The Biggest Tax Break for US ...........

If you want to look at what can make the US economy get energized you only have to look at the gas pump. We don't have to tell you what a 40% year on year increase in a barrel of oil has had on the economy. Oil impacts us at every level from the plastics we use for cars, computers and toothbrushes to fuel for trucking our products to the retail outlets we all buy from. All this adds up to a non-tax, tax, on the American consumer. The increase in fuel prices directs more of the economy's cash flow in a single direction, petroleum producers both domestic and foreign. Right now we export $800M per day to foreign countries for our fuel appetite. That is almost $300B per year or close to 1/2 of the stimulus package.

If our country would adopt an expansive energy policy that would open up drilling both on and off shore we would enjoy 3 direct benefits:

• Lower prices for fuel impacting consumable goods and the fuel pump. Just reducing the price of gasoline $.50 per gallon would spread $180M per day to other industries when consumers would spend on other items. This could translate to over $300B in growth in GNP which would could add a net 1% increase to GDP.
• Greater employment would result as consumer businesses would again have the traffic flow necessary to create a better hiring environment. We believe that the economy would add an average of 80,000 people to the employment rolls per month alone. 
• An average well needs 50 employees and generates $1.5m to the local economy. Pennsylvania has been enjoying a boom in the shale areas due to the resurgence in gas and oil well development. We do not have the economic impact numbers on off shore drilling but suffice it to say that the impact to local economies which are home base for off shore drillers are even more significant. 

An effective energy policy may do more to lift this economy than any one other change. It would lead to better homeland security, greater disposable income for the consumer and a broader tax base to draw from to help reduce our significant outstanding debt.

Why is it that things that seem so simply are not in Washington DC, even the Prophet has trouble seeing that.

Markets remain less volitile, keep your powder dry and remember you cannot lose by taking a profit.

The Prophet

Worst Week in the Financial Markets.......US Politicians to Focus on Economy

Sometimes it takes a punch in the gut to awaken the senses. Although it hurts at first, it is not fatal and if you are up to it, focus' your resolve to defeat the enemy. The "enemy" in this case, the economy of the United States. After enjoying a AAA credit rating for 100 years the country hosting the worlds most powerful economy had its own credit rating reduced. Yes, despite a $2.0T, yes trillion, error by one of the world's foremost rating agencies, they still downgraded the US debt to AA+. Now should we have not gotten that advice $2.0T of debt ago? Regardless, those that run, or mismanage depending on your point of view, were a little shocked and awed. How can this happen?, they protested.Well we looked at the budget since 1934 projected to 2016 and were surprised by a few things.

Did you know?:

•   The US budget expenses are automatically raised 7-8% regardless of Congress or the President
• When they  talk about reducing the budget it is only reducing the increase.
• Inflation has remained below 2% for 10 years        
• GNP only increases 3-4% on average (which includes inflation)
• 2008 Budget deficit was $450B
• US revenue has only decreased $250B per year since 2008 due to the recession and yes that includes the "missing" revenues from millionaires and billionaires
• If you took the 2008 deficit plus the revenue decrease the deficit should be $700B
• 2011 budget deficit should reach $1.5B

By looking at those 8 points your blood should boil. Why are we spending $800B more than normal. That is the question the punch in the gut should foster. Until they get down to answering that question the budget malaise will continue.

The financial markets are settling in waiting for the next shoe to drop. Italy, Spain even Great Britian are experiencing new pressures on their debt and monetary system. France may be the next victim of S&P. All these potential stories are setting September up to be choppy in the markets (that is being kind). The good thing is that the President and Congress are on vacation...vacation what is that?

We see less volatility until labor day with position stocks getting the most attention. Most funds have to have the blue chips with an emphasis on non-cyclical's getting the most attention. Gold and Silver are on the bubble watch, We would lighten positions. YHOO is still high on our radar followed by AAPL, DIS and INTC. We think September will see more merger activity however the IPO market will stay tepid. Groupon is the only HOT deal we see currently.

Remember you can never lose by taking a profit!

Prophet   

You Should be Watching Yahoo! while the Markets Shake, Rattle and Roll!

Another day another 400 point move on the DOW, a traders dream....or nightmare. Since our call the other day Yahoo is up almost $2 per share. For the math challenged, that is almost 20% over 3 days! Remember again that at this price any acquirer gets the search engine for $-0-! We still see.......$18-$20 on a buyout offer. Now we do not have inside information, but the stars seem to be lining up.

We have said to pick your spots and buy and then walk away, we said the markets will be a roller coaster now listen one more time......Whatever you bought this week hold to next month and reduce by 50%. September is historically the worse month in the Markets, contrary to the popular belief that October is the month. Add to that congress back in session and the 10th anniversary of the 911 attacks and you have a recipe that only those with a strong stomach can endure. 50% reductions into cash keeps your powder dry for opportunities that will present themselves in Oct-Nov during earnings season. We are liking retail, high tech and home builders for ideas in the 4th quarter.

Today, this morning, is short and sweet. Much to do, stars to chart, incense to burn......Remember that most traders flatten positions going into the weekend during the summer and YOU NEVER LOSE BY TAKING A PROFIT!

