Peter Schiff -  December 20 

CNN – Your Money

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2009 Earnings Projections

Profit forecasts for 2009 continue to be cut in large numbers. For every positive revision , there have been 6 cuts. The ratio is roughly the same whether the sample group is the S&P 500 or the larger Zacks Rank universe, which contains about 4400 stocks.

There is also quite a bit of difference in what analysts are forecasting. Last night, I calculated projected earnings growth for the S&P 500 based on the lowest, consensus and highest estimates. Here are the results based on a bottom-up calculation.

Lowest estimate: $71.60 (-5.8%)
Consensus estimate: $91.14 (Ʒ.5%)
Highest estimate: $111.14 (რ.7%)
The bottom-up estimate is calculated by using the individual earnings estimates for each company and then applying an index-weight to it. The lowest estimate uses the lowest profit forecast for each company. The highest estimate uses the highest forecast for each company.
It is possible that some of the highest forecasts are close to 90 days old, meaning that analysts have yet to adjust them for the credit crunch.

The top-down forecasts, which are consensus estimates made for the S&P 500 as a whole, show a tighter range.

Lowest estimate: $75.20 (Ư.6%)
Consensus estimate: $93.73 (ƴ.9%)
Highest estimate: $108.00 (Ƶ.5%)
As I have said previously, these profit forecasts need to be taken with grain of salt. Brokerage analysts are doing their best to make educated guesses, but the assumptions used in their models could end up being very wrong. It’s not the analysts’ fault, but rather just current reality.

Credit Markets

The credit freeze is continuing to show signs of thawing, a positive.

The 3-month London-Interbank Offered Rate (aka "LIBOR") is down to 2.29% as of Friday morning. At the height of the credit crunch, the rate had reached 4.82%. This rate is used as the basis for many loan terms, including the interest rate on your and my credit cards.

The TED Spread, which is the difference between the LIBOR rate and 3-month treasury bill rates, has also narrowed. Friday’s spread of 2% is well below the recent peak of 3.66%.

Higher TED spreads imply greater credit risk. Prior to the current credit crunch, the TED spread was 0.11%.

The Election and the Our Portfolios

During the campaign, President-Elect Obama said that healthcare will be one his top priorities. Since the Focus List presently has a heavy weighting towards the medical sector, I want to address why I’m not concerned.

Healthcare will be a major battle. There are too many players with high-powered lobbyists to allow true change to occur without a fight.

Furthermore, even if the U.S. moves towards national health care, much of the existing system could be kept in place. Switzerland has universal coverage AND powerful insurance and pharmaceutical companies.

In other words, I expect most companies within the medical sector to remain profitable long after President-Elect Obama leaves the White House. This said, we will monitor progress and make changes to the portfolio if legislation dictates it.

The Markets

Despite all of the volatility, we are still in one big trading range. The post-election pullback occured as the Dow was just above resistance and overbought on a short-term basis.

There was a big rally headed into the election, so a sell on the news reaction was not surprising.

In a monthly column that I write for SFO Magazine’s web site, I described the Dow’s range as between 8200-9450. We might see some intraday swings slightly outside these numbers, but I think it’s a close approximation.

Though this is a big range, if the Dow can start to see more days with double-digit moves, as opposed to triple-digit moves, then investor confidence would be more fully restored.

The Focus List

We did not make any changes this week, but there are a few companies we are looking at closely. Our target is adding 2-3 companies per week.

Perrigo’s (PRGO) earnings were a penny below expectations, but guidance seemed to be okay. We’re looking at the estimate revisions as they come out.

McDonald’s (MCD) said the stronger dollar could hurt fourth-quarter earnings. I do think the company will benefit from more frugal consumers in the U.S., however. We’re going to monitor the estimates revisions.

By: Charles Rotblut

Article Directory: http://www.articledashboard.com

Charles Rotblut is the Vice President of Web Content for Zacks Investment Research and the Senior Market Analyst for Zacks.com. He oversees the editorial staff, manages the market-beating Focus List, Timely Buys and Top 10 portfolios, and plays an instrumental role in the development of new products. For more information, visit www.zacks.com.

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Benefits of Bankruptcy

By declaring bankruptcy, a person is able to clear most of his debt and start a fresh lease of debt free life. Read on to know about the benefits of bankruptcy.

During the last century, any person who is unable to repay his debts was jailed. When in the debtor’s jail the bankrupt person had no hopes or opportunity to repay his debts, unless he was fortunate to have a family member clear it. It was a dead end, but in today’s world, debt management could be done by debt counseling. Debt consolidation could be an avenue for clearing debts if used wisely.

