Bush-Era Tax Cuts Extended

Announcements:

• My interview will Hedge Fund Manager, Tim Ayles regarding market outlook and how to trade 2011 will be debuted on December 17, 2010
• December Book of the Month is Aftershock by Robert Reich.  Book may be purchased through the Amazon link to the left of this writing

President Obama announced today that the Bush Tax Cuts will be extended for 2 years.  Markets surged at the open but ended lower with Dow down 3 points, Nasdaq up 4 points and S&P up just under a point.

Whether you agree with the tax extensions or not is your own personal opinion.  As far as the financial facts are concerned, the tax cut extensions will keep the low capital gain tax rate and low dividend tax rate.  So, as far as capital gains are concerned there are no new taxes but the estimated income loss for the government is $600B-$800B. Analysts polled said that the tax extensions will help make the recovery more speedy and easier to gain ground.

European Crisis Update
Hungary has, as of Monday, been added to the list of European countries that are in trouble.  Moody's double downgraded Hungary's debt ratings saying that the leadership is taking no active steps to reducing its blooming debt.  The EU faces yet another issue that could prove to be have a similar solution that transpired with Ireland and Greece.  The Euro lost gains that were posted last week.

Trades:  Stick with the trades advised in "Playing the European Crisis" and "Boosting Returns Using Dividends".

Rally: Day 2

Markets rallied for the second day in a row today with the Dow up 106 points, NASDAQ and S&P both up over 1%.  The continued rally was a surprising number in November same store retail numbers.  This showed us that the consumer was out and shopping more than expected, as I previously guessed in earlier posts such as "Playing the Consumer This Holiday Season".

The day began with some disappointing news on increase in unemployment benefit applications which again shows the reality of the jobs situation, as I described in yesterday's post.

However, great news on the housing front.  Pending home sales role 10.4% last month and real estate corp, Toll Brothers (TOL) returned to profitability for the first time since early 2007.

This is huge news for the housing sector which has just been a downer debby of a sector for a while now. Finally, we get some good news and Toll Bros, who was hit pretty hard in the beginning of the housing fall, finally returned to profitability.

European Crisis Update:
We like to keep readers up to date on the latest events that are occurring overseas, as they will have an impact on the US markets. 

Today's update is S&P's announcement that they may be cutting Greece's debt rating sometime over the next three months.  Greece's current rating is a "BB+" which is really not all that good.  S&P says they have seen little progress with Greece's handling of their debt since their mini crisis back in March and April of this year.  This is right within my estimates that I outlined in yesterday's post in terms of what could happen to Europe.  I am reiterating to buy put options on: iShares MSCI Ireland Index (EIRL), iShares MSCI Spain Index (EWP), iShares MSCI Italy Index (EWI) which were recommended last Saturday.

As far as the American economy is concerned stick with the recommendations from the past few weeks that I have been giving you, stick with strong retail stocks: Best Buy (BBY), Nordstrom (JWN), WalMart (WMT), and Amazon (AMZN).  Best Buy (BBY) reports earnings on December 14 so watch for those earnings to be quite good.


Disclosure: Long BBY

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

December Starts With A Bang

Major rally started December as new economic news proved that the economic recovery was gaining strength.  The Dow Jones closed up 2.3%, Nasdaq up 2% and S&P up 1.6%.

The private sector added 93,000 jobs in November after an expectation of 58,000 jobs, polled by economists.  Also there was an upward revised October's job creation from 43,000 to 82,000.  The Chinese also posted a positive manufacturing number which gave signs of stability in China.

It didn't stop there, the Fed released numbers from the Beige Book which showed improving economic climate around the country, this included a very positive consumer spending numbers.  Later, Goldman Sachs increased the GDP outlook for the US in 2011 from 2% to 2.7%.

Ford Motor Corp said they saw a 24% raise in car sales for November, GM saw 12% increase.

