I'll be the first to say it

Nobody has dared to mention the word yet. So, I’ll be the first.  This is a bubble, plain and simple. 

Just look at the companies involved: You’ve got Cisco (CSCO:NASDAQ), Amazon (AMZN:NASDAQ), Microsoft (MSFT:NASDAQ), and the parent company of AOL, Time Warner (TWX:NYSE).  It is the same old names.

Just like they were during the last tech bubble, these companies are on a buying spree. We may not be seeing the kind of outrageous buying we were used to seeing during the late ‘90s, but you can bet, this is just the beginning.

Major technology players are fighting tooth-and-nail to get a stake in the quickly growing Internet video craze.  This is a subject I have discussed at length in this column.  But even I didn’t think it would move this quickly.  I am not complaining. 

The BreakAway Investor portfolio is loaded with companies benefiting from the switch to “new” media.  The majority of our plays are already proving to be hefty, double-digit winners.

The latest gains came earlier this week with a fresh round of merger activity.  On Tuesday, Cisco announced it would be spending nearly $100 million to purchase Arroyo Video Solutions, a software company with products designed to enhance Internet video transmission and storage.

Sony Pictures Entertainment (SNE:NYSE) announced yesterday that it had bought Grouper, an online video site, for $65 million.  Some industry analysts are calling the move “defensive.”  They claim the company bought Grouper simply because its competitors were buying similar sites.

On a similar note, privately owned YouTube, a video-sharing Web site, will begin offering video advertisements.  Until recently, technology critics questioned the site’s revenue model.  This week’s news puts an end to the speculation.

Company’s like News Corp (NWS:NYSE), which owns Fox, and Warner Music Group (WMG:NYSE) and its Warner Brothers Records affiliate will be among the first to advertise their products on the site.  You can bet they will be spending big money, although no figures have been officially released. 

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There will be no shortage of ad watchers.  YouTube boasts that its videos, which cost it nothing to obtain, are watched over 100 million times each day.  Without exposure on YouTube, advertisers can only dream of getting that kind of consumer attention. 

Wall Street speculators have tried desperately to put a price tag on YouTube.  Right now, the estimates are well into the billion-dollar range.  Without a doubt, somebody will be spending huge amounts of money in the very near future to get their hands on the company and its Web site. 

The mainstream media has yet to call this trend a bubble, but they soon will.  Right now, modest amounts of money are being thrown around.  Soon, as the industry consolidates, huge amounts will be spent in an effort to ensure industry dominance. 

If you want to play this industry, do it now.  Valuations are cheap.  If history has taught us anything, they won’t stay that way for long.

On a totally different note, I wanted to take a few paragraphs to thank all the Fear and Greed readers who took some time out of their day to respond to my recent comments on Ford (F:NYSE) and its troubled future.

I heard a wide range of comments from all sorts of folks.  Some were former Ford employees, others were disgruntled Ford owners, and others were management experts.  With no exception, every comment was interesting and thought-provoking.  I appreciate the response. 

The rumors surrounding the company never stop.  Today, rumors that the Ford family may take the failing company private are making their rounds once again. 

If this happens, it would be the end of a great American company.  The family claims it could accelerate the automaker’s turnaround plans if it does it outside the “public” eye. 

I am afraid, though, without shareholders breathing down management’s back, this incompetent group would drive the company further into the ground.  After all, the CEO’s qualifications are nothing more than his last name. 

Please keep the comments coming, but don’t limit them to just the auto industry.  I am anxious to hear your thoughts and opinions on the Internet-video craze as well.   

I want to make sure I am researching and writing about companies and trends you want to hear about. With extensive media experience, I am extremely close to this subject.  I need to know if you care about the shift to “new” media as much as I do. 

Feel free to send your comments to fng@taipangroup.com.

Enjoy your day.

Andrew Snyder

Executive Editor, Fear and Greed

How to beat the pros...a true life example

I beat’em again. Yesterday morning I was intrigued to see a Forbes headline that read, “Subsea Oil Equipment Firms Poised To Gain.” The article focused on Morgan Stanley’s latest research, touting the opportunities in deep-sea oil.

Frankly, these analysts are bit late to the game. Almost three months ago, I alerted BreakAway Investor subscribers to the immense potential for deep-sea oil.  I laid out a great way to profit from the situation.

Some subscribers are already sitting on gains of more than 60% in only a few weeks.  Best of all, there’s plenty more to go. 

You see, there’s an untold amount of oil deep beneath the world’s oceans. In fact, estimates range as high as 1.3 trillion barrels. That’s more than enough to feed the world’s oil addiction for another 50 years! 

