It was a clear sell signal for Enron.

I worked with Enron during the early 1990s on some energy projects in Asia. They were smart, aggressive, swashbuckling types who could also turn on the Texas charm at the drop of a hat.

The Chairman, Ken Lay, primarily handled the power broker side of the business, schmoozing with world leaders and politicos.

Rich Kinder, Enron’s President, was the straight-talking lawyer and detail man who kept the train on the tracks.

But in 1996, Enron’s board decided not to give the top job to Kinder.

He promptly resigned to go into the hard asset pipeline business he preferred. McKinsey guru Jeff Skilling was selected to fill Kinder’s job with a mandate to plunge into the energy trading business.

You know the rest of the story…

But the lesson here is that who is at the top of big complex companies like Enron is a big deal. Corporate leadership changes can sometimes provide buy or sell signals.

This brings me to Brazil’s Petrobras (NYSE: PBR).

The Largest Company in Latin America

Brazil is a big deal in Latin America, representing 40% of the region’s entire economic output. In some ways, it offers a better bet for investors than China since it’s a democracy offering not only a surging middle class but also abundant natural resources.

And Brazil has the largest company in Latin America – resource-rich Petrobras.

David Fessler writes and speaks about Petrobras often, and points out that the company has the potential to become the largest energy company in the world.

Petrobras CFO Almir Barbassa agrees, and in an interview with Forbes, said he expects the company’s oil production rate to match Exxon Mobil. Petrobras also discovered an unbelievable amount of deep-water reserves of both natural gas and oil.

So why is its stock trading way below its $70 high in 2008 and quite a ways from the $50 price it opened in 2010?

In my opinion, it’s because the company is being mismanaged by government appointed executives.

Mr. Sergio Gabrielli has been CEO since 2005. An economics professor with little oil and gas experience, he’s leaving this week to pursue “politics.”

His biggest mistake was the high-handed $70-billion public offering announced in early 2010. While it raised some capital from private investors, the government grabbed $42.5 billion in shares in exchange for “giving” the company the right to develop some reserves.

This brought the government’s ownership up from 40% to 48%.

Diluted private shareholders expressed their disappointment by the only vote they have – selling the stock.

The new CEO taking the helm today is a well-respected technocrat steeped in the energy business – Maria das Gracas Silva Foster.

While a confidant of Brazil’s president, she’s expected to be less political and more business. And as current head of Petrobras’ gas and energy group, she knows the business inside and out, plus how to manage the bureaucracy.

Could she be a Rich Kinder?

As you can see, Petrobras has recently begun an upward trend.

My advice?

Jump onboard now with a 15% trailing sell stop in case our hopes of much better management are dashed.

Good Investing,

Carl Delfeld

Despite positive news lately, there’s a lot going on in the markets right now, and it isn’t good. The most terrifying aspect of all is that the doom and gloom is spread worldwide.

Europe is a mess right now. Two of its four largest economies teeter on disaster. Meanwhile, Greece is the troubled teenager who knows he needs to get his act together but continues to find himself in bad situations. Germany and France are still experiencing menial growth…

Eurozone authorities recognize there’s a problem, but it may be a too little too late.

Then the United States has its own problems.

Our Central Bank has come under fire for its “quantitative easing” monetary policy, which was primarily ineffective. Its latest initiative of flattening the yield curve may prove detrimental to long-term investment. The dysfunction of Washington policymakers is well noted and, finally, there’s that $14-trillion national debt thing.

Even from peaks earlier this year, Japanese markets are down over 20% due to natural disasters.

In times like these, it’s wise to go bargain shopping. Good companies sometimes get dragged down along with the ebbs and flows of a volatile market. For no fault of their own, they may be undervalued.

Morningstar’s Buyback List

One indication that a stock is undervalued is a company buyback. A few months ago, I wrote about Warren Buffet’s buyback announcement of Berkshire Hathaway’s Class A and B Shares (NYSE: BRK.A, NYSE: BRK.B). In September, Berkshire Hathaway’s board approved a plan to buy back the company’s stock, an indication that Buffett believed the stock was undervalued.

