Why the U.S. Credit Rating Downgrade Could Cause a Full-Fledged Market Crash

By Jason Simpkins, Managing Editor, Money Morning
That Standard & Poor's finally downgraded its U.S. credit rating surprised no one - the agency said weeks ago that it would require a deficit-reduction agreement of around $4 trillion to affirm its AAA rating on the United States. But what the ratings agency doesn't realize is that it's playing with fire. Because what we've seen over the past few weeks has been a massive sell-off in the stock market that suggests Wall Street's biggest players are scrambling to bolster their net capital positions. And it's entirely possible that this already-stiff correction will snowball into a full-blown market crash.

Read More: http://moneymorning.com/2011/08/09/why-us-credit-rating-downgrade-could-cause-full-fledged-market-crash/

Investing Icons Weigh In On U.S. Credit Downgrade
By Kerri Shannon, Associate Editor, Money Morning
The market's verdict on the Standard & Poor's (S&P) U.S. credit downgrade is in - and it isn't good. In direct response to the U.S. credit downgrade, the Dow Jones Industrial Average plunged more than 631 points, or 5.52%, yesterday (Monday), after falling 6% last week.No question, we're in the midst of a free-fall. And there's no doubt about the role Washington played in creating this dangerous situation. But U.S. policymakers aren't the only ones to blame.Some of Wall Street's heaviest hitters, including Warren Buffett and Bill Miller, have zeroed in on S&P for perhaps being a little too overzealous in its approach.

Read More: http://moneymorning.com/2011/08/09/investing-icons-weigh-in-on-u-s-credit-downgrade/

The Real Reason for Yesterday’s Stock-Market Sell-Off
By Shah Gilani, Contributing Editor, Money Morning
On Aug. 11, 2010, the Dow Jones Industrial Average plunged 265 points, or 2.5%.
This Tuesday - almost exactly one year later - the Dow dropped ... 265 points.
Those carbon-copy stock-market sell-offs weren't a coincidence. - as yesterday's (Thursday's) 512-point drop and further weakness will prove.Although the Dow is more than 700 points higher than it was at this time a year ago, U.S. stock prices are currently following virtually the same trading pattern that they did in 2010: Last year and again so far this year the early-year gains came to a halt in May, and the markets then fell through August.

Read More: http://moneymorning.com/2011/08/05/the-real-reason-for-yesterday%E2%80%99s-stock-market-sell-off/

Stock Investor Sentiment: The Bulls Love This Market

The number of bulls continue to increase as the “dumb money” indicator approaches extreme levels.  I am not sure what these investors are seeing, but we do know that higher prices will bring out the bullish instincts.  Putting our own emotions aside and looking at the data, extremes in bullish sentiment this late in a bullish run are better sold (i.e., lighten up on long exposure) than bought.

The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.   This indicator is barely neutral.
Figure 1. “Dumb Money”/ weekly

Read More: http://www.dailymarkets.com/forex/2011/04/16/stock-investor-sentiment-the-bulls-love-this-market/

Top 30 Growth Stocks Hedge Funds Are Crazy About

Long/short hedge funds are generally value investors. When they buy, they want to pay less than what a stock is worth. This doesn’t mean that hedge funds don’t invest in growth stocks with high PE ratios. Last summer, David Einhorn bought more than 800 thousand shares of Apple (AAPL), arguing that the stock’s PE ratio is extremely low compared to its growth prospects. Einhorn paid less than $250 per Apple share. There are several growth stocks that hedge funds think are undervalued.

Read More: http://seekingalpha.com/article/260604-top-30-growth-stocks-hedge-funds-are-crazy-about

The Best Dow Stocks for the Next 5 Years

The best performing stocks in the market are usually the fastest growing stocks or the stocks with the highest expected growth rates. In this article, we will present the 5-year growth rate estimates for the 30 members of the Dow Jones Industrial Average. The source of the data is Thomson Financial. Theoretically, the stocks with the highest growth estimates and lowest PE ratios should outperform the market on the average.

There are two main problems with using these estimates. First, the estimates may not be accurate under the current assumptions about the future. Second, the estimates may be accurate under the current assumptions, but we may experience adverse developments in the future that might render these estimates obsolete.

Read More: http://seekingalpha.com/article/259913-the-best-dow-stocks-for-the-next-5-years

Is Marc Faber’s Stock Market Correction Finally Coming Due?

Read more: http://www.beaconequity.com/jwis-marc-fabers-stock-market-correction-finally-coming-due-2011-03-08/#ixzz1GXppuJe0

Nearly five months have passed since Marc Faber’s prediction of a 10% correction in U.S stocks. It hasn’t happened. Will the month of March be the charm?

