participants were shorting equities and the Euro.
The news coming out of the European Summit is what drove prices higher according to most media outlets. However, few traders have actually taken the time to research the fact that Germany has not technically agreed to the European Stability Mechanism legislation at this point.
The German Constitutional Court has delayed the passage of the ESM legislation on the grounds that this court needs to affirm the agreement is constitutional. Several high profile politicians in Germany have allegedly filed multiple law suits surrounding the new ESM law.
Should the German Constitutional Court determine the ESM legislation is unconstitutional a referendum will go before the German people. The last thing the Eurocratic blue bloods and their banking cartel minions want is regular people actually having a say in the outcome of the Eurozone project. (more)
Two Contrarian Plays with Triple-Digit Potential
In 1939, Sir John Templeton borrowed $10,000 to start on the path that would lead him to create Franklin Templeton Investments, a global investment manager with more than $725 billion in assets under management today. Templeton is best known as a value investor, but he also had a contrarian streak.
Templeton looked at the world in 1939 and saw fear. At the start of what would become World War II, the Dow Jones Industrial Average fell almost 25 percent in five months and investors still in shock from two bear markets in the 1930’s probably thought “here we go again.” Surrounded by fear, Templeton bought 100 shares of every company trading for less than $1 a share on the New York Stock Exchange. His thinking was that these companies were as low as they could get and individually each company would either be a big winner or go bankrupt. He thought the winners were likely to outweigh the losers. He bought shares in 104 companies and invested about $10,000. Before the war ended, Templeton had made more than $30,000 on his investment (more than 41 percent a year) and only four of his stock picks resulted in a total loss with the company in bankruptcy.
Contrarians buy when everyone is selling and sell when everyone is buying. Rather than looking at value, they look at fear and greed and take positions contrary to the emotions driving the majority of investors. As a more recent example of this kind of trade, in 2000 contrarians shorted internet stocks while most investors thought these stocks would deliver triple digit annual gains forever. By going against the crowd, some investors enjoyed large gains while most suffered large losses. Others shorted the stocks too early and suffered losses. Contrarian trades need to be made at the right time and I think I found the next one.
Looking at the world today, Greece may well be the country that is most feared (it's market also recently triggered a "once in a decade "buy" signal"). Unfortunately U.S. investors can’t easily find 100 stocks to buy at low prices, but there are two cheap Greek stocks traded in the U.S.
One of these stocks is National Bank of Greece (NBG). This stock is actually among the relative strength leaders over the past six months with a rank of 98, indicating that it has outperformed about 98% of all other investments over that time driven by a 56% gain in the past three weeks.
This is a speculative trade on a Greek turnaround, one that Templeton would be likely to approve of.
The second trade to bet on a Greek comeback is Hellenic Telecommunications (HLTOY), which is traded on the Pink Sheets. Foreign stocks will occasionally use a Pink Sheets listing to avoid the expense of restating financial statements in the format required by U.S. regulators. Nestle (NSLYF) and Nintendo (NTDOY) are other examples of large companies that also trade on the Pink Sheets.
HLTOY fell 96% from its 2007 high and is now trading near $1.25 a share, about 2.5 times the company’s earnings over the past twelve months. The latest financial statements show that the company had cash equivalent to $1.97 a share on its books so traders are buying the stock at a discount by any measure. HLTOY is expected to grow earnings at 10% a year going forward so it could be worth more than $5 a share on a fundamental basis. The reason to buy now is because this week’s price action triggered a buy signal on the MACD indicator.
These are risky trades. The low prices for NBG and HLTOY makes a stop seem redundant. Trade only what you can afford to lose in these positions and you may enjoy Templeton-like gains.
