TFN eNews 10/22/2009: Anywhere but America!
Published via e-mail broadcast on October 22, 2009
In today’s TFN eNews:
* Where to look for opportunity
* Big announcement next Tuesday!
* International relations
Dear TFN eNews reader,
As predicted in yesterday’s TFN eNews, it turned out to be a good day for Xerox (NYSE:XRX) shareholders.
It was an even better day for those who took TFN option guru Andrew Snyder’s advice and bought the company’s November call contracts:
Thanks to a better-than-expected third-quarter earnings report, shares of the company jumped by nearly 5% today. Even better the options surged by over 35% on the news.
“We are not selling yet,” writes Andrew. “With word that the company’s outlook is stronger than previously stated, the gains will continue to pile up. Is this our next triple-digit winner? We will find out in just a day or two!
If you think these gains are nice, wait until you see what Andrew has planned for the natural gas industry. We’ll let you know on Tuesday!
*** I admit to some reluctance picking stocks these days. It’s not the stocks, mind you — I think so far this year, our 67 double-digit gainers at TFN’s Hot Stock Confidential have proven that there’s nothing fundamentally wrong with stocks.
It’s my expectations (or lack thereof) on our economic future.
For the past half century, the American consumer powered both the economic growth and the prosperity in the world. It was a virtuous cycle. Demand drove consumption, which in turn fueled domestic job growth, income growth, spending, and foreign imports. Then leverage entered the picture: Consumer credit supercharged demand… based on the American experience that everyone who wanted to work and make money could do so according to his ability. And that almost everybody who incurred consumer debt paid it off eventually.
But last year that paradigm shifted without clutch. Long-term prosperity breeds apathy and envy. Today, the American Way has been turned on its head. Instead of enabling an individual’s opportunity to grow and achieve, government policy is now based on populist pandering to covetousness and its ugly step sister, entitlement.
Passed off as “progressive” policies, this development represents a deplorable backsliding.
As one European country after the other shifts away from socialism and embraces market-oriented economic models, the United States is now embracing the mentality of Western Europe A.D. 1973.
I lived in Europe in 1970’s. Can’t say I’d want to return there: The endemic long-term un- and underemployment. The collapse of domestic industries. Inflation. Soaring debt. The erosion of private initiative and individual responsibility. The push to make the largest constituencies possible utterly dependent on government assistance. The intrusion of government into every aspect of life.
Been there, done that.
Accordingly, I look at most American industries with a jaundiced eye these days. Can you really expect to make money in real estate, construction, or car companies if unemployment and tax increases keep eroding current and future home ownership and disposable income?
Should you commit capital to a defense company if an Administration’s commitment to backing up “diplomacy” with military might is wishy-washy at best?
How about health-related companies or banks whose revenues flows and business structures are threatened by nationalization?
Manufacturers hobbled from competing globally thanks to mandated high labor cost and over-regulation?
Luckily, even the current Administration will take some time setting back the clock on economic globalism. With any luck, that may take as long as it takes China to distribute the American wealth it accumulated in the past 15 years.
China just reported GDP growth of 9% for the current year. That’s stellar compared to the creaking standstill of the EU and U.S. economies. Even if you consider that for China, 7% annual GDP growth pretty much corresponds to 0.3% “growth” in Germany or France.
That growth was bought dearly, though. Every last bit of it is “stimulus”-driven. Foreign lending may have fueled the last expansion of American prosperity. Domestic lending — dirt-cheap credit! — is now propelling Chinese expansion.
In 2005, 60% of Chinese GNP was generated by corporations and the government. That ratio has barely budged. While the $585 billion fiscal stimulus enacted last fall has been successful in maintaining GDP growth rates, its effect on private consumption is still dubious:
National retail sales growth this past years was 15.1% (17% after adjusting for deflation!). But many experts think this growth mainly reflects government officials’ spending on banquets, cars and junkets rather than rising household living standards.
It’s quite obvious. China is now doing with its economy what Beijing, Tokyo, and Berlin did with the American economy: Creating a demand bubble by extending easy credit. The main difference: The money’s not primarily going to stoke consumer demand. But it’s pouring into sectors that have strong ties to the government.
