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“Good Riddance To 2008”

So says Kim Rupert, analyst at Action Economics and she’s hardly alone in expressing that sentiment. 2008 has been the worst year for U.S. markets since 1931, with the Dow plummeting nearly 35%, the S&P 500 taking a 40% hit and the Nasdaq Composite off by close to 42%.

With those numbers recorded in the history books, it’s easy to see why people aren’t sad to see 2008 go even if the markets do seem to closing with a nice little burst of enthusiasm.

The good news is that you can expect that enthusiasm to hold and even grow gradually, but expect 2009 to start looking up bit by painful bit. Unfortunately, the key word there is “painful.”

Most analysts are expecting things to continue to get worse in 2009, at least on the surface while the economy begins a slow recovery. So that means more job cuts and high unemployment rates are likely to follow us into the New Year. That’s something just about everybody is agreeing on, even while they hesitantly put out forecasts for the next 12 months. (We all saw how their predictions worked out last time around.)

But, the main point is that overall, 2009 will be kinder to us than 2008 has been. So tonight when you’re staying up until midnight to ring in the New Year, keep your chin and your spirits up.

‘Cause tomorrow is a new day… so Happy New Year!

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RIP OPEC

It’s been said at least two dozen times on every major financial website and in every financially-minded newspaper, but no matter how many times people say it, it’s still mind-boggling. Oil has hit both an all-time high of $145 per barrel and reached multi-year lows of $33.87 in 2008.

In a normal year, I would say that you don’t get much crazier than that. But since 2008 has been anything but normal, I’ll refrain because we’ve seen just how crazy things can be.

Obviously oil diving that far is good for anybody not involved in the oil trade, and not-so-much for organizations such as OPEC. Members of the oil cartel have all pledged to follow the severe production cut of 2.2 million barrels a day that they agreed on a few weeks ago in a desperate attempt to secure some profitable fraction of the money they were raking in back in July.

Sadly for them, those times are no longer and it looks like OPEC is incapable of stopping it. While oil has been fluctuating within a $10 range since the cartel announced its latest move, it just fell again today from $41.03 to $37.97 per barrel. And that’s despite the still ongoing fighting between Israel and Hamas, a conflict that had oil spiking higher at the beginning of the week.

Like it or not, for at least the time being, OPEC is officially powerless.

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AIG Asks For A Favor. Who Didn’t See That One Coming?

I’ve already called AIG an attention… well, let’s just say it seems to enjoy making a scene. And it appears as if once again, the formerly prosperous firm just couldn’t resist taking national spotlight one more time as 2008 ekes out its last hours.

As if it hasn’t already been given enough government slack, it’s now preparing to ask the Federal Reserve to relax rules on how bidders pay for assets according to an article in the Financial Times today.

It claims that this will boost competition for the assets in a few different ways; both by allowing bidders to pay using a greater portion of shares or giving them the option of paying by installments. As it stands now, the company is limited to interested parties who can pay 90% or more in cash upfront.

It’s a cheeky move, but since the Fed has such an invested interest in AIG’s success at this point - think a minimum of $150 billion, which was the loan agreed upon back in November - the fault financial institution will no doubt get its own way… again.

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Three “Safe Haven” Sectors For Your 2009 Portfolio

Issue #585: Tuesday, December 30, 2008
by Martin Denholm, Managing Editor, Smart Profits Report

Last Christmas, my brother bought me a shirt that reads:

The Top Ten Reasons Why I Procrastinate…
1.

Regardless of whether the cheeky lad thinks this sums up my character, it always provokes comments or a laugh when I wear it.

As the final hours of 2008 ebb away, I bet economists and financial commentators have procrastinated more than usual over their traditional New Year forecasts. Given the rollercoaster year of upheaval and surprises we’ve just endured, compiling a “Top Tips For 2009″ or “Best Stocks For 2009″ list is much trickier than normal.

One thing seems certain: There’s more economic pain to come, which is forecast to drag into the second half of 2009 and possibly beyond.

The issue for investors is: There must still be good stocks out there. How do I find them?

In my last column, I ran down a list of stocks that I expect to profit from President-elect Obama’s massive U.S. infrastructure spending spree in 2009. Today, I’m going to give a few quick tips on what sectors to focus on…

A Healthcare Haven

It stands to reason that the sectors and companies that traditionally fare better during economic recessions are those that garner essential repeat business.

As my colleague Marc Lichtenfeld has pointed out many times here before, that includes the healthcare and biotech sectors. And far from procrastinating, Marc just issued his “Five Predictions For The Healthcare Sector In 2009″ for Xcelerated Profits Report subscribers in the January issue. If you’re not a subscriber, you should be! You can get more information on that here.

