Month: July 2011

Dan Veru, Chief Investment Officer of Palisade Capital Management, discusses a stock that could benefit from a “super-cycle” of merger & acquisition activity. (LAZ).

For the first time since December of 2008, the US trade balance has moved beyond the psychological barrier of -$50B. The news has so far only added to pessimistic concerns that the August 2 deadline for an expansion of the debt limit will not be met in time; a sentiment that adds strength to investment shifts to safety and lower yielding assets.

The first time this level of trade imbalance was seen in the US was in 2004 as the nation began to depend more heavily on imports as it undertook two significant military campaigns in the Middle East. The over-exposure to foreign markets, some say, weakened the US financial system to hasten the collapse of the housing market, and Wall Street along with it.

The ability of Congress and President Barack Obama to reach a compromise on taxes and budgetary adjustments appears to have reached a nadir as both fight to define their boundaries. As the trade deficit widens, several analysts have begun to wonder whether this is a sign of worse to come as the US gets muddied in yet more economic stagnation alongside the rest of the world.

Reports from the People’s Bank of China this morning revealed optimistic signs of consumer demand and economic growth in the Asian giant. New loans in China moved beyond the expected 623B to a level of 634B in June.

Additionally, the M2 money supply in China, which measures the percent change in local currency in circulation, and held in domestic banks, in an annualized format. The M2 report showed China’s level of domestic currency in supply to be 15.9% higher than its June 2010 level, suggesting an expansion of local and foreign demand for Chinese goods and services.

Inflationary data out of the British Office of National Statistics this morning put a negative slant on what some had assumed was a beacon of light in Western Europe. British housing has seen positive gains alongside steady increases to manufacturing production. Today’s inflationary data, however, appears to have turned the tide, dragging Britain into the quagmire of risk averse assets alongside its euro zone neighbors.

The UK consumer price index (CPI) revealed sluggish growth in one of the nation’s broadest measures of inflation. Expectations were for growth of 4.5%, but the actual 4.2% had some traders hesitant. The addition of sluggish RPI data and a negative HPI reading from Britain’s Department for Communities and Local Government (DCLG) added to the bearish sentiment, as did significant growth in the island economy’s trade deficit. Sentiment appears to have shifted bearish for the British pound (GBP) and may not turn back for the remainder of the week as a result.

Wells Fargo’s Evren Kopelman, top ranked retail analyst according to the Wall Street Journal, says Abercrombie & Fitch (ANF) is one of her top picks. .

July 12 (Bloomberg) — Andre de Silva, the head of Asia-Pacific rates research at HSBC Holdings Plc in Hong Kong, talks about regional economies and central banks’ monetary policies. De Silva also discusses Europe’s sovereign debt crisis and the U.S. debt ceiling. He speaks with Rishaad Salamat on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

An unemployment rate of 9.2% surprised no one. We’ve seen it coming for centuries.

I have saved millions of jobs over the past two years. Of the total population employed, nearly half would not have work had I not continued to spend, save and invest.

It sounds nutty, but is my boast any more fanciful than our government saying it saved millions of jobs over the past three years because of economic stimulus?

Not only has it not saved any jobs, but no government, by its nature, can create any new net employment.

At face value, this statement may seem preposterous. However, it’s not what you see, but what you don’t see, that makes the difference. It’s this vital aspect of economics that makes it so easy for government to fool most of the people most of the time.

Begin by realizing that nowhere did we say the government has not hired anyone. It has and will continue to until the presses run dry. Unfortunately, for every job the government creates, it must extract the funds from some productive citizen like you and me.

This is the government fable relied upon by our dishonest politicians to continue down the economic stimulus path so disastrously undertaken over the past 36 months.

There is nothing original in spreading this myth of how government works. It’s not a new story. It is a common theme throughout history.

The government tries to save the economy. It kicks the can down the road. Eventually, not only does it not solve anything, but it almost always creates a situation worse than before.

As much as I’d like to claim originality in my writings, I borrow heavily from a French economist of the mid-19th century (1849), Frederic Bastiat. As an economist, he ranks up there with von Mises, Hayek and Rothbard.

As a statesman (as opposed to politician), he’s in the Ron Paul category, driven entirely by the pursuit of truth and liberty.

Here’s how Bastiat describes poor economists of his day.

“Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

Would this not be the perfect description of every government-employed economist of our day? Or, better yet, is this not a summary of every stimulus package we’ve seen to date?

