Why Now Could Be the Right Time for Gold Stocks

Conditions have improved for gold equities, and economic policy decisions being made in Washington could further increase the investment appeal of these mining stocks for 2010.

The charts below clearly illustrate the relationship between gold- mining stocks to buy and the federal budget.

The top chart below compares the total-return performance of the S&P 500 (blue line) with that of the Toronto Gold & Precious Minerals Index* (gold line) going back to 1971, when President Nixon ended dollar convertibility into gold and deregulated the price of gold.

At that time, the United States was in the thick of the Vietnam War and was pumping billions of dollars into the financial system to pay for it. The dollar's value dropped compared to other currencies, and the demand for gold and its price shot up. At the same time, the U.S. top stocks market was languishing, taxes were high and new regulatory entities like the EPA were being created. It was also a period of socialism, unionism and protectionism in Europe.

The bottom chart shows the federal budget, and the trend is readily noticeable - when the federal government is spending more than it takes in, gold stocks for 2010 tend to outperform the broader market.

One hundred dollars invested in the S&P 500 at the start of 1971 underperformed the gold-stock index essentially for a quarter-century. In each of these years, the federal government engaged in deficit spending. The S&P 500 surpassed the gold-stocks market in 1997, in the midst of the tech boom and budget surpluses under President Clinton.

When those surpluses reverted to widening deficits after the Sept. 11 attacks, you can see the spread between the broad market and gold equities narrowing. At the same time, another important event occurred - China began to deregulate its precious metals markets. During that period, the S&P 500 dropped before largely leveling off, while gold stocks to buy charged forward.

Gold stocks have delivered a 9.9 percent average annual return since 1971, while the S&P 500's annualized return has been 9.6 percent. That $100 invested in gold stocks in 1971 would have grown to nearly $3,800 at the end of May 2009, while the same amount in the S&P 500 Index would be worth about $3,400.

Gold stocks are among the most volatile asset classes, but old and new research shows that their judicious use can enhance investor returns without adding portfolio risk.

U.S. Global Investors has updated research on gold stock investing by Jeffrey Jaffe, a finance professor at the Wharton School, that was published in the Financial Analysts Journal in 1989. Prof. Jaffe's study covered the period from September 1971, just after President Nixon ended convertibility between gold and the dollar, to June 1987.

The Jaffe study concluded that adding gold and gold stocks to a large portfolio increases both risk and return, but that the additional return from these non-correlative assets more than compensates for the additional risk.

During the study period, gold bullion saw an average monthly return of 1.56 percent, considerably better that the 1.06 percent average monthly return for common stocks represented by the S&P 500. Gold stocks shone even brighter, returning an average of 2.16 percent per month.

On the risk side, gold and gold stocks had greater volatility (measured by standard deviation) than the S&P 500. But Jaffe found that, due to their non-correlative qualities, adding gold-related assets to a diversified portfolio would likely reduce overall risk.

We picked up the Jaffe study's result for gold stocks (measured by the Toronto Stock Exchange Gold and Precious Minerals Total Return Index, converted to U.S. dollars) and compared it to the S&P 500 Total Return Index from September 1971 through the end of May 2009.

Our research included creation of an efficient frontier series to establish an optimal portfolio allocation between gold stocks and the S&P 500, with annual rebalancing. As you can see on the chart above, a portfolio holding 85 percent S&P 500 and 15 percent gold equities has essentially the same volatility as the S&P 500 (horizontal axis) but delivered a higher return (vertical axis).

Between September 1971 and May 2009, the S&P 500 averaged a 9.34 percent annual return. A 15 percent allocation to gold equities, with annual rebalancing, would have yielded on average an additional 0.89 percent per year.

How much is 0.89 percent per year? Assuming the same average annual returns since 1971 and annual rebalancing over 25 years, a $10,000 investment in the portfolio with 15 percent gold stocks would be worth about $114,000, 22 percent more than the 100 percent S&P 500 portfolio, while adding virtually zero risk.

U.S. Global Investors consistently suggests up to 10 percent gold in a portfolio allocation, so we also looked at returns for investors at that level. A 10 percent allocation to gold equities, with annual rebalancing, would have yielded on average 0.63 percent more than an exclusive S&P 500 portfolio.

In dollar terms, the $10,000 investment in the 90-10 portfolio would grow to $107,611 over the ensuing 25 years (assuming, the same average annual returns since 1971 and annual rebalancing), compared to $93,210 for the portfolio solely invested in the S&P 500.

And when you look at the efficient frontier in the chart, the 10 percent weighting is two diamonds above the 100 percent S&P 500 allocation. You can see that adding gold stocks also increased return with no increase in the portfolio's volatility.

More than two decades and many ups and downs have passed since Prof. Jaffe published his study, but our follow-on research shows that the relationship between gold, investor returns and volatility has remained pretty much the same.

Another bullish indicator for gold and gold stocks is that, for the first time in my 20 years at U.S. Global Investors, pension fund consultants and other gatekeepers for large institutional investors are advocating an exposure to gold.

These gatekeepers have influence over managers of many hundreds of billions of dollars in retirement funds, and they are advising a 5 percent to 8 percent allocation to gold, which is similar to the long- term exposure suggested by U.S. Global.

Another thing that held gold stocks down was the number of gold equity financings. In early 2009 there were roughly 50 deals and more than $5 billion raised, and that put a short term cap on many of the established gold producers that that said that they were going to start buying the junior exploration companies.

The emergence of a new merger-and-acquisition cycle has been a key driver for the small exploration stocks, which have significantly outperformed the actual producers in 2009. The miners that can replenish their reserves while also controlling their costs to enhance profitability will see this reflected in their stock price.

BRIC Nation Investors: Sleepwalking off a Cliff?

Today I want to share what could soon be an extremely profitable short:

The BRIC Claymore/BNY Mellon BRIC ETF (NYSE:EEB).

That's because the world is now waking up from the BRIC dream.

Six years after Goldman Sachs researchers coined the acronym for Brazil, Russia, India, and China in a report titled Dreaming with BRICs: The Path to 2050, long investors could end up sleepwalking off a cliff.

You see, the World Bank just revised its global growth forecast for 2009 from -1.7% to -2.9%, and BRIC nations are finding it hard to fight the international market downtrend now forming.

The first BRIC summit took place last week in the consummate Eurasian location of Ekaterinburg, Russia, just east of the Ural Mountains that divide the two continents. Where the four countries called for a "stable, predictable, more diversified monetary system" and greater power in the World Bank and International Monetary Fund, the Claymore/BNY Mellon BRIC ETF (NYSE:EEB) plummeted the first chance it got.

EEB gapped down on Monday, June 22 to a quick 4% loss, after 50% YTD gains through June 11.

Commodity and savings-driven optimism put BRIC cheerleaders high on the astral plain over the past few years. But strong pricing and demand for oil, gas, sugar, iron and even debt—i.e. China's massive stockpiles of dollars and U.S. bonds—depend on healthy bank-fed credit flows.

Investors and consumers all have to keep their expectations up as well, in order to justify rising costs in raw materials, consumer goods, and government bonds alike, and sagging confidence ripples far and fast.

State-level action is where BRIC matters most now—and the political echelon is also where BRIC could crumble. For example, China has launched a $585 billion stimulus package, but one-party rule casts a long shadow.

Running Down a Dream... Going Wherever it Leads?

Is the BRIC dream a profound vision to be interpreted, like when Joseph turned the Pharaoh's dream into history's first best stock forecast? (seven years of plenty followed by seven years of famine... the ultimate bull-bear play!)

Or is BRIC more of an interrupted fantasy, like squaring up to kick the winning goal in the World Cup—right before your morning alarm goes off?

It's a bit of both.

Asia Times Online, columnist Chan Akya called the inaugural BRIC conclave a farce, but also a "much-needed first step in a journey that could well overhaul global economic architecture in decades to come."

The BRIC summit, and the very idea of BRIC as an independent, self-sustaining unit, both reflect the past decade or so of economic growth trends and foreshadow a possible scenario for new economic leadership.

As with "decoupling," though, BRIC oversimplifies a complicated and continuous process of global economic expansion and shifts in power.

Political and business leaders in Brazil, Russia, India, and China would be wise to concentrate on smart growth that fits their needs, rather than conforming to a slick buzzword.

But when it comes to investors like us, it's easy to profit from the falling fortunes of BRIC ETF components.

Shorting the EEB BRIC ETF

EEB is chock-a-block full of vulnerable mega-cap top stocks to buy from the four countries in question. Here's what I mean...

Top holding China Mobile stands to lose from migrant workers returning home and cutting cell phone service.

Earnings at Petroleo Brasileiro, Brazil's national oil company, are of course subject to oil price flux, and future earnings will be hurt by near-term underinvestment should crude fall to far.

And even though national governments have become primary lenders across all continents and even in BRIC nations, EEB doesn't register the stimulus-era shift in financing—financials comprise 16% of the base index.

Instead of dreaming with long positions in that BRIC ETF, look at the reality of what's going on.

Right now, heads of state around the developing world are looking first and foremost at ways to shore up domestic demand. "Buy American" or "Buy Chinese" provisions dot the $5 trillion in stimulus spending governments have promised. For India, China's insular buying of its own goods adds to Indian entrepreneurs' frustration over cheap Chinese goods. That's right, even in India, Chinese imports are a major concern.

No wonder... Manufactured goods from the Middle Kindgom come in at between 10% and 70% less than Indian-made equivalents!

Corruption and Quarrels Hold BRIC Back

Corruption is also a major stumbling block on the path to BRIC dominance or even parity. Consulting group Kroll just issued its Global Fraud Report, which focuses on stimulus spending. Using data from anti-corruption watchdog Transparency International, Kroll estimates that a full 10% of total global stimulus funds—$500 billion—will end up in the hands of profiteers and dishonest officials.

Russia's petroleum-heavy resource economy will suffer with dropping oil prices, India's infrastructure problems still have that country pinned, and China aims its economic efforts not only toward boosting domestic demand but also to prevent social unrest that could easily arise from prolonged joblessness.

The World Bank did recently revise its China growth forecast upwards from 7.2% from 6.5%, but the Bank's projections are notoriously fudgy.

Brazil, the only BRIC member in the Western Hemisphere, is still struggling to fight corruption. President Luiz Inacio Lula da Silva is steadily opening the country to more foreign investment and cleaning up national finances, but U.S. weakness will create drag from the north.

