Ian Cooper - Angel Publishing

Why Financials Really Are in Trouble

An end to our woes is as premature as Jim Cramer calling an end to the depression fears. Unemployment will continue to climb. Consumer spending will suffer. And housing is only expected to worsen, as more resets rear their ugly heads.

Just ask Meredith Whitney. . .

She believes that financials still sizable headwinds, as the banking sector is "not adequately capitalized today." She's even calling for a double dip recession.

Cramer, of course, thinks she's dead wrong... writing at least three articles pointing out her errors. But if he spent more time doing research and less time criticizing, he'd realize she was right... (We wouldn't want to remind Cramer of his "brilliant" Bear Stearns call, would we? Too soon?)

Financials really are in trouble, especially this January 1, 2010.

That's when FAS 167, or the Federal Accounting Standards 167, effective January 1, 2010, will take effect. It'll basically force financials to bring bad, off-balance sheet asset back to the books... which could trigger substantial Street disasters, comparable to that of Lehman.

"In June 2009, the Financial Accounting Standards Board issued an amendment to the accounting standards for transfers of financial assets (SFAS 166) and an amendment to the accounting standards on consolidation of variable interest entities (SFAS 167). Both amendments are effective and will be applied prospectively by the company on January 1, 2010 ... Under these accounting standards, the company will record the underlying mortgage loans in these single-family PC trusts and some of its Structured Transactions on its balance sheet. These mortgage loans have an outstanding unpaid principal balance of approximately $1.8 trillion as of September 30, 2009... While Freddie Mac continues to evaluate the impacts of adoption, the company expects that the adoption could have a significant negative impact on its net worth."

Worse, check out what Wells Fargo had to say recently on FAS:

This comes from Wells Fargo's Q3 report:

"I want to update you on our most recent analysis of the impact of the application of FAS 166 and 167, which is expected to result in the consolidation of certain off-balance sheet assets currently not included in our financial statements. We provided a preliminary analysis in our second-quarter 10-Q. Based on our continued refinement of this analysis, we now expect approximately $55 billion in incremental GAAP assets to be brought on balance sheet, representing approximately $28 billion in incremental risk-weighted assets."

And they're probably not the only ones with this hanging over their heads.

Long story short, financials and our consumer cash-strapped society, are in trouble... big trouble.

We'll look to short some of the big names in Options Trading Pit as we near January 2010.

The Outlook for Lithium Production

Editor's Note: Rare Earth Metals (REEs) are nothing short of crucial to the way we live. In fact without them, some of our most important modern technologies could never exist: rechargeable batteries, electric motors, photo optics, and solar cells, just to name a few.

They are so pivotal to modern circuitry that industry insiders came up with a nickname for REEs: 'technology metals.' And on January 1st, Denmark will relinquish its sovereign hold over Greenland's mineral rights, making Greenland's $273 billion rare earth resources private property. To learn about the single company in control of all of it, read the following new report.

———

The lithium buying mania has only just begun, as investors and governments scramble for a way to cash in. . .

That's because even they know that lithium could soon replace billions of barrels of oil — or trillions of dollars in black gold revenue.

They also know that demand is expected to continue rising, as the lithium boom takes its cue from the demand for it in the electric car market. . .

We're not talking "flash in the pan" here.

We're talking about exposure to a lithium battery market that's expected to hit $15 billion by 2010. . . and quite possibly $30 billion within a few short years.

Why would you pass this up?

Already, some of the world's biggest players are wasting no time claiming their stake, including Warren Buffett, who recently stunned the market when he announced a $250 million investment in a Chinese electric car company — even though he knows nothing about electric cars.

Even China, Korea, Japan and the U.S. are pouring millions into lithium projects.

I could continue listing examples, but I think you get the point.

How can you not jump on this profit opportunity?

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The Boom is Just Getting Underway

There's simply not enough of the element to go around.

And demand is only going to get stronger with limited supply, as lithium batteries are on the cutting edge of powering the coming hybrid and electric car revolution.

Starting in 2010:

Mercedes will launch its hybrid sedan in early 2010.
Tesla Motors already delivered its Roadster.
Nissan will produce 150,000 electric cars.
Ford has plans to manufacture an electric Focus by 2011.
And General Motors is betting on the success the Chevy Volt, in 2010.

And, according to Brian Hicks, if you're skeptical or concerned that fuel efficiency alone is not enough to entice Americans to buy electric cars, consider the Silicon Valley company Tesla Motors. While their roadster is the first production automobile to use lithium-ion battery cells and travel more than 200 miles per charge, it is also capable of going from 0-60mph in less than four seconds.

Not only will the Roadster leave most sports cars in the dust; the car recently set a distance record in April 2009 when it completed the 241-mile Rallye Monte Carlo d'Energies Alternatives with 36 miles left on the charge.

At just over $100,000, the Roadster is probably too pricey for the average consumer. . . but Tesla has taken more than 1,000 reservations for the car and expects to begin production of an all-electric and more affordable sedan starting in late 2011.

But just remember, the Tesla — as well as every other electric car — needs lithium. And demand for lithium is skyrocketing. . . and will continue to skyrocket.

With limited supply and all this demand, what happens to the price?

It'll easily take off.

And as more than four million electric cars could be sold in coming years, there's not nearly enough supply. And it's not nearly enough to meet these projections:
- Deutsche Bank sees 70 new electric car models by 2011, for example;
We're talking big numbers — and a big demand that may not be met quickly. But it's great news for any company involved in finding lithium.

Here are some of the companies that should benefit. . .

There's always Western Lithium, which our own Brian Hicks recommends. It's well-funded and debt-free, with $7.3 million cash on the books. They recently completed a $5.5 million private placement in May of this year and have a market cap of 70 million.

And sure, the stock is up a lot this past year. . . but we believe the lithium bull market (one that could mirror the uranium-style bull market), is just getting started.

While there are many more "must own" lithium stocks to pick up today — featured in the latest Pure Asset Trader special report — there's another element "flying under the radar" that'll change our lives forever. . .

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Secret COP-15 Meeting Sparks Trillion Dollar Shift

According to billionaire venture capitalist John Doerr, COP-15 signifies. . .

