Sunday, September 30, 2012

GAMCO Global: Golden income


In the past two years, we've traded GAMCO Global Gold, Natural Resources & Income Trust (GGN) successfully, booking gains of 45% and 38% on two separate occasions. We are doing so again.

Shares of the fund are right back down to where we bought in last year, at the $14 level, while providing us a current dividend yield of 12%.

GGN is trading at an 8.18% premium to net asset value (NAV), nominal by historic measures, and pays monthly.
GGN seeks high current income with capital appreciation through investment in equity securities issued by gold and natural resources industries and through the use of an options strategy -- and currently using about 9.25% leverage to generate this handsome payout.

Top holdings include Newmont Mining, Goldcorp, National-Oilwell Varco, Gold Fields Ltd., Barrick Gold, Randgold Resources Ltd. and Newcrest Mining Ltd., with a total of 117 holding in all. Annual turnover is about 66%.

I think gold prices could easily shoot back up to $1,800 or higher over the next year, which would catapult shares of GGN back up to $18, my one-year price target.

In doing so, we'd book a 28% capital gain and take in 12% in dividends for a total projected return of 40%. That's a very probable scenario given the backdrop of easy money policies that central banks are embracing.

Any threat of monetary inflation is bullish for the gold mining sector, so let's take a position in the Aggressive High-Yield Portfolio. Buy GGN under $15.



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China Growth Boosts Asia Stocks

Asian markets jumped on Tuesday, with commodity-linked stocks particularly upbeat, after news that fourth-quarter economic growth in China had beaten forecasts eased fears of a sharper slowdown there.

In the Markets
  • MarketBeat: China Stocks Soar 4%
  • Crisis Causes Shift in Use of Bond Indexes

Mainland Chinese stocks, after dropping for the past four trading days, were the best performers, with the Shanghai Composite jumping 4.2% to 2298.38 and the Shenzhen Composite hopping 5.1% to 860.25.

Their performance, following an advance Monday for European stocks after a successful French debt auction, also inspired gains in other markets in the region. Hong Kong's Hang Seng Index gained 3.2% to 19627.75, Japan's Nikkei Stock Average climbed 1.1% to 8466.40 and Australia's S&P/ASX 200 index added 1.7% to 4215.6.

South Korea's Kospi rose 1.8% to 1892.74 and Taiwan's Taiex added 1.7% to 7221.08.

"Given the euro-zone crisis has thus far been a slow-bleeding process—unlike the sudden collapse of the U.S. financial crisis—China's hard-landing risks are not imminent," said Alistair Thornton at IHS Global Insight.

Data out Tuesday showed the world's second largest economy grew at a faster pace than expected in the fourth quarter, with output up 8.9% from the year-earlier period. The growth was weaker than in the July-September quarter, but better than economists' expectations, and helped soothe fears that Europe's debt-related problems would slow the Chinese economy. Other key China data, including retail sales and industrial output, also beat estimates.

The stronger-than-expected growth tempered expectations of an imminent reduction by Beijing in banks' reserve requirement ratios.

"Markets are rebounding after overreacting to the [S&P] European credit downgrades on Monday," said Linus Yip, strategist at First Shanghai Securities in Hong Kong. "People are still expecting more monetary easing, but we have to see the economy [slowing]. Right now, the better-than-expected GDP figure means the timing for the next easing measures may be a little delayed."

Commodity-linked stocks were notable gainers across Asia, with Aluminum Corp. of China and Jiangxi Copper jumping by the day's limit of about 10% in Shanghai. In Hong Kong, they rose 8.1% and 9.3%, respectively.

In Sydney, OneSteel jumped 7.8%, while Fortescue Metals Group—which reported a 19% rise in iron-ore shipments for the December quarter—added 3.9%.

Rio Tinto, which reported record global iron-ore production, added 1.3%.

The region's shippers added to recent gains. Daewoo Shipbuilding & Marine Engineering climbed 5.4% in Seoul and Mitsui O.S.K. Lines rose 2% in Tokyo. China Cosco Holdings surged 10% in Shanghai as well as Hong Kong.

Exporters were among notable gainers in Japan, as the euro appreciated against the yen. Pioneer rose 2.4% while Nissan Motor and NEC each firmed up 1.9%.

U.S. markets were closed Monday for Martin Luther King Jr. day.

Financial stocks also rose across the region, despite Standard & Poor's downgrade Monday of the European Financial Stability Facility—the euro-zone bailout fund—by one notch to double-A-plus.

Ric Spooner chief market analyst at CMC Markets in Sydney, said the downgrade was "unlikely to have a major impact on risk premiums since its funding requirements are largely covered until the middle of the year."

Hong Kong-listed banks also pushed higher, with index heavyweight HSBC Holdings adding 3.3% and Agricultural Bank of China climbing 4.7%. In Seoul, KB Financial Group Inc. rose 5.3%.

In Tokyo, Sumitomo Mitsui Financial Group put on 1.2% amid reports the company will buy Royal Bank of Scotland Group's aviation unit for as much as $7.2 billion.

How to Fix the U.S. Housing Market

If this week's economic reports showed us anything, it's the fact that two years into what's supposed to be an economic recovery, the U.S. housing market remains on life support.

But here's what those reports didn't tell you: If the housing market isn't fixed soon, it's going to drag the rest of the economy down into a hellish bottom that will take years, if not decades, to crawl out of.

The housing market is our single-most important generator of gross domestic product (GDP) and, ultimately, national wealth.

It's time we fixed what's broken and implemented new financing and tax strategies to stabilize prices.

Contrary to the naysayers - and in spite of political pandering and procrastination - we can almost immediately execute a simple two-pronged plan to fix mortgage financing and stabilize U.S. housing prices.

I call it a not-so-modest proposal.

The Worst Since the Great Depression The facts are frightening: We are in a bad place. The plunge in housing prices we've seen during the current downturn is on par with the horrific freefall the U.S. housing market experienced during the Great Depression.

And without an effective plan to arrest the double-dip in housing, there's no bottom in sight.

Hope Now, an alliance of lenders, investors and non-profits formed at the behest of the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, counts 3.45 million homes being foreclosed from 2007 through 2010. Current estimates of pending and potential foreclosures range from another 4 million to as many as 14 million.

According to RealtyTrac, a real-estate data provider, the country's biggest banks and mortgage lenders are sitting on 872,000 repossessed homes. If you add in the rest of the nation's banks, lenders and mortgage-servicers, the true number of these REO (real-estate owned) homes is closer to 1.9 million.

These shocking statistics illustrate just how large the current overhang of bank-owned properties actually is (at current sales levels, REO properties would take three years to unload). And they help us to understand how the staggering number of yet to-be-foreclosed, repossessed, and sold homes will depress U.S. housing market prices for years to come.

Follow the Money So how do we attack this twin-tiered challenge of mounting inventories and falling prices?

First and foremost, we have to address the biggest thing that matters - money. Without the ability to finance home purchases, we're only going to sink deeper and deeper into the black hole.

There's no arguing the fact that bad financing - securitization - got us into this mess.

Forget all the arguments about how loan factories spun out no-doc "liar loans," or how buyers were equally complicit in perpetrating mass fraud. Forget about the argument that the Community Reinvestment Act (CRA) forced banks to make bad loans to subprime borrowers (the academically derived statistics don't support this assertion). Forget about how low interest rates were to blame (that's partially true). And forget about the fact that deregulation greased the whole slippery slope (that's definitely true).

At the end of the day, the truth that matters is that securitization financed the whole scheme.

Without the ability to offload the risks being packaged into mortgage-backed securities (MBS), very few of the millions of suspect mortgages made would have been originated in the first place.

And without such government-sponsored enterprises (GSEs) as Fannie Mae (OTC: FNMA) and Freddie Mac ultimately competing against private MBS syndicators, the doomed housing-market train would never have left the station - let alone achieved the long length and high velocity that exacerbated the crash damage.

That's where we start. Unless the government is providing direct-and-transparent tax incentives to bolster homeownership (more on that later), it has no business being in the mortgage business - especially when that "business" ultimately puts taxpayers at risk.

Fannie Mae was a Depression-era program, as was the Federal Housing Administration (FHA). Fannie was nothing more than a "bad bank" that U.S. President Franklin D. Roosevelt established to take on the defaulting mortgages that were building up on the balance sheets of U.S. banks. The idea was to free up bank capital so that the banks could make loans elsewhere.

It worked so well that Fannie eventually grew to behemoth proportions and President Lyndon B. Johnson, in order to get Fannie's debt portfolio off the government's balance sheet, privatized it in 1968. In fact, Fannie was such a success as a monopoly that the U.S. government, in its infinite wisdom, decided to create a duopoly by forming Freddie Mac and privatizing it in 1970.

Because of the widespread belief that these institutions were backed by the federal government (technically they are not), Fannie and Freddie were cheaply and easily able to raise the money they would use to purchase mortgages. When the securitization business began in the 1980s - and especially after that business soared - those two GSEs were at the forefront of packaging and selling MBS instruments, as well as buying back many of them for their own bloated accounts.

Fannie and Freddie are both now under government conservatorship, which is another way of saying they became insolvent and taxpayers bailed them out. When they collapsed so did the private securitization market.

Here's how to fix that market - and revive the U.S. housing market in the process.

Three Ways to Revive U.S. Housing Market FinancingTo fix the securitization market, and resuscitate the American housing market in the bargain, the federal government must do three things.

First, the government must guarantee all of Fannie and Freddie's existing notes and mortgages (they're essentially doing that already), to make sure the market isn't panicked. Once that's done, announce a cutoff date - after which Fannie and Freddie will no longer be given a Treasury credit line and will be unwound.

