Thursday, January 3, 2013

Dogs of the Dow For 2013

Below is the 2013 "Dogs of the Dow" list, which represents the top 10 dividend yielding stocks in the Dow Jones Industrial Average at the beginning of the year. McDonald's Corp. (NYSE: MCD) is back on the list after a one-year hiatus and Hewlett-Packard (NYSE: HPQ) is new to the list.

  • AT&T (NYSE: T): Price $33.71; Dividend Yield 5.34%. AT&T raised its quarterly dividend 2.3% to $0.45/share with its last announcement on 11/7. The dividend will be payable on February 1, 2013, to stockholders of record on January 10, 2013, with an ex-dividend date of January 8, 2013.

  • Verizon Communications Inc. (NYSE: VZ): Price $43.27; Dividend Yield 4.76%. Verizon raised its quarterly dividend 3% to $0.515/share with its September announcement.

  • Intel Corporation (Nasdaq: INTC): Price $20.62; Dividend Yield 4.36%. Intel raised its quarterly dividend 7.1% to $0.225/share with its July announcement.

  • Merck & Co. Inc. (NYSE: MRK): Price $40.94; Dividend Yield 4.20%. Merck raised its quarterly dividend 2.4% to $0.43/share with its November announcement.

  • Pfizer Inc. (NYSE: PFE): Price $25.08; Dividend Yield 3.83%. Pfizer raised its quarterly dividend 9.1% to $0.24/share with its December announcement.

  • DuPont (NYSE: DD): Price $44.98; Dividend Yield 3.82%. DuPont raised its quarterly dividend 4.9% to $0.43/share with its April announcement.

  • Hewlett-Packard (NYSE: HPQ) Price $14.25; Dividend Yield 3.72% (*NEW). HP raised its quarterly dividend 10% to $0.132/share with its May announcement.

  • General Electric (NYSE: GE): Price $20.99; Dividend Yield 3.62%. GE raised its quarterly dividend 11.8% to $0.19/share with its December announcement.

  • McDonald's Corp. (NYSE: MCD): Price $88.21; Dividend Yield 3.49% (*NEW). McDonald's raised its quarterly dividend 10% to $0.77/share with its September announcement.

  • Johnson & Johnson (NYSE: JNJ): Price $70.10; Dividend Yield 3.48%. Johnson & Johnson raised its quarterly dividend 7% to $0.61/share with its April announcement.

These Could Be the Best Long and Short Trades in the World for 2013

One of the keys to successful trading is to find value stocks. Another key is to understand which markets offer better short trading opportunities. This week we look at which countries are the most promising buys and shorts in 2013. Next week, we'll turn our attention to which sectors are the most attractive trade candidates.

The end of the year always brings a wealth of research reports about which stocks performed the best and worst during the past 12 months. Other reports are published offering opinions about what the year ahead will look like. We prefer to avoid speculating about the future and favor using data to identify high-probability trading opportunities. To us, looking ahead starts with a look at the past to find the strongest stocks or ETFs with good fundamentals.

This is measured with relative strength (RS). We compare the performance of all stocks and ETFs over the past six months and rank each one from 0 to 100 with higher numbers showing the biggest winners from the past. A number of studies show that trends tend to continue and strong stocks often beat the market over the next six months.

One of the ways we look at fundamentals is with the PEG ratio, which is found by dividing the price-to-earnings (P/E) ratio by the earnings growth rate. Value stocks generally have PEG ratios under 1 and stocks with high PEG ratios often make great short trades.

The table below summarizes the strongest and weakest stock markets around the world. PEG ratios are calculated based on data published by Citigroup. A representative ETF for that country is also shown, but the PEG ratio is not based on the holdings of that ETF.

Country ETFs
Based on RS and value, country ETFs Global X FTSE Greece 20 ETF (NYSE: GREK) and iShares MSCI Poland (NYSE: EPOL) are "buys."

Using only these values, iShares MSCI Ireland (NYSE: EIRL) and iShares MSCI Spain (NYSE: EWP) should be watched as potential short trades. Traders should usually enter a short position only after an ETF starts to break down with RS falling below 80. EIRL is thinly traded and a short trade in this ETF would be highly risky unless volume increases.

GREK began trading in May 2012, and the short trading history makes any trade in this ETF risky. However, by any measure, Greece is in a bear market and could be a turnaround trade. The Athens Stock Index is about 84% below its 2007 high. The economy has contracted in each of the past five years and is expected to continue contracting in 2013.

Traders often say the time to buy is when the news is at its worst. While Greece has been the source of ever-worsening news for years, that trend will reverse one day. Until it does, the 10-day moving average could offer a useful guide for traders.
GREK Chart
We can analyze EPOL more effectively. RS is high, prices are in an uptrend and the stochastics indicator is bullish. This ETF has recently broken out of a year-long trading range. Buying on a new short-term high at $29.70 could provide a gain of 22% if EPOL reaches the price target of $36.20, which is based on the depth of that trading range.
EPOL Chart
A trend reversal would be signaled if EPOL breaks below the trendline, which would happen on a move below $26.67. The stop-loss level will rise over time as the trendline is extended.

Turning to the best short trade among country ETFs right now, iShares MSCI Taiwan (NYSE: EWT) appears to be the most profitable opportunity. Taiwan is the fourth most overvalued country using the PEG ratio to define value, but it is the only one of the most overvalued countries with a bearish chart.
EWT Chart
EWT was stopped by resistance at the upper limit of a year-long trading range. A decline to support at $11.50 would offer traders a potential gain of about 14%. Options are available on EWT, which makes this a low-risk trade based on the dollar amount required to benefit from a possible decline.

