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Future And Commodities Options:

An Insider’s Look At One Of The Most Explosive Markets
Smart Profits Report Issue #499
February 21, 2008

By Lee Lowell
Futures Options & Commodities Specialist, Smart Profits Report

Editor’s Note: “If you’re not taking a serious look at commodities as a viable addition to your overall investment portfolio, then you’re missing out on some potentially very lucrative profits.” So says our resident commodities expert, Lee Lowell. And Lee should know. He’s a 17-year veteran of the commodities world, spending six of them as a real insider - a market maker on the trading floor of the NYMEX, where he was one of just a few guys who actually set the price of oil and natural gas. That’s why we’re introducing an added benefit to your Smart Profits Report - a bi-weekly commentary of what’s happening in the critical commodities sector. We’ll analyze the major commodities, give you the latest news, trends and charts, and show you what to expect in terms of price movement, so you know how to profit. Over to Lee…

Stocks Dominate… But Commodities Drive The World’s Everyday Living

We live in a stock-dominated financial world.

Apart from perhaps the oil and gold markets, the commodities sector doesn’t get much attention, compared to the stock market. Most media outlets prefer to focus their attention on stocks.

But let me tell you something: For all the talk about how fortunes are made and lost in the stock market, that happens just as much in the commodities market. Having covered commodities pretty much exclusively over my 17 years in the business, I’ve seen this at first-hand.

If you’re unfamiliar with the commodities markets, don’t worry. This segment is a great chance to get up to speed. You see, investing in commodities isn’t really all that different to investing in stocks. Just as you invest in stocks and stock option contracts, in the commodities world, you do it through futures and futures options contracts.

So what exactly are commodities?

The Twin Combo Driving The Commodities Wagon

Simply put, commodities are everyday consumption items such as oil, natural gas, wheat, corn, soybeans, coffee, sugar, cocoa, cotton, orange juice, etc. Gold is also a member of the commodities market. There is a large and thriving market for all these products and we want to show what’s happening in the current environment.

Unlike stocks, which have a variety of external influences, the main factors that drive commodities prices are very simple:

• Supply and demand
• Growing cycles
• Weather conditions

Obviously commodities can be volatile, just like stocks. But because there are real-life, unbiased factors like this involved, it makes the commodities market a little easier to predict. That gives investors a great advantage.

As I mentioned, two commodities are dominating the headlines at the moment: Oil and gold. It’s not hard to see why.

Both are hitting all-time highs and don’t look like they’re going to stop rising any time soon. Oil recently eclipsed the $100 per barrel mark and gold has traded above $940 per ounce. Let’s see what’s in store next…

The “Mack Daddy” Of The Commodities World

You want excitement? With intraday moves of $3 to $4 per barrel, crude oil is rocking and rolling its way higher. That’s a dollar value move of $3,000 to $4,000 per single contract alone! And there are people who are trading 100 contracts at a time.

While such moves whip the media and investors into a frenzy, there are many others who are loving the volatility and are using it to rake in a fortune from the market. Take a look at the chart to see what I mean…

As recently as early September, crude oil traded around $70 a barrel. But just look at the spike we’ve seen since then. Just a few hours into 2008, oil finally hit the long-awaited $100 level.

What many casual observers don’t realize, however, is that this $30 span is representative of a dollar value of $30,000 when trading futures or futures options contracts.

Even with expected pullbacks along the way, it doesn’t seem like the psychologically significant level of $100 is going to hold this market back. There’s enough turmoil overseas and huge speculative hedge fund money to keep this market humming for a while.

Gold Following In Crude’s Oily Footsteps On The Way To A Watershed Level

When oil prices rise, gold prices also tend to rise, as investors look for a traditional safe haven hedge against high oil. This is what we’re seeing today, as gold prices have experienced a move almost as impressive as oil. Take a look at the chart…

With September again serving as our starting point here, you can see that gold has jumped $240 per ounce. That’s a dollar-value move of $24,000 per contract.

While $100 is the important mark for oil, it’s $1,000 for gold - and again, there is little standing in the market’s way right now.

Oil And Gold Grab The Headlines… But Wheat Wins The Price Spike War

The last commodity I want to discuss today is wheat. This market hasn’t received as much press as either crude oil or gold, but if you look at the sheer price movement in the chart below, it has eclipsed both of those markets.

That’s one heck of a run. From lows around $5 per bushel as recently as May last year, wheat has experienced a staggering run to its recent high of $11.50 per bushel. In dollar terms on an options contract, that equates to a huge move of $32,500.

So what’s the reason for this spike? As I mentioned at the top, weather conditions are a major influence on commodity prices - and wheat crops have endured a severe drought in overseas growing regions. Add this supply strain to growing demand and you’ve got the recipe for a major bull market - one that’s set to continue in the light of recent forecasts…

Government And Goldman Project Lofty Future For Wheat Prices

The U.S. is the world’s top wheat exporter… and the latest figures from the Department of Agriculture predict low supplies and high prices over the coming months, due to continuing strong demand.

In January, the USDA projected that U.S. wheat stocks would total 292 million bushels by the end of the 2007/08 marketing year on May 31. But recent shortages have resulted in a sharp downward revision to 272 bushels. This is the lowest level since 1947/48, according to Goldman Sachs’ weekly Commodities Watch report.

In light of this supply shrinkage, Goldman itself has raised its price forecast for wheat futures to $13.50.