This brilliant Frenchman’s writings read as if he worked today for Taipan. Here’s how he responded to government’s attempt to create jobs through public works projects:

Nothing is more natural than that a nation, after having assured itself that an enterprise will benefit the community, should have it executed by means of a general assessment. But I lose patience, I confess, when I hear this economic blunder advanced in support of such a project: “Besides, it will be a means of creating labor for the workmen.” [Emphasis added]

The State opens a road, builds a palace, straightens a street, cuts a canal, and so gives work to certain workmen — this is what is seen: but it deprives certain other workmen of work — and this is what is not seen…

Then you will understand that a public enterprise is a coin with two sides. Upon one is engraved a laborer at work, with this device, that which is seen; on the other is a laborer out of work, with the device, that which is not seen.”

This is as crucial of a point in his time as ours: For every job government creates, they delete an equivalent one from the private sector.

Take a moment and ask yourself is there a single efficient undertaking a government can do more efficiently than the private sector.

I dare say we both know the answer to this is a resounding “NO.”

Because government cannot create, it is only logical to concede that for every dollar spent by the government, one must be extracted from productive citizens.

Coupling this with the fact that governments are less efficient than the private sector, it must be concluded that not only are no jobs created, but with each government created position, there will not only be an offsetting loss, but a loss greater than the job stolen from the private sector.

There are volumes of research demonstrating exactly this. Unfortunately, even when presented by the government’s own wizards, they must be ignored, lest they lose a proven gimmick to dupe the citizenry and maintain their power.

As hard as it may be to hear, Washington knowingly destroys jobs with every spending program it initiates.

Written  by Joseph McBrennan for Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to Transoceaninal content or www.taipanpublishinggroup.com.

The past few days have shown the first cracks in the market’s newly formed foundation. There are more to come.

Two weeks ago everyone got über-confident and started buying stocks like crazy.

The S&P 500 gained 7% in eight trading days… an amazing feat considering the current state of things. This brought the major averages back above their 50-day moving averages, a bullish sign for shorter-term investors.

The broad market has remained amazingly resilient in the face of poor economic data here in the U.S. as well as geo-political issues and economic catastrophes (like Greece) around the world.

Nonfarm payroll data came in at its worst level in almost two years. And consumer confidence here in the States has been moving steadily lower since February.

And yet, investors still have an appetite for risk. The pros call this the “risk on” trade. Investors are buying stocks ignoring the economic data.

When the risk is on, the stakes are high and companies must deliver results. Earnings season kicked off yesterday with Alcoa (AA:NYSE). If a company doesn’t deliver more than is expected or misses a forecast altogether, crashes (small and large) can occur, especially in skittish markets like the one we are in now. In stocks with elevated P/E ratios like Netflix (NFLX:NASDAQ) and LinkedIn (LNKD:NYSE), this is even more likely to happen.

But would you believe that Apple (AAPL:NASDAQ) could be on the chopping block, too?

Why I Am Scared of Apple

Let me first say that I am a huge fan of Apple. It set the bar for computers and electronics with the Lisa (pre-Macintosh) back in the ’80s. After falling out of favor in the ’90s, the company has reclaimed its role as demigod of the tech sector.

Even with this status, Apple could be dangerous, at least over the next week or two. The Apple iPhone is its top product and accounts for 54% of its share price (forward estimate). But the Apple iPhone is under attack. Dozens of smartphone makers like Motorola, Samsung, HTC, LG, Sony and others are all running Google’s hot Android operating system.

Even though Apple overtook Research in Motion (RIMM:NASDAQ) in market share, Apple still only controls 26% of the smartphone market compared to Android, the leader with 38%.

Image Source: TREFIS

Apple is responding by letting other carriers offer data for the Apple iPad. I have even heard serious rumors that the Apple iPad and iPhone may be coming to Sprint, the last of the Mohicans when it comes to unlimited data plans. (These rumors are also flying around on Sprint’s internal chats…)

As you may or may not know, Apple also constructed a massive data center to house an armada of servers for its iCloud service.

Apple is trying to increase sales of its most valuable asset (iPhone) and grow other business segments because it needs a stellar earnings report. But shrinking margins, increased competition and aging product lines could knock Apple off its pedestal.

The second problem is expectations for theApple iPhone 5.

(Don’t forget to sign up for Smart Investing Daily and let me and fellow editor Sara Nunnally simplify the market for you with our easy-to-understand articles.)

Apple iPhone 5

Apple’s minions can’t wait to get their hands on the new Apple iPhone 5. I am curious what features the iPhone 5 will have. One feature many are talking about is 4G capability, which could add about $39 in manufacturing costs per phone. That won’t be good for margins.

