Source Gold (SRGL.OB) is an exploration and development company of high quality mining and exploration projects in Canada, concentrating on gold in the prolific Beardmore-Geraldton Gold Camp in North Western Ontario.
SRGL has been a great alert in the past making my members some great gains and it look’s like it will continue to run today.
To find out more about Source Gold:
* http://finance.yahoo.com/q?s=srgl.ob
* http://www.sourcegoldcorp.com/
Hopefully you did some research on my alert last week Ad Systems Communications (ADSY), a leading service provider of digital media and video communications.
I suggest that if you haven’t already did your DD, do it now! ADSY has potential to take off and I don’t want you to miss out!
To find out more about Ad Systems Communications:
* http://finance.yahoo.com/q?s=ADSY.OB%2C+
* http://www.adsystemscatv.com/
The US economy grew at 3.2 percent in the first quarter, which is a good sign that the US economy is experiencing a strong recovery. The first quarter in 2010 also marked the third consecutive quarter of positive GDP growth in the American economy. Looking forward, it is important to note that one of the main factors behind the growth rate is the 3.6% increase in consumer spending, a growth rate not seen since early 2007. This is more of a positive sign for the US economy than increased inventories because it demonstrates that the US consumer is returning to a more normalized behavior. However, although these are positive signs, investors must be cautious with their decisions and do what they can to mitigate the risk of another downturn
Turning our attention away from the US and back to the bigger global picture, we must again re-visit the story of Greece, or rather the tragedy of Greece. As I mentioned a few weeks ago, I believed that there would be an IMF/EU combination rescue package for Greece in order to stop contagion from occurring. Over the last week, it may appear to many that the typically slow response of Europe might have not stopped this sovereign epidemic. The S&P cut Greece, Portugal and Spain’s debt rating and it seems all but likely that another European country is in S&P’s sites. Although, it can be argued that the ratings agency made unwarranted downgrades as no new material information released over last week, it still has an affect on bond yields and can dramatically increase the cost of borrowing for sovereign countries.
The current plan under review by European ministers and the IMF will enable Greece to draw on more than 100 billion euros in loans from the IMF and eurozone. There is a fear that this action, albeit sufficient, is not enough to stop the spread of fear in the markets. Now, with Spain’s downgrade and their ridiculously high unemployment of 20%, they will find it extremely difficult to survive without a bailout, as the cost of their debt increases, interest payments will crowd out money available for government services. The political consequences are tremendous and the ability to pay down debt reduces everyday as populations strike or vow to elect politicians that ignore their fiscal well-being and maintain public services. This populous action only hurts the country’s ability to pay back debt as less people work and less taxes are paid. Sovereign nations are not like companies, they cannot file for chapter 11 and there is only a debt component to their capital structure. In good times and in bad, countries look to raise money by auctioning bonds while they simultaneously seek to lower tax revenues and reduce future cash flows because it is politically popular. Tough decisions are needed by the people of countries around the world to get themselves out of a potentially disastrous situation. It makes sense to borrow in bad times in order to give a jolt to the economy, but it does not make sense to place huge debt burdens on a country during good times as sovereign debt crises will be inevitable during downturns.
All nations that are debt laden have to address their bloating budget deficits before the markets gang up and essentially force a default. In addition to addressing budget concerns, the markets, companies and countries need to be more transparent with their finances so that people aren’t surprised or infuriated by decisions and actions made under the cloak of secrecy.
Ad Systems Communications (ADSY.OB)
There seems to be a lot of growing interest with Ad Systems Communications (ADSY.OB), a leading service provider of digital media and video communications. They have been announcing a steady stream of good news lately and the levels are very attractive at this point. I think now is the time to take a look at ADSY!
To find out more about Ad Systems Communications:
• http://finance.yahoo.com/q?s=ADSY.OB%2C+
• http://www.adsystemscatv.com/
**TRADE ALERT FOR MAY 15TH 2010**
eCrypt Technologies (ECRY.OB) could take off this morning after big news came out this morning that they are launching an international television campaign on CNBC. Consider getting on this before it’s too late!
To find out more about ECRY:
http://finance.yahoo.com/q?s=ECRY.OB
Remember to do your due diligence and set your stop losses to protect your profits
The years between 2008 and early 2010 will long be remembered around the globe as the period of the Great Recession. However, in the US it will be remembered for more than just that: the election of the first African-American President, the passing of monumental legislation such as the American Reinvestment and Recovery Act and the Patient Protection and Affordable Care Act, the START treaty for nuclear non-proliferation, and the moment in time that Americans began to take control of their spending.
It is no secret that consumer spending in the US grinded to a halt over the last two years from its peak in 2007 and although it has made some ground in recent months, it is still at historically low levels. But for investors there are signs of hope and knowing those signs will provide investors with opportunities of prosperity.