Morningstar reported a list of other companies whose Board of Directors are likely to or have given the “okay” to buy back stock. Here is a list of four companies mentioned:

1. CSX Corp. (NYSE: CSX)
2. Union Pacific Corp. (NYSE: UNP)
3. Norfolk Southern Corp. (NYSE: NSC)
4. United Parcel Service Inc. (NYSE: UPS)

Is There a Formula for Finding These Companies?

In fact, there are several…

Morningstar reports that to find firms in the position for a possible buyback, you can look for stocks trading at their 52-week lows with low debt – this would be measured by the total debt to total equity where the lower the number, the better – and high cash balances as measured by cash-long term debt/market capitalization.

Another option for determining possible buyback opportunities, according to Michelle Swartzentruber, a research analyst with Morningstar, would be able to identify companies that have enough cash left over to do buybacks even after paying off debt.

And a third option would be to look for stocks with strong balance sheets, strong sales growth and better-than-average dividend yields.

Even when the 24/7 news cycle is reporting doom and gloom, it doesn’t mean that every stock in the market is rubbish. As in any heap of rubbish, you can always find something valuable if you know where to look.

Good Investing,

Jason Jenkins

With the price of gold hanging in the upper stratosphere, investors are falling back in love with bullion.

The U.S. Mint reports that it already sold 115,000 ounces of gold in the first few weeks of this year alone.

And while Investment U’s Chief Investment Strategist Alexander Green maintains that gold will continue to slump through 2012, he does acknowledge that investors should hold around 5% of their assets in precious metals.

But choosing the wrong gold bullion coins can be a costly mistake. So it’s vital to own the right coin for your own personal investment goals.

In general, most people buy gold coins for three reasons: for investment, as collectibles and as a safe-haven. For each of these reasons, there are some gold coin options that are better than others. And in today’s article, I’ve outlined some of the best coin options available today for each reason to own gold.

Best Gold Coins for Investment

The best gold coins for investment are government-minted bullion coins with low premiums and high liquidity. On this stage, the American Gold Eagle is the model.

The U.S. Gold Eagle is the most recognized gold bullion investment in the world, with its gold content and purity backed by the U.S. government.

American Gold Eagles are legal U.S. tender and acceptable for precious metal IRAs. Eagles are minted in an alloy of 91.6% gold, 3.0% silver and 5.3% copper.

New investors are sometimes curious as to why Eagles aren’t .999 fine. But this 22k alloy is actually an important protective element of the Gold Eagle.

Pure 24k gold is a very soft and malleable metal. It scratches and dents quite easily. The Eagle’s 91.6% gold alloy helps protect against wear and tear, and thus helps retain the coin’s numismatic value.

And despite being minted in 22k gold, new investors are comforted when they learn American Eagles have a gross weight of 1.09 troy ounces (33.93 grams) – so they still contain 1 full troy ounce (31.10 grams) of pure gold.

The U.S. Mint produces Gold Eagles in 1/10oz., 1/4oz., 1/2oz. and 1-troy ounce denominations. The difference in the premiums on the different Eagle denominations can widely vary, with the smallest denominations carrying the highest premiums. So the full 1-troy ounce Eagles are the best for investment.

The premium on a 1-ounce American Gold Eagle is currently about 4.5% to 6.0%, depending on how many coins you purchase at once.

In the table below, I’ve laid out some current asking premiums for Gold Eagles (and two other bullion coins) from five online bullion dealers for you to compare.

There are several other gold bullion coins that are great for investment, too. As you can see in my table above, gold coins like the Canadian Maple Leaf and South African Krugerrand have lower premiums than the U.S. Eagle, and are still very highly recognizable around the world.

Other great gold bullion investment options include Austrian Philharmonics, Chinese Pandas, British Sovereigns and Mexican Libertads.

As I mentioned, the key to the best investment-grade gold coins are low premiums and high liquidity.

Gold Coins for Collectors

Since a collection is based on individual preference, there’s no way for me to say which specific gold coins are the best for you to collect. However, there are some major differences between third-party numismatic graders that collectors pay to evaluate their gold coins.

Collectors often want coin specimens as close to their original mint or proof state as possible. Third-party graders evaluate coins to determine their state of preservation. Graders then encapsulate coins in a hard plastic slab to protect the coin from damage.

