Ian Cooper - Angel Publishing

Watch for MA and V Bulls

Keep an eye out for bullish moves in MasterCard and Visa. Earnings estimates for the pair were raised by Morgan Stanley on the belief that they'll "enjoy low single-digit or less annual growth in their spending for advertising and marketing."

As we've said, if you must own a credit card stock, buy V or MA. They do not hold consumer debt. They simply process the cards.

Card companies like American Express on the other hand deals directly with credit. It has to worry that as of November 2007, credit card debt "soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October" and is still on the rise."

Or take a look at companies like Capital One, where the stock fell 36% over the last 12 months. Sure, it may be tempting to bottom fish. But things are likely to get worse. Credit card delinquencies are on the rise, which could lead lenders to lend less, which could eventually hurt profits.

While delinquencies have yet to reach the heights of the 2001 to 2003 downturn, the Street does expect for it to happen later this year. It's already forcing the likes of Capital One to increase loan-loss provisions on quarterly income statements, which can reduce profit.

Again, if you must buy a credit card stock or option, buy V or MA.

For further options opportunities and updates, visit Options Trading Pit.

The Quarter to Forget

...Next year could be worse.

Sure, we've said this time and time again. But we want to make sure you're well prepared, and as far away from financial stocks, consumer stocks, and housing stocks, as possible. And if your advisor advises that you buy any of the aforementioned stocks, fire them.

As we've said in the past, "It shouldn't come as a shock when mountainous Option ARM and Alt-A loans begin resetting and the second leg of the credit crisis begins. It's estimated that only 60% of Option ARM borrowers make only minimum monthly payments. Others estimate that up to 80%. Say a borrower makes minimum payments on a $600,000 loan. That loan could easily be a $750,000 loan within two years."

And we're supposed to be shocked when we're knee deep in another crisis? People like Meredith Whitney, who just placed Merrill Lynch, Citigroup, and UBS AG in the "underperform" category, get it.

Even Wachovia gets it. The bank just announced that Q3 would be a "quarter to forget" for investment banks, cutting estimates for Goldman Sachs, Lehman Brothers (which may get help from a Korean bank), and Morgan Stanley.

And if you're standing in the wrong place (housing, financial and consumer stocks) at the wrong time (now and through 2012), you will lose your money. Wachovia and Whitney are part of a long list of Street analysts, including ourselves, who see another tough quarter and year for U.S. investment banks, nailed by write downs across fixed income assets in a weak operating environment.

But there's a simple way to profit from it. Simply buy put options in any of the above mentioned sectors, and you'll do just fine. In fact, we're playing those very sectors in Options Trading Pit.

Crystallex International Corp.

"Ian, should we continue holding the Crystallex (KRY) position you recommended in June?"

Having just received that question, we wanted to answer it publicly in case you had a similar question.

The shortest, quickest answer is yes. The longer answer:

There's still no word on Crystallex's future in Venezuela. But the company is reporting that a team led by the Vice Minister completed a site visit of the Las Cristinas project.

"While it's early to predict the results of the process, we are encouraged by the progress made and the completion of the site visit, and remain optimistic about a prompt and successful completion of the process," says Crystallex's Chairman and CEO.

And, we remain as bullish as the CEO.

And if you're new to the KRY stock, or missed what we reported in June 2008, here's more.

"Mid-May 2008, all looked grim for shares of Crystallex (KRY), as Venezuela pulled the plug on the company's Las Cristinas property. Production was expected to begin there by 2009.

At the time, Venezuela refused to grant a permit to KRY for the Las Cristinas mine after deciding not to grant licenses for open-pit mining for gold, diamonds and coal. Instead, they opted to step up oversight on the mining industry. Citing ecological damage for the move, Venezuela dashed KRY's hopes to mine in the nine million acre reserve.

But that was in May.

Today, shares of Crystallex are a buy after the Venezuelan government said it was willing to reconsider the cancellation of the permit for the Las Cristinas project. In this release, the company said it was invited to a meeting by representatives of the Ministry of the Environment, and was told that possible modifications of the Las Cristinas project could result in an issued permit.

Modifications included further optimizing the social project in the area, mitigating the impact of open vein deposit in the affected areas of the Imataca, improving the remediation plans at the end of the mine life as well as remediation of the existing environmental damage caused by illegal miners.

Even better, from the minutes from a National Assembly committee meeting, Crystallex learned that representatives from the Ministry of Mines "confirmed support" for the company.

But nothing is set in stone just yet. So far, the news is good for the company and shareholders of the beaten down stock. Buy it. Hold it. And sit tight. We'll keep you up to date.

Good Investing,

Ian L. Cooper
http://www.goldworld.com

P.S. Options Trading Pit Has Launched

With the fall of the UK economy, subprime, Alt-A, and banking institutions, the major breakdown of the Dow... and my latest predictions of US and global economies spiraling out of control, the markets in the coming months will offer some incredible investment opportunities.

While some of you may know me from past options trading services, my 4,500% cumulative gains of 2007, and gains such as these...

Fremont General September 2007 12.50 puts - 291% in 16 days
Lennar January 2008 25 puts - 279% in 40 days
Pulte January 2008 15 puts - 224% in 40 days
New Century January 2008 25 puts - 214% in 16 days
Centex January 2008 25 puts - 207% in 40 days
Countrywide January 2008 27.50 puts - 203% in 69 days
Thornburg October 20 2007 puts - 188% in 6 days
MGIC Investments December 35 puts - 175% in 80 days
Capital One January 2008 65 puts - 160% in 59 days
Accredited Home September 2007 7.50 puts - 141% in 4 days
Hovnanian November 2007 17.50 puts - 136% in 13 days
Radian Group August 2007 60 puts - 122% in 19 days
Standard Pacific September 2007 15 puts - 111% in 2 days
Autonation January 2008 20 puts - 105% in 49 days
New Century January 2008 25 puts - 89% in 1 day

...we've decided to launch Options Trading Pit, looking to profit from the market's demise as well as its upside.

But know this... We're not your typical options trading letter. We use an aggressive trading approach... taking gains in as little as days to months using options and LEAPS to fully maximize gains.

Just ask yourself... Will you have a problem profiting as others suffer? And will you have a problem raking in profits from oversold gems?

If the answers are no... click here for more.

UK Economic Outlook

Over the last few months, we've talked extensively about the UK economic outlook, even offering two ways to profit from the coming downfall.

On March 29, we recommended buying the September 2008 CurrencyShares British Pound Sterling Trust 200 put (FXBUR) around $5. Today, it's a sell at or near its current price of $13.50 - a gain of 170% in just months.

At the time, even George Soros was reportedly short the pound again.

Then, on June 10 we recommended buying the iShares MSCI United Kingdom Index (EWU) to play further UK downside. Had you bought the October 23 put (EWUVG), for example, around $1.90, you're up about 111% in just months.

And if you're interested in similar gains like those above, check out our newest and most aggressive options service, Options Trading Pit.

But I digress...

Who didn't see the UK economy crumbling?

The UK boasted an annual GDP growth rate of 2.5% for years, with some calling for 3% growth in 2007. But that was before the credit crunch, a crippling housing market, and a cutback in consumer spending. Worrisome, UK consumers depend more on credit that US consumers do, drowning the economic view of the UK economy into the River Thames.

It was November 2007 when the Bank of England's chief economist warned that the effect of the credit crunch on banks may only be the tip of the iceberg.

But who didn't see this coming?

In the early days of February 2007, we saw the beginnings of a sub-prime meltdown that would soon wreck the future of housing, easy credit, and people who bought homes they couldn't afford. Now, months later, homebuilders and lenders are knee-deep in debt. And there's no real chance for a housing turnaround until 2010, at the earliest.

The UK Housing Crisis

But just as the U.S. has struggled for some control over sub-prime, Britain had to get aggressive or risk a tumultuous economic future. In the UK, more than 90% of all mortgages are adjustable-rate or floating-rate mortgages. More than 1.5 million homeowners are considered sub-prime, and another four million are seen as high risk because of imperfect credit histories.