These are three of the biggest commodity movers at the moment. I’ll be covering them - and other markets - in future editions. Meantime, if you’d like some free information about these products, check out the websites of the exchanges that these products trade on. Here are a few:

www.nymex.com
www.cbot.com
www.cme.com
www.theice.com
Talk to you again soon.
Lee Lowell
Today’s Smart Profits Notes:

• Oil prices dropped today following a report from the U.S. Energy Department that showed oil inventories rose by 4.2 million barrels last week - well above the projected forecast of a 2.9 million barrel increase. In addition, renowned commodities investor T. Boone Pickens popped up on CNBC and stated that he’s currently short on oil, as he believes the black goo is set for a short-term drop in price. In fact, he predicts a hefty fall of $10 to $15 per barrel during the second quarter… but not for long. He says oil will spike back to $100 a barrel again in the second half of 2008.

• In a volatile market like this, wouldn’t it be great to line up an investment and know that you have an 80% (or higher) chance of turning a profit before you even pull the trigger? That’s exactly what Lee Lowell does all the time in his Triple-Zone Profit Trader commodities investing service. He does so using the probability calculator - a tool that the pro traders know about, but most ordinary investors don’t. On Wednesday, Lee cashed out of a position in the cocoa market for a 44% gain in just one week. And just today, he closed out a cotton trade for 99% in 10 days. For more details on this explosive service, give our friendly VIP Trading Services team a call at: 888.570.9830 (within the U.S.) or 410.454.0498 (from overseas).

Related Articles:

Investing in Commodities: Four Reasons Why Commodity Investing Is Better Than Trading Stocks

Futures Commodities: How To Invest In The Volatile Commodities Market

Renewable Energy Resources: How To Profit From Rising Oil Prices & A New Boom In Renewable Fuels

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Managing Your Portfolio:

What Does Chocolate Pudding Have To Do With Your Portfolio?
Smart Profits Issue #498
February 19, 2008

By Marc Lichtenfeld
Senior Analyst, Smart Profits Report

I’m not sure when it happened and I’m not sure how it happened, but one day I woke up and had become my Dad.

I swore it would never happen to me, but there I was doing the grocery shopping at 8:00 AM on a Saturday.

8:00 AM! And on a holiday weekend, too.

As a teenager, I distinctly remember thinking, “Why would anyone in their right mind get out of a perfectly good bed early on the weekend to go food shopping?”

Yet there I was this past Saturday morning, strolling through Publix in a world of frozen pizza and bananas.

And that’s when things got a little depressing…

Full Bellies… Full Gas Tanks… But Empty Wallets

In the past, I’ve always been able to hit the grocery store and get out of there about $100 lighter in the wallet. But as you’ve probably noticed yourself, food prices are taking a heftier toll on consumers these days. When I leave now, I’ve paid $120 for the same groceries.

Story continues below…

On Saturday, I noticed just how high some prices had risen. By my unscientific calculations, bananas are up about 20% over last year, chocolate pudding (one of the major food groups in my household) has climbed 12%. Corn, orange juice, cereal… the list goes on. Nearly everything we buy has seemingly gone up in price.

But when you think about it, this trend isn’t entirely surprising. Consumer prices shot up 4.1% in 2007 - the biggest jump in 17 years. Energy costs rose 17.4% while gasoline skyrocketed 29.6%. Food was higher by 4.9%. And economists predict that January’s consumer price figures will show a further 0.3% rise.

Inflationary times call for similarly inflationary measures - at least when it comes to beefing up your own finances…

As Interest Rates Head Lower, Inflation Heads Higher

What makes this bout of inflation so unnerving to a lot of people is that their investment portfolios may not be keeping pace with rising costs. In 2007, for example, while inflation was up over 4%, the S&P 500 posted only a 3.5% gain.

And short-term money isn’t keeping up with inflation either. For example, my money market account currently pays 3.8%. If inflation rose by the same amount as last year, the buying power of my ultra-safe cash holdings would actually decrease.

Right now, investors are in a real quandary. They’re faced with a situation where GDP growth, the real estate market, and stock market are all falling. This is forcing the Federal Reserve to lower interest rates… even as inflation rises.

So if they want to see higher yields or returns, they’re forced to take on more risk. However, if you’ve got time on your side, I wouldn’t be too concerned. In fact, the next year may be a good time to increase your exposure to the stock market.

How To Build An Inflation-Beating Portfolio

Since 1950, the compounded annual growth rate of the S&P 500 is 8.7%.

Keep in mind that most years won’t return 8.7%. Some ugly years might see measly returns, while other years could bounce to gains of over 20%. But those investors in the market for the long haul should have no problem beating inflation.

For example, my wife and I recently reviewed our portfolio and despite all the negative news reports about recession, inflation and financial Armageddon, we’ve decided not to touch our asset allocation (we almost never do). In fact, we’re looking to put more money into the stock market over the course of the year.

The reason is simple: I don’t try to time the market, so I’m not waiting for it to hit a specific level before I increase my stock holdings. Instead, we plan to buy beaten-up stocks and mutual funds several times over the next year.

So what sectors will I be looking at?

One To Buy… And One To Bury

Amid the market beatdown recently, there are several sectors that look attractively cheap at current levels.

Then again, there are other sectors that still look like pigs, no matter how much lipstick you slap on.

One To Watch: The Financial Sector: Most of the bad news may already be priced into the sector and I’ll be scouting investment opportunities with interest over the rest of the year.

One To Avoid: Homebuilders: However, I’ll avoid the homebuilders. They might be cheap, but I think they have potentially to get hit even more and become cheaper. After all, Toll Brothers (NYSE: TOL) CEO Robert Toll recently stated that, “The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel.”

Here’s what else you can do to get proactive in a market that is currently enduring many knee-jerk reactions…

Injecting Some Health And Cold, Hard Cash Into Your Portfolio

As a healthcare specialist, I’ve naturally always been a big fan of investing in the sector - both the big pharmas, as well as emerging biotech.