I’m sure it will be cool, but with all the iPhone owners already out there and a slew of very sleek, fast and inexpensive smartphones from the likes of HTC and others, will the iPhone 5 get the same reception?

I don’t think so…

Let’s review some iPhone “facts”:

1. The glass on the iPhone 4 was the strongest ever and resists breaking better than any other phone. I even heard people call it “helicopter glass.”

   1. My iPhone 4 glass broke twice and cracked screens seem to be the norm among users unless you have the “otter box” cover, which costs about $40 and adds about an inch all around in size.

   2. I wouldn’t want to be in a helicopter made of iPhone 4 glass.

2. The “retina” display is the best display you can get. The human eye can’t sense any more detail beyond it.

   1. How do you improve on that?

3. The iPhone is infamous for dropped calls — so they “fixed” that and engineered the most amazing antenna ever made that is incorporated into the housing.

   1. Whoops, the housing antenna actually causes calls to be dropped when you touch a certain area.

4. It’s the most magical and amazing device ever.

   1. My phone (HTC EVO 3D) does everything the iPhone does, but faster and takes 3-D pictures! (Top that, Steve Jobs!)

Apple is its own worst enemy. Like an Olympic gold medalist, every subtle move and tactic is scrutinized. Even the slightest misstep is exaggerated by judges. Apple has changed the way we interact as humans and has created some of the most influential products of the past century… But no human or stock is invincible!

For now, investors have to be cautious in the near term. The bar has been set high. While I don’t think Apple will fault completely, it might just tap that bar going over the top on July 19, when it reports earnings.

Trader’s Tip

Take a look at this chart…

View Larger Chart

Apple goes through a short sell-off after earnings, usually lasting a couple days to a week. Most times, the stock is bought right up until the earnings report. Apple has beat analysts’ estimates every time; however, the stock has typically moved lower right after earnings.

Look at the arrows in the chart. They mark when earnings reports were released. History tends to repeat itself in the market.

My long-term view of Apple is still bullish, but if we take what we have learned from the past and perhaps some practical data from the present, we can make the most of our investment decisions.

Sell Apple before it reports earnings… You may be able buy it back a couple days later at a much better price.

Editor’s Note: Did you know Jared was once a market maker for Apple’s options? When it comes to this tech bellwether, he knows his stuff. His track record at WaveStrength Options Weekly proves it… with the average trade worth gains of 21%, often in a week or less.

Jared’s technique is unusual. He’s conservative. He’s safe. Yet his readers are treated to double- and triple-digit winners. To see how he does it and get seven months of WaveStrength Options Weekly essentially free, follow the link.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

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By Early To Rise

Creativity is a trait we all admire. Original thoughts and ideas are valued highly in the marketplace. But most people believe that creativity is an inborn trait and is beyond their reach. They’re right about the former, but wrong about the latter.

It goes without saying that some people are more naturally creative than others, but the same can be said of any human trait. A person with a high IQ might breeze through school with a “B” average, but a person with an average IQ can become an “A” student if he’s willing to invest enough time and effort in his studies.

The same is true of athletes. There are great athletes in every major sport who never rise above mediocrity, while guys like Larry Bird (slow and no jumping ability) and Emmett Smith (small and not particularly fast) became legends.

And so it is with creativity. What it gets down to is paying the price. If you want to become more creative, you have to be willing to put forth the effort necessary to do those things that lead to increased creativity.

One of the most encouraging facts about the brain that researchers have discovered is that intelligence is not a prerequisite to creativity. IQ tests focus on convergent thinking, which views a problem as having only one solution. There is no creativity involved in this process. To be creative, you have to think divergently, which entails considering many solutions. And that, in turn, requires you to disregard conventional wisdom and consider far-ranging possibilities.

Studies have demonstrated that the left hemisphere of the brain is responsible for convergent thinking, while the right hemisphere is the home of divergent thinking. Thus, a person with severe left-brain damage can still be creative.

Anyone who has ever watched young children at play knows that they tend to be very creative. However, their creativity soon becomes suppressed by a school system that values conformity and specific answers to specific questions.

Further conformity is demanded, or at least encouraged, on job applications and in the workplace. The cerebral risk-taker who dares to go against conventional wisdom does so at his own peril. If his unconventional idea is adopted and proves to be a winner, he may very well be on his way to the presidency of the company. But if he’s wrong, he may be looking for a new job.