While a small handful of these third-party coin-grading companies are perfectly legitimate and qualified numismatic experts, most are completely bogus. And in my opinion, for collectors looking to buy graded gold coins, there are only three third-party graders to consider:

• PCGS is one of today’s premier third-party coin graders. The company is a division of Collectors Universe (Nasdaq: CLCT), a leading third-party grading firm for high-value collectibles, including sports memorabilia stamps and numismatics.
• NGC is another very well respected third-party coin grader, whose primary owners are among the nation’s largest coin dealers.
• The third most well-respected coin grader is ANACS. Third-party coin grading was actually pioneered by ANACS – founded by the American Numismatic Association in 1972.

There’s no doubt that ANACS has a great reputation. It’s not a perfect metric by any means, but it’s been my experience that there’s a larger market for PCGS and NGC graded coins today, and they resell much better.

There are also many other third-party coin-grading services – but, as I mentioned, most are considered to be flat-out scams.

Dubbed “self-slabbers” or “basement slabbers,” individuals often try to misrepresent themselves as legitimate graders, or try to mimic the look of a tier-one grader’s slab. In a general scheme to garner higher prices, these individuals will typically over-grade, clean, or alter coins.

There are hundreds of self-slabbers trying to peddle their coins on eBay and other online auctions. Some of these guys go even as far as trying to mimic the names of legitimate companies. Names of self-slabbers include PNGS, NNC, NGCS, SGS, ACG and ANA. I recommend staying away from buying all coins from self-slabbers.

Safe-Haven Gold Coins

Some are worried (perhaps with good reason) that the U.S. dollar, as well as other fiat currencies, will ultimately collapse – leaving gold as the ultimate wealth asset. In their view, gold and silver could become be the preferred medium of trade in a post-fiat world, and perhaps the only means of barter. In other words, gold would be used as money.

Gold coins may be very valuable in a post-fiat, bullion-bartering world. But a 1-ounce coin isn’t divisible, and you may need to make smaller purchases. For this hypothetical case, fractional gold coins may be the best bet.

Most major gold bullion coins, including Gold Eagles, Krugerrands, Gold Maple Leafs, Libertads and Philharmonics, are offered in smaller denominations including 1/2oz, 1/4oz, 1/10oz and 1/20oz.

These fractional gold coins divide your wealth into smaller denominations, which could be used in a crisis scenario to make purchases.

Gold Coins to Avoid Altogether

Some companies – especially those that advertise on TV – use clever marketing techniques to lure uninformed buyers into impulse gold coin purchases. These advertisements often try to mislead buyers into thinking they’re buying something they aren’t.

One such company is National Collector’s Mint. You may have seen their commercials on television marketing several different coins, including this one:

Image Source: National Collector's Mint

In their television commercials, the company shows a real U.S. Mint-made American Gold Buffalo bullion coin and starts out saying:

“Look closely at history in the making. This $50 buffalo gold piece is the purest gold coin ever stuck by the U.S. government. It’s the first U.S. coin ever struck using .9999 (that’s four nine’s)   pure 24-karat gold.”

The company goes on to talk about the design, production and rising prices of the U.S. Gold Buffalo. And excluding the “history in the making” part, everything NCM says is true.

But then the commercial switches to the replica coin they want to sell you – which, for all intent and purposes, looks exactly like the real one. NCM then says:

“Now you can reserve your copy of the $50 Gold Buffalo, clad in 31 milligrams of pure gold.”

It’s actually pretty clever. If you’re not listening closely, you might hear that the coin has 31 grams of pure gold. That makes a full troy ounce. But look again. The coin is “clad” – in other words, plated – in 31 milligrams of gold.

This coin is similar to something you’d buy at a cheap souvenir shop. Thirty-one milligrams is equal to 0.001 ounces – worth $1.70 with gold at $1,700 an ounce. So there’s no wonder this beauty “can be yours for only $19.95.” And that doesn’t including shipping, handling, processing, insurance, destocking fee, restocking fee and whatever else they’ll try to stick you with. No thanks…

These coins are certainly not for investment or safe-haven. And their collectable value isn’t even very high, in my opinion. So I’d recommend staying away from gold-plated tribute coins altogether.

