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Apple’s iPhone

June 28, 2007

The Smart Profits Report: Issue #434
Thursday, June 28, 2007

Apple’s iPhone: “iDay” Is Here… Can You Play This New Tech Boom?
By Martin Denholm
Managing Editor, Mt. Vernon Research

Will you remember where you were at 6:00 PM on Friday, June 29, 2007? If you believe the hype (and there’s plenty of it), a huge day beckons for the tech world.

“iDay,” and the release of Apple’s iPhone.

After years in development and months of anticipation, Apple (Nasdaq: AAPL) will launch its vaunted iPhone today. Many folks will actually camp outside stores, just so they can be one of the first to get their paws on the flashy new device.

So crank up the hype machine… we’ve decided to focus on the release of Apple’s iPhone and show you that you don’t just have to play it by investing in Apple directly… there are other companies hitching a ride on what is expected to be a major boom…

Apple’s iPhone: Is It Worth The Hype?

Uh, okay. I know Steve Jobs and his Appleites have had the marketing machine cranked up to warp speed for weeks now, but is it really worth that much hype? Apple’s iPhone itself costs $500-600 (depending on the 4GB or 8GB version). You’re then locked into a two-year contract with exclusive carrier AT&T (NYSE: T), with monthly plans starting at $60. Why shell out megabucks now when you can probably get the iPhone for half price in 12-18 months - particularly given the chance of bugs in the first-generation product and the rumor that Apple will release an upgrade in a year or so? Remember what happened with iPods. The 4GB mini was all the rage until the 20GB and 40GB beasts and the nano version took over. The mini became dirt-cheap and is now discontinued.

On the flip side, the iPhone is one serious piece of new technology. It’s a phone, iPod, e-mail, web browser and camera all stuffed into a nifty device just 11.6 millimeters thick. Talk about consolidation. This could be the standard-bearer for the industry.

To cope with demand for the launch, AT&T has hired 2,000 extra staff for its stores and police are standing by to control the baying masses. In fact, the BetUS.com website is offering odds of 20-1 that someone gets trampled trying to get Apple’s iPhone. I’ll take it!

The question is… rather than sit back and watch the madness unfold, how can you profit from what is expected to be a mega boom? I’ve got a couple of ideas for you… but let’s deal with Apple first and see if it’s still a good idea to invest in the stock…

Apple’s 10 Million Sales Target

There’s no doubt that the Apple guys are masters at creating a buzz around a product. When Steve Jobs revealed the iPhone in January, he boldly proclaimed that, “The iPhone may really change the whole phone industry.” Some thought his 10 million sales goal by the end of 2008 was optimistic, too, considering it’s the company’s first foray into the mobile phone market - and with a so-called “smartphone” that includes several other applications and burgeoning, yet still raw, touchscreen technology.

But Apple shares have shot up 35% since January to $120. However, in keeping with our “smart profits” philosophy, if you’re thinking about investing, bear in mind that the hype is well priced in and that now might not be the best time to profit.

Since June 7 alone, shares have traded between $115.40 and $127.75 - a pretty wide range. The stock is actually overbought and could be ripe for some profit-taking. My colleague and technical wizard Jim Stanton tells me that a close below $115.40 would take the stock down to $110.75 at least. Apple’s iPhone now has to match its hype - there’s a risk of over-promising, but under-delivering and that expectations are too high - something Apple hasn’t had to face before. Not to mention the fact that negative press or iPhone bugs could hit the price.

For example, if you put the hype aside, Apple’s iPhone is… well, a phone. But there are other investment options…

How About These Apples?

First, AT&T, the biggest U.S. phone company, has an exclusive iPhone deal for two years. Having invested $16 billion since 2005 to upgrade what some say is a spotty wireless service, CEO Randall Stephenson promises, “iPhone customers will enjoy the best voice and data network in the nation.” But he would say that, wouldn’t he?

Nevertheless, AT&T should receive a boost from its iPhone sales, their monthly plans and the increased visibility that its other products will receive in stores and online, thanks to the hype. Its third-quarter earnings results will be key.

AT&T has also signed a deal with Synchronoss (Nasdaq: SNCR) to provide order processing support. With AT&T preparing to welcome a flood of such orders, take a look at SNCR’s stock chart and you can see what effect Apple’s iPhone hype has had recently. Since its IPO last summer, shares are up 238%. And with an impressive string of earnings reports, iPhone sales could tuck several million dollars in its pocket.

One other option is Broadcom (Nasdaq: BRCM). Having already supplied the multi-media chips for video iPods, Apple reportedly asked it to provide the technology for the iPhone touchscreen. With the touchscreen industry growing, this is one company that could profit. But while Apple and the iPhone is all the rage, the company that is leapfrogging all the current touchscreen technology is already in our Xcelerated Profits Report portfolio - and it’s one we’ve already taken triple-digit gains on this year. See today’s “Action Center” below for more details…

Don’t underestimate Apple’s iPhone accessories market either - and the companies making products such as cases and clips. According to industry research group NTD, it’s a market worth $1 billion.

The Smartphone Spillover Effect

The buzz from Apple diving into the mobile phone market is expected to affect the rest of the industry and increase the competitive pressure on fellow smartphone manufacturers Nokia (NYSE: NOK), Motorola (NYSE: MOT), Blackberry maker Research In Motion (Nasdaq: RIMM), and Palm (Nasdaq: PALM).

These firms are going to have to battle back with upgrades of their own, which will heighten consumer/investor awareness in the industry even more and affect the share prices of those who fare best/worst.

It remains to be seen what effect Apple’s iPhone will have on market share. Remember, the iPhone is brand new and probably has some kinks to iron out. In addition, the fact that Apple’s iPhone is expensive and the projected 10 million sales represents just 1% of the total one billion in annual cellphone sales could give these cheaper and more tried-and-trusted carriers some breathing room.

Oh, and one final tip: Steer well clear of Apple and AT&T stores tomorrow!

Until next time,

Martin Denholm

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Today’s Smart Profits Action Center

  • Apple’s iPhone is the latest piece of cutting-edge technology to hit the market - and the Xcelerated Profits Report team is hot on the trail of this massive, life-changing industry. It’s already handed readers triple-digit gains on Immersion (Nasdaq: IMMR) - a major player in touchscreen technology and force-feedback technology, used in cellphones, gaming consoles, medical devices and the auto industry. Could Immersion play a part in future iPhone products? The company’s current Chairman of the Board Jonathan Rubenstein worked for Apple from February 1997 to April 2006, serving as Senior Vice-President of the iPod division and Senior Vice-President of Hardware Engineering.
  • The XPR team recently added two more flourishing companies with groundbreaking technology to the portfolio. To find out how you can cash in before it’s too late, please click this link.