Second, Washington must mandate that all the banks that got government help - on a pro-rata basis proportionate to their bailouts and their profits (calculate in bonuses and dividend increases) - will have to contribute to a private national pool of mortgage capital. That pool will replace Fannie and Freddie and will finance mortgage lending in competition with all banks and mortgage lenders. But it will have a single, 10-year lifespan. The government must decree that earnings and profits from this pooled capital are tax-free and must unwind the pool over the allotted 10 years. After all, Fannie and Freddie don't pay state or local taxes, and never did.

Third, Washington must reinvigorate the private-securitization market by making a new federal ratings agency responsible for assessing creditworthiness and assigning ratings on mortgage pools. It should tax interest and profits on the pools (those not created out of the national mortgage pool outlined above) at a flat 10% for 10 years.

These moves will bring the securitization market back to life and new investor cash will flow into the mortgage business.

To establish a guarantee on individual mortgages the government should follow the FHA business model by having mortgage borrowers pay an up-front guarantee fee equal to 1% of the borrowed amount (the fee can be rolled into the loan, if desired). The borrowers can then pay an additional ½ of 1% of outstanding principal each year into the guarantee pool - and those payments can be spread out over the 12 months of each year.

Mortgage pool s yndicators should have a 10% retention requirement (5% is being proposed and banks are already balking at that), meaning that MBS bankers should have to keep 10% of what they originate on their books. But new regulations can give bankers a break on the set-aside haircut by reducing the reserves they are required to hold against these balance-sheet assets.

A Defibrillating ShockIf we're to simultaneously arrest the U.S. housing market's mounting inventories and falling prices, we need to create tax incentives for buyers to stimulate demand.

Banks have supposedly set aside loan-loss reserves against bad mortgages (in fact, they are already reversing a lot of those reserves as they see credit metrics improve). So these institutions are technically carrying inventory and MBS assets that have been marked-to-market, meaning they should be valued at today's depressed prices.

Against that backdrop, any improvement in sales and prices from here would be good news.

To stimulate sales, and generate at least some tax revenue, Washington needs to start a tax credit program that begins on Jan. 1, 2012 and runs for the next five years. For the first full year the property is owned, the rules should allow 100% of capital appreciation on purchased residential property to be credited back to reduce the home's cost basis. That cost- basis- reduction program should be permitted to run for five years, with a 20% annual diminishment in each subsequent year from the first full year of the program.

After this coming Jan. 1, in addition to a credit against appreciation that reduces the cost basis and increases the home's potential profitability, the government should also allow homebuyers a tax credit equal to 50% of any depreciation in the value of their home for the next five years.

In addition to increasing homebuyer demand, these tax incentives will also stabilize the market. And that will help drive investor interest in mortgage-backed instruments, increasing available financing and lowering its cost.

These are not-so-modest proposals, but if we are going to do something about the depressed state of the U.S. housing market, there's no time to waste being modest. Without these actions, the financial ugliness we're experiencing right now could literally last for decades.

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Afternoon Update: Averages Flirting With Key Levels

After dropping as much as 400 points on the Dow Jones Industrial Average, U.S. stocks have pared their losses only slightly. And according to Barrons.com’s technical guru, Michael Kahn, the major averages are holding just above key technical levels.

The DJIA has put about 100 points of space above what Kahn sees as near-term support in the 10,600-10,675 area. Keenly watched by traders is support for the S&P 500 at 1102-1121, the lows of early August, which thus far have held.

The Nasdaq Composite, meanwhile, is in somewhat better shape with a bit of breathing room above key support that Kahn puts at 2400-2415.

On Liquidity Traps and Quantitative Easing

Here’s a good discussion of what liquidity traps are from John Hussman. His weekly market commentary begins:

"There is the possibility… that after the rate of interest has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control."

John Maynard Keynes, The General Theory

One of the many controversies regarding Keynesian economic theory centers around the idea of a "liquidity trap." Apart from suggesting the potential risk, Keynes himself did not focus much of his analysis on the idea, so much of what passes for debate is based on the ideas of economists other than Keynes, particularly Keynes’ contemporary John Hicks. In the Hicksian interpretation of the liquidity trap, monetary policy transmits its effect on the real economy by way of interest rates. In that view, the loss of monetary control occurs because at some point, a further reduction of interest rates fails to stimulate additional demand for capital investment.

Alternatively, monetary policy might transmit its effect on the real economy by directly altering the quantity of funds available to lend. In that view, a liquidity trap would be characterized by the failure of real investment and output to expand in response to increases in the monetary base (currency and reserves).

In either case, the hallmark of a liquidity trap is that holdings of money become "infinitely elastic." As the monetary base is increased, banks, corporations and individuals simply choose to hold onto those additional money balances, with no effect on the real economy. The typical Econ 101 chart of this is drawn in terms of "liquidity preference," that is, desired cash holdings, plotted against interest rates. When interest rates are high, people choose to hold less cash because cash doesn’t earn interest. As interest rates decline toward zero (and especially if the Fed chooses to pay banks interest on cash reserves, which is presently the case), there is no effective difference between holding riskless debt securities (say, Treasury bills) and riskless cash balances, so additional cash balances are simply kept idle.

Edward here. This is another thought-provoking piece from Hussman to which I have linked at the bottom. I have been thinking about this from government’s angle since it is clear the US government is destined to print a lot of money due to the aversion to more deficit spending. Last November, I wrote a post called "On debt monetization" which went into a bit of this.

Normally, the U.S. Treasury must sell bonds when there is a budget deficit. The principal reason that the Treasury could not just print money out of thin air (what Murray Rothbard calls counterfeiting) is because the Federal Reserve needs them to control supply and demand of Fed Funds in order to maintain its target interest rate above the interest rate on reserve balances.

However, when interest rates are zero percent, the Federal Reserve doesn’t have this problem. There is no difference between the Fed Funds rate and the rate on reserve balances.

When the Fed Funds rate is essentially zero, the Federal Government does not have to issue any bonds at all (except as mandated by Congress to ‘fund’ deficit spending). In reality, when rates are zero, the Fed could simply monetize the deficits and it would be functionally equivalent. What this means is that there is no difference between quantitative easing and issuing short-duration treasury bills. Paul Krugman recently pointed this out in am essay, saying:

The point is that we’re now in a liquidity trap. What does that mean? It means that the Fed has pushed short rates down to zero, so that at the margin T-bills are no better than cash — and correspondingly, that means that at at the margin people and banks are holding some of their cash purely as a store of value. Liquidity is now free, and as a result the market’s demand for liquidity is satiated; adding more potentially liquid assets makes no difference. So issuing short-term debt and printing monetary base are equivalent.

But, you say, it won’t always be thus: at some point the economy will recover to the point where the zero lower bound is no longer binding; and at that point monetary base and short-term debt will no longer be the same thing. Indeed. But at that point the Fed will be seeking to reduce the monetary base — by definition: it’s only once the Fed is trying to curb the size of the base that the zero lower bound ceases to be binding.

-Monetary Base And Short Term Debt (Ultra-wonkish)

Buying treasuries with newly printed money when rates are at zero percent is an asset swap, nothing more.

Here’s the interesting bit. Krugman says that the result of this equivalence between short-rates and cash means that the Fed’s QE is really just a duration change by the Treasury. In quantitative easing, as contemplated in this next round, the Fed will be buying long-dated Treasuries. Given the preceding analysis, it’s as if the Treasury started issuing a huge slug of short-term debt and retired a bunch of long-term debt, making short-duration bills relatively more plentiful than ten-year or five-year Treasury bonds. I really didn’t think about it this way until I put the Hussman piece together with my November article. But Krugman’s characterization of this is true.

So, this gets us back to the question of what this – altering the term structure of Treasury debt – would actually accomplish in a liquidity trap. Here, commentary by Hussman is useful.

One of the most fascinating aspects of the current debate about monetary policy is the belief that changes in the money stock are tightly related either to GDP growth or inflation at all. Look at the historical data, and you will find no evidence of it. Over the years, I’ve repeatedly emphasized that inflation is primarily a reflection of fiscal policy – specifically, growth in the outstanding quantity of government liabilities, regardless of their form, in order to finance unproductive spending. Look at the experience of the 1970′s (which followed large expansions in transfer payments), as well as every historical hyperinflation, and you’ll find massive increases in government spending that were made without regard to productivity (Germany’s hyperinflation, for instance, was provoked by continuous wage payments to striking workers).

Likewise, real economic growth has no observable correlation with growth in the monetary base (the correlation is actually slightly negative but insignificant). Rather, economic growth is the result of hundreds of millions of individual decision-makers, each acting in their best interests to shift their consumption plans, saving, and investment in response to desirable opportunities that they face. Their behavior cannot simply be induced by changes in the money supply or in interest rates, absent those desirable opportunities.

You can see why monetary base manipulations have so little effect on GDP by examining U.S. data since 1947. Expand the quantity of base money, and it turns out that velocity falls in nearly direct proportion. The cluster of points at the bottom right reflect the most recent data.

Expanding the money supply doesn’t do anything. That is the clear upshot of what Hussman says. QE won’t work to expand the economy except to the degree the term structure of treasuries drives down rates. But of course, you have to weigh this against the lost interest income that this entails.

Bottom line: QE will be a bust; The US is in a liquidity trap. The only way out is through fiscal policy or a liquidation of excess capacity. I prefer the latter as the primary goal because it is geared to the longer term. Given the hugely misallocated US economy and the excess capacity, fiscal policy is likely to only be effective in the short-run.

Source: Bernanke Leaps into a Liquidity Trap, John Hussman

2 Billion Reasons to Believe in Netflix

Don't bury Netflix (Nasdaq: NFLX  ) . It's not dead yet.