I’d also suggest that you get proactive regarding your short-term cash. Brokerages and banks are running all kinds of specials to attract new deposits. The Internet is filled with sites that will show you the highest yielding CDs and money markets.

The highest-yielding money market I found was 4.39% at Everbank. I only dug up one 3-month CD yielding higher than 4%. But if you do your homework and are ready to pounce on a special offer, you may find something more to your liking. Last month, for example, TD Ameritrade had a special 5.3% 3-month CD for new money - a sensational rate in this market.

Here are a couple of websites to get you started:
http://www.bankrate.com/brm/static/cd-rti.asp
http://www.money-rates.com/cdrates.htm

Satisfied? Dissatisfied? Here’s The Bottom Line…

This is a tough environment to manage your finances. A possible recession, weak stock market and rising inflation, coupled with low interest rates, make it difficult to get ahead. But here’s the bottom line…

If you’re satisfied with your asset allocation and can live with volatility for a couple of years, I wouldn’t change too much, except to add some exposure when you can.

If you’re not satisfied with your financial picture, take the necessary steps now to make some changes, using some of the ideas above if it fits in with your plan. If you don’t, your buying power will deteriorate.

That’s a scenario I can’t afford in the wake of higher pudding prices.

Marc Lichtenfeld

Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now

Today’s Smart Profits Notes:

?An “unforeseen and unprecedented shift.” That’s how the United Nations describes the rapid shortage in global food supplies. According to the U.N. Food and Agriculture Organization (FAO) records, wheat reserves sank 11% in 2007 to the lowest level since 1980, while there are only 8 weeks of global corn reserves on tap. The global shortage has resulted in a food price spike across the world. In fact, the FAO’s food index soared by 40% in 2007, compared with a 9% rise in 2006.

Related Artcicles:

Ethanol Fuel: How To Combat Rising Food Prices Due To Ethanol’s Costly Production

The Weak U.S. Dollar: How To Combat The U.S. Dollar’s Demise Through Global ETFs

Three Monkeys on the Economy’s Back - And How To Shake Them Off

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What To Do in a Volatile Market

While Everyone Else Runs In Fear, Here’s Why I’m Jumping In
Smart Profits Issue #497
February 14, 2008

By Karim Rahemtulla
Investment Director, Smart Profits Report

When the going gets tough, the tough go shopping.

That’s certainly true when it comes to investing - and today, I’ve got the ultimate retail therapy for you.

Just six weeks into 2008 and it’s already been a very long year for most investors. Wall Street is worried - hardly surprising since the stock market has bounced up and down like a volitile yo-yo since the ball dropped in Times Square.

Fed Chairman Ben Bernanke piled on this morning, stating: “The outlook for the economy has worsened in recent months and downside risks to growth have increased.”

Like lemmings, investors promptly picked up on Bernanke’s comments and stocks sold off. It was amusing to flip the TV on to see the pundits whipping themselves into a frenzy over it, too. It’s so predictable that if this were Las Vegas, you could clean up.

Actually, the smart investors can.

You see, while stocks fall and volatility increases, I become more excited, not more worried. Don’t get me wrong… I don’t want to see the stock market crash. I don’t even want to see a long-term decline. And I certainly don’t want to see people losing money.

But when you’re investing, times like this are going to happen. It’s an inevitable fact. The question is: What do you do?

Shop Smart In Life… Shop Smart When Investing

Most folks try to be smart shoppers in life. After all, who wants to pay over the odds, or full price, for something? I’m a product of the frugal genes passed down to me and I hardly ever go shopping unless there is a sale.

Right now, the stock market is on sale, so why not extend that same theory to investing? Be a smart shopper - and smart investor. If you want to buy stocks, ETFs, bonds, or real estate, pay prices that make sense.

Of course, we should pay some attention to history here…

Let History Be Your Guide… Don’t Believe The Hype

Since the Great Depression, the market has acted quite rationally by providing opportunities to those who bought at the right time and the right price.

Even during the dotcom collapse, people made money by buying early and then selling into the hype. Of course, many people lost money too, but that’s because they got in too late and paid too much (not to mention the fact that many companies had flimsy business models and no profits).

It really is that simple to me. If you ignore value and get sold on the hype, you’re destined to repeat the mistakes of the past. In my opinion, this is one of those times. Remember, there is always a possibility that the market could crash. That would be painful for everybody.

But the current confluence of indicators and stimuli in the market do not point to anything other than a good, old-fashioned correction and maybe even a bear market of sorts, not “the sky is falling… sell everything” hype that some would like you to believe.

There’s Always A Bull Market Somewhere… Find It And Cash In

Right now, times are tough for those who joined the real estate party at closing time and bought property at the highs (see today’s “Smart Profits Notes” below for a vivid example of this). But it’s really no different than other times - like the Savings & Loans crisis, or the dotcom bubble, or even tulip mania.

Remember, there is always going to be a segment that gets hurt. But that also means that there will be a segment that finds opportunity in crisis. And those willing to look past the sensationalist headlines, look past the next quarter (or even 12 months) and sniff out bargains may see huge gains if they deploy their cash wisely.

And amid the “crisis,” there are several factors that can help us…

Take Advantage Of The Stimulus

Looking to pick up some bargains and profit while everyone else is scared? There are a couple of things in the buyer’s favor…

• The Federal Reserve is in full stimulus mode
• The U.S. Treasury and federal government is in full stimulus mode

When stimulus is applied to a sick patient, he usually responds. But the questions are: How long until those results take place? Will the stimuli produce the intended positive results? How will the patient finally end up?