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Trading System Design

June 27, 2007

The Smart Profits Report: Issue #433
Wednesday, June 27, 2007

Trading System Design: Two Critical “Pre-Trade” Functions That Breed Success
By D. R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research

Who knew that an article on laundry detergent could relate to investing? As I flipped through the pages of Consumer Reports, it basically stated that you can’t expect a product that combines both detergent and fabric softener to work as well as the two liquids would do when used separately.

Simply put, trying to get one product to do two very different jobs to the best standard is too tall an order.

You can apply that theory to the financial markets, too. I hear about so many people making a cardinal sin in trading system design: They continually search for that one system or strategy that will make money equally well in all markets. Unfortunately, it doesn’t exist. The markets are more complex than that. So beware the trading system design or strategy that claims to be all things for all people.

The good news is that there is a way to attack this problem. Here’s how…

Specialized Trading System Designs Abound

There are many different trading system designs available to investors - and designers have some specialized tools at their disposal to put together trading systems where the individual components can work when they’re supposed to and head to the sidelines when they’re not.

For example, if you subscribe to the theory that “the trend is your friend,” your trend-based trading system design would work well in that kind of market. But what if the market is moving sideways? Your trend-friendly system would likely get chopped to pieces. Likewise, counter-trend strategies face the prospect of missing the lion’s share of big moves.

What you need are specialized trading strategies that work in specific market conditions… To build a trading system that excels in different types of specific market conditions, you have to understand that different parts of your trading system design have specific functions. And once you know your setup and entry, you can then specialize.

  • Setup: The part of your trading system that tells you to “get ready to trade.”
  • Entry: The part that tells you to “pull the trigger.”

Your trading system design should require that the conditions of both the setup and entry are met before you trade. That means it should identify exploitable market conditions that allow you to enter a trade with a long-term expectation of making a profit. When it does, you wait for an entry signal to initiate the trade. If you get an entry signal but the setup conditions haven’t been met, you do nothing.

Set Them Up… And Knock Them Down

Specifically, your setup and entry must identify one of two general conditions…

  • High Reward-To-Risk Ratio: There is a possibility to scoop a very large gain, relative to the size of your initial risk.High reward-to-risk trading system designs usually look for very special market situations that can strictly limit risk while providing a big upside. They either need to identify explosive situations that occur infrequently, or trades that allow a lot of leeway to move around. With the latter, some trades inevitably give back profits, while others go on to make big gains. So in this world, trailing-stops are the profit-taking exit of choice.

  • High-Frequency, High-Probability Trades: You can take advantage of a repeating condition over and over, with relatively high frequency and probability of success.

In contrast, you’ve got the high probability, high frequency trading system design. These systems have lots of winners but typically the wins aren’t that much bigger than the losses, because in order to generate a high winning percentage, you must cash gains in quickly. To find high-probability, high-frequency setups, you’re looking for repetitive patterns or trends that have produced gains before. These situations are almost always very different from the ones that offer the occasionally huge move. If you go this route, the profit-taking tool of choice is the profit target.

Of course, the Holy Grail would be a set-up and entry trading system design that does both: Provides high reward-to-risk ratios and frequent, high probability trades. But in my experience, when people try to design their setup and entry combinations to do perform both functions, they struggle. It’s tough to find one trading system design that is all things to all people.

Choosing Your Piece Of The Pie

So there you have it. A world that offers big gains for low risk, and one that lures you with a high probability of winning investments on many occasions. Simple, right?

Not quite. While trying to devise a setup and entry combo that provides a glimpse into both of these worlds within the same trading system design is every investor’s dream, it’s almost a sure path to frustration.

It’s often more productive, less time-consuming, and more profitable to decide on which type of investing style fits your goals better, and gear your setup and entry system to specialize in looking for that type of situation. Some investors want a steady stream of winners, while others prefer to wait for the home run hits. But if you do want to stick a toe into both worlds, consider looking into developing two different trading system designs, with each one specializing in a specific objective.

Great trading,

D. R. Barton, Jr.

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Today’s Smart Profits Action Center

  • You don’t need to have a perfect trading system design… you just need to have one that gives you an edge and offers the right blend of profit potential and risk mitigation to suit your investment style. Successful money manager Tom Basso believes that you should spend half your time determining your objectives and goals before you start investing. A few key questions to ask: How much do you have to invest? What returns are you hoping to obtain? How much time do you have to execute the trading strategies? What’s your risk tolerance?


  • Our goal here is to show you how to invest like a pro so you can make more money faster. So if you want to eliminate the guesswork that is a breeding ground for bad investments and get on the profit fast-track, turn to the advice of the guys who’ve proved time and time again what it takes to make money in the stock market. Follow this link to see how you can get your hands on a report that gives you 31 tried and tested wealth-building strategies - direct from the experts.

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The Chart Of The Week

Apple (Nasdaq: AAPL) broken strong trendline


Selling Apple (Nasdaq: AAPL), let alone shorting it, is one to most difficult tasks in the investing world. But today, AAPL has broken a strong trend line and plenty of industry insiders are punching some considerable holes in the iPhone’s seemingly impermeable shell. Is this just another small pullback in AAPL’s march toward 200? Or is this the first real speed bump that Jobs & Co. have seen in years? We’ll see how many folks are willing to shell out five or six “C notes” and switch mobile carriers to AT&T/Cingular just for the privilege of owning an iPhone…

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The Housing Market

June 22, 2007

The Smart Profits Report: Issue #432
Friday, June 22, 2007

The Housing Market: Looking For Housing Bargains? Rent… And Wait Till Next Year
By Karim Rahemtulla
Investment Director, Mt. Vernon Research

“I can see the bottom!” That was the giddy cry from many real estate commentators in October 2006, followed by recommendations to buy housing stocks, because the bottom was in sight.

Not quite. Although both the PHLX Housing Sector Index (^HGX), which represents the nation’s biggest homebuilders, and Dow Jones Equity REIT Index (^DJR) both rallied towards the end of 2006, they’ve since slipped all the way back to where they were in October.

