Using The 5-10-20 Rule To Trade IBM

Three weeks ago, I presented a Cisco (CSCO) trade using the 5-10-20 Rule by Fahad Khalid. The trade gained 20% in three weeks. If you followed it, it might be a good time to take profits.

As a reminder, here is the breakdown of the strategy as described by Fahad:

• 5% - When trading options, never, ever in your life time allocate more than 5% of your portfolio in a single trade. It doesn't matter you have $10,000 or $1 million in your account, stick with the rule and it will serve you well in the long run.

• 10% - When doing a credit spread, the OTM strike you're selling or shorting, the difference between that and where the stock is currently trading at must be at least 10%. This is important because if the stock runs against you, it gives you a 10% cushion before your shorted option can get in the money.

• 20% - The total return or profit by selling the spread must be at least 20% each month. So, if it is a $5 spread, it should be done for no less than $1 credit; $1 spread should be done for no less than $0.20 credit.

International Business Machine (IBM) has been trading in a tight range in the last few weeks. Here is a one year chart:

Using the "the 5-10-20 Rule", you might consider the following trade on IBM:

• Buy IBM April 2012 175 put
• Sell IBM April 2012 180 put
• Sell IBM April 2012 205 call
• Buy IBM April 2012 210 call

The P/L graph looks like this:

IBM is currently trading around $193.42. The trade can be done for $1.50. The margin requirement is $350, hence the maximum gain is 42.8%. The trade is protected against a 8% down move and a 7% up move. This is slightly less than I would normally do, but IBM stock has a fairly good chance to stay in a trading range. Based on the deltas of the short strikes, the trade has a probability of 60% to expire worthless and gain the maximum profit.

Exit strategy: Watch the trade closely and consider cutting your losses if the stock moves enough to threaten one of the short strikes. Since we are getting fairly large credit, we can afford to make an adjustment if the stock makes a large move and still end up with a profit. With those trades, you should never allow the maximum loss. My rule of thumb is to cut the loss when it reaches about 1.5 times the potential gain.

Consider this trade if you think that the stock will be trading between $180 and $205 in the next 8 weeks.

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

Insights on Interest Rates: Why Treasury Bonds Are No Longer the Market Bellwether

Divining the direction of interest rates used to be a lot easier.

With the Federal Funds Rate, policymakers at the U.S. Federal Reserve would indicate precisely what they wanted the overnight lending rate between big banks to be. And the prices of U.S. Treasury securities of all maturities fell in line like obedient soldiers.

But things have changed.

Forget about watching the Fed Funds Rate now. That central bank benchmark has ranged between 0.00% and 0.25% for a couple of years now. Going forward, i t's not going to be an indicator of interest-rate movement, because it's not going to change much.

Sure the Fed wants it there. But more to the point, the Fed Funds Rate remains in that range because all the too-big-to-fail (TBTF) banks like Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC) are far bigger now, are lending less, and have huge excess reserves on which they'd love to earn an overnight profit. So for now and for the foreseeable future, they'll be plenty to lend between giant "TBTF" club members.

And t hanks to its "quantitative-easing" (QE) strategy, the Fed is essentially monetizing the U.S. Treasury's debt by buying in the secondary market from primary dealers like Goldman Sachs Group Inc. (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM) the equivalent of every new issue that comes to market.

The net result: There's no real gauge of demand because the Federal Reserve has hijacked the free market.

The New BellwetherTens of trillions of dollars are invested in the U.S. bond markets.

And - for as long as anyone can remember - the Fed, U.S. Treasury bonds and the Treasury yield curve were the bellwethers of where interest rates were headed. That's why investors watched those indicators so closely.

But they are bellwethers no more. With the $2.9 trillion market for municipal bonds now buffeted by pension, deficit, tax and potential state bankruptcy woes, it's the direction of muniyields and shape of the muni yield curve that investors should be watching to divine the future direction of interest rates.

T o divine the direction of interest rates - and stay ahead of the curve - watch the muni-bond market by watching the iShares S&P National AMT-Free Muni Bond Exchange-Traded Fund (NYSE: MUB).

Private investors - mostly individuals and insurance companies - hold about 95% of the $2. 9 trillion worth of municipal bonds currently outstanding.

Because it's essentially individual-investor demand that determines what yields states and municipalities must offer on their bonds in order to attract investors, pure supply-and-demand realities in the municipal arena make interest-rate movements much more transparent.

It's possible that budget, deficit, and pension woes will get worked out sooner rather than later.

But it's far more likely they won't.

Either way, because the muni-bond market isn't manipulated by the Fed or subject to extraordinary outside forces, demand in the face of available supply for new issues will result in true "price discovery."

A Look AheadThe market has calmed down since it began to swoon last October. After selling off on talk about Chapter 9 reorganizations at state and local government levels - and after an onslaught of muni-mutual-fund selling - prices have stabilized along with yields.

But don't be fooled. The only reason things are quiet on the muni-bond front is because there's virtually no supply coming to market.

Only $29 billion worth of muni-bond offerings were floated in the last two months, compared to $46.5 billion in the first two months of 2010.

The rest of the year could get ugly.

The Build America Bonds program expired on Dec. 31, 2010. Under that issuer-and-buyer-friendly program, the U.S. government subsidized taxable issuance by states and municipalities to the tune of $117.3 billion. With that backstop gone, new issuance of an expected $275 billion to $300 billion this year will sorely test the public's appetite for munis.

As new bond issues do come to market, the important thing to watch will be their maturities.

Issuers want to avoid offering variable-rate demand obligations (VRDOs) because they fear that if rates rise or their creditworthiness declines, they may not be able to roll over short-term borrowings. And the only way to borrow long-term in a rising-rate environment is to offer risk-averse investors higher coupons on bonds with extended maturities.

As the muni-yield curve steepens, investors will start interpreting that steepening as a reflection of increased risk. At the exact time that issuers are offering higher yields, such an interpretation by investors will force issuers to offer even higher yields and will cause the prices of old bonds to tank.

The purity of the supply-and-demand equation in the muni market - and its resulting reflection on interest-rate levels - is where the wheat will be separated from the chaff.

And that's why - for now - i t's the muni market that investors need to embrace as their new interest- rate bellwether.

[Editor's Note: As Money Morning Contributing Editor Shah Gilani detailed in today's story, U.S. investors have entered an era of interest rate uncertainty. The U.S. Federal Reserve has "hijacked" the free market - and could take investors' money with it.

Still, there is a way for investors to double their money in the next 12 months - and it doesn't involve any overly complicated market moves. All you need is the right blend of high-yielding investments. You can find out the details by clicking here. Or you can sign up for The Money Map Report, which each month delivers the most pressing profit opportunities available.]

4-Star Stocks Poised to Pop: MFA Financial

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, mortgage REIT MFA Financial (NYSE: MFA  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at MFA's business and see what CAPS investors are saying about the stock right now.

MFA facts

Headquarters (Founded)	New York (1997)
Market Cap	$2.44 billion
Industry	Mortgage REIT
Trailing-12-Month Revenue	$338 million
Management	Chairman/CEO Stewart Zimmerman (since 1997) CFO Stephen Yarad (since 2010)
Return on Equity (Average, Past 3 Years)	12.9%
Debt/Equity Ratio	344.9%
Dividend Yield	14.6%
Competitors	Annaly Capital Management (NYSE: NLY  ) Capstead Mortgage (NYSE: CMO  )

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 90% of the 340 members who have rated MFA believe the stock will outperform the S&P 500 going forward. These bulls include badducky and All-Star fcfroic, who is ranked in the top 5% of our community.

Just last week, badducky tapped the stock as a timely income opportunity: "Real Estate didn't stop holding fundamental value just because of the bubble. Now that the bubble has popped, REIT's like MFA offers attractive entry points for dividend investors, and MFA seems to be one of the stronger ones."

Over the past three years, MFA has even grown its top line at a brisk rate of 37% annually. That's much faster than industry peers like Annaly (7%) and Capstead (8%), let alone Redwood Trust (NYSE: RWT  ) and its average revenue decline of -8%.

CAPS All-Star fcfroic expands on the MFA outperform argument:

This is a mortgage REIT which has both agency MBS's and non-agency MBS's. This is a unique hybrid strategy. The agency MBS provide an opportunity to access liquidity if needed. ... The non-agency exposure provides higher returns but also higher risks. ...

Trading below book value, I expect that this will trade at a slight premium (perhaps 120% of BV) with a growing dividend stream.

What do you think about MFA, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

Making Cents in Penny Stocks

The occasional shower of pennies from heaven might do our bank accounts some good. Alas, Fools can't say the same for penny�stocks.�They're often subject to manipulation and deceit, making it harder for investors to separate the�few good offerings�from the multitude best ignored.

Still, many investors enjoy dabbling at the low end of the stock-price spectrum. At Motley Fool CAPS, a "penny stock" is any stock trading under $10, and you'll find some of the best CAPS All-Stars regularly seeking out winning investments there. We identify them with a penny icon.