Shares of the video-streaming giant soared 11% yesterday, after Netflix revealed that it served up a whopping 2 billion hours of video to its more than 20 million streaming customers during the holiday quarter.

This is significant for many different reasons.

For starters, there's the sheer size of that number. Pandora (NYSE: P  ) served up 2.1 billion hours of music streams in the previous quarter, but that's largely a free ad-based service. Netflix streaming is going out only to premium subscribers.

No one is going to come near that number, and CEO Reed Hastings knows it. Amazon.com (Nasdaq: AMZN  ) is quickly building up the streaming smorgasbord it offers online subscribers at no extra cost, but it doesn't seem to be gaining material traction. Either way, the same Amazon that has been tightlipped about how many Kindles it has actually sold in the past isn't going to publish a streaming consumption figure -- even if it wasn't embarrassing.

There's also the significance of the time frame. Remember back in September, when folks on dual plans saw their monthly bills spike as much as 60%? Netflix suffered net cancellations of 800,000 subscribers for that quarter. It's more than likely that the fourth quarter will have more people bolting than joining, but putting out this meaty data nugget covering the months of October, November, and December clearly shows that folks are still sticking around.

Sure, it's problematic to see Netflix refer to its user base as "more than 20 million streaming members globally" when it had 22.9 million global streaming subscribers at the end of the third quarter. However, Netflix has been using that round figure since mid-November.

Then let's work with that streaming audience. Two billion hours divided by "more than 20 million" members breaks out to less than 100 hours per streaming customer during the entire quarter. That's more than I thought, and I'm guessing that it's probably more than you thought, too. Folks are hooked on Netflix's digital service, and consuming an average of roughly 30 hours of content for $7.99 a month is a pretty darn good deal.

"Hastings needs to come out of the gate strong in 2012," was my fifth and final point last week in singling out the things that Netflix needs to do to get back on track this year.

Whipping out this announcement ahead of the second trading day of the year, waiting for last year's tax-loss sellers to move on last week, is brilliant. �

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Earnings Preview: eBay

eBay (EBAY) is expected to report Q1 earnings after the market close on Wednesday, April 27 with a conference call scheduled for 5 pm ET. Analysts are looking for EPS of 46c on revenue of $2.48B.

Guidance

The consensus range is 44c-49c for EPS, and $2.44B-$2.52B for revenue, according to First Call. In January, eBay guided Q1 EPS 44c-46c on revenue $2.4B-$2.5B . For FY11 EPS it sees $1.90-$1.95 vs. consensus $1.94, on revenue $10.3B-$10.6B vs. consensus $10.48B. In February, eBay guided FY13 revenue $13B-$15B compared to $9.2B in FY10, and compound annual EPS growth 10%-14%. The company said it expects the growth in the three-year period to be driven by continued strong global momentum at PayPal, sustainable growth at eBay, and a doubling of mobile gross merchandise volume to $4B in FY11. During the quarter, eBay announced the acquisition of GSI Commerce (GSIC) for $29.25 per share in cash, or about $2.4. eBay said it expects that the acquisition will be immaterial to 2011 non-GAAP EPS guidance. Additionally, eBay acquired WHERE, a company that helps mobile phone users get information on local businesses.

Analyst Views

As for quarterly results, Caris views eBay's changes to Marketplace as an incremental positive as the change may help eBay increase GMV per listing and realize better effective take rate. ThinkEquity believes eBay will report higher than expected Q1 EPS. Analysts and investors will listen for comments on growth at PayPal and Marketplace, as well as an update on the use of eBay.com and PayPal on mobile devices.

George Soros’ 8 Bold Predictions From the ‘Tiger Den’

George Soros, seen here at Davos in January, answered a broad range of questions at TIGER 21 event. (Photo: AP)

The wealthy investors who make up the peer-to-peer learning group Tiger 21 like to invite heavy hitters, such as Mohammed El-Erian, Carl Icahn and Jim Rogers, to their Headliner Lunches. In December, George Soros joined that illustrious roster, according to a statement from the group released Wednesday.

In an interview with Robert Johnson, executive director of the Institute for New Economic Thinking, Soros discussed the economy and issues affecting investments and world markets, and reacted to some members’ predictions for the year ahead.

Soros said the current economic environment “is about as serious and difficult an environment as I have experienced in my career.” The current financial crisis is a direct outgrowth of the financial crisis of 2008, he said. “In 2008, when Lehman went bankrupt, the financial system did collapse. The week between Lehman filing and the announcement of TARP were memorable days where one market after another ceased to function."

Now the viability of sovereign debt is in question, he said. In Europe, flaws in the euro’s construction are being exposed. However, he pointed out, the euro crisis is not a currency crisis, but rather a banking crisis.

Soros emphasized that the current crisis is more severe and more lasting than the crisis in 2008. At that time, the institutions that were needed to control the situation existed, whereas in Europe today, there is a central bank but no treasury.

“When the euro was introduced, everyone knew that the treasury was missing, but there was no political will to have a fiscal union,” he said. “The leaders thought that when the time came they would have the political will to put it in place. However, there is less political will today than there was in the 1990s.”

Lacking a solution, he said, authorities are trying to buy time, but this is not working because the crisis keeps growing. “The authorities are doing what it takes to keep things together, but never more. So you actually need a continuing crisis to make what is politically impossible, possible.”

Soros also engaged in a round of “Agree or Disagree,” commenting on predictions for 2012 proffered by individual Tiger 21 members. He was asked to indicate whether he agreed with the predictions or might reject them outright. Among the eight predictions:

1)  That one or more countries will leave the eurozone within the year.

While he did not fully agree, he said it was not very far from impossible. However, in the case of Greece, default is more than a 50% probability. [On Thursday, Greece struck a deal to clear the way for a possible bailout.]


2)  Collapse of the Chinese market.

Soros rejected this idea, but noted that the country’s housing bubble has been pricked, partly as a result of the effects of the financial crisis here spreading to China.
3)  Former MF Global CEO John Corzine goes to jail under Sarbanes-Oxley.

A real possibility, according to Soros.


4)  Attack on Iran–by either the U.S. or Israel.

An outside attack on Iran is very unlikely, Soros said. However, he thinks that the country’s present regime is not going to last the year.
5)  Gold reaches $2,000/ounce and rises.

Soros does not think gold will reach $2,000. He said gold is the ultimate bubble; its price can go in either direction. It was the ultimate safe haven, but funds had to liquidate their positions to cover some loses in the stock market. On the other hand, Soros does not expect gold to retreat much and does not consider $1,000/ounce probable either.


6)  The polarization of the top 1% and the rest of the population leads to rioting in American cities.

Soros said rioting is already happening in the U.S., but it is not getting much media coverage.
7)  On President Barack Obama’s re-election chances.

Soros hedged his response, saying it depends on whom the Republicans nominate. “Obama has a slightly better chance than most people because of the totally unacceptable character of the opposition.”


8)  Unemployment falling below 7.5% in U.S.

Soros does not expect employment numbers to grow, but also noted that expiring unemployment benefits will push down the overall unemployment rate.

At the end of the luncheon, Soros said, “At times like this is it more important to survive than to get rich. Since there are not many productive uses of money right now, it is time to take the long-view.” He suggested two potential plays: Think of undervalued stocks that will survive over long-term, and put the rest in cash. 

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Top Stocks For 2011-12-3-8

STDF, Steadfast Holdings Group Inc, STDF.PK

DrStockPick Stock Report!

DrStockPick News Report!

STDF, Steadfast Holdings Group Inc, STDF.PK

“Steadfast Holdings Group, Inc. Subsidiary Banx and Green Group, Inc.

Completes Joint Venture Agreement“

DrStockPick Stock Report! Friday July 17, 2009

“Steadfast Holdings Group, Inc. Subsidiary Banx and Green Group, Inc. Completes Joint Venture Agreement“

Recently, Steadfast Holdings Group, Inc. (OTC Pink Sheets: STDF) subsidiary Banx and green Group, Inc. announced that they have signed a joint venture agreement to build structurally insulated panels (SIPS) with Superstruct Building Systems, Inc. of LaQuinta, CA. The new venture will be known as Integrated Energy Group LLC.

This agreement provides access to the existing Superstruct manufacturing facilities allowing us to immediately fulfill building contracts in the inner mountain West and Western United States. We will immediately begin searching for a site to build an additional manufacturing facility in the region for utilization of the licensing agreement included in the joint venture.

Dr. John Kalogeris will initially operate the venture bringing with him builders trained in the system. Dr. Kalogeris was one of the initial makers of SIPS in the late 1950�s and is a renowned engineer with impressive credentials who has been active in building component and alternative energy fields for several decades. He is veteran pilot of the Korean War and began his engineering career with General Dynamics Corp upon separation from the service. He has worked in the space industry as a member of the engineering fraternity on the Gemini and Apollo space missions and was responsible for the trajectory calculations for their completely successful missions. �Dr. Kalogeris brings a wealth of knowledge, business and political contacts plus other potential business opportunities to expand this venture,� stated John Calash, President of Steadfast Group Holdings, Inc.

This is the first of several expected ventures to be completed in the month of July 2009. We expect to contracts for the production and construction of green buildings under this agreement, additional joint ventures for other types of panels, complete significant growth in the existing coatings business and the expansion into alternative energy as it relates to fuels, power for commercial and residential buildings plus propulsion systems and growth internationally from the combination of these elements. Several million dollars in revenue are expected from our ongoing negotiations and this agreement will allow us to fulfill these potential contracts on a timely basis with substantially less cost.

About Steadfast Holdings Group, Inc.

Steadfast Holdings Group distributes green products to the housing markets and a variety of products to the automotive aftermarket. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release that are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements, including but not limited to certain delays and risks detailed from time to time in the company’s filings with the Securities and Exchange Commission.