And of course, just because it would be more convenient for those countries to play nice, don't expect aggressive growth strategies to coincide. The aforementioned China-India trade battle is just one snapshot of how bitter bilateral relations can get when the going gets tough.

Through the rest of 2009, be nimble and ready to short emerging markets and related ETFs when uptrends show signs of reversal.

There's no better time than now to wake up and beat the markets to the punch.

Europe Breaks Out the Bazooka

Spain and Portugal must be licking their chops...

After endless speculation, the EU is getting closer to bailing out Greece. The deal isn't finalized yet — despite the headlines and leaders trumpeting a deal, which almost reeks of desperation.

But there has been progress... if you can call it that.

Germany is caving from pressure to put a deal together, after making a lot of noise about moral hazard in recent months. They've tentatively agreed to provide roughly one-third of a massive $61 billion package.

The aid will come in the form of low-interest three-year loans. Greece has $9 billion in notes coming due this May, which explains the announcement's timing.

The EU's Bazooka

But Greece will only use the lifeline if a rescue becomes necessary. So they say...

(That should sound familiar to U.S. readers. Remember Hank Paulson and his financial bazooka?)

Back in mid-2008 — when he was selling Congress on unlimited bailouts for Freddie and Fannie — then Treasury Sec. Paulson said, "If you have a bazooka in your pocket and people know it, you probably won't have to use it."

We all know how that turned out. Pretty well — at least for Paulson's buddies. It let them keep dumping questionable loans onto the public's lap.

Meanwhile, Freddie and Fannie continue to hemorrhage billions and require government backing.

It looks like EU financiers are using a similar ploy to sell this bailout to their citizens. It's a lot easier to sell an expensive plan when it "may not be needed at all."

There's no doubt that Greece is going to need the cash. The question should be whether $61 billion will be enough.

All this does is buy Greece a little time. They now have three years to fix decades of systemic mismanagement, excess, and corruption... Three years to slash budget deficits from 12.9% this year — recently revised upward from 12.7% to 3% in 2012.

Probably not gonna happen. But it buys some time, which is typical of today's kick-the-can school of economics.

Morally Hazardous

Carten Brzeski, an ING economist who worked at the European Commission, summed up the situation: "All that fuss and talk about not putting taxpayer money at risk has been made obsolete."

It's true. Once you put a safety net in place, everybody gets more daring.

Now that the net is in place, EU members have an incentive to let their budgets get out of control. And until the EU puts something in place to discourage reckless spending, that's not going to change. Eventually, it could lead to a breakup of the EU... but that would be much further down the road.  

I mentioned that Spain and Portugal are licking their chops on this news. That's because they'll probably be next in line behind Greece for a bailout. If the Greek bailout goes through, other countries will expect similar treatment. It's a dangerous precedent... But it seems the world is full of those these days.

A Broken State

The Greek economy needs an overhaul (as do many others). Its public sector is bloated and government employees are overpaid.

What they're getting is short-sighted, extend-and-pretend economics. Three-year loans from the EU and IMF aren't going to save Greece; they'll just postpone any real change from taking place and allow the status quo to go on a bit longer.

The plan will inevitably lead to more bailouts in the future, for Greece and other EU member states.

It doesn't bode well for the European Union.

I'm with Jim Rogers on this one. Rogers' take on the situation is quite blunt: "Let Greece default, it'd be good for the EU."

Rogers has a point, though. It would send a message that European leaders are serious about maintaining budget discipline and countries better get their finances in order.

But that sort of market discipline doesn't happen these days, so we have to invest accordingly.

Are Greek Stocks a Buy?

The Greek bailout plan may be nothing more than economic voodoo. But that doesn't mean we shouldn't take advantage of it in the markets.

My colleague Christian DeHaemer lives for situations like the one unfolding in Greece right now. Chris is betting on the Bank of Greece. After all, we saw what happened to American banks after they got their $700b... Here's a recent note he sent out to Crisis and Opportunity subscribers:

The Eurozone Blasts Greece with Cash... Top Stocks Launch 

Over the past two days, the leading Greek bank, The National Bank of Greece (NYSE: NBG) has jumped 17%.

It moved on Friday as rumors hit the markets about a Euro/IMF bailout of Greece... Today — or rather, last night — the stock moved up another $0.45 cents to $4.07.

The European government offered below market interest rates around five percent to bail out a country that was running debt levels above 12% of GDP. The Eurozone will offer as much as 30 billion euros in three-year loans.

Bloomberg quoted former IMF economist Stephen Jen as saying, "This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets, so we'll get a rally in those."

Two weeks ago, I recommended the largest Greek bank in my trading service Crisis & Opportunity. It seeks to find extreme value in crisis situations and profit as those situations are resolved and the top stocks for 2011 are revalued upward as a result.

The National Bank of Greece is a clear example of this type of investing. And the run is just getting started.

In the United States, bailed-out banks went on a bullish rampage:

Bank of America (NYSE: BAC) went from $3 at the bottom to $17.93 today...

Wells Fargo went from $8 to $31.20 today...

Citigroup (NYSE: C), with the worst management of the lot, climbed from $1 to $4.29!

NBG has a current P/E ratio of 1.89; pays a 0.29 cent dividend; has a 44% profit margin and an EPS of $2.24.

It is still priced for going out of business... But this company will rock and roll before that happens.

Join me for the NBG ramp-up... and in the meantime, .

 

Are you most bullish on right now?

I really struck a nerve on my personal blog on Friday!

Hundreds of our readers jumped online to answer the question of the day:

Is this the time to load up on gold, silver and other precious metals ... or not? Why?

How much of your portfolio have you invested? Do you plan to buy more in the months ahead?

Which are your favorites? Gold? Silver? Platinum? Palladium?

Surprisingly, a few of our readers are precious metals skeptics:

"I don't see gold soaring this year as a lot of experts expect," says David Y., "because I feel, as long as other currencies around the world are in trouble, the U.S. dollar will stay about where it is or even get a little stronger. Foreign investors will still have faith in the U.S. dollar and gold will stall."

But the vast majority are clearly bullish on precious metals in 2010 and beyond:

Eric agrees that gold prices will retreat, but sees that as a reason to buy: "I believe gold will drop further as a knee-jerk reaction to the idea that we have commodity deflation. This is, in my opinion, a good time to load up on physical gold as a dollar hedge. I like to keep 5% of my assets in physical gold."

Jay is looking for profits of up to 36% or more in gold over the next three years: "Just about every major industrial nation is inflating its currency. They are promoting growth of money supply over fighting inflation. With Ben at the helm, the price of gold in dollars will continue to climb. I expect gold at $1,200 by the end of 2010 and over $1,500 by the end of 2012."

Scott V.R. is a super bull with almost a third of his money wrapped up in precious metals: "If you have the guts to live with the fluctuations, it is time to load up with metals. As long as the government keeps printing money and banks continue to be net buyers instead of sellers, we will continue to see gold and silver as a safe haven. I have about 30% of my portfolio divided between top stocks for 2010 and bullion. Mostly gold and silver and a little platinum."

Phil, who also says he has about 30% of his money in gold and silver, couldn't agree more: "The recent price pullbacks present a buying opportunity. I favor silver as a two-way bet: Its uses are primarily industrial but it is also regarded as a bullion commodity so it will tend to go up with gold. Plus demand exceeds supply and that is unlikely to change."

Speaking of silver, it seems to have attracted quite a fan club, lately:

Al in Arizona: "The current ratio of silver to gold is 66 to 1. This will continue to grow closer, making silver a better deal than gold. Any silver under $20/ounce is a steal. It's destined to go up 20% in three months. Load up now."

Gerald says that longer term, silver could soar 250%: "If the gold/silver ratio ever moved back to the more traditional 20/1, silver would need to move up about 2.5 times its current level."

Marilyn G. seems to prefer palladium.

"Well," she writes, "I don't know why palladium is going up so nicely, I only know it is. But my thinking is, since palladium is the sister metal to platinum, might not car makers substitute palladium in future catalytic converters for expensive platinum?"

Judging from these and hundreds of other enthusiastically positive responses, it's clear that, among our readers, precious metals rank highest of all the investment classes we've discussed so far. I'd guess about a NINE on a scale of one to ten.

My view: No matter how good an asset class may sound — in theory or in practice — NEVER overinvest. Keep your money spread out over all FIVE asset classes. And if the conditions are ripe for major declines, consider also playing the downside.

Tomorrow, we'll take a look at how our readers define the optimal growth portfolio for 2010 — but first, I have one last asset class I want to cover: Currencies!

New ETFs make investing in euros, yens, pounds and other currencies — either for moves UP or DOWN — as easy as buying top stocks for 2010 in IBM or Microsoft. And we've all seen how dramatically the U.S. dollar can fall — or rise — against them.

So what do YOU think? Just to jump over to my blog and answer today's "Question of the Day:"

Do currency ETFs have a place in your portfolio?

Which currencies — the U.S. dollar, Canadian or Aussie dollar, euro, Japanese yen, Chinese yuan, Brazilian real or others — are you most bullish on right now?

What percent of your total investment capital do you invest in currencies?

As always, I'll add my own thoughts to yours. And then, we'll move on to the next major step — to build an optimal growth portfolio for the year ahead!

Good luck and God bless!

Top Stocks For 2010

Top 10 Stocks for 2010 from America's Leading Advisors marks the eleventh edition of NewsletterAdvisors.com's complimentary signature publica-tion. Each and every edition brings the best in investment ideas from the brightest minds in investing today to individual investors just like you.

Since NewsletterAdvisors.com was launched in November 2005, tens of thousands of individual investors from all over the world have visited the site and downloaded copies of our reports. We thank all of those who have downloaded previous editions of the report for their overwhelmingly positive feedback. As you evaluate your portfolio into 2009 we hope that you will turn to this special report from NewsletterAdvisors.com for ideas and inspiration. If this is your first time requesting a free report from us, you can also look forward to receiving 24/7 Investor's Daily Profit email newsletter, Featuring timely stock recommendations and analysis on the news that's really moving the market, plus interviews with investment experts, including contributors to NewsletterAdvisors.com special reports, Daily Profit is your indispensable guide to navigating a challenging market.