At the time, I wrote that the worst for the housing market had not yet occurred - and the fact that both the HGX and DJR have reverted back to where they started is hardly surprising when you consider just a few of the factors weighing on the market:

  • The fallout from the sub-prime mortgage mess.
  • A slump in mortgage REITs.
  • A rapid increase in the number defaults and subsequent foreclosures.
  • Housing starts (the number of new houses being built) and building permits have steadily fallen over the past year.
  • With more houses on the market, prices are falling - even in some of America’s fastest-growing states like Florida and Nevada.

After one of the most explosive real estate booms in history, a cooling off period won’t happen overnight. And if adjustable-rate mortgages rise, you could see many more foreclosures.

The weak housing market has the Federal Reserve in a spin over interest rates, too. So what’s next for this pivotal sector?

The Good, The Bad, And The Myth-Busting

First, a dash of good news: If you’re not trying to sell your house, don’t worry. You may only be in for a 10% to 20% trim in value.

Now for the bad news: If you are trying to sell your house, the market will not lose 3% or 5% when this is all said and done. In my opinion, the housing market will face write-downs in value of 20% or more from the top - maybe even more in some areas.

But it doesn’t seem to matter how bad things get, the so-called experts routinely trot out the same old, tired myths…

“Housing market values aren’t the same as stock market values.” No. But when you lose 20% or 30% on your home, can you still say that housing prices don’t collapse like stocks? You have to experience it first.

“Home prices don’t crash.” Really? When you have excess supply of anything, prices will correct - regardless of the market. And that becomes even more potent when you mix it with other factors: Slowing growth… tapped-out buyers… speculators who need to get out of the market… rising rates, insurance and property taxes.

Speaking of taxes…

Mortgage, Insurance, Taxes, Hurricanes… The Bill Keeps Rising

Last year, I can’t remember seeing a single home on my street for sale. This year, I’ve seen at least 12. Granted, I live on a big street, but when I see “new low price” and “lease purchase” and “price to sell,” I can tell that the environment has changed.

Worse still, you have the double-whammy of insurance and property taxes. Let me give you an example…

Take a $300,000 home in Orlando - about as safe a distance from the coast as you can get. At that price, you can expect to pay about $1,200 for your monthly mortgage payment with 10% down. Not so bad - you could pick up a nice three-bedroom, two-bath house on about one-eighth of an acre.

But on that same house, you’d pay $500 per month in property tax, and another $250 per month in homeowners insurance, with a 2% deductible for hurricanes. And this is even after the much-ballyhooed (but yet to materialize) property tax and insurance reform promised by Governor Charley Crist, who has turned out to be just another politician at heart.

So do the math - you’re paying about $2,000 a month for a three-bedroom house in Florida that isn’t really close to anything. And the median income in a place like Orlando is a mere $25,000 because of the huge services industry. This means that half the population cannot afford the median priced home (about $260,000 in Orlando), even if they are a dual-income family.

I use Orlando as an example because it has an extremely healthy, growing economy. But take this scenario and apply it to somewhere like manufacturing-heavy Detroit or parts of Ohio (both of which have already endured mass layoffs) - especially if we head into a recession.

Get Out Your Renting Shoes For This Housing Market

My advice for this housing market: Rent, don’t buy. You could rent the same house in the example above for about $1,200 per month - without the hassle of home ownership on a strapped budget.

And for my friends in Canada, the same advice still stands: If you’re seller, take the first reasonable offer and sell now. If you’re a speculator, get out now. There is a real estate bubble in Canada, too - and they’re saying the same things north of the border that America was saying just a year ag “Prices can only go higher.” But when sellers realize that they’re simply not going to get top dollar for their homes, prices will adjust… and fall. This is a piece of history that you really don’t want to repeat.

The recipe is in place for a painful correction. I predicted last year that it would take a couple of years before we saw the bottom of the housing market. So despite what you hear in the media, we’re only about six months into the correction.

I liken it to catching a cold. For the first day or two, you feel rough - but often just chalk it up to a one or two-day bug. Then it wallops you and you can’t get out of bed for a week. Simply put, if you’re looking to bargain-hunt, sit tight and wait till next year. Right now, the housing market is feeling rough and prices are correcting… but the suffering has not yet begun. This correction is still in its infancy.

Good investing,

Karim Rahemtulla

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Today’s Smart Profits Action Center

  • Another quarter… another drop in house prices. Following a 2.7% decline in the fourth quarter of 2006 - the largest year-over-year drop on record - prices continued to fall in the early part of 2007. First-quarter numbers showed that the median price of a single-family home slipped by 1.8% to $212,300, compared with Q1 2006. It was the third straight quarterly drop, as prices declined in every U.S. region. With slumps of 12% and 8% respectively, Sarasota and Palm Bay in Florida were the worst-hit metro areas.
  • The National Association of Realtors says 2007 will mark the first calendar year since its records began in 1967 that overall house prices will decline. The average house price is now down 6.5% from the high in 2006.
  • Ignore the overly optimistic pundits who say the housing market is over the worst and the price pressure is over. Logic dictates that after an enormous bull market, we’re likely to see a drawn-out cooling in house prices. Make sure you stay ahead of the curve - and check out Karim’s previous real estate piece from October, in Smart Profits #366, The Continued Erosion Of The Housing Market: Three Reasons Why Real Estate Will Crumble In 2007.

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Market Transitions

June 20, 2007

The Smart Profits Report: Issue #431
Wednesday, June 20, 2007

Market Transitions: The Three Main Market Conditions, and a Plan for Each
By D. R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research

Today, I’m one of those proud dads whose son made the baseball Little League All Star team. The path he took to get there is an interesting one, with some good market lessons. Josh has always been a great defensive player - a good glove man, as they’d say in baseball. But he started the year hitting below his capabilities.

But then a funny thing happened when he started golf season - Josh’s baseball swing suddenly became a terror in the league. In fact, by season’s end he was cracking the ball all over the park and moved up to the “clean-up” position in the batting order (meaning he bats in the fourth spot). In the end, Josh’s golf practice really improved his baseball swing. It’s the same swing, but two different situations - baseball versus golf.

And therein lies the market parallel - one stock market, but many different situations for investors as the market transitions… We’ve been enjoying one type of market - a steady uptrend - the easiest type of market in which to invest. But savvy investors already have plans for when (not if) the market character changes.

What’s Your Plan for the Next Market Transition?