Contact:

WSMG

Investor and Media Relations

Telephone: 760-329-4169

email: info@wsmg.biz

John Calash, President

Steadfast Holdings Group, Inc.

641 E Main St

East Haven, CT 06512

USA

Phone: 407-641-0705

Fax: 203-466-0600

Add STDF to your Watch List!, do your homework, and like always BE READY for the ACTION!

Take Some Rest When Betting, Too

When you work, you might not always get the results you want and it doesn’t matter how hard you work. Sometimes, you even need a break and this is also valid when it comes to betting. You may have a period of time when you guess a lot of outcomes, but you can also miss a lot of outcomes during a season. If you don’t feel very inspired, if the luck is not on your side, you should really take a break. You should think of giving up on betting for about a week or two, after which you can start all over again. This will definitely help you see things better and will bring you higher profits.

You should never live with the impression that all your bets will be winners because there is no chance something like that can happen. Most of the betters increase their stakes once they win something. Of course, they increase their stakes when they lose some bets, too because they have the impression that this is the best solution to recover all the money they have lost. This usually happens because the betters know that they can’t lose all the time, but they should also know that the chances are calculated just like they always are and it doesn’t matter if they won or lost before.

Last but not least, you shouldn’t be greedy. Most of the betters believe that they are invincible if they win a few matches. greed is natural, but you have to control it, especially when your money is at stake. All in all, obey these rules and you should make some nice profits from the bets you place.

Our website, Spread Betting Explained, offers you everything you need to know on spread betting, so visit us at www.spreadbettingexplained.net.

Fresh Water Heaters – When was it Time for you to Buy a Fresh Water Heater?

Tub heater. Nobody desires to buy a brand-new hot water heater. To start with, brand-new water heaters are very pricey. Additionally, shopping for a single along with choosing a certain model or perhaps product is not several people’s thought of an enjoyable Weekend. And then there’s the headache along with complication of putting in a single correctly. In case your outdated unit is not working, itrrrs likely that it may be less costly and simpler to correct, rather than to travel out and about and buying a fresh domestic hot water heat tank. Under is really a help guide assist you to decide if you’ll need a brand-new unit or perhaps if the outdated you can always be preserved.

To start with, before beginning to be able to troubleshoot the unit, you have to go ahead and take following steps for the utmost safety. Should it be a new gasoline unit, flip the pilot control device to be able to pilot. Should it be an electric powered unit, turn off the electric powered source in the circuit breaker. Subsequently, fasten a hose pipe towards the empty device. And then, disconnect the production associated with normal water for it. Tub heater.

A single) Failed heating unit. If your unit is actually generating minor domestic hot water, itrrrs likely that the heating unit went bad. Typically, it will always be easier and less costly to change that old a single with an all new domestic hot water heat tank, rather than attempt to replace the heating unit.

2) Corrode or perhaps deterioration within the fish tank. Typically, deterioration within the dive bombs requires you to the replace the whole fish tank. The operation is easy, and most undertake it yourselfers can deliver the results inside approximately one hour. This is usually the best option, rather than purchasing a brand-new unit. Additionally, it is almost always best if you put in a great anode pole to prevent your fish tank coming from corroding.

Several) Leaking. Most associated with water leaks can be sorted out rapidly by brand-new nozzles or perhaps brand-new hose pipe contacts. Occasionally, a new gasket might go bad and while these are more challenging to change, this can be nevertheless a better alternative as compared to purchasing a brand new one.

If you have to purchase a fresh normal water heatere, there are a few wonderful web sites on the internet that will help you discover the least expensive costs in all of the different kinds. Hot Water Heating unit Prices is an excellent a single. Tub heater.

Incoming search terms for the article:
  • FRESH WATER HEATER
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Trading Crude Oil Futures (Part II)

You might have heard some of your friends talk about trading crude oil futures. You must have been surprised because many people think that trading crude oil futures is only for the hedge funds or really wealthy people. Well, you can trade crude oil futures if you want to. But don’t do it without getting a good training.

You should be aware of the power of crude oil in the global economy. Crude oil trades around the world. Crude oil is one of the most heavily traded commodities in the world. Every day perhaps billions of dollars worth of crude oil gets traded. You must be thinking that crude oil contracts get traded between the oil producing countries like Saudi Arabia, Russia, Nigeria and so on with non oil countries. Now to your surprise, New York Mercantile Exchange (NYMEX) is considered to be the hub of crude oil trading in the world.

Light Sweet Crude is the high grade, low sulfur content crude oil that is more easily refined than the thicker oils. Now crude oil coming out of some of the Venezuelan and Saudi Arabian Oil wells contains high sulfur content and requires special refineries that only process the high grade sulfur crude oil. On the other hand Iraqi oil is close to the ground and has very low sulfur content. Ever heard of Light Sweet Crude? Sulfur content in oil is considered to be very important. Lower the sulfur content in crude oil, the easier and less costly will be its refining. The higher the sulfur content in the crude oil, the more expensive its refining will be.

The NYMEX contract for the light sweet crude is the most liquid of all the crude oil contracts. A standard crude oil contract is based on 1,000 barrels of crude oil that will be delivered to Cushing Oklahoma. The E-mini crude oil contract trades on the Chicago Mercantile Exchange (CME) GLOBEX platform and is cleared at NYMEX. It is based on 500 barrels of crude oil.

A barrel of oil contains 42 US gallons. Crude oil is traded in US dollars per barrel. In other words, the price of crude oil is quoted in US dollars per barrel. Now trading at NYMEX can be open outcry during the regular treading hours as well as electronic web based trading after hours.

Open outcry or electronic, it doesn’t make a difference to you. Most of the traders now day trade futures contracts from the comfort of their homes. Open outcry trading takes place between 10: 00 AM EST to 2:30 PM EST. After hour trading takes place on NYMEX ACCESSS system, an internet based trading platform starting at 3:15 PM EST Monday through Thursday and ending at 9:30 AM EST the following day. Sunday trading starts at 6:00 PM EST.

Now you must know this thing that real companies have huge trading desks with hundreds of traders all betting on the price of oil. Oil markets are about real people trying to figure out how much oil they would need in the next few months to years to run their businesses regardless of whether they are suppliers or users. Trading crude oil futures contracts require you to be in tune with the market sentiment. Trends in crude oil market don’t develop suddenly and they don’t reverse suddenly. This is something good for you as a crude oil futures trader. It’s always good to visit the website of the exchange to know more. You can visit the website of NYMEX and read a more about the crude oil trading that takes place at that exchange. Trading oil markets requires constant vigil on your part in monitoring the global supply and demand of crude oil. You will need to know which country supplies how much and what the productions quotas are for the time being. This is pretty scary stuff.

When a trend in the crude oil market develops, it may last for a few months to a year. It all depends on the global supply and demand situation of the crude oil. If you can spot a trend in the crude oil market in its early stage and ride it till its reversal, you can make a good profit. Now, just keep this in mind that crude oil prices are highly susceptible to global geopolitical situation and react violently to any political global uncertainty.

Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading! Grab a totally unique version of this article from the Uber Article Directory

Saturday, September 29, 2012

How Low Can Ctrip.com International Go?

Shares of Ctrip.com International (Nasdaq: CTRP  ) hit a 52-week low on Monday. Let's take a look at how it got there and see whether cloudy skies remain in the forecast.

How it got here
In the online travel booking industry, there's priceline.com (Nasdaq: PCLN  ) and everybody else. With little margin for error in this comparison, Ctrip's most recent earnings report is the primary culprit in its drop. Though shares initially popped after the announcement last month, the stock fell to a 52-week low shortly thereafter as investors further digested the earnings report.

For the quarter, China's largest online travel booking site saw revenue rise 19% to $145 million with net income dropping 28% to just $0.18 per share. Eating into the company's bottom line was a mixture of stock-based compensation (a nasty habit that has caused many China-based companies to miss earnings recently), a 57% rise in general and administrative expenses, and lower realized commissions on both air and hotel bookings despite the increased volumes. This raises many questions, the main one being, "What if Ctrip is losing its pricing power?"

Still, there are reasons to be positive regarding its outlook. The majority of leisure companies that have reported earnings have stated that hotel booking RevPAR -- or revenue �per available room -- and travel demand remains strong globally. Marriott International (NYSE: MAR  ) is one such company that serves as a daily reminder that people are still spending, as it forecast RevPAR growth of 6% to 8% in its most recent quarter. In addition, Ctrip has the advantage of being the largest online travel site in the most populated country in the world. It's still in its growth infancy.

How it stacks up
Let's see how Ctrip.com International compares to its peers.

CTRP data by YCharts.

As you can see, Priceline and Expedia (Nasdaq: EXPE  ) have managed to outperform Ctrip and India's MakeMyTrip (Nasdaq: MMYT  ) by a mile. With the latter two in heavily populated countries, growth hiccups seem almost unforgivable to investors.

Company

Price/Book

Price/Cash Flow

Forward P/E

5-Year Revenue CAGR

Ctrip.com International 2.2 9.2 16.0 33.2%
Priceline 11.8 25.3 15.5 31.1%
Expedia 2.8 5.3 13.7 9.0%
MakeMyTrip 4.4 151.7 43.9 34.6%*

Sources: Morningstar and author's calculations. * = denotes two-year CAGR.

Now here's where things get a little bit tricky, because each stock listed above has strengths and weaknesses.

Expedia's costly international expansion came at the expense of a moderate growth rate over the past few years, but it is clearly the cheapest and one of the strongest names poised for future growth.

Conversely, Priceline is much more expensive than its U.S. rival Expedia based on these metrics, but it also has the advantage of having its foot in the international markets for a longer period of time than Expedia. Overall, I consider Expedia a much better value between the two.

