Ian Cooper - Angel Publishing

LED Technology Stocks

You know what they say about bull markets...

There's always one somewhere. And rest assured, we'll find it.

In fact, if you pay attention to President Obama long enough, he'll lead you to the opportunities himself.

Check out LED technology, for example, which "just got a bit brighter" thanks to the President. (Pardon the pun.)

You see, in announcing the latest energy efficiency efforts, Obama said one of the new steps is to set new efficiency standards on fluorescent and incandescent lighting. "Now I know light bulbs may not seem sexy," said Obama, "but this simple action holds enormous promise because 7 percent of all the energy consumed in America is used to light our homes and our businesses.

"Between 2012 and 2042, these new standards will save consumers up to $4 billion a year, conserve enough electricity to power every home in America for 10 months, reduce emissions equal to the amount produced by 166 million cars each year, and eliminate the need for as many as 14 coal-fired power plants.

"And by the way, we're going to start here at the White House. Secretary Chu has already started to take a look at our light bulbs, and we're going to see what we need to replace them with energy-efficient light bulbs."

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And that sounds like an LED push to me.

But to understand why it'll pay to be bullish on LED technology stocks, we have to go back to December 2007.

That's when President Bush inked an 822-page energy measure that included a future ban on 100-watt incandescent bulbs by 2012.

It was intended to make way for bulbs that use 25% to 30% less energy, lop an estimated $18 billion off annual U.S. electric bills, and cut consumer electricity usage by 60%.

Even American Technology Corporation CEO Richard Prati agreed, saying LED technology would grow "astronomically" in coming years. He even believed LED technology would proliferate like Internet companies did in the 1990s, and that LED could save consumers up to 90% on energy bills.

And we're not talking about small industry growth either. In 2005, the LED industry was valued at $205 million. By 2011, it could be valued as high as $1 billion — 388% growth in six short years.

There'll be plenty of demand, and possibly tight supply, which will benefit LED companies. But if we name the companies here, we risk "jacking" prices too high.

However, you can find more information and the names of two LED companies (on radar) in the latest alert from Pure Asset Trader.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. In case you missed any of our top stories from Wealth Daily and our sister publications, we've included them here:

Renewable Energy Finance: The Best of Times, The Worst of Times
"It's never been better and it's never been worse." That was the line ACORE President Michael Eckhart used to open the sixth annual Renewable Energy Finance Forum Wall Street.

U.S. Consumer Credit: How to Profit from the "Recovery"
You don't see Nouriel Roubini on the financial news much lately. Could it be his views are spot on and too scary for CNBC to report to the naïve believers of Cramer's "bottom" theory?

Prime Mortgage Delinquencies Double: Home Prices Continue to Slide
This may be starting to sound a bit like a broken record, but please, don't shoot the messenger. I don't make the news. I just report it. And while I'd much rather write something positive for a change, I also know that recognizing the negative is just as vital. It is what is — even if I come off as something of a Debbie Downer.

Commercial Real Estate Fears of Fallouts and Failures Are Overblown?
Reis Inc. - an impartial provider of commercial real estate performance data - says vacancy rates at strip malls, neighborhood centers, and regional malls are increasing at rates not seen in 30 years. "We've never really seen deterioration of this order in occupied space since 1980. We don't see much in expectations for improvement throughout the rest of this year and next year."

Why Hasn't This Market Already Exploded: Government's Last-Ditch Efforts to Prop up This Domino Are All Doomed to Fail.
First it was housing. . . then the banks. And after that, the automakers came crashing down. Next up is a commercial real estate crash.

Insiders Sell the Rally: Green Shoots, Huh?
Green shoots or yellow weeds? That's the battle being waged on Wall Street these days. However, for the people who should know the answer to this eternal question, the verdict is already in. According to the "insiders," now is the time to sell stocks — not buy them.

Cap and Trade Legislation: It's Not Just a Climate Change Bill
In the ensuing media onslaught since the House passed the "Climate Change Bill," one thing has been forgotten: It's not just a climate change bill, it's also an energy bill. Initially, at least, this was supposed to be advantageous to the bill's passage. It has proven anything but.

Did the Royal Canadian Mint Get Ripped Off for $13.2 Million?
The Royal Canadian Mint, which has been touted as one of the most secure facilities in Canada, may have been the victim of a $13.2 million (CDN $15.3 million) gold heist, an audit concluded Monday.

Ontario Nuclear Development: Safety Concerns Slow Ontario Nuclear Development
The Canadian province of Ontario announced yesterday that it has suspended a plan to build two new nuclear reactors. The reason?

Dennis Kneale: An Idiot?

You've got to feel for Dennis Kneale... foot in mouth disease is horrible.

Could it be that bearish views from the likes of Nouriel Roubini are too spot on, too scary for CNBC to report to the naïve believers in Cramer's, Kneale's or Kudlow's abysmal "bottom" theories?

Could be.

If you listen to Kneale, who awkwardly took on bloggers last night, our recession is over. Yep, the same guy that once asked "What's a VIX?" is telling this to a national audience.

Even a strategist at Barclays Capital, for example, recently said that the economy appears "to be in the sweet spot of a recovery" and that the recession may have ended [in April]"

Huh?

According to Roubini, "recent data from the U.S. and other advanced economies suggest that the recession may last through the end of the year. Worse, the recovery is likely to be anemic and sub-par. . . The recession is not going to be over today. It's going to last another 6 to 9 months."

Unemployment is worsening. Housing woes are far from over. And banking troubles are far from being solved. "I see the risk of a double-dip, W-shaped recession. . . towards the end of next year," added Roubini.

Even Christina Romer, a senior White House official, is "more optimistic" that the economy is stabilizing. Others believe we'll stop contracting by Q3 or Q4 2009.

But how?

First of all, they fail to see a very important thing Brian Hicks, publisher of Wealth Daily, mentioned last week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

Second, unemployment is still getting worse. Most economists now believe unemployment will hit 10%. . . with some, according to Hicks, predicting 12% and higher. Couple that with the fact that U.S. consumers are swimming in debt, and what you're left with is a destructive downturn. That means consumers could still struggle to pay bills and be forced to dip into savings just to get by. And, as Peter Schiff will attest, savings are the "lifeblood of a healthy economy."

Third, the credit card crisis bubble continues to expand. In fact, credit card charge-offs just ballooned to a 20-year high, as Americans battled job and home losses, lost 401k value, and amassed mountainous debt. Revolving credit is about $1 trillion, up about 60% since 2000. The charge-off rate - which measures card loans the banks don't expect to be repaid - hit 10.62% in May from April's 9.97%, according to Moody's. And some expect that rate to surpass 12%.

I could go on, but there's another blog out there called The Market Ticker, which just published a brilliant piece called To Dennis Kneale: You're an Idiot that you should check out. Enjoy.

Since Dennis saw fit this evening on CNBC to "go after" bloggers who in turn had gone after him, yet he omitted The Market Ticker, I'll go ahead and put a full-on dredge out behind my stern and slow to 3kts.

And Dennis, if you would like me on your show, I'll be happy to appear. Phone is fine. And I'm not anonymous, nor do I want to be - CNBC already has has my full bio, my full name, and my CNBC-standard disclosure document back with a digital signature affixed. You can also "whois" this domain and get my full name and address. Good enough? Several employees of NBC Universal are on my forum and a CNBC producer has my direct email address - just ask around and I'm sure you can obtain it, and if you do email me I'll be happy to call you at your convenience.

OK, now on to the facts - your idiotic and utterly unsupportable "the recession is over" call.

There are two types of recessions, if you happen to know more about economics than you knew about options a year ago, when you were caught asking on the air "what's the VIX?"