Enjoy this special report and the outstanding investment ideas from our hand selected investment experts. We also encourage you to consider some of the special offers from the contributors to this special report, including free trial memberships, subscription discounts, and additional bonus reports. Please see page 13 of this report for complete details, or click here to take advantage of these free offers today!

Thanks again for turning to NewsletterAdvisors.com, your trusted source for investment information.

Top Stocks For 2010 No.1 Atlas Pipeline Partners
by Addison Wiggin

I've been involved in investing and financial markets for the past 15 years. In that time, I've met every kind of investor... and heard about every kind of investing strategy and stock opportunity you can imagine. Here at Agora Financial, we scour the globe looking for hidden investment opportunities often over looked by Wall Street. Capital &Crisis editor Chris Mayer uncovers these opportunities and delivers them to you. Chris is called by some "the best financial journalist you've never heard of ..."

And on behalf of Chris Mayer... I'll gladly put every minute of my hard work and reputation building on theline. His Capital & Crisis subscribers have benefited greatly from his unique recommendations. His globetrotting letter knows no bounds and goes wherever profits can be found. Over to Chris… Finding the Great Investments He's BeenSearching for His Whole Career I'm going to show you how you can start collecting a 20%-plus yield -- on one overlooked energy stock --right away. Besides these plumpdividends, you'll get a good shot at tripling your money. And there's good reason to believe you could make nine times your money -- if Wall Street wakes up and smells hard assets, and pays exactly what they're worth.

The market isn't rewarding Exxon, Chevron or even Gazprom. And now is not the time to start taking risks on wildcat energy explorers. Right now, I'm looking at a stock that's trading under $6. And today, it's showing signs of a climb -- so I wouldn't wait on this opportunity. Just let me give you the bare bones of its business and a nod from a very smart billionaire investor who knows tough markets.

The company's secret is that it doesn't drill for a drop of oil and it doesn't frack a single foot of shale gas. What it does is keep companies who do at its mercy.
Atlas Pipeline Partners (APL:nyse) owns 1,600 miles of pipeline connected to nearly 6,000 wells and is adding over 800 new wells per year in Appalachia. It also operates a growing interstate pipeline system in the Fayetteville Shale. Plus, it has a great deal with one of the most active drillers in America: Atlas Energy. Every well that Atlas Energy drills has to be connected to Atlas Pipeline's system. These are low-risk assets. Now let's talk dividend. Since 2000, APL's average dividend increase clocked in at 7 cents a year. A plump year offered a 107% increase. While it's true that 2008 was a tough year for natural gas, NGLs (APL's primary product) are up 50% from their December lows. Aside from price recovery, there's another catalyst for dividend growth. Given the prime location of its pipelines in Appalachia, you have every reason to expect an increased dividend payout down the road.

War horse Leon Cooperman, shares my interest in APL. He is one of the great living investors. At a recent Manhattan value investors' conference, Cooperman confessed, "This is the most difficult environment I've lived through. And I've been doing this for 41 years." But when he got to talking about getting 20%-plus on your money with APL, he had this to say: "At my age, it's better than sex, but that's just me."

Why does he think Atlas is on sale? Thank collapsing hedge funds the most. These guys have been forced to sell even their best positions to cover losses in other areas. Cooperman thinks this stock is worth $46 easily. My original estimate was $48. That's nine times what it trades at today. So why not consider a stock trading at so steep a discount to book?

Don't forget the great yield -- that's poised to increase. Even if that dividend stays right where it was last quarter, you could still make back today's investment in under four years -- just through the dividend alone.
Recommendation: Buy Atlas Pipeline Partners (APL: NYSE).

 

Top Stocks For 2010 No.2 U.S. Cellular 8.75% Senior Notes due 11/1/2032 (NYSE: UZG, $20.25)
by Nilus Mattive

Famed investor Warren Buffett made a telling remark on the kind of returns he hopes to achieve in today's tough markets: "We would be very happy if we earned +10%, pre-tax," he told shareholders at Berkshire Hathaway's (NYSE: BRK-B) annual meeting last May. Co-Chairman Charlie Munger quickly concurred, "You can take what Warren said to the bank... and I suggest you adopt the same attitude."

Well, my recommended security for this market bests Warren Buffett's benchmark. It offers secure yields of better than 16%. And we do mean secure -- as in legal obligation.Although this security trades like a stock every day on the New York Stock Exchange, it's actually a bond, not a stock. That means your quarterly interest payments have top claim on the company's assets, ahead of any common or preferred share dividends if the company runs into trouble. That kind of security is comforting in today's turbulent times, but it's hardly necessary for America's sixth biggest wireless firm. In fact, credit rating agency Standard & Poor's is so confident in this firm's financial position, it just upgraded the company's credit quality to investment grade "with positive out look," meaning the rating could be raised in one to three years.

The upgrade and positive outlook mean that any such bonds the company may issue in the future will most likely offer a lower interest rate than this high-yielding security. That's because today's featured security was issued in 2002, when the company was considered higher risk and needed to offer a higher rate in return.
Consider, too, that this security is now trading at around a -19% discount from its $25 par value. It matures in 24 years and can be called at any time. Either way, sooner or later you will be getting back $25 per share plus any unpaid interest. Meanwhile, you'll be paid amply to wait. If this all sounds too good to be true, read on and decide for yourself...

Snapshot: These exchange-traded notes were issued in 2002 by regional wireless operator U.S. Cellular (NYSE: USM). The company is the sixth-largest wireless carrier in the country by number of customers. Its wireless networks serve 6.2 million customers, for an estimated 3% share of the U.S. wireless market. Headquartered in Chicago, the telecom carrier focuses on smaller regional markets mainly in the Midwest, including Illinois, Indiana, Iowa, and Wisconsin.

Key Statistics:
Security Type: Exchange-Traded Debt
Annual Dividend: $2.1875
Dividend Yield: 10.8%
Frequency: Quarterly
Credit Rating: Baa3/BBB

Wireless services account for about 93% of revenues, while equipment sales contribute the balance. Roaming revenues from other wireless carriers using USM's networks provide a 7% chunk of the company's wireless service revenue. U.S. Cellular is a subsidiary of rural fixed-line phone operator Telephone & Data Systems (NYSE: TDS), which owns 80.8% of the company.

Performance: U.S. Cellular has seen earnings grow an average of +50.2% a year over the past three years through December 31, 2007. U.S. Cellular has a strong balance sheet, which is supported by funding from parent company TDS. Its debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio, a measure of leverage, is less than 1.0. Meanwhile, debt is only around 20% of total capitalization. Both those measures are well below its regional wireless peers. Rival Leap Wireless (Nasdaq: LEAP), for example, carries a debt-to-EBITDA ratio of 6.4 times, and debt is 60% of total capitalization.

 

Top Stocks For 2010 No.3 Strike Gold with SPDR Gold Shares (GLD)
by Ian Wyatt

If the gains gold has made are any indicator of profits to come, I think SPDR Gold Shares (NYSE:GLD) is the golden ticket investors need to expose their portfolio to the safety and profits of the precious yellow metal.

Gold has been one of the best performing investments in a down market, and was one of the only investments to post gains in 2008, proving to be an excellent safe haven. Like U.S. Treasuries, the price of gold has rallied as investors fled equities and bonds, and sought safe investments. SPDR Gold Shares is an ETF that trades at one-tenth the price of an ounce of gold, and tracks the price movement of the commodity. The metal has most notably been on the rise, jumping 31% to $923 an ounce from the recent Nov. 13 low of $700 an ounce. As I mentioned in my weekly letter on Monday, I had been considering buying the Market Vectors Gold Miners Index (NYSE:GDX). However, this higher-risk, higher-reward investment has soared an astounding 74% from a recent Oct. 27 low, making it much riskier than GLD.

Through SPDR Gold Shares, I intend to take a cautious approach to gaining exposure to gold, given the big gains that the ETF has already experienced in the last few months. I plan to start with a small position of $2,000, and may add to the position in the future. I don't intend to have more than 5% of my portfolio invested in this position at any time.

For any Goldfingers out there, investing in SPDR Gold Shares is much like buying gold bars or coins, minus the headache of having to hold them in a safe or hide them under your bed. Using the fund, you have the added flexibility of being able to buy or sell at any time. The fund is backed by physical gold reserves, giving investors the security of buying the real commodity.

Many commodity prices dropped in 2008, including gold, which fell briefly in October and November of 2008. Don't let this brief decline fool you though - this is a long-term bull market for commodities, and gold will continue to perform well. As investors ditch low-yield U.S. Treasuries and seek other inflation-protected investments that can provide safety, gold appears to be the perfect investment.

The reckless monetary policy of the U.S. Federal Reserve will have its day of reckoning in the future, and investors who are long-gold and have investments that aren't tied to the greenback will be smiling in the years to come.

Let's face it: once the economy picks up, deflation will change into inflation. And hyper-inflation isn't far off, as a result of a U.S. government that continues to spend aggressively and issue more curren cy in a thus far failed attempt to jumpstart the U.S. economy. This anti-inflation investment allows investors in the United States to diversify out of the dollar and own an asset backed by a physical commodity that is likely to see greater demand with limited additional supply coming on line in the coming years.I plan to begin with a small position, which I may add to if I see a breakout in the price of gold. I'll also look to add to my position if prices consolidate, which I think is quite possible given the recent jump in price.

 

Top Stocks For 2010 No.4 How One Tiny Drug Developer Could Take Down The Industry Leaders
by Greg Guenthner

Grab Your Share of a $31 Billion Market In 2007, the global pharmaceutical pain relief market was worth approximately $31 billion. In the U.S., two-thirds of the dollar volume of the prescription pain medication market is for drugs used to treat chronic pain, with the remainder going toward drugs used for acute pain.
Javelin Pharmaceuticals Inc. (JAV: AMEX) designs products to fulfill unmet and underserved medical needs in the pain-management niche. The company is particularly focused on breakthrough cancer, post-operative, back, orthopedic injury and burn pains. Despite the advances in medicine, the company insists treatments for these types of pain continue to be an underserved medical need. That's where Javelin's lucrative new contract comes into play…

The company penned an agreement in January worth up to $71 million that includes double-digit royalties on future sales of its new pain drug, Dyloject. Javelin will receive roughly $12 million in upfront cash payments from European pharmaceutical developer Therabel for the commercialization rights for Dyloject, the flagship product in Javelin's current pipeline. Dyloject is an injectable form of diclofenac, which is a prescription anti-inflammatory drug often prescribed to treat postoperative pain.