MakeMyTrip is still a relatively new company. Currently, its growth rates are enormous and the potential for gaining a huge following in India still exists. However, costs are going through the roof and the company is only marginally cash flow positive at best.

Finally, there's Ctrip, which offers a nice blend of growth and value that combines a little bit of what I see from Priceline and Expedia. Although Ctrip is taking advantage of the Chinese economy's projected 7.5% GDP growth, its pricing power is now in serious question after its booking commissions fell.

What's next
Now for the $64,000 question: What's next for Ctrip.com International? The answer is really going to depend on whether it can control its costs, but more important, whether it can generate higher booking commission.

Our very own CAPS community gives the company a three-star rating (out of five), with an overwhelming 95.6% of members expecting it to outperform. I have yet to personally make a CAPScall on Ctrip.com, as I'm still undecided on whether this is a two-or-three-quarter hiccup, or a bearish new trend in booking commissions.

Clearly Ctrip.com has demonstrated amazing growth and the huge number of potential customers in Asia gives the company a wide audience to target. It's just breaking the tip of the iceberg of what it's capable of. However, a surge in stock-based compensation and expenses has me concerned that shareholders are once again not coming first. I understand the need to expand promotions, but when I don't see that translated into rising air and hotel booking commissions, I get concerned. For now I'm going to hover in wait-and-see mode and revisit Ctrip in three to six months.

If Ctrip.com isn't the stock for you, then perhaps one of these three American companies that are set to dominate the emerging markets is? Click here to get access to our latest special report from Motley Fool Stock Advisor, and find out for free what three stocks could benefit from international exposure.

Craving more input on Ctrip.com International? Start by adding it to your free and personalized watchlist. It's a free service from The Motley Fool to keep you up to date on the stocks you care about most.

SM: 2 Ways to Invest in the Housing...

Also See
  • 'Safe' Stocks Off to Wobbly Start in 2012
  • The Mystery of Closed-End Fund Discounts
  • How to Capitalize on Public Works Projects

Even with the broad housing market still in a funk, some investors are putting cash back into real estate.

Play It Safe: Apartment REITs

When it comes to safe investing, real estate doesn't exactly pop into mind these days. But the bust that has beleaguered builders and real estate agents has actually been a boon for many apartment owners. Vacancies are at their lowest levels in six years, and rents are on the rise nationwide. Those factors aren't stopping families -- many of them former homeowners -- from becoming tenants, says Bob Peterson, CEO of Carter, a commercial real estate company in Atlanta. The simplest way investors can capitalize: Pick up shares of a real estate investment trust, or REIT, that specializes in apartments. REITs collect the rents and then pay out at least 90 percent of their taxable income to shareholders through dividends. While such REITs as a group are up 9 percent this year, they're still fairly priced, Peterson says. Home Properties (HME) now owns about 120 properties and yields 4.6 percent, while UDR (UDR) is about twice as big and yields 3.3 percent.

Go for Broke: Home Flipping

Do you have a lot of cash on hand? More important: Can you install drywall? If you said yes twice, then "flipping" an abandoned house could be your next big score. With the number of foreclosures still rising, there are plenty of rehab projects to choose from, and banks often sell them at big discounts. But navigating a foreclosure auction is tricky; pros say investors usually end up buying homes first, sight unseen, and inspecting them for damages later. Buyers likely then need to sink a hefty amount of time (at least six months, flippers say) and money into rehabbing the home. There's no guarantee of selling the rehabbed house for a profit, either, which is why veteran flipper Doug Clark calls it "the riskiest part of the real estate industry." But the potential payoff can be huge. Clark recently paid $1.6 million at auction for a 14,000-square-foot Utah mansion. He spent $250,000 to fix it up and expects to sell it for $3 million. Not bad for a couple of months' work.

Molycorp: Stock Plunges on JP Morgan Downgrade

JP Morgan analyst Michael Gambardella cut his rating on rare earth miner Molycorp (MCP) today to Neutral from Overweight as prices for rare earth have tumbled in recent weeks and there is more than the usual uncertainty in the industry. Molycorp stock dropped 20% in midday trading.

“We believe a large part of this year�s run up and recent drop was caused by a host of players in China speculating on rare earth oxides,” Gambardella writes. “While we continue to expect the Chinese government to reduce illegal rare earth supply and consolidate (and restrict) production over time, we are taking a more cautious stance on the stock given the near-term uncertainties that have recently arisen from the news of speculation and the recent downgrade of rest of the world 2011 demand forecast from IMCOA to 40k tonnes from 60k tonnes.”

Rare earth prices have fallen since hitting highs in July, but they are still relatively high, with many rare earths equal to or above their average first quarter prices.

Gambardella slashed his price target to $66 from $105.

U.S. Financial Services M&A to Gain Momentum in 2010

Merger & acquisition activity in the US financial services sector will gain momentum in 2010 as industry conditions continue to improve and the outlook for regulatory reform gains clarity, according to PricewaterhouseCoopers.

Selected excerpts from On the Road Again – Transactions in an Opportunistic Market,

Deal-making in the remainder of 2010 will be marked by a steady stream of FDIC-assisted M&A deals in the banking sector, continued consolidation among small- to mid-size asset management firms, and an uptick of deals in the property and casualty (P&C) insurance segment.

Although year-to-date transaction volume has been modest, PricewaterhouseCoopers expects activity to increase over the remainder of 2010. Improving sector fundamentals will reduce the gap between buyer-seller pricing expectations and uncertainty surrounding regulatory reform is likely to be clear. These factors will enable the potential impact of prospective reforms to be priced into term sheets.

We believe the current market presents a significant number of potential opportunities in the banking, asset management and insurance sectors for investors that have the liquidity and capital strength to be acquisitive and the infrastructure and capabilities to realize potential synergies - Gary Tillett, PricewaterhouseCoopers

  • Banking. Continued high credit losses, weak asset generation, and a reduction in the availability of cheap liquidity will make it difficult for banks to return to historical levels of profitability and growth.
  • Asset management. Asset managers are likely to benefit from increased savings rates. Individual investors, however, remain averse to the market volatility that significantly impacted their savings and retirement accounts.
  • Insurance. Insurance companies achieved improved performance in 2009 driven by the recovery in asset values; however, continued soft pricing in property and casualty insurance and a shift to safer products for life insurance may mean lower profits in the near future.

An Up-and-Down Quarter for This Mobile Stock

The following video is part of our "Motley Fool Conversations" series, in which technology editor/analyst Andrew Tonner and industrials editor/analyst Isaac Pino discuss topics around the investing world.

Telecom player Sprint Nextel recently reported its quarterly earnings to mixed reviews. Going into earnings season, Sprint found itself in a precarious situation. Although the economics of the deal appeared more than unappealing for Sprint, the company recently signed a deal to bring the much-sought-after iPhone onto its network. However, in doing so, the company largely paid more than it was worth, further underscoring the importance of offering high-profile smart devices for wireless providers. How will Sprint fare?�

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Big tech names might gather a lot of investor attention, but the truth is that they're playing second fiddle to an even larger revolution in technology. To better prepare investors for this new revolution, The Motley Fool has just released a free report on mobile named "The Next Trillion-Dollar Revolution" that details a hidden component play inside mobile phones that also is a market leader in the exploding Chinese market. Inside the report, we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

Is GameStop the Next Best Buy?

There's one fewer Wall Street believer in GameStop (NYSE: GME  ) .

Needham analyst Sean McGowan downgraded shares of the video game retailer yesterday.

It's odd that McGowan waited three weeks after the company's bleak fiscal fourth-quarter report to move the stock from buy to hold, taking down his revenue and profit targets over the next years. Shouldn't the weakness have been apparent then?

It's obviously not as simple as watching Best Buy's (NYSE: BBY  ) upheaval this week and just going one name lower on the corporate death pool, though there are similarities between Best Buy and GameStop. Best Buy is looking to close 50 superstores this year. GameStop is also looking to close out this year with 50 fewer stores. Both chains have seen historically robust comparable-store sales turn negative.

However, at least GameStop has responded somewhat effectively to the crisis. GameStop's trade-in business and PowerUp Rewards loyalty shopping program have helped keep customers close in a world where lower prices are a click away.

In the end, it won't matter. Both Best Buy and GameStop are doomed. It's just a matter of which one is rearranging the deck chairs the nicest at this point.

McGowan sees revenue falling to $9.4 billion this fiscal year. Until yesterday his projection was for GameStop's top line to grow from $9.55 billion to $9.89 billion. He's also slashing next year's revenue forecast -- from $10.1 billion to $9.625 billion -- but at least that implies growth. McGowan is slashing his profit estimates for this year, but moving them higher for next year despite slashing his revenue outlook. The chain has been buying back a ton of shares to keep its earnings buoyant on a per-share basis.

Optimists used to believe that Nintendo's (OTC: NTDOY) new Wii U console would reignite interest in an industry that has been sliding for most of the past three years, but McGowan doesn't feel that the Wii U -- or the new Xbox and PlayStation consoles that should follow next year -- will generate the boost that earlier generations have delivered.

Even if they do, the emphasis on digital delivery for software distribution in the next generation of gaming systems will sting GameStop in terms of both initial sales and its still-thriving resale business.

McGowan may be late to the party. GameStop has dropped plenty of clues, including slashing its same-store sales target three times over the past year. However, it's better to be late and right than early and wrong.

Digital future
Even though the next trillion-dollar revolution will be in mobile, it may not involve GameStop's digital initiatives. A free special report will get you up to speed.