And, as we've seen in the U.S., the ARM resets are having a negative effect on British consumers, sending the housing market into a U.S.-type tailspin.

Is it any surprise that UK banks felt the pressure, too? They wrote off more than $18 billion in bad consumer debt last year alone. It was the sole reason I shorted shares of Northern Rock (NRK.L) at about 700, to watch it crash and burn under 120.

And there's still the fallout from falling home prices, and rising mortgage payments. The UK Financial Services Authority, for instance, says (as reported by the Wall Street Journal), "homeowners, whose monthly mortgage payments are resetting this year could face an increase of $411, at a time when they are already digesting a sharp rise in energy and food costs."

But behind the scenes the availability of cheap debt was coming back to haunt the UK.

These days, the Bank of England is reporting that mortgage applications have fallen about 50% over the last year to levels not seen since the early 1990s.

Even the Halifax house price index recently fell more than 6%. And house price declines like this only happen when the economy is in recession and unemployment is rising.

The other reason for house price declines is when there's a loss of monetary policy control. And that's happening as a result of the credit crunch, which has lessened the availability of credit.

Outlook on the UK Economy: This Recession's Only Getting Worse...

With rising interest rates, and the value of homes declining, more UK homeowners who had little capital to begin with are finding themselves in hot water. Now that the bubble has burst, a reported 37,740 UK homeowners, between March and June 2008, according to Spiegel.de, lost their homes to the bank.

Worse, UK home prices posted the biggest yearly decline since 2002, as banks cut off mortgage lending, deepening the crisis. The average selling prices fell close to 5 percent in August, year over year.

And now there are worries of a technical recession, according to a Bank of England forecast. "It is bound to be the case there will be a quarter or two of negative growth," reported the Bank in its outlook.

But while interest rates should be cut to counter recessionary risk, doing so plunges consumers deeper into inflation. Consumers are already struggling with higher food, mortgage and energy costs, just as we are in the U.S. In the UK, inflation has hit 4.4% and is on the rise.

That's on top of news that jobless totals could rise another 300,000 to more than two million.

Even the IMF is delivering a "grim" outlook for the UK, cutting growth forecasts to 1.4% in 2008 from the 1.8% predicted in May, and warning the UK Prime Minister that the budget deficit needs to be controlled.

So How Do You Profit from the UK Economic Downfall?

You buy long dated puts on the pound and the British ETF... and sit tight for the next few months.

A year ago, no one thought it would come to this. Northern Rock and Bradford & Bingley were sailing along nicely, packing mortgages. The Treasury and the Bank of England had no reason to be concerned. Consumers were happy. The economy was growing well, and the Bank was raising rates to slow things down. Now... well, as Bob Dylan sang, "The Times They Are A-Changin'":

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

Longing Oil on Gustav Potential

Packing 90 mph winds, Hurricane Gustav is expected to make landfall in Haiti, and could eventually hit oil rigs and refineries in the Gulf of Mexico. If it makes that move into the Gulf, we could be looking at a devastating Category 4 or 5 storm with the capability of severely disrupting oil supply.

You may remember that crude oil production plunged, as prices skyrocketed, when Katrina and Rita nailed refiners and platforms in the Gulf in August and September 2005. Katrina shut down 95% of offshore output in the region.

We're already hearing that Royal Dutch Shell could start evacuating non-essential staff from the Gulf as early as Wednesday.

But there is a way to profit from it.

On news of the hurricane and on oversold conditions, we believe natural gas has bottomed, and setting up for reversal. The trading rule of thumb with natural gas is to buy in March, and sell at the end of July. Then, buy in August and September, and sell at the end of December.

So we're buying now.

UNG, for instance, is technically extremely oversold based on MACD, which bottomed out and is showing signs of reversal.

Crisis Investing

Note: As part of our ongoing educational Wealth Daily series, including How to Invest in LEAPS, How to Invest in Options, and Lockup Expirations, I wanted to bring your attention to the topic of Crisis Investing. Enjoy.

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After the December 2007 assassination of Prime Minister Benazir Bhutto, the Karachi Stock Exchange plummeted along with Pakistan stocks... with a delay caused by a government suspension of trading.

On the market's reopen, Pakistan's financial markets were plunged into economic and political uncertainty, as fears of waning foreign investor sentiment raged.

But where there's crisis, there's wealth.

It's known as "blood in the streets investing" or "crisis investing."

While the investing approach may seem like a cold, heartless, cheap way to make a buck, it works. As the masses are selling, those who can stomach the wreckage step in and buy quality companies at significant discounts.

Take the unfortunate Bhutto assassination, for example. Investors waited for the news to be fully disseminated, and for the news to begin tapering off, at which point, they bought the damaged stocks, and waited for a recovery.

You see, crisis breeds opportunity, and it's been exemplified many times. Again, let's look at Pakistan stocks following the Bhutto assassination:

· Had you bought MCB Bank (MCBBI) for example after a fall from $14 to $12, you stood to profit on the recovery from $12 to more than $15.

· NetSol (NTWK) fell from $2.75 to about $1.75, only to recover from $1.75 to $2.50.

· Pakistan Oil & Gas Development (ODVCI) fell from $21 to $18.50 only to recover to $22 shortly thereafter.

History of Crisis Investing Opportunities

In 2007, for example, the Bovespa sold off and later recovered based on the market's absorption of U.S. rate hike fears. Those who sold at or near the bottom of the sell-off missed the opportunity to profit as the IGBC rose 402.03 points, or 6.5%, two days later, and to pre-fear levels a year later.

In 2001, for example, severe political and economic crises stripped 50% off the Turkish lira, as hundreds lost their jobs. But had you bought the "crisis investment" opportunity, buying shares of strong, but beaten-down companies, you'd have made a small fortune. Turkcell, for example, plunged from $24 to $1.50 only to recover to $16.52 following the crisis.

Even George Soros has used crisis investments to his advantage. He made a billion dollars in one day playing England's Black Wednesday currency crisis.

Truth told... When crises, such as Bhutto's assassination, occur, be prepared to buy. Crisis investing may sound cold, but it's proven to be profitable.

How To Invest in Post- Musharraf Pakistan

Faced with growing threats of impeachment by the ruling coalition government, Musharraf gave in and announced he was stepping down. "After viewing the situation and consulting legal advisers and political allies, with their advice I have decided to resign," Musharraf said. "Please accept this decision. I am not thinking on personal levels, but Pakistan first. Take care of Pakistan."

And it was no surprise when Pakistani stocks flew on news that President Pervez Musharraf was stepping down. We had a crisis over Musharraf and political turmoil. We had our opportunity to buy on Musharraf's announcement. Crisis bred an opportunity.

So it came as no surprise when the Karachi Stock Exchange jumped about 5% to 10,719 on the news. Investors were buying the opportunity on the expectation that the change would end political deadlock

While there's still time to buy the post-turmoil stocks we mentioned above, the rally's sustainability will depend on who replaces Musharraf and how the fiscal policies would be resolved.

Crisis investing - you can buy the whole seat, but you'll only need the edge.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. Options Trading Pit Has Launched

While some of you may know me from past options trading services, my 4,500% cumulative gains of 2007, and gains such as these...

* Fremont General September 2007 12.50 puts - 291% in 16 days
* Lennar January 2008 25 puts - 279% in 40 days
* Pulte January 2008 15 puts - 224% in 40 days
* New Century January 2008 25 puts - 214% in 16 days
* Centex January 2008 25 puts - 207% in 40 days
* Countrywide January 2008 27.50 puts - 203% in 69 days
* Thornburg October 20 2007 puts - 188% in 6 days
* MGIC Investments December 35 puts - 175% in 80 days
* Capital One January 2008 65 puts - 160% in 59 days
* Accredited Home September 2007 7.50 puts - 141% in 4 days
* Hovnanian November 2007 17.50 puts - 136% in 13 days
* Radian Group August 2007 60 puts - 122% in 19 days
* Standard Pacific September 2007 15 puts - 111% in 2 days
* Autonation January 2008 20 puts - 105% in 49 days
* New Century January 2008 25 puts - 89% in 1 day

...we've decided to launch Options Trading Pit, looking to profit from the market's demise as well as its upside.