"Nothing less than the reindustrialization of the whole planet."

There's $45 trillion at stake as that happens. Click here to learn what's going on and how smart investors are already profiting.

Vanadium Leading the Charge

Sitting between titanium and chromium on the periodic table lies a little-known element that could make investors a small fortune — just as lithium could do.

You may have never heard of it, but it's all around you. It strengthens steel in offices and tools. . . and could soon play a big role in electrifying cars.

Future growth for this element already looks very strong in the steel industry. In addition to the trillions in global stimulus spending, CIBC World Markets estimates that global infrastructure spending will hit $35 trillion over the next 20 years. These projects will focus on rail, highways, bridges, and airports. . . and all will require vanadium.

But growth in energy storage will be a big boon, too. Subaru recently revealed its G4E car, powered by a high-capacity vanadium-lithium battery. That battery alone will be capable of storing two or three times more energy than standard batteries.

We're talking wild, explosive growth in a sector that just starting to take off.

How can you pass this up?

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

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A Trading System That Works...

The market is beyond rigged these days... Nothing makes sense. Up is down. Black is white...

It's terrifying... that is, unless you have a good system in place, which brings us to today's trading idea.

Starting today, and running about three to four times a month, we want to share some of the technical secrets that we've spoken about and use in Options Trading Pit.

Sometimes, it's just so easy to make money in this market... especially if you have a system that works. And if you want more "live" similar trades, we always welcome new readers to Options Trading Pit.

For starters, here are the technical set ups that we use.

Now let's apply it.

Take a look at Wynn Resorts (WYNN) with Bollinger Bands, W%R, and candlestick overlay on a six month chart.

Notice that every time, WYNN hit the upper or lower Bollinger Band coupled with an oversold or overbought W%R read, the stock bounced.

So it was no surprise when the stock bounced from about $51 to about $70 after the stock bounced off the lower Bollinger Band, coupled with an extremely oversold W%R read and a doji reversal candlestick. It was also no shock when the stock began to sell off today. The stock ran to the upper Bollinger Band with an overbought W%R read and plunged.

And we literally have a list of 100 or more of these that we go through every day.

Here are more examples. These are plays that haven't sold off just yet... but are expected to based on the technicals that we use. Each has a gravestone doji parked at the upper Bollinger Band with an overbought read on Williams % Range.

Landstar (LSTR)
BRE Properties (BRE)
Constellation Brands (STZ)

If you buy any, don't risk the house. This is not a market that makes much sense these days. This is just a sampling of what we look at daily for Options Trading Pit, which is accepting new readers.

Cash-Rich Companies

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

It may seem like this market has just about lost its mind, as the dollar wobbles.

But the world is still full of money-making opportunities. Here's a look at some of them from the past week...

A week after Warren Buffett bought Northern Santa Fe for $34 billion, the buyouts continue. Hewlett-Packard, for example, just announced it'll acquire 3Com Corporation (COMS) for about $2.7 billion. And this won't be the last of the mega-deals: Companies are still sitting on record levels of cash, just waiting to spend. We're talking $994 billion in cash hoarding. Tech companies, for example, are loaded with $269 billion in cash that could be used for M&A and dividends. Keep an eye on Microsoft, Google, Cisco, Apple, Intel, EMC Corporation, Dell, Yahoo, Amazon.com, and eBay Inc.

Ranging from $78 to $79 a barrel, oil's been quiet this week. But we were hit with a lot of crude oil forecasts, making our Bakken investments that much more appealing. According to OPEC, global oil demand will grow by 700,000 barrels a day next year, thanks to China and India. The always 'trustworthy' Goldman Sachs maintained its $85 a barrel forecast for year end and $95 by next year. And the IEA is reporting that global oil consumption will average more than 86 million bpd in 2010 — marking the third straight month that the forecast has been increased.

And what would a week in investing be without mentioning gold? Gold continues to rocket. As of this writing, it passed $1,123 for December delivery. The increase now marks the ninth straight day that gold futures have spiked, as dollar-wary investors race to gold.

Speaking of gold, the Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) started trading this week. But while the fund will offer good gold miner exposure, according to the prospectus, the fund is not allowed to invest in a junior gold miner with a market cap of less than $150 million. That means that some of the top-quality names will not qualify. Still, this fund should give you enough exposure to gold's further run north.

Also making headlines: New claims for unemployment benefits fell more than expected last week to 502,000 from an upwardly revised 514,000 last week.

But you can profit from more than the good news. You can profit from the coming bad news, too. As we've been warning, the second round of the housing crisis will soon begin. (U.S. foreclosure filings passed 300,000 for the eighth straight month, as unemployment makes it tough for homeowners to pay bills. A total of 332,292 homes received a default or auction notice, or were seized by banks — that's up 19% year over year.) But there is a way to trade the coming trend, as we've seen in Options Trading Pit.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

9 Billion Barrels of Light, Sweet Crude the Saudis Will Never Get Their Hands On...

If Bakken boom stocks can see their prices increase 300%, 400%... even 500% with oil discoveries of one or two billion barrels... just imagine what a discovery of up to nine billion barrels of oil would do to a stock's price.

Sure, we're already sitting on gains of 195% and 153% on just one of these plays already... but the run is far from over.

Isn't it time you made gains like this? Click here for more.

P.S. In case you missed any of the week's top-read articles from Wealth Daily and our sister publications, I've included them here.

Peak Oil Reality: Closer to Peak Oil than Officials Have Admitted
Wealth Daily Publisher Brian Hicks comments on a recent news article that sent shock waves through the energy sector, edging the theory of peak oil ever closer to reality.

Now Has Never Been An Easier Time to Profit: Commodities Again Leading the Charge
Oil prices are rising so fast that the International Energy Agency just increased its world oil demand forecast for 2009, mid-year. According to IEA analysts, we can expect demand to spike an average of $3.6 million barrels a month. . . and we plan to be right there to profit, again and again.

Global Desalination Investments: Where Abu Dhabi is Spending Oil Profits
Energy & Capital Editor Nick Hodge discusses the growth in Middle East desalination and the investments that go along with it.