J.C. Penney Is Setting Investors Up For Disappointment

I wrote earlier this month that J.C. Penney's (JCP) disappointing November sales numbers were a sign of worse things to come. The company ended last quarter with more inventory than in 2010, but has been posting fairly substantial year-over-year sales declines in recent months. The bottom line, I argued, was that J.C. Penney's margins would deteriorate far more than the market currently expects, leading to profits as much as 50% below the company's guidance.

Since then, the stock has continued to rise, closing Thursday at $35.19. Ultimately, I think that this move higher is based purely on investors' wishful thinking, and has made the stock an even stronger sell/short candidate. At today's levels, J.C. Penney stock is trading at a greater than 10% premium to Macy's (M) stock, despite the fact that the company's trailing 12 month EPS is less than half that of Macy's. J.C. Penney's valuation is even more absurd given that it has missed guidance more than once this year, whereas Macy's has routinely exceeded its guidance.

There are a couple of potential reasons for recent investor optimism regarding J.C. Penney, but neither is warranted, in my opinion. First, investors are excited about the new management team headed by Ron Johnson [formerly the head of Apple's (AAPL) retail devision and a senior executive at Target (TGT) before that]. It is true that Ron Johnson is a very creative executive, and I am sure that he is developing a solid plan to turn the retailer around. But even those analysts who are confident in Johnson's ability to turn J.C. Penney around believe (for the most part) that it will be a slow process. There is nothing that he, or anybody else, could do to materially improve results this quarter, and his turnaround plan (which will be revealed next month) will only have a minimal impact next year. Given the deterioration the business has seen in recent quarters, this suggests that he will have to dig out of a large hole. Given that the company's balance sheet is not nearly as strong as it was even a year ago, the company is likely to undergo significant pain before it can get back on the growth track, assuming Johnson is successful. Investors are therefore likely to become demoralized over the next few months as they realize that there is no quick fix to J.C. Penney.

The second reason J.C. Penney stock may be going up is that some recent reports suggest that holiday consumer spending may be higher than previously expected. According to the International Council of Shopping Centers, chain store sales (pdf) increased 4.6% year over year last week. For the month of December so far, sales are up a little less than 4% year over year. This may be good news for the retail industry, but it does not necessarily mean that J.C. Penney will see a benefit. For the week of Black Friday, chain store sales were up 4% year over year, and yet J.C. Penney's sales were very weak on Black Friday weekend. (The company did not report exact numbers, but the implication was high single digit declines)

In large part, it seems that J.C. Penney only managed to limit its same-store sales decline to 2% by a relatively strong performance prior to Thanksgiving; i.e. when the company was clearing fall merchandise (and much of the country was experiencing unseasonably warm weather). Ironically, the company's poor performance in Q3 meant it still had fall merchandise that consumers wanted in November. But unless J.C. Penney has done a much better job of interesting consumers in its winter items this month, we could see another significant sales decline in December.

All in all, the facts do not support J.C. Penney's recent move higher. Investors would be wise to avoid or short the stock until the company posts Q4 earnings in February.

Disclosure: I am short JCP.

Friday, September 28, 2012

5 Funniest Super Bowl XLVI Commercials

The New York Giants� win against the New England Patriots in Super Bowl XLVI was logged in dramatic fashion, second maybe only to Titans-Rams in 2000. Also dramatic? The commercials, a greater number of which (think Anheuser-Busch (NYSE:BUD) and Chrysler) strayed away from the traditional hit-�em-with-humor formula and instead hoped to tug at the heartstrings.

But Super Bowl XLVI still had a decent number of comedic bits, led by a couple of the usual suspects: automakers and food companies.

Here�s a look at five of the funniest ads from Super Bowl XLVI:

    View All  No. 5: Audi

While the concept was fantastic on its own, it would�ve been 10 times better had it decimated the cast of �Twilight.� Still, Volkswagen (PINK:VLKAY) luxury brand Audi gets a tip of the cap for comically tapping vampires� run of popularity in this bit. My only criticism: A full commercial to tout a car�s headlights?

    View All  No. 4: Chevy

There�s �Ford (NYSE:F) Tough,� and then there�s apparently apocalypse tough. General Motors� (NYSE:GM) Chevy Silverado is the latter. This combined several end-of-times facets, such as Twinkies and raining frogs, but the biggest nod here goes to the fantastic drop line, �Dave drove a Ford,� followed by a serene bow of the head.

    View All  No. 3: M&M�s

Usually, M&M�s Red makes the commercial. This was no exception. Ms. Brown sets the scene, and Red (with help from LMFAO) takes it away, yelling �So it�s THAT kind of party� before pulling off a stunt that I�m sure had the FCC quivering.

    View All  No. 2: Doritos

Doritos — a headliner of PepsiCo�s (NYSE:PEP) Frito-Lay division — traditionally is good for a commercial laugh, and this year was no exception. Even with slightly dark overtones (one imagines PETA was mulling a call over a fictionally dead cat), Doritos landed another hit with snack bribery.

No. 1: Dannon Oikos

Anyone else amazed that John Stamos still looks this good at almost 50 years old? And thanks to a little slapstick, �Uncle Jesse� still has some comedic worth, too. Stamos� bit for Dannon Oikos Greek yogurt — a product of French food company Danone (PINK:DANOY) — took a turn for the hilarious after a romantic tease led to a well-timed headbutt.

– Kyle Woodley, InvestorPlace.com Assistant Editor

Corzine to Face Congress Over MF Global Collapse

Former MF Global(MFGLQ.PK) CEO Jon Corzine has been called to testify in front of the House Financial Services Committee on what went wrong at the brokerage firm which filed for bankruptcy last month.

Corzine will appear in front of the Oversight and Investigations Subcommittee on Dec.15. the subcommittee will focus on the "decisions and events leading to the collapse of MF Global, the effectiveness of regulators in overseeing MF Global's activities, and the impact MF Global's bankruptcy will have on its customers," according to a release by the committee.

See if (MF) is in our portfolio

The trustee in charge of liquidating MF Global said on Monday that the amount of customer money that is missing might touch $1.2 billion, double the original amount estimated. >To follow the writer on Twitter, go to http://twitter.com/shavenk.>To submit a news tip, send an email to: tips@thestreet.com.

>To order reprints of this article, click here: Reprints

Bank of New York: Financial Loser (Update 1)

Bank of New York Mellon (BK) was the loser among major U.S. financial names on Monday, with shares down over 4% to $20.57.

See if (BAC) is in our portfolio

The company announced during an investor presentation that its fourth-quarter profit would suffer from incremental expenses ranging from $80 million to $100 million as it implemented a program to save $750 million in expenses by 2015, according to a Reuters report.The broad U.S. were all down 1% as the positive energy from Boeing's (BA) huge new orders and the swearing-in of new Italian Prime Minster Mario Monti, was overshadowed by continuing worries over Italy and Spain and uninspiring comments from German Chancellor Angela Merkal, who said that Europe was "in one of its toughest, perhaps the toughest hour since World War Two," while offering no fresh ideas to solve the eurozone's financial crisis.The KBW Bank Index (I:BKX) was down over 2% to close at 38.58, with the 24 index components showing declines of at least 1%.Shares of Citigroup (C) pulled back over 3% to close at $28.39, as investors "sold the good news" after the company agreed to sell EMI Music Publishing to group of investors to a group of investors including Sony (SNE), Blackstone Group (BX) subsidiary GSO Capital Partners LP, David Geffen and the Estate of Michael Jackson, for $2.2 billion. The deal followed Citigroup's agreement on Friday to sell EMI Group's recorded music business to Vivendi SA's subsidiary Universal music Group, for $1.9 billion.Shares of Bank of America (BAC) declined 35 to close at $6.21, after the company agreed to sell most of its remaining stake in China Construction Bank to a group of investors for $6.6 billion in cash, for an after-tax gain of $1.8 billion. The deal is expected to be completed in November, and will leave Bank of America with a 1% stake in CCB.CEO Brian Moynihan said that the deal would "generate approximately $2.9 billion in additional Tier 1 common capital and further strengthen our Tier 1 common capital ratio by approximately 24 basis points under Basel I."Wells Fargo Securities analyst Matthew Burnell reiterated his neutral rating for Bank of America, but saying he believed that the "sale will move BAC's Tier 1 common capital ratio to slightly above 9.0% by FYE 2011, aided by the 24 bps benefit to its T1C ratio from this sale," and that the implied "sale price of approximately $0.63 [per CCB share] sits about 11% below the 11/14 closing price," which Bank of America "was willing to accept to consummate the transaction."FBR analyst Edward Mills said in a report on Monday that the Federal Housing Finance Agency's expanded mortgage refinance program could lead to an "upside surprise" for Bank of America and other large mortgage servicer. The FHFA will release details of the refinancing plan on Tuesday.Other large U.S. banks seeing 3% declines included Morgan Stanley (MS), which closed at $15.93; Capital One (COF), at $43.83; Fifth Third Bancorp (FITB), at $11.87; KeyCorp (KEY), at $7.23; Northern Trust (NTS), at $38.82; Regions Financial (RF), at $4.03; SunTrust (STI), closing at $18.63.RELATED STORIES: 5 Super Regional Banks on the Rise >Obama Gives Bank of America a Hand: Analyst >Bank of America Sells China Construction Bank Stake for $6.6B >Buffett Likes Diluting All Bank of America Shares, Except His >MF Global Clients Challenge JPMorgan: Report >Gingrich Would Break Up Big Banks >Republicans Want to Break Up Big Banks >'Margin Call' and Volcker Rule: Intervention for Risk Junkies >-- To contact the writer, click here: Philip van Doorn.To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

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GameStop: Janney Ups To Buy

Janney Capital analyst Tony Wible this morning raised his rating on GameStop (GME) to Buy from Neutral, while maintaining a $27 price target on the shares.

