Friday was a one day reversal to the downside as the Dow opened higher and closed lower.  The most watched index fell 139 points on average volume.  The advance/declines were 2 to 1 negative.  The summation index started heading lower again.  We will really need to see things turn around rather quickly or we could be heading towards new recent lows for the stock indices.  The technicals remain oversold and that will be a problem if we don't start a rally here.  We got a bounce but there was no follow through.  The employment report was a bit better than expected but it didn't mean much to stocks.  Next week should be very interesting.  GE was flat after opening higher and the volume was a little better than average.  No trades here for now.  Gold got pounded lower on a stronger US dollar.  The precious metal futures lost $40, which was the biggest one day loss in quite a while.  The XAU fell 8 1/8.  ABX off 1 1/3, GG dropped 2 1/4 and NEM led the way down by 4 1/2.  Volume was heavy in the gold shares as traders headed for the exits in a hurry.  I think the prevailing wisdom here is that the US dollar is starting a longer term rally here and the commodity complex is going to head lower.  That's my guess as to what occurred on Friday.  Whether or not that is true only time will tell.  Of course I'm still reeling from the ABX November call trade but I'm  willing to take a look at the gold share calls again for January.  However the drop at the moment is so steep that I will have to reassess this idea.  Mentally I'm feeling OK.  The stock indexes need to hold on here or it could get ugly.  Still oversold and we should have had more upside than the bounce on Thursday.  Perhaps we will get some rally this week but the market will go where it wants.  Gold is in a down trend.  There is a bit of support where we are right now but much more at $1625.  The charts of the gold shares look ugly to the downside.  I'll be away from my desk starting on Tuesday.  I may or may not be able to provide the daily market updates until Thursday or Friday.  I might be able to post remotely but we'll see.  Enjoy the rest of the weekend.  

Hot Oil MLPs with High Incomes

Investors looking for high incomes often turn to MLPs or Master Limited Partnerships, and generally are companies in energy, primarily oil and gas exploration and production. According to WallStreetNewsNetwork.com, there are over a dozen Oil and Gas Exploration and Production MLPs, with yields ranging from 3.1% to 9.9%.

MLPs are investments that are similar to income royalty trusts, except that they are structured as limited partnerships. MLP's differ from high income stocks in several ways. Since they pass through income without being taxed at the corporate level, they avoid double taxation. In addition, tax deductions can be passed through to the holders of MLPs, providing sheltering of the MLP dividends.

But there are differences when you compare them to income royalty trusts. MLPs shouldn’t be put into a retirement plan because of the UBTI or Unrelated Business Taxable Income problem, which could jeopardize the tax deferred status of retirement plans. The UBTI issue is way beyond the scope of this article so you should certainly talk to your accountant about any and all tax consequences of MLPs. Also, MLPs don't send out 1099 forms, they send out a Schedule K-1 Form, and the income is reported differently on tax returns. This may mean extra hours and aggravation when you or your accountant prepare your taxes.

One example is Mid-Con Energy Partners, LP (MCEP), which pays a yield of 8.8%. The dividend is paid quarterly. This Dallas, Texas based company explores, develops, and produces oil and natural gas on properties in southern Oklahoma, northeastern Oklahoma, and parts of Colorado. The MLP trades at 11.9 times trailing earnings and 10.5 times forward earnings.

Pioneer Southwest Energy Partners L.P. (PSE), based in Irving, Texas, yields 8.2%. The company has a price to earnings ratio of 11.5 and forward PE of 10. Pioneer operates in the Spraberry field in the Permian Basin area of west Texas.

One high yield company that is actually structure as an LLC instead of a MLP is Linn Energy, LLC (LINE), which operates in the Mid-Continent, the Permian Basin, Michigan, California, and the Williston Basin. Linn pays a dividend rate of 6.8%. It has a forward PE of 24.9. It was the first publicly traded independent oil and natural gas limited liability company in January 2006.

In spite of the fact that Linn is an LLC, it is classified as a partnership for tax purposes, so a unitholder is considered a partner and receives a Schedule K-1. In regards to the taxation of the income, the company website says "In general, cash distributions received from LINN Energy are not taxable. You are typically only required to report in your tax return items of income, gain, loss, deduction or tax credit reflected on your Schedule K-1. However, if the cumulative cash distributions received from LINN Energy exceed your tax basis in the Company, you could be taxed on the amount exceeding your tax basis."

For a free list of all of the oil and gas exploration and production master limited partnerships including three that pay more than 9%, go to WallStreetNewsNetwork.com. The list can be downloaded, updated, and sorted.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Market Sense and Nonsense

The book, Market Sense and Nonsense: How the Markets Really Work (and How They Don't) by Jack D. Schwager, is a great compilation of very useful and eye-opening information relating to investments and the stock market.

Using humor and extensive statistics, he debunks numerous myths about stocks and returns. For example, you would think that investment newsletters overall would if not beat stock market returns, then at least meet those returns. Unfortunately, Schwager's book shows that newsletters overall do worse than random investing (what he refers to as a "chimpanzee throwing darts at the stock market quote page").

Chapter 2, The Deficient Market Hypothesis, has a fascinating article about the Palm and 3Com Episode. Back in 2000, Palm was trading for $95 dollars a share, yet you could have bought 3Com for only $82 per share, which represented 1.5 shares of Palm (3Com owned 95% of Palm at the time). Plus you would own a bunch of other assets that 3Com had. So excluding Palm, 3Com was being valued at more than a NEGATIVE $60 a share. The author shares lots and lots of great stories like this.