What is bankruptcy? It is defined as a process by which a debtor clears his debts with the help of the Bankruptcy Court (Federal Court). A debtor can file for bankruptcy under the bankruptcy laws of Chapter 7 and Chapter 13. Filling for bankruptcy is the last resort because it can blemish the credit report for nearly ten years. A debtor files bankruptcy based on the amount he owes his creditors. Depending on his type of debt he can choose the form of bankruptcy – Chapter 7 and Chapter 13.

If Chapter 7 is the form of bankruptcy chosen by the debtor, the court cancels all his debts provided he surrenders all his properties. However, if he chooses the Chapter 13 as his form of bankruptcy, he is allowed to keep his properties but he has to deposit a stipulated amount in the court to clear off his debts. Under this law, the debtor would be asked to approach a reputed debt counselor who would help him to create an effective financial plan based on his income.

Positive Side of Bankruptcy

It is true that society still looks down on people who declare bankruptcy. However, there is a positive side of bankruptcy. It provides immense relief to many a people who are sinking in debt. Here are a few benefits of bankruptcy.

When you file for bankruptcy, your debts are cleared off and you have no legal obligation toward your creditors.

One of major benefits of bankruptcy is the prevention of wage garnishment (The process of deducting money from the salary account of an individual to clear off his debts is known as wage garnishment).

When a person files for bankruptcy under the bankruptcy law Chapter 13, then his properties such as house and car will not be attached to the Federal court to pay off his debts. If any of his creditors had previously taken away his possessions, they will be given the instruction to return the properties back to him.

If you have lapsed on the payment of your utility bills, the utility service providing companies cannot disconnect utility services such as your cable TV and telephone (land and cell). In case they have disconnected they would have to restore the connection immediately.

If you have a loan liability such as a home loan liability and you are unable to clear off the principal and interest amounts, the bank, which granted the loan, can start the process of foreclosure. However, if you have filed for bankruptcy, the concerned bank would have to halt the process of foreclosure and give you certain time period to clear the outstanding loan amount. This is one of the benefits of declaring bankruptcy.

Declaring bankruptcy would help you to clear off many of your debts and give you a fresh start. However, you should be aware there are a few non-dischargeable debts such as a student loan and certain type of taxes which cannot be cleared by declaring bankruptcy.

You should be aware of the fact, if you have chosen Chapter 7 as the form of bankruptcy, then your co-signer or the guarantor would be held responsible if you ever lapse in clearing your debts. On the other hand, bankruptcy under Chapter 13 will not hold the co-signer responsible if the debtor defaults or strays from his financial repayment plan.

It is important that one gets a debt advise from a reputed debt counselor before filing for bankruptcy.

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Trading Emerging Market

Forex Currencies

Although most of the forex trades include five major currencies, there is very good opportunities available to profit from other emerging market currencies. Know about some most traded and profitable emerging market currencies and also how can you profit by trading them.

Globalization, increased availability of human resources, better exploitation of natural resources and technical developments are helping many Asian, European, South American and African nations in quick economic growth. This also offers an opportunity to traders/investors worldwide to profit from their economic growth. Studies have shown that emerging market funds tend offer better returns than local funds and local benchmarks. Currencies of emerging world economies are also becoming popular among forex traders, and the market is becoming increasingly liquid and profitable.

Some of the most popular emerging market currencies are Hong Kong Dollar (HKD), South African Rand (ZAR), Malaysian Ringgit (MYR), Singapore Dollar (SGD), Mexican Peso (MXN), Czech Koruna (CZK), Korean Won (KRW), Thai Baht (TBH) and Polish Zloty (PLN). Each of these currency pairs have different levels of liquidity, and risk to return ratios. There are usually far less liquid than G7 forex currencies but usually liquid enough to trade. Forex currency traders who seek diversification of their portfolio can allocate a small portion of their portfolio for trading these emerging market currencies.

Trading emerging market forex currencies do require good planning, sound decisions and better money management. Many emerging world economies (e.g.: China and India) have tight regulations for trading their currencies and often these currencies are traded only through interbank market or by institutional traders. Also exchange rate of currencies of many nations are tightly regulated by respective central banks are the prices are less-floating. Chance for Political crisis, policy changes and quick economic changes is very high with emerging world nations than developed nations, so similar effects are also expected in their currencies.

Many emerging market currencies are actively traded on different trading hours than G7 currencies, so the trader must have to adjust his/her trading timings; this is very important when a trader is trading both G7 currencies and emerging market currencies. Also not all forex trading brokers offers all emerging market currencies for trading, so choosing the right forex broker becomes necessary. Also check for the spread and other charges that the brokers charge for these minor currency pairs.

For trading these minor currency pairs, the trader should be good on fundamental and technical analysis. He/she must be aware of the fundamentals (GDP, growth, strengths and weaknesses) of the nation of which currency he/she is trading. In forex market, every country’s currency exchange rate is linked to other countries currency and any economic or political change in one country can affect the price of another currency.

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