Wible offers six reasons for his more bullish position on the video-game retailer’s shares:

  • The launch of new loyalty and digital programs could improve the company’s position.
  • Potential for 3D video game catalysts.
  • Launch of new hardware.
  • Potential for casual game revival through new peripherals like Microsoft’s Project Natal.
  • Competitor store closures.
  • Cross-sale of downloadable content in stores.

Wible writes that the company also will benefit from easier comps and better title visibility.

“While competitive risks remain and questions about the health of the game cycle linger, publisher comments suggest digital threats are contained for now, expectations have come down over the past year, and GME is taking steps to minimize transitional risks,” he writes.

GME this morning is up 94 cents, to 4.3%, to $22.60.

9 Financial Stocks to Buy Now

In the wake of recent Federal Reserve stress tests, some banks are looking better than others. While there are indeed some systemic risks to the financial sector, there are also opportunities for the very best players.

I watch more than 5,000 publicly traded companies with my Portfolio Grader tool, ranking companies by a number of fundamental and quantitative measures. And this week, I’ve identified nine financial stocks to buy.

Each one of these stocks gets an �A� or �B� according to my research, meaning it is a �strong buy� or �buy.� Here they are:

BlackRock (NYSE:BLK) is an independent investment management firm. In the last year, BLK stock is up 10%. BlackRock stock gets a �B� grade for the magnitude in which earnings projections have increased over the past months. For more information, view my complete analysis of BLK stock.

Mitsubishi UFJ Financial (NYSE:MTU) is a Japanese holding company mainly engaged in the banking business. Mitsubishi Financial has posted a gain of 11% since this time last year. MTU stock gets a �B� grade for operating margin growth, a �B� grade for the magnitude in which earnings projections have increased over the past months, and an �A� grade for cash flow. For more information, view my complete analysis of MTU stock.

U.S. Bancorp (NYSE:USB) provides its customers with lending and depository services, cash management, foreign exchange and trust and investment management services. Since this time last March, USB is up 19%. USB stock gets an �A� grade for operating margin growth, a �B� grade for earnings growth, a �B� grade for its ability to exceed the consensus earnings estimates on Wall Street, a �B� grade for the magnitude in which earnings projections have increased over the past months, an �A� grade for cash flow, and a �B� grade for return on equity. For more information, view my complete analysis of USB stock.

Sumitomo Mitsui Financial Group (NYSE:SMFG) is another Japanese financial services-related company to make the list. Sumitomo Financial has jumped 9% in the last 12 months. SMFG stock gets a �B� grade for earnings momentum, an �A� grade for the magnitude in which earnings projections have increased over the past months, and an �A� grade for cash flow in my Portfolio Grader tool. For more information, view my complete analysis of SMFG stock.

BB&T (NYSE:BBT) owns the commercial banking subsidiary, Branch Banking and Trust Company, and has posted a gain of 16% since last March. BB&T stock gets an �A� grade for operating margin growth, an �A� grade for earnings growth, a �B� grade for earnings momentum, an �A� grade for the magnitude in which earnings projections have increased over the past months, and a �B� grade for cash flow. For more information, view my complete analysis of BBT stock.

Banco de Chile (NYSE:BCH) provides a range of credit and non-credit products and services to its Chilean customers. Banco de Chile is up 23% in the last 12 months. BCH stock gets an �A� grade for return on equity. For more information, view my complete analysis of BCH stock.

Credicorp (NYSE:BAP) is involved with banking, pension funds, insurance and brokerage services. BAP stock has outpaced the broader markets with a gain of 21% in the last year. Credicorp stock gets a �B� grade for sales growth, a �B� grade for earnings momentum, a �B� grade for the magnitude in which earnings projections have increased over the past months, an �A� grade for cash flow, and an �A� grade for return on equity. For more information, view my complete analysis of BAP stock.

American Express (NYSE:AXP) is best known for its charge and credit payment card products. Since last March, American Express stock has gained 29%. AXP stock gets a �B� grade for operating margin growth, a �B� grade for earnings growth, a �B� grade for the magnitude in which earnings projections have increased over the past months, a �B� grade for cash flow, and an �A� grade for return on equity. For more information, view my complete analysis of AXP stock.

Discover Financial Services (NYSE:DFS) is also best known for its credit card service. Since last March, Discover stock has posted the biggest gain on this list at 45%. DFS stock gets an �A� grade for sales growth, a �B� grade for operating margin growth, an �A� grade for the magnitude in which earnings projections have increased over the past months, an �A� grade for cash flow, and an �A� grade for return on equity. For more information, view my complete analysis of DFS stock.

The Twin Lost Decades: Housing and Stocks


10,000 baby boomers are retiring per day. This two decade trend has only started but will certainly have an impact on the housing situation moving forward. In most economic reports the boom and bust of the housing market was not factored into the equation. Many boomers will downsize or sell as they age. This is just a matter of demographics. While trends are harder to predict, we know that 10,000 baby boomers will be retiring on a daily basis for well over a decade. 

What does this do to housing? 

The challenge we will face is that the younger home buying generation is less affluent and more in debt prior to purchasing a home. Instead of growing households, we saw over 2 million young adults move back home to live with their parents. So much for household formation taking up all that excess demand. The recipe for the moment has been to constrain inventory and artificially push rates lower but this has done very little to increase actual financial security. What happens when millions of baby boomers retire?

Home ownership rate by cohort

The recent major Census report shows one clear thing. Home ownership is dominated by older Americans:

The big changes can be seen when looking at the trend from a much higher perspective:

1980 home ownership rate

15 to 24:                               22.1%

25 to 34:                               51.6%

65 years and older:              70.1%

2010 home ownership rate

15 to 24:                               16.1%

25 to 34:                               42%

65 years and older:              77.5%

The home ownership rate from those 15 to 24 and 25 to 34 has declined substantially over this time while the 65 year and older group has seen their home ownership rate increase. The good news is that nationwide home values have fallen dramatically yet in many large metro areas home prices are still inflated. Bubbles do not deflate uniformly.

The twin lost decades

People have a hard time imaging a lost decade for the US but we have just experienced that with housing and the stock market:

Both home values and stock values are back to levels last seen over a decade ago. Economists and financial analysts have built models with stock markets returning 7 percent almost on a continual basis. Yet for housing, Professor Shiller went back to the 1800s and found that housing prices essentially only kept track with inflation.  Stocks? Do we have a long-term model where many multi-national corporations make money from their businesses abroad? Why can someone assume the stock market will return 7 percent after adjusting for inflation in a dynamically different world?

As baby boomers retire, their stock portfolios look very much like they did a decade ago (assuming they even saved and data suggests very few even did). Most Americans have their wealth stored up in housing. And housing is still near a trough. Part of the low inventory also comes from many Americans unable to sell their homes because they are flat out underwater.

Underwater home owners

It should be clear that the bulk of home owners come from the older cohorts. Many of these are actually in negative equity positions:

11.4 million (23.7 percent) of homeowners are in a negative equity position. That is, you have a large segment of our home owning population that simply cannot sell without losing money, and this does not factor in the standard 5 to 6 percent selling costs. So many baby boomers are simply staying put if they can. It was interesting but not surprising to read the following:

“(Bloomberg) When Bank of America Corp. sent letters to 60,000 struggling homeowners offering to slice an average $150,000 off their loans, the lender got an unusual response from most of them: silence.”

So why would someone not respond to a $150,000 reduction on their mortgage? Well if you are in Nevada and bought a $500,000 home that will now carry a $350,000 mortgage but is worth $150,000 is this even worth your time? Can you even afford the lowered price? Many obviously cannot as indicated by the foreclosure rate. So the foreclosure pipeline is still healthy and full yet leaked out inventory looks better because:

-1.  Banks are selectively leaking out properties

-2.  The 11.4 homeowners in negative equity keep supply low as well (many may like to sell but cannot)

-3.  Household formation has slowed so less demand on more expensive homes (competition from echo boomers and boomers can be strong because of low inventory in some locations)

Yet the low inventory is more of a symptom of dysfunctional housing market. The baby boomer home selling trend is going to have a big impact. Much of the analysis we see assumes that the new home buying generation is basically going to replicate the trend that the boomers did. Why should we assume that? There are a few things that have changed after WWII:

-1.  The massive stock bull market. After WWII with many industrial countries in ruin, the US had a major competitive advantage in nearly all economic sectors ushering in multi-decades of prosperity.  Look at the stock market chart above. The world has become more competitive and wages for Americans have been stagnant for well over a decade. This is support for lower home prices not expensive home values.

-2.  Home buying on one income. It was feasible for many blue collar one income households to purchase into the American Dream. That is now tougher for many and virtually impossible in expensive metro areas.  Blue collar work has been on a major off shoring trend. In expensive markets you need two professional incomes just to buy a decent home.

-3.  Global debt bubble.  Never in our history has there been so much debt both at the government and individual level. We are living through a major de-leveraging event.

-4.  Multiple jobs with little security.  While many boomers had guaranteed job security with one company and many times pensions, many younger Americans will have multiple jobs/careers over a life time. Many are looking for mobility and many do not have home buying as part of their future plans (certainly not at levels like that of the boomers).

You have a wealthier generation that has seen their wealth decline trying to sell to a less affluent and smaller generation. Instead of household formation or even renting, over 2 million young Americans moved back home. 

Is it any wonder why we have now faced a lost decade in housing?

*Post courtesy of Doctor Housing Bubble. 

 

Gain Market-Beating Trade Timing Through Software

The average home computer today is millions of times more powerful than the room-sized behemoths of the 1950s. Computing power continues to increase – and computers become more and more affordable every year. This has led to computers being nearly omnipresent in homes and businesses; and of course, computers have completely changed the way that many industries conduct business – and others have been decimated by new technology. There is one economic sector which is still evolving as a result of increasing computing power, a change which has been underway for over a decade now.