Smart Grid Stocks: Wires, Lights, and Energy Networks
Green Chip Editor Nick Hodge discusses smart grid stocks. . . and what's in store for the sector in 2010. . .

Biotech Stocks to Watch: The Race for the Cure
Not only is this company working on the cure to one of the deadliest diseases know to man, it's also following an enormously profitable trend in the biotech sector.

Profit Update: Hyatt IPO: We Nailed It — Absolutely Nailed It
Despite the naysayers that advised against buying Hyatt (H) on the IPO, Wealth Daily bucked the trend — and won.

Profit Update: Hyatt IPO

Despite the naysayers that advised against buying Hyatt (H) on the IPO, we bucked the trend and gave you three ways to profit on August 11.

And each paid off well... very well.

As we said:

First, you can buy Hyatt out of the gate. It should trade under "H" by fall.

And second, you can buy its competitors like Marriott (MAR), Intercontinental Hotels Group (IHG), and Starwood (HOT) . . . not for the long term, though. You simply want to buy these names as we get closer to a possible Hyatt IPO.

And third, you can buy the U.S. IPOX-100 index, which includes the 100 largest, typically best-performing, and most liquid IPOs in the United States. It measures the average performance of U.S. IPOs during the first 1,000 trading days. We've already seen it race from $18 to $26 on the heels of MasterCard (stock ran from $43 to $200) and First Solar (stock ran from $24 to more than $220). We saw it run on Visa's IPO (from $21 to $26) and we could see it run up again on a successful Hyatt offering.

Those that bought the Hyatt (H) IPO watched the stock soar more than $3 on day one.

Those that bought Marriott (MAR), Intercontinental Hotels (IHG) and Starwood (HOT) on the Monday ahead of the IPO and held until today would have seen the following gains.

MAR ran from about $24 to more than $26.50.
IHG ran from about $12 to more than $14.
HOT ran from about $28 to more than $32.

And had you bought call options on each, you stood to rake in some fat, impressive gains in less than a week.

As for the U.S. IPO-100 Index (FPX), which we used when Visa (V) went public, it ran from $18.50 to $19.10.

Besides using our technical indicators and thematic trading opportunities in Options Trading Pit, profiting from IPOs is yet another way to find profit opportunities in any market.

Congratulations on the quick and easy gains if you took the advice.

Tax Credits and Other Benefits Extended

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

This week had a sprinkling of positive stories before Friday: news of a powerhouse billionaire buying railroads, India buying a chunk of gold, and the Senate extending unemployment benefits. . .

Friday's news of the U.S. unemployment rate jumping above 10% for the first time since 1983 (thanks to a worse-than-expected read), is certainly not the kind of story with which you want to head into your weekend.

It's yet another sign of continued weakness in the labor market, despite the economy's growth in Q3. . . and another reason why we'll see the Fed interest rate "exceptionally low" for an "extended period."

The Best Lithium Play on the Market

A tiny Chinese lithium play is about to corner the market.

Even Warren Buffett is excited about it. He's already bought in.

In all reality, this could be the best stock to own for the next five years.

Click here to read all about it.

But there are some signs of good news out there for suffering Americans. . .

The Senate wants to extend unemployment benefits by 14 weeks in all states. This should kick the can further down the road, as about a million people face expiring benefits. But this may not be the end of the extensions — not with this economy.

And the Senate also agreed to extend the home buyer tax credit. The $8,000 in free money will be extended for another seven months. And homeowners who have been living in their homes for five years will be eligible for a $6,500 credit if they buy a new home.

The cost? Whatever it takes to get our economy moving.

Also making headlines. . .

Gold rallied to record highs after India shocked the market with the biggest single buy of gold by a central bank in 30 years — a tell that governments around the globe are becoming increasingly uncomfortable with the dollar.

As a result, gold neared $1,100 after it was announced that the Reserve Bank of India bought 200 tons of gold from the International Monetary Fund. That's about half of the 403.3 tones the IMF approved for sale back in September 2009.

India wasn't the only one making big buys. . .

In what's being billed as "an all-in wager on the economic future of the United States," Warren Buffett bought Burlington Northern Santa Fe for $34 billion.

But will this be the last of the mega-deals, near-term?

Probably not. . .

Companies are still sitting on record levels of cash, just waiting to spend. We're talking $994 billion in cash hoarding. Standard & Poor's 500 companies' cash levels, which stood at $600 billion to $665 billion since 2004, just jumped to $994 billion. This excludes financials, utilities, and transportation companies which hold high cash reserves as a normal part of business.

As for what the bigwigs are selling, Buffett doesn't seem too happy with Moody's (MCO) cutting his stake in the stock for the third time in three months. He sold another 1.2 million shares of Moody's around $24.87 following a $21.6 million sale in early September.

Credit rating agencies could be more regulated and see further exposure to lawsuits under recently-approved legislation. The bill now goes to the full House. . .

Short away.

In case you missed any of the week's top-read articles from Wealth Daily and our sister publications, I've included them below.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

Investing in Rare Earth Metals: The Saudi Arabia of the Arctic Holds the Key to these "Dragon Metals"
Wealth Daily Publisher Brian Hicks shares new developments in the global rare earth metals market, and how to invest in the years to come.

Natural Gas Companies: One Natural Gas Buy for Winter. . . And One Investment Pitfall
Energy and Capital 's Keith Kohl tells his readers about one natural gas company that's ready to take off this winter.

How To Profit from Energy, Right Now: Commodities Again Leading the Charge
Oil prices are rising so fast that the International Energy Agency just increased its world oil demand forecast for 2009, mid-year. According to IEA analysts, we can expect demand to spike an average of $3.6 million barrels a month. . . and we plan to be right there to profit, again and again.

Top Wind Energy Companies: These Are the Companies Running the Wind Energy Game
Green Chip Editor Jeff Siegel reveals some of the big players in wind energy.

Investing in Palladium: Big Potential In "Little Platinum"
Wealth Daily's Editor Adam Sharp provides a guide to investing in palladium, one of the lesser-known precious metals.

Top Biotech Stocks: The Race for the Cure
Not only is this company working on the cure to one of the deadliest diseases know to man, it's also following an enormously profitable trend in the biotech sector. . .