But know this... We're not your typical options trading letter. We use an aggressive trading approach... taking gains in as little as days to months using options and LEAPS to fully maximize gains.

Just ask yourself... Will you have a problem profiting as others suffer? And will you have a problem raking in profits from oversold gems?

If the answers are no... click here for more.

"The Worst is Yet to Come..."

If I hear one more banking CEO reference baseball metaphors for how deep our financial crisis really is, I'll scream. Truth is - we're no where near finished with the downturn. Honest.

Smart analysts like Meredith Whitney know this. I know it. And you know it. It's just the banking world and the naïve that actually believe we're nearing a market bottom.

Richard Fuld, for example, once told us the worse of the crisis is "behind us."

JP Morgan Chase's Jamie Dimond believed the market debacle is "maybe 75 percent to 80 percent over."

Remember when the Merrill Lynch CEO said the subprime crisis was "reasonably well contained"?

Or when FDIC Chairman Sheila Barr said we're in the 7^th inning?

Or when Morgan Stanley said we're in the 3^rd inning?

Or even when Morgan Stanley CEO John Mack says the 8^th inning... maybe even top of the 9^th?

Truth is we're lucky if we're in the top of the 6^th inning of a double-header.

But truth be know, "The worst is yet to come in the U.S.," according to Kenneth Rogoff, former chief economist at the IMF.

From Bloomberg.com:

"Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund."

"The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''

"The U.S. housing slump has triggered about $500 billion in credit market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm. Bonds of regional banks such as National City Corp. and Keycorp are under pressure on expectations of more fallout. Rogoff, 55, said the government should nationalize Fannie Mae and Freddie Mac, the nation's biggest mortgage-finance firms."

"Freddie Mac and Fannie Mae ``should have been closed down 10 years ago,'' he said. ``They need to be nationalized, the equity holders should lose all their money. Probably we need to guarantee the bonds, simply because the U.S. has led everyone into believing they would guarantee the bonds.''

"Banks repossessed almost three times as many U.S. homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent, according to RealtyTrac Inc., an Irvine, California-based seller of foreclosure data. U.S. builders broke ground on the fewest houses in 17 years last month, according to a Bloomberg News survey."

"Rogoff told a conference in Singapore today that the credit crisis is likely to worsen and a large bank may fail, Reuters reported earlier. He was the IMF's chief economist from August 2001 to September 2003."

"Like any shrinking industries, we are going to see the exit of some major players,'' Rogoff told Bloomberg, declining to name the banks he expects to fail. ``We're really going to see a consolidation even among the major investment banks.''

"The only way to put discipline into the system is to allow some companies to go bust,'' Rogoff said. ``You can't just have an industry where they make giant profits or they get bailed out.''

Oh, and don't forget that Option ARM resets, which will be worse than subprime, is right around the corner.

"It shouldn't come as a shock when mountainous Option ARM and Alt-A loans begin resetting and the second leg of the credit crisis begins.

Alt-A loans were given to borrowers with credit scores of between 620 and 700, and included the option of interest-only loans, option ARMs, and no documentation loans that required little if any documentation for loan approval. Ninety percent of those that got an Option ARM in 2006 provided little or no documentation.

Ninety percent!

And it's estimated that only 60% of Option ARM borrowers make only minimum monthly payments. Others estimate that up to 80%.

Say a borrower makes minimum payments on a $600,000 loan. That loan could easily be a $750,000 loan within two years.

And we're supposed to be shocked when this problem ends in the second credit crisis?"

I'd love to hear what you think. You can leave a message below.

Options Trading Pit Has Launched

Options Trading Pit Has Launched

While some of you may know me from past options trading services, my 4,500% cumulative gains of 2007, and gains such as these...

Fremont General September 2007 12.50 puts - 291% in 16 days
Lennar January 2008 25 puts - 279% in 40 days
Pulte January 2008 15 puts - 224% in 40 days
New Century January 2008 25 puts - 214% in 16 days
Centex January 2008 25 puts - 207% in 40 days
Countrywide January 2008 27.50 puts - 203% in 69 days
Thornburg October 20 2007 puts - 188% in 6 days
MGIC Investments December 35 puts - 175% in 80 days
Capital One January 2008 65 puts - 160% in 59 days
Accredited Home September 2007 7.50 puts - 141% in 4 days
Hovnanian November 2007 17.50 puts - 136% in 13 days
Radian Group August 2007 60 puts - 122% in 19 days
Standard Pacific September 2007 15 puts - 111% in 2 days
Autonation January 2008 20 puts - 105% in 49 days
New Century January 2008 25 puts - 89% in 1 day

...we've decided to launch Options Trading Pit, looking to profit from the market's demise as well as its upside.

But know this... We're not your typical options trading letter. We use an aggressive trading approach... taking gains in as little as days to months using options and LEAPS to fully maximize gains.

Just ask yourself... Will you have a problem profiting as others suffer? And will you have a problem raking in profits from oversold gems?

If the answers are no... click here for more.

Vice Stock Investing

Editor's Note:

Options Trading Pit Has Launched

While some of you may know me from past options trading services, my 4,500% cumulative gains of 2007, and gains such as these...

Fremont General September 2007 12.50 puts - 291% in 16 days
Lennar January 2008 25 puts - 279% in 40 days
Pulte January 2008 15 puts - 224% in 40 days
New Century January 2008 25 puts - 214% in 16 days
Centex January 2008 25 puts - 207% in 40 days
Countrywide January 2008 27.50 puts - 203% in 69 days
Thornburg October 20 2007 puts - 188% in 6 days
MGIC Investments December 35 puts - 175% in 80 days
Capital One January 2008 65 puts - 160% in 59 days
Accredited Home September 2007 7.50 puts - 141% in 4 days
Hovnanian November 2007 17.50 puts - 136% in 13 days
Radian Group August 2007 60 puts - 122% in 19 days
Standard Pacific September 2007 15 puts - 111% in 2 days
Autonation January 2008 20 puts - 105% in 49 days
New Century January 2008 25 puts - 89% in 1 day

...we've decided to launch Options Trading Pit, looking to profit from the market's demise as well as its upside.

But know this... We're not your typical options trading letter. We use an aggressive trading approach... taking gains in as little as days to months using options and LEAPS to fully maximize gains.

Just ask yourself... Will you have a problem profiting as others suffer? And will you have a problem raking in profits from oversold gems?

If the answers are no... click here for more.

Today's Wealth Daily: How to Protect Your Portfolio

Impressive market rallies aside, they don't mean that the U.S. recession or bear market has been called off... not yet anyway.

You see, not only do wild rallies happen during bear markets they are actually a defining aspect of bear market. Take a look at the Dow since the downside slide began in 2007 and you'll see a few triple-digit upside moves in a day.

Then, take a look at the five-year bull market that preceded our bear market, and you won't find many of the same triple-digit gains in a day... In fact, they were just about non-existent.

While it's likely we'll see more triple-digit gain days, we're still in a bear market... and things may only get worse. According to the Pew Research Center:

Between February and August 2008, the number of Americans that put inflation at the top of the "worry" list grew by 47%,
Two-thirds of the sample population said incomes were falling behind living costs,
72% of the sample believes we're already in a recession.
38% said they were having problems pulling together enough money for food cost

Yep, by now, most investors know that our economy is in real trouble.

Thanks to housing, energy, financial, and unemployment fiascos, the White House lowered its economic growth forecast this year and for 2009. For 2008, 1.6%, as compared to February's 2.7% projection is expected. For 2009, growth of 2.2% versus 3% growth rates is expected.