The Prophet

Give and Take.....Sure Tests the Soul

Well what the Federal Reserve gave us on Tuesday was taken back Wednesday. After recovering 400 points in the DOW on Tuesday, due to positive Fed Speak, the DOW fell over 500 points as worries over the European debt crisis again became center stage. A little side issue is brewing and may impact investor sentiment, KOREA. It seems there are itchy trigger fingers at the 38th parallel both sides lobbed things that go boom at each other. No reports of injuries but this simmering geography may show itself to be more of an issue than the market currently appreciates.

We saw some cracks in the market before the trading session opened, we even told you to walk away after making any strategic buys. Well if you did not walk away, the roller coaster ride left your heart in your mouth. These points are re-entry opportunities but tread lightly and carefully. YHOO however, interestingly enough, held its ground and reported better search gains in July. According to the STREET the MicroSoft BING deal is starting to generate positive results.

Financials are taking a hit but most bank exposure to Europe is limited and Bank of America has almost no exposure. Wells Fargo and Morgan Stanley are quality buys under the circumstances.

Congratulations to Apple (NASDAQ: AAPL) they are now the most valuable publicly traded company surpassing Exxon by almost $30B in value. By the way AAPL has over $70B of cash and equivalents in the bank.

Settling down for the evening and some star gazing....Remember you never lose by taking a PROFIT!

The Prophet

Federal Reserve to the Rescue?

Words do make a difference ......

At 2:15 pm yesterday the Federal Reserve made our prophetic Blog of the day look good, if not scary. What happened, not much other than the Chairman, Mr. Bernanke informed the markets that interest rates will remain low until at least 2013 and they stand ready to assist the economy when conditions merit additional assistance. Mere utterances by Mr. Bernanke resulted in a 400+ point increase in the DOW with financials leading the way. Now, if only the politicians would take some notes from this lesson, CONFIDENCE. The economy is about confidence not number crunching. Pointing fingers and sniping will not solve the ills influencing the economy.

Now the markets will sway a little as it absorbs the meaning of the action or lack thereof, of the Fed. It is a pickers market and YHOO was up over 10% yesterday. Commodity firms are feeling the pressure of dropping prices and their prices are reflecting the uncertainty of the volatility. We are staying clear of this sector. Financials were strong and should head north of their current prices. Bank of America (NYSE: BAC) and Citi Bank ( NYSE: C) are risky but the upside looks much better than the downside. Wells Fargo (NYSE: WFC) or Morgan Stanley (NYSE: MS) are solid upside contenders. Oil is on hold and Gold is certainly a bubble waiting to happen but neither is worthy of a "short". 

THIS MORNING:

Markets seem to be looking for some profit taking this morning. Pick you entries and then walk away unless you have a strong stomach. 10 year Treasuries hit 2.07% yesterday but settled at 2.27% yield...that yield is about equal to the S&P 500 dividends which have a lot more upside potential. These are indeed interesting times. 

Remember to look at YHOO, we still think this is a takeover opportunity with a better than 50% upside from here. 

The Prophet

The Future is Ahead of US

The US was spanked Friday by of all people ..S&P. Now S&P are the same people that rated CDO's, remember those AAA investments that plunged to $0 in 2008? Although the markets were starting to build in the possible downgrade, the actuality of the downgrade certainly still cast a pall on Wall Street yesterday. But give the devil its due, this downgrade finally awoke the politicians who spent this country to a level seen only by the likes of Greece, Ireland, Iceland and Japan. Belgium and France, two countries that cannot seem to pony up their fair share of NATO costs etc, are now rated superior to the US by S&P. Now I don't know about you but I would not consider countries that cannot even defend their own borders, as safe financial bets, but what do I know.

The stock and commodity markets responded well to the downgrade by losing almost 5% in one day. The DOW experienced its 6th largest loss ever, Oil lost 7%  in one day and off course GOLD bucked the trend as investors believe we will be paying for milk with gold bars soon. Well Virginia there is a Santa Claus and yesterday's investors gift wrapped your present. Of course you will have to go out there and get it but it is there. For those who are not familiar with Virginia, GO BUY EQUITIES NOW! Remember when the DOW hit 6666? you said "I should have bought Ford (NYSE:F)", next time. Well investors this is one of those times.

The Pick of the day, month.....YHOO! Yahoo, Prophet you have been hit with one two many sun spots you say. Well, the stock is at $10.96 as of yesterday's close and the value of its Chinese and other Asian holdings are estimated to be worth $18.00 alone. Mr. Softee ( NASDAQ: MSFT) already offered over 3x that amount 3 years ago and YHOO wisely rejected the offer so that they could make small fortunes out of large ones. Microsoft may just scoop this one up with petty cash, sell off Asian properties and have the search engine for the grand sum of $0.00, yes that is ZERO. We are looking for a $20.00 bid from several interested buzzards. Of course do your own due diligence.

Well we saw the double dip threat in March and now it is here. The economy is on life support and politics currently do not favor business. We will be looking for ideas to buck these trends and keep you up to date. The crystal ball has been working overtime, need to let it cool off. Until it does good investing and remember that you never lose by taking a PROFIT!

The Prophet