Investors get hurt the most in market transitions. Two weeks ago, I called this market the “Energizer Bunny” - it just keeps going and going. In fact the S&P 500 hasn’t had a 10% retracement since hitting lows in October of 2002. We’re coming up on five years without what market technicians would consider a correction.

And while this climb could continue for months, even years, all investors and traders need a plan for how to handle the next market change.

You see, three generally accepted market conditions exist: up, down and sideways. Some add a second variable - high versus low volatility - to the mix. But for this discussion, thinking in terms of three main market types will do…

Since no one knows for sure what the market’s next transition will be, let’s be prepared with a useful plan for each of the three market types:

  • Up market: Since we’ve been in a steady up market for so long, it’s probably best described as “business as usual.” The two main dangers here are trying to pick a top and being overconfident. If you’re wrong when picking a top, you’re going to miss out on the longer-term gains. And overconfident investors often speculate on the most volatile performers - ones that are the quickest to fall off the cliff when a pullback comes. So be mindful of each.

  • Down market: This is what most folks are not prepared for financially or emotionally. For instance, the little air pocket we hit on February 27th had people screaming about unbearable carnage. And it was only a 3.4% drop (in the S&P 500).

    Preparation for an inevitable pullback is the area where most investors and traders need to spend some planning time. So make sure you have your stop loss points for all your investments. And also prepare a re-entry plan. You must strike a balance between getting back in too soon (and then getting caught in more down movement) and waiting too long for confirmation.

  • Sideways market: The slow grind sideways isn’t that tough, unless it is accompanied with volatility. Non-volatile sideways markets are just boring. They rarely produce moves big enough to stop you out of positions. And they don’t make us much money either. A sideways market was last seen in 2004 - from December of ‘03 to December of ‘04, the market was stuck in a range of 100 S&P 500 points (for comparison sake, in the last three months, we’ve had almost double the range of that whole year).

    The plan for a sideways market is patience. Finding the sectors that are outperforming is helpful, but this is typically a time when traders and investors must take what the market gives and not try to wring blood out of the proverbial turnip.

A periodic review of your trading and investing plan is always a good idea while the market transitions. And knowing that you have a plan to survive and even thrive in whatever conditions the market throws at you will help even the most jaded investor enjoy restful nights.

Great trading,

D. R. Barton, Jr.

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Today’s Smart Profits Action Center

  • If your portfolio is looking a little overweight on “iffy investments,” give it a summer tune-up by adding some quality. First, re-evaluate your holdings to see if they still meet your original investment criteria and risk tolerance, paying special attention to small-cap stocks and more speculative investments. Second, think about adding some solid, large-cap value plays that are less volatile than growth stocks. Third, grab some passive income by owning some solid dividend-paying companies to your portfolio.
  • And if you really want to eliminate the guesswork that is a breeding ground for bad trades, just follow the advice of the guys who’ve proved time and time again what it takes to make money in the stock market. Follow this link to see how you can get your hands on a report that gives you 31 tried and tested wealth-building strategies - direct from the experts.

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The Chart Of The Week

The U.S. and world markets have bounced back from their recent drop. But emerging markets have been stronger, making new highs versus early June numbers. Beware; the same volatility exists on the way down when we hit the next pullback!

Emerging Markets Making New Highs!

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Current Interest Rates

June 18, 2007

The Smart Profits Report: Issue #430
Monday, June 18, 2007

Current Interest Rates: The Inflation Numbers Are Out… Here’s The Bullish And Bearish Spin
By Martin Denholm
Managing Editor, Mt. Vernon Research

Let me see… how shall I spin this news? If I were a perma-bull, I’d probably say something like this: “Well, that was pretty tame, huh?” But if I were a perma-bear, I’d have an entirely different take on the news. Something like this… “Curses to those perma-bulls and their rosy glasses! If inflation is so “tame,” then why do I have less money?”

Today’s Consumer Price Index (CPI), a key gauge of U.S. inflation levels, added more weight to the theory that inflation is well contained. The so-called “core” inflation rate - which excludes volatile energy and food prices - edged up a paltry 0.1% in May. Over the past three months, the core rate has risen at a mere 1.6% annualized rate, and 2.2% over the past year - close to the Fed’s target level of current interest rates.

In addition, the “core” Producer Price Index (PPI) number, which was released on Thursday, showed the first increase in three months - and even then, by just 0.2%.

Looking Beyond The Bullish Spin

“Consumer prices show 2nd largest gain in 16 years,” blared the headline on MarketWatch this morning.

While the ever-giddy market latched onto the tepid core inflation rate and zoomed off to the races today, there’s another side of the coin.

The overall CPI was up 0.7% in May - the biggest monthly rise in almost two years - due to a 10.5% jump in gasoline costs and 5.4% increase in energy prices.

And that’s not all… Thursday’s Producer Price Index (PPI), which measures production prices, as opposed to retail prices, also showed a nasty inflationary spike. Led by a 10.2% surge in wholesale gasoline prices and a 4.1% climb for energy prices, the biggest in six months, the overall PPI rose 0.9%.

While the latest inflation readings didn’t surprise anyone, it parks the Fed squarely on the fence. For a group that is on record as saying it’s more concerned about rising inflation than slowing GDP growth, this number puts them in a tricky situation. So let’s see what the bankers are thinking…

Fed Slaps On A Lovely Shade Of Beige

On Wednesday, June 13, 2007, the Federal Reserve released its latest “Beige Book” report, which provides an economic rundown of all 12 U.S. regions and serves as a guideline for upcoming monetary policy meetings.

Overall, it reported that the country continues to grow at a steady, moderate pace, with consumer spending and manufacturing faring well and helping to offset a sluggish real estate market.

But what effect will this, plus the latest inflation news, have on Fed policy from here?

Bill Vs. Ben: Talking About Current Interest Rates

In my English homeland, there used to be a cute children’s TV show called, “Bill And Ben: The Flowerpot Men.” The show was basically about the daily lives and adventures of two little guys who live in flowerpots next to each other and chat (a neat idea, but don’t ask me what the creator was smoking when he/she came up with it!)

Now, I’m not saying Ben Bernanke and Bill Gross are stuck in flowerpots. But they’re certainly talking about current interest rates.

In the red “Reserve” corner… armed with a wad of paper that could kill a rainforest… the “Beard Of The Beltway,” Fed chairman Ben Bernanke.

In the blue “bond” corner… one of the most successful and highly respected money managers in the world, responsible for investing $700 billion for his PIMCO bond clients… PIMCO bond fund chief Bill Gross.