The thing is, we’ve known about the tremendous pools of oil hidden deep beneath the sea for more than 40 years. The problem is, no one could get to it.

As you can imagine, pumping oil from the ice-cold regions as deep as 12,000 feet below the ocean’s surface can be pretty challenging. 

At those temperatures, oil and a host of contaminants form a waxy buildup that clogs the pipes that lead the oil to the surface. The wax is infamous for shutting down deep-sea rigs, costing their owners huge sums of money.

But one company has developed the solution the deep-pocketed oil industry has been dreaming of for more than 40 years.

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This little-known company has opened the floodgates to a 50-year supply of oil that’s barely been tapped. It will dominate the deep-sea oil industry.  Its shareholders will be huge beneficiaries of the explosive growth in the drilling market. 

Companies that specialize in getting oil from deep under the seabed to the ocean’s surface will be raking in profits for years. BP’s Prudhoe Bay pipeline may be partially shut down and turmoil in the Middle East may or may not continue to drive up prices, but I say, “Who cares.” 

This company’s technology is so good, oil that used to be strictly off-limits can now be pumped cheaper and faster than ever before. Energy experts estimate oil more than 10,000 feet below the ocean’s surface can be recovered for about $7 a barrel.

With figures like that, who cares how much we are paying for Middle East crude?  Whether oil shoots up to $100 or plummets back to $12, this company is going to be raking in profits for years to come. 

The most attractive part is the level of demand compared with supply. The demand for deep-sea drilling equipment is strong. According to a representative from the company I’m recommending, “We now have visibility of our market going out to 2010 and we are talking to operators about their requirements up to 2012.”

That means there’s at least six more years of fat profits and lightning-fast growth in the future. The outlook for deep-sea oil is even better from a 10-20 year perspective.

Alternative energy may have its day in the sun (pardon the pun), but for now, oil is still king.  It will stay that way for a long, long time. 

Enjoy your day, 

Andrew Snyder

Executive Editor, Fear and Greed

Are we dead yet?

By now, you are getting to know the Taipan Group’s news junkie, Ian Cooper, quite well.  He has written more than a few columns for Fear and Greed readers and is always willing to share his thoughts on the latest profit-making opportunities. 

There’s no arguing with Ian when he feels strongly about an issue.  And if his keen sense of media intricacies and their impact on the stock market are this spot on, what else is going on in that head of his that you should be aware of?

Last Friday, Ian, the chief editor at Extreme Volatility Speculator , told Fear and Greed readers: “Even after studying the behavioral tendencies of mass-media gatekeepers, I’m still shocked by their audacity, thinking we’re naive enough to believe in an August 22, 2006 apocalyptic event.

“But the fear -- implanted into the American psyche by the trusted media -- could help spike oil prices back to record highs.  In fact, I would use this week's end of travel-season-induced oil pullback to buy into oil companies, and even alternative fuel companies, which stand to rebound on high oil.  You can thank Islamic scholars for starting the media obsession with an apocalyptic event of August 22, which has deep roots in Quranic mythology.

“Reportedly, that date is ‘known in the Islamic calendar as the Night of the Sir'a and Miira'aj, the night Prophet Mohammad ascended to heaven from the Aqsa Mosque in Jerusalem on a Bourak...’

“The Night Journey ‘is central to Islam's claim to Jerusalem as an Islamic holy city,’ according to FrontPageMag.com. Expect for the media to play this up during the week of August 22 and parade so-called reliable sources through the American media outlets, driving fear through the heart of the American psyche and sending oil prices skyrocketing on fear alone.”

And wouldn’t you know it, Ian was right. The important date of August 22 is being touting across television screens, newspapers and airwaves across the world.

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But Ian’s not one to toot his own horn.  He simply tells me, “The media thinks we’re stupid.  Add a bit of fear into the daily medley of media coverage, and a few million concerned citizens will show up at the media doorstep, trembling with anticipation of what’s to come.  Fear sells, just as much as sex sells.”

Yesterday, the headline of DrudgeReport.com read, “Concern for Tomorrow.” The big, bold letters were linked to an ABC News story asking if Tuesday was Doomsday. 

Even the markets were rattled by the date, which marks the deadline for Iran to give up its nuke plans.  Oil rose close to $72, and gold ran up about $11 on the day, mostly because of fears over Iran’s possible actions.

What else is Ian hiding in that head of his?  For one, Ian tells me he just uncovered a $4.50 stock that rivals Hansen before its record-shattering climb.  I am sure he will be telling us all about it in the future.