Says the Associated Press, "The U.S. economy has continued to expand, but growth has slowed as a result of the sharp housing decline, disruptions in financial markets and high energy prices," the administration said. "Because of the recent slower economic growth, the labor market is likely to remain sluggish for a period of time before returning to better performance," the White House budget office said.

But the news comes as no surprise.

It's just building on prior bad news of doubling oil prices, skyrocketing gold, a severely battered dollar, the sub-prime and credit crash, six consecutive rate cuts, and a domino effect of falling banks. Oh, and let's not forget about inflation, which which is rising at its fastest pace in 17 years.

But what most investors are unaware of is that throughout history, especially in recessionary environments, a select group of ignored stocks start to rally.

And they rally because, as a recession looms, there's no better way to feel better than to eat, drink and be merry.

Even with soaring energy costs, higher food costs, and troubled mortgages, folks are not prepared to relinquish some of their pleasures... including alcohol and cigarettes. It's a trend well-echoed in stronger financials from so-called "sin stocks."

Anheuser-Busch, for example, turned a profit despite fears of rising costs for glass, barley, wheat and even fuel. And it's so confident that sales won't diminish that it has plans to up prices for popular brands.

Diageo PLC believes that its brands, including Johnnie Walker whiskey, Smirnoff Vodka and Captain Morgan Rum won't be given up, even in an economic breakdown. Diageo even expects its Scotch whiskey business to grow another eight to nine percent annually, thanks to stronger global demand.

Even tobacco companies are doing okay. Philip Morris just reported that earnings rose 23% in Q2 and raised their earnings forecast for the year, saying it wasn't affected by inflation.

That's just to name a few.

During the Dot-com crash starting in March of 2000, for example, while the NASDAQ took its historic 70% plunge and the Dow tanked 14%, certain vice stocks started to take off. The Standard & Poor's Casinos and Gaming index, for example, gained 115%, while the S&P 500-stock index plunged 47%. Shares of tobacco giant Altria (then known as Philip Morris) more than doubled, and the stock of Anheuser-Busch, the largest U.S. brewer, skyrocketed 87%.

The best part - we're not investing in risky or wildcatter companies. We're investing in thriving, well-established businesses.

Here's a gaming stock during the Dot-com era that pulled in almost 400% gains as people sought the dream of "fast" cash...

That's just an example of one stock fueled by tough economic times.

We'll get into more examples, and which stocks to play shortly. Stay tuned to SC Trading Pit for more.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

Green River Oil Stock

Weeks ago, we recommended buying into Warrior Energy (TSX-V: WEN) in Pure Energy Trader. But we didn't want you to miss the opportunity either. While, to date, we're up more than 25%, we do expect further upside.

This is a junior company focusing on the exploration and development of oil and natural gas in the Green River basin.

And we don't expect these guys to drop in the short term, not after announcing major operational milestones with two successful wells in the Strike project area.

As you may know, the Strike project is in the Green River basin of Wyoming. And, according to the company, the area is a "multi-play, unconventional gas resource play with outstanding economic potential characteristics." To date, the company has identified 77 new well locations on the project area.

That announcement was about the company's first well, the Strike State #11 (in which Warrior has a 20% working interest). The well was spud on May 20, 2008 and drilled to a depth of 11,145 feet. The initial production rate includes 152 barrels of oil per day and 1578 Mcf/day. That equates to a total of approximately 2,490 Mcfe (thousand cubic feet of gas equivalent).

At the second well, the Strike State #12 (Warrior also holds a 20% working interest in this well) was also completed with initial producing sales at 515 Mcf/day.

Due to the success of these two wells, Warrior believes their current net production will double. Additionally, the company intends to drill four more wells in 2008, spending about $4.2 million. It expects to begin drilling within the next 20-30 days.

Now there's news that the company acquired more oil and natural gas leases in the Green River Basin of southwestern Wyoming. This will increase the company's total leasehold position in the Basin to more than 5,000 net acres.

If you're new to Warrior Energy...

What makes domestic oil production companies even more attractive as long-term investments are the oil and gas discoveries, and the fact that these explorations are more appealing, given geopolitical tension.

You know as well as we do that prices would come down sharply if we started producing on our own. And it'd be a strong global signal that we're not willing to be hostages of oil rich companies.

Even the President agrees.

"Our problem in America gets solved when we aggressively go for domestic exploration," Bush said.

And we need all the oil we can get.

While the International Energy Agency's oil supply forecast won't be released until November 2008, there's growing fear of a sharp downward revision in supplies. That means supply could be much tighter than previously thought, a nightmare scenario if proven true.

Any pessimistic IEA view will shock the market, spawning oil super spikes. We've already seen prices rocket to $130, doubling year over year. And it'll only get worse on a dismal IEA forecast.

For years, the IEA has said that crude supplies and other liquid fuels would keep up with rising demand, topping 116 million barrels a day by 2030. But now there's fear that the IEA, basing findings on aging oil fields, could revise sharply lower and warn of a struggle to keep up with 100 million barrel a day demand over the next 20 years.

But IEA pessimism is nothing new. Just last summer, the IEA warned that spare OPEC capacity could fall to "minimal levels by 2012."

Even the U.S. Energy Department is embarking on its own supply studies, which could be finished by summer. But they, too, may have nothing positive to say. They already suggest that daily 73 million barrel daily output will level off at 84 million barrels. To then reach 100 million barrels a day by 2030, we'll need a sizeable boost from other fuel sources.

And if you need more of a reason for a rise to $150, $170, even $200, look no further than the Middle East.

Israeli-Iranian tensions over nuclear projects aren't doing much to help. There's a growing fear that in the event of war with Iran, the Strait of Hormuz (passageway for 90% of oil exported from Gulf producers) would be jeopardized. If that happens, we'd see an immediate oil super-spike.

Iran's Revolutionary Guards has already said it would impose controls on shipping in the Persian Gulf and Strait of Hormuz, which accounts for about 40% of the world's oil, if it were attacked.

Green River Oil: Warrior Energy (WEN.V)

This is a new natural gas company we're keeping an eye on with a focus on large undervalued assets in the Green River Basin (Wyoming).

We can tell you that the energy companies are drilling and applying for drilling permits like there's no tomorrow.

And Warrior Energy is no different. It's buying land on the cheap with expectations for considerable upside. They just paid $8 million for producing property with active development.

Warrior's current project - called Strike - consists of 3000 net acres with 11 producing wells that are already kicking off cash flow.

And the stock only trades at a scant sub-3 with long-term $10 potential upside.

Better yet, the future doesn't look too shabby.

Over the next two years they hope to demonstrate year over year growth of proven reserves, production and cash flow through acquisitions and development to justify $500 million in asset values.

The investment firm Macquarie gave Warrior a $50 million line of credit, which is huge for an early-stage energy company... and a testament to the company's game plan to increase production within a short period of time.

Again, this is a $10 stock now masquerading at $4. It was $3 just weeks ago.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

This Only Affects a Third of All Homeowners Who Bought Over the Last Five Years

"Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth," according to Bloomberg.com. And the numbers are rising fast.

But that may just be best case scenario. Implode-o-Meter says "it is widely thought the Zillow valuation estimates are high because they do not take in account many of the actual foreclosure related sales that made up some 42% of all sales in the state of CA last month and even a larger percentage in other ‘bubble states'."

What's scary is if the numbers are correct, housing prices and the broader mortgage market fiascos are going to get a lot worse before they get better.

Here's more from Bloomberg.com.

"Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.

Negative equity and declining prices are making it difficult for homeowners to sell property for a profit. Almost one-quarter of U.S. homes sold in the past year were for a loss, Zillow said. That contributes to the foreclosure rate because some homeowners can't absorb the loss and end up surrendering their homes to the bank that holds the mortgage, said Stan Humphries, Zillow's vice president of data and analytics.