Last Word…

Just make sure identify your own personal investment goals before laying any money out. Once you have your personal goals clarified, carefully review all your options and avoid impulse buys.

Good Investing,

Luke Burgess

Like a hungry predator, investors are on the prowl for yield. Many quality companies that were yielding 4% or 5% a year ago now have dividend yields below 4%, as prices have been bid up on nearly any stock with a respectable dividend.

As a result, investors are forced to look in some more exotic places. Real estate investment trusts (REITs), business development corporations (BDCs) and especially master limited partnerships (MLPs) have all gained popularity over the past year.

One area that has been a bit overlooked is foreign dividend payers.

There are quite a few American depositary receipts (ADRs) that pay a decent dividend – often more than their American contemporaries. However, you need to keep a few things in mind.

The dividend isn’t always paid quarterly. Most American companies that pay a dividend do so on a quarterly basis. However, foreign companies sometimes pay only twice a year or even just once annually.

Currency fluctuations may alter the amount of the dividend per ADR that you receive. The company usually pays its dividend in the local currency. If you’re invested in a Brazilian company, management will think about and pay its dividend in terms of Brazilian reals, not dollars. Any yield consideration will be based on its share price trading on the Bovespa (the Brazilian stock exchange). Holders of the ADR will also receive a dividend, but it will be dependent on how much was paid in the local currency and the exchange rate.

A Brazilian company could keep its dividend payment constant from one year to the next, but if the real depreciates in price, you’ll get fewer dollars. If the real appreciates, you’ll receive more dollars.

Therefore, for investors who prefer companies with a steady history of dividend growth, foreign ADRs may not match those objectives perfectly.

But that doesn’t mean there aren’t interesting income opportunities in foreign markets. As long as you can handle the currency fluctuations and the irregular payments, the yields are attractive enough to make it worth your while to take a look at some.

For example, CSN (NYSE: SID) is the sixth-largest steelmaker in the world. Based in Brazil, it earned R$2.9 billion in the first three quarters of 2011 and paid R$1.9 billion in dividends. The company pays its dividend in May and is expected to yield about 6% based on the current price.

Another Brazilian company with a healthy dividend is CPFL Energy (NYSE: CPL), the country’s largest privately owned energy company, with 13% of the national market. Roughly 75% of CPFL’s revenue is regulated, which means the company’s cash flow is rather predictable. That should give shareholders confidence that their dividend is secure. As long as the Brazil’s economy continues to grow, so should its dividend.

CPFL generated R$2.3 billion in cash flow from operations over the last 12 months and paid R$1.3 billion in dividends. It’s expected to yield 5.5% on today’s price.

Don’t Forget to Pay Uncle Santos

Often, when you receive dividends from a foreign company, taxes will be automatically taken out of your dividend payment. Since you already paid taxes on those dividends to the foreign government, the IRS will not make you pay it again. In fact, they’ll give you a tax credit against your U.S. tax obligations.

So, if you earned $1,000 in foreign dividends and paid $250 in taxes to Brazil, for example, you would be entitled to a $250 tax credit on your U.S. taxes.

Of course, when it comes to taxes, be sure to consult a professional tax advisor with any questions.

There are plenty of other foreign companies with juicy yields. You have to do a little bit of work in order to understand the story. But to feast on yields that in some cases are double what their American counterparts are paying, it’s worth putting in a little elbow grease. Your portfolio will thank you.

Good Investing,

Marc Lichtenfeld

[Editor's Note: This article was originally published by our friends over at Wall Street Daily. Matt Weinschenk covered an intriguing aspect of Facebook's IPO that nobody else is really talking about. I hope you enjoy.]

Now that Facebook has filed for the largest internet IPO in history, all anyone can talk about is what valuation the social networking giant deserves.

With the IPO months away, I’ll take a different tact for today… and that is, “What do suppliers and Facebook partners stand to gain the most from the behemoth’s extra $5 billion in cash?”

After all, IPOs are ostensibly a way to raise money to invest in growth. So where exactly is Facebook’s future growth and who will get paid to make that growth happen?