The types of recessions are inventory driven recessions, the most common, and credit driven recessions.

The last material credit driven recession was in the 1930s. We called it the "The Great Depression."

Inventory-driven recessions are primarily about excessive industrial capacity for demand. That is, manufacturers and suppliers of services get too bullish about prospects, build too much capacity and inventory, and wind up engaging in a destructive price war in an attempt to "win". This drives down profits and ultimately forces the weaker firms out of business, ergo, recession - GDP and employment decline. Having cleansed itself of the excess, the economy recovers. The trigger for these recessions is often (but not always) an external shock such as the oil embargo in the 1970s or the collapse of the Internet fraud-and-circuses games in 2000.

You can read more here.

Great stuff. I think I just found my next favorite blog... well, in addition to mine.

And to those of you that celebrate, have a very happy and healthy July 4^th weekend... except you Kneale (kidding).

U.S. Consumer Credit

You don't see Nouriel Roubini on the financial news much lately.

Could it be that his views are spot on, too scary for CNBC to report to the naïve believers in Cramer's "bottom" theory? (You can't really depend on Cramer, in our opinion. When the market is up, he's bullish; when it's down, he's bearish.)

Could be.

You see, according to Roubini, "recent data from the U.S. and other advanced economies suggest that the recession may last through the end of the year. Worse, the recovery is likely to be anemic and sub-par. . . The recession is not going to be over today. It's going to last another 6 to 9 months."

Oil is quickly rising. Unemployment is worsening. Housing woes are far from over. And banking troubles are far from being solved.

"I see the risk of a double-dip, W-shaped recession. . . towards the end of next year," added Roubini. If by next year oil is heading towards a hundred US dollars per barrel, and the budget deficits are not controlled, "that could tip the global economy into another kind of relapse."

We do, in fact, see a silver lining to the economic disaster over the next two years. But it's impossible to ignore the talking heads that'd have you believe the recession is over and that economic recovery is under way.

Even Christina Romer, a senior White House official, is "more optimistic" that the economy is stabilizing. Others believe we'll stop contracting by Q3 or Q4 2009.

But how?

First of all, they fail to see a very important thing Brian Hicks, publisher of Wealth Daily, mentioned last week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

Second, unemployment is still getting worse. Most economists now believe unemployment will hit 10%. . . with some, according to Hicks, predicting 12% and higher. Couple that with the fact that U.S. consumers are swimming in debt, and what you're left with is a destructive downturn. That means consumers could still struggle to pay bills and be forced to dip into savings just to get by. And, as Peter Schiff will attest, savings are the "lifeblood of a healthy economy."

Third, the credit card crisis bubble continues to expand. In fact, credit card charge-offs just ballooned to a 20-year high, as Americans battled job and home losses, lost 401k value, and amassed mountainous debt.
Revolving credit is about $1 trillion, up about 60% since 2000. The charge-off rate — which measures card loans the banks don't expect to be repaid — hit 10.62% in May from April's 9.97%, according to Moody's. And some expect that rate to surpass 12%.

Yep, it's bad. And bank charge-offs could near $100 billion this year alone, cutting into loan-loss reserves and sending the financial community into a whirlpool of hardship. And it'd leave little room for losses on housing and commercial loans.

Check this out: if unemployment rates hit 10%, defaults could explode. At American Express and Capital One, for example, about 20% of the credit card balances are expected "to go bad this year and next."

The Green Energy Gold Rush

$148 billion was invested in the renewable energy sector last year. Are you getting your share of those profits?

The world's wealthiest investors are... and they're doing it outside the U.S. In fact, half of the world's wealthiest investors -- those with assets greater than $1 million -- are invested in green markets.

This report contains all the information you need to start investing just like the richest people in the world. You can't afford to continue leaving these unchecked profits on the table.

As for Bank of America, Citigroup, and JP Morgan Chase, we're talking about 23%.

And the last thing the financial sector needs to feel is further squeeze, as Americans have accumulated some $970 billion in revolving consumer debt since the end of September 2008, up 3.4% from the close of 2007.

Sure, the credit card industry is typically resilient during our economic slowdowns, thanks to pricing flexibility. And the traditional thinking is that as the economy sours and consumers become late on payments, credit companies can boost earnings through late fees and higher interest rates. But that's no longer the case.

The jig is up.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

And as a consumer-driven economy that has trouble saving money, coupled with the lack of available credit, the economy can do nothing but collapse.

But it won't just hit the financial community. It'll hit retailers hard, too, with many of them switching to survival mode.

So tell me, where's this economic recovery going to come from?

Again, we may sound economically pessimistic, but we're going to tell you how it is. We're not going to pretend everything is okay and have you invest your life savings into a recovery pipe dream. I can say that we do see recovery. . . but it's about two to three years off.

Right now, the best way to profit from this market is to be short financial stocks like the banks and credit cards. . . even the XLF, high-end retailers like Coach (COH), and credit card stocks, such as Capital One (COF) and American Express (AXP).

The talking heads will continue to tell you every thing is fine. But it's not, at least not for the next two to three years. Fortunately, we'll be honest with you and safely show you how to make money even in these challenging times.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. Think fears of commercial real estate fallouts and failures are overblown?

Reis Inc. — an impartial provider of commercial real estate performance data — says vacancy rates at strip malls, neighborhood centers, and regional malls are increasing at rates not seen in 30 years. "We've never really seen deterioration of this order in occupied space since 1980. We don't see much in expectations for improvement throughout the rest of this year and next year."

But that Reis forecast assumes positive job growth and an increase in consumer spending. So, even Reis may be a bit off, as unemployment could continue to rise.

Truth of the matter, the problem could get much worse. Between now and 2011, for instance, about $814 billion in commercial real estate loans will mature, and will need to be refinanced — an issue that could make commercial real estate the next shoe to drop in this decline.

Be there when Options Trading Pit pulls the trigger on two commercial real estate put options this week.

Must See CNBC

From Zero Hedge blog:

"Art Laffer of Laffer Associates has some very good perspectives on why he sees 20 year of hell coming up for the US economy. With thoughts like "never heard of anyone spending themselves into prosperity" he is, of course, correct. One of the best non-partisan critiques of our economic collapse. Must watch video."

Enjoy.

The 1,200-Page Climate Change Bill is a "Pile of..."

Just in case you didn't finish reading all 1,200 pages of the climate change bill, as Washington did, here are some key points:

Greenhouse gases mus be cut by 17% by 2020, and by 80% by the time 2050 rolls around. The government will also issue limited numbers of one ton permits every year, which companies must have if they want to emit greenhouse gas.
Twelve percent of power from electric utility companies must come from renewable sources by 2020.
New office buildings must be 30% more efficient by 2012.
And, according to the Congressional Budge Office, the current bill should cost U.S. households another $175 a year and higher.

But while Democrats are partying like its 1999 over the Friday passage through the House, don't expect immediate action. It now goes to the Senate where it could get tied up with the health care bill.

Here's more from The Business Insider:

"John Boehner tells the Hill that he spent over an hour reading excerpts of the massive climate bill during Friday's debate because "people deserve to know what's in this pile of s...."

Now it goes to the Senate, but don't expect immediate action.

Speaking on "This Week" Obama adviser David Axelrod told George Stephanopoulos that the Senate will focus on healthcare, not the climate bill. He says the climate bill will be shelved until the fall.

That means the fate of the climate bill is tied to the healthcare bill. Any gains Democrats make on the healthcare legislation will come at the expense of the climate bill.

We imagine this pisses Boehner off even more. If the Senate isn't waiting for the bill, why did the House push it through so quickly?