``For homeowners who need to sell, this is a gravely serious situation,'' Humphries said in an interview. ``It can also be harmful to communities where the number of unsold homes adds more to inventory and puts downward pressure on prices.''

The highest percentages of homeowners with negative equity were located in California. In four of the state's metropolitan areas — Stockton, Modesto, Merced and Vallejo-Fairfield — the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said.

In five more California areas — the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera — the percentages were more than 80 percent.

Foreclosure Sales

In Stockton and Modesto, more than half the sales in the second quarter were of foreclosed homes, Zillow said. Almost 15 percent of sales nationwide were foreclosures, the company said.

Prices fell on a year-over-year basis in 140 out of 165 markets, Zillow said. Pittsburgh, Oklahoma City and Austin, Texas, were among the markets that saw rising home values, the company said.

The 9.9 percent decline in home values was the largest on a year-over-year basis in at least 12 years, Zillow said. The median home price of $206,919 was the lowest since the fourth quarter of 2004, the company said.

``Sellers are starting to adjust their expectations,'' Zillow Chief Financial Officer Spencer Rascoff said in a Bloomberg TV interview. ``More sellers accepting a loss is actually a sign of optimism. It means that the transactions might start happening. There are so many sales contingent upon the buyer selling their home.''

The Zillow Home Value Index is the median valuation for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period, the company said. The index at the national and metropolitan area levels is calculated using a weighted average of the median home value for each county, Zillow said."

Caution: High Risk Trade Ahead

JA Solar Holdings (JA) August 15 calls are seeing heavy volume of 6,397 ahead of Tuesday earnings. But it's an earnings trade, which warrants a tight stop loss policy of at least -25%. Be sure not to risk the house. Earnings, regardless of who is bullish, can go either way.

While the stock has seen better days, firms like AmTech still believe it'll double over the next 12 months. Here's what AmTech had to say, according to ClusterStock.com:

"We believe ASPs [average selling prices] remained strong in 2Q08

Despite demand uncertainty as a result of ' 09 legislative concerns, we believe estimates for JASO remain low based on Si procurement levels and scheduled capacity ramp

Early ' 09 ASP negotiations seem to be progressing well for JASO at down 5-10%. This is in-line to slightly better than we have been modeling, giving us further confidence in our ' 09 revenue estimates

We believe that JASO's balance sheet entering a period of legislative uncertainty is a significant advantage versus peers following its recent $400M convert

We believe that all poly shipments are currently on schedule after some internal poly production delays at Shunda earlier in 2008 (covered by M. Setek supply)

We expect management to increase FY08 shipment and revenue guidance given poly procurement levels and scheduled capacity ramp."

Again, this is an earnings trade. Use tight stop losses. Earnings can go either way. Do not risk the house. If you're interested, we'd recommend buying the September 15 JASO call (QJPIC). We're speculating on good earnings with a high risk trade.

Keep an Eye on Marvell

After refilling a bullish gap at $15, and consolidating, buyers are lining up for call options. There's also rumor of a buyout, with Texas Instruments named as a possible suitor.

So far today, here's what's been happening in the call option pits:

August 2008 15: volume of 17,667
August 2008 17.50: volume of 3,726

September 2008 15: volume of 1,133
September 2008 17.50: volume of 9,720

November 2008 15: volume of 4,022
November 2008 17.50: volume of 8,726
November 2008 20: volume of 7,430

That's amazing volume for the stock. While we're not sure what's happening behind the scenes, it's apparent that some one may know something.

If you're game, we'd recommend a buy on the November 17.50 calls (UVMKW). But don't risk the house. Part of the call volume may strictly be rumor-related.

Good Investing,

Ian L. Cooper

Haynesville Shale Natural Gas

By now, I'm sure you've heard of the Haynesville Shale. We've covered it extensively in Energy and Capital and in the pages of Wealth Daily. It was even recently covered on CNBC, weeks after we first brought it to your attention.

And if you've heard of the Haynesville Shale natural gas formation, you've also heard about Chesapeake Energy (CHK), a stock that helped Pure Energy Trader readers realize quick gains of 16% and 19% in less than a month.

But 16% and 19% are nothing, as compared to long-term gains we could realize, especially if the Haynesville natural gas find proves to be the world's fourth largest. CHK's CEO Aubrey McClendon has said the Shale could hold more than 250 trillion cubic feet of natural gas and supply U.S. needs for about 10 years.

Better yet, an insider just bought 750,000 more shares of the beaten down company, or $43 million worth of stock, and he's been a steady long-term buyer.

In April 2007, he bought 100,000 shares
In November 2007, he bought 50,000 shares
In December 2007, he bought 50,000 shares
In February 2008, he bought 200,000 shares
In March 2008, he bought 400,000 shares and another 100,000 shares
And just recently, he bought 600,000 and now another 750,000.

Nor does it hurt that a potential Hurricane in the Gulf of Mexico could send oil and gas cost higher; or that a war between Iran and Israel could lead to $200 oil on a closed Strait of Hormuz; or that the eventual reset of Option ARMs could lead to a weaker dollar.

But it's the Haynesville Shale that gets us the most excited.

The Haynesville natural gas shale is found in a vein approximately 11,000 feet underground.

Although the Haynesville shale is being touted as one of the largest onshore natural gas fields, it's a little too tell exactly how much natural gas is down there.

But it's not stopping companies from rushing to grab acreage in the play, including CHK, XTO Energy, Range Resources, and Quicksilver Resources.

As the third largest producer in the United States, Chesapeake is no stranger to natural gas. Natural gas makes up 92% of the company's production. With success in the Barnett, Marcellus and Haynesville shales, Chesapeake has had an impressive year so far.

In March, the company announced plans to develop its 300,000 acres in the Haynesville shale and expects to pick up another 200,000 acres in the future. Chesapeake even stated, "...the Haynesville shale could potentially have a larger impact on the company than any other play in which it has participated."

And it doesn't hurt that lawmakers are taking an interest in the Haynesville Shale.

"Imagine if tomorrow you could announce a new energy plan that would in one stroke cut your constituent's gasoline bill in half, reduce our oil imports, improve our air quality, enhance national security, strengthen the dollar, reduce greenhouse gas emissions and create tens of thousands of new jobs in the U.S," Aubrey McClendon said before Congress. "I believe your upcoming reelection chances would be even higher than they already are."

And several lawmakers already seem convinced, describing natural gas as a "bridge to a renewable energy future - and a replacement for coal."

Rep. Rahm Emanuel D-Ill. And Rep. Dan Boren, D-OK, for example, have already introduced a bill that could result in having 10% of all vehicles powered by natural gas by 2018. And, in addition to providing tax credits, the bill could also require that Big Oil companies install at least one natural gas pump at each of their stations, says a Forbes.com article.

And as for hurricanes, the CHK CEO says the days of being "concerned that hurricanes will damage the infrastructure for natural gas is ‘pretty much over.'"

Again, what's not to like? Buy. Hold. And sit tight with CHK. Patience will pay off.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

Why Banks Need to Get Real

Ever since Meredith Whitney downgraded Citigroup, I've been a fan... and for good reason. Like me, Whitney believes the credit crisis is far from over, despite the clamoring talking head buffoons that think credit woes and housing debacles are bottoming.

Whitney even warned last year, and continues to warn, that the "incestuous" relationship between the banks and the credit-rating agencies during the real estate bubble will have a long-lasting impact on banks' ability to recover."

Here's more from Forbes magazine:

"You're going to have this stealth pressure on bank balance sheets until you start to see the ratio of downgrades to upgrades change."

"Whitney's bearishness has deep roots. In fact, she was the first analyst to sound the alarm loudly about subprime mortgages, predicting back in October 2005 that there would be "unprecedented credit losses" for subprime lenders. The problem, as she saw it, was that loose lending standards and the proliferation of teaser-rate mortgage products had artificially inflated the U.S. home-ownership rate."

"A lot of the new homeowners were in over their heads, she believed, and would have trouble making their monthly payments when home prices started to fall and their teaser rates got bumped up."