Knowledge is another factor that is critical to creative thinking, in at least two ways. First, because the left brain is the cerebral filing cabinet for specific knowledge, it keeps the creative right brain from running wild. We’ve all known people who can come up with an idea a minute, but most of their ideas either fail or never get off the ground. Usually, it’s a result of their lacking enough specific knowledge in their left brain to silence their creative right brain and tell it to move on to the next idea.

Second, and even more important, if your left brain is overflowing with knowledge, your right brain has access to the material it needs to be creative. Good ideas and concepts are only as good as the knowledge upon which they are based.

What comes into play here is the Schlock Blocker, which states: For every hour spent watching schlock TV, the left brain is deprived of an hour’s worth of valuable knowledge that could be gained by reading a serious book.

But it gets even trickier. There is convincing evidence that too much specialized knowledge can actually inhibit creativity. Viktor Frankl alluded to this problem when he described an expert as a person who no longer sees the forest of truth for the trees of facts.

When it comes to the arts, in particular, too much knowledge can be detrimental to creativity. Researchers have discovered that people who experience severe left-brain damage become less inhibited and more creative in such skills as drawing and painting.

This is because the left brain organizes our social skills and tends to repress “eccentricity” and nonconformity. There is a strong suspicion that Vincent van Gogh’s wackiness was a result of left-hemisphere brain damage, which in turn gave him the freedom to be totally uninhibited in his right-brain artwork.

Today, Hollywood is overflowing with artistically creative people who talk as though they’ve had left-brain lobotomies. If one gives them the benefit of the doubt and assumes they are well-meaning, one is also forced to conclude that their clueless babbling on such topics as politics, world peace, and the environment stems from a lack of knowledge. But this lack of knowledge does not get in the way of their artistic creativity.

Finally, it is much easier to be creative when you’re not under pressure. That’s why it’s a good idea to get away from your office periodically and relax. Some of my best ideas have come to me while cruising at 35,000 feet – no telephone, no e-mails, no projects piling up all around me. Vacations, ball games, attending conferences, and just going for long walks all serve the same purpose.

Above all, develop the habit of grabbing hold of random, creative thoughts and quickly getting them down on paper. Nothing frustrates me more than realizing that a great idea I came up with yesterday is gone because I was so certain I’d remember it that I didn’t take the time to write it down.

To discourage this lazy habit, I keep pads and pens everywhere – throughout the house, in my car, and next to my bed. Be rigidly self-disciplined when it comes to writing down your ideas, especially those that are the most extreme or that you’re positive you’ll remember.

It’s also a good idea to always be ready to put your DVR into action, because you never know when some great tidbit is going to make its way in between the standard schlock programming and appear on your television screen – provided you watch the right channels, of course.

Lastly, and most important, I believe that creativity flows from action. Action stimulates your brain cells and gets your creative juices flowing. What happens when you take action is that the atoms in your brain increase the speed of their vibrations, which causes your “mental paradigm” to expand. And when that occurs, you begin to see new ideas, new concepts, and new possibilities that you may not have previously considered.

That’s why you can’t afford to wait until you become motivated to take action. Instead, you have to employ your free will and force yourself to take action. And when you do, motivation is almost sure to follow. In other words, don’t make the mistake of waiting for something to happen; make it happen!

Remember, to be successful in business, the three most important areas you have to focus on are strategizing, innovating, and marketing. And since all three require creative thinking, it’s imperative to your success that you constantly hone this remarkable human trait.

[Ed. Note: If you’re ready for a treasure chest of proven ideas, strategies, and techniques that are guaranteed to dramatically improve your dealmaking skills – and, in the process, increase your income many times over – you won’t want to miss Robert Ringer’s bestselling audio series, A Dealmaker’s Dream.

Robert Ringer is a New York Times #1 bestselling author and host of the highly acclaimed Liberty Education Interview Series, which features interviews with top political, economic, and social leaders. His recently released work, Restoring the American Dream: The Defining Voice in the Movement for Liberty, is a clarion call to liberty-loving citizens to take back the country. Ringer has appeared on numerous national talk shows and has been the subject of feature articles in such major publications as Time, People, The Wall Street Journal, Fortune, Barron’s, and The New York Times. To sign up for his e-letter, A Voice of Sanity in an Insane World, visit www.robertringer.com.]

This article appears courtesy of Early To Rise, a free newsletter dedicated to creating wealth and success through inspiration and practical, proven advice. For a complimentary subscription, visit http://www.earlytorise.com.