Don't expect the House GOP to stop fighting. Republicans think they have a major issue to seize upon:

The Hill: Even though Sen. Majorty Leader Harry Reid (D-Nev.) holds the bill's fate in his hands, House Republicans intend to hammer Speaker Pelosi's signature climate-change measure over recess.

And GOP Conference Chairman Rep. Mike Pence (Ind.) said "we have only just begun to fight" as he left the Capitol Friday night.

Pence encouraged GOP rank-and-file lawmakers to hold energy summits in their districts over the Independence Day recess. In the recess packets sent home with members, he even included directions on how to organize energy summits.

The goal of holding an energy forum is to "educate your constituents about the Democrats' national energy tax legislation and let them know what 'all of the above' solution you support.""

The Next Big Financial Crisis Upon Us

U.S. consumers are knee-deep in nearly $1 trillion in outstanding credit card debt... and it'll be the next major crisis to rip through the economy.

Revolving credit is about $1 trillion, up close to 60% since 2000. The charge-off rate - which measures card loans the banks don't expect to be repaid - hit 10.62% in May from April's 9.97%, according to Moody's. 10%!!!

And some expect that rate to surpass 12%, as Americans battle job losses, home losses, 401K lost value, and heavy debt load.

Yep, it's bad. And bank charge-offs could near $100 billion... this year alone, cutting into loan-loss reserves, and sending the financial community into a whirlpool of hardship. And it'd leave little room for losses on housing and commercial loans.

Check this out. If unemployment rates hit 10%, defaults could explode. At American Express and Capital One, for example, about 20% of the credit card balances are expected "to go bad this year and next."

As for Bank of America, Citigroup, and JP Morgan Chase, we're talking about 23%.

The jig is up.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

And as a consumer-driven economy that has trouble saving money, coupled with no available credit, the economy can do nothing but collapse.

U.S. Housing Bottom

There is no bottom for housing. . . at least not near term.

But there is somewhat of a silver lining.

You see, when it comes to an "improving" housing market, you can just about ignore the mainstream press and Wall Street hot shots who would have you believing in a bottom or the illusion of strength.

Jim Cramer, who has constantly called for housing bottoms since the market topped out in 2005 and continues to declare that "Housing Has Officially Bottomed," should be ignored. Heck, his August 2008 prediction of a Q3 2009 bottom is still laughable.

Alan Greenspan is wrong, too... having alerted us that the decline in the U.S. housing market "may be bottoming" and that it's "very easy to see" financial markets continuing to improve.

But what they fail to see is the very thing Brian Hicks, publisher of Wealth Daily, mentioned this week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

Worse, according to Steve Christ this week, 22% of all Americans are underwater on their mortgages. And, "according to Fitch, home prices will fall an additional 12.5% nationally and 36% in California, with home prices not exhibiting stability until the second half of 2010. . ."

But 2010 may be a bit too optimistic, in my opinion. Resets don't level off until September 2012, at best.

Tell me, where's the economic recovery going to come from, as ARMs reset over the next 24 months, and higher unemployment results in surging prime mortgage defaults? The only things we'll see more of are foreclosures and declining home values. And that doesn't sound like bottoming to me.

Just as we've been warning, the next phase of the real estate disaster is upon us. It's only shifted from subprime, to Alt-A, to prime. And with many economists predicting unemployment will rise into the double digits from 8.9%, foreclosures will only accelerate, which will add to bank losses, which will add pressure to the financial system and broader economy.

"Things have gotten so bad in the housing market that the S&P has lowered its ratings on 102 classes from 33 U.S. prime jumbo residential mortgage-backed securities issued from 1998 to 2004. That's notable because these securities were previously thought to be safe, due to when they originated," said Steve.

But as I said, there is a silver lining. It'll take some patience, though, as it's about three to four years off.

But as soon as resets begin to level off, then we can call that housing bottom. Any predictions from the Street before that are just guesses. Patience, though, will be rewarded.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

An Urgent National Priority

GE, Google, IBM, and Cisco have quietly invested $3 billion in a new technology that Energy Secretary Steven Chu has called an "urgent national priority."

It's all part of the emerging $2 trillion smart grid market.

And claiming your share has never been easier. Click here to learn about my three best smart grid plays.

P.S. In case you missed any of our other top stories of the week, we've added them here:

The U.S. Housing Market: Lower Prices Accelerate the Downward Spiral
Unfortunately for the green shoots crowd, the trend in residential real estate continues its downward spiral.

"Indeflation" and "Compartflation": Have We Reached an Inflection Point in Economics History?
A fierce debate now rages among economists, investors, pundits, and the puppetmasters of fiscal policy: What's next, inflation or deflation?

Why Hasn't This Market Already Exploded:Government's last-ditch efforts to prop up this domino are all doomed to fail.
First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

The Outlook for Precious Metals Mining Stocks: Waiting for the Next Big Wave in Precious Metals Mining Stocks
The market is building a foundation for the next major wave in both the precious metals and junior mining stocks.

Detroit Fuel Economy: The Value of Detroit Fuel Economy
According to a new University of Michigan report, a successful turnaround for Detroit automakers could hinge on a rapid cultural transformation. What does that mean, exactly?

Credit Card Companies Say "Let's Make a Deal!": Tough Times For Lenders
As my old pal Ian Cooper has been writing about for some time, credit card companies now have one foot on the edge of the abyss and the other on a banana peel.

Prechter: U.S. to Lose AAA Rating: Analyst Sees Another Leg Down
On Monday, Technical analyst Robert Prechter said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.

Foreclosures Were Bad Last Year?: It's Going to Get Worse
It's not just subprime and Alt-A that we have to worry about any more. It's prime, too.

Natural Gas' Comeback

With natural gas prices this low, it's slowing drilling and hindering future supply. There's a huge amount of reserves, but the problem is that we can't convert those huge shale reserves (which boosted domestic production by 9% last year) into production. So every day nat gas sits below... say $5/mcf... we're delaying that production. As the economy improves and our industrial demand picks back up, that's going to put another crunch on available supply, causing prices to shoot back up.

Also, if we're expecting natural gas to play a larger role in our energy picture—like transportation— we're going to HAVE to develop unconventional shale plays like the Marcellus formation, which puts us back into that upcoming supply crunch. Natural gas companies will also benefit from overall energy moves, like oil.

—Ian Cooper, with an assist from Energy and Capital's Keith Kohl

Commercial Real Estate Fears

Think commercial real estate fears of fallouts and failures are overblown?

Reis Inc. — an impartial provider of commercial real estate performance data — says vacancy rates at strip malls, neighborhood centers and regional malls are increasing at rates not seen in 30 years. "We've never really seen deterioration of this order in occupied
space since 1980. We don't see much in expectations for improvement throughout the rest of this year and next year."

But that Reis forecast assumes positive job growth and an increase in consumer spending. So even Reis may be a bit off, as unemployment could continue to rise.

Truth of the matter, the problem could get much worse. Between now and 2011, for instance, about $814 billion in commercial real estate loans will mature, and will need to
be refinanced - an issue that could make commercial real estate the next shoe to drop in this decline.

The head analyst of commercial mortgages for Deutsche Bank believes commercial real estate won't recover until at least 2017. "The froth is still working itself out. We are currently in something which is comparable to what we saw in the 1990s and potentially worse."

Worse, "U.S. commercial real estate could fall by more than 50 percent from the peak in 2007. The number of new loans that are becoming delinquent each month are defaulting at
rates between 5 percent and 8 percent per year, with the most loosely underwritten loans of 2007 defaults at 8 percent per year. We are not only not approaching stability, we are at a period of maximum deterioration."

So how do you play the coming fallout? Steve Christ has four ways.

The Obama Bubble

The financial media would have you believe that everything is okay, that a second-half recovery is upon us.

Whatever.