A major thought on the minds of traders today was whether or not the S&P would close above the 1200 mark, which in theory, gives a great chance of a "Santa Claus Rally" to close out the year.  The S&P closed up 1206 today passing that mark.  After the huge news today, I think that a Santa Claus rally could be possible with only one obstacle on the horizon...Europe.  Europe has been a major issue for traders lately and it isn't going to go away until decisions are made and steps are taken to resolve, or at least temporally capped.

Jobs Reality (Downer Debby alert!!): Yes, jobs are being created and less people are filing for unemployment benefits.  That is great news but there are under-the-surface reasons behind those facts.  Employers tend to hire more staff around the holidays to cope with demand of the season.  Most of these jobs that are being created now will be lost in January.  I guarantee January's job report is not going to be showing that employers added more jobs because of the fact that we are still in a downturn and we are not in that point of the recovery yet where sustainable job growth is a reality.  The huge optimism behind jobs right now is great but remember that unemployment is still at 9.6%.

Look, I'm not trying to ruin the party and kill the fun but it is better to be a smart trader than a trader who doesn't step back and look at the full picture because those traders always get burned in the end.  Its about positioning yourself to outperform and make money rather than falling for the false hope that is jobs. 

For example, 93,000 jobs were created in private sector, sweet.  What you may not know is that today, State Street Corp announced that it will be cutting 5% of its workforce to cut costs.  This is just one more example that yes, jobs are getting temporally better for the holidays but the underlying facts are that a recovery is not coming soon.

November: Review and Moving Forward

Stocks closed down yet again today as the continuing European crisis strikes fear in the heart of investors and a delayed vote on the possible extension of the Bush Era Tax Cuts.  Dow was down as much as 110 points today but closed ended the session down 46.  Nasdaq down 27 and S&P down 7. 

Stocks closed out November in a loss, the first monthly loss since August.  November saw big events that had mostly negative twists to them; QE2 and Ireland bailout (second Euro nation to receive a bailout this year).  QE2 has received many negative views and opinions.  Most of which are essentially worries of a "dollar crash" or very high inflation. 

EUROPEAN CRISIS UPDATE:

As for Ireland, many remain skeptical on Ireland's plan to get its economy stable again.  Another worry is that two European nations have received bailouts this year and there may be more to follow.

Standard and Poor are reviewing Portugal's financial documents and hinting at a downgrade.  Portugal seems to be heading closer and closer into the dark everyday with its huge debt position and the bond market issues. 

As for Spain, leaders have vowed to stabilize the economy and reduce the debt.  "Talk is cheap" is the main response from traders and other Euro leaders.  Spain needs to start acting now on its solution to keep down fears of default and a possible bailout. 

Prediction:  I predict that Portugal will end up being downgraded by S&P and will eventually need a bailout from the EU, marking the 3rd bailout.  I believe Spain will need some sort of EU assistance to help rebalance the debt but I don't believe they will need a bailout because they do seem to be aware of the situation and its severity.  Greece and Ireland will need more EU assistance, especially Greece.

In addition for the trades that were suggested my article "Playing the European Crisis", I would like to add gold.  Gold surged up over $21 today, but eventually closed lower, on Euro debt woes.  I believe gold is a great addition to the list of trades that were suggested in earlier article.  Possible ETFs are the SPDR Gold Trust (GLD) and iShares Gold Trust (IAU). 

Look for the December Stock of the Month, coming soon!

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Disclosure: no positions

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Playing the European Crisis

As I wrote about in yesterday's post, Europe is in trouble.  Ireland, Spain, Portugal, Greece and possibly Italy are at the forefront of the financial crisis in Europe.  Overwhelming debts combined with already weak economies are creating serious issues.  The EU is now contemplating whether to make the bailout fund larger to suit the current position that Europe is facing.  However, Germany, largest contributor to the bailout fund, is hesitant to make the bailout fund larger because Germany is risking a large sum of capital in countries that are on the brink of defaulting. 

 I do believe that at the end of the day, Germany and the rest of the EU will have to compromise to allow a bigger rescue fund.  If they decide not to, the consequences could be devastating to markets around the world. 