Let’s turn to Bernanke first…

A Summer Snooze For The Fed Head

With the economy hitting the skids during the first quarter (a measly 0.6% GDP growth rate - the lowest in four years), you may have heard speculation that the Fed would be forced to cut interest rates - even with energy inflation spiking - in order to kick-start the economy. Of course, doing so could also trigger a vicious cycle, where higher growth breeds higher inflation.

But in saying that “core inflation seems likely to moderate gradually over time” and that the economy will shake off housing woes and “advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion,” Bernanke seems comfortable with current interest rates at 5.25% - just where they’ve been for the past year. Those comments virtually end the chance of a shift in monetary policy before the end of the year.

In fact, Goldman Sachs now says the Fed won’t cut interest rates in 2007 or 2008. That’s a pretty bold prediction, given already slowing economic growth, high energy and gasoline prices that could curb consumer spending, and a weak real estate market. Merrill Lynch is also pessimistic about interest rate cuts.

A Bull On The Loose At Goldman… But Not In Corporate America

And there must be a herd of bulls running around at Goldman Sachs, because the firm has also revised its second and third quarter U.S. GDP growth estimates from 2% in both quarters to 3% and 2.5% respectively.

The White House Council of Economic Advisors (which Bernanke used to run), the Office of Management and Budget, and the Treasury also recently said that GDP growth will strengthen this year and power its way to 3.1% in 2008 and 2009.

But the nation’s CFOs aren’t so chipper. The latest CFO Business Outlook Survey has corporate number-crunchers feeling gloomy about economic growth. They cite a bevy of reasons:

  • Tepid economic growth
  • Weaker corporate earnings growth expectations
  • Less hiring and capital spending (from 6.7% growth in the last quarter to 5.2% over the next year)
  • Rising labor costs
  • And weak consumer demand (due to higher inflation and weak housing market).

The only bright spot is the continued frantic pace of Merger & Acquisition deals - a topic I wrote about here two weeks ago.

But while the Fed, Goldman Sachs and Merrill Lynch have scrapped the chances of an interest rate cut, Bill Gross has different ideas…

This Market Is Nuts… And I Want A Rate Cut

As a bond fund manager, Gross would like to see lower current interest rates, as that would kick up bond prices. So it’s no surprise to see him call for a rate cut in what he calls a “schizophrenic” market.

According to Bloomberg, Gross says the Fed will keep interest rates at 5.25% for now. But he also says that when the “housing bust” and weak economic growth eventually drops inflation below the Fed’s 2% target level, it may lower interest rates in six months.

That’s a fair argument. But it’s one that has affected Gross negatively this year. While his Total Return Fund has only declined 0.35% this year, it’s lower than 86% of its comparable competitors, because almost half its assets mature in one year or less - based on Gross’s belief that the Fed will lower interest rates.

So what do we have here?

Ben Bernanke has kicked off his shoes and hunkered down for the summer - the Fed is comfortable with current interest rates where they are right now. Goldman Sachs and Merrill Lynch are so comfortable, they’re almost horizontal, having scrapped any chance of an interest rate cut this year or next. Goldman and the White House are roaring like bulls, with their GDP growth projections. Corporate CFOs are painting a bleak picture. And poor old Bill Gross just wants an interest rate cut to help his ailing bonds!

I don’t think the Fed will do anything with current interest rates for as long as it can get away with it. The bankers are hoping the situation will sort itself out - inflation will drift lower, consumers will keep spending, economic growth will rebound, the housing market will shore up. But remember, one or two awful economic reports, or external shocks like a geopolitical crisis, terrorist attack, or a hurricane that hits the oil and natural gas markets… and the situation could change pretty quickly.

Good Trading,

Martin Denholm

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Today’s Smart Profits Action Center

  • While the Fed probably won’t touch interest rates when it meets to discuss monetary policy in two weeks, there’s no doubt that investors pay very close attention to the announcements to see what the bankers say about the current economic climate and gauge its potential future moves. You should, too. And my colleague D.R. Barton, Jr. wrote all about it in Smart Profits Report #391, Federal Reserve Interest Rates: How To Prepare For A Potential Price Shock.
  • And for more on Fed chairman Ben Bernanke, make sure you check out this recent column from our sister publication, Investment U, Fed Chairman Ben Bernanke: How To Profit from the Fed’s Current Policy…

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Stock Market Trading

June 12, 2007

The Smart Profits Report: Issue #429
Tuesday, June 12, 2007

Stock Market Trading: Two Ways To Eliminate Ill-Advised Stock Investments
By D. R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research

In the persistent stock market battle of bulls vs. bears, there’s no question which side has held the upper hand over the past year.

Since last July, we’ve seen an extraordinary rally, pierced by just one major pullback - the slump at the end of February. Against some pretty major odds (for example, a slowing economy and rising gasoline prices), the market has continued to rise. This has given investors a heavy edge - and many have capitalized on the trend with gusto.

Despite this, however, millions of investors are placing trades where they have little to no edge, simply wading in and hoping for the best. This is a dangerous and unnecessary way to invest - but fortunately, there are some simple steps you can take to help your stock market trading…

Forget The Quantity… Focus On Quality

Have you ever made an investment that you knew in your heart wasn’t that great as soon as you entered it? One of those investments that didn’t quite meet all your entry requirements, but you took it anyway? Maybe you were acting on a hot tip, or - like now - because the market is in bull mode and you don’t want to miss out.

I call these “low-quality trades.” And they’re positions that blot the record of even the most experienced professional occasionally and can drain the profit potential from your account. But there are some key questions you can ask yourself beforehand that might reveal whether you’re committing this mistake, and why you might be making bad market investments:

  • Does every trade meet all your entry rules and requirements?
  • Are you taking a stock market trade that “almost” makes it on one or two of your entry criteria, but requires you to fudge things a bit to sneak it in?
  • Are you trading because you’re bored, or because you have nothing else to do?
  • Do you need the action of stock market trading - even when a high quality trade doesn’t exist?
  • Are you taking a trade that just “feels right” when you have no provisions in your investment plan for executing intuitive-style trades?
  • Are you frustrated because your last trade(s) didn’t work out and you’re trying to make up for it?