Thematic Trading

Anyone would think the markets were suffering from an onset of schizophrenia by the way they've been acting lately.

One second, all is well. . . buyers line up to chase the recovery. The next, buyers are swimming for the exits in a sea of red ink.

Not exactly the kind of "confidence" you'd expect in a recovery, is it?

But while negativity is abundant, a bull market is never far away. . . and you can easily find it by using the three technical indicators I've written about before.

Or, by using themes.

Largest Gas Find in U.S. History Sparks "Louisiana Land Rush"

This is big... real big. In the swampy outskirts of Red River Parish, Louisiana -- 271 miles northwest of New Orleans -- a group of scientists made the discovery of a lifetime...

What they found more than 1,000 feet beneath the surface is the single largest natural gas deposit in U.S. History... and so far, the fourth largest deposit ever found on earth!

The four companies at the forefront are already up 51%, 80%, 41% and 66% -- since March 2009. And they're poised to run even more.

Isn't it time you made similar gains?

I'm going to give you some examples. . .

Resolution Profits

It's a seasonal phenomenon that many of us are all-too familiar with.

This year is likely to be no different, as millions head into the winter holiday season rummaging through our kids' Halloween candy, anticipating the traditional Thanksgiving gravy and stuffing, and marking our calendars for December holidays and office parties. . .

The end of the year marks the time when we assess the pounds we've packed on from pumpkin pie and eggnog and start worrying about added "baggage" — and promise ourselves that next year will be different.

How do you profit from this predicable trend? You find the stocks, namely ones like eDiets.com (DIET), that have historically risen at the tail end of the year on New Year's resolutions. The trick to playing this stock is to buy during mid to late November.

The stock should then rise as people begin promising themselves that next year will be the year for weight loss, and sign up for diet and exercise programs.

We haven't noticed the same run in stocks like Weight Watchers or NutriSystem that we have with eDiets.com (DIET), though:

From around mid December 2003 to the start of 2004, DIET ran from about $3.50 to about $6.50.
DIET ran from $3.25 to $5.35 from mid December 2004 to the start of 2005.

It ran from $4.50 to about $8 between mid December 2005 and January 2006.

From mid December 2006 to the start of 2007, DIET sold off after an early November 2006 run.
And from the end of November 2007 to the start of 2008, DIET ran from about $4.60 to $6.

DIET is a seasonal — and very predictable — thematic mover, as you can see by most of the posted gains. Buy and hold.

Another way to trade themes is to watch the press. Take H1N1, for example. . .

H1N1: How to Live High on the Hog

It's all about swine flu these days. Millions of kids have been out of school. Parents are calling out of work sick. People—unfortunately—have died. And multi-billion dollar industries are suffering.

Six months ago, fears that H1N1 might have originated at a Smithfield Foods (SFD) facility in Northern Mexico put the company in crisis mode. And the stock plunged until Mexico said there was no connection to Smithfield's farms.

There is news that a pig at the Minnesota State Fair tested positive for H1N1 in preliminary tests. But while confirmation is still needed, the "easy money" trade may be to play the downside of stocks, like Smithfield (SFD), Tyson (TSN), and even Hormel (HRL), as this could easily cause panic in the pork industry.

It took only a few cases of mad cow disease to create a wave of panic in the beef industry years ago. Countries — including Japan — banned American beef imports and prices plummeted. And from what we're seeing now, the damage is far from over. . .

Suffering like they haven't suffered in years. . .

Things are so bad for pork producers that congressional leaders are drafting a letter to the U.S. Secretary of Agriculture, asking that he buy $100 million in pork for various federal food programs and take more emergency action to help the troubled industry.

Take a look at Smithfield again: The company had record sales of $12.5 billion last year. But thanks in part to H1N1 and high supplies of pigs, they lose an average of $23 on every pig sent to slaughter.

This loss has resulted in a $190 million loss for the year ending May 2009. Other companies are losing an average of $20 to $25 per pig.

Even hog-related commodities have come under pressure, based on fears that pork consumption can cause swine flu. Frozen pork belly futures fell close to 7% in recent months, thanks to swine flu.

So how do you profit from the swine flu theme? You play off the nation's fears, and short pork-related companies like Smithfield (SFD).

Just imagine what could happen to the $15 billion pork industry bottom lines going into end-of-year holidays, in which pork is normally consumed in high volumes.

It could be bad. . . real bad.

But you can profit from it, even in this schizophrenic market.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

P.S. Wealth Daily has been pointing out market trends and opportunity for profit to our readers for years now. . . and our team of researchers realizes just how precious time is when it comes to gathering information, spotting trends, buying, holding, and selling. We take the legwork out of this time-consuming process for readers. Options Trading Pit, for example, delivers market commentary, urgent updates, and market picks that are up 1,794% since January of this year. Click here to become one of these profit-taking readers.

Soros and Ross -- Where Have You Been?

For months, we've pounded the table over the risks of commercial real estate... and for good reason. It's a trillion dollar time bomb... And it's exploding as we speak.

But it seems Ross and Soros are just realizing this.

Ross sees a "huge crash in commercial real estate coming" and Soros spoke of a "bloodletting yet to come." Makes you wonder how these guys became so filthy rich when they can't see what's happening.

"In commercial real estate and leveraged buyouts, the bloodletting is yet to come," Soros said. "These factors will continue to weigh on the American economy, and the American consumer will no longer be able to serve as the motor for the world economy."

That's interesting, Soros... because the bloodletting started a long time ago.

There have been bankruptcies, bank failures, foreclosures, destroyed property values, and so on and so forth. And there's more pain to come for commercial real estate and the greater economy. I don't care what Geithner would have you believe about the economy's ability to handle any CRE hits it takes.

But I digress...

Here's what we reiterated in early September, months after the collapse already began:

Without a doubt, this problem has emerged as the biggest threat to our economic rebound and banks (especially regional banks, which hold more than $1 trillion of mortgages backed by CRE that is quickly losing value).

The sector will suffer from two things, one of which is bad underwriting. CMBS owners were lent money on the assumption that occupancy and rents would keep rising. But that never happened. The opposite did. "The result is that a growing number of properties aren't generating enough cash to make principal and interest payments."