Put options with an exercise price of $13 expiring in June are trading near $0.67 a share. They would be worth at least $1.50 if EWT reaches the price target of $11.50 for a potential 124% gain from current prices.

Entering 2013, traders looking for global market exposure should consider buying EPOL and buying puts on EWT. This strategy is likely to benefit in a bull or bear market over the next six months.

Recommended Trade Setups:
-- Buy EPOL with a buy-stop order at $29.70
-- Set stop-loss at $26.67
-- Set initial price target at $36.20 for a potential 21% gain in 6-12 months
-- Buy EWT June 13 Puts at $0.90 or less
-- Do not use a stop-loss
-- Set initial price target at $1.50 for a potential 67% gain in 6 months

Doug Casey on 2013 / By Louis James / January 2, 2013

(Interviewed by Louis James, Editor, International Speculator)

L: So Doug, the world didn’t end in 2012, so it’s onward into another new year. It’s time to tune in to your guru-vision and tell us what trends you see shaping up and what actions they imply taking.
Doug: Yes, it looks like the Mayans missed this one; perhaps they’ll get another kick at the cat a few millennia from now when it’s once more time to turn the page on their calendar. Better luck next time, Mayan astrologers! But although nothing seems to be happening on that front, it’s appropriate that I’m speaking to you from Punta del Este in Uruguay, which is one of the most happening places in the world at this time of year – North American and European winter, South American summer. I went to a New Year’s Eve party last night with some rather interesting temporary denizens of the place, and of course this was the subject of much conversation. None of them happened to be American, incidentally, and all but one – who is very involved in local politics – is extremely bearish on 2013.
L: Do you mean bearish on the global economy? Bearish on geopolitics? Or bearish on civilization itself?


Kyle Bass: “This Ends in War; The Government’s Never Going to Tell You That It’s Going To Happen.”

by Tekoa Da Silva, Bull Market Thinking:

In a follow up presentation to the AmeriCatalyst Group, Hayman Capital fund manager Kyle Bass shares thoughts on a number of key issues facing the world over the next few years. Among those that stood out, was the inevitability of a major war, escalation of food riots, and why the government’s job is to maintain confidence over truth.
Excerpts are show here below:
5:00 – “This Ends In War”
“We sit today at the world’s largest peacetime accumulation of debt in world history…you know how this ends right? This ends through war…
I don’t know who’s going to fight who, but I’m fairly certain in the next few years you will see wars erupt, and not just small ones…”
19:00 – “More Social Unrest”
“You’re going to see more social unrest. You saw HUGE riots in Greece, and you’re seeing HUGE riots in other parts of the world over food (and lack of food) and those are actually derivatives of the financial problems that we’re seeing. We’re exporting inflation to some other nations. Going forward it’s going to be a problem.”
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Merck & Co, Inc (NYSE:MRK)

A head and shoulders (H&S) pattern is a reversal pattern that forms after an uptrend. A textbook H&S pattern starts to form when a stock rallies to a point and then pulls back to a particular level (left shoulder). Next, the stock will rally again, but this time to a higher peak (head) than the previous one. After forming the head, the stock will pull back to the same support area that the first shoulder did. Finally, the stock rallies a 3rd time, but not as high as the head (right shoulder). The level that has been created by all 3 of the pullbacks is simply a support level referred to as the “neckline”. The formation of an H&S pattern warns of a potential reversal of the uptrend into a possible downtrend.

To review the H&S pattern that has formed on Merck & Company’s stock, please take a look at the 1-year chart of MRK (Merck & Company, Inc.) below with my added notations:
MRK had been on a 5-month rally since its bottom in June. Over the last (6) months, the stock has created a very important level at $42.50 (red), which would also be the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (blue). Confirmation of the H&S occurred when MRK broke its $42.50 “neckline” support. Also, notice the volume spike on the breakdown (pink). Volume increases on breakouts or breakdowns add validity to the break. So, the stock should be moving lower overall from here.

Does the Collapse of an Empire Follow the Same Pattern?

by Martin Armstrong
Armstrong Economics

The answer to that is yes! Here are three charts on Britain. Its debt soared with World War I, the cost of living became exceptionally high and foreign labor migrated to London making it the first city after Ancient Rome to reach a population of 1 million during the late 19th century. Labor migrated because wages were the highest among all leading cities in the world. This is why people have migrated to USA in recent times.
The US was bankrupt in 1896 and was the emerging market with cheap labor. People migrated to the US during the 19th century because of (1) all the gold discoveries made people claim the Streets were Paved with Gold, and (2) people could own land whereas in Britain they still clung to long lease where you could never “own” your home. That is how the British lost Hong Kong – a long lease 100 years.
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Ambrose Evans-Pritchard - Stocks to soar as world money catches fire

The US, Japan, Britain, as well as the Swiss, Scandies, and a string of states around the world, are actively driving down their currencies or imposing caps.
They are tearing up the script, embracing the new creed of nominal GDP targeting (NGDP), a licence for yet more radical action.
The side-effects of this currency warfare -- or "beggar-thy-neighbour’ policy as it was known in the 1930s -- is an escalating leakage of monetary stimulus into the global system.
So don’t fight the Fed, and never fight the world’s central banks on multiple fronts.
Stock markets have already sensed this, up to a point, lifting Tokyo’s Nikkei by 23pc and Wall Street by 10pc since June. (more)