If you find yourself answering “yes” too often, then you’ve at least identified the patterns that affect your particular investing style, which is good. Making marginal stock market trades is just like flipping a coin - you lose control and it becomes a game of chance. Here are three ways they can hurt you:

Stock Market Trading: Less Is More

  • Brain Drain: Managing low-quality positions diverts your attention away from finding higher-quality stock market trades. And the cost can be quite high if it makes you miss some really good investments. Stick to a manageable number of quality investments.
  • Higher Transaction Costs: While low-quality stock market trades chew up your mental energy, the transaction costs also eat up your funds. For example, let’s say you make five low-quality trades per month, because you don’t want to get bored. With a $10 commission per side, and a $10 slippage getting in and getting out, you are spending an extra $200 per month. That’s $2,400 per year just on transaction costs. And if the frequency of your low-quality trades is higher, or your commissions are more expensive, it’s worse.
  • Physical/Emotional Stress: Entering poor trades simply adds to your stress level. And investing already has plenty of challenges, without adding the cost of taking low-quality trades that you really shouldn’t be in.

So how do you stop yourself from questionable stock market trading? Here are some tactics to help you minimize or eliminate it…

Two Ways To Avoid Making A Bad Trade

  • Keep a Stock Market Trading Log: In addition to the routine information (date, time, symbol, number of shares, entry price, stop loss, etc.), make sure you include two columns, labeled: “Reasons for entering” and “Reasons for exiting.” This will help you in two ways. First, it will allow you to see when you’re getting into a marginal trade. Second, since you’re explaining in writing why you took the trade, you’ll subconsciously find that you bend the rules less often.
  • Find a Trade Mate: Run your proposed trade by a friend or someone who may force you to answer the tough questions before you take the plunge.

There’s no need to turn investing into a game of chance, where you’re simply trading for the sake of it, then hoping for the best. Making ill-advised trades will be a big performance drag on your portfolio. Find out why you’re tempted to take them, then set up a plan to minimize or eliminate this dangerous practice within your stock market trading.

Great trading,

D. R. Barton, Jr.

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Today’s Smart Profits Action Center

  • If your portfolio is looking a little overweight on “iffy investments,” give it a summer tune-up by adding some quality. First, re-evaluate your holdings to see if they still meet your original investment criteria and risk tolerance, paying special attention to small-cap stocks and more speculative investments. Second, think about adding some solid, large-cap value plays that are less volatile than growth stocks. Third, grab some passive income by owning some solid dividend-paying companies to your portfolio.
  • And if you really want to eliminate the guesswork that is a breeding ground for bad trades, just follow the advice of the guys who’ve proved time and time again what it takes to make money in stock market trading. To see how you can get your hands on a report that gives you 31 tried and tested wealth-building strategies - follow this link direct from the experts.

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The Stock Market

June 7, 2007

The Smart Profits Report: Issue #427
Thursday, June 7, 2007

The Stock Market: A Tale Of Two Bulls… 2000 Vs. 2007
By D. R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research

The stock market is currently a financial version of the Energizer bunny - it just keeps going and going.

And with the stock market hitting lofty heights, we’ve got three types of investor right now:

  • The Giddy Optimists: Those who think things are different this time, and that the market will just keep rising to the moon. This group includes everyone on the brokerage or sell side who makes big bucks when the market is hot.
  • The Rationalists: These folks are waiting for the bottom to drop out - the perma-bears, plus the rational technicians and fundamental analysts who wonder exactly where the jet fuel will come from to keep this rocket soaring.
  • The Hopeful Crowd: These people are investors who’ve latched onto the rally and just put their money in the market, hoping that things work out.

One fact is certain, though: Every investor would have to acknowledge that this is one mighty impressive stock market run. And while nobody can predict with absolute certainty where this thing is heading, that doesn’t stop plenty of folks from weighing in.

Has The Wall Street Journal Got The Stock Market Wrong?

Enter the respected Wall Street Journal, which ran an interesting article recently, arguing why the market is not like the “old times” in 2000 when the last great bull run ran into some tough sledding.

Let’s look at the points the article makes and see how we can apply them to our own investing…

Stock markets that are barreling along non-stop in one direction are always eventful - and this one is no exception. But can the rally continue? The WSJ article lists three reasons why stock prices might not be overpriced yet. But I believe two of the three are weak, and the third is pretty suspect…

  • Price-To-Earnings Ratios Are Low: Yes, price-to-earnings ratios (P/E) are indeed at relatively tame levels. At an average of about 17.8, it’s only slightly above the 17.0 figure generally considered the “line in the sand” that separates an expensive stock market from a market trading at a “good value.”Counter-point: But the main reason that P/E ratios are as low as they are stems from the fact that great corporate earnings have driven the ratio down, despite an exceptionally strong stock market. The WSJ does point out that corporate growth is slowing, but many economists believe that earnings are as overblown as stock prices now. And if earnings drop across the board (and this is more of a “when” than an “if” scenario), then the P/E ratio of the market will head back up.
  • Yields Are Higher Than In 1999: The dividend yields of the S&P 500 are 60% higher now than in 1999.Counter-point: Comparing yields to one the biggest bubbles in stock market history is really more like “damning with faint praise.” It’s kind of like saying, “Yields are below historical averages now, but they’re not nearly as bad as back in 1999.”
  • Stock Market Breadth Is More Favorable Now Than In 2000: The WSJ points out that back in 2000, tech, media, and telecom stocks made up a much larger capitalization portion of the S&P 500 in 2000 than they do now. And their climb was what fueled the bubble.Counter-point: Today, the Nasdaq (largely made up of those tech, telecom and media stocks) is precisely the index that is lagging the Dow and the S&P 500 during the current upward charge. So although there is a broader based rally now, it’s by no means inclusive. Stock market breadth basically means the number of winning stocks versus losing stocks on a given trading day. In fact, this so-called “technical breadth” of the market is actually lagging - a key warning sign that the stock market’s advances are not sustainable.

The best course of action for you to take right now is to continue participating in the bull run, but realize that the stock market is overbought. That means you need to be very alert to quick changes. Hitting another “air pocket” like we did on February 27 (when the Dow shed 216 points) is a very real possibility.

Protect yourself by making sure that your protective stops are in the right place. And keep moving them as new profits are captured. Enjoy the ride up, but make sure you have an exit strategy for when the bus starts heading down the hill.