For now, keep an eye on the headlines.  Ian will be using them to make his Extreme Volatility Speculators some serious profits.

Enjoy your Tuesday.

Andrew Snyder
Executive Editor, Fear and Greed

Get him out of there

Sometimes things just don’t work out as planned. 

Two weeks ago, I scheduled a fishing trip with my father.  We fish together off the Mid-Atlantic Coast a lot, but rarely do we get perfect weather like we did that week. 

A day on the water rarely excites me to the point of not being asleep anymore, but that morning, I was up a good half hour before the alarm clock.   As we slurped down a couple of cups of coffee, I tuned my marine band radio to the latest weather forecast. 

The daily synopsis: perfect.

We tossed our lines onto the dock just as the sun was making its first daily appearance on the horizon.  Before long, we were blazing across a mirror-flat bay, through the inlet and heading towards our “secret” spot.   

Seconds after pulling back the throttles, our lines were in the water, and we were set to spend the day lazily drifting atop some of the East Coast’s best fishing grounds.  No worries. 

Then it happened.  My cell phone rang. 

Immediately, two thoughts ran through my head. 

One:  How is my phone getting reception way out here?  Two:  Should I toss the phone in the water and worry about it when I get home?

When I reached for the phone as it rattled across the helm, the second option was the intention.  Then, I saw the number that was calling me.  It was my brother-in-law. 

He’s smart enough not to bother me when he knows I’m fishing.  It had to be something important.

It was important.  His truck, with baby on board and boat in tow, broke down about 90 miles short of his destination.  He needed help and I was close.  Fishing would have to wait.

As the continent slowly curled back onto the horizon and the miles between me and the fish increased, I couldn’t help but curse Ford (F:NYSE) for making a truck that would break down with just 170,000 miles under its belt in 90 degree weather while towing a 5,000-pound boat.  Unbelievable. 

Of course, I am not the only one cursing the company.  The roughly 20,000 workers that are employed at the 10 factories Ford will be partially closing for the rest of year are likely to be even angrier than I am.  They are losing more than a day on the water. 

If you haven’t heard, the company is expediting its “Way Forward” plan that management claims is sure to turn the company around.

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Frankly, it is Ford’s management team that needs to be cut, not its hourly workers.  Its incompetent management is a perfect example of how not to run a company.

Bill Ford Jr., the company’s CEO, does not have the forward-focused vision it takes to lead the company through an ultra-competitive market.

As I mentioned, the company announced last week that it would be drastically cutting its production for the remainder of the year.  By eliminating 21% of its production, 168,000 fewer new cars and trucks will be produced.

The chief reason for the cuts is the management team’s gross underestimation of the powerful effects rising gasoline prices would have on the sales. SUV sales have slipped to figures that were not expected until 2010 and truck sales are downright pitiful. 

Because of the sales setback, the company will produce fewer vehicles than it has since 1991.  The figures are disgusting.  Multibillion-dollar companies are not supposed to make major slips like this. 

I don’t want to sound like a socialist, but there is far more on the line than just an automaker.  Out of the company’s $14.24 billion market valuation, $9.7 billion is held by mutual funds and institutional traders.  In other words, hundreds of thousands of pensions and 401(k) plans are relying on the company to continue to appreciate in value.

Unless Ford gets a solid management team -- preferably a leader without a last name of Ford -- billions in investor equity will be lost.  A lot of people are depending on this company and the industry it spurs.

To say the least, Ford’s turnaround is not going nearly as well as hoped.  Worst of all, the “Way Forward” plan is misguided and is already proving to be riddled with inaccurate forecasts.  This is only the beginning of the bad news. 

General Motors (GM:NYSE), with Rick Wagoner at the helm, has a shot at a turnaround.  Unless it finds a new captain, Ford does not. 

Send me your thoughts on the subject at fng@taipangroup.com.

Enjoy your Monday.

Andrew Snyder

Executive Editor, Fear and Greed

Three experts...three ways to profit

“Oil is seldom found where it is most needed, and seldom most needed where it is found.”

That quote belongs to L. Brouwer, a former managing editor for Royal Dutch Shell (RDS:NYSE).  In a nutshell, it sums up the world’s oil dilemma.  Crude oil is spread across some of the globe’s most oppressive deserts and buried under the deepest, most inaccessible parts of the sea. 

Even Iraq, smack dab in the middle of the land of oil, is having troubles.  Its citizens are paying nearly $5 a gallon for gasoline on the black market.  Even though the government is selling it for about 65 cents, it can’t produce enough to keep up with demand.  The country is witnessing its biggest fuel shortage in years. 