Pinching pennies
This week, we'll look at three low-priced investments the CAPS community has singled out as those with the best chances of success by bestowing four- and five-star ratings on them. We just might want to turn our umbrellas upside-down to catch them!

Here are three low-priced stocks enjoying high CAPS support.

Company	Recent Price	CAPS Rating (out of 5)	Return on Capital
Dean Foods (NYSE: DF  )	$9.72	****	5.3%
Pacira Pharmaceuticals	$7.31	*****	(64.3%)
Sequenom (Nasdaq: SQNM  )	$4.19	****	(55.5%)

Score is by how many percentage points that pick is beating the S&P 500.

The above three companies are low-priced, but that isn't necessarily enough to suggest that they'll have an easier time recording big gains. Low-priced stocks are often low-priced for a reason. We have to check and see what their catalysts for growth might be before diving in to the shallow end of the stock pool.

Hiding in plain sight
The milk business is not noted for its generous margins, and rising commodity costs have pressured dairy farmers' ability to survive. As part of the consolidation under way in the industry,�Dean Foods, one the country's largest dairy providers, purchased tiny Foremost Farms in 2009, a move it said would help Wisconsin dairy farmers maintain a stable outlet for their milk. The Justice Department said the reduction of four dairy farms to three was anticompetitive and forced Dean to sell the fluid-milk operations from its Fresh Dairy Direct division this past September.

That's the same division Dean just had to take a huge, $1.9 billion goodwill impairment against. The recession and competitive pricing have cut into volumes of milk sold, and FDD, which represents 85% of Dean's revenues, was no longer worth what it once was. It distributes both branded and private-label dairy products, including milk, ice cream, and creamers.

Grocery chains such as�SUPERVALU� (NYSE: SVU  ) and�Safeway (NYSE: SWY  ) have�passed along the higher costs�to branded consumer goods, since it makes their own private-label brands look more attractive, but they've been feeling the pinch of rising costs, too, and their own margins are coming under pressure.

More than 90% of the CAPS members rating Dean Foods think the dairy processor has not only got milk, but also has what's necessary to beat the broad market indexes. Let us know in the comments section below or on the�Dean Foods CAPS page�whether you think the impairment will spoil everything, and then add it to your watchlist to see whether it pulls it off.

No pain, no gain
Shares of Pacira Pharmaceuticals have been on the decline since getting FDA approval for its postsurgical painkiller Exparel. (Insert record-scratch sound here.) What? Yep, the drugmaker, using its proprietary DepoFoam delivery system, gained approval to market the extended-release formula of bupivacaine, but shares have fallen more than 25% since the announcement.

That might be tied to the decision to sell the drug to hospitals rather than individual practitioners, because the institutions are deemed a harder sell. However, Pacira says it's still targeting surgeons, anesthesiologists, pharmacists, and nurses, but the sales teams can cover more ground in a hospital than by hitting individual offices.

Not that it won't be an easier sale, since bupivacaine is already commonly used with plastic bags and catheters, but Pacira needs to make its mark soon, as others are looking to exploit the same area. Durect (Nasdaq: DRRX  ) , for example, is testing an extended-release patch of bupivacaine called Eladur, using its own unique delivery system. But there's also some promise of branching out with the DepoFoam, too, as Pacira is partnered with Novo Nordisk (NYSE: NVO  ) to explore using it for other drug-delivery systems.

CAPS member�PharmaD is bullish based on the Exparel approval, but how about you? Put Pacira Pharmaceuticals�on your watchlist,�and let us know in the comments section below whether you think it will gain traction with its strategy.

Buckle up
With the dark past behind it, Sequenom can look forward to greater growth now that its MaterniT21 Down syndrome test has hit the market. It began selling the test last month, so while its third-quarter results showed better sales as a result of its MassArray technology -- it has a growing installed base of machines that lead to greater consumables use -- the MaterniT21 test should be the bigger driver going forward.

Still, losses, while narrowed to $0.19 a share, were a penny worse than Wall Street's forecasts, which had the market sending Sequenom's shares down. No matter: CAPS member unkownuser sees the Down syndrome test being huge as well.

So my feeling is that now that detection has been reduced to the level of simple blood work, more and more women outside the high risk category will be requesting the screening as a "just in case" measure.

What this means is that Sequenom's extremely conservative estimate of potential sales, which includes only the 750,000 births yearly to those women in the high risk category; could balloon into something much much bigger.

Add the biotech to the Fool's free portfolio tracker and tell us on the Sequenom CAPS page when you think it will start testing new highs.

AT&T: Raymond James Trims EPS Est. on Record iPhone Sales

Raymond James’s Frank Louthan IV this morning reiterates a Market Perform rating on AT&T (T), writing that the company’s disclosure last Wednesday that it would have a record level of smartphone sales this quarter.

Louthan thinks that will entail a record number of Apple’s (AAPL) iPhones sold as well, he writes, and so he’s lowered AT&T’s profit estimate to account for the “large subsidies on this particular smartphone.”

He writes, “We believe the total quarter of iPhone sales to be greater than 7 million [at AT&T].”

Louthan is now modeling $2.25 per share in profit, below the Street consensus of $2.30.

One can imagine those AT&T iPhone sales will be enhanced by news of a promotion from Radio Shack (RSH) running this week that offers discounts on the new iPhone 4S, as described by TechCrunch’s Jordan Crook.

Several analysts last week raised their iPhone numbers based on AT&T’s remarks.

AT&T shares today are down 5 cents at $28.98, while Apple shares are down $2.06, or half a percent, at $391.56.

The Contrarian: 5 Downtrodden Global ETFs

The summer downturn was cruel to many international markets, with several developed and emerging exchange traded funds on track for a tough 2011 despite the recent bounce.

Since the market highs in spring, some global equity ETFs have taken a beating as investors dumped risky assets and piled onto safe-havens.

Still, these same downtrodden investments could hold allure for contrarian investors looking for undervalued ETFs, according to a report Monday.

Jim Woods for InvestorPlacehighlights five global ETFs that have fallen more than 30% off their highs:

• iShares MSCI Germany Index (EWG). Year-to-date, EWG is down 17% as investors have quickly shunned Europe assets through the middle of the year. The fund has dropped 23.3% over the last three months, but EWG has made a 4.3% rebound over the last month. If a solid accord is reach in the Eurozone, investors should expect the European markets to stabilize and recover, Woods said.
• iShares FTSE China 25 Index (FXI). After an impressive run up in 2010, FXI has dropped 25% so far in 2011, even as the economy posts robust growth, albeit at a slower pace. As the global economy rebounds, China will continue to be a growth story. On Monday, the fund received a nice boost after China revealed higher-than-expected manufacturing numbers.
• PowerShares India Portfolio (PIN). While the World Bank projects India’s growth to slow to 7% to 8% for 2011 and 2012, the percentage expansion is still impressive. The country hosts a large population of educated workers and a big manufacturing sector. PIN is down 26% year-to-date, but it has jumped 5% since the start of October.
• iShares MSCI Brazil (EWZ). Brazil is rich in natural resources. However, EWZ’s large allocation to the various resource sectors has dragged on the fund. The ETF is down 28% year-to-date, but it has been rallying up 13% in October. This fund is a good play on a commodity producing country. [Brazilian Stock, Currency ETFs in Focus After Rate Cut]
• iShares MSCI BRIC Index Fund (BKF). BKF holds investments from BRIC countries – Brazil, Russia, India and China. While the fund is down 27% year-to-date, BKF has increased 11% since the start of October. Investors may play this fund on the eventual broad recovery in the global economy.

iShares MSCI Germany ETF

click to enlarge

Max Chen contributed to this article.

Disclosure: None

3 Overvalued Stocks Vulnerable to a Prolonged NFL Strike

On Monday, Judge Nelson delivered an 89-page ruling that backed the NFL players in their fight to stop NFL owners from locking out the players to force negotiations for a new collective bargaining agreement. The owners have already appealed to the appeals court for a stay. Hopefully this means there will be some movement that eventually will settle the latest labor dispute and we will enjoy a full season of NFL football.

However, what happens if this continues into the summer and we don’t have a full football season? More importantly, which stocks might be impacted if the football season is shortened or cancelled altogether?

Buffalo Wild Wings (BWLD)

Does anyone ever eat wings without a game in front of them? I personally can’t imagine that scenario, and Sundays and Monday nights would be heavily impacted if there was no - or a delayed - NFL season. The company alluded to this in its last earnings report:

Buffalo Wild Wings also said that the labor dispute between NFL players and owners could pose a temporary challenge for its business. Sporting events lure guests to the bar-and-grill restaurant's chains -- where games can be viewed on large projection screens.

BWLD is already vulnerable to rising gas and energy prices. Although it was one of the few restaurants or retailers that did experience a significant decrease in food costs, as chicken wings fell 36% in the last quarter to $1.22/lb, chicken wing costs make up 20% of BWLD’s sales. Given inflation everywhere else in the food chain, this trend is unlikely to last long term and will undermine profit margins when it inevitably reverses.