Speaking with Margaret Brennan on Bloomberg Television’s Oct. 26 edition of “InBusiness,” Marc Faber, dubbed Dr. Doom, said, “We are in the inflation trade again,” underscoring “a weak dollar, strong precious metal prices, strong equity prices especially in emerging markets and now in frontier markets, plus strong industrial commodities.”

“So, I think a correction is overdue,” he asserted.

S&P 500 Year-End 2011 Strategist Price Targets

A Look at 8 Stocks That George Soros Is Buying

George Soros is a billionaire investor who uses a hedge fund strategy that searches for mispriced assets based on macroeconomics. Those assets can come from anywhere in the world and be of any type, including bonds, currencies, stocks, interest rates or commodities. Soros also concentrates his portfolio among a few assets (see here). I think this strategy of "concentrating" is important because:

   1. It allows the investor to spend less on transaction fees.
   2. It increases the odds of getting higher yields. If the investor has a basket of stocks, all assets need to gain 100% to double all of the invested money.

This strategy, however, also has risks, because if the assets fall, the investor could get burnt. Thus, it is important to pick an asset that has minimal downside. However, picking an asset that has minimal upside is not a very good move either, in my opinion. I also like looking for an asset (or stock) that I can hold for at least a year to minimize taxes while still enjoying a strong yield.

So let’s look at the top stocks that George Soros is buying as of February 23rd. The top black line in each graph is overbought, and the bottom line is oversold. Green circles are bullish signals. Red circles are bearish signals.

Detail Source: http://seekingalpha.com/article/255550-a-look-at-8-stocks-that-george-soros-is-buying

Next Decade Will Be Good One for Stock Investors: Matthew Lynn

(Bloomberg) -- Even the most practiced soothsayer will struggle to make any detailed predictions for the next 10 years. It’s hard enough to know what will happen in the markets in January 2010, never mind December 2019.The main thing investors need to know about the coming decade can be summed up in one of those pithy Twitter updates. Will it be good or bad for stocks? Everything else is extraneous.The answer? Good. A shortage of capital from any source other than the stock market; moderate but persistent inflation; and the probability that economic growth will be stronger than many economists expect means that “the 10s” will be a time when equities start to have some rocket fuel in their engine again.Stock markets usually work in decade-long cycles.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ad7L3gw_8wB8

U.S. Dollar, Stocks May Both Advance 10%, Biggs Says

(Bloomberg) -- The dollar and U.S. stocks may keep rising together as economies improve around the world, reversing the relationship that held between March and November, hedge- fund manager Barton Biggs said.The currency is undervalued against the euro and yen and the economic recovery is “gaining momentum,” he added. Gross domestic product will increase 2.6 percent next year after contracting 2.5 percent in 2009, according to the median economist forecasts in a Bloomberg survey.Bullish bets that Biggs made during the worst of the credit crisis are giving his six-year-old firm its best returns ever. His view on the dollar echoes the forecast from Marc Faber, publisher of the “Gloom Boom & Doom” newsletter, who told Bloomberg Television today that currency dollar may appreciate 5 percent to 10 percent against the euro in the near term while equities advance.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aCaX_mHzcbf0

Stocks seen notching up more gains in 2010

(Reuters) - Stocks should score a second straight year of gains in 2010 as an economic recovery brightens the profit outlook, extending the market's rebound from the depths of a punishing financial crisis, a Reuters poll showed on Wednesday. Most of the upside is forecast for the first half of the year as investors bet on a more stable economy boosting sectors like technology, industrials and materials.The second half of 2010 will be more muted as investors seek clarity on when and how the U.S. Federal Reserve might tighten monetary policy by raising interest rates or draining the financial system of excess liquidity, or both.The survey of about 40 analysts at top Wall Street dealers, brokerages and fund managers taken over the last week showed a median target of 1,208 for the benchmark Standard & Poor's 500 index at the end of next year.

http://www.reuters.com/article/idUSTRE5BF2TE20091216

2010: A bounce into the unknown
Outlook marred by risks in unwinding of central banks' easy money measures

(MarketWatch) -- Still high on the sugar provided by ultra-low interest rates and the massive amounts of liquidity provided by central banks, stocks could climb steadily in the first half of 2010, according to the predictions of some major Wall Street banks and analysts. But beyond that time frame, many strategists color their views with caution. A big question remains as to what will happen when the Federal Reserve and other major central banks remove the massive amounts of money they injected to rescue the financial system and the global economy. Ablin expects U.S. stocks, as measured by the broad S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,126, +5.89, +0.53%) , to gain another 15% in the first half of the year, thanks to the fuel provided by government and central bank money.