Why? Simple answer: terrorism, corruption and a lack of refining capacity.  The same three things that have oil prices across the globe near-record highs. 

Let’s face it.  When it comes to our addiction to energy, the world is in trouble. Huge amounts of money are being spent feeding the addiction. 

Exxon has seen obscene profits.  Share prices of oil and natural gas exploration companies are going through the roof.  And alternative energy producers are getting more attention than ever.    

If you read Fear and Greed with the most minuscule amount of consistency, you already know my thoughts on energy investing: short term, alternative energy; long term, oil, oil, oil.

But I don’t work alone.  Every day, I spend time with a talented group of individuals that all call themselves Taipan Group editors.  While we see eye-to-eye on some subjects, there are times when none of us can agree (hey, we’re not paid to conform). 

But no matter how heated the arguments get, this group of savvy Wall Street wizards is always making a profit somewhere. 

For some slightly different takes on profiting from the world’s oil addiction, I asked a few of Taipan’s editors to sum up their thoughts on how to profit from the energy industry.  I think you will be intrigued to read what other Taipan editors are writing and thinking. 

Please, take some time to read their comments and click on the links that lead to their respective Web sites.  A unique perspective is a horrible thing to waste. 

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First, you’ll hear from S.R. Nunnally of Material Profits fame.  This hotshot editor has been featured on numerous TV and radio programs and always has a detailed plan to make money from the alternative energy industry.

Here’s S.R. Nunnally of Material Profits:

As bad as it seems, there’s a silver lining to high energy prices, particularly oil prices.

High energy prices mean more interest in alternative energy, and not just interest, investments! The Cleantech Venture Network said earlier this week that venture capital investing in alterative energy is now the third most lucrative investment field. And, this quarter that just ended showed a 64% increase in capital investments in clean technologies.

Yes, you can now make more money by investing in wind energy, et al, than by investing in either medical or telecom ventures.

Though this may be news to some people’s ears, it’s hardly out of the blue. That 64% increase in investment dollars is the eighth growth quarter in a row for clean technology.

If high oil prices are here to stay -- and I think they are -- investors shouldn’t ignore the profit potential in the alternative energy investment sector. – S.R.N.

Todd Schoenberger of Diligent Investor has a different opinion.  If you ask him (most of the time you won’t have to, though), he will clearly tell you the only alternative energy is crude oil. 

Here’s Todd Schoenberger of Diligent Investor:

I find it amazing that people are still touting alternative fuels like ethanol as the one energy source that’s going to change our lives.  It’s great that there are so many visionaries on the planet that are trying to create something to help sustain global demand for oil resources; but their efforts are a complete waste of time and money.

The only alternative fuel available in the world is called oil and the faster everyone accepts this fact, the faster we can go and explore for more.  There is so much global demand for the commodity that the world requires 84 million barrels a day just to survive.  Former emerging markets like India and China are quickly becoming economic superpowers and are the catalyst for this higher demand.

Invest in the companies pumping oil from the ground.  They will be doing well long after the alternative energy craze is over. – T.S.

Finally, there is Ian Cooper of Extreme Volatility Speculator, an ultra-unique trading service designed to run fast and hit hard.  Because of his background and extensive formal education in the world of fast-breaking news, Ian always knows what is going on long before the rest of us. 

By the time a story makes headlines, his devout followers are already banking gains. Ian is quick and precise. I once watched him make triple-digit gains in just a few short hours. His view on the media and its coverage of the oil markets is something you don’t want to miss. 

Here’s Ian Cooper of Extreme Volatility Speculator:

Even after studying the behavioral tendencies of mass-media gatekeepers, I’m still shocked by their audacity, thinking we’re naive enough to believe in an August 22, 2006 apocalyptic event. 

But the fear -- implanted into the American psyche by the trusted media -- could help spike oil prices back to record highs.  In fact, I’d use this week’s end of travel-season-induced oil pullback to buy into oil companies, and even alternative fuel companies, which stand to rebound on high oil.

You can thank Islamic scholars for starting the media obsession with an apocalyptic event of August 22, which has deep roots in Quranic mythology.  Reportedly, that date is “known in the Islamic calendar as the Night of the Sir’a and Miira’aj, the night Prophet Mohammad ascended to heaven from the Aqsa Mosque in Jerusalem on a Bourak (half animal, half man)… .”

The Night Journey “is central to Islam’s claim to Jerusalem as an Islamic holy city,” according to FrontPageMag.com. A couple weeks later, an Islamic scholar reported he had the same concerns about August 22. 

The fear, spread with the help of a gullible mass media, is that an apocalyptic nuclear event could occur on this date. 

