The Economy’s Health; The Death of LivingSoci al; And The Marvel of Musk.

Your Gains Could Hit 11,255%

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The Economy's Health; The Death of LivingSocial; And The Marvel of Musk.

10/27/2016 By Nick Lanyi

How fast did the U.S. economy grow in the third quarter? We'll get our first glimpse tomorrow.

The initial GDP number for the third quarter will be revised, but it's significant as the last big economic report before Election Day – and, potentially, as further confirmation of a Fed rate hike.

We all know that economic growth is positive but tepid. But some indications point to a better-than-expected number, north of 3%, which would be the first quarter above 1.5% since last year. Trade, consumer spending and housing starts were all fairly strong in recent months. Corporate earnings so far have been better than expected, too.

On the other hand, the higher dollar has constrained exports and productivity growth has slowed, and possibly even declined this year. These negatives are part of the reason GDP growth has been so sluggish.

Tomorrow's number will tell us, and the Fed, how the tug of war is playing out.

Did They Get a Discount?

Remember the "daily deals” electronic coupon craze that started about a decade ago? LivingSocial, Groupon and countless copycat services would send you an email everyday allow you to pay upfront for discounts at specific restaurants, hotels, stores and services. These "deal” coupons were crazy popular, especially as we were still emerging from the Great Recession.

These companies became business darlings. LivingSocial, headquartered in my hometown of Washington, D.C., even opened a (completely unnecessary) storefront at which it hosted happy hours frequented by hipsters and techies.

At the time, many so-called experts predicted that these companies' fast growth would vault them into the stratosphere of technology companies. Roughly 99% of these articles used the phrases "game changer” and "paradigm shift” to describe electronic coupons' effect on consumer choices. At its peak, LivingSocial was valued at $6 billion.

That lasted all of about two years. Like many fads, the coupon craze became un-hip. Consumers started to realize that they were losing more on unused coupons than they were saving on the ones they used.

The other shoe fell yesterday. Groupon announced it was buying LivingSocial for a price that "isn't material.” Groupon's share price fell 19% on the news. Guess investors aren't too excited about the synergies associated with this mighty merger.

The lesson: Don't believe the hype.

America is rightly famous for innovation. We've invented more products and services, even entire industries, than any other country. But it's a hit or miss proposition. Every fad isn't a trend; every trend doesn't last.

Tesla in the Black

Speaking of trendy companies, Tesla Motors (Nasdaq: TSLA) actually reported earnings yesterday. The company made a profit the first time in three years, posting $21.9 million in profit thanks in large part to sales of "clean car credits” to companies that don't meet emissions standards.

With $3 billion in cash on its balance sheet, Tesla's earnings are almost beside the point as it continues to ramp up. Analysts say the positive earnings take the pressure off CEO Elon Musk as he continues to unveil his ambitious plans (including manned flights to Mars).

Unlike Groupon and LivingSocial, Tesla is actually making something – in fact, three things that are sorely needed: cleaner cars, cleaner energy and cheaper rockets. But Elon Musk is a risk-taker, which means he could very well fail. This quarter's report doesn't prove the case one way or another, but it's a step in the right direction.

Without this company, the "Internet of Things" would be dead

Basically every big tech company is in on the "Internet of Things."
But we've found something better: a small company that makes it all possible.
Here's the thing: It's much easier to make big money from unknown companies like this than by trying to squeeze a few bucks from the tech giants.

Don't Let Your Guard Down on Nov. 9

10/27/2016 By Linda McDonough

If the presidential campaigning has you stressed out, join the club. A recent Huffington Post poll found that 81% of Americans wish the election was over. The riotous debates, uncivilized language and voter suspicion of both candidates has left many Americans eager for the dawn of Nov. 9.

But in a couple weeks investors might look back and think that now was the calm before the storm. Despite some suggestions that we will see a "relief rally” once the new president is elected, I think the market will need some time to digest the new president's agenda.

The technical behavior of the S&P 500 indicates volatility in the near future. While I don't base my stock recommendations in Growth Stock Strategist and Profit Catalyst Alert on charts, I do keep a close eye on some technical measures that help decipher the health of the overall market. And it looks like the market could use a sick day.

Although the S&P 500 is up almost 5% year to date, it has been range bound since August. Most importantly stock market breadth, a measure of how many stocks are participating in a rally, looks weak. As of mid-October only 29% of stocks were trading above their 50-day moving average versus 70% in August. Often times the movement in the market averages is influenced by a rallies in a few large cap stocks (the S&P 500 is a market cap weighted index). Market breadth is a better illustration of the market's overall health.

The market hates uncertainty, and it's swirling around Wall Street like confetti in a ticker-tape parade. For the first time in years we do not have an incumbent running for president, guaranteeing new leadership regardless of which candidate gets elected.

There's also the likelihood that one or both houses of Congress will be flipped from Republican to Democrat. While it may seem counterintuitive, the gridlock in Congress for the past two years has been bullish for the market. Investors are simply more comfortable buying stocks and companies more comfortable starting projects when they know the rules governing taxes, tariffs and regulatory issues will not change. Status quo—or gridlock depending on your perspective—is good for business.

Since 2014 Republicans have ruled both the Senate and the House. Since that time President Obama has had little success in moving any legislation into law. Polls are increasingly suggesting that we will see a Democrat in the Oval Office come January. Election forecasting site FiveThirtyEight estimates the Democrats have a 67% chance of taking over the Senate. And while it's unlikely the Democrats will win the 30 seats necessary to win the House, a Democratic president will certainly encounter a friendlier Congress when pushing for change.

Patrick O'Hare, chief market analyst at Briefing.com sums it up like this: "To get major legislation passed—the type that can make a big difference in terms of economic prospects and earnings—you've got to have Congress involved. Even though the presidential candidates promise a lot of things and are talking tough on issues, it's going to take three to tango. You need the president, House, and Senate, and it's all got to come together between those three to get major legislation through and passed.”

I've been warning since late August that the market isn't the picture of health. Earnings beats are met with half-hearted rallies and small misses met with hammering blows. I've been adding bearish option trades to my Profit Catalyst Alert portfolio and keeping tight stops on the names in both Profit Catalyst Alert and Growth Stock Strategist portfolios.

In fact, just this week I recommended a put for PCA subscribers that's a play on the sagging apparel market.

It will take some time before major legislation gains traction, but the market should begin to heal as more information becomes available. In the meantime, as your portfolio is resting up, you can contemplate the mindset of the other 19% of voters in the aforementioned poll who wish the election season would never end.

I guess some people are just gluttons for punishment.

Big Players Are Loading Up on Silver

In the past few months, JP Morgan, Bank of America, Morgan Stanley, and a handful of other giant investment houses have all established billion-dollar positions in the silver market.
The reason? Prices are about to go parabolic. In fact, one industry insider says they could skyrocket by up to 587%. If they do, the tiny $1 trade I've put together could turn into a staggering 11,255% winner.