No matter what happens with the broader economy, people will still get sick and will still need drugs and medicines. With a growing population and people living longer, the long-term prospects for healthcare remain excellent.

But in a poor economic and investing climate, your best bet is to stick with the powerhouse pharmaceutical companies like Johnson & Johnson (NYSE: JNJ) and Proctor & Gamble (NYSE: PG), which are masters of the “razor-and-blade model” (basically, once a consumer buys a razor from the company, he/she needs to keep buying blades for it, thus generating repeat business). In the biotech world, look at big boys like Genentech (NYSE: DNA) and Gilead Sciences (Nasdaq: GILD).

Food, Glorious Food (And A Bunch Of Other Stuff, Too)

If people regularly require medicines and drugs, they need everyday essentials like food and drink even more. And while the retail sector is struggling overall, there are some companies that should fare well as the economy stumbles and consumers cut back.

You got it… discount retailers. Okay, so I know pretty much all retailers are slashing prices these days in a desperate bid to get folks to spend their hard-earned dough. But the ones who already boast a discount model as their bread-and-butter are better prepared. That includes sector bellwether Wal-Mart (NYSE: WMT), plus bulk goods stores like Costco (Nasdaq: COST) and BJ’s Wholesale Club (NYSE: BJ), which also offer a huge range of items at bargain-basement prices.

Switch On And Profit

Another favorite safe haven sector during economic downturns is utilities. Again, the companies within it produce goods that consumers can’t live without: Energy and power such as electricity.

The Dow Jones Utility Average (^DJU) includes major power producers like American Electric Power Company (NYSE: AEP), Exelon Corporation (NYSE: EXC), Consolidated Edison (NYSE: ED), and Southern Company (NYSE: SO), which generate reliable, repeat revenues and also pay hefty dividends.

And speaking of dividends, you could head to tiny Luxembourg this New Year and pick up a beefy one with steelmaker Arcelor-Mittal (NYSE: MT). A Business Week article cites the company as a potential turnaround performer next year, stating:
“Most analysts think it’s unlikely that Old World bourses will rally before the second half of 2009. Still, investors with more appetite for risk - and a willingness to pore over balance sheets - can find some good values even in cyclical businesses such as manufacturing. Bleak earnings outlooks have already been factored into many share prices.”

And having endured a brutal 2008, slumping from $78 to $24 a share, Arcelor-Mittal has announced widespread cost-cutting measures that includes shedding 9,000 jobs in a bid to save $1 billion. Its forward Price-to-Earnings ratio is just 2 and with Obama’s infrastructure revolution set to get underway in 2009, the global steel giant could be well poised to profit from it.

The “No-Hype” ‘09

As 2008 thankfully disappears, it will be more important than ever to stick to the tried-and-tested investing principles in 2009.

Right off the bat, that includes being very watchful for hype. In a down market, some companies will undoubtedly be keen to gloss over or downplay any bad news, for fear of causing harm to their stock prices in an already weak market.

Make sure the companies you invest in boast strong, honest management teams, with minimal spin and no excuses. It sounds simple, but look for companies with competitive advantages and which continue to grow revenues and earnings and even pay dividends as a key sign that they’re probably still in good shape.

Remember that with recession hanging over the economy - one projected to be the worst and longest since 1982 - upward momentum could be tough to achieve. Investors are still very skeptical and, among other things, are likely waiting for GDP growth to improve (or at least not be revised lower)… for corporate earnings to beef up… for job losses to ease… for Obama’s tax cuts… and to see what kind of effect Obama’s huge economic stimulus package proposal has. It will arguably take something around $750 billion to provoke much sustained, positive reaction.

So be very wary about bold statements, proclaiming that we’ve seen a bottom in the stock market. We probably haven’t yet. Meantime, consider some of the companies mentioned above and/or those that pay dividends.

That wraps it up for today - and indeed for 2008. Have a safe and happy New Year celebration. We look forward to bringing you more insights in what we hope will be a prosperous 2009 for you.

Martin Denholm

P.S. I’m generally not a fan of making New Year’s resolutions simply because the calendar flips from one year to another. But here’s something you can easily do to kick off 2009 in the right way - and position yourself to profit from the huge opportunities that next year will bring (ones that we’ve talked about several times in previous columns): Upgrade your subscription and join the Xcelerated Profits Report team.

Our elite group of professional traders will show you how to dodge the stock market’s landmines next year - and help you to not only stay protected through excellent, low-risk investment strategies, but profit handsomely from the trends, too.

