April 10, 2014
- “Taxpayers” have recovered bailout money? The joke about the newest IPO
- 1,816% gains on the poster child of the 2008 Panic: If you missed out, your next chance is coming
- Because a 96% loss in purchasing power over 100 years isn’t enough…
- Biding his time: Elmerraji on where stocks stand after a week’s sharp ups and downs
- The ultimate soccer fan’s keepsake… the strange statistical certainty of the IMF… one more laugh and a sensible perspective on Putin… and more!
Ally Financial went public this morning at $25. As we write, it’s down to $24.51.
As you might know, we don’t like IPOs as a rule. Actually, we hate them. The best time to buy is usually before they go public. (You’re not an accredited investor with the right connections? The system’s designed to shut you out.) The second-best time to buy is some weeks or months after the IPO.
So we’ll wait and see on Ally. But we bring it up this morning to help illustrate how some of the most lucrative profits can be found in the most unlikely places. And you don’t have to be an accredited investor with a net worth of $1 million or more to pull it off…
To begin, we must revisit Ally’s seamy history.
For all its touchy-feely TV commercials, few people are likely aware Ally is in fact the shiny new coat of paint on the rotted edifice once known as General Motors Acceptance Corp. — GMAC, the finance arm of GM.
Too many subprime home loans and too many 0%-for-72-month auto loans in the early 2000s finally did in GMAC during the Panic of 2008. The firm took a $17.2 billion bailout; in exchange, Uncle Sam took a majority stake.
“Ahead of the IPO,” Reuters informs us, “taxpayers have recovered $15.3 billion.”
We love it whenever the media say “taxpayers” benefit from schemes like these. If that’s true, where’s our damn check?
But we digress. Again, we bring up Ally because 1) it’s timely and 2) it reminds us of an opportunity we’re kicking ourselves for overlooking…
One of the biggest and best opportunities of the last 12 months lay within another casualty of the 2008 crisis.
In September of that year, the feds took over Fannie Mae — one of the “government-sponsored enterprises” that got in too deep with shady mortgage lending. After flailing about for nearly two more years, Fannie announced on June 16, 2010, it would be delisted from the New York Stock Exchange.
But shares continue to trade on the Over-the-Counter Bulletin Board.
“In February,” says our newest analyst Rick Pearson, “this company delivered a 2-for-1 earnings treat that rocketed shares up in double time.
“First off, the mortgage giant delivered record profits of $84 billion in 2013, to cap off eight consecutive profitable quarters.
“Second, that meant it could hand over $7.2 billion in dividend payments so that it was no longer in hock to the federal government, but had, in fact, poured more into the coffers of the Fed than they’d received in their 2008 bailout.
“Investors took this as a positive sign… a possible signal that FNMA could stand on its own once more.”
Indeed, that was the third of three big ramps in Fannie Mae: 260% in six days… 1,260% in 10 weeks… and up to 1,816% in less than a year.
“That’s enough to turn $5,000 into $95,800,” says Rick, performing a little napkin math. “Not bad for a year’s salary — and making it in mere days is life-changing.”
Again, we’re sorry we didn’t tip you off to this play back in February. But we’ve done the next best thing: We’ve brought Rick on board to deliver plays just like it from here on.
Fannie Mae is a prime example of what Rick calls a “Newton Profit Trigger” — an event that sparks a fast — but lasting — change in a company’s share price. He’s spent nearly a decade spotting them.
“I got a little burned out working 80- to 90-hour weeks on Wall Street,” he explains. “So in 2005, I decided to take a year off. After my first trades on my own… that ‘year off’ became the rest of my days!”
He walked away from a seven-figure salary and began trading for himself. “It didn’t take long to discover the catalysts that gave my investments an edge.”
During that year off, he took a position in a military stock called Force Protection at $1.80. He sold at $10. From then on, he was hooked.
Now you can benefit from his profitable experiences and seize on the five types of “Newton Profit Triggers” he’s identified from his research. In the case of Fannie Mae, the trigger is a “surprise” earnings announcement — the kind that are no surprise at all “when you understand a company’s on-the-ground competitive situation,” Rick says.
One week from today, on Thursday, April 17, you can be among the first people Rick will clue in to each of the “Newton Profit Triggers”… and how you can play them for threefold gains in a mere 24 hours. (He’ll also explain how ol’ Isaac Newton figures into these plays.)
To get the first-mover advantage, all we ask is that you sign up in advance. It’ll take you less than 60 seconds to do when you click here.
Stocks are back in the red today, and the Nasdaq is getting whacked hardest — down 1.5% as we write.
Yesterday brought a monster rally after minutes were released from the Federal Reserve’s meeting last month. We’ll spare you the tedious details: The upshot of it, in contemporary Internet lingo, is “NEEDS MOAR INFLATION.”
Or as the Fed’s favorite media conduit, Wall Street Journal reporter Jon Hilsenrath, put it: “The Fed began 2014 hopeful that a strengthening U.S. economy would push very low inflation from 1% toward the 2% level that officials associate with healthy business activity. Three months into a year marked by unusually harsh winter weather, which appears to have damped economic growth, there is little evidence of such movement.”
As we often say when citing official inflation figures, any resemblance to your own cost of living is purely coincidental.
Upon the news, gold rallied and the dollar sank. Those moves are largely holding this morning — gold is up to $1,321, and the dollar index is down to 79.4.
“The ‘most hated stock rally in history’ just got a little more hated,” writes Jonas Elmerraji of our trading desk.