http://www.marketwatch.com/story/us-stocks-seen-rising-in-early-part-of-2010-2009-12-22

Stocks Next Year: More Gains As 'Pessimism Bubble' Pops

By: Jeff Cox CNBC.com
From the unbridled despair of 2008 to the only-somewhat bridled optimism of 2009, what a difference a year makes on Wall Street. And so it goes into 2010. Most analysts are offering upbeat forecasts for stocks, though tempered with a healthy dose of what-ifs: whether housing ever does get back on track; whether the Fed raises rates too soon; whether the profligate government spending catches up with the economy and thwarts the nascent recovery. And, most ominously, whether unemployment continues to prevent the consumer from goosing the economy.

Despite the lingering fears, a return to an armageddon-like scenario is being almost wholly dismissed and investors are enjoying the healthy profits that 2009 offered. This year's 19 percent stock-market profit contrasts handsomely with the nearly 40 percent loss of 2008.Positive GDP growth—with some estimates as high as the 4 percent range—coupled with continued help from Washington is seen as a solid barrier against fears of a double-dip.Analysts at Bank of America-Merrill Lynch are calling it the popping of "the equity pessimism bubble."

http://www.cnbc.com/id/34510786

Investors Will Return to US Markets in 2010: Expert
By: Krystina Gustafson Special to CNBC.com
The Federal Reserve's pledge to keep interest rates at near zero for an extended period means U.S. markets will continue to rise in early 2010—and asset bubbles and a shaky world economy will cause some investors to pull out of emerging markets, said Eric Ross of Watch Harbor Asset Management. He and Brian Daley of Conifer Securities offered CNBC their outlooks for next year."I think the worries that we have are really the rest of the world's starting to fall apart economically, particularly the euro zone," Ross said.

As the U.S. market rises, the dollar will continue to weaken, and commodities will head higher, Ross said. And although gold isn't his favorite commodity, it is a good way to play the weak dollar, he said. Ross predicts January's earnings season will be better than many expect, with technology leading the pack. But Daley said investing in equities will still be stock-specific in 2010.
http://www.cnbc.com/id/34514860

Best and Worst Stocks of the Decade

By: Ariel Nelson Director of Market Data & Content Services
Best & Worst of the Decade
As the decade moves towards its close, here is a look back at the biggest gainers and losers over the past ten years. For the next few days, we will highlight the best and worst in stocks, commodities and more as you reflect and plan for 2010.
To start off, let's take a look at stocks in the current S&P 500 [.SPX ]. Using data from Capital IQ, we looked at total return over the past decade, assuming any dividends were reinvested to buy more shares. Three energy stocks lead the top 10 performers with Southwestern Energy [SWN ] providing a whopping total return of 5782%. At the same time, only one tech stock managed to reach the top 10 - thermal imaging systems maker, FLIR Systems [FLIR).

Top 10 S&P 500 Performers over the Past Decade:









On the downside, there are many companies that did not make it through the decade due to financial collapse (e.g., Bear Stearns) or mergers. That being said, there are 8 companies that are still on the S&P 500 that have yielded their investors losses of 90% or more in total return. Topping the list of losers is JDS Uniphase [JDSU, one of the stars of the tech bubble, which is down nearly 99% since December 1999. In addition to the 5 tech stocks that made the bottom 10, are bailed out financials AIG [AIG] and Citigroup [C].

Bottom 10 S&P 500 Performers over the Past Decade:









http://www.cnbc.com/id/34512439

Renowned Bear Makes Bullish Predictions For 2010

By: Lee Brodie
Widely followed strategist Richard Bernstein is making some surprising predictions for 2010. What should you know? In case you’re not familiar with Bernstein, he was renowned for being bearish, but turned bullish over the past few months. On November 10th he went from big bear to baby bull when he told the Fast Money desk, “People like me have underestimated the rebound. The economy is slowly getting better.”

Why the change of heart?
Because initial jobless claims, which he and many others consider a leading indicator, had improved dramatically.Then in mid-December, on the website Business Insider, Bernstein shed his grizzly skin for good -- and put on a pair of bull horns -- when he revealed his 10 predictions for how financial markets will shape up in 2010. His outlook wasn't just optimistic, it was downright rosy.

http://www.cnbc.com/id/34468514

Greenspan Says Stock Rally Means Lower Stimulus Need

(Bloomberg) -- The biggest stock market advance in seven decades is reducing the need for additional government stimulus measures, according to former Federal Reserve Chairman Alan Greenspan. The Standard & Poor’s 500 Index’s 64 percent jump since March made Americans richer by restoring $5.4 trillion to U.S. equities and helped spur a 1.3 percent increase in retail sales last month, data compiled by Bloomberg and the Commerce Department show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aNnOG1VbdDZs&pos=7