We're nowhere near a sustainable recovery, regardless of what the media says. Fortunately, there's a simple way to profit from it, which we explain below.

Look, we're not here to rant about politics. We're simply pointing out how the financial media is missing the real story with their religious-like faith in Obama. Newsweek editor Evan Thomas, for example, once said: "Obama's standing above the country, above — above the world. He's sort of God.''

Such hero worship could lead Obama to believe his own press. Heck, I'd be inclined to believe it too if I were praised as much.

But what the press won't tell you is we're headed for a minefield of financial catastrophe that could end in a double dip recession.

The current Administration is re-inflating the old Bush bubble by pumping up asset prices, re-inflating the popped credit bubble, and hoping for some sort of economic recovery that's still a ways off.

They're basically kicking the can down the road, hoping for the best.

Greenlight Capital fund manager David Einhorn agrees, noting that the Administration is "trying to stretch things out in hope that time will solve the problems." They've "adopted an attitude that "what's good for the banks is good for the economy."

But Einhorn questions that view of "what's good for the banks is good for the economy," "because the best interest of the banks is to buy time so that future earnings can outrun embedded losses, while the best hope for a rapid economic recovery rests on insolvent borrowers. . . A corporation, homeowner or consumer that has more than manageable amount of debt is not going to hire people, invest or spend."

And, unfortunately, no amount of new capital will force banks to provide credit to consumers and businesses that carry far too much debt.

Win Big When the Next Domino Tumbles

First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

And unfortunately - just like the rest of them - the government's last-ditch efforts to prop up this domino are all doomed to fail.

But a 372-year-old investing technique is the answer to it all. And it might not only save your portfolio during this $1 trillion crisis... but also make you a fortune!

To learn more about this moneymaking opportunity click here.

It's also why smart traders are short the market...

...And betting on the possibility of a double dip recession, as unemployment skyrockets, bank bailout funds begin to dry up, and interest rates rise.

You see, there's increasing concern that when the flow of money dries up (beginning in 2010 when much of the stimulus package is spent), the economy won't be as strong as we think it is. And at the core of the double dip scenario are the consumers, who have barely left a dent in their debt.

Consumers have witnessed an unprecedented destruction of wealth over the last two years. They won't be prepared to face any more challenges like rising mortgage rates, an end to stimulus spending, and high rates of unemployment.

By the end of 2008, households were on the hook for more than $13.8 trillion in debt. And households owed about 130% of disposable income at the close of 2008, proving a willingness to spend well beyond means.

Add this to crippling credit card defaults, high unemployment, and mortgage reset problems over the next three years, and you'll see we're nowhere near the end of the economic woes.

(As economically pessimistic as this may sound, there are bright spots to be found in this market, too. There's always a bull market opportunity somewhere.)

So how do investors like yourselves profit in a debiliating situation?

One way is to buy LEAPS on the major indices (as we're about to in Options Trading Pit), credit card companies like American Express (AXP) and Capital One (COF), or even consumer discretionary stocks. It's only a matter of time before each of these come tumbling down.

And as we said above, there's a very easy way to profit from the possible "double dip", using LEAPS.

And for those of you new to LEAPS, here's a bit of background from Options Trading Pit. . .

How to Buy LEAP Options. . . and Maximize Your Gains. . .

There are two ways to fully maximize your potential gains. One is to buy the underlying stock in each, diversifying your portfolio. Another is to buy long-term options LEAPS.

Say you're anticipating an advance in the price of a stock option over the next two years, but don't want exposure to time decay issues.

Buy LEAPS.

LEAPS cost only a fraction of owning a stock. And they've been known to rocket higher as the underlying price moves. Say you own a $50 stock, and it goes up $5. Your gain is 10%. But say you own the January 50 calls, for example, at $1 and the stock went up $5. You could now be sitting on 400% gains.

That's how you maximize your potential gains. Not by worrying about time decay, or making scant gains from holding overpriced stocks.

Plus:

Your risk is known.
You can buy LEAPS calls if you think a stock is rising. You can buy LEAPS puts if you think a stock is heading lower. There's a lack of time decay.
You can play "big picture" trends, using commodities such as gold. Say the dollar gets weaker. Investors run to gold as a safe haven, and you own the XAU LEAPS that'll leverage your gains when gold moves in "your" direction.

Smart plays for tough economic times.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. My Options Trading Pit readers are gearing up to bank monstrous gains playing the coming "double dip" crisis. We already banked 57% on the short side of Treasuries this month. And we believe credit cards, prime loans, commercial real estate and broad market weakness are right around the corner. Click here to make sure you get in on the next winning play... and the 48 others I'm guaranteeing after that.

Prime Home Loans

Calling an end to our current bear market is as premature as Jim Cramer's 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. . .

Whitney recently reiterated her bearish position on the financial sector and the overall economy. While some are forecasting recovery in 2009 or 2010, she (and we) believes banks have still not "properly reserved against greater than expected losses in home prices."

Still, if the "geniuses" of Wall Street want to draw this "end of crisis" conclusion, that's just great. We can then stop the bailouts, stop flooding the market with cheap money, and leave banks to live or die. Sounds great to me.

And if you believe the worst is over, that's fine. But be warned, the next leg of the crisis is upon us.

Prime Loan Defaults Have Only Begun to Mount

Truth be told, when it comes to an "improving" housing market, ignore the mainstream press and Wall Street hot shots that would have you believing in a bottom or the illusion of strength. We're still nowhere near the bottom.

Yep, with surging unemployment, the foreclosure crisis can no longer be blamed on ARM loans, particularly subprime. For the first time, fixed-rate prime loans — those given to people with good credit — accounted for the largest share of foreclosures in Q1, according to the Mortgage Bankers Association.

Nationally, about 29% of the foreclosure proceedings that began in the first three months of the year involved prime loans. That's up from 25% in Q4 2008 and 19% about a year ago.

And it'll only get worse before improving.

Yep, after suffering through subprime fiascos, we're now left to deal with Option ARM resets and prime loan defaults that have only begun to mount.

Here's what we still have to look forward to:

We can't just worry about subprime and Alt-A anymore. We have to worry about prime, too.

Warren Buffett Has Increased His Stake

Some of the world's top investors are swooning over one company. Warren Buffett... T.Rowe Price... even the Obama Administration.

They've all increased their stakes. And you can get in just like they did!

Click here to learn what they're so excited about and how you can profit from it.

Morris A. Davis, a real estate expert at the University of Wisconsin just may have hit the nail on the head with his comment, "Foreclosures were bad last year? It's going to get worse."

Just as we've been warning, the next phase of the real estate disaster is upon us. It's only shifted from subprime to Alt-A to prime. And with many economists (including the New York Times) predicting unemployment's rise from 8.9% 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.

Here's more from the New York Times article:

"We're right in the middle of this third wave, and it's intensifying," said Mark Zandi, chief economist at Moody's Economy.com, according to the article. "That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They're coast to coast."

"From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.

Overall, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier."

Why Credit Cards Will Fall, too

As the unemployment rate mounts, so will credit card defaults.

Experts are predicting millions of Americans will not be able to pay credit card debts, leaving a big hole for troubled banks trying to recover.

Worse, the bogus stress tests released suggested the banks could "expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called a 'worst case' economic scenario," according to the New York Post.

However, if unemployment rates hit 10%, defaults could explode. At American Express and Capital One, for example, about 20% of the credit card balances are expected "to go bad this year and next," according to the stress tests. As for Bank of America, Citigroup, and JP Morgan Chase, we're talking about 23%.

And the last thing the financial sector needs to feel is a further squeeze, as Americans have accumulated some $970 billion in revolving consumer debt since the end of September 2008, up 3.4% from the close of 2007.