Short interest — bets that stocks will fall — is now at its highest since 2009. “That either means that huge numbers of bearish investors just correctly predicted a major top in stocks for the first time in history, or that we’ve got a big contrarian buy signal.”
Heh… Snark aside, Jonas isn’t quite ready to pull the trigger on new trades. Let’s revisit the long-term trendlines of the S&P 500. “Whenever the S&P’s been near the top of the channel,” he says, “it’s been a time you didn’t want to own stocks.”
And he anticipates more uncertainty as the month wears on; his STORM Signals readers have been out of the market since March 20. “When the S&P returns to the bottom of its price channel, we’ll have a really good buying opportunity — just like the beginning of February.”
That’s when he recommended a call option on SPY — the big S&P 500 ETF — which promptly jumped 100%.
For the soccer fan who has everything, there’s now…
Well, let’s simply cite the AFP newswire verbatim: “Pele has unveiled an unusual line of diamonds using strands of the football legend’s own hair, local media reported.”
The publicity stunt coincides with the buildup to the 2014 World Cup, which Brazil hosts in two months. Now 73, Pele delivered Brazil a World Cup victory in 1958, 1962 and 1970.
“The diamonds,” we’re told, “are made using a high-pressure, high-temperature process during which strands of Pele’s hair are charred.” There will be 1,283 of them — one for each of his goals. Cost? About $7,500 each.
Here’s a question we couldn’t find answered in the (very limited) news coverage: How much hair do you need to make a diamond in the first place?
“What is the scale they are using, and where are they starting their guess from?” writes one of our regulars.
We got a surprising amount of reaction to our short and sarcastic item yesterday about the International Monetary Fund declaring a 0.1% probability of a global recession this year.
“Maybe they’re starting from 0 degrees on the Kelvin scale? You know, the temp at which all molecular activity ceases? Looking at what the Obama administration has done to the economy, that sure looks like the right scale to use to me!”
“Stating a value of 0.1%,” another reader writes, “suggests an inherent precision in their models of at least 1/10 of 1%. Wow!
“They are ‘estimating’ a probability (in a statistical sense), and ‘estimates’ come with a ‘confidence interval’ (sort of an error bar) that must be very small. One can be very precise, while at the same time very inaccurate (i.e., precisely wrong).
“I would interpret 0.1% as ‘zero,’ not ‘nearly zero’; do their models really differentiate between 0.0%, 0.04359% and 0.1%? Of course, saying zero would not leave them the insurance of “We didn’t say zero.'”
The 5: “The term physics envy,” according to Wikipedia, “is used to criticize a tendency (perceived or real) of softer sciences and liberal arts to try to obtain mathematical expressions of their fundamental concepts, as an attempt to move them closer to harder sciences, particularly physics.”
Alas, it runs rampant through the world’s central banks…
“I just watched the Putin video,” a reader writes of our latest attempt at making a viral video. “Laughed my ass off. Thanks for that!”
The 5: We’re glad someone watched it in the spirit it was intended…
“Vladimir Putin is a KGB thug, and what he’s doing is not nice,” reads a long and thoughtful letter from a reader. “But many government people and TV news people show gross ignorance. Crimea is not really part of Ukraine.
“Not every USSR thug-in-chief was a Russian. Stalin was a Georgian who removed the residual Mongol population from Crimea and replaced them with Russians. Khrushchev was a Ukrainian who transferred administrative control of Crimea to the Ukrainian SSR in 1954. Nobody thought of Crimea as Ukrainian in the 1,000 years before that. The Crimean population has been mostly Russian for a long time.
“Vladimir is Russian for ‘king of the world’ (Volodimir in Ukrainian). When I suggested to a Ukrainian friend named Volodimir that it sounds rather presumptive, he said, gleefully, ‘Yes, it corresponds to the Western name Raymond.’
“Ukraine (oo-krah-EEN-yeh) is Russian for ‘beside the border.’ Ukrainians live on the edge, and always have. For centuries, their vast steppe was a no man’s land between Europe and Asia.
“That’s where the Slavs originated. Some of them went west and became Polaks, Slovaks and Czechs. Others went southwest and became Slovenes, Serbs and Croats. The Eastern Slavs who stayed in Ukraine were converted to Christianity by missionaries from Constantinople in 989.
“About 200 years later, the Mongols came out of Asia and made life miserable for them. Some of them took refuge in the north woods. They split into Belarusians in the northwest and Russians in the northeast.
“Mongol cavalry was formidable on the open flatland, but they couldn’t beat the Slavs in the woods. The Russians built up strength, then came out of the woods and began pushing the Mongols back into Asia. Winning the east was like our winning of the west. It took them several hundred years to get control of Mongol territory all the way to Vladivostok (Capital of the east).
“Raymond Putin has the same paranoia all Russians have after 1,000 years of invasions by everybody from Mongols to Germans. Russians want control over the former peripheral SSRs as buffer territory between Mother Russia and invaders. Putin is not nice, but in dealing with him, we should understand why Russians think the way they do.
“TV news people should have thought of that.
“Secretary of State Kerry should have thought of that.
“President Obama should have thought of that.”
The 5: For once, we have no pithy insight of our own to add…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “This is my primary source of stable income,” writes a satisfied reader. “I generate over 15% on my money consistently, every year. I finance the cost of my mother-in-law’s $4,500-per-month assisted-living facility with the income I generate using this system. It is the best path to a secure retirement.”
Best of all, the system the gentleman describes does not raise your risk level. Check it out right here.