Consumer spending is driven by a few factors, but is largely dependent on the employment levels of the population and consumer confidence. The two factors are almost inextricably linked, as during periods of high unemployment, the consumer confidence index trends lower. The key to making a good investment in the consumer products industry is by buying in at the bottom or the moment the industry is starting to see a turnaround.
A general shift in consumer spending has occurred as a result of the dramatic shocks that American consumers felt over the last two years. Consumers are now looking at best value and giving more weight to quality in their decision process of making a purchase. A unique industry that is experiencing promising signs of return is the bedding industry, specifically the specialty bedding industry.
The bedding industry’s fundamentals essentially make this a good and safe consumer product investment in normal cyclical markets. The fundamentals that drive demand are demographics and pent-up replacement. Naturally, a growing population will require more and more mattresses and the medical benefit of getting better sleep has helped shift consumers to more specialty (and higher end) sleep surfaces. I would expect that as housing sales begin to increase again and unemployment levels fall this will be one of the industries in consumer products that will make a stronger than expected recovery.
As the US economy begins to lift itself up out of the Great Recession, there will be many public equity offerings that will accompany the rise in GDP. Public equity offerings are the easiest (and cheapest) way for companies to raise capital for expansion, acquisitions or sponsor/debt pay down. Some of these equity issuances will be first time participants and some will be making secondary offerings and some will be returning as reorganized companies emerging from bankruptcy.
According to JP Morgan, “since 2007, 426 public companies filed for bankruptcy, representing $1.2 trillion in assets.” Not all reorganizations will successfully emerge from bankruptcy as healthy companies and return to the public equity markets, in fact, many will not and there business units or assets will be sold off in order for senior secured lenders to recover value. However, expect that companies such as General Motors will tap into the public equity markets once again over the course of this year and the next.
Determining whether to invest in the offering of a company that has emerged out of bankruptcy has to be on the basis of prudent analysis. There are essential factors that assist investors in forming an investment thesis on whether a reorganized company will perform well. The investor should be analyzing a “combination of cyclical and secular factors”, debt reduction, asset structure shifts and management changes.
A successful reorganized company has the following characteristics:
The first few months following an emergence from bankruptcy and public offering is the narrow timetable for when the investor should decide to invest in a reorganized company in order to maximize return. During this short time period the company will typically experience specifics items that depress their stock price – information access will be limited because of the lack of regular updates; investor skepticism is often observed within the first few months of going public as mainstream investors typically view reorganized companies poorly; lack of research will further limit the information out there as coverage tends not resume for at least one year; and there is expected to be an initial drive down in prices as lenders are quick to sell their holdings to realize a nominal return. A prudent approach could lead to successful returns, which history has shown us to be true during the last recession and rebound of the early 2000s, where the first 12 month gains of publicly traded reorganizations averaged 84% in returns (relative to the S&P).
Last week I attended the 2010 EIA Energy Conference – “Short Term Stresses, Long Term Change†– in Washington DC. The conference was made up of industry types, financial investors and government regulators, which focused on energy-related issues that ranged from US Natural Gas supply to Climate Change policy. The keynote addresses were given by the Secretary of Energy, Steven Chu and the Director of the White House’s National Economic Council, Lawrence Summers.
The EIA (Energy Information Administration) is a non-partisan section of the US Department of Energy that provides statistics, data, analysis on resources, supply, production, and consumption for all energy sources to the public domain. The information provided by the EIA is used for determining pricing and future output of the US and the world and is heavily relied on by the energy industry.
The conference was very informative and I think it would serve investors well to know a few of the key takeaways from the conference.
In short, there is a tremendous amount of capital and attention being paid to the energy debate and until we solve our energy crisis, money will continue to flow into new technologies and there will continue to be investment opportunities. The energy investment landscape is very similar to the technology investment landscape of the 1990s. It is entirely accurate to declare that not all of the current energy technologies will survive and become a big the next big thing, but some will and the opportunity to invest in the leader should never be disregarded.
It was almost inevitable that healthcare reform would pass under the current administration. As we all know, there has been a lot of hysteria around the great debate for more than a year. It has been a long battle and a hard fought process and yet still, few people actually understand the impact it will have on the economy.
Currently, healthcare costs are a huge burden on small business owners and individuals that pay for their own insurance and healthcare. In addition, hidden costs of healthcare place huge burdens on hospitals struggling to stay afloat, as they have to treat patients in the emergency room, whether or not they have insurance. These hidden costs are ultra visible to healthcare providers but are invisible to the average consumer. Despite all the additional services the healthcare bill will bring to the average American healthcare user, it will probably have the greatest impact on the hospital industry in a positive way.