Expect for the media to play this up during the week of August 22 and parade so-called reliable sources through the American media outlets, driving fear through the heart of the American psyche and sending oil prices skyrocketing on fear alone. - I.C.

There you have it.  While we may not always agree (why should we?), it’s obvious each of the editors at the Taipan Group have laid out their plans to make money from soaring energy prices.

Stay tuned.  More of these round-table debates will be coming your way.  Feel free to send me the topics you would like to see discussed at fng@taipangroup.com.   We are open to anything.

Enjoy your weekend.

Andrew Snyder

Executive Editor, Fear and Greed

What's in a name

Most folks would never call William Shakespeare a brilliant investor, but he was onto something.  When Juliet asked the world, “What’s in a name?” in Act II of Romeo and Juliet, she may not have been cursing the Montague name, but giving investors a subliminal message.  One that could lead to big profits. 

Just yesterday, President Bush was in my hometown of York, Pennsylvania, touring the local Harley-Davidson (HOG:NYSE) plant.  The company has one of the most prominent names on the globe.  The White House calls the company, which manufacturers bikes with names like Fat Boy and Night Train, “a great American company.” 

The morning papers are dotted with photos of the president, with dorky safety goggles and all, sitting on a “hog,” fresh off the assembly line.  Images of the leader of the Free World grinning ear to ear on a product, once associated with dangerous gangs and anarchy, kick-started my brain. As an investor, a brilliant marketing scheme gets me drooling. 

When it comes to marketing its name, Harley is one of the best, if not the best.  McDonalds and Coca-Cola are right up there, but I haven’t seen many folks with the Golden Arches tattooed on their forearms. 

The company’s success started when its decision-makers decided to capitalize on the lifestyle of owning a Harley.  Selling the biker lifestyle adds immense value to its products but costs the company absolutely nothing. 

Harley fosters the biker lifestyle in various ways. It started the Harley Owners Group (HOG), which has a membership of nearly 700,000 bikers.  It also makes sure every bike it sells comes with a subscription to Enthusiast magazine, a publication dedicated to fostering the biker lifestyle. 

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Finally, it sells every accessory and piece of clothing it can put its brand on.  Not only does this effort further embrace the Harley lifestyle, it also turns every biker and wannabe biker into a walking billboard. 

Harley and its employees know the value of its apparel lineup.  I was at the plant on Tuesday chatting with a senior engineer about the company’s recently opened store in China.  The company spent millions entering a market where it is not even allowed to sell a single bike because of engine-size restrictions.

The goal is to warm the market by first selling apparel.  By the time it develops bikes it can sell in the country, China will be covered in Harley’s trademark orange and black. And tattoo shops will be booming. 

Because it has developed a brand far larger than its motorcycles, Harley can walk into Asia and sell its bikes without spending millions on advertising costs.  It lets its consumers spend their money to advertise for the company. 

Marketing like Harley’s is what makes investors rich.  It is why I am constantly looking for up-and-coming companies with a unique marketing angle.  In today’s world, strong fundamentals don’t always cut it.  Investors need an edge. 

Unfortunately, there is no line on a balance sheet that measures the worth of a company’s brand.  So at BreakAway Investor, I use a unique formula that helps to weigh the value of a company’s branding and marketing efforts.  By comparing market share statistics with industry valuations and size, I can get a strong grasp on the value of a brand. Never overlook the value of a brand. 

I will leave you with one statistic.  Harley-Davidson went public in 1986.  One hundred dollars invested in the company would now be worth over $16,000.  The same amount of money invested in the S&P 500 would be worth less than $600. 

That, my friend, is what’s in a name.  Shakespeare would be proud. 

Enjoy your day. 

Andrew Snyder

Executive Editor, Fear and Greed 

The world's most successful growth market

There are few things I enjoy more than sitting back and watching tens of millions of dollars float across the water.  That is just what I did last week, and I could not have enjoyed it more.

If you are not familiar with the world of sport fishing, the world’s largest and most lucrative marlin tournament is Ocean City’s White Marlin Open.  It is the Super Bowl of fishing.

World-class anglers and multimillion-dollar boats come from all over the world in hopes of taking top prize and the $1.5 million check that comes with it.  That kind of cash could make a big dent in future boat payments.

With that much money on the line, the competition is fierce. This year, the difference between the first- and second-place fish (the difference between $1.5 million and $125,000) was less than half a pound.  Needless to say, anglers were doing whatever it takes to get an edge.

In this game, every ounce counts. 