All the while these events are happening, the Euro is being hit hard against the dollar.  Similar events occurred earlier this year when Greece was the main problem. 

Now it seems those days have returned and that sets up a few good trades as far as currency goes.  I recommend Powershares Bullish Dollar Index (UUP), and Proshares Ultrashort Euro (EUO).  These trades made great returns during the first European incidents at the beginning of the year, and they are sure to make good returns the second time around until Europe can stabilize the ailing economies.

There are other options at your disposal if you don't want exposure to currency.  We can use put options or short the individual countries that are having a hard time cutting down debt and stabilizing their economies.  A few trades that would be ideal are: iShares MSCI Ireland Index (EIRL), iShares MSCI Spain Index (EWP), iShares MSCI Italy Index (EWI).

Another route you can go (if you want a higher risk, higher return situation) is shorting Europe as a whole or shorting financials, which are the hardest hit sector in Europe.  If you want that higher risk a few plays that would suit that screen are: Proshares Ultrashort MSCI Europe Index (EPV), MSCI Europe Financials Sector Index (EUFN).  Be sure that if you play one of these trades that for EPV is already a short fund so you would simply just buy the ETF.  However with EUFN you would need to short it or buy put options.

No matter what way you plan to play the European crisis, I urge you to do your own research before you invest money, to understand if the risk is suitable for your financial situation.

***A recommended ebook read, Short Swing Trading, explains in detail how to go about using swing trading to benefit from companies that are turning lower. A proven technique that can produce very nice returns if you know how to find the signs that a company is turning.  You can bet that this ebook will provide you with those tools.  A great read that will definitely help you with successful swing trading.  Please click the link below entitled "Click Here". 
Click Here!

Disclosure: no positions

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Rough Start to Black Friday and Update on European Debt Crisis

Before we begin, a few announcements:

• I hope every had a very nice, safe Thanksgiving.
• A new feature has been added to Invest Chief.  At the bottom of each post there are options to: email, blog, Twitter, Facebook, and Google buzz to share with your friends posts from Invest Chief. 

Markets opened lower today on European debt worries.  The Dow is down 83.36 or .75%, Nasdaq down 7 or .3% and the S&P 500 is down 8.05 or .67%. 

The main focus today should be retail, its Black Friday.  Earlier this week a surprising consumer report came out that showed us that consumers are starting to spend their income again.  A surprising lower number of people are applying for unemployment benefits went along with the consumer report earlier this week.  Retailers are also cutting prices a record rates to make it even more affordable for consumers to splurge on holiday gifts.  This could point towards a good holiday retail numbers.  Now to be clear, we are in no way out of the woods.  Yes, the consumer is showing signs of recover, as is employment, very slightly.  However, keep in mind we still have an unemployment number around 10%.  That being said, the economy is, no doubt, much stronger than is has been in the last few years.  Please refer back to my "Playing The Cautious Consumer This Holiday Season" article from Monday to see how to play retail this holiday season.

Back to the European debt crisis.  Ireland was recently bailed out by the EU and they have issued a 4 year plan to get their economy back on target and stabilized.  However, many people are skeptical that Ireland will be able to hit that target because of its insistence not to raise the corporate tax rate, which the EU has been pressing Ireland to raise.

 The problems don't stop there.  I was reading the Wall Street Journal on Wednesday and an article entitled "Fears of Domino Effect Pervade Europe" caught my eye.  Essentially, the article says that because of Ireland's bailout and unstable economy, other EU nations such as Spain and Portugal, and Greece.  Spain's economy is on the brink, as is Portugal.  Greece's debt securities are at risk to default.  Lots of unrest is occurring in Europe right now which could prove to have worse outcomes than earlier this year when these problems were last in the spotlight.  A safe trade to be in right now is Powershares Bullish Dollar Index (UUP).  The Euro is not safe right now due to all the uncertainty in Europe.  The Pound fell against the Dollar based on risk adversion.  Lastly, the Dollar rallies against the Yen based on a higher inflation number in October.  We are in an uncertain time right now with Europe's economic woes, potential second Korean war, TSA full body scans at airports.  A safe place to be is UUP.