Dyloject is undergoing Phase 3 clinical development in the United States - the drug is already available in the United Kingdom. During its pivotal U.K. registration trial, Dyloject's efficacy and safety were shown to be significantly superior to standard intravenous treatments currently marketed in the U.K.

A Faster, Better Treatment
The competition for Dyloject requires dilution and slow infusion into the patient. But Dyloject comes ready to use for immediate IV administration. Anti-inflammatory drugs such as Dyloject, along with opioids like morphine, are often used post-operatively. They help reduce opioid doses by as much as 50%, thereby decreasing morphine-related side effects on the patient.

Dyloject's most significant U.S. competitor in the injectable antiinflammatory category is ketorolac tromethamine. In January 2006, Javelin announced the results of a Phase 2b U.S. study in which Dyloject showed superior onset of action compared with ketorolac five minutes after intravenous injection.

Bottom line: This drug does what it is supposed to do. And it does it better than all of the leading competitors. That's the ringing endorseent for Dyloject…especially since it's awaiting approval in the U.S. U.K. Sales and European Agreement Are Signs of Things to Come Dyloject is already on the market in the United Kingdom, and sales have been growing at an impressive pace. The drug is now on the formularies of 73 hospitals in the U.K., 58 of which were considered gold accounts and 15 silver accounts. In the first nine months of its availability, Dyloject was accepted at 40% of their targeted accounts. The drug has been accepted at 95% of the institutions to which it's been presented. This, Driscoll believes, shows that Dyloject has value to clinicians. It will prove valuable to shareholders, too…

Since Dyloject was introduced to the market, sales of the drug have doubled each quarter. Although that may be a small sample size, it shows the growth potential of the product once it is introduced into a wider market.Javelin is on schedule to complete its studies on Dyloject and submit applications in late 2009 for approval in the U.S. and European markets. The partnership with Therabel helps Javelin accelerate this process.Javelin's a Bargain at Current Prices Javelin has put itself in a fantastic position to succeed. The company currently has $34.6 million in cash and equivalents and no long-term debt whatsoever. Its burn rate during the first three quarters of 2008 was $8.6 million. With $12 million in upfront cash from Therabel, the company is well positioned to wait out approval in the U.S. Javelin feels that the self-medication segment is an area of possible growth. It generally takes 15-20 minutes and sometimes as long as 40 minutes for commercially available oral pain medications to provide any meaningful relief. Javelin says that all three of its product candidates appear to work faster than the oral formulations of currently available prescription pain products. Dyloject has shown to relieve pain in as little as five minutes, a mark that has not been achieved by current injectable anti-inflammatory drugs.

Recommendation: Buy Javelin Pharmaceuticals Inc. (JAV: AMEX).

 

Top Stocks For 2010 No.5 Abercrombie & Fitch
by Bernie Schaeffer

At Schaeffer's Investment Research, we employ a 3-tiered analysis approach known as Expectational Analysis® (EA) that was created more than 2 decades ago. EA utilizes traditional methods of fundamental and technical analysis and combines these with a third, crucial look at investor sentiment. It is this third layer of analysis that provides a critical edge in selecting stock and option plays. Both anecdotal and quantifiable measures of investor sentiment provide a window into how the investing crowd perceives reality. These perceptions serve as powerful contrarian indicators, as the crowd tends to move as a herd and is, to paraphrase the venerable contrarian Humphrey Neill, "right during the trend but wrong at both ends." A look into the psyche of the collective investing masses, while also taking into account important technical and fundamental variables, can offer a reliable recipe for trading success.

The latest opportunity found by the EA methodology is Abercrombie & Fitch (ANF). According to Hoover's, Abercrombie & Fitch (A&F) sells upscale men's, women's, and kids' casual clothes and accessories. The firm has 1,000-plus stores in North America (mostly in malls) and also sells via its catalog and online. It targets college students, and has come under fire for some of its ad campaigns, as well as for some of its short-run products. The company also runs a fast-growing chain of some 450 teen stores called Hollister Co., and a chain targeted at boys and girls ages 7 to 14 called abercrombie. RUEHL, a Greenwich Village-inspired concept for the post-college set, debuted in 2004.

In early February, earnings rolled in from the trendy retailer, surpassing the consensus estimate. For the fourth quarter, the company posted a profit of $68.4 million, or 78 cents per share, compared to its year-ago profit of $216.8 million, or $2.40 per share. Excluding impairment charges and costs tied to a new employment agreement with its CEO, the retailer boasted a profit of $1.10 per share, beating the Street estimate for a profit of $1.01. Sales fell 19% to $998 million, said the company. ANF stated that it would not issue an earnings forecast for fiscal 2009, citing a tough year ahead. The company said it expects a difficult selling environment to continue.

Abercrombie forecasts capital expenditures of $165 million to $175 million in fiscal 2009, a major portion of which is tied to new stores and remodeling.
Technically speaking, the security gapped sharply higher on the earnings report, gaining more than 10% amid broad market weakness.What's more, this significant bullish gap has placed the equity above resistance at its 80-day moving average. This short-term trendline had capped the shares' recent rally attempts.

As followers of the EA method, we ideally like to see solid price action persist against a backdrop of skepticism, as this implies that there could be additional money waiting on the sidelines that hasn't yet been committed to the bullish cause. It seems as though there is plenty of room on the bullish ANF bandwagon. Options players have leveled some heavy bearish bets against the stock in an attempt to call a top to its uptrend. The Schaeffer's put/call open interest ratio for ANF stands at 1.28, as put open interest outweighs call open interest among near-term options. This reading is also higher than two-thirds of those taken during the past year, indicating extreme skepticism among short-term options speculators.Meanwhile, Wall Street has yet to fully jump on this outperforming security. According to the latest data from Zacks, 14 of the 19 analysts following ANF rate it a "hold" or worse. Any upgrades from these remaining holdouts could help to propel the shares higher during the long term.

Overall, this combination of pessimistic sentiment against the stock's backdrop of improving earnings and strong technicals has bullish implications from a contrarian perspective. As investors unwind their bearish bets and jump on the stock's bandwagon, they will help to push the security even higher.

 

Top Stocks For 2010 No.6 Redefining Pharmacy Benefit Managment
by Ian Wyatt

The way I see it, even through current market malaise, SXC Health Solutions (Nasdaq:SXCI) is standing firm with its two corporate feet firmly planted in two complementary arenas: it's providing pharmacy benefits management services and developing the technology engine needed to keep costs under control.
Bringing down health-care costs remains a hot-button issue, as the baby boomers reach retirement age, Medicaid and Medicare grow, and drug costs continue to rise.

SXC Health, formerly known as Systems Xcellence, is a niche player in the benefits marketplace. Headquartered outside Chicago, SXC Health is a provider of health-care information technology solutions and services to providers, payers and other participants in the pharmaceutical supply chain in North America.

SXC Health is redefining pharmacy benefit management (PBM) by providing a broad range of pharmacy spend management solutions and information technology capabilities. The company is a leader in delivering an innovative mix of market expertise, information technology, clinical capability, scale of operations, mail order and specialty pharmacy offerings to a wide variety of healthcare payor organizations including health plans, Medicare, managed and fee-for-service state Medicaid plans, long-term care facilities, unions, third-party administrators and self-insured employers. In essence, the company's services allow customers to make good decisions and save money.

SXC Health's informedRx business sells management services mostly to government and universities, while its Healthcare IT Group develops the technology behind the services and provides a revenue stream via software licensing.

SXC's recent acquisition of National Medical Health Card Systems expanded its informedRx services, which is a broad, flexible suite of à la carte PBM services, which provide flexible and cost-effective alternative to traditional PBM offerings. The acquisition is an essential step in SXC Health's strategic evolution toward being a leader in pharmacy spend management, and gives the company's customers the chance to pick and choose what services are right for them. SXC Health is the only company in the PBM space to offer its clients such a broad portfolio of solutions SXC Health's technology touches close to 1 in every 4 of the estimated 3.5 billion prescriptions written in the United States annually - a plus considering that the health-care sector and health-care IT industry will outperform the market for the next few years.

The company also stands to benefit from demographic and political trends, in that the population is aging and pharmaceutical companies will need SXC's products and services. Also, the new administration has vowed to digitize the health-care system. Both of these trends will positively influence SXC Health's earnings.
In the quarter ended Sept. 30, 2008 earnings were $3.5 million, or $0.15 per share, up from $2.7 million, or $0.12 a year ago. Revenue increased to $318.1 million from $22.2 million. SXC increased full-year EPS guidance to $0.54 to $0.58 a share, from its previous estimate of $0.41 to $0.50. Additionally the company narrowed revenue estimates to $840 to $855 million, from $825 million to $875 million. We forecast the company will earn $0.59 EPS in 2008 and grow EPS 50% in 2009 to $0.88. We expect revenues will be $854 million this year and increase 52% to $1.3 billion next year. The company has made brilliant acquisitions in recent years, which have made it one of the primary players in pharmacy spend management services and information technology solutions.

The company was recently trading at 32 times current year EPS and 22 times forward EPS. These are high multiples in the current environment, but SXCI shares are worth every penny. In fact, shares are worth more. We estimate fair value to be $28 based on EPS and revenue growth projections.

 

Top Stocks For 2010 No.7 Power Lines and Trees: A Dynamic Duo for Income And Growth
By Justice Litle

They may not be sexy, but it's hard to go wrong with trees and power lines. In fact, we'll be using that unlikely duo to execute this "perfect inflation hedge."
Brookfield Infrastructure Partners (BIP:NYSE). BIP is a limited partnership (though its cash flows are not subject to the same tax treatment as MLPs, or Master Limited Partnerships).

Brookfield Infrastructure Partners (BIP) is a spin-off from a much larger mother ship, Brookfield Asset Management (BAM:NYSE).While little BIP is small and scrappy at $316 million, mother BAM boasts a far larger market cap of $9.5 billion.As a publicly traded partnership, 50% of BIP is owned by investors like you and me. Forty percent is owned by BAM, the parent, and the last 10% is owned by Brookfield directors and management.