BWLD is valued at 24 times this year’s projected earnings and 20 times next year’s consensus - pretty rich for a restaurant stock. Insiders have sold approximately 20% of their shares over the preceding six months. A prolonged NFL strike could significantly impact this stock in a negative way, in my opinion.

Electronic Arts (ERTS)

Think Timmy is going to want the latest version of Madden NFL Football for Christmas if there is no football by late October? Do you think you are going to get it for him even if he wants it? Me neither. The release of Madden football is a huge revenue driver for this company. Madden 2011 was the number 1 selling game in North America last August, which gives some idea on the popularity of this game series. The company is already dealing with significant revenue challenges and does not need another one.

In addition to the football strike, rising gas prices could really continue to impact this segment of consumer spending. The recent Sony (SNE) PlayStation debacle will not help overall video game sales either. Selling at a rich 30 times this year’s projected earnings and approximately 23 times 2012’s consensus, this struggling company is already valuation challenged. I believe there are better opportunities in the gaming universe.

The COO of ERTS evidently agrees with me as he announced that he is leaving for social media gaming concern Zynga this week. ERTS does have a pristine balance sheet with almost $6/share in net cash.The stock is an “avoid” sans a strike and a "sell" if the NFL season is impacted. I believe Activision (ATVI) is a better value here.

Under Armour (UA)

Is there a company whose main product persona is more tied to the NFL brand? When you think of the NFL draft, which images flash in your head? I bet at least one is from a combine workout where prospects are put through their paces in the ultra sleek UA outfits. I highly doubt we will have a prolonged strike, as both players and owners have too much at stake. However, if there is one stock that is highly vulnerable to this possibility, UA would be my pick.

The company’s vulnerability to bad news was demonstrated yesterday by the over 10% selloff in UA’s stock after its earnings report (see conference call transcript here) provided transparency into its growing inventory problem. Under Armor sells at over 42 times this year’s projected earnings and 3.3 times revenues after yesterday’s selloff. It is already vulnerable to rising gas prices, and lost 55% of its value during the last gas spike of late 2007/1st half of 2008. Insiders have sold over 500,000 shares in last six months.

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

Will SPX Fall Short Next Quarter?

There's no foolproof way to know the future for SPX (NYSE: SPW  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like SPX do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is SPX sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. SPX's latest average DSO stands at 82.1 days, and the end-of-quarter figure is 86.4 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does SPX look like it might miss its numbers in the next quarter or two?

The numbers don't paint a clear picture. For the last fully reported fiscal quarter, SPX's year-over-year revenue grew 12.6%, and its AR grew 21.6%. That looks OK. End-of-quarter DSO increased 9.2% over the prior-year quarter. It was up 3.2% versus the prior quarter. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

What now?
I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.

• Add SPX to My Watchlist.

Funds Are Flowing Back Into Stocks

By Bryan McCormick

After earnings season in April, retail investors began taking funds out of stocks and pouring them into bonds. That basic pattern helped to keep a lid on equities and drive yields on bonds to near-record lows.

In the last two weeks, however, that flow has begun to reverse just as sharply as it began.

According to the Investment Company Institute, municipal bond funds were the big losers in terms of capital flow. An estimated $1.26 billion was pulled from munis in the week ending Dec. 8 and $4.85 billion in the week ending Dec. 15. This has followed lower prices in the same period.

Exchange-traded funds have been the preferred way for investors to play the equity markets, rather than mutual funds. Last week investors pulled some $6 billion out of equity ETFs, with $4.12 billion of that from the SPDR S&P 500 (SPY) alone.

Despite that rather big redemption, the previous week saw assets in ETFs hit more than $1 trillion for the first time. So it does appear that retail investors, while not rushing headlong into equities, are adjusting their allocations.

If more money comes out of bonds in the New Year, that could be a significant positive for stocks. We will have to wait and see how well retail investors have timed this move.

This fund reveersal could be coming at a market peak, or it could be the last ingredient necessary for stocks to break out of the holiday doldrums.

Disclosure: No position

Currency Trading:UBS Gaining Market Share In Currency Trading – Fox Business

The Guardian

UBS Gaining Market Share In Currency Trading Fox Business ZURICH — As it is moving towards conducting more flow business on behalf of clients, UBS AG (UBS) is gaining market share in currency trading, Tom Naratil, chief financial officer at Switzerland's largest bank, said Tuesday. SNB to Aggressively Enforce Currency FloorWall Street Journal SNB Won't Tolerate Franc Breaching Euro Limit, Jordan SaysBusinessWeek Swiss risk deflation if euro crisis worsens: JordanReuters Washington Post -FXstreet.com all 379 news articles »

{fcurrency trading} – Forex News

Big Blue’s Shares Tumble After Decent Earnings

International Business Machines (NYSE:IBM) reported earnings Tuesday that were generally in line with analysts’ estimates, with revenues of $26.2 billion and adjusted earnings of $3.28 per share. The company also upped guidance slightly, noting that some contracts had been pushed out until next quarter and were not recognized in this earnings report.

So why is IBM being hammered, dropping more than 5% to below the $178 level? Reduced or, at least, tempered growth.

While the actual numbers were in line, there was no earnings surprise, so the stock was taken out to the proverbial woodshed. As many investors are exiting, I’m looking at the current weakness as an opportunity to get into a fundamentally solid company at a much more attractive valuation.

While IBM may have gotten a little ahead of itself pre-earnings, it hasn�t lost its mojo. The current weakness puts it back in the attractively valued camp. With a now more reasonable P/E of 14.2, plus a dividend yield of 1.6%, IBM shares look poised for a grind back to the $185 level by January 2012.

Based on IBM’s current market price of $177.39 and using a target price of $185.00, a target date of January 20, 2012, and $10,000 of investment capital, this is a great candidate for a near-term options trade.

To play this with options, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature. Input the ticker, target price and date, and investment amount, and you�ll see several ways to trade that include selling a January put spread, buying the stock, or using some more-advanced strategies.

Best of all, you can see a potential profit-and-loss outline for each strategy. If you set up an account, you can hit the �Trade� button on your preferred strategy and be on your way! Create your free login, and get access to these IBM option trading strategies by visiting the TradeBuilder here.

Emerging Markets’ Growing Middle Class a Boon for U.S. Investors: 2012 Outlook

Indonesians on Black Friday raised their fists to show 'priority' wristbands as they jammed a Jakarta shopping mall to buy the first BlackBerry Bold 9790s. (Photo: AP)

Heads up, investors: the world is getting flatter.

As Occupy Wall Street protestors in November were bemoaning the decline of the U.S. middle class, impatient Indonesians on the other side of the globe were raising their fists in mobbed shopping malls on Black Friday to show the “priority” wristbands that would let them be among the first to buy the new BlackBerry 9790.

“Emerging markets are a good buy” is now a favorite theme of investment strategists and portfolio managers as they present their outlooks for 2012.

Why? T. Rowe Price Fixed Income Director Michael Gitlin put it precisely during a media breakfast in New York: “It’s getting more and more difficult to determine what is emerging.”

Opportunity Abroad

Yield-hungry U.S. investors may very well find in 2012 that the best opportunities lie abroad. Emerging nations are selling the goods they manufacture to an ever-growing number of middle-class consumers at home, emerging market fundamentals are strong, and the economic woes suffered in the U.S. and Europe may be an EM drag—but not for long.

During the 2012 outlook season, investment strategists and other market watchers have repeatedly taken note of the growing middle classes in places like China, Southeast Asia, India and Brazil. These regions are rising to match the demand for goods that the developed world has seen for decades—at the same time that consumers in the U.S., U.K. and Europe are tightening their belts.

Emerging markets offer “intriguing growth prospects” over the longer term, said Scott Berg, portfolio manager of T. Rowe’s Global Large-Cap Stock Fund. “Ultimately there will be market recognition of the superior long-term fundamentals in the emerging world.”

Emerging economies are poised to benefit from better fiscal conditions, under-control inflation and strong GDP growth relative to developed markets, said T. Rowe’s Gitlin, who predicts that developed economies will continue to lag emerging ones. Pointing to International Monetary Fund forecasts, he said GDP growth in the next three years will be about 2% to 3% in the advanced G7 economies versus about 7% for the emerging and developing economies.

Newcomers Swell BRIC Ranks

Goldman Sachs Asset Management Chairman Jim O’Neill—the man who 10 years ago was credited with coining the term “BRIC,” in reference to the developing economies of Brazil, Russia, India and China—said at the time that the BRIC countries should become more central to global economic policymaking because their combined global GDP could rise to 14% from 8%. Today, that figure is closer to 20%.

Looking forward with the BRIC economies, O’Neill said in a Nov. 28 analyst note that they have grown to around $13 trillion and are poised to overtake the size of both the United States and the European Union in coming years. And he now adds Indonesia, Korea, Mexico and Turkey to his list of growth markets.