Templeton looked at the world in 1939 and saw fear. At the start of what would become World War II, the Dow Jones Industrial Average fell almost 25 percent in five months and investors still in shock from two bear markets in the 1930’s probably thought “here we go again.” Surrounded by fear, Templeton bought 100 shares of every company trading for less than $1 a share on the New York Stock Exchange. His thinking was that these companies were as low as they could get and individually each company would either be a big winner or go bankrupt. He thought the winners were likely to outweigh the losers. He bought shares in 104 companies and invested about $10,000. Before the war ended, Templeton had made more than $30,000 on his investment (more than 41 percent a year) and only four of his stock picks resulted in a total loss with the company in bankruptcy.
Contrarians buy when everyone is selling and sell when everyone is buying. Rather than looking at value, they look at fear and greed and take positions contrary to the emotions driving the majority of investors. As a more recent example of this kind of trade, in 2000 contrarians shorted internet stocks while most investors thought these stocks would deliver triple digit annual gains forever. By going against the crowd, some investors enjoyed large gains while most suffered large losses. Others shorted the stocks too early and suffered losses. Contrarian trades need to be made at the right time and I think I found the next one.
Looking at the world today, Greece may well be the country that is most feared (it's market also recently triggered a "once in a decade "buy" signal"). Unfortunately U.S. investors can’t easily find 100 stocks to buy at low prices, but there are two cheap Greek stocks traded in the U.S.
One of these stocks is National Bank of Greece (NBG). This stock is actually among the relative strength leaders over the past six months with a rank of 98, indicating that it has outperformed about 98% of all other investments over that time driven by a 56% gain in the past three weeks.
This is a speculative trade on a Greek turnaround, one that Templeton would be likely to approve of.
The second trade to bet on a Greek comeback is Hellenic Telecommunications (HLTOY), which is traded on the Pink Sheets. Foreign stocks will occasionally use a Pink Sheets listing to avoid the expense of restating financial statements in the format required by U.S. regulators. Nestle (NSLYF) and Nintendo (NTDOY) are other examples of large companies that also trade on the Pink Sheets.
HLTOY fell 96% from its 2007 high and is now trading near $1.25 a share, about 2.5 times the company’s earnings over the past twelve months. The latest financial statements show that the company had cash equivalent to $1.97 a share on its books so traders are buying the stock at a discount by any measure. HLTOY is expected to grow earnings at 10% a year going forward so it could be worth more than $5 a share on a fundamental basis. The reason to buy now is because this week’s price action triggered a buy signal on the MACD indicator.
These are risky trades. The low prices for NBG and HLTOY makes a stop seem redundant. Trade only what you can afford to lose in these positions and you may enjoy Templeton-like gains.
KWN SPECIAL RELEASED: ONE of HIS GREATEST IN-DEPTH INTERVIEWS EVER – Eric Sprott:
Eric Sprott: Chairman, CEO & Portfolio Manager of Sprott Asset Management - Eric has over 40 years of experience in the investment industry and manages over $10 billion. He has been stunningly accurate in his writings for over a decade, and is one of the most respected industry professionals who accurately foresaw the current crisis. Eric chronicled the dangers of excessive leverage as well as the bubbles the Fed was creating, while correctly forecasting the tragic collapse. Sprott Asset Management is one of the top firms in the world. The firm has become well known not only for its performance, but also for creating a gold and now silver trust. (click here for audio)
A Safe, One-Click Real Estate Investment Yielding 5%-8%
Right now, there's a real estate investment paying safe, 5%-8% yields.
This real estate is always in demand... even in recessions. It's easy to buy and sell – as easy as buying or selling a stock.
And it's a great situation for income investors. Let me explain...
The real estate I'm talking about is the land where the nation's oil and gas pipelines sit. The owners of this real estate – the operators of energy pipelines – can be a good friend to the income investor.
Pipelines are the "toll roads" of the energy industry. They get paid a toll for every unit of oil or natural gas that moves through or is stored in their infrastructure.
Most pipeline owners have contracts up to 10 years or more. Contracts often include adjustments for inflation. And some even strike "take or pay" contracts, where the pipeline receives a set fee, even if the full capacity isn't used.