If there’s one thing about Chinese financial management, it’s that Westerners trained to look for the bottom line are often hopelessly set adrift. Communism by and large measured economic success in tons, not dollars. Accordingly, expect Beijing to measure the performance of its forced commodities buying program not by using detailed price analysis… but quantity-based parameters.
Who’ll be profiting from the Chinese credit bubble?
Miners and resource companies. From the perspective of investors calculating in greenbacks, especially those miners who sell their output in currencies that will appreciate as the bills for Obama’s social engineering projects start coming in: Those located in Canada and Australia.
That’s why my HSC Hot Stock Pick of the Week was a Toronto-traded Canadian miner of rare earth and strategic metals. If current trends continue, I think we could generate a nifty super-charged return… up to 50% gains over the next 6 months, multiplied by the appreciation of the Canadian dollar over the greenback!
(Click here if you’re interested in this speculation: http://www.todaysfinancialnews.com/HSC/ridic/WHSCK904.html)
*** TFN’s stock guru Andrew Snyder expressed similar sentiments in his lead article on our TFN web portal today:
“Anywhere but America. That’s the philosophy of plenty of investors these days. As the dollar weakens, unemployment rises, and political uncertainty surges, more and more are looking for growth and safety overseas.
“Today’s report from debt rating agency Moody’s says Washington better cut its deficit or risk its triple-A rating. That’s not helping the situation: Until recently, that perfect rating was considered untouchable. But a lot has changed.
“Not all is bad for domestic investors. As long as a market is moving somewhere — and there’s no doubt the currency markets are moving! — there’s money to be made. That’s good news for investors and the folks that make the investments happen:
“According to press releases this morning, Fidelity is opening the door to foreign equity and currency investments by expanding its international trading capabilities. Now the company’s trading customers will have access to a dozen foreign markets, plus a shot at eight currencies, just like the boys on the Street. As Fidelity notes, 80% of the world’s best-performing stocks over the past decade were traded outside of the Wall Street…”
Read on right here: http://www.todaysfinancialnews.com/international-investing/nows-the-time-to-go-foreign-10219.html
*** Yesterday, I mentioned Winner Medical Group, Inc. (AMEX:WWIN) as a possible play on preventive swine flu paraphernalia. TFN’s customer service queen Tara Useller pointed out that all you really need for your family to avoid contamination can be yours, hand-made in the U.S. of A., for $20: http://www.etsy.com/view_listing.php?listing_id=33026936&ref=mt
And in case that doesn’t work out, here’s my private recipe for instant relief as you’re sitting home for three days: http://www.dvdempire.com/Exec/v4_item.asp?item_id=1294883
*** SPECIAL OFFER! Northeastern University’s Master of Science in Finance: fully online, 16 months, AACSB accredited. Visit: http://onlinemsf.neu.edu/finance-online
*** Quote of the Day:
“There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at solving problems than the people on the spot, who have the strongest incentive to get the solution right. Unlike bureaucrats, they bear the costs of their mistakes.”
– John Stossel, Creators.com
Recommended Reading:
Q4 Update: TFN Complete Guide to Stem Cell Stocks under $10
Today’s Top 3 Financial News Stories:
WAToday.com.au – China takes new course on growth “Chinese officials shifted yesterday from emphasizing the country’s fast economic growth to defending its composition and sustainability, as GDP figures showed the economy surged 8.9 per cent through the year to the September quarter.”
Finance.Yahoo.com — New jobless claims rise more than expected to 531K “The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, as employers remain reluctant to hire even with the economy showing signs of recovery.”
LATimes.com — Bill giving FDA new powers to oversee food supply has wide support “The legislation, sponsored by Sen. Richard J. Durbin (D-Ill.), would require the FDA to step up inspections of food facilities and to issue new rules to improve the quality of imported food and to combat contaminants in fresh produce. The measure also would give the agency authority to recall products on its own, instead of relying on industry cooperation.”
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
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