“I spent Friday in one of the non-BRIC growing economies, visiting Istanbul to present my views of the world for a major client. I was literally in and out, but what a remarkably vibrant city Istanbul is these days,” O’Neill wrote. “I cannot understand why continental European countries are not more eager to embrace this country, especially as it would seem like an obvious credible model for some of the dramatically changing nations in Northern Africa and the Middle East.”

China Is Still a Buy

To be sure, it’s difficult to predict the timing on just when the markets will recognize the emerging world’s superior long-term fundamentals, said T. Rowe’s Berg. And as for the biggest of emerging markets, China, investment strategists agree that it is experiencing some troubles in terms of consumer inflation and a slowing manufacturing sector.

But those troubles will be short-lived, they say.

“In bullishness reminiscent of the technology bubble of the 1990s, analysts who work for investment banks based around the world rate nearly every Chinese stock they cover as a ‘buy,’” reported The Wall Street Journal on Nov. 28. Analysts have 19.2 “buy” recommendations on Chinese stocks for every one “sell” recommendation, The Journal reported, citing data compiled by research firm Forensic Asia Ltd.

Investors’ anxiety over an economic slowdown in China have seen that country’s real estate market correct recently along with industrial metals prices, wrote Van Eck Global’s David Semple in a Nov. 22 analyst note.

So while growth may be slowing, Western investors who have no exposure are missing out on an opportunity, according to the portfolio manager of Van Eck’s Emerging Markets Fund. China’s troubled real estate sector aside, Semple is focused on the long-term trends of rising incomes and an emerging middle-class—forces that he believes will drive economic output and domestic consumption for decades.

“Economic transition issues are complex and challenging, but media-fueled fears of an imminent, so-called ‘hard landing’ are exaggerated,” Semple wrote. “Seen through Western binoculars, investors run the risk of over-emphasizing the negative and missing the increasing importance of the Chinese economy, which we believe is grossly under-represented in most investors’ portfolios.”

Read AdvisorOne's complete lineup of Outlook 2012 stories.

Read Best 5 Investment Picks for 2012 at AdvisorOne.com.

How I Know Housing Is Dead for a Long Time

I will lay out the long version below but the short version is:

Housing is dead because the banks do not even want any of the action.

So simple really.

Ok, the long version.

Yesterday's big conference on the future of housing finance was a mix of pure baloney and hints at the future.

First off, the baloney. Tim Geithner opened the show stating such things like Fannie (FNMA.OB) and Freddie (FMCC.OB) need overhaul and that taxpayers will not support housing in the future. The Treasury head also said the government needs to be smaller in the housing sector, while at the same time, it will guarantee mortgage funds and low rates for all. Try squaring that jumble of mess!

The big dog of the day was PIMCO's Bill Gross who luckily dispensed with the double talk and playing make believe for the children in attendance. How does Mr. Gross see things in the future? You would already know if you have been reading as I have predicted this event for some time. From Yahoo Finance:

Banking execs say gov't needs to back mortgages.
The call from business for less government has a notable exception: the mortgage market.
The Obama administration invited banking executives, Tuesday, to offer advice on changing the government's role in backing the mortgage market. While they disagreed on the exact level of support needed, the group overwhelmingly advocated for the government to maintain a large role in the $11 trillion market.
If the government pulled out, millions of Americans wouldn't be able to convince banks to take the risk of giving them home loans, the executives said. Ending government support could lead to a spike in mortgage rates. That could deter many from buying homes, and banks, mortgage lenders and Realtors would lose money over time.

This is pure disgusting, but at least it is both honest and shows what really matters to the bankers.

More:

Bill Gross, the managing director for bond giant PIMCO, suggested Fannie and Freddie should be formally merged into the government. He also called on the administration to allow millions of homeowners to automatically refinance their loans to help stimulate the economy.

Gross said Fannie and Freddie's function should be consolidated into one government agency that would issue mortgage-backed securities. Without such a solid guarantee, mortgage rates would soar, he warned.

He also told the administration that the economic recovery required more government stimulus, particularly in the housing market. He suggested the administration push for the automatic refinancing of millions of home loans backed by Fannie and Freddie. Without such stimulus in the next six months, Gross said, the economy will move at a "snail's pace."...

So how many times does the biggest bond firm in the known universe have to ask?

The set up here is slick as all get out. The components:

• Threaten lack of lending for mortgages
• Scare everyone with tales of higher rates
• Threaten to step away from lending
• Government is now "forced" to make a move

Where's my "Easy" button?

You can forget about merging FNM/FRE into the government balance sheet, that is not going to happen. They will instead just keep it in some off the book type of setup. The last line about all this being a crazy Internet rumor will come back to haunt quite a few people later on. This IS the plan as far as the banks are concerned, there is no back up.

What will be interesting to see is how the government will make a mortgage market with rates set at say 4% for the next 10 years, should rates rise outside of the program. Any housing plan will have to figure out a way to skirt the structural issue of so many homes being financed at all time low rates. Any rise, and it is an instant loser for the homeowner. Expand your balance sheet much FED?

Stepping back, what was started Tuesday is the transfer of housing market responsibilities to the US government. The banks made a bundle on the way up, lost a bundle on the way down, got made almost whole via bailouts, and selling bad paper to the FED. Now they are stepping away all together. They do not see a way to make any money in the housing market which is maybe the only smart thing they have done in a while. This will not be good for any of us though.

Auctions – For Fun and Profit

In today’s economy there seems to be a lot of activity in the auction business. There is a profit to be made here, if you have a basic understanding and know a little about the going price ranges of the day. Some of these auctions provide a way to actually find some very good deals. Some real treasures if you will. You can find some very good bargains. Also you can even sell your stuff at some of these consignment auctions.

To find auctions in your area, you can search in the classified section of your local newspaper, for any upcoming auctions. Many of these are old antiques and collectables. Some of these type of auctions are on the high end of the scale as far as prices are concerned. It just depends on what you are looking for. Some people search and buy good deals at garage sales and flea markets and resale these items at these consignment auctions.

As for where to find the most listings, check all the local newspapers, the local free ad papers.You can find these free ad papers across the country, they are everywhere now. Also about twice a year your local police and or sheriffs departments will have auctions. These usually are a excellent source for some really good deals on motorcycles, four wheelers, tools of all kinds, stereos, televisions, computers, and whatever else, you might can imagine.

Also estate auctions can turn up some very good deals. Estate sales usually involve the sale of the complete contents of the house. Literally everything in the house is sold. It could be everything from firearms to antiques. Some estate auctions take place right on the property. Most auctions have items of all price ranges.

One of the best secrets around, is the where they auction off the contents of storage barns that people abandoned or just couldn’t afford anymore. usually you bid on the entire contents, sight unseen you can really get some good deals here. I heard of one person bidding on a storage barn site unseen and winning the bid. It was a couple hundred dollars, but it had a nearly new Harley Davidson motorcycle inside

There are some great reasons to buy at these auctions. You can usually find what you are looking for or at least something you can use. This is something that most people really enjoy and It makes for a very lucrative hobby sometimes. But the idea here is to have fun, just have fun.

Tony Brazier has been involved in the building industry for several decades. I am a student of life. I love to help people any time I can. I study wildlife every chance I get. I love dogs and I especially love the very misunderstood Bulldog I am into the training and care of all animals.

http://www.storage-plans.com
http://www.learnadog.com

Verizon blocks Google Wallet

NEW YORK (CNNMoney) -- Verizon has decided to block its customers from installing Google's new, high-profile Wallet application on the carrier's smartphones.

Welcome to the opening shot in the war over who will get a piece of the action as your smartphone becomes your mobile wallet.

A year ago, Verizon, AT&T (T, Fortune 500) and T-Mobile teamed up with Discover (DFS, Fortune 500) and Barclays (BCS) to form a mobile payments company called Isis. Using a technology called near-field communications, or NFC, the forthcoming Isis mobile wallet will let consumers store multiple credit cards and make payments with a wave of their phone. They'll also be able to check balances, receive coupons and use rewards points at the point of sale.

Google Wallet is a nearly identical NFC service. Unveiled by Google in May, the service requires two pieces: An NFC chip and Google's app.

The first phone to feature native Google Wallet support is Samsung's Nexus S, which went on sale last year with a built-in NFC chip. In September, Google Wallet went live and the Samsung Nexus S became Google's mobile payments guinea pig.

Here's the catch: Sprint (S, Fortune 500), along with MasterCard (MA, Fortune 500) and Citigroup (C, Fortune 500), threw its support behind Google Wallet and partnered with Google. Verizon and the other major carriers are backing Team Isis.

The two technologies can co-exist happily. MasterCard, for example, has partnered with both Isis and Google Wallet. Phones can easily support both options, letting customers download either or both payment apps and choosing which they prefer to use.

But with billions at stake in the mobile payments revenue stream, every player in the ecosystem is moving very, very cautiously.

"This is an opening salvo in what is likely to be a very long war for the mobile consumer wallet," said Carl Howe, analyst at Yankee Group. "I think this is perhaps a very good indication that Google is now a very close frenemy of Verizon."