Sure, the credit card industry is typically resilient during our economic slowdown, thanks to pricing flexibility. And the assumption is, as the economy sours and consumers become late on payments, credit companies can boost earnings through late fees and higher interest rates. But that may not be the case, as the Obama Administration looks to overhaul the industry.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

And despite the recent rally in financials, nearly all credit card lenders are facing mounting losses as more of their customers fall behind on payments or default on loans. According to Forbes.com:

As unemployment has risen sharply, credit card defaults have also climbed. During recessions, credit card losses tend to closely mirror unemployment rates, though some analysts now believe default rates will move even higher than where unemployment rates might peak in the coming quarters.

It's already happening at Citigroup. The company's 10.2% credit card charge-off rate for Q1 has already broken the correlation to unemployment and shows no signs of improvement.

The outlook is so bad that Advanta Corporation is shutting down accounts for one million customers next month as the recession pushes default rates even higher. Lending will draw to a close on June 10, 2009, as part of a plan to preserve capital now that uncollectable debt has reached 20%.

As a result, major credit card issuers have been approving fewer applicants, lowering credit lines, and closing out unused accounts. Even Meredith Whitney expects for lenders "to cut the lines of credit they extend to borrowers by a total of $2.7 trillion through 2010. That is equivalent to a 57 percent reduction in the credit they made available two years ago at the height of the boom," says the New York Post.

Things are bad. And they'll only get worse for credit issuers like American Express and Capital One. But we've been saying that since late last year.

Housing still has a ways to drop before bottoming. And credit cards are teetering.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. My readers have already banked hundreds of percentage points playing this extended crisis and the intermittent rallies. We banked over 57% shorting treasuries this month. Credit cards and prime loans are next. Click here to make sure you get in on my next wining play. . . and the 49 I'm guaranteeing after that.

Oil Super Spike, Part II?

Just the other day, we reported that If you're noticing gas prices moving north again, brace yourself because oil could be headed to $70... maybe even $80 near-term.

But we may have been off just a tad.

Here's what an editor at BarChart.com had to say:

"'Super Spike Two' coming to a screen or terminal near you. Is $150 barrel oil going to be cheap in the coming years? Well the kingpin oil minister of the OPEC cartel sure seems to think so.

Saudi Arabia's oil minister and the most influential member of the OPEC cartel says that he thinks that oil prices could exceed the previous record above $147 a barrel in the next two or three years. The reason is that the current "low" oil price has caused a lack of exploration and capacity expansion. And because of that al Naimi said we will see new record high oil prices within the next two or three years.

In a speech in Italy Naimi said that Saudi Arabia is maintaining its long-term focus rather than being swayed by the volatility of short term conditions. However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two to three years another price spike similar or worse than what we witnessed in 2008.

Of course as smart as Al-Naimi is he has not been the best predictor of long term price moves. Still when the man talks it is obvious that the market listens. And because of the wide contango in futures, a phenomena that means that long term futures are priced higher the shorter term delivery dates, the market may have been expecting this future potential price supply squeeze all along. The market has been paying the market place to store oil for that rainy day. And according to some hard rain is soon to fall.

It is not just al-Naimi that is saying it. In fact he is echoing the same concerns that the International Energy Agency raised last week. The IEA warned in a report that falling energy investment was paving the way for a huge oil price surge within three years. They estimate this that because of the recession oil companies and investors have canceled or postponed about $170 billion of investment, equivalent to roughly two million barrels a day in future oil supply. Add to that an additional 4.2 million barrels a day in future oil-supply capacity that has been delayed by at least 18 months. If you put that together, it is over 6 million barrels of daily oil production that we thought we would see come on line that more than likely will come on when it might be too little, too late.

In the short term the oil market is moving on a delicate balance of concerns over inflation mixed in with a rising tide of economic optimism. Oil seemed to forget all about the geo-political risks brought on by North Korea and instead focused on that surging consumer confidence. The oil market continues to react to any semblance of good economic news partly because of the fears of inflation expectations in the back drop of a recovery but also because an economic recovery and a surge in global oil demand will be hard pressed to be met by supply because of the dramatic and continuing drop in oil investment. Oh sure, I know that supply is ample right now and I am not talking about shortages but the market is doing things for a reason. We may need high oil prices to get the type of investment that will be critical to meet the demand needs of the future. If we don't. it might not just be the high price of oil that hurts the economic recovery but the inability to secure future supply.

Now the big question is whether or not all that consumer confidence will show up in the gasoline demand numbers. I am betting that it will.The Energy Information Agency reported that national average retail price of regular gasoline rose 12.6 cents a gallon to $2.435 a gallon in the week ended Monday. Some of that increase was the switch over to the summer time blends of gasoline and of course the higher demand over the holiday. My guess is that the surge reflects a surge in demand as well that may keep prices not far from this Memorial Day peak."

But there's a very easy way to profit from this possible rise.

The Crude Oil Market: The Easiest-Paying Bottleneck of a Lifetime

Most Americans' economic woes are only going to get worse.

We know the spike's just around the corner. But here's what you might not know. . .

We've uncovered a rare investment that could pay you gains just as astonishing as any jackpot oil resource company out there - but without the risk!

Here's how it works.

You see, this investment (which most investors know absolutely nothing about) doesn't even follow oil producers or risky exploration companies. It strictly follows the physical oil market.

And thanks to the unique nature of this investment, not only can you bask in the riches of the oil futures market - you actually get paid double the gains that oil makes!

In other words, a 10% gain pays you 20%. . . a 20% gain pays you 40%. . . a 100% rise in oil prices pays you 200%.

So, if oil shoots 50% this year, which is our gross-underestimate, you'll double your money!

If oil shoots up to the $70 range, every $5,000 invested will suddenly turn into a $10,000 payday!

With oil trading in the $60 range, this unique opportunity just doesn't get any easier.

You can get more information on it right here.

Foreclosures Were Bad Last Year?

It's not just subprime and Alt-A that we have to worry about any more. It's prime, too.

And Morris A. Davis, a real estate expert at the University of Wisconsin may have just hit the nail on the head with his comment, "Foreclosures were bad last year? It's going to get worse."

Yep, just as we've been warning about - the next phase of the real estate disaster is upon us. It's only shifted from subprime to Alt-A to prime. And with many economists predicting that unemployment will rise into the double digits from 8.9%, foreclosures will only accelerate, says the NY Times, which will add to bank losses, which will add pressures to the financial system and broader economy.

Here's more from the article.

"We're right in the middle of this third wave, and it's intensifying," said Mark Zandi, chief economist at Moody's Economy.com, according to the article. "That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They're coast to coast."

From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans - those given to people with slightly tainted credit - rose 159,000, to 836,000.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier."

The Crude Oil Market

If you're noticing gas prices moving north again, brace yourself.

They're going higher... much higher.

Crude oil already nailed a six-month high last week, thanks to a significant drop in oil inventories ahead of the summer driving season. And it's likely to spike even more. That is, if the Saudis are right.

Saudi Arabia's King Abdullah thinks $75-to-$80 oil is a fair price. And he says, "we are now seeing a quick recovery in the global economy, and see indications of increasing demand for this material (oil)."

Oil minister Ali al-Naimi says the price of oil will climb to $75 as demand picks up. "We'll get there eventually," he adds. "It will be achieved as demand rises and the fundamentals are better than they are now."

And yes, there are even fears of revisiting $100 oil and $3+ at the pump, which once aggravated the global economic slump.

Sure, the pullback to $33 was a relief while it lasted. But the days of cheap oil may be numbered, possibly giving way to another historic oil spike that could send us into a "double dip" recession.

But we'll worry about that if and when it happens.