Some captains flew in fresh bait from Florida. Others painted bright schools of fish on their boat’s hulls. And others spent tens of thousands of dollars on the latest, state-of-the-art electronics. 

With entry fees approaching $10,000 or more, no competitive edge, no matter how expensive, is off-limits.  Big money is on the line. 

The world of investing is no different.  Instead of measuring success in pounds and ounces, investors measure it in dollars and cents.  When each day is done, the top prize goes to the guy who comes to the scales with the most money in hand. 

Here at the Taipan Group, our team of skilled editors has uncovered numerous ways to gain that competitive edge.  We prove there is always a way to make money, no matter if the market is moving up, down or sideways. 

Some editors, like those at WaveStrength, use technical indicators to pick out the best moneymaking investments. 

Others, like Extreme Volatility Speculator’s Ian Cooper, use their experience in the world of fast-hitting news stories to uncover big profit opportunities before the rest of Wall Street even knows what is going on. 

As the editor of Taipan Group’s BreakAway Investor, I look for the investment that is unlike any other.  I want to see an opportunity that offers something nothing else does, hence the name BreakAway Investor. 

Instead of looking for middle-of-the-pack investments, I find the companies that are doing things a bit differently or have a slightly different business model, the ones that break from the pack and run miles ahead. This way, as their market takes off, the company’s investors earn exponentially larger shares of the profits. 

What I’ve got my eye on lately fits the bill just perfectly. 

If you are looking for an investment that offers the perfect competitive edge, the kind that steps on the face of the rest of the market, London’s FTSE Alternative Investment Market (AIM) is the place to be.  It is the most successful growth market in the world.  In fact, it is the ultimate small-cap market.

Best of all, the AIM only lists the companies with the highest liquidity and available float.  There’s no more buying shares of a tiny company and hoping somebody will eventually be there to buy them back from you. 

A few month’s ago, I was in Atlanta chatting with a professional investor that absolutely swore investors should dedicate at least 10% of their portfolio to privately traded companies. 

His advice was great, but a bit tough to follow. We’d all love to get in on the very ground floor of a successful company.  But besides starting your own company or getting involved in a venture capitalist group, it is nearly impossible to invest in a closely held company. 

Try walking down to your local family-owned machine shop and say, “Here’s ten grand, I want a piece of your profits.”  Sure, they’ll take your money and invest it, but you will never see it again. 

The FTSE AIM market is the tool that allows you to invest in some of the world’s most up-and-coming companies before they get too large and expensive to make the huge profits we all dream of. 

The vast majority of the companies listed on the exchange are small, young, and filled with potential.  They have come to the AIM because they are looking to grow, but are too small to deal with the strict regulations and hassle of larger exchanges like the NYSE or Nasdaq.

Since its inception in 1995, the AIM has done quite well, especially during the recent surge in small caps.  Since 2003, while the much-touted Russell 2000 index (a favorite index of small-cap investors) gained by over 50%, the AIM UK50 index soared by more than 150%. 

This is a perfect example of the kind of investments I am constantly searching for.  Because it targets a unique niche, and is positioned in a highly successful segment of the market, it greatly outperformed even its closest competitors. 

There are a total of 18 subindices that track all segments of the AIM.  While investing in an entire index is still not possible, it won’t be long until a handful of ETFs are developed that directly track this successful market.  When they are, we’ll have a great profit opportunity.

For now, take a look at the companies currently listed on the AIM.  There are plenty of great moneymaking opportunities.  The rest of the market may be moving sideways, but this unique sector is filled with potential.

Enjoy your day.

Andrew Snyder

Executive Editor, Fear and Greed

Stepping in it

I was ready to scream.  This was one of those mornings I wanted to crawl back into bed, pull the covers over my head and tell the world to go away. 

Everything started off as usual.  The alarm went off, I got dressed and fired up a pot of coffee.  Heck, I didn’t even spill any water on my shirt for a change.   

From there, I opened the back door to let my dog out.  She knows as soon as I get the coffee brewing, it’s her chance for some morning relief.  As she was sniffing around for her “spot,” I saw a streak of blazing red fur come barreling through the trees.  It was not the rising sun, but a healthy red fox sprinting through the backyard. 

Before I knew it, my mutt of four breeds was on the fox’s trail.  And I was on hers.  I didn’t stand a chance. 

The chase ended just as abruptly as it had started.  The two varmints were long gone.  I could hear them zigzagging and crashing through the woods hundreds of yards away. 

I, well… my brief sprint ended when I felt something squishy under my bare feet.  My right foot was toe-deep in my pooch’s “natural” fertilizer.  I was far from happy about the situation. 