That industry in the midst of a transformation is the stock trading and commodities trading industry. Stock trading, especially day trading, involves trying to beat the market on trade timing. The person who moves first on a trade tends to make the most money.

Day trading is part and parcel for the stock brokerage career, and day traders at big financial firms do trade swings with leverages of 20:1 or more (leverage is taking out a short term loan to buy shares, hoping that the profit on selling them will pay off the loan and its fees).

Since leverage is one of the causes of the woeful state of the world economy at present, leverage has earned a reputation as being an extremely dangerous thing. Think of leverage as a tool; when used responsibly, it can be very helpful – but used improperly, it can cause serious damage. It all depends how the tool is used. Like a chainsaw, leverage is not inherently dangerous.

However, enough traders have made careless mistakes with leveraged trades to give day trading the same kind of dangerous reputation. While there are other ways to make profitable stock trades like the buy and hold strategy used by Warren Buffett, this is not a style which is well suited to every trader. Making profitable trades on this model means having an in depth knowledge of how the market works and of the long term prospects for the companies whose stock is being traded.

The big change in stock trading is due to the increasing power of computers and their declining cost. The software used to model market behavior and perform market analysis is becoming increasingly sophisticated and at heart, any successful day trader is a pattern analysis geek. What traders are looking for in those charts and analytical tools they use is patterns: patterns of price movements which tell them that a particular investment has a good chance of being profitable. There are now programs known as day trading robots which are making the analytical process much easier, which has opened up the stock market to investors who may not have an extensive background in trading stocks and commodities.

Some of the more entrepreneurial sorts are selling newsletter subscriptions based on day trading robot reports; these will usually be aimed at the small investor, and are often times centered around the penny sock or pink sheet market. As with any financial information seller, they’re going to give you information for a fee, and they’re trading on their reputation for making a majority of good trades, usually from some sort of secret pattern matching program.

These can make you a decent amount of money, but like any investor, you should use this as one tool in your arsenal. You want to investigate the businesses being invested in as well as use automated buy-and-sell recommendations from computer software. Also, most of these buy-and-sell recommendations are based on pattern matching of past performance records; this does involve risk, as does any stock investing.

Are you tired of scraping by at your day job? Why not get into the stock trading and make some money the easy way… with the guidance of artificial intelligence! Learn more about how to make money trading now. You can also check trading for a living info.

Hotel REITs: Time To Check In

The key operating metric for the hotel industry is RevPAR, which represents revenue per available room. RevPAR captures both occupancy levels and the average daily rate charged to customers ("ADR") to reflect the operating performance of a hotel.

In a recent release, Smith Travel Research, the leading research firm in the hospitality sector, projected RevPar growth of 4.3% in 2012 and 4.9% in 2013. It also projected that the main driver of this growth will be an increase in room rates over the next two years. With this level of projected growth, investors should take a look at the hotel sector and determine if now is a time to check into hotel REITs.

According to Marcus & Millichap and Smith Travel Research, the hotel sector is coming off a strong year in 2011 with RevPAR growth around 8%. These strong results in 2011 follow a 5.6% RevPAR growth in 2010. With the steady growth in occupancy and the accompanying rise in hotel rates over the past two years, the hotel sector has transitioned into a recovery phase of the property market cycle. Supported by an improving economy, the hotel sector should experience the 4%+ annual growth projected by Smith Travel for the next two years. This recovery period in the hotel sector provides investor with the operating to invest in strong hotel REITs that will be positioned for near-term earnings growth.

While an economic downturn could hurt the hotel recovery, real estate economists point to the strong growth in hotel demand from increases in both leisure and business travel as a positive sign. Hotel room demand increased by over 4% in 2011 and boosted the average occupancy close to 60%, according to Marcus & Millichap and Smith Travel Research. With limited new hotel construction in the pipeline, existing hotel owners will be positioned to continue the increase in room rates and generate greater profitability for the hotels. Three of the largest state hotel markets--, California, Texas, and Florida-- are among the strongest performing markets. And, investors in hotel REITs will be positioned to benefit.

From an investment standpoint, limited service hotels provide attractive investment opportunities. According to Real Capital Analytics, the cap rates, or yields, on limited service hotels are approaching 9.0%, which is among the highest yields of all commercial real estate sectors. The cap rates on full service hotels are currently around 7%. Full service hotels have attracted greater attention over the past year, as they represent nearly two-thirds of the transaction volume in 2011. With the high cap rates on limited service hotels, REITs with the underwriting expertise to invest in the strongest markets and highest performing hotel chains are positioned to take advantage of a favorable investment market.

Below are some hotel REIT options with moderate leverage and attractive yields to consider:

  • Ashford Hospitality Trust (AHT): Listed REIT, 8.95 current share price, 5.0% current dividend yield. AHT invests primarily in full service and limited service hotels across the big four hotel brands -- Marriott (MAR), Hilton, Hyatt (H), & Starwood (HOT).
  • Hospitality Properties Trust (HPT): Listed REIT, 25.38 current share price, 7.8% current dividend yield. HPT has invested in 300 select and limited service hotels and 200 travel centers across several well-known brands. HPT has had increasing revenues over the past year.
  • Carey Watermark Investors: Non-listed REIT, 4.0% current dividend. Carey Watermark invests in both full-service and limited-service hotels. It currently has invested in 2 hotels in Long Beach, CA - one full service and one limited service. The sponsor, W.P. Carey, has significant experience in commercial real estate with an investment portfolio over $12 billion.
  • Apple REIT Ten: Non-Listed REIT, 7.5% current dividend. As of 9/30/11, Apple REIT Ten had investments in 19 limited service hotels with brands such as Hilton Garden, Hampton Inn, and several Marriott brands. Apple REIT Companies has a long and successful track record of investing in limited service hotels.

With the favorable pricing on hotels and the strong projected growth in RevPar over the next few years, these hotel REITs can provide good returns for investors who check in now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Billionaire Wilbur Ross’s latest energy pick

U.S. billionaire Wilbur L. Ross, Jr., who paid $11.3 million for a Rene Magritte painting in London last month, also purchased a very large number of shares of natural gas producer EXCO Resources, Inc. XCO that same week.

When asked by a reporter what he thought of the final price of the painting he stated, "Well, I paid it." It seems the chairman of W.L. Ross & Co. is more convinced of the value of EXCO Resources with his multiple purchases than he is of his new wallpaper.

From June 18 through June 20, Ross purchased 700,000 shares at an average price of $6.78 per share. His total cost amounted to $4,746,751. Invesco's WL Ross & Co. is a specialist in leading turnaround groups that invest in and restructure distressed companies. The fund is managed by Mr. Ross and has a sizable stake in the company.

As of March 31, 2012, it held over 29.5 million shares. Mr. Ross has been a buyer for a while, actually paying as much as $14 per share in August of last year. Ross's other stock picks include Governer & Co. of the Bank of Ireland IRE and BankUnited BKU .

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Other notable funds and personalities hold large positions in XCO. At of the end of March, 2012, both Ares Management LLC and Perkins Investment Management, LLC held slightly more than 13 million shares.

Billionaire and media personality, T. Boone Pickens, a director of the company, reported owning over 9.2 million shares in a filing made at the end of 2011. Billionaires Howard Marks, Phil Falcone, and Ken Griffin also had positions in the stock (see Ken Griffin's top stock picks).

Over the previous year, a supply glut of natural gas drove the commodity to record low prices, prompting many investors to sell their shares of XCO without pause. The stock consequently fell off the proverbial cliff, tumbling from a 52-week high of $16.70 reached last July, to a 52-week low of $5.74 touched on both April 18 and 19 of this year. That is a drop of 65.6%, about two-thirds of the company's market value wiped away in a few months. Since reaching those lows, shares have recovered slightly, trading near $6.92. However, that is still 58.5% off its peak.

There does appear to be light at the end of the tunnel for XCO. Natural gas prices might be finding their footing as a recent report found that power generation plants used 40% more natural gas and 20% less coal this past March. As that trend may continue, the glut in natural gas supplies could be shrinking, helping to lift or at least stabilize prices.

Several analysts have recently become more positive on the stock as well. On May 8, KeyBanc upgraded XCO to a buy. Not only did analyst Jack Aydin see better gas prices coming, he sees opportunities others don't and adjusted his 2012 earnings estimates from $0.04 to $0.16 per share, a 400% increase. Mr. Aydin stated this was an environment where "XCO has a number of potential transactions that are on the cusp of being consummated, which could provide significant catalysts for shares if executed to plan."

Such a large drop in XCO's share price, in such a short time, may end up being an opportunity to catch undervalued shares along with the top dogs on Wall Street. XCO also has a dividend yield of 6.35%. Its peers Encana ECA and Chesapeake CHK yield 4.1% and 1.9% respectively. The stock prices of these two stocks were also under significant pressure over the past 52-weeks, losing more than a third of their value.

The declining prices also grabbed the attention of billionaires Carl Icahn and Dan Loeb. Dan Loeb made CHK one of its top 5 positions recently ( see Dan Loeb's investor letter).

There are warts on XCO as it swims upstream in a difficult industry, selling a commodity as fickle as a two year-old child at dinner. Yet there are many reasons to be hopeful, if not love the stock at these prices. At least love it as much as Chairman Ross loves his newly purchased Magritte. At under $7.00 per share, any buyers' remorse would be much easier to handle. Stock certificates also come in convenient sizes, lending themselves to framing.

Note: This article is written by Shane Sokol and edited by Meena Krishnamsetty, who owns a long position in CHK.