Even economists think oil is headed higher. "As the economy picks up, spare capacity will start to erode, and the oil market could tighten up again in the first half of the decade," dean of world oil economists Daniel Yergin said in a U.S. congressional testimony.

Even James Hamilton of the University of California at San Diego added, "If demand in China and elsewhere returns to its previous rate of growth, it will not be too long before the same calculus that produced the oil-price spike of 2007-08 will be back to haunt us again."

And there's Ed Yardini who suggests, "oil traders are expecting that once the global economy recovers, supplies will tighten up quickly relative to demand."

How You Could Collect 500% From Oil's Violent Rally

We first alerted you back when it traded for $33. We proved to you why there would be no ceiling of $147 this time as oil erupted through $40... then $45... and again at $55.

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Even legendary oilman T. Boone Pickens recently told Fox, "You're going to be back to $75 oil by the end of the year, and $200 per barrel within five years."

Worse, when global demand comes back — as it will in China, India, and other emerging countries — there's no telling how high oil could run. And it doesn't help that within OPEC as many as 35 new projects have been delayed.

"I've often described unsustainably low oil prices as carrying the seeds of future spikes and volatility," Ali al-Naimi said, according to TheStar.com. "If we place a low priority on preparing for the future, that lack of action can come back to haunt us through supply shortages and another round of high prices."

Truth is, we're headed much higher.

And there's a very easy, very cheap way to profit from the rise.

The Crude Oil Market: The Easiest-Paying Bottleneck of a Lifetime

Most Americans' economic woes are only going to get worse.

That's because in the coming months as the economy turns around — and yes, it'll turn around on its own in short order — oil prices are about to face the fastest price spike in history.

We know the spike's just around the corner. But here's what you might not know. . .

In fact, some of the richest, most savvy traders around don't know about this little gem of a play.

We've uncovered a rare investment that could pay you gains just as astonishing as any jackpot oil resource company out there — but without the risk!

Here's how it works.

You see, this investment (which most investors know absolutely nothing about) doesn't even follow oil producers or risky exploration companies. It strictly follows the physical oil market.

And thanks to the unique nature of this investment, not only can you bask in the riches of the oil futures market — you actually get paid double the gains that oil makes!

In other words, a 10% gain pays you 20%. . . a 20% gain pays you 40%. . . a 100% rise in oil prices pays you 200%.

So, if oil shoots 50% this year, which is our gross-underestimate, you'll double your money!

If oil shoots up to the $70 range, every $5,000 invested will suddenly turn into a $10,000 payday!

With oil trading in the $60 range, this unique opportunity just doesn't get any easier.

You can get more information on it right here.

To safe and prosperous investing,

Ian L. Cooper
http://www.wealthdaily.com

2009 Economic Predictions

We've always been a fan of Meredith Whitney. . .

Not just because she's agreed with everything we've said, but because she tells it the way it is.

And we're happy to see Meredith Whitney doesn't drink from the same Kool-Aid the banks do. Nope. She tells it the way it is, destroying the idea that the financials rally is real.

"They were overdone all the way into this rally. What happened was the government — I call this the great government momentum trade — the government enabled the banks to have better than expected, better than even the banks could organically deliver, first-quarter earnings. That looks like it could continue into the second-quarter and the third-quarter. The banks rallied from well below tangible book multiples to almost two times tangible book multiples. . . the underlying core earnings power of these banks is negligible," she says.

Worse, this will not be the last time banks need to raise capital. And she believes bank earnings in 2010-2011 will be below consensus estimates.

But if you ask Bill Miller, he'll tell you she's dead wrong. Miller believes "financials have the biggest potential to outperform other stocks because of how far they've fallen in the worst bear market since the Great Depression. . ."

Miller also said he expects U.S. housing prices to stabilize "this year and for the economy to perform better than Federal Reserve projections." He also believes the equity markets will rise 20% to 30% in 2009 and that his fund will rebound. (But if he continues to invest in companies like AIG and Freddie Mac, or make any other massive bets in companies that crumbled, the fund may not improve any time soon.)

Who do we agree with?

Whitney. . . and for reasons we've spoken about here in Wealth Daily: crumbling commercial real estate and coming Option ARM resets.

Investors may disagree with us, too, as they disagree with Whitney. But we are the same analysts who called for the downfall of subprime and its spillover into the greater economy, the downfall of financials, the Treasuries, the British economy, and even the breakdown of our own economy, which is struggling to come back.

But our economy will not come back until at least 2012, in our opinion (mark these words). And that's because of commercial real estate, mounting foreclosures, higher unemployment figures, and more pain in residential real estate. . .

Commercial Real Estate Problems: "Have the Potential to Intensify"

Even as banks deal with rising foreclosures and defaults, lenders have something else to worry about — quick rising tides of potential losses from commercial real estate. These losses could easily stretech into the billions, as delinquencies and defaults on office buildings, retail buildings, and hotels have more than doubled in just six months.

Says the Associated Press, "While homeowners are defaulting at almost four times the rate of commercial landlords, the sudden spike in late payments has many industry insiders worried about the collateral threat to the economy and financial sytem. Nearly $73 billion worth of commercial real estate loans are in some level of financial distress, according to Real Capital Analytics."

And its risk to the greater economy is largely unknown, but it'll be bad. . . real bad. Frighteningly, its impact is likely underestimated in the government's bogus stress test.

Worse, about $271 billion worth of commercial real estate loans are coming due this year alone. That's part of the reason why General Growth Properties dug itself an early grave.

Yep, the commercial real estate market is just beginning to mirror the 2007 residential real estate market. The meltdowns at some of the biggest commercial REITs will be another blow to a financial system teetering on the brink of disaster. And nothing may be able to stop the slide.

Even Jamie Dimon is bearish, saying the bank industry should brace itself for "rapidly rising" losses related to commercial real estate. "In general, the losses [in commercial real estate] are going up, and I think if you talk about the whole system. . . you are going to see rapidly rising charge-offs in real estate loans."

Even Dallas Fed chief Richard Fisher believes "problems in the financial industry and commercial real estate have the potential to intensify. . ."

Additionally, vacancies in commercial properties are skyrocketing, and millions of square feet of commercial real estate are currently under construction and ready to flood the market. About $171 billion in loans backed by offices, shopping centers, hotels, and other buildings are coming due this year, according to Union Tribune. Experts are fearful there may not be enough "credit capacity in the system to refinance them."

Why Hasn't This Market Already Exploded?

The truth of the matter is... this bomb likely should have already detonated by now. But thanks to the Plunge Protection Team, the fuse on this one still has some time to burn.

That has given savvy investors everywhere another shot to win big when this market finally blows for good.

To learn more about how to profit when the Commercial Real Estate Market collapses click here.

As for Option ARM resets. . .

They are just around the corner and will mark the beginning of the second half of our crisis. But this is nothing new. We've been warning about these resets for months, just as we warned about subprime in February 2007.

It's the reason I remain bearish on the market medium-term.

For an idea of just how bad the resets could get, take a look at some of these charts pulled from Dr. Housing Bubble.

What's more, about $750 billion of Option ARMs were originated between 2004 and 2007. And a reported 55% of those who took out an Option ARM owe the bank more than what their homes are actually worth.

As of December 2008, 28% of Option ARMs were already delinquent or in early stages of foreclosure.

We haven't even begun to see massive resets, and already one in every four is a disaster. Guess what happens when $30 billion of Option ARMs reset this year and another $67 billion reset next year?

Even worse, according to Dr. Housing Bubble, "the average Option ARM monthly payment is going to go up by 63 percent or $1,052." And this will happen to all of these loans, whether or not the loan holder loses their job.