The Samsung Galaxy Nexus, set to go on sale later this month, was supposed to be the first Android device on the Verizon network to feature Google Wallet. It's the third of Google's "hero" Android smartphones, which are designed by Google explicitly to show off the cutting-edge features of its Android operating system. Google partners with manufacturers on the phones -- Samsung, in this case -- and releases them under the "Nexus" brand.

But a Google (GOOG, Fortune 500) spokesman said Tuesday that Verizon Wireless has asked the search company "not to include this functionality in the product."

Google's spokesman declined to discuss Verizon's reasoning or comment further.

Verizon (VZ, Fortune 500)'s spokesman Jeffrey Nelson countered that the company "does not block apps." The problem, Verizon says, lies in Google Wallet's technology.

"Google Wallet is different from other widely-available mobile-commerce services," Nelson said in a prepared statement. "In order to work as architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones."

It's true that Google Wallet needs to access a special NFC chip built into the device. Verizon didn't explain why that was a problem, particularly because Google's technology has been working just fine on Sprint's network for several months. But Verizon said it is continuing "commercial discussions" with Google about the issue.

"We're working to provide expanded services that will provide the best security and user experience in the market around mobile commerce," Nelson continued. "We expect to provide access to an open wallet when those goals are achieved."

It's not a direct answer, but it's possible to read between the lines. Since Verizon said it is working to provide access to "an" open wallet, and not specifically Google's Wallet app, it's likely that Verizon is hoping to favor its own mobile payments option over Google's.

Both Isis and Wallet are theoretically "open" services, meaning any card company, carrier, manufacturer, or even mobile operating system can participate. But so far, each has mostly gone its separate ways.

Verizon's blocking of Google especially ironic, because Google and Verizon fought together to lobby the Federal Communications Commission to allow carriers to determine what services can be used on smartphones running on their networks. That agreement is coming back to haunt Google.

Last year, as the industry thrashed out so-called "net neutrality" rule, Google and Verizon stuck a controversial compromise: They jointly agreed that open Internet proposals should not apply to the mobile market. Their position was that the wireless field is more competitive and changing more rapidly than the wireline broadband market, and shouldn't be constrained by added regulation.

The FCC ended up drafting rules that closely mirrored those suggested by Google and Verizon. Those rules went into effect Nov. 20.

Can Verizon permanently keep Google's Wallet off its smartphones?

Probably not. When the public pressure -- and pointed queries from Washington watchdogs -- grows intense enough, tech industry rivals tend to make their peace. Apple (AAPL, Fortune 500), for example, finally got over its claimed technical objections and let rival services like Google Voice onto its iPhone.

But Verizon can drag its feet -- and its latest chess move indicates that it's not giving Google a mobile payments head-start without a fight.  

2 Positive Signs for Arch Coal

Arch Coal (NYSE: ACI  ) carries $540 million of goodwill and other intangibles on its balance sheet. Sometimes goodwill, especially when it's excessive, can foreshadow problems down the road. Could this be the case with Arch Coal?

Before we answer that, let's look at what could go wrong.

AOL blows up
In early 2002, AOL Time Warner was trading for $66.27 per share.

It had $209 billion of assets on its balance sheet, and $128 billion of that was in the form of goodwill and other intangible assets. Goodwill is simply the difference between the price paid for a company during an acquisition and the net assets of the acquired company. The $128 billion of goodwill in this case was created when AOL and Time Warner merged in 2000.

The problem with inflating your net assets with goodwill is that it can -- being intangible after all -- go away if the acquisition or merger doesn't create the amount of value that was expected. That's what happened in AOL Time Warner's case. It had to write off most of the goodwill over the next few months, and one year later that line item had shrunk to $37 billion. Investors punished the stock along the way, sending it down to $27.04 -- or nearly a 60% loss.

In his fine book It's Earnings That Count, Hewitt Heiserman explains the AOL situation and how two simple metrics can help minimize your risk of owning a company that may blow up like this. Let's see how Arch Coal holds up using his two metrics.

Intangible assets ratio
This ratio shows us the percentage of total assets made up by goodwill and other intangibles. Heiserman says he views anything over 20% as worrisome, "because management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."

Arch Coal has an intangible assets ratio of 6%.

This is well below Heiserman's threshold, and a sign that any growth you see with the company is probably organic. But we're not through; let's also take a look at tangible book value.

Tangible book value
Tangible book value is simply what remains after subtracting goodwill and other intangibles from shareholders' equity (also known as book value). If this is not a positive value, Heiserman advises you to avoid the company because it may "lack the balance sheet muscle to protect [itself] in a recession or from better-financed competitors."

Arch Coal's tangible book value is $3 billion, so no yellow flags here.

Foolish bottom line
To recap, here are Arch Coal's numbers, as well as a bonus look at a few other companies in its industry:

Company	Intangible Assets Ratio	Tangible Book Value (millions)
Arch Coal	6%	$2,993
Alpha Natural Resources (NYSE: ANR  )	18%	$5,159
CONSOL Energy (NYSE: CNX  )	0%	$3,427
Peabody Energy (NYSE: BTU  )	0%	$5,289

Data provided by S&P Capital IQ.

Arch Coal appears to be in good shape in terms of the intangible assets ratio and tangible book value. You can never base an entire investment thesis on one or two metrics, but there are no yellow flags here. If any companies you're researching do fail one of these checks, make sure you understand the business model and management's objectives. I'll help you keep a close eye on these ratios over the next few quarters by updating them soon after each earnings report.

Tech Sector Hit By HP, Dell, Apple

The technology sector and related ETFs have been hit by Hewlett Packard (HPQ), Dell (DELL), and Apple (AAPL), as the “bubble” starts to cool.

The technology sector has been red hot in recent months, with major ETFs up more than 5% since the beginning of February. Apple has been the big news maker, as it broke $500/share for the first time and has been up more than 10% in the last three weeks.

Hewlett Packard dropped 1.4% yesterday, as the company reported a steep drop in earnings that widely missed estimates, while Dell Computer tumbled 5.8% due to slow sales and declining profits. Apple also declined 0.35% yesterday, as it consolidated above $500/share and remained in vastly overbought territory, amid rumors that it is going to pay a dividend. Apple’s shareholders’ meeting today sees the prospect of a dividend announcement by CEO Tim Cook.

Major Technology ETFs:

Sector SPDR Trust SBI Interest (XLK): -0.35%

PowerShares QQQ Trust (QQQ): -0.46%

Vanguard Information Technology ETF (VGT): -0.54%

iShares Dow Jones U.S. Technology Sector Index Fund (IYW): -0.49%

The technology sector and technology ETFs remain vastly overbought and overextended on a technical basis with PowerShares QQQ Trust sporting an RSI reading of 69.87, just touching the “red zone” of 70, and with the ETF price some 12% above its 200-day moving average. However, the technology ETFs remain on point and figure “buy” signals and well above their 50- and 200-day moving averages, so we have a situation where markets are consolidating after a most impressive bull run.

Bottom line: The technology sector and technology ETFs are due for a pullback that could be as much as 10% as all major indexes are in severely overbought territory and stretched very tightly.

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.

New Survey Shows Huge Wave of Apple iPad Demand Striking Amazon

It’s been just a matter of weeks since Steve Jobs announced the impending release of the new Apple (AAPL) iPad tablet.

A ChangeWave survey of 3,171 consumers — conducted in the aftermath of that Apple announcement (Feb 1-10) — shows a huge wave of pre-launch demand for the iPad and offers key evidence that the Apple tablet will have a major impact on the e-Reader, laptop and home entertainment markets.

Moreover, the survey shows Amazon (AMZN) and its e-Reader competitors are poised to take a big hit early on from the iPad’s entry into their market.

The survey is a follow-up to a January ChangeWave survey that was conducted before the Steve Jobs announcement and which also found that an Apple tablet device would elicit a major wave of demand among consumers.

Bigger Than the iPhone?

Consumer respondents were presented a brief description of key features of the new Apple iPad tablet (scheduled for March 2010 release) and then asked how likely they were to buy one when it becomes available.

A total of 4% said they are Very Likely to buy the Apple iPad and 9% said Somewhat Likely.

Importantly, the percentage saying Very Likely is the same as in a January ChangeWave survey prior to Apple’s actual announcement. And although the percentage saying Somewhat Likely has declined since the previous survey (from 14% to 9% currently) that’s likely due to the fact that the current survey is the first in which the exact nature of the device is known.

In other words, back in January when virtually no one was yet certain the device was actually real, there were some consumers who thought they might purchase it who subsequently lost interest when the iPad’s exact specifications became known. But this is to be expected — and the percentages who do want to purchase the iPad in the latest survey remain extremely high and represent a tremendous pre-launch demand for the new product.

For comparative purposes, here is how the latest iPad findings compare to an April 2007 ChangeWave survey on the original Apple iPhone, taken just weeks before its release.