According to the S-1 filing, Facebook doesn’t have specific investments planned:

“We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however we do not have any specific uses of the net proceeds planned… We may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets.”

Of course, there’s an entire economy of companies trying to make money off of Facebook’s boom.

But they aren’t trying to earn checks from Facebook itself. Rather, they’re trying to extract money from its users. And Facebook – let’s be clear – isn’t going to spend a dime of its cash to attract users.

Facebook already has users. Lots of users. What it needs is innovative ways to handle users efficiently.

Such a reality leads us to the one place where Facebook will no doubt be investing: efficient data handling.

Powerful Gains

Storing conversations… puppy pictures… “likes”… interests… and the private details of all those friends amounts to a massive data load.

Facebook data consumes at least 60,000 servers and over 50 million operations per second. The company presently spends about $30 million per year leasing data operations from Digital Realty Trust (NYSE: DLR).

But after years of leasing facilities, Facebook started running the network from its own $210-million datacenter in Prineville, Oregon in April 2011.

Months later, it started building a second datacenter at the same facility. And according to the IPO filing, “We are investing in additional Facebook-owned datacenters in the United States and Europe.”

At $200 million-a-pop, that’s at least $1 billion in spending.

Louis Basenese has written before about Facebook’s preferred datacenter builder, Fusion-io (NYSE: FIO).

The Prineville facility built by Fusion-io is a wonder of engineering. But its most astounding advances come from power management.

Even though it uses more electricity than 10,000 households, Prineville is the most efficient datacenter to date.

The average datacenter runs at a 1.7 power usage effective rate. But Facebook’s facility runs near 1.05 – close to the perfect ratio of 1-to-1. Such metrics allow Facebook to save 38% on energy costs, which amounts to millions added to the bottom line.

So who’s the genius behind this incredible efficiency? California-based Power-One (Nasdaq: PWER).

Stellar Fundamentals

Power-One earns 31% of its revenue from power sources like the one it makes for Facebook. The rest comes from its Renewable Energy Division, which manufactures power inverters for solar energy. As a result, the stock trades mostly in lockstep with the solar market – making it mouthwateringly cheap.

For a few years now, I’ve seen shares of power-inverter manufacturers for solar unfairly dumped by investors – the result of falling solar cell prices. If anything, cheap solar cells should increase the installation of inverters, which haven’t dropped in price.

When you consider that the solar-inverter market is estimated to grow from $5 billion to $7.5 billion over the next three years, the turnaround story almost writes itself.

Over the last two years, Power-One has increased sales by 145% and grown its patent portfolio to over 116 patents. It also started a lucrative licensing program to supplement manufacturing.

The company’s return on equity is 49%. And 20% of shares are held by insiders.

Despite such strong fundamentals, however, the stock is ripe for the picking at only 4.4 times trailing earnings and 1.28 times book value. What a value play!

While Facebook partner, Zynga (Nasdaq: ZNGA), jumped 22% on the day of the IPO filing, Power-One has yet to see a price surge from its Facebook connection.

Bottom line: The high-profile custom power supply, along with Facebook’s plan to continue expanding datacenters, suggests that Power-One’s shares will trade well north of its current $4.50 per share price.

Ahead of the tape,

Matthew Weinschenk

Bond investing is the answer to most investors’ needs; not their get-rich-quick dreams, but their real needs. So, you’d think the bond market would be doing everything possible to get these survivors of the stock market into bonds…

But they aren’t!

In fact, the bond market seems to do everything possible to keep the small investor out.

The walls, buying restrictions and ridiculous pricing structure of bonds are set up to keep the little guy out of individual bonds and in bond funds. Bond funds that have all kinds of flaws; hedging and very long average maturities, the implications of which most investors don’t fully understand.

But bond investing can have some real advantages. They’re custom made for investors who:

• Want returns above what savings or CDs are paying
• Are tired of the wild fluctuations of the stock market
• Those who can’t afford any more of the losses they have incurred in the past 10 or 12 years
• Those who need more reliability and predictability in their investments

But plenty of problems stand in the way of the novice investor who’s simply trying to buy a bond:

Lack of Exposure

Unlike most investments, there are no 24-hour television networks that have a constant flow of bond investing ideas. And most bond information that does exist consists of the 10-year Treasury, overnight rates and confusing quotes about rising and falling rates, Treasury auctions and prices.