You've been warned. Option ARMs will be the next leg of the credit crisis. No one can stop this from happening. Again, this is the reason we remain bearish medium-term and why we'll continue to load up on put options.

So, the next time someone says we or Meredith Whitney are wrong. . . just laugh in their face.

Take care,

Ian L. Cooper
http://www.wealthdaily.com

P.S. The opportunities we'll face over the coming months to make an absolute fortune, thanks to the Option ARM resets, are so numerous, it's mind-boggling. In fact, I'm so sure that you can land at least 50 double-digit trades in the next 12 months that $1,000 is yours if I'm wrong. Click Here To Find Out How You Can Collect.

Credit Card Defaults

The stress tests are done. The results were so-so. Financials are up.

Unfortunately, foreclosures are still climbing, credit card defaults are growing and could out-pace unemployment, and no one knows how to value toxic assets.

But the bank crisis has been solved! Yep, and I'm the king of England.

Just as we called back in July 5, 2008, credit cards have and will continue to take it on the chin.

But not many people listened:

"AXP will be fine," one reader said. "You're blowing the consumer issue out of proportion."

"Ian Cooper has no brain." "I think Ian Cooper is an idiot," said another reader.

But those "smart readers" who listened and shorted American Express did quite well, as the AXP stock plunged from $35 highs to about $10. . . only to rebound on false financial optimism.

However, the recent elevated price levels give us an even better position to go short, as we'll soon be doing in Options Trading Pit. And it's all thanks to consumers who are building up massive amounts of debt without the means to pay it back.

You see, it's far more difficult for millions of Americans to dig their way out of debt now that once-relied-upon options, such as home equity loans, are no longer readily available. And an 8.9% unemployment rate in the U.S. doesn't make the credit card outlook any better.

Why Credit Cards Will Continue to Fall

As the unemployment rate mounts, so will credit card defaults. . . and the outlook isn't much better.

Experts are predicting millions of Americans will not be able to pay credit card debts, leaving a big hole for troubled banks that are trying to recover.

Worse, the bogus stress tests released last week suggest the banks could "expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called a 'worst case' economic scenario," according to the New York Post.

How You Could Collect 500% From Oil's Violent Rally

We first alerted you back when it traded for $33. We proved to you why there would be no ceiling of $147 this time as oil erupted through $40... then $45... and again at $55.

But now, with oil rapidly approaching $70 - and about to BURST a lot higher - find out exactly how one group of traders is loading up now, while the game is still early, to collect DOUBLE THE GAINS!

Click Here For Your Free Report Now

The jig is up.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

As unemployment has risen sharply, credit card defaults have also climbed. During recessions, credit card losses tend to closely mirror unemployment rates, though some analysts now believe default rates will move even higher than where unemployment rates might peak in the coming quarters.

It's already happening at Citigroup. The company's 10.2% credit card charge-off rate for Q1 has already broken the correlation to unemployment. . . showing no signs of improvement.

The outlook is so bad that Advanta Corporation is shutting down accounts for one million customers next month as the recession pushes default rates even higher. Lending will draw to a close on June 10, 2009 as part of the company's plan to preserve capital, since uncollectable debt reached 20%.

As a result, major credit card issuers have been approving fewer applicants, lowering credit lines, and closing out unused accounts. Even Meredith Whitney expects lenders "to cut the lines of credit they extend to borrowers by a total of $2.7 trillion through 2010. That is equivalent to a 57 percent reduction in the credit they made available two years ago at the height of the boom," says The New York Post.

Things are bad. And they'll only get worse for credit issuers like American Express and Capital One. We've been saying this since last year to anyone who'd listen...

However, if you must own a credit card stock, buy Visa and/or MasterCard.

They may suffer, too, on slower consumer spending. But they don't have to worry about consumer debt. They don't have any. They only process cards.

Reader Mailbag

Before we sign off. . . Let's go over some recent question from my readers. Here's one from Russell K.

"Ian, what advice do you have for those of us just starting out with options?"

Study, read, practice, and back-test on paper. A good place to start is my options volume primer.

Study lots of charts — that's where the answers are. Every day, I study 20 charts in after-hours, examining the trends that took certain stocks up or down.

Don't get bogged down with indicators. Find those that work for you. It took me months to find the right combination of Bollinger Bands, W%R, and candlesticks, in addition to trading news. And that's what works for me.

Don't jump from strategy to strategy. That doesn't mean you shouldn't refine, but pick something and stick with it.

Don't copy someone else's habits or try to become the next Warren Buffett. Read, study, learn, and repeat.

Get your mind in focus to trade.

Have a time-tested method and stick to it.

Have stop losses in place. And have trailing stop losses set up to lock in gains on unexpected pullbacks.

Manage losses well.

And never risk the house. There's never any such thing as a sure winner.

I hope that was useful. If you have further questions, please send them in. We're more than happy to help.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

Editor's Note: Options traders of every stripe are getting the options education of their lives. . . and finding themselves on the winning sides of Ian Cooper's trades. In fact, Options Trading Pit members have enjoyed 61 wins in 75 trades so far, cumulative gains of 4,462%. . . and an average hold time of 11 days.

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Why We Agree with Whitney... Again.

We've always been a big fan of Meredith Whitney... and not just because she's agreed with everything we've said... but because she tells it the way it is.

And we're happy to see that Meredith Whitney isn't drink from the same Kool-Aid the banks are. Nope. She tells is the way it is, destroying the idea that the financials rally is real.

"They were overdone all the way into this rally. What happened was the government - I call this the great government momentum trade - the government enabled the banks to have better than expected, better than even the banks could organically deliver, first-quarter earnings. That looks like it could continue into the second-quarter and the third-quarter. The banks rallied from well below tangible book multiples to almost two times tangible book multiples... the underlying core earnings power of these banks is negligible," she says.

Here she is with more.

Worse...This will not be the last time banks will need to raise capital. And she believes that bank earnings in 2010-2011 will be below consensus estimates.

As for us, we believe the second half of the financial disaster has already begun with weakening commercial real estate, and the start of Option ARM resets.

Stay tuned for more downside in financials... and if you're interested in playing it, check out Options Trading Pit for more.

Stress Tests Worse than Reported

There's a reason we always listen to Nouriel Roubini... it's because he's usually right.

It was May 5 when he said:

"Stess tests on banks, to be released in a few days, will not mark the beginning of the end of the financial crisis. If we are to believe the leaks, the results will show that there might be a few problems at some of the regional banks and Citigroup and Bank of America may need some more capital if things get worse. But the overall message is that the sector is in pretty good shape.

This would be good news if it were credible. But the International Monetary Fund has just released a study of estimated losses on U.S. loans and securities. It was very bleak - $2.7 trillion, double the estimated losses of six months ago.

The stress tests' conclusions are too optimistic about the banks' absolute health, although their relative assessment is more precise, because consistent valuation methods were used. Still, with Thursday's announcement of the results, it shouldn't be a surprise when the usual suspects emerge. We fear that we are back to bailout purgatory, for lack of a better term."

And surprise, surprise... he was dead on.

According to the Wall Street Journal, the Fed reduced the size of capital deficits facing several banks before releasing the stress test results. The changes came after days of negotiations with the banks, said the story. "The Federal Reserve used different method than analysts and investors had expected to calculate capital levels."

Sounds like Geithner has got to go.

"Citigroup's capital shortfall was initially pegged at roughly $35 billion, according to people familiar with the matter. The ultimate number was $5.5 billion. Executives persuaded the Fed to include the future capital-boosting impacts of pending transactions."

Here's more from the Wall Street Journal.