In the current market, the stimulus is very positive. Interest rates are extremely low and that provides the opportunity for leverage for those who didn’t get sucked into the high price game of the past five years.

Sure, we hear about pain, but everyone does not share that pain. That’s like saying that we’re all subprime borrowers, that nobody is saving any money, and that we’re all overextended. So ignore the sweeping statements you might here elsewhere. It’s just not true. There are many who will take advantage - many who’ve waited patiently for a time like this.

Yes, there are pockets of real weakness in the system - real estate, for one. But just because someone needs an appendectomy, we don’t euthanize him to solve the problem. So there is pain and a reduction of the wealth that accumulated at a very fast pace - but not total catastrophe.

There are another couple of factors, too…

The Dollar Is Dying And The Masses Are Miserable

The U.S. dollar’s slow, painful demise is a great example of how we overestimate the country’s bad health.

Yes, of course it makes us feel bad when we hear about our currency struggling so much and how foreign governments are switching out of the dollar. But since when did a government take the prize for intelligence?

Maybe you can recall when gold was $250 per ounce - yet the central banks in Europe were selling reserves. Hmm… wouldn’t want to take the credit for that call!

Yes, a low dollar stinks if you’re going overseas. But a low dollar is bullish for the U.S. financial system. Money flows into the U.S. from abroad are dwarfing those of years past. Why? Because foreigners are bargain-hunters too - and U.S. assets are cheap.

Consider purchasing power as one indicator. The U.S. dollar still buys a Coke at Wal-Mart for 30 cents. The same Coke that sells for $1 in France. We’re not the only ones that know this little secret. Maybe that’s why these massive foreign government funds are so ready to provide us with capital. Of course, there could be another reason, too. It’s kind of hard to sell a patient drugs (in this case, oil and Chinese goods) if he’s dead.

As for negative sentiment, it couldn’t get much worse. Just about every national publication is calling for financial Armageddon and the death, once again, of the dollar.

While The Pundits Take The Market’s Pulse, Hit The Bargain Basement

The wildcard is luck. But in the case of the stock market and the economy, we don’t call it luck. We call it confidence.

The worse the patient (i.e. the economy and stock market) feels, the longer it will take to recover. Right now, we’re taking the stock market’s pulse every minute, counting the time until recovery mode sets in. There will be ups and downs along the way and significant obstacles on the horizon to overcome (one of the biggest being the presidential election in November), but it’s just a matter of time.

If we can see past the current malaise and look at the stimuli (both domestic and foreign), then we’re actually not facing a “run for the hills in fear” scenario, but instead a massive opportunity to go bargain hunting.

So do yourself a favor and spend some of your money on some of those stock market bargains. But spend it wisely and with thrift. Wait for the prices to excite you for the long-term. If the patient dies, we’ll all be mourning. But if he recovers, some of us will be much better off for taking the time to understand the diagnosis, rather than panicking and fearing the worst.

To profitable investing,

Karim Rahemtulla

Today’s Smart Profits Notes:

• “To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.” So said Fed chief Ben Bernanke in comments to the Senate Banking Committee. Talk about an understatement. The latest batch of real estate woe came from the National Association of Realtors today, who said existing home sales fell in 45 of the 50 U.S. states, as well as Washington, D.C. during the fourth quarter. The nationwide sales figure crawled in at an annual rate of 4.96 million units - a 21% slump from Q4 2006.

• Breaking down the data, the only states to escape the misery were the Dakotas - the North showed no change, while the South posted an 8.9% jump from Q4 2006. Indiana, New Hampshire and Idaho didn’t provide figures. In all, 77 of the 150 metropolitan areas endured a drop in sales, with 16 of them slumping to double-digit declines.

Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now

Related Articles:

• Investing In The Fear Effect: How To Buy Bargain Stocks When There’s Blood In The Streets
• The Weak U.S. Dollar: How To Combat The U.S. Dollar’s Demise Through Global ETFs
• Contrarian Investing: The Best Investment Strategy You Should Use Today

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A Powerful Investment Strategy In Today’s Market

Five Reasons Why You Should Use This Powerful Strategy In Today’s Crazy Market
Smart Profits Issue #495
February 12, 2008

By Karim Rahemtulla,
Investment Director, Smart Profits Report

In a crazy, topsy-turvy market like this, many investors can barely afford to take their eyes off it for too long, for fear that the next time they look, the bears will have once again ravaged their portfolio.

Most don’t know where to turn for solid, profitable advice and spend too much time listening to mainstream media sources that specialize in bland, one-size-fits-all reporting and pay way too much attention to what the crowd is doing.

So at the end of yet another volatile week, separate yourself from this crowd and invest in a smarter way. Today, I’m going to show you one way to do that…

“Leap” Ahead Of The Crowd With This Pro Technique

Most ordinary investors are perfectly content to stick with a tried-and-tested stock investing strategy. There’s nothing wrong with that, but when the market decides to lurch around like a rollercoaster, many folks end up dazed and totally confused.

They simply don’t have the knowledge that allows them to stay protected and profitable when the market heads south. Don’t be one of those guys. You can certainly do better.

As you may know, I’m very fond of using certain professional investment strategies as an alternative investment tool to just plain old stock investing. And contrary to popular myths, they’re not confusing or complicated.

I’m talking primarily about strategies like covered call options and bull spreads. But today, I want to focus on one strategy in particular that is excellent in a volatile market: LEAP options. Let me give you five reasons why…

Five-Star Protection And Profitability In A Down Market

#1: LEAPS Are Cheap: In the current market, the possibility of getting stopped out of an investment, or enduring a hefty loss is significantly increased. The whipsaw action has smashed many portfolios that I’m sure investors thought were solid.