At 5:59, I was sound asleep in the sanctuary of my Serta.  By 6:02, I was dragging my foul-smelling foot through the wet grass, searching for my dog.  All this, before my first cup of coffee.  It can’t be good for the heart. 

As bad as my day started, I can’t help but think somebody else’s is worse. 

Today, the award goes to the top executives at Dell (DELL:NASDAQ) and Sony (SNE:NYSE).  They are doing more than scraping dog excrement from their feet.  They are desperately trying to stop the bleeding from a major recall, the largest electronics-related recall in history.

Dell announced that it is recalling more than four million lithium-ion batteries that were shipped with many of its popular laptops.  It turns out, the batteries have a tendency to catch on fire.  More than one not-so-lucky user has had a computer burst into flames while using it. 

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So far, Dell has not released any estimates on what the recall will cost the company.  But a smaller component recall cost the company over $335 million last year.  Fortunately, Dell does not have to deal with the problem alone.

Sony, the maker of the battery, is helping to cover the costs of the recall.  It could end up paying for the entire mess.  After all, it did make the faulty batteries.  Dell claims, thanks to Sony’s help, the recall will have no material impact on the company.

I tend to disagree.  Sure, the balance sheet may go unaffected this quarter, but long-term revenues are bound to falter as word spreads about Dell’s “shoddy” products. 

The recall comes at a time when Dell is desperately trying to grow, especially in Asia.  Currently, the Texas-based company boasts a 12% share of the Asian market.  Not a bad stake, but it could be better. 

Unfortunately, Dell is fighting an uphill battle.  Hewlett Packard’s (whose batteries are not affected) products are putting up a good fight and are gaining plenty of market share-stealing momentum.  If Dell wants to win in the global market, it needs to clean up its act. 

Today, Wall Street is actually applauding Dell for issuing the recall, with industry analysts calling it an “image and brand management” issue. 

I don’t know how a company can admit four million of its latest products are defective and call it good for the brand, but shares of Dell are currently trading more than 2% higher than they were at yesterday’s close.

The rally won’t last.  Bad news is bad news, no matter how you spice it up.

Enjoy your Tuesday.

Andrew Snyder

Executive Editor, Fear and Greed

Christmas in August

“It’s Christmas in August,” said Staples (SPLS:NASDAQ) CEO Ron Sargent about the back-to-school shopping season. According to Sargent, “It's our biggest season from a customer traffic standpoint.”

This year’s back-to-school season is expected to be the best on record. The National Retailers Federation (NRF) expects back-to-school shopping to total a record $17.6 billion, or $527.08 per family with school-aged children.

Compare this to a few previous back-to-school seasons. The previous five-year high in back-to-school spending came in 2004 when families shelled out $483.28 on average. Last year, spending dipped to $443.77.

As you can see, the NRF is expecting a stellar back-to-school shopping season, with an anticipated 19% rise. When expectations are this high, I rarely see too much profit opportunity. But in this case some still exist.

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The most popular ways to play the back-to-school season are the office-supply stocks. However, only 35.8% of shoppers expect to visit an office-supply store for their children’s back-to-school needs.

Also, office-supply stocks have had a rough time in the past when they missed the mark. Following last year’s poor showing in back-to-school season, OfficeMax (OMX:NYSE) shares plummeted 20%. But OfficeMax shareholders weren’t the only ones feeling the pain last year: Shares of back-to-school favorite Office Depot (ODP:NYSE ) slid 16% during the same time period.

Office-supply stores are not even the top three visited locations for back-to-school shoppers. According to a recent BIG Research poll, 72.2% of them are headed to discount stores, 53.3% department stores, and 30.9% specialty stores (survey respondents were allowed to answer more than once).

Simply put, there’s significantly less of a need for pens and pencils anymore. With the sharp increase in the number of computers in schools, it’s more likely that a student will need a portable USB Flash Drive than a new pencil sharpener.

That’s why electronics sales are going to be leading the 2006 back-to-school shopping season. After all, that’s what caused the weakness in back-to-school sales last year, just look at the numbers.

In 2004, $3.09 billion was spent on electronics for back-to-school. This declined to $2.06 billion 2005. Current NRF expects resurgence in electronics buying this year, with its official estimate pegged at $3.82 billion. That’s a pretty staggering amount.

The best way to play the resurgence of back-to-school electronics is with Linear Technology Corp. (LLTC:NASDAQ). Linear is a key player in the electronics industry. Even though you won’t see its brand name on products throughout your house, they’re probably inside.