BIP was spun off from the BAM mother ship with the intent of being a "pure infrastructure play." The far larger BAM has all sorts of assets on its balance sheet; through the creation of a stand-alone entity, BIP offers a way to pick up direct infrastructure exposure.BIP's primary assets are electricity transmission lines and timber, and they are distributed across North and South America. On the electricity side, BIP owns roughly 5,500 miles worth of transmission lines (power lines) in Chile and Canada (Northern Ontario). Additional power lines in Brazil were sold at a considerable profit in the third quarter of 2008.

BIP's transmission lines are part of a regulated monopoly, which means no competitor can muscle in. As of March 2008, these assets had a recorded book value of $330 million -- more than the value of BIP's current market cap. Using the Brazilian asset sale as a benchmark -- in which BIP fetched a 40% gain over book price -- its likely current holdings have a far, far higher value than the old numbers reflect.

A Toll Road for Electrons
Power lines are a great business. Just as you have to drive to work each day (unless you're retired or work from home), the electricity has to move from the power plant to your house (or the office building, the factory and so on).

Here's why you want to own power lines:
They require very little maintenance and upkeep, so most of the cash flow goes right into the owner's pocket.
Because people and businesses are steady in their use of electricity, those cash flows are very stable.
As inflation rises, steady price increases can be pushed through as part of the contract.

Additionally, BIP will have the chance to build out its electricity transmission networks at attractive rates of return over time. The only thing better than a strong, stable, cash-flow-producing business is a business that can expand on the same great terms. As emerging markets resume their upward trends, electricity use will go up too... and this can only be good news for BIP.

An Infinite Resource
The other thing BIP owns is timber -- more than 1.2 million acres in Oregon,Washington state, and coastal British Columbia. The nice thing about timberland is that, when managed properly, it's an infinite resource. Unlike metals or fossil fuels -- which eventually run out and leave a site in decline -- trees can grow back.
As with electricity, BIP's parent company (and 40% owner) offers four decades of experience owning and operating timberlands. This gives BIP an edge in key areas like harvest planning and managing the product mix.

BIP's acreage is concentrated in premium timbers like Douglas fir and hemlock. In addition, the close proximity to the coast gives BIP an edge on the export side of the business.

Timberland tends to rise in value over time because, unlike the currency spit out of a printing press, they just aren't making any more of it. Timber's uses are many and varied for the global economy, and, like power lines, timber has the advantage of being a high-margin, low-upkeep business.

When prices are high, BIP can cut more timber. When prices are low, they can cut less (saving costs) and let the acreage value appreciate. The timber itself is a renewable resource, and BIP has the ability to book capital gains through the occasional sale of choice parcels for land redevelopment.

An Exceptional Value
Investors are coming back to their senses, snapping up assets that got insanely cheap. BIP's parent could well be buying back shares too, figuring it's crazy to leave them out on the market at such a tempting price. Back in March of 2008, management gave an estimate of BIP's book value (the value of the underlying transmission and timber assets) at $24 per share. I think that is not only a reasonable estimate; it is more than likely a conservative estimate. BIP could easily be worth $25 to $30 per share.

As we prepare for a central-bank-induced inflation deluge, stable, cashflow producing infrastructure assets will only increase in value. Power lines and trees will never go out of style... and the stream of income collected from those assets will only keep ticking up year after year. Buy Brookfield Infrastructure Partners (BIP:NYSE) at $18 per share or better.

 

Top Stocks For 2010 No.8 Big Profits from Downsizing
by Stephen Rawls

All Americans are changing their spending habits as the economic recession hits home. We're adjusting to the idea of driving the car an extra year or more, to buying clothes at Sears instead of Joseph A Banks, that sort of thing. And while our change in spending habits hurts some, it helps others. As investors, we need to focus on those companies well positioned to profit from these changes. Those companies well positioned to profit from the fundamental changes in the American lifestyle.
One of the major changes that we're seeing now is a turn by the American consumer to private label brand foods to feed their family. As a result, one of the big beneficiaries of this move is American Italian Pasta Company (AIPC), the nation's largest manufacturer of dry pasta. Sales are booming. And so is the stock.

What makes American Italian Pasts so interesting is that it's booming because of several trends. The first is the aforementioned transition to private label foods. A second favorable trend is that consumers are moving away from a meat and potatoes diet to something less expensive, like pasta. And, finally, the low-carb "Atkins diet" fad is now history. Even more amazing in the recession of 2009, American Italian Pasta has actually been able to raise their prices while sales increased! Sales of pasta products in the United States rose 5% last year to $6.4 billion. During that time, American Italian was able to raise prices faster than their costs increased.
For the first quarter 2009, American Italian Pasta earned a whopping $1.23 EPS, up from 2008's first quarter EPS of 43 cents. Retail revenue for the quarter rose 56% to $136.1 million, while cost of goods sold rose only 40%. Overall volume for the company was up some 13%.

From a technical standpoint, American Italian Pasta seems to defy the overall market, making new highs as recently as February 25th. The company is a newly listed issue on the NASDAQ, beginning trading there on November 14, 2008. The company is trading above its 50-day moving average and gapped higher on February 12th after releasing its first-quarter earnings. Since then, the stock hasn't looked back.

With no upside resistance to speak of, the critical technical support level comes in the gap between $27.00 and $29.19. Given the strong earnings report on February 11th, I wouldn't expect the stock to violate this gap. Prospects for the company seem very strong and the company appears able to deliver on those prospects.

Pricing power is something almost unheard of in the economic climate of 2009. And that's one of the things that impresses me the most about American Italian Pasta - it has the ability to increase sales, while raising prices.

One other factor that hasn't yet been considered by most analysts, I believe, is that the cost of raw ingredients, which had been going up for most of 2008, are now in retreat.With higher prices already in effect, any fall in cost of goods sold will reflect directly in higher profitability for the company.

In summary, with American Italian Pasta, you have a company that's benefiting from multiple trends working in its favor. Fundamentally, the ability to raise prices and not affect sales is amazing. With more Americans "trading down" their eating habits, this trend to higher sales shows every indication of continuing. And with their raw ingredient prices now falling, the company will not have to raise prices in the near future to stimulate growth. Rather, the profits for the second quarter of 2009 will come from higher prices already in place, accompanied by falling ingredient prices.From where I sit, American Italian Pasta Company looks like a rare winner in 2009.

 

Top Stocks For 2010 No.9 Looking for Safe Stocks? Try Channeling Ben Graham
by John Reese

When I began conducting extensive research into the strategies used by some of history's greatest investors some 12 years ago, one thing quickly became apparent: Many of these Wall Street stars, including Peter Lynch, Warren Buffett, and Benjamin Graham, built their fortunes and reputations not by relying on some sort of investing "sixth sense", but instead by using approaches that were mostly or completely quantitative. They stuck to the numbers, never letting emotion influence their decisions.

That was great news to me. Because of my background in computer science and artificial intelligence, I was able to develop sophisticated but easy-to-use models based on these gurus' quantitative approaches.

Today, these models power the research and analysis on my web site, Validea.com, allowing everyday investors to take advantage of the strategies that some of history's most successful stock-pickers used. Since I started tracking them nearly six years ago, portfolios built using each of my eight original "Guru Strategies" have all significantly outperformed the market.

For some top picks in today's market, let's turn to my top-performing strategy -- one that, interestingly, is inspired by what is far and away the oldest of these methodologies, the approach of the late, great Benjamin Graham. Known as the "Father of Value Investing" -- and the mentor of Warren Buffett -- Graham detailed his strategy in his 1949 classic The Intelligent Investor. Six decades later, my conservative Graham-based model is up almost 70 percent since its July 2003 inception, while the S&P 500 has fallen more than 22 percent. Last year, while the market tumbled close to 40 percent, my Graham-based model sustained well less than half of that decline.

One stock my Graham model is particularly high on right now:
Ameron International Corporation (AMN), a California-based firm that makes water transmission lines, fiberglass-composite pipe for transporting oil, and infrastructure-related products like ready-mix concrete and lighting poles -- just the kind of company that could benefit from the federal stimulus package's infrastructure funding.

Having lived through both his own family's fall from financial grace (following his father's death when Benjamin was a young man), and, later, through the Great Depression, it's no surprise that Graham focused as much on preserving capital and limiting losses as he did on producing big gains. He liked stable, conservatively financed companies, not speculative gambles, and Ameron fits the bill. One example of why: its strong current ratio of 2.87. Graham used the current ratio (current assets/current liabilities) to get an idea of a company's liquidity (and the credit crisis has shown us all how important liquidity is).

Companies with current ratios of at least 2.0 were the type of financially secure, defensive, low-risk plays he liked, and Ameron makes the grade.Another way Graham targeted conservative firms was by making sure long-term debt was no greater than net current assets. Ameron has just $36 million in long-term debt and almost $300 million in net current assets, a great sign.

The other main part of Graham's approach was making sure a stock had what he termed a "margin of safety" -- that is, its price was low compared to his assessment of the intrinsic value of its underlying business. Stocks with high margins of safety have downside protection -- they're already selling at a discount compared to their real value, so even if problems occur and earning power declines a bit, the stock still might gain ground because it's so undervalued to begin with.
To find undervalued stocks, Graham looked at both the price/earnings ratio (the model I base on his approach requires the greater of the stock's current P/E or its three-year average P/E to be no greater than 15) and the price/book ratio (which, when multiplied by the P/E, should be no greater than 22). Ameron's P/E (using the higher three-year figure) is just 8.2, and its P/B is just 0.99, indicating that the stock is a great value.

In addition to Ameron, here are a couple more of myGraham model's current favorites:
Schnitzer Steel Industries (SCHN): Hammered when commodity prices began to tumble last summer, this Oregon-based firm has made a big rebound since late November, and my Graham model thinks it has a lot more room to grow. It has a current ratio of 3.2, just $106.1 million in long-term debt vs. $338.5 million in net current assets, and bargain-level P/E and P/B ratios of 5.8 and 1.01, respectively.

National Presto Industries (NPK): Talk about an eclectic group of business segments. This Wisconsin-based firm's housewares division makes small appliances and pressure cookers; its defense segment makes ammunition, fuses, and cartridge cases; and its absorbent products division makes adult incontinence products and baby diapers. Its fundamentals are exceptional -- current ratio of 5.23, P/E ratio of 14.5, P/B ratio of 1.49 -- and, the firm has no long-term debt.