So let me ask you this: Would you rather lose 20% or 25% of your capital with no possibility to make any money back, or have just 10% of your capital at risk, with a comfortable time cushion built in to recover any losses and still make a profit? LEAP options are long-dated securities that allow you to risk a very small amount of money up front, compared to forking out for the underlying shares.

For example, you could buy 100 Walt Disney (NYSE: DIS) shares today for $32 - a total outlay of $3,200. Or you could buy one options contract (equivalent to 100 shares) in January 2009 $32.50 LEAP calls for $2.30 - a total outlay of just $230 ($2.30 x 100).

#2: Time Is On Your Side: When you trade short-term options, time is your enemy. With LEAPS, though, you can make the same rational decisions about investing in a company that you do with stocks. But because LEAPS can expire in one, two or even three years in some cases, it gives you the flexibility to withstand a lot of adverse short-term market action. So in the Disney example above, you’d give yourself almost a year to be right while the market volatility subsides.

#3: Build A LEAPS Portfolio That Beats Stocks: Because LEAP options are available on so many companies, sectors, and ETFs today, you can build an entire portfolio of LEAPS, leave the rest of your money in a nice money market account and make more on your investment than you would with a stock portfolio.

Of course, the downside is that you’d miss out on any dividend payments. But on the upside, you can almost get a free ride on the market if you work it properly.

Here’s how: On your next stock trade, consider buying a LEAP option instead. As you’ve seen, you can save a big chunk of cash by doing so. Put the money saved that you didn’t spend on the stock into a money market account for two years. The interest you’ll get on that hefty amount may well cover a large chunk of the money you spent on the LEAP option - maybe ALL the money.

#4: You Can Go Long Or Short With LEAP Options: You don’t just have to go long with LEAPS. You can protect your portfolio from downside moves by buying LEAP put options on individual stocks or indexes without worrying about the unlimited downside risk of shorting stocks. Your downside is limited to what you paid for the LEAP option.

#5: LEAPS Are Easy To Trade: You can execute LEAP options in any type of trading account, including your IRA. They are liquid investments that provide you with a well-rounded, diversified portfolio.

To profitable investing,

Karim Rahemtulla

Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now

Today’s Smart Profits Notes:

• LEAPS… calls… puts… if you’re unfamiliar with any of the options terms used in today’s article, or need a quick refresher, check out our one-stop Smart Profits Glossary.

Related Articles:

LEAP Options: The Pro Strategy That Provides Protection And 177% Profits

Stock Option LEAPS: Buying LEAPS Or Stocks… What You Should Do

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Healthcare and Construction Investment Sectors:

Smart Profits Issue #496
Tuesday, February 12, 2008

Two Solid Election Year Investment Sectors: Healthcare and Construction

By Martin Denholm,
Managing Editor, Smart Profits Report

It’s presidential primary day here in Maryland today, as well as in Washington, D.C. and Virginia.

Having been left for dead just a few months ago, Republican frontrunner John McCain stormed into the area riding a remarkable wave of momentum. On the other side, a Democrat dogfight is in full swing, with the Clinton bandwagon rolling through on Sunday and Monday, while the Obama team hit the First Mariner Arena in downtown Baltimore on Monday afternoon.

But as city traffic came to a grinding halt, this taxed-but-unable-to-vote English guy hung around at the office a little longer, thinking not about political pontificating, or hanging chads, but about how an election year affects the stock market and which sectors could fare well…

As Political Rhetoric Ramps Up, The Healthcare Sector Will Be Thrust Into The Spotlight

While it’s difficult to predict exactly which stocks could receive a boost, there are certain areas that are more prone to move on election developments than others. Let’s cover a couple of them beginning with Healthcare…

Healthcare: We’ve mentioned healthcare here before as a very good sector to invest in during an economic downturn or recession. But that holds true during an election year, too. No matter what politicians say or do, people will still get sick and will still need their drugs and medication.

You’ve heard the election year buzzwords and phrases as often as I have, as the struggle continues to find a so-called “universal” healthcare plan that is “inclusive” and “affordable.” In an election year, that rhetoric kicks up a notch and puts healthcare stocks in the spotlight. Many stocks could move higher on the perception that the sector will see increased R&D funding.

With a massive number of Americans currently uninsured and not able to afford adequate healthcare, you may see the government working more closely with the major drug manufacturers to form a drug pricing plan that covers more people. The bottom line is that drug companies want to sell as many drugs as possible to as many people as possible - but at the right price. So if negotiations happen, the subsequent share price performance of Big Pharma and drug manufacturers will be affected by how successful the outcome is.

As Baby Boomers Prepare To Retire, Biotech Is Set For Big Developments In The Healthcare Sector

The fact is, though, that many diseases still need treatment, cures and basic research. In addition, with the baby boomer generation just about to hit retirement age, healthcare is more important than ever.

That means biotechnology could be set for a big year. My colleague, and biotech expert, Marc Lichtenfeld tells me that many biotechs are expecting phase III data, or an FDA decision this year - pivotal events that could propel shares by double, even triple-digit percentages. He’s got a couple to keep an eye on…

Genentech (NYSE: DNA): This biotech heavyweight already has approval for Avastin, used for colorectal and lung cancer. But on February 23, the FDA will make its decision on Avastin for breast cancer (with the drug already approved in Europe). Avastin is also being tested in a variety of other tumors.