Great trading,

D. R. Barton, Jr.

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Today’s Smart Profits Action Center

  • Over the past few years, investors have cashed in on the stock market’s momentum by favoring small-caps over large-caps, growth stocks over value stocks, and emerging market investments over developed markets. But you still need to strike the right balance between maximum returns and minimum risk. Always use a trailing stop to protect your profits, and consider covering your bases with investments like bonds and precious metals. When the next pullback or correction hits, you’ll want to be prepared in advance, as it’s usually too late to do much once it gets started.
  • Whether you want tips on how to allocate your assets properly… five ways to lower your risk and improve your returns… ten key rules of trading… or even the one investing rule that’s worth $52 million, learn how to build and protect wealth, just like the pros, using 31 tried and trusted moneymaking strategies - direct from some of the world’s most respected and successful money managers. Visit this link for more details.

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The Chart Of The Week

iShares S&P Latin America 40 Index up almost 40%

Since the end of the market’s pullback in early March, the four major stock indexes (S&P 500, Dow, Nasdaq and Russell 2000) have all performed strongly. As the chart shows, they’re up between 8% and 11% - pretty good for just a couple of months’ work. But lest we get too giddy about the U.S. performance, note that Latin American stocks - represented by the iShares S&P Latin America 40 Index (AMEX: ILF) - have been up almost 40% in the same time frame. The U.S. is still the world’s financial leader, but if the rest of world starts to fall, the U.S. will follow in our inextricably linked global economy.

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Merger & Acquisition Special Report

June 6, 2007

The Smart Profits Report: Issue #426
Wednesday, June 6, 2007

Merger & Acquisition Special Report: Global M&A Just Hit $2.2 Trillion
by Martin Denholm
Managing Editor, Mt. Vernon Research

If love and marriage go together like a horse and carriage, then corporate America is off to the races in a big way - and feeling pretty darn frisky in the process! The economy is slowing. The dollar is crumbling. Oil and gasoline prices are rising. But executives across the country don’t seem too bothered. Like a drunken frat boy, they’re only too happy to flash the cash at any pretty young fillie who looks their way.

There must be something in the air at this time of year. With May 2007 in the books, a mad blitz of corporate wheeling and dealing is poised to make this month the best since May 1998 for merger and acquisition (M&A) activity. Over the past month, U.S. companies have racked up $191 billion in total deal value.

That brings the total value of U.S. M&A deals done so far in 2007 to $830 billion, well on pace to beat the record set in 2000. But it’s not just the U.S. that has the urge to merge. The M&A party is a worldwide affair, with the long trend showing no sign of stopping…

May Was The Month To Merger

May was a record month for global merger and acquisition activity, with the total value of done deals hitting $496 billion. For the year to date, the number has surged to $2.2 trillion - a 60% spike from the same period in 2006.

Just five months into 2007, that’s an enormous figure, especially when the global total in 2006 was a record $3.8 trillion. We’re well on pace to smash that.

In the public sector, materials led the way in May, with $90 billion worth of planned deals. Financials rolled in next, chalking up $74 billion, and technology took third place, with $44 billion. But the private sector kicked the temperature up a notch, too, accounting for $81 billion worth of the total U.S. deal value in May.

So what’s driving this global M&A juggernaut?

Building Up By Buying Out: Web Giants Get Busy

One reason is that many companies believe it makes better long-term business sense to buy or merge with a competitor, rather than spending a ton of money in areas like R&D in an attempt to beat them. And in an already strong, globalized corporate environment driven largely by the Internet, now is the best time to do that.

Google is a good example. The company only went public in 2004 as a “search engine firm,” but hasn’t wasted any time breaking into new markets. It acquired web-video company YouTube in just a few days, helping establish it as more of a “media” firm than just a search engine.

It’s also trying to get the Federal Trade Commission into rubber-stamping its $3.1 billion deal to acquire web-advertising rival DoubleClick. But FTC has already launched an antitrust enquiry, with fears that if Google gobbles up a leading firm like DoubleClick, it will simply monopolize the $8 billion search advertising market and can charge what it wants to companies looking to target their ads.

Despite this concern, however, industry experts believe the Feds will eventually bless the move, albeit with Google perhaps forced to make some concessions over the amount of personal information it can collect and use.

And Microsoft’s recent $6 billion purchase (its largest buyout ever) of web advertising stalwart aQuantive, as well as Yahoo’s $680 million outlay to acquire RightMedia, shows that there are viable competitors. It also ups the ante between the big boys in this area, so look for a pretty interesting scrap to occur.

The Microsoft-aQuantive deal is huge and immediately propels Mr. Softie into the online marketing and advertising world with a vengeance. aQuantive profits surged 53% to $54 million last year, on revenues that spiked 43% to $442.2 million. Gates, Ballmer & Co. mean business here - and they’ve got the cash to succeed. After all, Microsoft offered $66.50 a share for aQuantive - a massive 85% premium over its share price at the time.

But it’s not just the web where things are heating up. The temperature is rising in the good ol’ fashioned newspaper industry, too…

Bancrofts Put Up The “For Sale” Sign

Media mogul Rupert Murdoch knows how to bat his eyelids in just the right way.

I flipped on my computer this morning and saw news that the Bancroft family, the controlling shareholder of the Dow Jones & Co. publishing company, has finally relented to Murdoch’s proposal and may now sell the firm. And after having an initial offer rebuffed, it puts Murdoch in pole position to toss $5 billion at them (at $60 a share, this is a 65% premium over the company’s pre-bid share price) and add yet another company to his News Corp. empire. This includes 20th Century Fox, FOX broadcasting network, Fox News Channel, the New York Post and the popular MySpace online friends network.

The main sticking point to a deal appears to be the Bancrofts’ fear that once Murdoch gets his paws on the firm, he’ll slice and dice it up into little pieces, damaging its independence and integrity. Murdoch says he’ll invest in the company and maintain its independence, but the union that represents The Wall Street Journal (which Dow Jones & Co. publishes) is against a Murdoch takeover, and the family will consider other offers - a situation that could spark a bidding war.

In response to the news, Dow Jones & Co. shares shot up around 15% today.

The potential Dow Jones-News Corp. deal is interesting, considering newspaper circulation rates and advertising revenues continue to dwindle. The industry recently reported another 2.1% readership decline over the past six months. That led to fellow publisher, the New York Times Company, reporting a 26% first-quarter earnings slump.

So you wanna know where the rest of the M&A action is?

Forget Gold And Silver… Look To Aluminum

We all know about how scorching demand is pushing up the price of gold, silver, copper and other metals. But here’s something you might not know: According to Bloomberg, this demand has triggered almost 500 deals or takeover bids within the metal industry.