Simply put, the current pre-launch demand for the new iPad is greater than the pre-launch demand at a similar point in time for the original iPhone.

Shaking Up the e-Reader Market

We took a close-up look at the budding e-Reader market and found the iPad is all but certain to have a transformational impact on it going forward.� While a handful of e-Reader manufacturers — most prominently Amazon — clearly have a major head start, the survey findings show the iPad is poised to profoundly shake up this market.

Among consumers who already own an eBook Reader, the Amazon Kindle (68%) towers over its closest rival, the Sony Reader (10%). But to gauge the potential impact of the iPad on this market, we asked eBook Reader owners whether they would have purchased their current e-Reader if the Apple iPad had also been available.

Now think back to when you purchased your eBook Reader. If the Apple iPad tablet had been available at that time, which eBook Reader do you think you would have purchased — your current eBook Reader or the Apple iPad tablet?

While nearly half (45%) of current eBook Reader owners say they would have still bought their same device, better than one-in-four (27%) report they’d have bought the Apple iPad if it had been available at the time of purchase.

e-Readers Future Market Share

But it’s when we asked consumers about their planned eBook Reader purchases over the next 90 days that the full extent of the Apple iPad’s impact on this marketplace becomes apparent.

The survey shows the Apple iPad is now poised to capture an astonishing 40% of the e-Reader market going forward in the first 90 days after its launch.

The Amazon Kindle ranks second in terms of future purchase share with 28%. Barnes and Noble Nook (6%) and Sony Reader (1%) are far back in third and fourth place respectively.

In short, while the iPad launch is likely to strengthen overall e-Reader demand, the survey suggests Amazon and its competitors could well find themselves relegated to playing catch-up within just a few quarters if they don’t preemptively move quickly to upgrade their own e-Readers.

In a further warning sign, the survey shows the wave of Apple iPad demand is likely to continue strengthening throughout the first six months after its release.

Which Features Do Buyers Want to Use Most?

In his announcement, Steve Jobs described multiple ways consumers could use their iPads.

We asked likely buyers which features they were most interested in using:

From the list of possible uses, please tell us which ones you’re most interested in using on the iPad. (Check No More Than Three)

Topping the list �- better than two-thirds (68%) say they’re most interested in using the iPad for surfing the Internet.

Checking email (44%), reading eBooks (37%), reading magazines, newspapers and periodicals (28%), and watching video (24%) are additional key ways that consumers are most interested in using the iPad.

But All May Not Be Rosy for Apple

There is at least one potential downside for Apple to its upcoming iPad launch.

To what degree might the iPad negatively impact sales of other Apple products?� To find out, we asked respondents whether they would now be purchasing the iPad instead of a different Apple product that they had previously been considering.

The goal here was to gauge the degree to which the iPad may cannibalize sales of other Apple products.

All told, one-in-four planned iPad buyers say they’ve put one or more of Apple’s other products on hold because they plan on getting an iPad — a clear signal Apple will experience at least some loss of sales among its other product lines due to the iPad launch.

Nonetheless, when you consider the huge wave of pre-launch demand for the new tablet, the cannibalization concern appears to be a minor and quite manageable issue for Apple.

Of course, Apple’s success with the iPad is ultimately dependent on the device being able to turn on and perform up to the expectations of its new owners. Based on Apple’s past history, many, if not most, buyers are expecting it to successfully mass produce and deliver the tablet of their dreams.

We’ll soon be finding out. A ChangeWave survey of new iPad owners is set for early spring.

Global Trade and Port Data Seasonality

One of the many indicators that we track is that of the Los Angeles and Long Beach port data. Combined, these two ports handle almost 50% of the shipping traffic for the United States, so they are obviously useful in order to follow global trade. As you can see in the chart, port data is very seasonal. You can see that total trade (the green line) typically peaks in October and typically bottoms in February. Sometimes this cycle is off by a month in either direction, but for the most part it’s very consistent.

LA and Long Beach Port Data

(Click to enlarge)

While total shipping volume, outbound plus inbound containers, is down over 25% from the peak back in September of 2007, it is important to look at the same month due to seasonality. Looking at shipping volume from February 2010 against the peak February in 2007, shipping is down -13.7% or 118,562 containers.

So is trade improving or getting worse? By breaking the data down into performance by month we can see if this January and February are better or worse than other years. In the chart below, you can see that in both January and February 2010 the level was slightly above their historical averages. On average, January sees traffic shrink by -3.10%, but this year it only shrank by -3.05%. February sees an average decline of -4.42%, but for 2010 it only declined -2.89%.

Port Data Seasonality For Jan And Feb

(Click to enlarge)

Frankly, right now the data isn’t screaming at us. Numbers are coming in close to the historical norms, but overall there is little to get to worked up about. Basically, port data is currently telling us that the recovery is still in progress, but that nothing is really improving or declining. What would be a constructive sign would be to see higher March data, where we have a historical average increase of 10.69%. A large miss would be a bad sign, while an average or even slightly higher number would be considered by us to be very bullish.

Disclosure: No positions

Is PulteGroup Making You Fast Cash?

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to PulteGroup (NYSE: PHM  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for PulteGroup for the trailing 12 months is 500.1.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at PulteGroup, consult the quarterly-period chart below.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at PulteGroup looks less than great. At 500.1 days, it is 110.2 days worse than the five-year average of 390.0 days. The biggest contributor to that degradation was DIO, which worsened 108.4 days when compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at PulteGroup looks good. At 412.0 days, it is 77.8 days better than the average of the past eight quarters. With quarterly CCC doing better than average and the latest 12-month CCC coming in worse, PulteGroup gets a mixed review in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

• Add PulteGroup to My Watchlist.

Estee Lauder Jumps; Weakness Seen in Europe, Korea, Elsewhere

Estee Lauder (EL) shares are rising 8.5% this morning after the company beat fiscal fourth quarter earnings and revenue expectations and said that sales have been strong in China and other emerging economies, as well as in the U.S.

The owner of Clinique and other skincare and makeup brands posted 17 cents of core EPS, a penny ahead of expectations. Revenue of $2.25 billion beat expectations for $2.21 billion.� Operating income jumped 35% in Asia and 18% in the Americas. Total operating margin rose 1.2 percentage points year over year.

“Despite pockets of economic uncertainty around the globe, our sales growth was broad-based, with strong gains in every geographic region and product category and many distribution channels,” said CEO Fabirizio Freda in a statement.

Still, the company is seeing weakness in certain parts of the world, and its 2013 EPS guidance fell below analysts’ expectations. Estee Lauder forecast core EPS of $2.44 to $2.56, below expectations for $2.57. The company projected net sales to grow 6% to 8%, versus analysts’ expectations for 6% growth. Said the company:

“While the Company�s business is performing well, certain Western European countries, Korea and Australia are seeing increased weakness due to ongoing economic uncertainties and volatility in financial markets.

Separately, the Company is also cautious of macroeconomic factors that may temper the growth trend of the Chinese economy.”

Competitor Revlon (REV) is down 0.5%. Avon Products (AVP) rose 1.3%.

Gold And Silver Continue To Get Hit Hard

If you've been following my articles on gold, you would know that I have been bearish on the GLD ETF. I’m going to add another precious metal to my short watch list.

Silver underwent a similar rise to gold, and as of the last few trading days has become technically broken. The SLV ETF hit a high around 50 and over the next 5 trading days got crushed towards the 35 level earlier this year. Since the bottom in May, the ETF has basically traded higher in a tight consolidation range towards 44. The ETF finally broke on September 22nd and has continued to fall. The SLV broke 30 on 9/23 and looks to trade to at least 25 over its next leg lower.

I would exit any position in the SLV and look to short the ETF based on the chart below.

The similarities between silver and gold is concerning. Although gold remains fundamentally valued in the investment community, I continue to believe that the chart points lower. Whether we get a consolidation range similar to SLV from May-September is anyone’s guess. The GLD remains technically broken and for the first time in a while people have losses in their portfolio's. As of today, the ETF is trading below 160 and anyone buying higher, will become a seller looking to lessen his loss or capitulate.

This is a very real scenario and not often reviewed in the retail world. The GLD has major headwinds above its current price. In fact, it has not had any resistance in over a year and has had only one major correction since 2008, when it traded lower by 25%. The current downtrend is about 13% and I expect at least a 20% move near term and a potentially much larger move over the next year.

Below is the daily GLD chart showing a clear break towards the 148 level.

The chart below shows the weekly move since the end of 2008. As this chart shows, the move has been steady with almost no correction. I believe that a larger correction is in store, possibly heading towards 110.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in SLV over the next 72 hours.

Citigroup May Be A Buy For The Mid- To Long-Term Investor

Citigroup (C) may be a possible long-term consideration for investors with a 3-5 year horizon. Citigroup has been struggling since the March 2009 lows, before it conducted its 1 for 10 reverse stock split, and has been continuing the struggle since this time. However, pressures of investment banking have been felt by Morgan Stanley (MS) and of course JPMorgan Chase (JPM). The banks were leaders early this year, but have been strong laggards since April. Citigroup closed at $26.28 on Thursday, down over 2% year-to-date, and was down nearly 45% during 2011. Just an awful 18 months for the stock's performance.