Onyx Pharmaceuticals (Nasdaq: ONXX): The company already hit a home run with Nexavar, a drug that treats kidney and liver cancer. In lung cancer, the drug is phase III trials, in combination with chemotherapy, and phase II trials as a single agent. Positive data could send the shares even higher.

Thanks, Marc. I’ll add that if a Democrat claims the White House, I believe it could also bode well for companies involved in stem cell research, as current restrictions will likely be eased, or lifted altogether.

By the way, having already grabbed a 99% win on the first half of his BioMarin (Nasdaq: BMRN) recommendation - and currently sitting on a 115% gain on the second half, as the stock reaps the rewards from the Kuvan drug success - Marc is also about to make a new healthcare recommendation in the March Xcelerated Profits Report issue that he thinks has superb moneymaking potential. To get on board and find out what it is, follow this link.

I’ll wrap up today with one more sector that could fare well this election year…

Spending To Sustain America’s Vital Operations With the Construction Sector

Construction: As the U.S. population grows, resources become more depleted and strained. This includes both natural resources like water, and also man-made areas like roads and bridges. Here in Baltimore, everywhere I turn, there’s a construction crew digging up a road - part of the city’s “Operation Orange Cone” project (my suggestion of “Operation Yet More @#%*$&* Roadworks” didn’t seem to fly).

But as inconvenient as construction might be, infrastructure spending is vital for the health of the economy and population and is an issue that both political parties can generally agree on. It could see a spending boost with a new president, but the priorities may differ, depending on who it is.

Remember, while it’s important to pay attention to what’s happening politically to gauge what might happen to certain industries, you shouldn’t let the presidential election sway your investment decisions too much. It’s more important to stick to a company’s individual prospects and fundamentals.

Best regards,

Martin Denholm

Today’s Smart Profits Action Center:

• Six weeks into the election year, the Dow Jones Industrial Index is performing true to election year form - at least according to researchers at Chart of the Day. The group says that in each average election year since 1900, the index has historically endured volatile, choppy trading over the first five months of the year in the uncertain runup to polling day. After that, however, the index has tended to rally as the picture becomes clearer.

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• Healthcare Investments: 5 Steps to Investing in Healthcare During a Bad Economy

• The Water Industry: Water Wars Begin On The World’s Most Precious Resource

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The Element Of Surprise And A “Giant” Upset

The Element Of Surprise And A “Giant” Upset… How A Sports Shock Relates To Investing
Smart Profits Issue #494
February 6, 2008

By Marc Lichtenfeld
Senior Analyst, Smart Profits Report

I watched in disbelief as the New York Giants knocked off the New England Patriots last Sunday in the most thrilling Super Bowl that I can remember. It was also one of the biggest upsets in the history of the showpiece.

Although I was born and raised in New York, I didn’t give the Giants much of a chance against the then-perfect Pats. Good thing I’m a stock picker and not a football handicapper!

What the upset did do, however, was remind me of a life lesson learned long ag Expect the unexpected. And it wasn’t just the game that demonstrated this. That nugget of wisdom was reinforced to me on two other occasions last week. Here’s the story - and what you can learn from it with your own investments…

The Housing Slump Is No Surprise…

We hear a lot these days about how badly the real estate market is slumping… how homeowners have over-extended themselves and can’t keep up with mortgage payments… how foreclosures have skyrocketed and people are losing their homes and investments… how sellers can’t sell and have to significantly lower their asking price.

With each new set of poor data, the pundits busily start speculating about what it means for the market. Some are even surprised that the situation has spiraled downward to such a miserable extent.

But you know what? When the real estate bubble was inflating over several years, there was no doubt that it would eventually pop and the situation would get ugly. I was certain that speculators would get burned and the days of cheap and easy credit would come to a halt.

However, the credit contagion is seeping into areas that I did not foresee - and you need to be aware of them in order to protect yourself…

… But The Far-Reaching Effects Of The Credit Crunch Are Springing Some Surprises

Surprise #1: It’s Not Just Homeowners Getting Hit: One of our favorite medical technologies is the CyberKnife, designed, manufactured and sold by Accuray (Nasdaq: ARAY). The CyberKnife is a cutting-edge radiosurgery device that is able to track any cancerous tumors anywhere in the body, then kill them using non-invasive surgery. It uses powerful, deadly accurate beams of radiation to do this, so side effects are minimal. It’s an alternative to traditional invasive surgery that is less accurate and does have greater side effects - and the technology is quickly being adopted across the world.

However, Accuray missed quarterly earnings estimates last week and lowered its future guidance because some free-standing facilities (non-hospitals) are having a difficult time getting credit to build the necessary room to host a CyberKnife. In other words, these cancer centers can’t get a construction loan.

Yes, I expected housing to fall on its face, but I did not expect medical facilities to have a hard time getting loans - especially in a high growth area like cancer.

Surprise #2: The Rich Are Impacted, To Although the credit crisis has hit hard, with far-reaching effects, I expected wealthy Americans to be relatively immune from the fallout. However, property values are falling so fast and access to credit is so tight that some are delaying or canceling big purchases or plans.

Case in point: We know a couple that got out of the rat race and essentially retired at age 40. They bought a house four years ago for about $850,000 in a wealthy equestrian community and watched as its value surged to $1.3 million.

However, our friends recently applied for a home equity loan in order to convert the three-car garage into an office. Their house appraised for just $775,000. Because of the low appraisal, they did not qualify for a large enough loan to undertake their project.

So what does this tell us? And what can we do about it?

Judging The Length And Scale Of A Recession - And How You Can Profit Regardless

Are we headed into an economic recession, or are already in one? I don’t see how we can’t be when people who want to spend can’t do it.