And with values sinking, vacancies soaring, and a recession making it unlikely for us to see demand pick up, banks aren't exactly jumping up to refinance deals.

Even Steve Christ will tell you that all of this is a recipe for disaster. . . and that industry leaders have estimated that 200,000 businesses and 10 percent of the nation's shopping malls will close their doors over the next year.

That means that we're maybe only in the second inning here as this crisis unfolds.

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, you have to wonder how it will all get done, says Steve.

The brutal answer: it won't.

"Federal Reserve and Treasury officials are scrambling to prevent the commercial real estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat," said a recent Wall Street Journal article. But "their efforts could be undermined by a surge in foreclosures of commercial property carrying mortgages that were packaged and sold by Wall Street as bonds."

And, according to Deutsche Bank AG, "as property value declines and scarce credit continue to drive commercial property developers and investors into default, total lifetime losses on banks' $1 trillion "core" commercial-mortgage holdings, or those backed by income-producing properties, would reach between 11.6% and 15.3%, or $115 billion and $150 billion."

"So far, banks in general have been reluctant to take losses on their commercial books," says the Wall Street Journal. "This "delay and pray" strategy is preventing most banks from issuing new loans as they prepare their balance sheets for potential future losses..."

It's bad... real bad. But there are ways to profit from the coming disaster... which you can check out in Options Trading Pit.

Even Insiders Think Market is Overvalued

Tough week, huh?

Any one would think the markets were suffering from the onset of schizophrenia the way they've been acting this week. One second, all is well. Buyers line up to chase the recovery. The next - buyers are swimming for the exits in a sea of red ink.

It didn't help that consumer confidence fell unexpectedly to 47.7 in October from 53.4 in September thanks to worsening unemployment numbers... or that new home sales plunged 3.6%, as the effects of the temporary tax credits begin to die off.

Not exactly the kind of "confidence" you'd expect in a recovery, is it?

But don't tell that to those buying anything that confirms the delusion of a "jobless" or "consumer-less" recovery...

Even corporate insiders know better than to chase this rally higher.

Insider selling just about tripled last week to $846 million, as insider buying came in at a pathetic $14.7 million from $32 million. That's a clear message. Even insiders believe their company share prices are overvalued... and they're cashing in before the next leg down that we have been calling for.

Technical Trading Made Easy

Technical trading may sound hard. Heck, I often hear how trading options is hard.

But I'm here to tell you that both couldn't be easier.

With just three simple steps, you can master the art of technical trading in no time at all.

In fact, in addition to thematic trading, Options Trading Pit uses these tools more often than not — despite market direction.

Largest Gas Find in U.S. History Sparks "Louisiana Land Rush"

I'll give you some examples. . .

Tiffany & Company Upside Profit. . . in a Recession

It was June 2009 when we watched Tiffany & Company (TIF) briefly spike from an oversold $25 to more than $30 — in spite of being knee-deep during the recession.

Those who went long with the underlying stock walked with max gains of 25%.

Those who bought the August 2009 26 call (TIFHZ), for instance, walked with 45% off of the same move.

But here's something else you may not know: profiting from technical developments has never been easier.

While there are many ways to screen for opportunities, four of my favorites involve the use of Bollinger Bands, W%R, the news, and candlesticks.

By using these four things, we can call for tops and bottoms on indices as well as individual stocks.

Let's take a look at AIG, for example, from November 2006.

In late November 2006, shares of AIG were grossly overbought.

Technically, once we got word of extremely overbought W%R read (as seen in mid-November), we knew AIG was overdue for a correction. Also notice that at the time, the underlying stock crossed above the upper Bollinger Band with a doji cross, indicating near-term reversal, which we got.

And just as we had hoped, AIG fell from about $72 to less than $69, handing us a quick gain.

However, AIG then bottomed out at $70. Again, technically, we had another doji reversal signal — this time at the bottom of the trend (a doji at the bottom of a trend can be used as a bullish reversal signal).

We bought again at the bottom, marked by an oversold W%R and rode it back from about $69.50 to more than $72 in a few short weeks.

For those of you who aren't familiar with the terms (doji, Bollinger Band and W%R), check this out:

Dojis usually appear at times of market indecision and have called key reversals in indices and individual stocks.

W%R (or Williams % Range) is the ultimate momentum indicator that signals oversold and overbought conditions. W%R shows an overbought condition with a numerical range read of 0% to 20%. Oversold conditions are measured with a numerical range read of 80% to 100%.

As for Bollinger Bands (plotted at standard deviation levels above and below moving averages), stock prices tend to stay within the upper and lower bands. So when prices (in this case, with the Dow) move above the upper Bollinger Band, and are coupled with a bearish candlestick read (gravestone doji, for example), and an extreme overbought W%R read is present, we expect a reversal at the top.

Reverse everything you just learned and you can play bottoms, too.

Using the W%R, the Bollinger Bands, and bearish candlesticks, we called the top of CVS before it sold off from a $36 high on Sept. 12, 2006, to less than $31 two weeks later.

Here's how we found this:

Step 1: On Sept. 12, 2006, the W%R peaked in overbought territory.
Step 2: On the same day, a bearish doji made its presence known above the upper Bollinger Band.
Step 3: We bought puts and watched as the stock sold off to $31.

Okay, but what's a doji?

The profit stars, more commonly known as dojis, are commanding reversal signals. These are formed when the candlestick opens and closes at the same level, implying indecision in the stock price.

Depending on the location and length of the shadows, dojis can be categorized into four subcategories:

Doji

This candlestick looks like a cross, inverted cross, or plus sign. At the top of a trend, it can indicate that a reversal is near.

Long Legged Doji

Long legged doji formations occur when the stock opens at certain levels, trades in a wide trading range intra-day, and closes at the same level that it opened. These become better predictors when preceded by small candlesticks. Long legged doji formations can imply a change in trend.

Dragonfly Doji

The bearish dragonfly doji can usually be found at the market top or during an uptrend. This candlestick tells us the bulls may be losing their way and casts doubt on the market's ability to continue north. Confirmation is essential. You can confirm with a gap down or a lower close on the following day.