Linear’s seemingly limitless product lineup can be found in almost everything electrical. Cell phones, disk drives, radars, satellites and cable modems all rely on Linear products. Even new calculators and other portable electronics use them. That’s why Linear is a great way to play the back-to-school shopping season and get in ahead of everyone else.

Even without the back-to-school shopping season, Linear looks good. The company has been growing at a 22% clip during the past five years and is expected to continue a similar level of growth in the future. And its growth hasn’t come at the expense of performance, either. Linear boasts an impressive profit margin of 39.2% and an operating margin of more than 51%. On top of all that, Linear’s stock yields 1.9% and trades at a relatively low P/E of about 23.

Linear, however, has been caught up in the SEC’s informal investigation into stock-based compensation. Despite that drawback, Linear is very attractively priced. As the electronics industry gets back on its feet for the 2006 back-to-school shopping season. There’s going to be a big push to replace inventory that will keep Linear’s factories humming in 2007.

Enjoy your day.

Andrew Mickey

Editor, Fear and Greed

Digital zombies

Not long ago, Betty Carty decided it was time to finally see what the Internet was all about. She started out by ordering an inexpensive Dell computer, assembled it herself, and was soon on her way to hooking up to the Internet.

After a few weeks of e-mailing and casual surfing, Betty thought she was really getting the hang of things. That is, until she received a message from Comcast, her Internet Service Provider, letting Betty know she would no longer be allowed to send out e-mail.

Betty was very dismayed. In the few weeks she was online, she had sent out more than 70,000 e-mails. She was tagged as a pattern spammer.

She wasn’t doing the e-mailing, though. It turns out, her computer was turned into a zombie. I’m not talking about the skeletal creatures with outstretched arms that rise from the grave at inopportune times in really bad movies. Her computer was taken over by a hacker.

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Betty’s not the only one afflicted by a “zombie” computer. Today millions of computers are doing the dirty work for hackers. In fact, “zombie” computers are sending a staggering 4 billion e-mails each day, or more than 30% of all e-mails sent.

So today I’ll be taking a look at a couple of stocks set to battle it out over the PC security market.

McAfee (MCF:NYSE) has been a leading PC security business for years. Thanks to deals with Dell (DELL:NASDAQ) and Hewlett Packard (HP:NYSE), McAfee has grown at a 50% clip annually during the past five years, but the growth is not expected to last.

McAfee has grown so large, it’s now only expected to grow earnings at a 15% rate during the next five years. McAfee is sitting on a sizable stockpile of cash and short-term investments that, at last report, totals more than $830 million.

As a result, I believe McAfee is having trouble finding worthwhile investments to grow its business. Normally, growth stocks are starved for cash because of the continuing need for capital expenditure. Despite a high relative amount of current liabilities, in this case, the large cash and short-term investment holding is not a good sign.

Management can work through issues like that, though. It will just take time. McAfee is also facing an SEC probe into its stock-compensation practices, along with 79 other companies, and may have to restate earnings for the last six years. This could hurt McAfee’s stock even more so over the short-term, but it’s Microsoft (MSFT:NASDAQ), the bully of the PC industry, that concerns me most about McAfee.

You see, Microsoft has been developing its own line of PC security software, Windows Live OneCare. The beta test of the system was completed a few months ago. And now that OneCare is for sale to the public, Microsoft will be trying to dominate yet another segment of the PC market.

Microsoft has a good track record, too. First, Microsoft successfully tackled the demand for spreadsheet software. Next, in a highly publicized manner followed by a legal battle and much polarizing debate, Microsoft conquered the Web browser market.

Now, Microsoft has quietly set its sights on the PC security market. And with 70% of paid PC security software buyers up for renewal annually, Microsoft has a shot.

No doubt, PC Security is a lucrative business that is expected to almost double in size to $7.9 billion by 2009. The highly respected research firm, The Yankee Group, says the PC security industry could easily be worth $15 billion in the same time frame. And where there’s this kind of growth, you can bet the competition is going to get pretty fierce.

The big players are still Symantec (SYMC:NASDAQ), McAfee, and now Microsoft, but there’s also a lot of grass-roots freeware like antivirus software cleverly named AntiVir and free firewall Jetico Personal Firewall that are very popular as well.

Even though there are millions of people like Betty Carty out there, overall, increased competition will cost all of these companies their impressive profit margins. I would stay away from investing in them until the ensuing battle has been sorted.

On another note, if you want to avoid ending up like Betty Carty and the millions in her situation, run through this quick 10-step checklist to ensure your computer stays under your control and your valuable personal information is secure.

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Enjoy your weekend.

Andrew Mickey

Editor, Fear and Greed