As it stands today, hospitals have very narrow margins due to several issues 1) Medicare reimbursement rates 2) Insurance reimbursement rates 3) Personal bankruptcies and 4) Emergency room service. These issues often force hospitals to close down or sell to the state, as they cannot generate sufficient cash flow to service their debt. Firstly, a large percentage of hospitals generate most of their revenues from Medicare and the reimbursement rate is the rate at which Medicare will reimburse the hospital for a specific procedure. The remainder of the cost is billed to the patient. As healthcare costs rise, Medicare reimbursement rates have actually decreased and more of the cost has been passed on to the patient. Some doctors have chosen to not accept Medicare patients as a result and it wouldn’t have a significant negative effect on hospitals if medical insurance filled the void and reimbursed hospitals, but that is not the case. Medical insurance reimbursement rates are steadily on the decline as the rate is loosely pegged to Medicare reimbursement rates, which means that less money is spent on a patient’s treatment, which enables the insurance company to increase profits as insurance premiums increase. The third issue is that of personal bankruptcies related to healthcare, which affect more Americans than any other form of bankruptcy. As individuals file for bankruptcy and fail to pay the hospital for their treatment the hospital has to write-down the lack of payment as an expense, which has a direct effect on their cash flow and bottom line. Finally, emergency room service severely affects the profitability of a hospital as patients (even those with insurance) claim to be uninsured and as the hospital has a responsibility not to turn anyone away, the hospital is forced to provide a service and incur a non-billable expense by doing so.
The language in the healthcare bill will prevent more hospitals from going bankrupt and refocus insurance money on the patient instead of insurance company profits. The mandate to purchase insurance will limit the amount of write-downs that the hospital incurs while treating patients in the emergency room. As a result of the healthcare bill hospitals will become better investments and healthcare costs could potentially decline as hospitals won’t be forced to mark-up prices in order to make up for lost revenue.
If you have watched or read any business news network or financial newspaper in the last 3 months then you will be well aware of the environment of vastly differing opinions surrounding the US economic recovery. Some of these opinions offered are made by intelligent economists such as Simon Johnson of MIT, Mark Zandi of Moody’s, Joseph Stiglitz of Columbia and Nouriel Roubini of NYU, however some are made by politicians that seem to ignore evidential facts and figures and point blame at each other’s parties. The fundamental rule for analyzing data is to set politics aside as politics hinder one’s objective ability to discover conclusions and make sound forward-looking decisions.
It is without question now that the Troubled-Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA) helped save the US economy from falling off a cliff and reversed the downward trend. TARP allowed for the largest banks in the US—also the largest backbone of the American economy (unfortunately), not to go bankrupt, which would have caused severe paralysis. ARRA first lessened the impact of the unemployed by aiding states already struggling to pay unemployment benefits, kept hundreds of thousands of teachers, firemen and policemen from losing their jobs due to a substantial shortage in tax revenue and is currently funding construction projects in 48 states around the country. The majority of the ARRA funds will be spent this year, which will further accelerate the US economic recovery.
In February we learned that GDP increased 5.7% in the fourth quarter of 2009, which was a high follow-up quarter to the 2.2% increase the US saw in the third quarter of 2009. More recently, we were given some positive figures by the Commerce Department, which reported that February retail sales increased a seasonally adjusted 0.3% from a month earlier and excluding auto sales that figure was 0.8%. In perspective, this change represents a 4% increase over the same period last year. Manufacturing has also increased as companies have focused spending on re-stocking their depleted inventories. However, despite these positive signs there is still real weakness in the economy, especially in the real estate market and unemployment rate. Housing starts are still low and the unemployment rate remains at half-century highs. These issues are serious concerns but unemployment usually lags general growth indicators, which means that companies start to hire when they see results and determine that their businesses need to expand. The residential real estate market lags unemployment figures as the industry is dependent on a population’s reoccurring income.
In my previous postings we have devoted considerable attention to investment opportunities relating to the economy turning south again and I want to present some investment areas that will provide returns if the economy further accelerates. As I mentioned earlier, GDP, retail sales and manufacturing figures have shown strong growth, which is good news for the logistics and shipping industries. American exporters and importers are experiencing positive growth and this fuels the demand for transportation. The general consensus in the logistics industry, which includes all forms of trucking, rail and airfreight, is that the bottom has been hit and shipment counts are improving. If these trends continue then 2010 will be the year of the rebound for these companies. In regards to the shipping industry, rates are significantly off their peaks (which was basically a bubble), but the companies present themselves as good investment opportunities as international trade growth will heavily rely on their capacity, and if the Administration can make good on its goal to double American exports in five years, this industry will see a return to historical highs. It is fundamentally important to follow the facts and figures regarding investment opportunities because that is the only way that an investor can be sure of a positive return.
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