Shares of Citigroup are being traded for roughly half of their reported June tangible book value of $51.81. They are also trading for approximately five and half times the street's consensus 2013 EPS estimate of $4.54. For this year, the consensus EPS estimate is only $4.09, so analysts are looking for EPS growth of 11% year over year. In the second quarter, Citigroup reported earnings 95 cents a share (about 2.9 billion), which was essentially equivalent to Q1 reported results. This second-quarter report, however, was a significant decline from $1.09 a share (about 3.3 billion) reported in the comparable quarter a year ago.

While there was a decline in the earnings, things are starting to look up longer term for Citigroup. It reported a total of $409 billion in consumer loans and $246 billion in corporate loans at the end of the quarter. While this represents a 2% decline in consumer loans, it also represents a 6% growth in corporate loans, for an overall 1% growth in the loan portfolio over the previous quarter. International exposure has been a major concern, and in the short term, it is definitely a headwind. However, for those investors with a longer term 3-5 year outlook, the stock could be a buy at these levels. Analysts see a large opportunity for great returns.

First, they see Citi Holdings Capital eventually being slowly released over time. Further, analyst Richard Staite pointed to the fact that they have approximately $64 billion in deferred assets. Deutsche Bank analyst Matt O'connor has a price target of about $40 for Citigroup shares, and he believes that the company will earn $4.05 per share this year, followed by $4.64 of earnings in 2013, excluding items. The second quarter was a positive sign as he recently stated, "The second quarter 2012 was a step in the right direction for Citigroup being able to deliver respectable earnings in a tough macro and capital markets environment."

Citigroup also pays a dividend, which can create a floor of support underneath the stock. At 2 cent per share, there is not such floor. However, Citigroup is aiming to hike its dividend for the first time since the 2008 financial crisis. Vikram Pandit said he expects to start discussing a larger return of cash to investors by the end of the year in the form a dividend increase. "I believe we will be in good shape and have the capital to be able to do that by the end of the year," the CEO told the U.K.'s Sunday Telegraph.

With positive analyst commentary, decent quarterly results, expected increase in performance into next year, the price to tangible book value and the possibility of a real dividend being paid, I believe Citigroup represents a potential stock to consider for capital appreciation over the next few years.

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

RIP Google Buzz: 2010-2011

In a recent blog post, Google(GOOG) announced its first foray into the social networking world will be shut down "in a few weeks."

If you're thinking Google has killed off Google+, its main challenger to Facebook, shame on you. You've forgotten the Google+ predecessor, Google Buzz. Perhaps because the less than 2-year-old feature has long since faded into obscurity, Google Buzz has finally been given the ax.

See if (GOOG) is in our portfolio

"To succeed you need real focus and thought -- thought about what you work on and, just as important, what you don't work on," the Google blog post reads. "It's why we recently decided to shut down some products, and turn others into features of existing products."Google launched Buzz in February 2010, then proceeded to launch Google+ in June 2011, which quickly became the fastest-growing social network in history.For those who loved Buzz and are sad to see it go, Google says users can still see old Buzz posts on their Google Profile and download a copy of their Buzz data via Google Takeout.Follow TheStreet.com on Twitter and become a fan on Facebook.

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FSI Supports a Universal Standard of Care for Financial Advice

The Financial Services Institute (FSI), the lobbying and policy advocacy voice for independent broker-dealers and their affiliated financial advisors, has issued a statement on October 6 urging the House Financial Services Committee to apply a new universal standard of care to broker/dealers in addition to investment advisors under the proposed Investor Protection Act of 2009 (IPA).

The FSI comment, issued by Dale Brown, the group's president and CEO, stated, "We are suggesting another approach to harmonization of broker/dealer and investment advisor regulation that will work for all client situations, and across the broad spectrum of industry business models. As currently drafted, the proposed legislation seeks to make the fiduciary standard designed for Registered Investment Advisors, now under oversight of the SEC, also applicable to all financial advisors in the broker/dealer industry, without regard to important differences between these business models. Ultimately the proposal falls short of real protection for middle class retail investors for the following key reasons:

? The core issue the proposal attempts to resolve - bringing clarity to investors over the difference between investment advisors and broker-dealers - will not be addressed through the adoption of an arcane and opaque fiduciary duty as the standard of care for those dispensing investment advice;

? The term 'fiduciary standard' is subject to a variety of different legal definitions that fail to provide investors clarity as to the specific duties owed to them by their financial advisor;

? Imposing the so-called 'fiduciary standard' will have the unintended consequence of limiting middle class investor access to financial advice, products, and services by increasing costs and raising other barriers to entry;

? Any standard of care that is applied to all financial advisors must be combined with vigorous and effective enforcement to bring about real reform of financial services regulation."

The statement goes on to note that FSI supports the creation of a new "universal standard of care" focused on the middle class investor and applicable to both RIAs and B/Ds. The organization notes that the standard it would support would ensure transparency of business relationships, place the interests of the client at the forefront, avoid material conflicts of interest whenever possible and obtain informed consent when such conflicts are unavoidable, and provide advice based on information known about the client's investment objectives, risk tolerance, financial situation and needs.

FSI also stresses the need for an efficient and effective regulatory examination and enforcement program as part of any reform effort. "Many of the financial advisors involved in recent high-profile fraud cases, such as Bernard Madoff, were subject to a 'fiduciary standard,' and yet were able to engage in fraudulent activities for years, due to the lack of effective, regular and vigorous oversight of their activities," the statement notes.

In the statement's conclusion FSI throws its support behind "the creation of an industry-informed, self-funded regulatory authority dedicated to effective supervision, timely examination, and vigorous enforcement of both registered investment advisers and broker-dealers."

Welcome to Another Digital Disruption

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This video is part of our "Motley Fool Conversations" series, in which Chief Technology Officer Jeremy Phillips discusses topics across the investing world.

In 2012, digital film viewings will grow to surpass physical viewings, which are comprised of DVDs and Blu-ray discs. This incredible stat is overshadowed by another, more amazing data point: Only about 10% of the revenue generated on a per-view basis is transferred from the physical medium to the digital one. This shift represents both monstrous risks and outlandish opportunities for investors in the space.

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

Buy This Dip… At Your Own Peril

 

Eurozone concerns have absolutely crushed stocks this week. Very few names have been able to shake off the negative sentiment, proving once again that positive earnings or guidance just doesn’t matter right now.

We are in a news-dominated market. As long as the press remains focused on the deepening crisis in Europe, it will be difficult for individual stocks to find higher ground. It will most likely take a major resolution to decouple stocks from the eurozone’s grip. Until that time, sentiment could continue to snap from bullish to bearish on the smallest rumor.

Yet, even if you ignore the news completely, the markets give important clues that can indicate where we might be headed in the coming days and weeks— and judging by how stocks are behaving this morning, I would not rush out to buy this dip. Here’s why:

Indecision on “non-event” days is crippling positive momentum. If you’re looking for the market to snap back with a powerful performance following a broad downward move, don’t hold your breath.

Since the beginning of November, stocks have struggled to string together more than one day of upside action. This is especially prevalent in small-cap stocks. On the days before Wednesday’s big drop, buyers and sellers yanked stocks back and forth to no avail. The close ended up the same as the open, with a lot of noise in between.

The market can’t match October’s highs. None of the major indexes have been able to top their late October highs. While I didn’t expect the pace of the October rally to sustain itself through the end of the year, it would have been ideal to see the market digest the move with additional sideways action.

Instead, several sharp downward moves have effectively corrected a good chunk of the preceding rally. It will take much more conviction from the bulls to push equities any higher.

Support levels are holding, but for how long? The silver lining today is that the S&P 500 appears to be holding a major support zone.

5 Stocks Under $10

If you've got ten bucks, I have some stock ideas for you.

I've been singling out attractive opportunities in low-priced stocks since my original "5 Stocks Under $10" column 10 years ago, and I've seen plenty of stocks with pocket change prices generate incredible gains.

There are risks, and they are readily apparent given the recent volatility. There are often good reasons for stocks to be ignored or beaten down. However, a market rally can work wonders for the unloved with positive catalysts in their pockets.

Let's go over my five picks from March 2009 -- when low-priced stocks bottomed out -- to prove my point.

Company	10/14/11	3/13/09	Gain
Sirius XM Radio (Nasdaq: SIRI  )	$1.80	$0.198	809%
Bare Escentuals*	$18.20	$3.66	397%
Focus Media	$25.78	$5.74	349%
Geron (Nasdaq: GERON  )	$2.34	$4.36	(46%)
Ford	$11.56	$2.19	428%

Source: Yahoo! Finance. *Bare Escentuals was acquired for $18.20 a share last year.

The average gain of 387% in less than three years is remarkable.