And as I said, the effects are far-reaching and hitting all kinds of people and industries. For example, how many contractors won’t work just because of the two examples cited above? How many goods and services will those contractors not purchase because they don’t have steady work? And on down the line it goes.

I’ve stated here before that I’m a straight stock picker, not a market timer. However, it’s not a stretch to see that the stock market has traded in an established downtrend since October. From here, I expect more losses, to the point where it’s officially classified as a bear market (when stocks fall 20% from their highs).

As for how long it lasts, and how far down it goes, let’s turn to InvestTech Research. The group states that since 1950, the average bear market has lasted 14 months and has sliced 33.5% off the S&P 500.

So if the current conditions evolve into an official bear market, we have 10 months and a fall of about 280 points on the S&P left to go before we’re in line with the average bear market.

So what do you do now?

If you have money in the market that you’ll need in the short-term… sell. But given that I’m not an advocate of market timing, you shouldn’t have short-term money in the stock market anyway.

If you’re in the market for the long-term, I actually don’t see a reason to panic. In fact, I’d start identifying stocks that you’re interested in owning at a lower price, because the chances are you’ll get the opportunity.

But of course, always remember that the unexpected could happen. Fed chief Ben Bernanke could continue to cut interest rates to zero in a mad, market-rescuing attempt. The S&P could rally all the way up to 2,000. I don’t think either of these scenarios is likely. But then again, life has a way of surprising us. Just ask Tom Brady.

Good investing,

Marc Lichtenfeld

Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now

Today’s Smart Profits Notes:

• Expect the unexpected: For the first time in almost five years, the U.S. service sector contracted in January - a report that goes some way to explaining why the U.S. economy shed 17,000 jobs last month, since services have fueled the nation’s job growth for several months. The reading of 44.6 points on the Institute for Supply Management’s (ISM) index was significantly under the 50-point line that separates growth from contraction. The service sector includes businesses like banking, retail, restaurants, travel and construction, but just three areas (utilities, educational services and professional services) showed expansion in January, while 14 sectors declined. Given the stock market’s ugly reaction to the report (the Dow, Nasdaq Composite and S&P 500 all sank around 3% on Tuesday), it heightens fears that the U.S. economy is either already in, or is rapidly approaching, a recession.

• No matter whether the U.S. economy is in a recession or not, rest assured that it won’t stop the team of professional traders at the Xcelerated Profits Report from making money for you. That’s because, with around 80 years worth of combined market expertise, they’ve experienced just about arrow that the market can sling at investors and weathered many financial storms. In recent months, they’ve handed investors gains of 117%… 99%… 79%… and 65%. Not only that, they guarantee an 80% win rate on their recommendations.

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Three Ways To Invest Money:

Smart Profits Issue #493
Monday, February 4, 2008

Three Ways To Invest Money In The Financial Sector

By Karim Rahemtulla
Investment Director, Smart Profits Report

If you’re an Xcelerated Profits Report subscriber, you’ll know that I’m currently very bullish on financial shares and recently recommended one of the strongest banks in the business, which is already showing signs of a recovery. This is partially why I wanted to give you this, a quick guide with three ways to invest money in the financial sector.

Although there is plenty of pain in the sector, it will eventually turn into Jim Cramer’s proverbial “house of pleasure.”

Don’t get me wrong… I’m not so gung-ho on the sector that I’m buying whole hog. But I’ve been nibbling week after week since about mid November. So has Dan. But what are we buying?

Three Ways To Find and Invest in A Robust Bank

Investing in a battered sector like financials right now does take a little courage. But not as much as you might think if you play it correctly. Independently, both Dan and I have developed very similar criteria when looking to buy into the dreaded banking sector. And far from being a gut-wrenching ordeal, it’s really quite simple…

1. Look For Strong Banks: Sounds obvious, I know. But one of the best ways to define a “strong bank” in this climate is its ability to pay and raise dividends during the current market. Remember, banks have made an awful lot of money over the past several years and if management has done its job properly, it should have plenty of cash on the books.

2. Look At The Bad Loans: What percentage of bad loans does the bank have? During any slowdown, loan loss reserves will rise. But if the bank is solid, these reserves should only increase modestly - perhaps by 20 or 30 basis points.

3. Look At Insider Activity: What are the officers and directors of the bank doing? Are they buying shares of their own company, even as the price declines? Or are they sitting on the sidelines (or worse, bailing out)? If we see a pattern of very large purchases, it confirms that the selling is probably overdone. This doesn’t mean there won’t be more pain, but it does tell us that the people running the show, and the directors who talk to the people in charge, know far more about the business than we do - especially at banks.

In sum, when we see a bank that churns out a healthy dividend to its shareholders (and increases it), strong fundamentals, manageable loan reserves, and hefty insider buying, we’ll be at the table buying with the insiders and against the crowd.

And make no mistake here… we’re not looking for a quick 5% or 10% pop. While that’s nice, it’s not enough. Instead, we’re looking to make 100% or more in a few years or less. In the meantime, we’ll savor the 6% and 7% dividends and the benefits of capital gains tax rates. It’s not rocket science; it’s just some neighborly advice.