Gravestone Doji

Gravestones are the opposite of dragonflies and indicate top reversals when confirmed with a bearish engulfing scenario (which we also use). These dojis look like gravestones and can signal the death of a stock.

As for the bearish engulfing scenario, an engulfing occurs when a candlestick engulfs the preceding candlestick body.

The Bollinger Bands

For our purposes, let's make this a bit simpler.

When we use the Bollinger Bands, the closer the market prices move to the upper Bollinger Band, the more the stock market is considered overbought. The closer the prices move to the lower Bollinger Band, the more the stock market is considered oversold.

We're not going to get into the scientific structures and Bollinger band calculations with each trade. We'd be here until New Year's 2012 doing that.

Using the Bollinger Bands, look at what happened to CVS (CVS: NYSE) after putting in a doji cross above the upper Bollinger Band. (Note: If a pattern is above the upper Bollinger Band, it's an extremely overbought condition. We view this as a near-term reversal opportunity.) It sold off from its $36 high (on Sept. 12, 2006), to about $31 two weeks later.

The Williams Percentage Range (W%R)

The third component of the trade is to find an overvalued W%R read, or a chart where the W%R has peaked. According to the W%R, values of 80% to 100% indicate an oversold condition. Values of 0% to 20% are overbought.

Interesting to note: W%R has the ability to anticipate reversals. The indicator will oftentimes peak and turn down days before the stock peaks and turns down. It does the opposite with upside.

In Conclusion. . .

If you're interested in trading options, print this article. Reference it often.

These are some of the easiest and most important technical indicators out there. Master them, and you can call tops and bottoms with ease.

They're what we use in Options Trading Pit, along with thematic trading. And we've been banking some impressive gains along the way.

Stay tuned for some new research we're publishing on how we'll take our newest gains trading options.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

Dow Breaks 10,000

Welcome to the Wealth Daily Weekend Edition - our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

———————————

The dollar just can't catch a break.

But that's okay. We're finally above 10k... hooray!

As long as the dollar stays weak and traders remain pumped over the start of earnings season, we should have no problem staying above 10k... at least immediate term.

FHA on the Brink of Disaster

More than a year after the government took control of Fannie Mae and Freddie Mac, both of which were on the brink of disaster, what have we learned?

Absolutely nothing.

According to a congressional hearing, the Federal Housing Administration "appears destined for a taxpayer bailout in the next 24 - 36 months."

And believe me - this should go over really well with taxpayers.

But it didn't take a genius to see this one coming. A year after bailing out the over-leveraged Fannie and Freddie, the FHA has managed to put itself in the same predicament.

You see, when our market stopped issuing easy money last year, the "geniuses" at the FHA stepped in and became the big player in the mortgage loan business. So, FHA went from insuring 6% of new mortgages to 21% in 2008... .and even more in 2009.

Genius.

Nowadays, the FHA insures 5.4 million mortgages - most of which only required 3.5% down payment at a value of "only" $675 billion. Unfortunately, the FHA forgot to beef up its cash position, which sits at just $30 billion. That's about a 20:1 leverage... and should end well, as insured loans only begin to deteriorate.

So what happens when the FHA goes down the drain? Unfortunately, we can't let that happen because there'd be no mortgage market.

Dig deep in your pockets, folks. We'll be paying for another failure.

None of this should come as a shock, though. We first brought this to your attention in late September:

Be prepared to fork over more of your hard earned dollars to Uncle Sam, who continues to guarantee and insure loans to just about any one who wanted a house. The financial decay continues... and this time, it isn't Fannie or Freddie on the chop block, it's the Federal Housing Administration.

The Federal Housing Administration has said its cash cushion will dip below mandated levels for the first time... but insists that it won't need a taxpayer rescue (where have I heard this before?).

The agency, a source of income for first-time home buyers is facing mounting concerns that it will need a taxpayer bailout, despite what it's telling the public. As of this summer, 17% of FHA borrowers were at least a month behind or in foreclosure, as compared with 13% for all loans.

Those rising defaults mean FHA reserves could sink below the 2% mark required by federal law. And a study being sent to Congress this November is expected to show that percentage dipping below required levels for the first time.

According to the Wall Street Journal:

It isn't clear how the rising losses may affect home buyers. Options for the agency could include politically unpalatable choices, such as asking for taxpayer funds to boost reserves or increasing the premiums borrowers pay for the insurance offered by the agency. Agency officials say if there is a shortfall, they don't have to do anything except report it to lawmakers. But some mortgage and housing analysts see trouble ahead. "They're probably going to need a bailout at some point because they're making loans in a riskier environment," says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. "...I've never seen an entity successfully outrun a situation like this."

But hey, it's only money, right?

When you have trillions in debt, what's a few billion dollars more?

Gold Runs Wild

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

All it took was a rumor. . . and gold just took off.

Rumor had it that a global group of European, Middle Eastern, and Asian nations were plotting to stop using the U.S. dollar to trade oil, according to the UK's The Independent.

Gold's Double Recession-Proof Secret

We're having a great recession.

On top of SIX (6) triple- and quadruple-digit winning stocks that average a gain of 1,051%, we're making money hand-over-fist with a little-known, physically-backed gold investment that doubles our profits.

I've laid out all the details on this incredible find in a brand new report that you can read right now - for free - here.

The report, which caught the eye of many in the media, claimed:

"Gulf Arabs are planning — along with China, Russia, Japan and France — to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Cooperation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."

And gold ran north of $1,040 in the blink of an eye.

Bakken IPO

Dear Reader,

Today I turn your attention to my colleague, Keith Kohl.

Keith and I have been covering the domestic Bakken oil formation for the past two years, primarily through Keith's Energy and Capital letter.

And we're anxious to report on a brand-new development in the Canadian side of the Bakken... before the story hits the major financial rags.

Keep reading to get the full report from Keith. This region is hot... and what he's about to share with you could be well worth your time.

Enjoy.

Ian L. Cooper
Wealth Daily

—————————-

Let's rewind the clock for a minute.

A year and a half ago, I had a discussion with my readers about tapping into Canada's next oil patch.

Those of you that have been with me for a while will immediately think of the oil sands. I won't hold that against you.

After all, we already know the important role the oil sands will play in Canada's future oil production. . . But that's not what I'm talking about today.