And while it’s not the most glamorous metal, aluminum is charging forward with gusto. Prices have doubled over the past four years. And companies want to cash in. On May 7, Dow heavyweight Alcoa launched a hostile takeover bid for Canadian aluminum miner Alcan in a deal worth $27 billion (a 20% premium to Alcan’s all-time high on May 4). Alcan has rejected the offer, but if sealed, it would be the second-largest metal merger in history, following Mittal Steel’s $39 billion buyout of Arcelor SA last year.

Like Google’s bid for DoubleClick and Sirius Radio’s bid for fellow satellite radio company XM, this has set antitrust alarm bells ringing. But I’m not sure it’s warranted. Yes, the new company would boast twice the aluminum capacity of OAO Russian Aluminum. But considering that Russia and China already control over one-third of the global market for the metal, with Alcoa and Alcan both seeing their own market share erode in the process, they could use some competition.

But a deal is far from done. Apparently, Australian mining powerhouse Rio Tinto has hired an investment banker to size up a potential bid for Alcan itself. And rumors are swirling that Norsk Hydro ASA is about to submit a $30 billion bid for Alcan.

And then there’s the biggest buyout of the lot - and just like Braveheart, a classic Anglo-Scottish battle is underway…

British Bank Battle

Hot on the heels of a bid from fellow British bank, Barclays, a consortium led by the Royal Bank of Scotland (RBS), which includes Santander and Fortis, ponied up a massive $95.6 billion hostile offer for Dutch banking behemoth ABN Amro. That’s about 10% more than the Barclays offer.

The wrench in the works at the moment is ABN’s proposed $21 billion sale of its U.S. division, Chicago-based LaSalle Bank, to Bank of America - with part of the cash going to Barclays. Many saw this as a sneaky move on ABN’s part, given that RBS has a strong interest in LaSalle. In fact, RBS and LaSalle were close to a deal before RBS had to pull out to formalize its ABN takeover bid.

Enter the lawyers! A Dutch court froze the sale, saying ABN wrongly bypassed its shareholders by whizzing the deal through so fast, without approval. Bank of America then jumped into federal court and said the buyout is good to go under U.S. law. Now, the Netherlands Supreme Court is set to rule on an appeal against an order to freeze the LaSalle sale and whether ABN should have consulted its shareholders first.

And although the ABN board has blessed the Barclays deal, powerful ABN shareholders could yet scoot around that and call for a meeting to decide on the LaSalle sale and takeover proposal for themselves. So far, RBS negotiations with Bank of America to settle the issue one way or the other have gone nowhere.

Calling RBS “tall and deep” and Barclays “wide and thin” in terms of the two companies’ investment power, RBS chief Frank Goodwin believes his group has a “particularly comprehensive strategic fit in all of the main markets in which ABN Amro is operating.”

Regardless of whether RBS or Barclays prevails in this scrap, it would be the largest-ever banking takeover.

OK, let’s wrap this up…

A Quartet Of Potential Deals

According to Standard & Poor’s, the hottest sectors for merger and acquisition deals are media, finance, healthcare, energy, mining, manufacturing and transportation. Here are a few to watch:

  • BMW & Volvo: With Cerberus Capital Management having bought DaimlerChrysler’s Chrysler division for $7.4 billion, the Financial Times and Sweden’s Goteborgs-Posten reported that BMW might buy Volvo. Since Ford owns Volvo, this could lift the struggling U.S. automaker, which lost a whopping $12.6 billion last year ($327 million of which came from its Premier Auto Group that includes Volvo). While a BMW executive said a deal is possible, Ford has scotched the rumor - although the two have done business in the past, with Ford buying BMW’s Land Rover division in 2000. But some are wondering why BMW would want any part of Ford’s business now when its brand is pretty stacked already and has sales growth issues of its own.
  • Nasdaq Stock Exchange & London Stock Exchange: This one has been brewing for a while, with the Nasdaq’s hostile attempt to acquire the LSE. The NYSE and Australian group Macquarie have also filed bids, with the Nasdaq fighting a particularly interesting “Big Apple Battle” with its fellow stock exchange in the city.
  • NYSE Group & Euronext: These two exchanges are already in talks to merge. But the Tokyo Stock Exchange might yet jump in, having expressed an interest in a NYSE-Euronext marriage. Hope it’s not a third wheel!
  • US Airways, Delta & Northwest: Having withdrawn a $5.2 billion bid for Delta in January, will US Airways return to the well, now that Delta is trying to battle back from bankruptcy? Some have also touted Northwest as a potential bidder for Delta, and a consolidation of the sector’s weaker players would make sense.

What seems certain, however, is that the blistering hot M&A market will continue for the foreseeable future. Despite a weakening economy, the urge to merge has rarely been greater. Companies are cashing in on previous strength, a scorching stock market, and a truly global economy to make a deal. And it may be that investors are rushing into the market, in hopes of snagging the next takeover target. While it’s tough to predict exactly which companies will get bought out, this is nevertheless a very important trend to follow for the rest of the year.

Best regards,

Martin Denholm

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Today’s Smart Profits Action Center

  • In the latest M&A news, Wachovia is acquiring A.G. Edwards for $35.80 a share - a 16% premium… Lehman Brothers and Tishman-Speyer Properties are finalizing a deal to buy apartment REIT firm Archstone-Smith for over $12 billion… and URS Corp. has agreed a $2.6 billion deal to buy Washington Group International.
  • Another sector that might be ripe for a round of takeovers is real estate. The number of home sales slumped by the biggest amount in 17 years in 2006 - and the market isn’t getting much better. As homebuilding companies’ profits and share prices have fallen off the cliff, speculation is mounting that some firms may have to consolidate to recover market share, grow together to become a stronger player, or diversify into specialty markets like apartments/condos, retirement communities, or luxury homes.
  • When you talk about expensive acquisitions, the region seeing the hottest activity is the American Southwest. And it’s pretty darn critical, too - as it concerns a commodity that is essential for everyone in the area. Since 1994, one company has specifically targeted the water industry here, gobbling up land and water rights to such an extent that it now owns 1.3 million acres in Nevada, Colorado and Arizona. And it’s about to sell them for 1,285 times the original purchase price. That will inject $408 million into its coffers - with another four major deals already in the pipeline. To discover how this opens up some explosive investment opportunities, read the special report here.

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