In short, they make consistent profits whether oil trades at $50 a barrel or $150 a barrel. And in order to encourage infrastructure investment, the government offers pipeline operators a tax break if they pay out most of their income as dividends. So a lot of those profits get passed on to shareholders... through regular cash payouts.
The thing is, when energy prices fall, pipeline shares can fall, too. Over the last two months, the benchmark U.S. oil price has fallen about 24%. As DailyWealth readers know, natural gas has been clobbered. Even after a recent bounce, the price of natural gas is down more than 22% this year.
Because of the U.S. natural gas boom, these pipelines are going to enjoy extraordinary demand for decades to come. But pipeline giants Kinder Morgan Partners and Enterprise Product Partners are down nearly 20% this year. And the DataStream pipeline index is down as much as 11% since May.
This has made them cheap.
Since these are dividend-rich investments, my preferred way to value them is with a "spread" over U.S. Treasurys. (My colleague Dr. David Eifrig did the same with municipal bonds in Friday's essay.)
The "spread" is simply the U.S. Treasury yield minus the yield on pipelines. Since 1973, the average spread is -1.9%. That means Treasurys usually pay 1.9% more than pipeline stocks. But today, the opposite is true. Today, pipelines pay 4.1% MORE than Treasurys. Take a look...
According to DataStream, pipeline companies have only paid a higher spread over Treasurys once. This was during the depths of the financial crisis... which was a fantastic time to buy pipeline shares.
Today, pipelines have the second-highest spread over Treasurys we've ever seen.
Based on history, high Treasury spreads have been GREAT buying opportunities. The last two times the spread peaked – in 2009 and 2002 – pipeline stocks soared by 58% and 93% in the next 24 months.
I've put together a table of a few of the major U.S. pipeline companies... along with their hefty dividends...
These companies pay an average dividend yield of 5.7%. That's more than three times the tiny 1.65% paid on 10-year U.S. Treasurys.
Importantly, while the companies have rallied in the past few days, the overall trend is still down. It wouldn't be smart to buy without the confirmation of an uptrend. We'll need to see these stocks exhibit just a bit of price strength first.
When they catch some upward momentum, these companies will be a fantastic option for any dividend-oriented investor.
Put these companies on your watch list for now. I'll let you know when it's time to buy this high-yield real estate.
Nordson Corporation (NasdaqGS: NDSN)
Nordson Corporation engineers, manufactures, and markets products and systems for precision dispensing, testing and inspection, fluid management, surface treatment, and curing. Its Adhesive Dispensing Systems segment provides equipment to apply adhesives, lotions, liquids, and fibers to disposable products. The company's Advanced Technology Systems segment offers automated gas plasma treatment systems to clean and condition surfaces for semiconductor, medical, and printed circuit board industries; controlled manual and automated systems to apply materials in customer processes requiring precision and material conservation. Its Industrial Coating Systems segment provides automated and manual dispensing systems to apply materials in automotive, heavy truck, and recreational vehicle manufacturing industries. It also offers ultraviolet equipment to cure and dry operations for specialty coatings, semiconductor materials, and paints. The company also serves appliance, construction, electronics assembly, furniture, and LED industries. It markets its products in the United States and internationally through direct sales force, distributors, and sales representatives. The company was founded in 1935 and is headquartered in Westlake, Ohio.
To review Nordson's stock, please take a look at the 1-year chart of NDSN (Nordson Corporation) below with my added notations:
First, NDSN has formed a key level of support at $48 (navy) over the last (2) months. That same $48 support was also an important resistance towards the end of last year. Next, the stock has been forming a down trending resistance level (red) that has now been tested (3) different times. These two levels combined have NDSN stuck within what could be considered a Descending Triangle, which will eventually have to break one way or another.
The Tale of the Tape: NDSN is currently trading between its down trending resistance and $48 support. A long trade could be made on a pull back to the $48 support or on a break above the down trending resistance with a stop placed below the entry point. A short trade could be made on NDSN if the stock breaks below the $48 support level. In that case, a stop should be placed above the level of entry.
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