Relying on the mainstream media for profitable information just isn’t going to cut it. They thrive on fear and sensation… we thrive on profits. It’s that simple. Set yourself up for a whole year’s worth of specific investment recommendations that allow you to accelerate your wealth faster and with less risk than 99% of “ordinary” investors. Check it out here.

* * * * * * *

Today’s Smart Profits Notes

~ Which U.S. city has endured the worst 2008? My vote goes to Detroit. In hopes of snagging a quick n’ easy $25 billion in bailout money from the federal government, the CEOs of General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler thought it would be a great idea not to drive to Washington in their companies’ cars, but to fly there in lavish corporate jets instead. Way to make a statement, fellas! The “Detroit 3’s” embarrassing pleas initially fell on deaf ears and they retreated back to the Motor City with their tails shoved firmly between their legs. Couldn’t they have “jet-pooled?” They got a bit more attention when they drove there (separately), and have now secured a fat, sweaty wad of Washington cash… but the outlook remains desperate.

Oh, and the Detroit Lions just capped a miserable 2008 season by becoming the first NFL team ever to lose every single game. Perhaps they should apply for a bailout, too.

~ New Year predictions are always popular right now - and this year is no different. While analysts believe the U.S. recession will last into the third quarter of 2009, they also say that banks will start lending again possibly as early as the January-March period.

Related Articles:

Federal Reserve Slashes Interest Rates Again… Why You Should Go For Gold, Commodities, And Financials

U.S. Stocks Will Be A Worthwhile Steal

You Can Still Profit In A Bear Market Like This

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One Of The Worst Considerations of 2008 And How It Will Affect You

“Cash-strapped states look to sell roads, parks.” Now there’s a title that makes you sit up and take notice… and then say “huh?”

But according to the msnbc.com article, 44 out of our 50 states are considering doing just that. Among that number are Minnesota, Massachussetts, New York and Illinois.

That last state might not come as much of a surprise considering its less-than stellar gubernatorial record, but you can’t lay the entire blame at Blagojevich’s feet. Oh, I’m sure he’s part of the problem, but this predicament has deeper roots than just two terms. Not to mention the fact that the apparent criminal only has authority over one state; and clearly there are at least 43 other states in need of “restructuring.”

But while it’s always fun - and sometimes necessary - to play the blame game, right now we should be focusing on the solution. So I’d give the problem-ridden 44 states kudos for thinking of something other than the federal government bailing them out, except that this new idea is almost as bad.

After all, what happens if they sell roads to private bidders? The only way those private bidders will be able to make any kind of profit off of their infrastructure purchases is to charge drivers who frequent them.

And that means more tolls to pay. I don’t like the idea because I don’t like spending money on tolls, but my objection goes deeper than that. As a citizen of a particular state and of the United States as a whole, I’ve been contributing taxes towards the supposed maintenance of roads ever since I got my first job.

In other words, I’ve made an investment in the U.S. infrastructure. It is my legal responsibility to help maintain it through monetary donations; they exist because of your and my tax dollars.

I.e. Those roads are ours. And I for one, don’t care all that much about something I own being sold off to pay for other people’s bad mistakes. Especially when the end results consist of me paying even more. It just doesn’t seem quite fair now, does it?

Nothing but government talk and media speculation has happened so far concerning these disturbing ideas, but as we’ve seen through 2008, anything really can happen. So I’m not holding my breath one way or the other.

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Consumer Index Indicates That We Have A Rough Road Ahead Of Us, But What’s New?

It’s the end of the month and the end of yet another year. Am I the only one asking where it went?

According to the latest consumer report data just published, I might very well be the only person concentrating on such trivial matters. Everybody else seems to be mired in doom and gloom this December.

Of course there’s some strong reason for that. December hasn’t been brutal to the average American citizen, but it hasn’t been kind either. More companies have laid-off employees and cut production rates, causing speculation about how 2009 unemployment rates will look.

And with yesterday’s headlines about the recession lasting through third quarter ‘09 dominating the news, it’s no wonder that people are down and out.

If anybody was actually expecting public sentiment to change, than I’d like to see their reasoning why. Sure, it went up in November, but that was when many U.S. citizens were feeling particularly ecstatic about the new president elect. But the larger populace has proven fickle before, so it’s no big surprise that it can’t keep an opinion for more than a month this time around.

We’ll have to see whether the new year brings any boost of confidence or not.

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iPhone Books Might Have Come To Town, But Don’t Think They’ll Own It For Long If At All

Technology has taken us so far now, that you don’t even have to go to a bookstore to read anymore. Forget waiting in lines or paying $15.00 for a single novel when you can download them to your computer from the Internet or to special portable devices designed especially for that purpose.