 

Top Stocks For 2010 No.10 Hedged Investing with Hussman Strategic Growth
by Ian Wyatt

When I recently discovered the Hussman Strategic Growth fund, it was love at first sight. Hussman acts like a hedge fund, providing the fund managers much flexibility in the investment instruments and strategies utilized to capitalize on rapidly changing markets like those we are currently experiencing. Manager John Hussman's disciplined strategy has navigated the mutual fund toward calmer waters amid choppy market conditions, a testament to the fund's ability to achieve remarkable performance in down markets.

Although Hussman receives the advice of key personnel on the fund's board of trustees and at Hussman Econometrics, this mutual fund depends heavily on Hussman himself. He also invests all of his personal liquid assets (outside of cash and money market accounts) in his two funds, clearly aligning his personal interests with those of fund shareholders. Hussman Strategic Growth invests primarily in U.S. stocks with the objective of longterm capital appreciation. It currently has 116 long holdings that include the likes of Johnson & Johnson (NYSE:JNJ), Nike, Inc. (NYSE:NKE ), Amazon.com, Inc. (Nasdaq:AMZN), Coca-Cola (NYSE:KO) and Best Buy Co. (NYSE:BBY). Hussman goes long on individual positions, and can leverage using equity call options. Ninety percent of the fund's net assets are tied up in stocks while the remaining 10% is sitting in cash.

Hussman was down only 9% in 2008, a performance that was the envy of most fund managers, especially in light of the 37% drop in the S&P 500. In the previous bear markets of 2001 and 2002, the fund was up a whopping 14% in each of those years. Because the fund is so risk-averse, its short-term track record may limp in bullish environments, but its long term performance is where investors begin to see solid profits. Given the current state of the market, and the fact that my outlook calls for a range bound and volatile stock market in 2009, Hussman Strategic Growth fund is a solid place to have capital invested.

John Hussman develops a risk versus reward profile for the current market climate, identifying economic trends and valuing individual stocks based on their expected streams of cash flow. For much of the past decade, Hussman has considered most stocks overvalued and did not think they were providing enough reward given their high level of risk.To preserve capital, he hedged the portfolio against market risk by shorting indexes such as the S&P 100. As a result, the fund has been fairly uncorrelated to the whims of the market and has been shielded from the heavy losses many funds have faced.

Since its July 2000 inception, the fund's 8.9% annualized return has outpaced the S&P 500, which lost 4.4% annually over the same period.Performance in 2009 appears to be holding up, with year-to-date returns of 0.25% versus a loss of 8% for the S&P 500 index. Morningstar calls Hussman "one of the steadiest and cheapest options in the fledgling long-short category," and gives the fund a 3-star rating.

Hussman's claimed approach of "investing for long-term returns while managing risk" is in perfect alignment with my aggressiveapproach to conservative investing. I, too, aim to find opportunities for long-term capital appreciation, while limiting downside risk through portfolio diversification and aggressive risk management. The fund is currently taking a very conservative approach to equities, which makes sense given the performance last year. With the bleak prospects for global growth in 2009, this fund should perform well in horizontal or down markets, making it a nice fit within the equity portion of my Recovery Portfolio. Additionally, the fund's flexibility should allow it to perform nicely once stocks begin their recovery.

US Economic Boat Sinking in the Money Flood

Does anyone seriously think the feds can do a better job? These are the people who run the Post Office...and Amtrak, for Pete's sake. Even with monopolies, they can't make money. Now they're the majority owners of auto companies, insurance giants and mortgage firms. Hardly anyone buys a house in America anymore without the help of a government-owned mortgage business. And soon, you won't be able to get a doctor to take your temperature - assuming they still do that - without getting a bureaucrat's approval.

In theory, the feds take charge of more of the economy, and spend more money, so they are able to keep the GDP from going down. The feds have been pumping about $4 billion per day of deficit spending (money they didn't collect in taxes) into the economy. The bankers say 'thank you very much' for the business and pay themselves big bonuses. But this money doesn't stimulate the private economy...it replaces the top stocks for 2011.

But it replaces it with zombie 'growth.' The government-driven part of the economy is largely brain-dead. It is a waste. What real, positive boost to prosperity comes from someone filling out health care forms for the feds? What benefit do we get from tax accountants? How about from the ambulance-chasing lawyers?

(Yesterday, driving to work, we saw an ad in Baltimore's inner city: "Birth injury? Malpractice? Workplace injuries? You need a lawyer!")

How about from any of these multitudes of mid-level bureaucrats...lobbyists...handlers...interveners...meddlers...?

The feds spend money. But the money is like warm water to a boat hull. It just stimulates the barnacles. Gradually, the boat slows...and sinks.

What can you do? Haul it out and scrape the barnacles off! That's what Ben Bernanke is proposing. But wait...the barnacles vote!

And they make campaign contributions...

But here is Ben Bernanke talking tough. 'If you don't straighten up,' he seemed to say, 'you're going to end up like Greece.'

Wait...this has a familiar ring to it. This is the same Ben Bernanke who is holding rates near zero to make it easier for the feds NOT to straighten up. Like those of his predecessor, Bernanke's centrally- controlled lending rates are sending out just the wrong signal at just the wrong time.

And like Greenspan, he can get away with it...top stocks for 2011.

But maybe not for long. On Monday, US T-note yields ran over 4%. "The fun's over," said old-timer Richard Russell. It looked like the end had come for the long bull market in bonds. Bond yields have been going down since '81. But they seemed to hit bottom near the end of 2008. What we're seeing now - possibly - is the beginning of the long march in the other direction.

This seemed even more likely because at the end of March the Bernanke Fed lost one of its pumps. It can no longer buy up the toxic mortgage- backed bonds of Wall Street, thereby giving the banks money to buy US Treasury debt.

Still, on Wednesday, threats of more trouble from Greece sent investors towards US bonds for safety.

"Greece Rescue Not Going According to Plan," was the headline at Bloomberg.

"Demand strong in US 10-year Treasury debt sale," reported The Financial Times.

But by yesterday, it looked like the plan for US debt was not going well either.

"Treasuries decline after $13 billion auction of 30-year bonds," said another Bloomberg report.

Jobless claims unexpectedly rose last week. What do you expect? This is a Great Correction. Learn to love it.

"China offers high-speed rail to California," says The New York Times. Get used to that too. Who's got the money? Who's got the new technology? Who's got the engineers...the people who actually know how to do something.

Hey China...let's make a trade. We'll give you 1 million lawyers for 100,000 engineers. Or, how about 20,000 lobbyists for one good metallurgist? Heck...we'll throw in 535 members of Congress.

Hold the Congressmen? Okay...guess we're stuck with them.

A Space Oddity

Since 1946, at least in the US, the skies got a little bluer every day. Consumer spending increased nearly every year. At first, consumers spent what they earned. And then came the wonder years...when they spent more and more money they hadn't earned yet.

Then, in the 20 years leading up to 2007, incomes scarcely rose. But standards of living went up anyway. How was it possible? Easy. Instead of saving 8% of their incomes, as they had for the previous 5 decades, they spent the money. The savings rate fell to near zero. Debt increased. Of course, you can only take a thing like that so far. In this case, the end of the credit expansion came three years ago. All of a sudden consumers were faced with a grim prospect. They could no longer spend money they didn't have. Now they had to NOT spend money they DID have. It was pay back time...time to return the money they had borrowed during those carefree years.

Settling up was so alarming and so disagreeable that the feds swung into action to prevent it. First came the monetary stimulus - with the Federal Reserve's key rate reduced to zero...and the Fed empowered to buy $1.7 trillion worth of toxic loans from shaky lenders. Second, the federal government itself greatly increased its spending - adding $4.11 billion of deficit spending every single day since September 2007.

And now, US Treasury Secretary Larry Summers says the recovery has reached "escape velocity." Whether or not he correctly judges the speed of the economy, we don't know. But we're sure he's wrong about gravity.

According to the official stopwatch, 163,000 people found jobs in America last month. Forty-eight thousand of them were jobs with the US census bureau. Those jobs are temporary and useless. If you could create wealth by having people count one another, perhaps we could create even more wealth by having them count the stars in the heavens or the grains of sand on Malibu beach. Take off the counters and that leaves 114,000. Now take off the statistical adjustment for births/deaths, and the statistical adjustments for bad weather, and the statistical legerdemain that disappears people who are too discouraged to continue to look for work, and you have a negative number. The economy actually lost jobs in March. According to John Williams, who keeps track of the figures, joblessness rose in March to 21.7% - just a tad lower than the worst figure from the Great Depression.

Now, we turn to savings rates. Some analysts say savings are on the rise - showing consumers' 'pent up' buying power for the future. Other analysts note a recent downturn in the savings rate. That, they say, shows consumers' willingness to spend now. Both are wrong.

It will be a cold day in Hell when Americans are not willing to spend. What is at issue is not the spirit but the flesh. The Baby Boomers were flying high during the wonder years. They looked forward to higher house prices and rising stock prices in 2011. But now, after having suffered an $11 trillion loss in top stocks for 2011 and real estate, what can they do? Gravity is pulling them back down to earth. Like it or not, they have retirement to think about. That's why they have not participated in this best stock market rally; inflows into mutual funds are running at only a quarter of their '90s rate. The boomers know they can't trust their retirement to the best stock market of 2011. They've got to spend less.

Nor does a rising savings rate mean what analysts think it means. Savings are not simply 'pent up' spending for the future, not following a 63-year-old credit expansion; the money was spent years ago. Bankruptcy filings hit a record in March - at 6,900 per day. This debt elimination is registered as an increase in "savings." But it's not the kind of savings that you can spend at the liquor store.

Meanwhile, Alan Greenspan says rising bond yields are "the canary in the coal mine." This week, the canary was still alive...but wheezing...with yields on the 10-year note over 4%. Why? Probably, it is because the Fed is no longer, indirectly, buying US Treasury debt. Until last week, the Fed bought the banks' bad mortgage-backed securities. The banks returned the favor. Rather than lend to the private sector, they bought US notes and bonds.

In the private sector, bank credit is still contracting, with commercial and industrial loans falling at a 17% rate over the last 3 months. Revolving credit - auto loans and credit cards mostly - is down for the first time ever. The money supply is contracting too. M2 is declining at a 0.2% rate and MZM going down at a 5.4% speed. Consumer prices are still dropping in the US. In Europe, too, inflation is at record low levels - 1.5% annually. And Goldman Sachs economists predict further drops in the CPI - to 0.3% in the US and 0.2% in Europe.