Frankly, the information available from all sources, The Wall Street Journal and Barron’s included, is useless! I don’t think I’ve ever seen a news story about an upcoming corporate bond offering, and if there was one, the offering was sold exclusively to institutions.

Lack of Information

Second, just getting to a page on an online broker’s site to invest in bonds is ridiculously difficult.

Go to any broker’s website and click on “Trade Bonds,” and you’ll get something that looks like this:

What you’re supposed to do with this chart is beyond me.

To get any sort of usable information and know where to click to get to the next page (it’s never clearly marked), you must fill in as much information as the U.S. government wants from folks joining the military.

Here’s a partial list of the information that’s needed:

• Cusip
• Frequency
• Maturity
• Coupon
• Yield
• Price
• Quantity
• Current Yield
• Bond
• Bill
• Notes
• Zero Coupon
• Indexed

If the average guy knew this much about bond investing, he wouldn’t need a broker at all.

Even if you can come up with all the information necessary to find some bond possibilities, you usually end up with a list of thousands of bonds and no information about any of them other than their cusips and descriptions.

Lack of Access

Can you imagine having this much trouble trying to find a stock to buy? It’s absurd – but absurd by design – designed by the market to make small-time bond investing virtually impossible.

You see, the bond market doesn’t want the small guy. They only want the big money, and they price their bonds accordingly.

If you buy 10, better yet 20 bonds or more, you have your pick of any type of bond and at the best price. But how many people have $20,000 to invest in each trade? The answer is: very few.

Try to buy five, or just one bond, and the most-likely answer you’ll get from a bond desk is: “We can’t sell one bond,” or “It isn’t worth it to you to buy so few.”

Baloney! What they really mean is that they don’t make enough money on a trade that small to make it worthwhile to them.

Plus, the small bond investor is annoying to the gods of the bond desks. The bond gods don’t like the little guy. They do annoying things like ask questions and expect the people on the bond desk to speak English, not the tree-fort, insider-only lingo they have concocted.

Better Returns without Leveraging

The fact is: You can buy one bond.

Yes, it’ll cost a little more and you’ll get a little less if you sell it before maturity. But most stockbrokers know so little about bonds, they don’t know this, either.

And fortunately, the increase in buying price isn’t so great that it makes a significant difference to the average guy. A bond desk will make the increased cost for small bond orders sound like the end of the world, but do the math and it isn’t that bad.

When you buy individual bonds instead of bond funds, you can get better returns without any leveraging. Leveraging is one of the biggest unknowns to bond funds investors, and it will come back to haunt them.

Investing in individual bonds also allows you to buy many small positions in many different industries. This has the same effect as diversifying in your stock portfolio.

As you diversify, you also have the opportunity to spread your maturities over a much shorter range, preferably less than a seven-year average. The best part is you have control of the maturities you hold and you aren’t bound by a bond fund’s prospectus – which can cost you a lot of money when rates run up.

Buying many small, ultra-short bond positions in this market is the only way you won’t get crushed when rates turn back up. Even though we don’t expect any real uptick in rates for about three more years, you can’t risk holding long maturities (in excess of a seven year maturity). Long-term bond investing isn’t prudent!

The Oxford Club is a good place to begin to learn about the benefits of individual bonds. They have a list of brokers called the Pillar One Partners. Many of these brokers will buy as few as one bond and all of them have met our standard of excellence and have been a part of the Club for many years.

Bond investing can be the answer to almost all of the needs of the average person. It may take a little effort to get to the same level of comfort you feel with stocks, but it’ll be worth it.

Good Investing,

Steve McDonald

• The unemployment rate has dropped for four straight months on news that U.S. employers added 200,000 jobs in December.
• For the year, 1.6 million non-farm jobs were created (1.9 million total, less 280,000 government jobs lost).
• The unemployment rate dropped to 8.5%, the lowest rate since February 2009.
• The hourly workweek rose from 34.3 to 34.4. Those underemployed (such as part-time workers) dropped from 15.6% last month to 15.2%.
• The long-term unemployed, those jobless for 27 weeks and over, lowered to 5.6 million from 5.7 million. This group represents 42.5% of the total unemployed
• Gains for the month were particularly strong in transportation, retail, manufacturing, healthcare and mining.

