Dow Jones

Finding Money-Making Opportunities with Bank Stocks

By George Leong for Investment Contrarians | Feb 14, 2013

Opportunities with Bank Stocks The major bank stocks all closed off 2012 near their respective 52-week highs; and they’ve started 2013 with a bang. Driven by an improving banking industry that is assuming less risky businesses while shoring up their balance sheets and producing stronger units, the KBW Bank Index is up eight percent, outperforming both the S&P 500 and the Dow Jones.

The subprime credit crisis that surfaced in 2008 and drove the U.S. and the global economy into a recession was not what we wanted to see; but in some sort of twisted way, the events have led to an industry that has restructured the way banks do business—more specifically, the amount of risk that is assumed by a bank via sophisticated strategies. So far, this shift in structure, coined the “Volcker Rule” because it was set in place by economist and ex-Federal Reserve Chairman Paul Volcker, appears to be capping the number of speculative trades made by the banks, which is good.

Banks have altered the way they do business, and they’ve shown positive strides along the way.

In my view, the operating results have been fairly good, and this indicates that the banks will be able to grow their business volume across the board during the U.S. economic recovery.

Moreover, with the housing market and the U.S. economy continuing to improve, I feel bank stocks will also see some gains.

Most of the big banks have paid back part or all of their government loans. Overall, bank stocks are showing promise and delivering better results.

While risk surrounding the bank stocks has declined, there are still issues that could hamper … Read More

Portfolio Protection Against the Collapse of the U.S. Dollar

By John Whitefoot for Investment Contrarians | Feb 12, 2013

Portfolio Protection When it comes to the state of U.S. politics and the economy, you can’t believe everything you read or hear.

Example 1: In 2003, President George W. Bush famously gave a speech aboard the aircraft carrier USS Abraham Lincoln, during which a banner behind him proclaimed, “Mission Accomplished.” It wasn’t then, and it still isn’t.

Example 2: Who can forget these wise words from former Federal Reserve Chairman Alan Greenspan in 2007: “The worse is over for the U.S. housing market, and there will be no economic spillover effects from the poor housing market.” It wasn’t then, and it still isn’t over.

Example 3: Here’s more dubious wisdom coming from the world of finance. Published in the pages of the Saudi Gazette, a January 28, 2013 article announced, “Global ‘economic crisis over,’ say Davos pundits.” Courtesy of Philly.com, a February 6, 2013 article headline proclaimed, “Financial crisis officially over, proceed into stocks with caution.” Again, it wasn’t then, and it still isn’t.

Why do some think the global crisis is over? Because the stock market is doing well. The Dow Jones index recently rose above 14,000 for the first time since October 2007. And the S&P 500 is trending near its all-time high. So, what more proof do you need? Well, for one, how about looking at those who are not liquid enough to participate in the stock market?

Frankly, I’m not sure how anyone can declare an end to the global economic crisis when the eurozone continues to report record unemployment and a bleak economic outlook. Here in America, the unemployment rate remains stubbornly higher and economic growth projections … Read More