The Bond Bubble

The Dow Industrials dipped below the psychologically
significant support point of 10,000 early in yesterday’s sell-off. But
interestingly, buyers stepped in and drove the index as 10,111 before
weakness resumed.

Yes, the Dow still closed weakly at 10,040. But yesterday
was the first day in several where there was any significant buying interest.
And it makes sense, when you consider we are dealing with a range bound
market.

At 10,700, stock prices are expensive and there’s no
incentive to buy. At 10,000, however, stocks begin to look cheap and buyers
step in.

Who’s Profiting Now?

Stocks have been unable to make any headway over the past
few sessions. And late-day sell-offs have been a common theme.

I often refer to oil prices as a proxy for growth
expectations. And with oil prices set to drop below $72 a barrel today, it’s
clear that investors are not bullish on growth. Of course, recent economic
data has indicated that economic activity in the
U.S. has slowed down.

Perhaps the biggest drag on the economy is housing. That’s
nothing new. But New and existing home sales have been weaker than expected
after the expiration of the homebuyer tax credit in April.

What the Potash Buyout Tells Us

The bidding war for fertilizer company Potash Corp of
Saskatchewan (NYSE:POT) is getting very interesting. Last week, the company
rejected a $34 billion buyout bid from mining giant BHP Billiton (NYSE:BHP).
BHP countered by saying it would make the bid a $38 billion hostile bid,
which means BHP takes its offer directly to the shareholders.

To counter this move, Potash Corp has been in talks with
other companies to see if they can get the buyout bid higher. China’s
Sinochem and Brazil’s Vale have been mentioned as having interest. And
Potash’s board is already saying that a “superior offer” is expected. That’s
good, because Potash Corp. currently has a market cap of $44 billion, and
rising
.

Now, this buyout process is interesting in its
own merits. As a company, Potash is a cash cow, throwing off $1.42 billion in
net earnings and $2.58 billion in operating cash flow on $4.9 billion in
revenues. One might look at the forward P/E of 19 and conclude the stock was
expensive. But when you consider that earnings would pay for the buyout in less
than 20 years (based on forward estimates), maybe it’s not so expensive.

The World’s Most Profitable Agriculture Company

I hate falling into the trap of simply responding to the
hottest news headlines – because very few people get rich by reacting to
headlines and pulling the trigger on investments based on “hot” trends in the
market.

At this point, computers can wipe the floor with most any
day-trader, so if you think you can buy yesterday’s news and still eke out a
profit, you’re probably wrong.

In the past couple
weeks agriculture has been the hot topic on everyone’s mind. First, fires in
Russia caused wheat prices to double in less than a month as Vladimir Putin
banned Russian wheat exports. In sympathy, many other crop commodities rose
in price as well. Then yesterday, BHP Billiton (NYSE: BHP)
the world’s largest mining company, put in a failed bid to buy Potash
Corp (NYSE: POT)
the world’s largest fertilizer company.

How Do You Feel Abou the GM IPO?

You’ve no doubt heard about the wildfires ravaging
Russia‘s countryside. These fires have
seriously impacted
Russia‘s wheat
harvest, and have sent wheat prices soaring around the world.

This morning, mining company BHP Billiton (NYSE:BHP) offered $39 billion, or $130 a
share for the world’s largest fertilizer company, Potash Corp of

Saskatchewan (NYSE:POT).

The significance of this deal is clear. Lower crop yields
increases the demand for fertilizer.
Russia‘s wildfires have brought this point
to an immediate catalyst for fertilizer prices. But the underlying issues of
agriculture have made fertilizer stocks a growing sector for the last few
years.

The Only 3 Commodity ETFs You Need for Profits

If you’ve invested in ETFs over the past few years – you’ve
probably lost money.

I know it’s not news to you, but the simple fact is that most ETFs were never
designed to succeed for individual investors – they were designed to do only
one thing: line the pockets of the Wall Street big shots with the brilliant
idea to sell “easy” investments to Main Street investors.

It’s simple to see why: they make between 0.5% and 1.0% regardless of what
the ETF does
. Just another Wall Street con job.

Good investments are rarely easy, and although ETFs seem like a no-brainer,
that’s because most of them were specifically designed to appear that
way.

Top Performing Mutual Funds in the Sector You’d Least Expect

Yesterday was a “sigh.” Today is an “ugh.” The labor market in the U.S. just
can’t get any momentum going.

Today’s non-farm payroll number for July came in lighter than expected. And
the number of job losses came in higher. Put those together and you get a bad
overall employment number. Ugh.

Through the miracle of statistics, the unemployment rate held steady. But it
doesn’t really matter. Every investor knows that number is a sham, and stocks
would be off today even if the “official” unemployment number fell to 5%.

I’ve said repeatedly that employment will be the last sector of the U.S.
economy to show gains. But it still feels like we are being overwhelmed by
the negativity of the employment numbers.

Will Europe

Before European regulators released the results of the
banking “stress tests”, which were designed to test whether Euro-zone banks
were healthy enough to withstand economic shocks, Goldman Sachs (NYSE:GS)
estimated that European banks probably needed to raise somewhere in the
neighborhood of 38 billion euros to shore up their balance sheets and offset
non-performing loans.

Barclay’s went for a much more expensive neighborhood, at 85
billion euros.

So it might have seemed like good news when European bank
regulators announced that only 7 of the 98 banks that received stress tests
came up with failing grades. What’s more, it would only take 3.5 billion euros
to change those “Fs” to “Ds” or “Cs”.

The Truth Behind Tech Revenues

Up, down, up down. To say that the stock market has been
volatile over the last week is like saying King Kong was big monkey. It’s
true, but it doesn’t really give the complete picture.

Investors and traders really don’t seem to know what’s
coming next. I’ve tuned into
CNBC a few times during the trading day recently, and you can see the
frustration on the commentators’ faces. It’s as if they know that, no matter
what they say, they will be wrong.

This market is experiencing indecision in its purest
form.

Is a Double Dip of Recession Coming?

What a difference a day makes. Yesterday morning, the
situation looked dire for stocks. Headline revenue misses from

IBM
(NYSE:IBM) and Goldman Sachs (NYSE:GS) took
the Dow Industrials Average down well over 100 points at the open.

But that initial decline marked the lows for the day, and
stock prices rallied the entire day and finished with some impressive gains.

I discussed the apparent disconnect between earnings and
valuations yesterday. Sure, some big companies have missed revenue estimates
while still meeting or beating earnings estimates. But at the same time,
valuations already reflected a good amount of pessimism about 2Q
earnings.