Her current concern is that banks aren't cutting costs or losses in loan portfolios quick enough. "On the cost side, she says, banks have yet to come to terms with the disappearance of the securitization market, which she believes will stay in hibernation for the next three years."

"Why does this matter? From 2001 through 2005, for every dollar of bank capital used to make mortgage loans, 10 were supplied via investors in mortgage securities. All that secondary-market capital is now sidelined, but the staffing levels of bank lending departments don't yet reflect it. "

"She also argues that banks need to "get real" about how they're valuing their problem mortgage-related debt, much as Merrill Lynch has now done. Merrill recently sold a large package of toxic mortgage debt for just 22 cents on the dollar."

"Whitney's idea of "real" is pretty drastic. Whereas most banks are estimating 20% to 25% peak-to-trough declines in housing prices, the Case-Shiller housing futures traded on the Chicago Mercantile Exchange portend a much steeper 33% decline, she points out."

"In fact, Whitney thinks the actual declines will be worse - closer to 40% - because of the loss of the securitization market and the paucity of mortgage credit available. And that means more defaults: "The consumer's ability to refinance his way out of trouble has diminished greatly."

"Whitney's critics, and there are many among bankers and analysts, contend her bearishness at this point shows she simply doesn't now how to measure the remaining downside risk. "

"Her response: If she has no idea how to properly value bank stocks now, it's because the metrics don't work. Price-to-earnings ratios are useless when earnings are nonexistent. And valuing banks on price-to-book ratios is just as futile. Those book values - which reflect underlying assets and liabilities - are moving targets."

Well, that, and a lot of bankers and analysts, as compared to Whitney, don't have the guts to tell it like it is.

American Express Stock

It could be a long time before American Express regains its credit throne. CEO Ken Chenault alluded to it himself, predicting further weakness in coming quarters because of economic malaise.

But it comes as no surprise to us.

We've been saying the same thing for months. Ignore American Express (AXP) stock because of its exposure to consumer debt. But no one listened.

AXP will be fine, they said. You're blowing the consumer issue out of proportion. "Ian Cooper has no brain," said one reader.

But we were right.

American Express just posted a Q2 profit that fell 38%, well below Street forecasts, as consumer spending slowed and the number of loans that were written off increased beyond expectations.

For Q2, the company posted net income of $653 million, or 56 cents a share, as compared to the $1.06 billion, or 88 cents per share posted last year. Analysts expected 83 cents this time around. Net loan write offs came in at 5.3%, as compared to 2.9% year over year.

The company also said the weakened economy would not longer allow it to attain a 4% to 6% growth rate this year. "The scope of the economic fallout was evident even among out longer term superprime cardmembers," said Chairman and CEO Kenneth Chenault.

Even that's not a surprise, as many debt holders can barely keep their heads above water.

Americans were carrying $960 billion of credit-card debt in May, up from $879 billion at the end of 2006. The average household with credit cards has a balance of $8,600, according to the Philadelphia Inquirer.

It only helps to confirm what we've said all along.

Here's what we reported in Wealth Daily on July 5.

American Express (AXP) continues to be a favored short. And that's because they hold consumer debt, and fall prey to mounting delinquencies. So when I learned that UBS upgraded the stock from Sell to Neutral, I had to laugh at the absurdity.

The argument remains the same, though.

If you want to own a credit card stock, buy Visa (V) or MasterCard (MA). They do not hold consumer debt. They simply process the cards.

American Express on the other hand deals directly with credit. It has to worry that as of November 2007, credit card debt "soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October" and is still on the rise."

They're the ones where share values are being beaten stilly because of charge-offs, payment delays, and higher delinquencies.

Same goes for American Express, whose CEO said, "Business conditions continue to weaken in the U.S. and so far this month [June 2008] we have seen credit indicators deteriorate beyond our expectations."

It was January when AXP's CFO Daniel Henry predicted that the company's U.S. write off rate would peak between 5.1% and 5.3% in 2008. It's now July and delinquencies and default rates are growing worse.

American Express and Cash-Strapped America

With homeowners struggling to stay above water, American Express has to worry about further delinquency problems, as credit card debt balloons.

Instead of just using credit cards for big ticket items (TVs, furniture), some are now charging gas, food, and even paying other bills with them. And some are only making minimum payments... if they can afford even that.

It's far more difficult these days for many consumers to dig their way out of debt, since other relied upon options, such as home equity lines of credit, are no longer readily available.

National revolving debt just hit a record $957 billion in April, from $800 billion four years ago. Total credit card debt was up by 0.4% in April, according to the Fed. And Moody's is reporting that the charge-off rate, which measures credit accounts considered uncollectible, hit 6.27% in April.

Q1 consumer borrowing skyrocketed to $34 billion, the biggest amount since 2001 when the U.S. was diving into a recession. And not all of that may be paid back. Credit card investors are becoming increasingly concerned that a weaker U.S. economy will hurt borrowers' ability to pay back debt.

But as long as there are naïve investors, and foolish upgrading banks, it's hard to get that reality to the investing masses. Still, downside risks remain at American Express... even Discover and Capital One. They'll slide long-term as subprime fiascos are replaced with Option ARM reset fiascos.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

White House Lowers Growth Estimates

Thanks to rising unemployment, housing, financial, and energy fiascos, the White House lowered its economic growth forecast this year and for 2009. For 2008, 1.6%, as compared to February's 2.7% projection is expected. For 2009, growth of 2.2% versus 3% growth rates is expected.

According to the AP:

""The U.S. economy has continued to expand, but growth has slowed as a result of the sharp housing decline, disruptions in financial markets and high energy prices," the administration said.

With economic growth slowing, the unemployment rate is projected to move up to 5.3 percent this year and to 5.6 percent in 2009. The administration's old forecast called for the jobless rate to climb to 4.9 percent this year and next. The unemployment rate averaged 4.6 percent in 2007.

"Because of the recent slower economic growth, the labor market is likely to remain sluggish for a period of time before returning to better performance," the White House budget office said.

The administration believes the jobless rate will drop back to 5.3 percent in 2010 and continue to dip in subsequent years, falling to 4.8 percent in 2012 and 2013.

On the inflation front, consumer prices are now expected to rise by 3.8 percent this year, up from the administration's old forecast for a 2.7 percent rise. Prices should calm down a bit next year, rising by 2.3 percent. Still, that's also higher than the old forecast of a 2.1 percent rise.

"Inflation has increased in recent years, in large part because of surging food and energy prices," the administration said. Oil prices, which had spiked to a record high of more $146 a barrel, are now hovering around $124 a barrel.

The new forecasts were contained in the budget office's updated look at the nation's balance sheets. A record $482 billion budget deficit is now being projected for next year, something the next president will inherit."

Keep Chesapeake Energy on Radar

We hold the Chesapeake Energy (CHK) underlying stock in Pure Energy Trader, but wanted to bring it to your attention, too. And that's because of solid volume in August 50, 52.50 and 55 calls.

News is that China National Petroleum Corporation (CNPC) is "thinking" about bidding for minority stakes in CHK shale gas assets. CHK is reportedly looking to raise as much as $5 billion from selling minority stakes in Arkansas and Pennsylvania shale gas properties, according to the South China Morning Post.

This follows early-July news that BP agreed to buy 90,000 acres of CHK's Oklahoma natural gas properties for $1.75 billion.

Keep it on radar.

"We're saying no to almost everybody"

There's a heart-stopping article in today's New York Times about the changing commercial lending environment and the impact on the broader economy.

"Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring."

"Companies that rely on credit are now delaying and canceling expansion plans as they struggle to secure finance."

"Drew Greenblatt, president of Marlin Steel Wire Products, figured it would be easy to get a $300,000 bank loan to finance a new robot for his factory in Baltimore. His company, which makes parts for makers of home appliances, is growing and profitable, he said. His expansion would add three new jobs to an economy hungry for work."