I think it’s safe to say that these numbers were received with guarded optimism. But a better question is: What does all this mean?

The Message Inside the Message

In general, increases in employment means that businesses are hiring and that these businesses are healthy and growing.

Thus, the more people newly employed now have money to spend on goods and services. And this ladies and gentleman is called growth – that all-illusive ingredient missing from our economy over the past few years.

While the overall number of jobs added or lost in the economy is big, there’s other information involved in the report that can weigh on financial markets:

• The unemployment rate as a percentage of the overall workforce. This is an important part of the report, as the amount of people out of work is a good indication of the overall health of the economy.
• Sectors that increased or decreased in jobs. You can now see which sectors of the economy may be primed for growth, or are hurting.
• Average hourly earnings. This is an important component because if the same number of people are employed but are earning more or less money for that work, this has the same effect as if people are added to or subtracted from the labor force.
• Revisions of previous nonfarm payrolls (NFP). The NFP number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the farming industry – releases.

Don’t Draw Too Many Conclusions From One Positive Report

For example, the gains in the transportation sector, which were concentrated in courier and messenger services, may be a seasonal blip, experts say. That could be the same for job growth with retail hiring in December.

Overall, investors shouldn’t invest in a sector based on one month of positive job growth, says Mark Lamkin, the CEO of Lamkin Wealth Management. The more important point is that a fairly wide range of sectors added jobs, which suggests the improvement wasn’t an anomaly, but a sign of real economic growth, Lamkin says. “This type of employment report sets the stage for 3% growth in GDP,” he says.

Is jobs data a one-stop shop to market insight? No, but a few months of compiled jobs data might be.

Good Investing,

Jason Jenkins

Last week’s Fed statement was a little more forthcoming than normal…

Chairman Ben S. Bernanke said The Federal Reserve is considering additional asset purchases to boost growth after extending its pledge to keep interest rates low through at least late 2014.

“The Committee expects to maintain a highly accommodative stance for monetary policy,” the FOMC said in a statement. “Economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The FOMC statement went on to say that policy makers are “prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate-consistent rate.”

It seems the table is being set for QE3 in the very near future because this statement steered away from growth – contrary to past reports.

Fed Not So Bullish on the U.S. Economy

Here’s what has the Fed worried:

• Growth estimates have been lowered for 2012 and beyond. The Fed lowered its forecast for growth this year to 2.2% to 2.7%, down from a projection of 2.5% to 2.9% in November. It predicted the economy will expand 2.8% to 3.2% next year, down from a previous forecast of 3.0% to 3.5%.
• The Fed’s projected range of 8.2% to 8.5% means it doesn’t expect the unemployment rate to get much better this year. Even by 2014, the Fed expects this rate to have improved only to between 6.7% and 7.6%.

Inflation Not Expected to Rise

The Fed also offered an official target for consumer price inflation – 2% a year – the level that was long considered the Central Bank’s implicit goal. The Fed’s congressional mandate includes maintaining rough price stability, allowing neither runaway inflation nor a potentially devastating cycle of deflation that could push investors and consumers out of the market:

“Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability,” the panel said in a statement. It also enhances “the committee’s ability to promote maximum employment in the face of significant economic disturbances.”

 Where Will the Money Go?

Look to the BRICs. The already-emerged markets of China and Russia should do quite well.

“QE3 is very, very good for emerging markets because it means there’s lots of cash in the system,” says Mark Mobius, who oversees about $40 billion as Executive Chairman of Templeton’s Emerging Markets Group, said in a phone interview from Bangkok on Jan. 27. “I would expect more institutional flows into stocks, generally, and of course, emerging markets as well.”

Valuations in developing nation stocks are “attractive, almost globally,” Mobius said. He continued on to say “rallies should continue” as markets have “already anticipated” a global economic slowdown. “Emerging markets, even this year, are growing at four times that of developed countries.”