S&P 500 to Climb to 1,350 Next Year, Prudential’s Praveen Says

(Bloomberg) -- U.S. stocks may rally more than the average Wall Street strategist’s forecast in 2010 as economic and earnings growth recover, Prudential International Investments Advisers LLC’s John Praveen said. Praveen, the company’s chief investment strategist, forecasts that the Standard & Poor’s 500 Index may rise to 1,350 next year, representing a gain of 21 percent from yesterday’s close. Stocks in emerging markets and Europe may advance more, climbing about 25 percent next year, he said in a Bloomberg Television interview from Mumbai.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aXxGbYY2EkDE

S&P 500 Rallying 9.8% Is Forecast of U.S. Strategists

(Bloomberg) -- The Wall Street strategists who correctly predicted U.S. stocks would rebound from the steepest plunge since the Great Depression now say the Standard & Poor’s 500 Index will rally 9.8 percent next year.

Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., and Goldman Sachs Group Inc.’s David Kostin, this year’s most-accurate forecasters, say Federal Reserve interest rates near zero and profit growth of more than 26 percent will drive the S&P 500 to 1,300 and 1,250, respectively, in 2010. The combination of higher earnings and an increase in mergers and acquisitions will boost the index to 1,250, according to Thomas Doerflinger, a senior strategist at UBS AG in New York.

While analysts failed to foresee 2008’s crash, when credit markets froze and the S&P 500 fell the most since 1937, investors who followed their advice this year were rewarded with 23 percent gains. The index will end 2010 at 1,223, according to the average of 10 projections in a Bloomberg News survey. Their optimism clashes with Pacific Investment Management Co.’s Mohamed El-Erian and economist Nouriel Roubini, who predict smaller returns or losses.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZWcAYwYzP_0

JPMorgan Says S&P 500 Will Rise 18% by End of 2010

(Bloomberg) -- The Standard & Poor’s 500 Index will rally 18 percent to 1,300 next year as the economy recovers and Federal Reserve Chairman Ben S. Bernanke holds down interest rates, said Thomas J. Lee, the chief U.S. equity strategist at JPMorgan Chase & Co. The forecast level represents a multiple of 14.4 times the $90 a share the bank estimates the companies in the index will earn in 2011, equity strategists led by Lee in New York said in a report dated yesterday. The S&P 500 trades for 22.2 times its combined profit in the last 12 months, the most expensive level since 2002, data compiled by Bloomberg show.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAPPUhu11D6s

Strategists Get U.S. Stocks Right, See More Gains: Chart of Day

(Bloomberg) -- Wall Street strategists, who redeemed themselves as equity prognosticators this year, are unanimous in expecting U.S. stocks to rise more next year after a nine-month rally. The CHART OF THE DAY compares the average estimate for the Standard & Poor’s 500 Index, as compiled from Bloomberg surveys, at the beginning of every year since 2005 with the benchmark’s year-end value.Yesterday’s S&P 500 close was 2.2 percent higher than the 1,078 average estimate at the start of this year. In 2008, when the index suffered its biggest full-year loss in seven decades, it trailed the comparable projection by 45 percent.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aS12b5dCPH3w

Rate Worry Could Mean US Equity Pullback: Analyst

By: Reuters
US stocks could fall sharply in early 2010 as investors fret about changes in US monetary policy, though the economy's recovery looks sustainable, Larry Kantor, Barclays Capital's head of research said Thursday. "It could be something in the order of between 5 and 10 percent. This is not the start of the bear market," he told Reuters on the sidelines of a briefing to unveil his firm's 2010 global outlook. Expectations that the Federal Reserve could raise interest rates have moved into sharper focus following the better-than-expected November non-farm payrolls report.

http://www.cnbc.com/id/34367117

Market Rally Will Continue into 2010: S&P Equity Strategist

By: JeeYeon Park CNBC News Associate

The Dow jumped Friday morning on a jobs report that suggested unemployment is finally starting to peak. What should investors be watching for in the next few weeks? Alec Young, equity strategist at Standard & Poor’s, shared his market outlook.“The market needs news—we’ve been bumping up on this 1,110 level on the S&P, which is a key technical resistance level,” Young told CNBC.“We’ve been spending 6 weeks trying to clear this level and we’ve had a lot of good news—the risk trade’s been working; the dollar’s been weak; the commodities strong; energy, materials and areas we like have done well.”Young said the equity rally will continue into 2010, albeit at a more modest pace.

http://www.cnbc.com/id/34261839