In fact, I want to alert you to a new Canadian oil investment. It's not your traditional IPO... but upside potential is tremendous. More on that below, and how you can get in on it before the news breaks.

And, trust me, this is big news.

First, let me explain what led to this.

What initially attracted our attention last year were the record land sales in Saskatchewan.

And you can't blame us for taking notice. . .

In April 2008, Saskatchewan raked in $265 million in revenue during its land sale auction. That single auction generated more revenue than all of the land sales in 2007.

Naturally, my readers were all over it.

Today, our stance hasn't changed in the slightest. If anything, we've become even more interested in the Weyburn-Estevan area.

But before I get too far ahead of myself, let's take a quick look at why Canadian production is becoming increasingly important to us.

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The Backside of Peak Oil

Much of this story revolves around peak oil.

I'll let my readers make up their own minds concerning when a global peak in oil production will take place. Some believe it won't occur for another 5 to 10 years. . . some even push the date back 30 years. . . still, many of you think it's already passed.

Whatever your opinion on the subject, there exists one cold, hard truth that none of us can deny: Oil production in the U.S. peaked nearly four decades ago.

There's no getting around that fact. Put global peak oil aside for just a moment.

Since 1970, the U.S. has been sliding down the backside of the peak oil curve. It's that simple. Please feel free to check it out for yourself: Looking at the EIA data on U.S. field production is a sobering experience.

A Shining Light of U.S. Production

By now, you're well aware of Bakken oil production. I know the success that my readers are having with several prominent Bakken players.

Now we have news coming from producers that the Three Forks-Sanish formation beneath Bakken may be a separate reservoir. And if it turns out to be more than just a drip pan for the Bakken, we'll be smiling all the way to the bank.

However, make no mistake about our situation: As bullish as we are with the Bakken, we know that production there is not a panacea. U.S. production peaked almost 40 years ago, and nothing - nothing - will magically boost our domestic production back to 10.4 million barrels per day.

That was the highest amount of oil we've ever pumped out in one month, back in November 1970.

The name of the game today isn't to increase our production by 12 million barrels per day to eliminate our reliance on foreign oil imports. I haven't met one person that still believes that's a possibility - nobody is that optimistic.

Right now, the best thing we can do is lower our exposure to some of the riskier oil. That means cutting our ties with the Middle East.

And that, dear reader, is already happening. . .

Take a look at the EIA import data for yourself. Something happened that hasn't occurred for 21 years. In fact, it's happened twice already this year.

In March and June of 2009, Saudi imports fell below a million barrels per day. The last time that happened was in April 1988.

Perhaps they're finally starting to get the picture.

Canadian Imports on the Rise

While Saudi imports are steadily decreasing, someone has to be picking up the slack.

It's no secret where we're making up those imports: our neighbor to the north.

Even despite last year's oil price crash, imports from Canada have been on the rise. As you can see below, it's clear on whom we're depending for crude oil:

This time around, Canada's good fortune isn't from their oil sands. You see, not just the United States is developing the Bakken formation. It's also no secret that Saskatchewan's portion of the Bakken is what drew the most interest during last year's record land sale auction.

Tomorrow, the pot will get much sweeter for investors, as a small Canadian company is about to make big headlines.

However, it's not their production numbers that has my attention - rather, it's the area in which their focusing their efforts.

My readers of the $20 Trillion Report have been banking on these hot oil and gas plays all year. In fact, I know they've closed 11 winners in the last two months alone. Tomorrow morning, they're going to take a strong position in this small Canadian oil stock. By tomorrow afternoon, it'll be too late. . . which means this may be your last chance to get in on the ground floor. Click here to learn more.

You don't want to sit on the sidelines for this one.

Until next time,

Keith Kohl

Tax Nightmare: A National Sales Tax may be Coming

President Obama, who wants to stimulate consumer spending and revive the economy, may consider a consumption tax with a national sales tax...

That's absolutely brilliant...

It should do wonders for his approval ratings if he takes it seriously... not to mention how well it'll impact our wallets.

This Wednesday the Center for American Progress, led by John Podesta (an Obama adviser), will recommend that:

The Administration should consider a tax on consumption, such as a value-added tax [VAT] system similar to that in use in the European Union. Mr. Podesta suggested that its impact should be limited to protect lower-income people, who otherwise might be hit particularly hard.

With the federal budget deficit ballooning, the Obama administration and congressional leaders could look to tax-code changes to generate more revenues for the government.

But hey, as long as it stimulates the economy and consumer spending... oh wait.

Wealth Daily's Weekend Edition

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

It was this time last year that all hell broke lose. . .

Traders ran screaming — eyes shut, ears covered — toward the exits, as the Dow would lose 800 points in a single day and $1.2 trillion of shareholder value.

And it was all thanks to the House, which shot down the first version of The Emergency Economic Stabilization Act of 2008 — or as we like to call it, Paulson's Blank Check Request.

While the House would eventually pass the package aimed at cleaning up toxic assets, have we really recovered lost ground or done anything to clean up the banks or future CDO or mortgage-backed disasters? Has the bad news gone away?

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Bear Market. . .

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It all depends on who you ask. . .

One thing's for certain: We're almost right back to where we started, as the bulls and bears put up quite a fight. And they're far from done.

Heck, we even have perma-bears turning bullish.

But don't count the bears out just yet.

Economic Recovery in Doubt

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

Confusing traders and aggravating the poor bears to no end, schizophrenic markets were all over the place this week.

And while government intervention and money managers chasing performance have been suggested as the cause, it has more to do with the psychology of the herd. . .

Seems like it just takes one big "sheep" (Bernanke, for example), to yell "all clear" and the herd follows, thinking all is alright.

9 Billion Barrels of Light, Sweet Crude the Saudis Will Never Get Their Hands On...

But are we really recovering, as Bernanke and President Obama may have us believe?

We may not be. . . but then again, it depends on who you ask.

The Student Loan Bubble Bursts

The end is nigh for private student lenders.

A growing number of people can no longer pay their mortgages, their credit cards, or even their car notes. And then there are nearly 250,000 student loan borrowers who can't even afford to pay back their student loans.