Good Investing,

Jason Jenkins

Last Thursday, Swiss miner Xstrata (LSE: XTA) and commodities trader Glencore (LSE: GLEN) announced a potential blockbuster merger that would shake up a few of mining’s biggest industries.

According to Reuters, the deal is set to total $80 billion. And the newly combined firms “would rank as the world’s largest thermal coal exporter, the largest zinc producer and third-largest copper miner…”

Many analysts are already predicting a jump in the price of coal, copper and zinc in the coming weeks.

But the all-share merger would also disrupt another big mining industry… iron ore. And investors will want to pay close attention.

Iron Ore Equals Big Profits

Over the past 10 years, iron ore has had a run even gold can’t touch.

From August 2001 to August 2011, prices jumped 1,266%. Gold jumped 566% comparably.

Today, about 70% of iron ore traded in the world is accounted for by three companies – BHP Billiton (NYSE: BHP), Vale (NYSE: VALE) and Rio Tinto (NYSE: RIO). And they’re raking in massive profits.

Reuters reports, “Iron ore sells for around $140 per tonne to China… and only costs about $20 to $30 per tonne to mine.” China’s steelmakers aren’t very happy about paying such high prices. But since October 2011, they’ve had a little bit of a reprieve.

The “big three” have flooded the market with iron ore supplies, driving the price lower, to around $120.

As mining.com explains, the iron ore’s big players are “concentrating on building market share rather than maximizing prices. This way the giants drive high-cost producers out of the business.”

If Glencore and Xstrata don’t want to get left out in the rain, they should make this merger happen.

And there are two main reasons it’s more likely to happen than not.

Glencore and Xstrata Make Sense

First, Glencore already owns 34% of Xstrata. So both companies already understand the risks and advantages this merger carries. And it should make it that much easier for them to agree on a final price.

Second, Xstrata has been trying to gain a stake in the iron ore industry for years. In 2009, the company attempted to purchase Anglo American (LSE: AAL). The deal would have made Xstrata the fifth-most-profitable company in the iron ore market. But talks fizzled and the deal fell through.

Now the proposed merger between Glencore and Xstrata has reignited speculation of another takeover attempt coming for Anglo American, the world’s fourth-largest iron ore producer.

A few other companies also stand to be bought up if a deal is reached, as well.

Iron Ore M&A Heating Up

First Quantum Minerals (LSE: FQM), Fortescue Metals Group (PINK: FSUMF) and Freeport McMoRan Copper & Gold (NYSE: FCX) are also being seen as potential targets.

But Freeport may also be too expensive for Xstrata and Glencore and could end up as more of a competitor than potential takeover.

Only time will tell. But this is one development that should begin unfolding in just the next few weeks.

Good investing,

Mike Kapsch

What if you could reach total financial independence in just four minutes a day?

If that sounds unrealistic, stay tuned. Because in the weeks ahead, our panel of experts at Investment U is going to show you exactly how it’s done.  Best of all, it won’t cost you a dime. After all, this service is free.

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Proven Principles Don’t Change

We do something virtually no one else does. Investment U provides daily commentary and analysis about today’s fast-moving financial markets, but always with the objective of tying our advice to timeless investment principles.

Economies expand and contract. Currencies rise and fall. Governments come and go. Markets zig and zag. But proven investment principles don’t change.

Yet the sad fact is that most investors have never learned them. They’re trying to ace Trigonometry without having mastered Algebra 1. Why don’t you have the crucial knowledge you need?  Because schools don’t teach it and telling the unvarnished truth isn’t conducive to selling high-priced financial products.

As Vanguard founder John Bogle likes to say, “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.”

We don’t have conflicts like that here. We don’t charge commissions or fees. We don’t want to “capture your assets.”

Yes, Investment U offers premium services to subscribers. (We couldn’t support a free e-letter forever if we didn’t.) But there is never any obligation to buy and any purchase comes with a free-trial period and a money-back guarantee.

So stick with us. In the weeks ahead, we are going to reveal big dividend plays, high-yield bonds, undervalued currencies, ultra-cheap commodities, risk-reduction techniques, and proven strategies to prevent losses, protect gains and navigate today’s volatile investment environment.

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Good Investing,

Alexander Green