And now you can download them onto your iPhone.

This latest advancement might be innovative, but let me tell you a few reasons why you shouldn’t give up on bookstores such as Barnes&Noble (NYSE: BKS) and Borders (NYSE: BGP) just yet… at least not because of the iPhone threat:

Practical Reasons Why The Hard Copy Isn’t Going Anywhere

Reason #1)  The print is too small. Sure, you can read your favorite Steven King or Elizabeth George novel on the subway now during your commute to work, but that doesn’t help much when you’re getting headaches from squinting at a tiny screen for the hours it takes to finish it.

Reason #2)  There is just something relaxing about holding an actual book in your hands. For many of us, staring at a computer equates to work. It’s what we do all day on the job as we copy spreadsheets, write articles, read emails, even conduct business conferences.

Also, try reclining comfortably with a computer. Yeah, it’s possible, but not for very long. (Especially if you’re also trying to balance a cup of hot chocolate without spilling it on your laptop. Believe me; I’ve tried.)

Reason #3) The vast majority of people who own iPhones are not the type to really be reading novels all that much anyway - unless they’re of the sci-fi/fantasy variety. Get my drift?

Think about the people who have iPhones? They’re popular among Mac-obsessed elitists of course, but that’s a rather small population, believe it or not. Probably the largest group to own them are the hip, trendy types who have better things to do with their time than read. Why pick up a book when there are so many stores or video games to attend to? Not to mention the fact that the book will be turned into a movie within the next year anyway.

And finally then, there’s businesspeople who have too much on their hands to even think about stopping at a Borders or Barnes&Noble, much less actually buying something there.

Why People Think iPhone Books Is The Next Big Thing, And Why They’re Wrong

Then again, that’s just my opinion, and it’s always important to consider counter arguments before forming a mature opinion. So, in the spirit of friendly debate and the pursuit of truth, here’s what the opposition says:

Reason #1)  It’s much more eco-friendly. Think about all of the trees we could save if we didn’t cut them down for paper to fashion into novels.

My Response) Cynical though this might be, let’s face it; what percentage of people care that much? Maybe some California residents and a few more in New York City, but most people are more than willing to espouse one view in public (save the earth, go green, eco-friendly business, etc.) and go on acting the way they always have before in less-public forums.

        Reason #2)  It’s good to travel with since it’s on a device you already own.

My Response)  True, but there’s the problem of the small print again. And guess what else is easy to travel with? A book. Just slip it inside your briefcase, purse, laptop case or carry-on. People do it every day, and really, most of them don’t find it to be that big of a deal.

Reason #3)  It’s the wave of the future. In ten years, everybody is going to be using them.

My Response)  Even if millions of people flock to such applications in the next decade, they’re going to end up someday as middle-aged or elderly retirees wearing bifocals and reading hard copy print again.

Make up your own minds of course, but that’s why I’m not buying into the hype.

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Commodities Calm Before The Champagne Pops

Monday, December 29, 2008
by Lee Lowell, Futures Options & Commodities Specialist, Smart Profits Report

Welcome to the final installment of “Commodities Corner” for 2008.

As the year plods through its final few days and investors look forward to flipping the calendar to 2009, it comes as oil prices continue to march downward.

Over the past few issues, we’ve noted how the price of crude oil has blasted down through the $50 per barrel level and then down through the $40 barrel level. Just last week, it even managed to sink to the $32.50 a barrel level - a price we haven’t seen in over four-and-a-half years and miles away from the high of $147 just five months ago.

And true to its volatile nature, oil is currently trading back around $40 a barrel today.

So where next for the black stuff?

On December 17, the OPEC oil cartel held a major meeting and decided to cut oil production by two million barrels per day. But the market expected the move and oil has continued to sell off since then.

It looks like there might be a little more liquidation in store, so we might not have seen the bottom yet. Some of the major investment houses that boldly called for $200 oil not that long ago have now done a 180-degree turn and are now saying $25 oil is around the corner.

Based on the 200-month moving average technical indicator, oil stopped right on the mark, as that indicator can usually be counted on as a major support area. Will it hold or blast down through it? The early New Year trading will give us more clues.

Destination: $5.000

If you’ve read my past couple of columns, we’ve been looking for natural gas futures to edge down to a longer-term support area at the $5.000 per MMBtu level.

We almost got there last week when the price nailed a low of $5.210 per MMBtu, but has since bounced back above $6.000 per MMBtu.

What next? We may have seen the near-term low for now, but we’d like to see some more price action before we call a bottom here. Holiday trading tends to be very thin, so the market movements can be exaggerated.