Sirius XM Radio has come a long way since balking at bankruptcy in early 2009. It's been consistently profitable in recent quarters, and this quarter will bring the debut of Sirius XM 2.0 -- its first major receiver upgrade since the inception of satellite radio.

Geron has been the lone disaster in this list, the only pick that hasn't at least quadrupled in value. I was attracted to the biotech shortly after it secured FDA approval for a study to test human embryonic stem cell-derived therapy for the treatment of spinal cord injuries. My theory apparently lacked backbone. Profitability has been elusive for Geron, and Wall Street doesn't see positive earnings anytime soon.

Let's go over this month's picks.

E*TRADE (Nasdaq: ETFC  ) -- $9.80
I didn't think that I would see the discount broker on this list after it executed a 1-for-10 reverse split last year and made a pedigreed choice as its new CEO. However, here we are -- at prices that would imply spare change if it wasn't for the reverse split.

This is the wrong time to give up on E*TRADE. The discounter is now quite profitable, and when it reports its latest quarterly results on Wednesday, we'll see that its bottom line is growing. We're also in a niche that is prone to sector consolidation. If E*TRADE stays this cheap for too long, either of its two larger rivals, or any financial services heavyweight looking for some skin in discount brokering, will adopt the E*TRADE Baby.

Dice Holdings (NYSE: DHX  ) -- $9.78
Dice runs several specialized career websites for professional communities. Its namesake Dice.com site has been a hub for IT pros since the mid-1990s. Other sites include ClearanceJobs.com for folks with security clearance and Rigzone for the oil and gas industry.

Its latest quarter was a beauty. Revenue climbed 50%, or a still impressive 37% if you back out recent acquisitions to get an organic pulse. Earnings and operating cash flows more than doubled. Even one of its largest websites that appears to be dedicated to a troubled industry -- eFinancialCareers -- saw a 48% year-over-year spike in revenue.

Despite Dice's heady growth, the stock is now trading for less than 20 times this year's projected profitability and just shy of 15 times next year's target. Dice knows that its stock is a bargain, initiating a buyback plan this summer. Investors should follow suit.

Demand Media (NYSE: DMD  ) -- $7.57
Content may be king, but it's a dethroned king at Demand Media.

Demand Media went public at $17 in January. Its portfolio of websites -- including the eHow tutorial site, Cracked.com comedy hub, and Trails.com hiking guide -- was drawing more than 100 million unique visitors every month at the time.

For better or worse, Demand Media has been tagged as a content mill. It turns to freelancers for cheap but timely material, using its search engine optimization magic to milk traffic. Some of its websites were stung after an algorithmic tweak began to penalize the content farms, but the pessimism is overdone. Even if Demand is often caught emphasizing timely quantity over timeless quality, it's not as if its content is rubbish. More importantly, Demand Media's model is defying the skeptics by actually working. After barely breaking even as it went public, analysts see Demand Media earning $0.23 a share this year and $0.39 a share come 2012.

Crown Media Holdings (Nasdaq: CRWN  ) -- $1.50
Crown Media is the profitable broadcaster behind the Hallmark Channel, a cable channel that is available in 88 million U.S. homes.

Hallmark Channel is home to endearingly hokey original movies and surprisingly robust daytime programming. Now that even The CW is apparently capable of a meaty digital distribution deal, isn't it time to show Crown Media some respect? Even if it is ultimately content poor, it's not as if its flagship operations are chopped liver. Revenue and adjusted EBITDA climbed 16% and 18%, respectively, in its latest quarter.

Jiayuan.com (Nasdaq: DATE  ) -- $8.69
Jiayuan runs the top online dating site in China. Unlike some of its subscription-based rivals, Jiayuan is free to use. Bachelors and bachelorettes simply pay up for individual messages to one another.

It's certainly true that government officials are concerned with the Internet these days and the culture-altering freedoms it inspires. Do you really think that will mean clamping down on the country's most popular site when it comes to widening the courtship pool?

Wall Street sees this recent Rule Breakers recommendation earning $0.32 a share this year and $0.51 a share next year.

Five for the road
These five stocks aren't trading in the single digits by accident. If I'm right about the catalysts, though, they may not be trading in the single digits for too much longer.

Finding promising stocks while they're still cutting their baby teeth is at the heart of the Rule Breakers newsletter that I write for. You can check it out for free this month with a 30-day trial subscription. There are a half-dozen active stock recommendations in the growth stock research service trading for less than $10 at the moment. Check those out, and I'll be back with more on the third Monday of next month.

If you want to follow these five low-priced stocks, consider adding them to My Watchlist.

• Add E*TRADE�Financial to My Watchlist.
• Add Demand�Media to My Watchlist.
• Add Dice�Holdings to My Watchlist.
• Add Jiayuan.com�International to My Watchlist.
• Add Crown�Media�Holdings to My Watchlist.

The Rarest Securities In the World Yield 11.5%, 11.4% and 9.1%

It was greeted as "an oddball security from Canada" when it debuted in December 2003.

I'm speaking about one of the newest (and most lucrative) asset classes to hit Wall Street in recent years -- enhanced income securities (EIS). The name might not sound very glamorous, but who cares when they offer juicy yields of 11%?

The Perfect Successor to the Dying Canadian Trust
EISs are really Canadian income trusts in disguise, efficiently distributing a company's cash flow to shareholders. Canadian investment banks designed them specifically for U.S. companies seeking an income trust structure better suited to American tax laws.

 

As you may know, Canadian trusts have been a staple of many income investors' portfolios for years. But soon, we can kiss our favorite trusts goodbye. Thanks to the Canadian government's decision to tax them like corporations starting in 2011, their double-digit yields will become a thing of the past.

Not to worry. Enhanced income securities can pick up the slack -- they're as close to Canadian trusts as hot chocolate is to cocoa, but they likely won't face the same onerous tax penalties in the coming years.

A Peculiar Stock/Bond Hybrid
What makes these securities so unique is that they are comprised of one share of common stock and one high-yield bond. In other words, about half of the yield comes from common share dividends that can grow with the company's cash flow. The rest comes from a high-yield bond that pays you virtually guaranteed income.

It has taken a few years, but enhanced income securities are starting to receive some much-deserved attention from investors. And for good reason -- many pay more than DOUBLE the average yield on an "A"-rated bond, and more than four times the average yield delivered by the S&P 500 Index.

The Best of Both Worlds . . . High Yields with Low Risk
While many high-yield securities carry equally high risks, EISs are special because their rich yields are buoyed by the bond portion of the security. And for me, this is of paramount importance. After all, it's not often investors can count on enjoying high yields from investment-grade bonds while also having the upside of an equity. That's why I seek out securities like EISs that offer income investors like us the highest potential reward with relatively low risk.

In order for a firm to issue an EIS, it must generate a steady stream of regular annual cash flows. After all, income deposit securities are expected to pay both regular interest on a bond and steady dividends. As a result, those companies with unpredictable earnings and poor cash flows need not apply. Since cash flows must be stable, only steady companies in solid, predictable industries issue the securities.

These companies run the gamut from school buses and hospitals to funeral homes and recycling plants. Whatever their focus, all of them are in recession-proof businesses that throw off piles of free cash flow, even in a slowing economy. And they all pass along the lion's share of that cash flow to investors by paying abnormally high dividends.

Why the Dow Was Up Today

All three major stock market indices were up slightly today.

Index	Change	Ending Value
Dow Jones Industrial Average (INDEX: ^DJI  )	+32.77 [+0.27%]	12,392.69
Nasdaq (INDEX: ^IXIC  )	+2.34 [+0.09%]	2,676.56
S&P 500 (INDEX: ^GSPC  )	+2.89 [+0.23%]	1,280.70

The biggest news today is the unofficial start of earnings season.

Each quarter, Alcoa (NYSE: AA  ) is the blue-chip first reporter. And today was no different.

Alcoa reported after market close, but it was the biggest winner out of the 30 Dow stocks today (up 2.9%) as investors anticipated good news. The reported news was actually mixed, though. Alcoa's adjusted earnings came out at -0.03, either off a penny or in line with analyst estimates, depending on your preferred source. But Alcoa's Chairman and CEO Klaus Kleinfeld had this to say on the year ahead:

�"For 2012, we expect global aluminum demand to grow 7% and are forecasting a global deficit in primary aluminum supply."

After Alcoa, Bank of America continued its volatile ways, gaining 1.5%. On the losing side, Microsoft (Nasdaq: MSFT  ) was worst off, down 1.3%. Not that we can blame the decline on this tidbit, but this year will be Microsoft's last as a major participant at the annual Consumer Electronics Show in Las Vegas. Tonight is the final keynote address from CEO Steve Ballmer.�

It's fun to look at the daily market news, but remember to keep your perspective and invest for the long term. If you're looking for a long-term stock pick, our chief investment officer has identified his No. 1 stock for the next year. Find out which stock he likes in our brand-new free report: "The Motley Fool's Top Stock for 2012." I invite you to take a copy, free for a limited time. Get access to the report and find out the name of this legendary company.