Bollinger Bands Explained

The success of our options trading portfolio has my team's email inboxes flooded with reader questions every day. I want to share as many of them as I can with you... so today let's take a look at one from Michael R:

"Ian, I've never made so much money than I have with you guys. With other services I'm trading, they also use Bollinger Bands, but I don't understand them. Can you help?"

Let me clear things up a bit.

Bollinger Bands are a popular technical indicator for traders to determine overbought and oversold conditions. In a range-bound market, for example, it works even better as prices travel between two "rubber bands," or like balls bouncing off the walls of a racquetball game.

But using the Bollinger Band as a sole buy/sell indicator isn't very smart. It's why we also use W%R (Williams percentage range) and candlestick signals to help call tops and bottoms. As John Bollinger says, "Tags of the bands are just that — tags, not signals. A tag of the upper Bollinger band is not in and of itself a sell signal. A tag of the lower Bollinger band is not in and of itself a buy signal."

And if you try to use Bollinger Bands by themselves, you can get stopped out or worse as prices "walk the bands" without direction. Again, it's why we use W%R and candlesticks, too.

As we said in "How to Trade Like a Hedge Fund: Secrets of an Options Trader":

With 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 the prices move above the upper Bollinger Band, 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.

Bollinger Bands allow users to compare volatility and relative price levels over a period of time. They consist of three bands:

A simple moving average (SMA) in the middle. . .
An upper band (SMA plus 2 standard deviations). . .
A lower band (SMA minus 2 standard deviations). . .

Standard deviation, a statistical term that provides a good indication of volatility, ensures the bands will react to price movements and reflect periods of high and low volatility. Sharp price increases (or decreases) will lead to a widening of the bands.

In late November 2006, shares of AIG were grossly overbought, for example. Technically, once we got word of an extremely overbought W%R read (as seen in mid-November), we knew AIG was overdue for a correction. Also, notice the underlying stock crossed above the upper Bollinger Band with a doji cross at the time, indicating a near-term reversal which we got.

Or for another example, every time Forest Laboratories (FRX) touched the upper Bollinger Band, it would sell off.

Now that oil has finally bottomed out... what's your next move?

The precipitous fall for oil prices late last year has decimated nearly every oil and gas company in the industry. It also struck fear in most investors, causing their knee-jerk selling. Lost in the panic, however, is the fact that many of those oil and gas stocks were unfairly beaten down.

Fortunately for investors, you have somewhere you can turn to prepare yourself for the next round of oil profits.

Simply click here to learn more about The $20 Trillion Report.

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'll be here until New Year's 2012 doing that.

Again, using Bollinger Bands by themselves just won't cut it. But the bands have become crucial in technical markets. By using the bands' functionality and examining them as "rubber bands" that, when pulled too tight, can snap back to the mean, traders can achieve unimaginable profits. . . just as we have in Options Trading Pit.

Here's another question from Marty C. "Ian, do you recommend using stop losses and trailing stop losses?"

Yes. In Options Trading Pit, we like to use a "mental stop loss rule" of at least -35%. With trailing stop losses, we like to use at least -25% when we're showing a nice gain.

For instance, if you bought your option at $20, you might want to plug in a stop-loss order to sell if the price drops by 35% ($13).

On the other hand, if your option rises, you could set a trailing-stop. This is the opposite of a stop loss and locks in gains for you at a set level. For example, if you buy an option for $20 and it rises to $40, you could set a trailing stop at $30 to lock in a 50% gain.

Note: Make sure your broker understands that you want a stop-loss order and not a sell order — otherwise he might execute the order immediately, and you could end up reselling an option worth $10 for $7.50. Simple mistakes like this illustrate why it is essential to find a broker you trust. . . or learn to trade for yourself.

Bottom line, give your broker instructions about your options. Don't get left holding a worthless contract or shares you never intended to purchase.

That's all for this week. Stay tuned for more shortly. And as always, if you have a question, feel free to e-mail it to us I may feature it in this daily e-letter.

For more on options trading, we direct your attention to the following:

How to Invest in Options

Stay tuned for more options education next week, when we'll dive into naked options trading.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

Editor's Note: Members of Ian's Options Trading Pit advisory are getting the options trading lessons of their lives. . . and finding themselves much richer in the process. In fact, they've enjoyed 61 wins in 75 trades so far, cumulative gains of 4.462%. . . and an average hold time of 11 days. Isn't it time you made gains like this?

Hoenig: Let Troubled Banks Fail

I don't know about you, but I'm sick of bailing out banks that should fail... and so is Dr. Thomas Hoenig, President of Federal Reserve of Kansas City who is speaking today at Demos: A Better Way To Restore The Banking System.

You can view that live conference here.

This follows up his Financial Times article: Troubled banks must be allowed a way to fail,which you can also read here.

"When the financial crisis began to unfold in 2007, US policymakers reacted quickly out of fear that rapidly evolving events would lead to a global economic collapse. In my view, the policy response to this point has been ad hoc, resulting in inequitable outcomes among firms, creditors, and investors. Despite taking a number of actions to stabilise markets and institutions, uncertainty continues and markets remain stressed.

I believe there is an alternative method for addressing this crisis that deals more effectively with the issues we currently face while also considering the long-run consequences of those actions: the implementation of a systematic plan to resolve large, problem financial institutions.

In recent weeks, I have outlined such a resolution framework for dealing with these large, systemically important institutions. Boiled down to its simplest elements, the plan would require those firms seeking government assistance to make the taxpayer senior to all shareholders, with the government determining the circumstances for managers and directors. These firms would be operated by outside individuals with no conflicts involving either the firm or its competitors.

Non-viable institutions would be allowed to fail and be placed into a negotiated conservatorship or a bridge institution, with the bad assets liquidated while the remainder of the firm is operated under new management and re-privatised as soon as is feasible. This plan is similar to what was done in Sweden in the 1990s and in the US with the failure of Continental Illinois in the 1980s.

This plan has many advantages, including that management and shareholders bear the costs for their actions before taxpayer funds are committed. This process also is equitable across all firms; is similar to what is currently done with smaller banks; and provides a definitive process that should reduce market uncertainty. These are important reasons to implement this kind of resolution process.

In contrast to this suggested approach, the current policy raises a host of issues:

● Certain companies have not been allowed to fail and, as a result, the moral hazard problem has substantially worsened. Capitalism is a process of failure and renewal, and a "too big to fail" policy undermines this renewal and makes the financial system and our economy less efficient.

● So-called "too big to fail" firms have been given a competitive advantage and, rather than being held accountable for their actions, they have actually been subsidised in becoming more economically and politically powerful.

● The US government has poured billions of dollars into these firms without a defined resolution process, adding to our national debt. While there will be some repayment, there also will be losses. The longer resolution is postponed, the greater the losses and the larger the debt burden.

● As these institutions are under repair, the Federal Reserve is making loans directly to specific sectors of the economy, causing the Fed to allocate credit and take on a fiscal as well as a monetary policy role. This is reflected in the fact that its balance sheet continues to swell, which may compromise the independence of the Federal Reserve and make it more difficult to contain inflation in the years to come.

● Failing effectively to resolve these non-viable firms has long-term consequences. We have entrenched these even larger, systemically important, "too big to fail" institutions into the economic system, assuring that past mistakes will be repeated.

Certainly, the approach I suggest for resolving these large firms also is not without substantial cost, but it looks to both the short and long run.

A systematic approach would reduce the uncertainty that has paralysed financial markets; the cost is more measurable and therefre manageable; and there will be fewer adverse consequences compared to the path we are on now.

Because we still have far to go in this crisis, there remains time to define a clear process for resolving large institutional failure. Without one, the consequences will involve a series of short-term events and far more uncertainty for the global economy in the long run.

While I agree that central banks must sometimes take actions affecting the short run, they must keep the long run in focus or risk failing their mission."