Good investing,

Karim

Today’s Smart Profits Action Center:

• Over the second half of 2007, banks saw the value of their combined portfolios slashed by $140 billion. Today, MBIA added to that, with an ugly $2.3 billion fourth-quarter loss ($18.61 per share) after it wrote off $3.5 billion in collateralized debt obligations from its poorly performing credit portfolios.
• While the bad headlines keep rolling in from the financial sector, you don’t have to sit back and watch, fearful of what will happen next. As we’ve noted here before, rather than run away when the sector is getting crushed, smart investors use the situation as a chance to buy quality companies at bargain prices. In today’s column, we’ve given you a few key things to look for if you’re thinking about investing in the financial/banking sector. But a better option is to let us do the work for you and actually give you specific recommendations that you can make today. Karim has done this already in the banking sector - and we’ve got plenty more picks lined up for 2008. Do yourself a favor and get in on the action - it will only cost you $50 for a year. Get more Info

Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now

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How A Fed Rate Cut Impacts Stock Prices

The Fed Is Ready For another Rate Cut… Here’s What It Means For Stocks Prices

The Smart Profits Report Issue #492
Friday, February 01, 2008
By Jim Stanton
Technical & Quantitative Analyst, Smart Profits Report

The Fed wielded the axe and cut the benchmark interest rate by 0.75% to 3.5% - its biggest ever one-day Fed rate cut.

The move came after a tumultuous day that saw stock indexes across the globe plunge amid mass fears of a U.S. economic recession. As the financial sector crisis and real estate slump worsens, yet energy prices and consumer debt soars, investors battered the markets, sending several to their worst one-day losses in many years).

Cue, Fed Chairman Ben Bernanke, who cancelled a trip to New York and hastily organized an emergency meeting with his fellow Fed bankers.

The board overwhelmingly voted to slash interest rates before its scheduled meeting. And the bankers aren’t done yet.

Along with a proposed $150 billion package of tax relief and incentives from the Bush administration, the Fed’s statement strongly hinted that it will cut rates again. Let’s see what this means for the stock market…

A 1.25 Percent Rate Cut In 8 Days

The increasingly few people opposed to further interest rate cuts argue that it will crush the U.S. dollar and spark even higher inflation. Valid points, but the fact that the stock market has stabilized somewhat shows that investors value Bernanke’s leadership and clear messages of intent.

The consensus is for a further 0.5% cut, taking the benchmark rate down to 3% - a 1.25% reduction in just over a week. Right now, Fed funds futures show a 74% chance of a 0.5% cut, with a 0.25% reduction fully priced in. And since the Fed seems to be listening to the markets more closely now, we’re likely to get another cut.

This will probably help push stock prices higher over the short-term, but the question on everyone’s mind is: Will it last? Here’s what the charts say…

Bring Out The Bears As A Five-Year Trendline Is Busted

Because it represents the broader stock market, we’ll deal with the S&P 500 here.

The first thing you’ll notice on the weekly chart below is that the index is currently trading about 65 points below its five-year uptrend line, dating all the way back to the bear markets lows in October 2002.

That’s a clear bearish sign, which increases the odds that the stock indexes have some unfinished business on the downside.

That said, however, the trendline currently comes in around 1,420 and if the index can close above that level, there is some hope - especially at the end of the month. This is because on a monthly basis, January would be the first month that it’s closed below the trendline. If it can avoid that, the bulls could take back control.

Critical Number: 1,420

A look at the daily chart of the S&P 500 really shows just how important that 1,420 area is. A 50% Fibonacci retracement drawn from the highs in October 2007 to the recent lows comes in at 1,423. And in order to set up a daily buy signal, using the ESP Profit System, the S&P needs to first trade above 1,410.

While closing above 1,420 at the end of the month seems a tall order, stranger things have happened - particularly with the Fed trying to propel the market forward again.

If that fails to occur, any rally up to the 1,400-1,420 area on unimpressive volume and poor advance-decline readings, should be used to lighten up on long positions, or hedge against them. If you’re an aggressive, intermediate-term trader, you could use this scenario to short the stock indexes, using a definitive weekly close back above the trendline as a stop-loss point.

Fed Rate Cut Doesn’t Guarantee Success

While the Fed is using all its monetary policy power to jump-start the economy and stock market back to life, its powers are limited if the market doesn’t want to play ball.

In addition, while cutting rates can be an effective way to prop up the market, it can also be a somewhat artificial and temporary tool that merely papers over economic/market cracks without allowing the market to fully correct the situation for itself.

So if the selling resumes, you could use it as an opportunity to employ some downside investment strategies. Some of the stocks on my bearish watchlist that should make new lows are:

• Rick’s Cabaret (Nasdaq: RICK)
• Triquint Semiconductor (Nasdaq: TQNT)
• First Solar (Nasdaq: FSLR)
• Thor Industries (NYSE: THO)
• Interactive Corp. (Nasdaq: IACI)

Good investing,

Jim stanton

Today’s Smart Profits Action Center:

More concerned with the stock market and what Wall Street wants than the overall economy and inflation rate. That’s the charge that some economists are leveling against Ben Bernanke in the wake of last week’s 0.75% interest rate cut and the likelihood of a further cut on Wednesday. And following a Commerce Department report today that showed a 5.2% jump in December durable goods orders - the biggest rise in five months - some are wondering if another rate cut is even necessary.

But also weighing on the Fed’s mind is the fact that figures released this morning from RealtyTrac show that U.S. home foreclosure filings rocketed up by 75% to 2.2 million in 2007, compared with 2006 numbers. A late-year surge pushed the figures higher, as the subprime mortgage crisis began to bite, on top of already debt-laden consumers. Fourth-quarter filings shot up 86% over Q4 2006, while December filings ballooned 97% to 215,749, compared with December 2006 - the fifth straight month that filings exceeded 200,000. At 3.4% of total homes, Nevada took the dubious honor of having the nation’s highest foreclosure rate (up a staggering 200% over 2006), while led the way in terms of total foreclosure filings and homes in some stage of foreclosure. This on top of news that new home sales slumped by 26% in 2007 - the worst year since 1963.

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