The chapters cover risk, past returns, volatility, track records, and my favorite chapter on correlation. Did you know that there is a direct correlation between the number of hedge funds and wine consumption in the United States? Do you think the wine consumption caused the hedge fund growth or vice versa? No matter which one you choose, you would be surprised at the answer (you have to read that chapter to find out).

There are also several chapters on hedge funds and diversification. Anyone who invests should be aware of the issues covered in this book, whether you are a small investor who just wants to put money in a mutual fund, or a mid-size stock trader, to a large investor interested in finding a top-performing hedge fund. Market Sense and Nonsense will give you exactly what you need to watch out for to help you become a better investor.

By Stockerblog.com

On this Day in Financial History November 3

On this Day in Financial History November 3

1817 – The Bank of Montreal, Canada's oldest chartered bank, opens in Montreal, Quebec.

1838 – The Times of India, the world's largest circulated English language daily broadsheet newspaper is founded as The Bombay Times and Journal of Commerce.

1883 – Notorious "Black Bart the poet" gets away with his last stagecoach robbery

1911 – Chevrolet officially enters the automobile market in competition with the Ford Model T.

1913 – The United States introduces an income tax.

Facebook Allowed Some Accounts to be Accessed Without a Password

As if Facebook didn't have enough problems, according to an article by the BBC which reported information from the Hacker News website, accounts at Facebook (FB) have been accessible without a password. However, the company acted right away in closing this loophole.

Apparently, hackers could see the email addresses of Facebook users. The problem related to a feature that allowed users quickly log back in to Facebook.

First, Facebook, which trades on NASDAQ, was hit with a poorly performing IPO after-market. Then it turned out that the major investment bankers had reduced their earnings forecasts for Facebook during the IPO roadshow, including Morgan Stanley (MS), JP Morgan (JPM), and Goldman Sachs (GS). It was then hit with securities investigations and lawsuits began developing. The stock is now down around 44% from its original trading price.

Facebook trades at 110 times trailing earnings and 33 times forward earnings. Year-over-year revenues for the latest quarter were up 32.3%. The stock holds over $10.45 billion in cash, with $902 million in total debt.

Stocks Going Ex Dividend the Third Week of November

  Here is our latest update on the stock trading technique called 'Buying Dividends'. This is the process of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets. In flat or choppy markets, you have to be extremely careful, and may need to avoid the technique during those times.

In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks. WallStreetNewsNetwork.com has compiled a downloadable and sortable list of the stocks going ex dividend during the next week or two. The list contains many dividend paying companies, all with market caps over $500 million, and yields over 2%. Here are a few examples showing the stock symbol, the ex-dividend date, the yield, and the market capitalization.

Exelon Corporation EXC 11/13/2012 5.7% $31.0B

International Paper Company IP 11/13/2012 3.2% $16.1B

Eli Lilly & Co. LLY 11/13/2012 3.8% $60.2B

Shaw Communications Inc. SJR 11/13/2012 4.7% $8.7B

The additional ex-dividend stocks can be found at wsnn.com. (If you have been to the website before, and the latest link doesn't show up, you may have to empty your cache.) If you like dividend stocks, you should check out the high yield utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com or WSNN.com.

Dividend definitions:

Declaration date: the day that the company declares that there is going to be an upcoming dividend.

Ex-dividend date: the day on which if you buy the stock, you would not be entitled to that particular dividend; or the first day on which a shareholder can sell the shares and still be entitled to the dividend.

Monthly Dividend Stock List
Record date: the day when you must be on the company's books as a shareholder to receive the dividend. The ex-dividend date is normally set for stocks two business days before the record date.

Payment date: the day on which the dividend payment is actually made, which can be as long at two months after the ex date.

Buying Dividends (Dividend Capture) book 25% Off
Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

The expected upside showed up today as the Dow gained 136 points on good volume.  The advance/declines were 3 to 1 positive.  Perhaps the market knows something about tomorrows employment report.  Or not.  Technically we needed a bounce and we got it.  We'll have to wait and see if it is the start of something more.  GE gained 1/4 on average volume.  Perhaps we are trying to put in a base here as well.  No trades there for now.  Gold lost a few bucks as the dollar didn't do much again today.  The XAU fell 1 1/8.  ABX was the story of the day as it got clobbered on a poor earnings report.  ABX down 3 7/8, GG up 1/8 and NEM fell 1 1/3.  Volume was extremely heavy on ABX, about average for the others.  My ABX November calls were a complete 100% loss.  ABX gapped down at the open and blew past my stop loss order.  I never seem to do well with the short term trades and this was no exception.  I wasn't expecting anything like this but the market as usual will go where it wants.  Mentally I'm feeling OK.  We will have to see if we get any follow through to todays rally in the overall market tomorrow.  If so, we could be at the beginning of some type of rally here.  If not, it will be more of the same sideways activity pre-election.  So we'll see.  Gold seems to be in the same stand by mode.  I'm not sure if I'll try the gold share calls again.  I'll have to try and regroup from todays debacle.  I might go with the GDX for the next gold trade as the single stock risk would be less.  Trading a basket of the gold shares vs. a single company in theory has less risk.  We'll see.  Perhaps I simply expected ABX to have the same upside movement that GG had on its earnings release.  We'll get the employment number tomorrow and go from there.