. . . And I'm willing to bet that rate gaps even higher as we move forward.

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Even those who can pay their monthly student loan bills are stretching the loans out for years, as depressed wages and a weak economy take toll.

No Job. . . No Money. . . No Student Loan Payments.

Nineteen percent of college students can find and secure a job these days, as compared to 50% in 2007 and 25% in 2008 — meaning there's real trouble ahead for graduates who are competing in the toughest job market in years.

And according to the College Board in a report earlier this year, total student loan borrowing more than doubled between 1998 and 2008. We're talking about $85 billion in loans, as compared to $41 billion ten years ago.

Privately-funded student loans have skyrocketed, too: from 7% in 1998 to 23% of all student loans in 2008. It makes for quite a brew for cash-strapped Americans this year, who are already saddled with unemployment and loss of income. Sallie Mae, for example, had a delinquency rate of 9.4% in Q3 2008 — compared to a rate of 8.5% just a year earlier.

The student loan market has been, is, and will be riddled with trouble. We expect to see higher default rates, as students cannot pay back these loans.

And now, Congress could push through the most dramatic overhaul of student lending practices ever.

Just last week, the House approved the Student Aid and Fiscal Responsibility Act that could eliminate the role of private lenders and establish the government as the sole lender of student loans. Basically, the government will seize control of student lending, kill off the private sector, and take on an enormous amount of student-loan debt.

Democrats claim the move will save $87 billion over ten years' time, which would increase the maximum amount of Pell Grants, expand Perkins Loans, and invest in community colleges and other programs.

Still, the bill could have a rough ride through the Senate, where Obama will need 60 votes to prevent threats of filibuster.

And those in the student loan industry (where 35,000 jobs could be lost if the government seizes control of lending), aren't giving up without a fight ahead of a Senate vote that could come this week. Would you believe the lenders are already putting themselves and their interests before the students'? They argue that cutting out the middle man (the banks) will take away an important revenue stream at a time when they're already hurting. . .

This is part of the reason why the system needs an overhaul.

Good Investing,

Ian L. Cooper
Wealth Daily

P.S. We're now putting the finishing touches on a detailed report that explains how higher education and the student loan industry are inflating a massive bubble — one that's highly reminiscent of the housing bubble — and to profit from their demise. If you're ready to begin taking these imminent gains, simply click on this link to get started right away.

Recovery? What Recovery?

Just where is this recovery that every one's talking about?

Because it doesn't exist.

Bank of America and Citigroup - which make up 35% of the credit card industry - just announced that consumers are defaulting on credit cards at rates no seen since the recession began. Bank of America's charge off rate was 14.5%.

Other banks like JP Morgan, and creditors like Discover and American Express have recently revealed similar August numbers. This is reality. And we're not surprised... just shocked at the naivety of Wall Street bulls that think the worst is over.

Credit card defaults typically track unemployment, which just rose to a 26 year high of 9.7% (really 16%) in August. The jobless rate isn't expected to peak soon.

Consumers are in trouble. There is no recovery.

The Next Ticking Time Bomb

It's almost funny.

We've been warning about the coming fallout from Option ARMs and showing readers how to profit... and explaining that there's further downside for housing.

And now, after all this time, the federal government and states are just now preparing themselves for the next foreclosure crisis in our housing malaise.

Payment option ARMs are about to explode, according to the Iowa Attorney General after meeting with members of President Obama's administration. "That's the next round of potential foreclosures in our country."

Option ARMs are considered one of the riskiest loans made during the housing boom and have left many borrowers owing much more than their homes are actually worth. These underwater mortgages have and will continue to be the driving force behind defaults and foreclosures.

And you want us to believe there's a bottom in housing, or that a recovery is taking place? Come on.

As we said earlier this year.

The next phase of the real estate disaster is upon us. It's just shifted from subprime to Option ARM.

And with many economists predicting unemployment will rise into the double digits, foreclosures will only accelerate, which will add to bank losses, which will add pressure to the financial system and broader economy.

The Fed is well aware of what's coming. Why do you think they're so desperate to pump up the economy before the next fiasco?

Truth is, the amount of debt wrapped up in these Option ARMs is much worse than that of subprime.

And if the government or the banks fail to understand this, the second round we've been warning about will begin and banking instability will wreak havoc yet again.

Option ARM resets will be tougher for the economy to handle than subprime. And we will see greater numbers of bank failures, job losses, foreclosures, delinquencies, and economic hardships.

Honest.

The Year of Option ARM Resets. . . and Why There's No Foreseeable Bottom.

Just as 2007 and 2008 were the years of subprime woes, this one will go down as the year of Option ARM resets (or adjustable rate mortgage resets). With billions in Option ARM resets in 2009 and 2010, this crisis is about to unleash a fury no one's prepared for.

It won't be as bad as subprime, of course. It'll be worse.

That's because lenders created these ARMs with "teaser" features for borrowers, which included making lower minimal payments for the first few years before the loan reset to a higher payment schedule. And if that weren't bad enough, there was another feature called "negative amortization," which meant you weren't paying back any principal.

In fact, with negative amortization loans, your loan balance increased over time. Incredulously, every time you made a payment, you owed the bank even more. These are the loans that allowed consumers to buy houses they couldn't otherwise afford.

As for speculators, they may use negative amortization loans if they believe prices will increase at a fast pace. But with the opposite happening, they're out of luck.

And the banks will be left holding the bag.

What should concern you is that about $750 billion worth of option adjustable mortgages (option ARMs) were issued between 2004 and 2007. . . and will begin resetting shortly. And banks like Bank of America, JP Morgan Chase, and Wells Fargo are in for a rough ride, given their exposure to option ARMs.

Worse, as of December 2008, about 28% of option ARMs were delinquent or in foreclosure, according to reports. Compare that to the 23% default rate in September 2008. And nearly 61% of option ARMs originated in 2007 "will eventually default," according to a Goldman Sachs report.

What will happen is this: many borrowers, if they haven't already, will start throwing in the towel as they realize just how far under water they really are. And the likes of JP Morgan (JPM) could be heavily and negatively impacted.

One thing's for certain. . . we'll be paying for someone else's mistake yet again.