***Please take the time to look at Getting Started in Currency Trading by Michael D. Archer, which can be purchased via the link to the left.  I have read it myself and it is the best book I have read about currency trading (FOREX). 

Disclosure: No positions

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Playing The Cautious Consumer This Holiday Season

Tomorrow's GDP report will be key to give us an idea to whether we could be expecting a good or not so good Black Friday.  Economists are expecting the GDP to be reported at 2.4%. 

Regardless, there are a few plays that will be winners this holiday season for consumers that are spending less.  I do expect these companies to outperform in the retail sector this holiday season.  Here are your possible plays this holiday season:

• Best Buy (BBY): Best Buy is a top electronics retail play that does expect a huge holiday season.  The company was upgraded today by Barclays, who share the same opinion, that Best Buy will outperform this holiday season.  The rose their target to $51 and remained their outlook at overweight.  Best Buy was up 3% today on the news.
• Nordstrom (JWN): Nordstrom is a higher end retail play that is currently pretty cheap with a P/E of 18, ROE of 33% and a dividend yield of 1.9%.  Nordstrom has done a pretty good job of staying ahead of the pack in the higher end retail.  Look for JWN to capitalize on its sales momentum.
• Wal-Mart (WMT):  WMT is a great low cost retailer especially in this economic climate. Wal-Mart has great deals and savings that should be very attractive for the frugal consumer.  Wal-Mart is the largest offline retailer and they should easily post great numbers this holiday season.  The stock is very cheap at the moment with a P/E of 13, ROE of 22%, P/S of .47.  I like WMT.
• Amazon (AMZN): With a growing number of consumers looking for better deals online and skipping the crowds at the malls, Amazon, the largest online retailer, will be an obvious choice for consumers.  Amazon and Wal-Mart are in a huge price war this holiday season but I don't see it being a big deal because there will not be a big enough price difference to determine a clear "winner".  They will both be winners in their right.  Amazon will be the winner of online retail.

These companies are the top of the retail sector and will outperform this holiday season.  These companies manufacture success and know their market.  Marketing and deals have been very successful in the past and should have continued success this season.  Consumers are looking for the best deal this holiday season and I think these companies will give them those deals they are looking for.  Stick will Best Buy (BBY), Nordstrom (JWN), Wal-Mart (WMT), and Amazon (AMZN).

Disclosure: Long BBY

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

A Great Stock for the Second Half of 2010

Before we begin, please take a moment of remembrance of the attacks on 9/11.  Remember the sacrifice of the FDNY and  NYPD who became heroes that day as the worst disaster in US history unfolded.  Lastly, take a moment for all the victims and their families.  Thank you!



I was doing some research this weekend and I found an excellent trade for the second half of 2010.  The trade is Anheuser-Busch InBev (BUD).  BUD is the best beer stock that is poised to outperform this second half for a couple of reasons:

• World beer prices are rising
• BUD has the highest market share that no other beer company comes close to (66% in Argentina, 73% Brazil, etc)
• Football season is here and what is one of the beers you think of when you think of football?  Bud and Bud Light
• People buy beer increasingly into the fall and early winter
• P/E ratio of 19
• No long term debt

These are huge reasons to get behind BUD.  BUD will profit the most from rising prices.  Football season is always a very successful time for BUD.  Then in a fundamentalist view, a low P/E and no debt.  We are trying to promote stocks that have little/no debt because of the rising issues with debt default.  As far as analysts go, 3 are saying "strong buy", 2 "buy" and 2 "hold".  No analysts recommend SELLING the stock.  Analysts are estimating a huge revenue increase from Q3 2010 to Q4 2010.  To be exact, they predict BUD will report an increase of $26.98B in revenue.  Although, this is an estimate and should be looked at with caution.


At the end of the day, BUD is going to outperform the market and its competitors.  Invest Chief recommends a "buy" of BUD.


Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.