TFN eNews 11/12/2009: Markets thrive on denial! But so do we!
Published via e-mail broadcast on November 12, 2009
In today’s TFN eNews:
* Markets have decoupled from reason
* 20% gains on this bio-tech
* Penny stock fortunes?
Dear TFN eNews reader,
What do you get if you put liberal Democrats and free-market Republicans into an office and close the glass doors?
Raucous disagreement on everything!
That’s what life at TFN is like: A constant collision of unencumbered Hope and Change with the reality of “Who’ll pay for it today… and the day after tomorrow.” Of redistribution and entitlement vs. creation and ambition. Of expansion of the status quo vs. progress.
It’s surprising we even agree on the weather!
I was pondering this conundrum as the TFN team was trying to come up with a blueprint of what to expect from 2010.
On the one hand, we have unflagging belief in the benefits of dirigist stimulus spending. On the other, the bleak realization that creating non-productive positions in government and academia has never done anything to kick-start a consumption-based economy… no matter how often you declare a 12,000-count “improvement” on half a million lost jobs per month an economic breakthrough.
But if the history of the past years has taught us anything, it’s that reason and prudence are no match for hope and exuberance. Stock markets in particular thrive on denial, I keep reminding myself:
How else can you explain the equity market’s rise in a week when the U.S. House of Representatives passes one of the most wealth-eroding legislation packages in history?
What does that mean for the year ahead?
I think one thing is clear: To continue making money in the market, you’ll have to join those with an alternate reality… and follow the speculative money that again is flooding the markets. In fact, I think the potential to make gains in U.S. stocks over the next two months is as high as it ever was.
Especially if you used the October slump to get into position!
*** TFN’s Laura Cadden fired the first shot in the end-of-year gains parade. She recommended members of TFN’s premium service Hot Stock Confidential sell Cerus (NASDAQ:CERS) for 20% gains.
CERS’ main product, the INTERCEPT system, is designed to destroy pathogens in all donated blood components. Shares were climbing today, mostly on speculation on rumors of a potential buyout by a European company. “Such rumors often don’t pan out,” Laura writes. “But over 20% gains banked are nothing to sneeze at.”
It’s not the first time that Laura has taken CERS to the cleaners. Back in April, she banked 20.4% gains on this stock and again cashed out for 53.7% gains in July.
For HSC Members, this is double-digit gainer #68 so far this year.
But TFN readers had a chance to make the same gains in an even shorter period. On Sep. 1, we featured CERS as a free Editor’s Pic on our TFN news portal: http://www.todaysfinancialnews.com/editors-pic/gift-of-life-technology-could-spell-big-bucks-for-cerus-corp-cers-9901.html.
Today that freebie paid off for those of you who took this advice.
My recommendation: Take the gains and re-invest them in a subscription to Hot Stock Confidential. Because our open positions not only are still very cheap, thanks to October’s correction. They’re back on the move! http://www.todaysfinancialnews.com/HSC/ridic/WHSCK904.html
*** But HSC Members weren’t alone counting their cash. TFN’s options service, TFN Strategic Trader, also recorded some sensational gains:
“We did it,” wrote options maven Andrew Snyder. “400% gains! Since mid-October, shares of one of the most popular natural gas funds have plunged by 25%. That means our strategically chosen options surged by 400% since my original recommendation.
“But the gains don’t stop there. As I write, all four of my recent natural gas plays are up by double digit proportions. I may have called the disastrous decline in gas prices, but even I didn’t think it would happen this fast.”
Read up on his original report right here: http://www.todaysfinancialnews.com/TST/GAS/WTSTKA04.html
*** If raw speculation — not fundamentals — will be the fuel for next year’s markets, what asset classes are particularly attractive?
I venture a modest guess: Probably the most speculative and volatile sectors you can find.
From all the gainers of the past year, one class in particular stands out: Penny shares.
Andrew Snyder wrote today: “Every day, right around lunchtime, I log onto my screener and search out the day’s biggest movers.
“Without fail, the majority of the top ten (usually at least eight or nine) winners are from the small- or micro-cap sector. Stocks with share prices of fifty cents, five cents or ninety-five cents — that is, true ‘penny stocks’ — are up by 15%, 60% or even doubling in value, while most of their bigger, ’stronger’ brethren are moving in lockstep with the overall markets.
“While penny stocks are not for everybody (thankfully), I’m willing to bet they deserve a role in your portfolio. Here is why:
“For the nation’s up-and-coming (or down-and-out) companies, it doesn’t matter that unemployment is at 10.2%. It doesn’t matter if the dollar is weak against the euro and the yuan. And it most certainly doesn’t matter what Obama, Pelosi and the gang are doing in Washington. The average penny stock has nothing to do with macroeconomic themes and everything to do with specific fundamentals and a breakthrough product or technology…”
Just look at some of today’s best performers: http://www.todaysfinancialnews.com/investment-strategies/best-investment-make-room-for-penny-stocks-10321.html
Or look at one of our “12 Invisible Stocks” that we introduced to members of our penny share trading service, Penny Stock Confidential just two days ago.
This stock has a history of see-saw trading between $0.25 and $0.40, with recent spikes to $0.45. Like CERS and a bunch of other “money making machines”, this has the potential of being a perennial gains maker if bought and sold within its recent ups and downs.
This was one such opportunity. On Tuesday, we were able to nail our first round of gains at the upper end of the recommended buying range, $0.30. We recorded this as our entry price, right alongside our first PSC Members. (We timed it — and the window was open for two straight days afterwards!)
Today the stock traded at $0.43!
Notice something?
Right! Penny shares are as volatile as Archie Bunker on Red Bull! That’s why it’s important to observe the recommended entry price. When I wrote “Catch it between $0.25-0.30,” I really meant it.
We’re currently up 43% on this stock, and about 2 cents away from its recent highs. I decided to take the gains and run.
Chances are, the stock will be back below $0.30 in a few days… at which point we might just issue another buy recommendation again.
For now, those members who took our advice were able to book 43% gains in two days!
But remember: This ultra short-term in- and out-trading only makes sense if you have an ultra short-term investment horizon. This particular stock could do well in the medium- to long-term as well. Follow your gut and experience on this! And of course, keep a close eye on your transaction costs of more active trading makes repeat buys and sells not economical.
*** 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:
“According to a new economic forecast, there will lo longer be any differences between the economies of East and West Germany in only 12 years. Thanks to decades-long ’solidarity payments,’ economic crisis, and bankruptcies, the Western states will have declined to the level of the former East bloc, say experts.”—Titanic
Recommended Reading:
Gold miners: Play the little guys
Natural Gas Prices: “Stealth Buyer” tips his hand
Today’s Top 3 Financial News Stories:
AP.com – Gold hits record high above $1,123 “The price of gold surged to an all-time high point above 1,123 dollars per ounce here on Thursday, as trade was driven by buoyant stock markets and the weak US currency, analysts said.”
MoneyNews.com — Get Ready for a 60 Percent Top Tax Rate “Liberal economists today do not believe monetary incentives drive risk-taking and hard work, therefore, appropriating a larger portion of national income for the state will not affect the growth rate. Not that these economists have a good track record of prognostication.”
Bloomberg.com — Home-Purchase Index in U.S. Plunges to Lowest Level Since 2000 “Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.”
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
Next Article: Blowing off steam in China
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