Escape velocity? Looks more like stall speed to us.

The Follies of Federal Reserve Chairmen

Poor ol' Alan...

We almost felt sorry for him...

"Maestro mauled..." said the headline in The Financial Times. We wanted to maul him many times. But now that others were doing it...it made us feel sympathetic to the old scalawag.

Didn't the Alan Greenspan Fed's failure to curb subprime lending deserve to go into the 'oops' category, demanded chief tormentor Phil Angelides.

Mr. Greenspan defended his legacy. He was right 70% of the time, he said. The other 30% of the time he was wrong for 2011 top stocks.

Hey, that's not bad. Pity it's not true. Greenspan was wrong 90% of the time - at least.

He thought those fancy derivatives actually spread the risk of failure...and made the system more stable.

He thought those subprime loans helped people of modest incomes realize the goal of home ownership.

He saw no risk in keeping the key rate at an 'emergency' low level...years after the emergency had passed.

But he hit one of those magic moments last week...when he was finally right about something. He declared that the yield on the 10-year note was "the canary in the coal mine." This week, the canary wobbled...but stayed on his feet. He's still standing...but looking a little peaked. More below...

While the former Fed chief was in the spotlight at The Financial Times yesterday, the present Fed chief was front-page news over at The Washington Post. Alan Greenspan is a scoundrel, no doubt about that. But he was, in some ways, a better Fed chief than Bernanke.

The trouble with Bernanke is that he doesn't know his limitations. He actually believes the Fed can look at the possible outcomes going forward and improve them before they come out.

"Fed chief sounds a deficit warning," is the headline. He said Americans faced a "difficult choice." It's between higher taxes and fewer entitlement services, he said.

This doesn't seem like a difficult choice to us. We'd gladly accept fewer "services" from the feds if they'd lay off on the taxes. But that's because we're in the half of the US households that actually pays taxes.

No kidding; the report was in yesterday's news:

"Almost one half of US households pay no federal income tax."

So, welcome to the beginning of the end. If half the citizens get bread and circuses without paying for them, you can bet that the whole shebang is headed for destruction. The math doesn't work. Half the people have no interest in curbing taxes or spending. Obviously, those people would prefer to raise taxes - on us - rather than give up their free pills and retirement benefits. Even among the half that does pay taxes, most pay very little - less than they get back in 'services.'

Meanwhile, the 'rich' get socked hard. According to the reports we're seeing on scurrilous blogs and from our usually unreliable sources, the tax burden on the rich is set to rise over 60% of income - thanks to the health care charges they will have to bear.

By the way...the whole thing is a fraud. The services, that is top stocks for 2011...

Here's how it works. In 2007, the private sector finally blew itself up - thanks largely to all that debt offered by Wall Street and encouraged by the Alan Greenspan/Ben Bernanke Fed.

So then...in comes the Fed again...and the US government...wearing white hats and pretending to save the situation. How? By bringing more of the economy under their control!

As far as we can tell, the last successful government program was WWII. And that was only successful because the competitors' programs were also run by government. But that doesn't stop them...

More below, after today's column...

They're Finally Beginning To Grasp the Truth

The numbers came out yesterday - and they were especially ugly.

According to Moody's Investors Service, commercial real estate prices fell 8.6% in April.

Now take a look at what Nick Levidy - Managing Director at Moody's - had to say about the numbers:

"The size of April's decline, following a 5.5% decline in January, also suggests that sellers are beginning to capitulate to the realities of commercial real estate markets."

What was that again? "Beginning to capitulate to the realities?"

Translation: Sellers are waking up to the fact that they've lost millions. And believe me... this crisis is far from over.

My colleague, Steve Christ, has been writing about the coming collapse in the commercial real estate markets for months.

He's been on-the-money with each and every prediction - and just last week, he released a new report that spells out how the final dominoes will fall in the weeks ahead... and how YOU can take full advantage.

I've taken the liberty of re-sending Steve's report - see below - because it's so especially relevant now that these latest figures have been released.

As you'll see - the numbers aren't going to get better any time soon. In fact... things are about to get a lot worse.

But the good news is that Steve has uncovered a specific investing strategy - one that's been around for centuries - that he recommends to take full advantage of this latest real estate crisis.

I urge you... take a moment to read Steve's report to learn just how enormous this crisis really is - and what you can do about it.

It's been around for the last 20 years.

And even though the U.S. Government won't officially acknowledge its existence, it's about to make you an absolute fortune.

It's called the Plunge Protection Team -- and the secretive committee's primary responsibility is to manipulate the U.S. financial markets and prevent devastating collapses.

But here's the critical part:

The Plunge Protection Team - at this very moment - is pushing the U.S. market artificially higher... but not for much longer.

You see - they've exhausted nearly every trick they know just to push the Dow back toward 9000... in search of a solution for an imminent market collapse that could have a devastating effect on the U.S. economy.

But the fundamental collapse of one market in particular is as close to a sure thing as there can be.

It's the Commercial Real Estate Market. And there's nothing anyone in Washington can do to prevent its complete demise.

The potential exists for not only $1 trillion worth of damage and defaults - but also a collapse of the banking system... a stock market of 2011 crash... and soaring unemployment rates.

The cracks in the foundation of the commercial real estate market are simply too deep for anyone - including the famous "Plunge Protection Team" - to prevent a total disaster.

I've got the numbers and scary details to prove it. But I also want to make one thing abundantly clear...

This crisis doesn't have to wipe YOU out. As a matter of fact - as long as you see it coming and take a few simple steps - you'll actually see it as one of the biggest profit opportunities of your lifetime.

How is it possible for you to actually make a fortune as a direct result of a historic market collapse?

The answer lies in a special type of investment that has been in existence for 372 years. It's a simple investment that allows you to not only survive a market disaster - but also collect double- and triple-digit profits all along the way.

I've just put the finishing touches on four new research reports that spells out exactly how you can take advantage of this centuries-old investment to capitalize on...

I'll show you how you can claim your copy of these reports - FREE of charge - in just a moment.

First, though, I need to tell you why...

The Commercial Real Estate Collapse Could Cripple the Markets

Listen - I'm no doom-and-gloomer. Not by any stretch. I love a roaring economy and a fast-moving bull market in stocks as much as anyone.

But I have to call things the way I see them.

And there's nothing that can prevent the commercial real estate market from an historic collapse. You see, the potential damage of a catastrophic drop in commercial real estate values could total more than $1 trillion.

At best, we're a few months away from this market explosion. At worst, it could be happening even as you read this letter.

But don't just take my word for it. Here's what one of the most respected commercial real estate strategists in the U.S. said on national television recently...

"When you talk about the banking sector, we're talking about a major impact, another blow to the belly of the banking sector when commercial real estate really hits. We've just seen the tip of the iceberg so far." - Phillip F. Blumberg, chairman and CEO of Blumberg Capital Partners on CNBC 5/14/09

It's vitally important that you take the steps needed to prepare yourself now.

Failure to prepare for this coming disaster could lead to devastating losses in the best stock market or your retirement account.

But by taking a few simple steps - which I'll tell you all about below - you can position yourself to receive large payouts while the commercial real estate market nosedives. Best of all... these payouts are 100% legal and potentially unlimited in size and number.

Here's what I mean...

Because of a lethal combination of soaring vacancies... declining property values... and an inability to refinance - commercial property owners are in deep, deep trouble.

And with a commercial real estate market currently valued at more than $6.5 trillion - it's easy to see why the U.S. Government is highly motivated to prevent a collapse.

A collapse of the commercial real estate market would serve as a final "death" blow to the nation's banking system (which has nearly $2 trillion worth of exposure)... crash the U.S. stock market... and effectively cripple the operating capacity of the Obama administration.

They've done a fair job of holding things together for the moment... but that's about to all come crashing down in a huge way.

Why the Commercial Real Estate Market is a Ticking Time Bomb

At this very moment, there are three critical elements to this crisis - and they're all bad news.

1. Commercial property values are in a free-fall - In fact, according to the Wall Street Journal, four years worth of gains in value have been wiped out since the beginning of 2008. And it's possible that property values could fall by as much as 50% from their peak when all is said and done.

2. Vacancies are soaring! - You don't even need me to tell you about this truth. Just take a look around your local mall, shopping plaza or office complex. In many cases, it's like an absolute ghost town.

In fact, according to the Wall Street Journal, "The value of offices, apartments, hotels, warehouses and malls has fallen to March 2005 levels."

Below I've listed some truly shocking numbers. According to research firm Reis Inc., delinquency and default rates for securitized commercial real estate loans are expected to continue soaring at an astonishing rate.

3. Refinancing is NOT an option - The vast majority of commercial real estate mortgages are designed differently than the mortgage you might typically use to buy a home. In most cases, commercial mortgages are actually designed to be refinanced after a period of 5 to 10 years.

But because of the recession, banks have made the underwriting standards much more difficult these days.

So in some cases, even the best refinancing candidates are having trouble getting new loans as their old loans come due for refinancing.

Here's what I mean:

Bank lending for commercial projects in the first half of 2009 is on a pace to reach about $25 billion. And that sounds like a big number.

But consider this - at the height of the market, bank lending was at $33 billion per quarter for commercial projects.

And as for securitized commercial mortgages? Forget it - as this graph proves... that game is over.

So with roughly $530 billion in commercial mortgages coming due for refinancing in 2009-2011 - and some estimates showing that as many as 68% of loans maturing during that time will FAIL TO QUALIFY for refinancing, I must ask the question...

Why Hasn't This Market Already Exploded?

The truth of the matter is... this bomb likely should have detonated by now.

But thanks to the actions of the Plunge Protection Team... disaster has been postponed - for the time being.

The government is desperate to keep the "other shoe" - commercial real estate - from dropping like a lead balloon. Because they know just how extensive the damage will be.

Before I go any further - let me clarify...

The Plunge Protection Team is not some urban myth or Oliver Stone-style conspiracy theory.

It's real - even though the U.S. Government still refuses to own up to its existence.

But my new research reports - which I'd like to give you FREE of charge - gives you everything you need to know about the Plunge Protection Team, its impact on this crisis, and how you can profit -- handsomely -- from this information.

In the meantime, here's the "Cliff's Notes" version...