Over the past six years, the $4.500 to $5.000 per MMBtu area has proved to be solid support for natural gas. In fact, the last time prices traded under $4.500 per MMBtu on a consistent basis was in early 2002.

Just As Predicted… The Metals Dig In And Move Up

“The old theory of precious metals being in high demand during times of economic turmoil might finally be coming back into play.”

“It seems that gold and silver have washed out all the weak bullish speculators, with both metals enjoying decent technical bounces and possibly regaining some upside momentum.”

“Gold has already made solid upside moves over the last two weeks and silver looks like it might be able to break out of the narrow trading channel that has trapped it for the past two months.”

That’s what we said in our last issue two weeks ago - and our stance hasn’t changed since then. If you take a look at the charts below, both gold and silver have actually followed through on what we said back then, managing to gain some upward traction and appearing to enter a solid bullish phase.

“The Ags” Are Stuck In The End-Of-Year Mud

As end-of-year trading volume dwindles, many of the other commodity markets that we track are treading water.

For now, the “softs” (coffee, sugar, cotton and orange juice) appear to be following a more downward path, while the grains (corn, wheat and soybeans) have enjoyed a bump higher over the last week.

You can see a snapshot of this activity in the wheat and orange juice charts below. Again, we’ll have a better gauge of the way forward for these markets once 2009 gets underway and volume returns to more normal levels.

That wraps things up for 2008. Wishing you a very happy and prosperous 2009…

Lee Lowell

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Yeah, The Economy Is Bad, But Here’s Why We See The Markets Getting Better

I don’t know about you, but even as a child I always ate my vegetables before the rest of my meal. Why? Because then I got the “bad” over with and could savor the “good” stuff freely.

So with that mentality still in mind, brace yourselves because I’m going to hit you with some further bad news…

Contrary to the sunny notion of bright futures, clean slates and new beginnings, it looks like the U.S. economy isn’t out of the woods yet. We knew that already of course. That’s what all of the experts have been saying for weeks now. But while originally they were roughly calling for a turnaround mid-2009, now they’re predicting that the majority of the 2009 will be marked with further turmoil.

Now on to the good news… and yes, there is some. Markets are known to recover before economies. And right now, we seem to be seeing either the beginning of that or the end of the end.

And The Expert Says…

Let me quote Jim Stanton, our resident Quantitative/Technical Analyst who studies market charts like fortune tellers study the stars. If anybody has a good handle on where the markets are going, it’s him.

“With another holiday-shortened week ahead of us, I expect the lighter trading to continue. Then again, since it is the end of the quarter not to mention the end of the year, we may see a bit of action.

“Barring any significant sells signals, the intermediate-term outlook is unchanged. The trend remains bullish though the three major indexes haven’t been able to close above their December 8 highs. The smaller cap indexes along with the NYSE Composite and Wilshire 5000 had better luck over the last two weeks, though they pulled back as well.”

That’s taken directly from this morning’s 1-2-3 Trader, a Mt. Vernon Research VIP Trading Service that offers both stock and option recommendations for maximum profits.

If you don’t read market speak fluently, don’t worry; the above quote simply means that things are looking up. So amid the economic bludgeoning we’re apparently going to get in the coming months, know that the markets should start looking up significantly.

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The Sun Hasn’t Set On The British Pound Yet

When I studied at the University of Gloucestershire in England as a college junior, I remember getting into a conversation with a particularly studious fellow classmate about whether England would ever adopt the euro as its currency.

His final thought was yes: the country as a whole wouldn’t be happy about it for a variety of reasons, but it was inevitable sooner or later.

And as the euro marks its first double-digit birthday right along with a never-before reached rate against the British pound (1.02522), it seems logical to start believing that the “sooner” part of his prediction is true rather than the “later.”

That’s especially true with the Bank of England deciding whether they should cut interest rates again, even though at 2%, they’re at their lowest since 1951. And according to Forecast Pte Ltd currency strategist Lee Wai Tuck as reported by Bloomberg.com, the pound may decline as much as 96.50 against the euro today alone.

There are numerous reasons why it’s performing badly, including weak house price data - which are expected to weaken further in the upcoming year and possibly even into 2010 - and lack of internal spending. Chalk in lowered interest rates, and a more severe recession and you have a perfect recipe for a declining pound.

The British pound appears doomed.

Then again, maybe not, and a good old stiff upper lip might be exactly what’s needed. Because currency investors are beginning to bet on the UK currency again. They expect it to take some initial hard knocks in 2008 before rising again by 14% against the euro.

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