"But when Mr. Greenblatt called the local branch of Wachovia - the same bank that had been aggressively marketing loans to him for years - he was distressed by the response."

"The exact words were, ‘We're saying no to almost everybody,' " Mr. Greenblatt recalled. "This is why God made banks, for this kind of transaction. This is going to slow down the American economy."

Ouch.

Here's the full New York Times article, if you're interested.

"Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Drew Greenblatt of Marlin Steel Wire Products is having trouble getting a $300,000 loan to buy a robot for his Baltimore factory. "This is what a bank is supposed to do," he said.

Two vital forms of credit used by companies - commercial and industrial loans from banks, and short-term "commercial paper" not backed by collateral - collectively dropped almost 3 percent over the last year, to $3.27 trillion from $3.36 trillion, according to Federal Reserve data. That is the largest annual decline since the credit tightening that began with the last recession, in 2001.

The scarcity of credit has intensified the strains on the economy by withholding capital from many companies, just as joblessness grows and consumers pull back from spending in the face of high gas prices, plummeting home values and mounting debt.

"The second half of the year is shot," said Michael T. Darda, chief economist at the trading firm MKM Partners in Greenwich, Conn., who was until recently optimistic that the economy would continue expanding. "Access to capital and credit is essential to growth. If that access is restrained or blocked, the economic system takes a hit."

Companies that rely on credit are now delaying and canceling expansion plans as they struggle to secure finance.

Drew Greenblatt, president of Marlin Steel Wire Products, figured it would be easy to get a $300,000 bank loan to finance a new robot for his factory in Baltimore. His company, which makes parts for makers of home appliances, is growing and profitable, he said. His expansion would add three new jobs to an economy hungry for work.

But when Mr. Greenblatt called the local branch of Wachovia - the same bank that had been aggressively marketing loans to him for years - he was distressed by the response.

"The exact words were, ‘We're saying no to almost everybody,' " Mr. Greenblatt recalled. "This is why God made banks, for this kind of transaction. This is going to slow down the American economy."

Earlier this year, credit extended by banks to companies and consumers was still growing at double-digit rates compared with three months earlier, according to an analysis of Federal Reserve data by Goldman Sachs. By mid-June, bank credit was declining at an annualized pace of more than 6 percent.

That is a drop of nearly $150 billion, an amount much larger than the value of the tax rebates the government has sent to households this year in an effort to spur economic activity.

Financial industry executives say tighter credit from major banks represents a swing back to a realistic assessment of risk, after years of handing out money with abandon. Those practices produced a mortgage crisis whose losses could reach $1 trillion, by many estimates.

"Before, they wouldn't verify income and they were loose on the valuations of collateral," said John W. Kiefer, chief executive of First Capital, a private commercial lender. "Now they're tightening down on the ability to repay. They go off the reservation, and now they come back to basics. It's preservation for many of them at this point. It's survival."

But if the newfound caution of American banks is prudent in the long run, the immediate impact is amplifying the troubles with the economy. The Federal Reserve has been lowering interest rates aggressively to make money flow more loosely and to spur economic activity.

The financial system is not going along: As banks hold on to their dollars, mortgage rates are climbing. So are borrowing costs for corporations.

Some suggest that the banks, spooked by enormous losses, have replaced a disastrously indiscriminate willingness to hand out money with an equally arbitrary aversion to lend - even on industries that continue to grow.

"There's been a lot of disruption in the credit market, and a lot of traditional lenders have really tightened up," said Gregory Goldstein, president of Macquarie Equipment Finance, which leases computer gear and other technology to companies. "Before, some of the standards they lent on were weak, but we think they have overshot and gone too far on the other end."

Such was Mr. Greenblatt's reaction, as he learned that an infusion of credit for his Baltimore factory would not come easily. His company has been enjoying double-digit sales growth. This month, it received the two largest orders in its history, he said.

"It was jubilation," he said. "I was doing the Funky Chicken."

The initial call to Wachovia left him dismayed.

"I'm stunned," Mr. Greenblatt said. "God is smiling on this factory. We're at such an exciting inflection point, and this is what a bank is supposed to do. There's sand in the gears."

No loan meant one fewer order for the factory in Chicago that makes the robot Mr. Greenblatt wants to buy, and fewer hours for workers there. It meant less business for the truck driver who would have hauled the robot to Baltimore, and no help-wanted ads for Marlin Steel Wire Products.

Mr. Greenblatt eventually got oral approval for the loan, though after more than a week. He was still waiting for the money at the end of last week.

Wachovia, which lost $8.9 billion in the second quarter, declined to discuss the loan. But the bank confirmed that it has been reducing its lending in troubled areas of the economy.

"We've got industries that we consider to be stressed industries, and we're looking at those a lot harder," said Carlos Evans, a wholesale banking executive for Wachovia, listing as examples housing construction, building products and distributors for those goods. "Our loan growth slowing is more indicative of the economy than anything else."

Still, Wachovia's commercial and industrial loans grew by 13 percent in June compared with the prior year, Mr. Evans said.

"We're saying yes daily," he said.

But recent signs suggest that tight lending is spilling from housing into other areas of the business world. Companies with solid credit and profitable businesses can generally still get loans, but rates are higher and wait times are longer.

According to a survey of senior loan officers conducted by the Federal Reserve in April, 55 percent of American banks tightened lending requirements for commercial and industrial loans to large and midsize companies - up from about 30 percent in the previous survey, in January. About 70 percent of the respondents said they have made such loans more expensive.

"Banks will be much more cautious and keep raising the bar, and that will lead to an outright decline in total commercial and industrial loans," predicted Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. "Banks clearly have to rebuild their capital base. They're going to look a bit more nervously before they make those loans."

Until last summer, banks lent freely, banking experts say, because they sold most of the loans they issued, making them less concerned about whether the customer could handle the payments: If the loan went bad, that was someone else's problem.

But in the wake of the mortgage crisis, that system has all but shut down. Banks are now stuck with the loans they extend, making them more motivated to scrutinize their customers, particularly younger and smaller businesses.

"It's the small business guy who creates most of the jobs," said Mr. Kiefer, the First Capital chief executive. "If they can't borrow to employ people, then we've got a mess on our hands."

For the last six months, Saul Epstein has been trying in vain to get a $2 million line of credit for his company, Global Harness Systems. The company, based in Bala Cynwyd, Pa., has a factory in Mexico, where it makes parts for engines. The factory gets paid for its wares weeks after they have shipped, necessitating credit to finance the upfront costs of production - raw materials, labor and transportation.

Mr. Epstein figured that getting a loan would be easy. Since he became chief executive last year, Global Harness has gone from break-even to profitable. Sales should reach $20 million this year, up from $17 million last year, he said. But in this new era of caution, banks are focused on the fact that Global Harness lost money in 2005.

"They keep saying, the way the times are, we need a longer track record," Mr. Epstein said.

Mr. Epstein, forced to limit his production to what he can finance with his existing cash flow supplemented by his own money, has been tightening credit himself: He has been turning down orders from companies with any whiff of financial troubles, lest his company fail to get paid.

"The same way the bank is hesitant to lend to me, you're concerned about taking on a customer that might go into bankruptcy," he said.

George Rosero, president and chief executive of Atlanta Pediatric Therapy, has been trying for more than a month to increase his roughly $500,000 credit line to about $1 million.

His company, profitable for the last two years, offers therapy to children with speech and physical impediments, he said. Mr. Rosero aims to expand by adding four sales people. He wants to buy new software to better manage communications with patients and hire a consultant to improve the work environment.

All of that is on hold.

"Three or four years ago, I could just make a phone call and get an increase," Mr. Rosero said. "Now, they're asking me for a lot more information."

Biotech Boom

Institutional money has been pouring into the biotech sector, as biotech stocks enter the third quarter surprisingly strong.

Take the Rydex Biotech Fund, for example. In 2000, the fund had about $1.4 billion invested. Then, over the following eight years, biotech stocks floundered, stripping the Fund of about 95% of assets.