The Plunge Protection Team - Interfering With YOUR Financial Markets Since 1988

 

The Plunge Protection Team has been in existence for more than 20 years - it was created by the Reagan administration in response to the stock market crash of October 1987.

The secret standing committee is made up of a mixture of government agencies, stock exchanges, and large, influential Wall Street firms.

The Team's primary role is to prevent catastrophic market downturns - or, as a 1997 Washington Post article put it, "the group aims to prevent the smoothly running global financial machine from locking up."

Sounds good, so far, right? After all - who wouldn't be in favor of preventing a devastating stock market collapse or a "locking up" of the financial system?

Well, there's more...

In spite of the fact that a former top advisor to the President of the United States acknowledged the existence of the Plunge Protection Team on national television... the U.S. Government still adamantly refuses to acknowledge its presence.

In some cases, the Plunge Protection Team responds to a crisis by "gently persuading" large banks to buy top stock index futures - thus stopping the bleeding in a fast-moving bear market.

In other cases, though, the Plunge Protection Team has been accused of going even further - using government dollars to buy stocks or stock index futures.

And more recently - in April 2009 - a number of observers noticed some unusual patterns in the "program trading" of the New York Stock Exchange - a pattern that suggested someone may indeed be working to "prop up" the market with large amounts of buying.

Even more suspicious in that frenzy of April 2009 buying was the fact that the largest trader - with a volume five times higher than the second-largest trader - was none other than Goldman Sachs.

I don't even have to remind you about Goldman Sachs' extraordinarily "cozy" relationship with the U.S. Government.

Again - I'll spell all of this out in more detail in the research reports I'd like you to have right away.

But here's the important thing for you to know: There's a mountain of evidence that shows that the U.S. stock market has been propped up by the government - and the firms it is "friendliest" with - over the past 12 months.

You see, the powers-that-be have strong motive to cut in and manipulate our markets, and you'd better believe they have the means to effect these changes.

But all this artificial "propping up" is about to come to a sudden - and devastating - end.

Because this time, the crisis is simply too large. At best, the Plunge Protection Team can call in more favors - and use its remaining clout - to keep the market from collapsing for a few more weeks.

But when the staggering number of commercial real estate defaults begins to pile up, there will be absolutely nothing the boys in Washington - or on Wall Street, for that matter - can do to prevent the explosion.

Fortunately, though, there is still something that you and I can do about this collapse. No - we won't be able to prevent it... but we can prevent it from devastating our retirement accounts.

In fact, with one simple phone call - and by taking advantage of a simple technique that has been used for more than 370 years - you can position yourself perfectly for a succession of double- and triple-digit profits as the commercial real estate market collapses.

How the Great Commercial Real Estate Collapse Will Unfold

Truth be told... the fuse has already been lit.

The history books will show that the Great Commercial Real Estate Collapse of 2009 actually began on April 16.

That's the day that General Growth Properties, Inc. (GGP) - the second largest mall owner in the United States - filed for bankruptcy.

With that one filing, a company with more than 200 properties filed the biggest real estate bankruptcy in U.S. history.

But here's the problem - General Growth Properties was just the beginning...

Thousands of commercial mortgages - totaling roughly $530 billion - coming due for refinancing in 2009-2011.

But - as I showed earlier - the lending market has almost completely dried up.

In fact, some estimates show that as many as 68% of loans maturing during that time will FAIL TO QUALIFY for refinancing.

And if those commercial buildings can't be refinanced, prices will plunge rapidly... and we'll soon see a bust just like we've seen in the housing market.

Listen... there's a reason why the imminent collapse of the commercial real estate market has been the top priority of the Plunge Protection Team for months.

They know that once the commercial real estate market begins to collapse... the banking system is in grave danger.

All of that hard work - and all those billions of dollars - to help stabilize the banking industry?

Out the window. All of it. And as soon as they're hit with massive commercial real estate defaults - the U.S. banking system will be devastated.

But that's only the beginning. Because bad news from commercial real estate - and the banking sector - will almost certainly cause the stock market to crash... and who knows how low it will go this time.

Couple all of that with the fact that thousands of construction, real estate and other jobs are sure to be lost as a result of this crisis... and you've got a financial crisis of the highest order on your hands.

This is an urgent matter - and it requires your immediate attention. But as I've said... it's possible for you to avoid being wiped out as a result of this collapse. In fact, I've spelled out - in clear detail - in my new reports just how you can...

Protect Yourself from this Disaster - and Make Obscene Amounts of Money along the Way

It might sound a bit crazy - but it's possible to collect regular, substantial payouts in the midst of a historic market collapse.

In fact, it's not only possible... it's actually rather easy.

The key to collecting these payouts is actually a centuries-old investing strategy that was specifically designed to take advantage of crisis situations just like this one. Truth is... this powerful strategy sets up perfectly for this scenario.

The first known instance of this strategy being used came all the way back in 1637. And while it may not be the most popular - or the "sexiest" - investing technique you've ever heard of... it figures to pay off in a huge way over the next several months.

All it takes is one simple phone call to your broker to put this strategy to work for you. And here's the best part - in my new research reports I'll tell you exactly what to say when you call your broker in order to make sure you take full advantage of the profit potential.

I've spent the better part of the past two years examining the real estate market as a whole - and the commercial real estate "nightmare scenario" is the first thing I investigate each morning.

In this letter, I've spelled out some of the details as to how this scenario will unfold in the months ahead... but the truth of the matter is - I haven't done all of this research because I enjoy the "doom and gloom."

Simply put - I want to make money. Lots of it.

And I've discovered a handful of unique investments that will allow us to take full advantage of what figures to be a historic market event.

In my research report - titled Commercial Real Estate: How to Profit When the Other Shoe Drops - I'll show you exactly which investments I think will provide the biggest potential payoff.

And I'll tell you everything you need to know in order to take full advantage.

Introducing... The Wealth Advisory

Before I go any further... I should introduce myself. My name is Steve Christ. Since 2006, I've served as managing editor of Wealth Daily. I'm also the Investment Director of The Wealth Advisory.

I developed The Wealth Advisory as a vehicle for investors like you to capitalize on situations just like the one we're facing right now with the imminent collapse of the commercial real estate market.

With each "Big-Picture" opportunity comes a chance to employ a carefully-selected investment - like the 372-year-old strategy we're using in this case - and get in ahead of the masses.

Let's be honest - the market eats naïve investors for breakfast... especially in turbulent times like those we're living in right now.

That's why it's so important you have an appropriate, rock-solid investment philosophy... as well as sound research and advice.

And that's where The Wealth Advisory comes into play.

You see... The Wealth Advisory goes far beyond winning stock picks. We don't just deliver investment recommendations that can help members build a lifetime of wealth.

Net Cumulative Gains of 648% in the Midst of the Worst Bear Market in Decades

We launched The Wealth Advisory in January 2008.

During the ten months we've been making recommendations, the Dow has dropped 31.9%... the NASDAQ has dropped 25.2%... and the S&P500 is down 36.8%.

How have Wealth Advisory subscribers done during this difficult time?

We've posted a cumulative net gain of 648% on our closed positions... with more gains still to come.

Here's a peek at just a few of those closed positions so you can see for yourself just what kind of gains are possible - no matter what kind of market we're in...

Adobe Systems Inc. (ADBE:NASDAQ) closed with a 32.28% gain in 11 weeks.
Converted Organics Inc. (COIN:NASDAQ) closed with a 42.11% gain in two weeks.
FXP UltraShort FTSE/Xinhua China 25 Proshare (FXP:AMEX) closed with a 27.23% gain in four weeks.
Morgan Stanley China - SHORT POSITION (CAF:NYSE) a 32.51% gain in four weeks.
PowerShares DB Commodity Idx Trking Fund (DBC:AMEX) a 14.26% gain in eight weeks.
PowerShares DB Energy (DBE:AMEX) a 15% gain in nine weeks.
VMware Inc. (VMW:NASDAQ) a 44.44% gain in eight weeks.
Chesapeake Energy (CHK:NYSE) a 15.4% gain in 6 weeks.
UltraShort QQQ ProShares (QID:NASDAQ) an 11% gain 4 weeks.
PowerShares DB Oil (DBO:AMEX) a 49% gain in 5 months.
UltraShort FTSE/Xinhua China25 Proshare (FXP:AMEX) a 16.45% gain in 2 days.
UltraShort MSCI Emerging Markets Proshare (EEV:AMEX) a 19.6% gain in 2 days.
W.R. Grace & Co. (GRA:NYSE) a 72.12% gain in under 3 weeks!

Again... that's a cumulative gain of 727.7% vs losses of only 79.7% or a net gain of 648%!

Not bad for a bear market.

Here's How You Can Get Started Today

The coming collapse in the commercial real estate market will have a potentially life-altering impact on your money. That's why you need to take action now in order to safeguard your wealth - and profit - by taking advantage of a 372-year-old investing technique that is perfect for this very situation.

So here's all you need to do in order to get started right now...

Step One - Sign up for a risk-free, trial subscription to The Wealth Advisory. The minute you sign up, you'll be granted immediate access to my four new reports:

Commercial Real Estate: How to Profit When the Other Shoe Drops

The Secrets of the Plunge Protection Team

The 376-Year Old Investment Technique That Never Fails in a Down Market

Safe Harbor Savings Account - How to Sit Back and Become a Millionaire

Step Two - Read over the reports as soon as you can... and simply follow the step-by-step instructions I've provided. Once you're armed with the information in my reports, one simple call to your broker should do the trick.

After you've taken advantage of the information in my up-to-the-minute research reports, I encourage you to take a look around our members-only web site. While you're there you'll have full access to The Wealth Advisory archives as well as our complete portfolio.

The one-year subscription price for The Wealth Advisory is an absolute steal at just $79.

For roughly $1.50 per week, you'll get my FREE research reports... and access to a portfolio that has produced a cumulative net gain of 648% in the past 18 months alone.

And remember - you're protected at all times by my...

100% Iron-Clad Guarantee

I'm so confident that you'll be more than satisfied with the research and recommendations found in The Wealth Advisory that I'm willing to assume all of the risk for your subscription.

Here's what I mean...

If, for any reason, you're not completely satisfied with The Wealth Advisory, the top stocks in it, or the level of research presented, simply let me know within your first 30 days and I'll personally refund every penny. No questions asked.