But over the last few weeks, assets have just about doubled in the Fund, as Wall Street comes back. They know the next biotech boom is upon us.

But the move comes as no surprise to us.

Drugs are recession proof. They have no exposure to subprime and housing concerns. No matter what happens in the economy, people still buy medication. Period, said Brian Hicks in November 2007.

Hicks, you may remember, has been calling for the return of biotechs since November 30, 2007, catching the biotech bull-run before it began.

How could you not see the boom coming?

Hicks knew that as the baby boomer generation rushes into old age, like a colony of army rats, healthcare spending is expected to skyrocket. And all this spending represents a boom for drug and medical device developers and manufacturers.

So the recent boom isn't a big surprise.

Take Intuitive Surgical (ISRG - NASDAQ), for example. This company makes the robotic da Vinci surgical systems for use in urologic, cardiothoracic, gynecologic, and general surgeries.

Sales at ISRG have gone from $26 million in 2000 to over $524 million today.

The stock is up about 4,500% since the start of 2003!

And with baby boomers getting surgeries in record numbers, medical device companies like Intuitive Surgical are going to continue to do quite well.

But it won't just be companies that make surgical lasers and robots that'll profit from this trend. Drug companies stand to make a fortune as baby boomers get older and need more healthcare.

Take a look at some of the returns posted by biotech stocks:

Amgen...............+59,000%
Gilead Sciences....+3,500%
Biogen IDEC........+2,329%
Celgene..............+9,030%
IDEXX Labs.........+3,300%

And There's still time to Buy Biotech

After scouring the biotech industry looking for the next Amgen or the next Genentech... Hicks discovered 2008 favorite Anavex (AVXL.OB).

As we said on June 14:

More than 5.2 million Americans have Alzheimer's disease. Another 7.7 million Americans will suffer with it by 2030, and another 16 million will suffer by 2050. And there's a yearly price tag of $148 billion to treat these patients.

No one is quite sure what causes the disease that gradually robs sufferers of memory and the ability to care for one self. There's no known cure, and current drugs are only temporary pain relievers.

So wouldn't it be nice if the drug companies got it right?

Hopes are already mounting that an experimental drug from Elan and Wyeth can do the trick. If they can clear out deposits called amyloid plaque, or simply halt the production, they could help millions of patients, and potentially see annual sales of $13 billion.

But such theories of anti-amyloid could be based largely on "theory and hope," says University of Southern California psychiatrist Lon Schneider (as quoted by Forbes). "None of the drugs have shown evidence of efficacy yet. Geneticist John Hardy, one of the first to finger amyloid as a suspect, puts the odds at 50-50 that one of the antiamyloid drugs will work."

Plus, says the Forbes report, people that can function normally also have large amounts of amyloid-beta plaque, which casts doubt on whether the plaque is a cause, a consequence, or simply an indication of an aging brain.

While there's some hope that Elan and Wyeth can help millions of sufferers, and in the end reap millions for shareholders, some drug developers are turning to the theory of oxidative stress, which damages and destroys cells and is believed to be a primary cause of Alzheimer's disease.

According to PharmaLive.com, ‘Involvement of Oxidative Stress in Alzheimer's Disease' study leader Dr. Nunomura "pointed to extensive evidence of mechanistic and chronological links between oxidative stress and a number of key characteristics of the disease."

The research also suggested that amyloid beta could be produced by the body as it tries to fight the disease, later turning into an accumulating toxic substance. In other words, there's a belief that if amyloid was removed during early stages of the disease, it could do more harm.

Alzheimer's Drug Stock: Anavex Life Sciences (AVXL.OB)

The company's drug candidate, ANAVEX 1-41, uses sigma receptors to stand guard against oxidative stress and repair cells. And when AV-1-41 goes into Phase I trials, we fully expect the market to re-rate the company upwards to $10 to $12 a share.

The drug is already showing promise in early stages. And in some trials, the drug reportedly provided neurons with protection from oxidative stress, prevented amyloid beta from becoming toxic, and reduced memory deficit in animal tests.

We continue to rate Anavex stock as one of our favorite small cap investments for 2008-2009. And the fact that the stock hasn't sold off - especially during the recent market turmoil - speaks volumes.

Better, we wouldn't be shocked if Anavex was a buyout candidate.

One, the company is betting that compounds for Alzheimer's disease based on its Sigmaceptor platforms will provide it with competitive advantages. Its Anavex 1-41 treatment has demonstrated that the compound "significantly" protects neurons by preventing oxidative stress, which can damage and destroy cells and is strongly believed to be a main cause of many neurodegenerative diseases.

In short, if drugs like Anavex's can slow or prevent diseases like Alzheimer's there's no telling how many buyout offers would flood Anavex offices.

Plus, they've got another 11 sigma receptor compounds in pre-clinical development, three of which could soon file for investigational new drug applications this year alone. This includes treatments for epilepsy, colorectal cancer and other solid tumors.

Anavex 7-1037 (for colorectal cancers) preclinical trial treatments, for example, shows a 69% reduction (with minimal adverse effects) in tumor growth.

Two, big pharmaceutical companies may not continue overlooking companies with oxidative stress exposure. And three, the Alzheimer's drug market could triple to $9 billion by 2017. Why wouldn't big pharma want a piece of that?

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

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In case you missed our other investment opportunity highlights, here's what we covered in Wealth Daily, Gold World, Energy and Capital, and your free blogs for the week of July 21, 2008.

Let's Take Some Gains: 180% Lehman Put Gains... Bank it.
In the weeks preceding our options product launch, we've been issuing trades in this free blog. And to secure our hard-earned gains, we're closing five of our positions today.

The Non-OPEC Oil Peak: He said it's "imperative that governments acted urgently to reduce their dependency on oil..."
While the International Energy Agency's oil supply forecast won't be released until November 2008, there's growing fear of a sharp downward revision in supplies. That means supply could be much tighter than previously thought, a nightmare scenario if proven true.

Pickens: Oil is Headed to $300 in 10 Years: Boone Heads to the Hill
In case you haven't heard, T. Boone Pickens is a worried man when comes it comes to the energy situation these days. America, according the legendary oilman, is in a heap of trouble-and it's only going to get worse.

Copper Mining Stocks: A Big Surprise in the Copper Market - Part 2
In Part 2 of our Argentinean copper mining stocks report, we'll take a look at the rest of Coro's copper mining prospects, which are numerous and conclude with specific details regarding my recommendation.

The Bakken Oil Field: Is it Too Late For You to Play the Bakken?
Over the last few weeks, I've been trying to wrap my head around the recent excitement over our domestic production. Whether the topic of drilling in ANWR or the outer continental shelf came up, people were getting excited. There are a few problems, however.

Domestic Oil and Gas Companies: The One Energy Stock You Must Own

Renewable Energy in Germany: New Energy in Old East Germany
BERLIN, GERMANY: West Berlin wasn't just the free half of this city during the Cold War; it was an island. All around the reunified capital today, there are reminders of East Germany's economic past, and signs that Europe's largest economy can do more to bring the East into the future.

Gold Price Forecast: Why Gold Could Spike to $1,200 by January
It'll be 2009 when we see $1,200 to $1,300 gold. Here's why.

Green Energy Investing: How To Follow the Green Money Trail
This article originally appeared in the Green Chip Review on July 17th, 2008 as an in-depth report on today's green energy investments. With the current state of the energy market, and the looming boom in green energy, we felt readers of Wealth Daily could also profit from the information presented in this article. Enjoy.

Profit from American Depress
American Express posted a Q2 profit that fell 38%, well below Street forecasts, as consumer spending slowed and the number of loans that were written off increased beyond expectations.

Caution: High Risk Housing Trade Ahead
President Bush just dropped his opposition to a housing package that could bolster the economy. The House is expected to vote on it later this afternoon, and it could become law as early as this week. Reportedly, House Republicans do not have enough votes to prevent it from becoming law.