Featured Trades: (CISCO), (CSCO)

4) The Cisco Shock. When a great company announces a surprise, temporary setback that sends the stock plunging, I am drawn like a starving great white shark to fresh blood in the water. All it took was a matching of earnings expectations for this great technology firm to crater 13% in minutes, triggering stop losses, the gnashing of teeth, and the rending of great swatches of hair. This is not a commentary on Cisco itself, but of the fragile, over extended nature of the markets at this lofty altitude.

Of course, the big surprise came from a sudden drop off in sales to state and local governments, who are big users of video conferencing products. Somehow, it escaped notice in the recent midterm election that spending cuts always lead to falling sales and swinging great job losses. This is what it really looks like up close and ugly. I have been warning readers about this all year, but it seems I have few readers in Washington, and those that do mostly use the hard copies to line the bottoms of their bird cages. The other disappointment came from the cable industry, which is cutting back capital investment while its lunch is being relentlessly eaten by the Internet.

At $20.52 a share, Cisco offers a PE multiple of 10 times, versus a market average of 15, the prospect of a dividend next year, and at 12%-17%, one of the most consistent long term growth outlooks of anyone. Did I mention that they get a majority of their sales from overseas, where growth rates are posting white hot double digit rates? Buy this baby on dips to catch a Q1, 2011 rebound. Despite the sorry state of the US economy, demand from the Internet for Cisco's high end routers from data centers continues to grow at blistering rates.

Got Any Cisco For Sale?

Featured Trades: (ONLY BUY COMPANIES YOU HATE),
(SPX), (INDU), (BAC), (C ), (JPM), (WFC),
(AAPL), (GOOG), (QQQQ),
(BP), (GS), (C), (PFE), (MO)

2) Only Buy Companies You Hate. The Wall Street Journal published one of the funniest investment strategy pieces I have ever read. Dilbert cartoonist Scott Adams argues that you should invest in companies you hate because only the most unprincipled and rapacious firms make the greatest profits.

Moral bankruptcy is a great leading indicator of success, and the best ones can get you to balance your wallet on the end of your nose and bark like a seal, as you buy products that you utterly despise. Companies with the work ethic of a serial killer, like British Petroleum (BP) come to mind, but you can also add other firms to the list, like Goldman Sachs (GS), Citicorp (C), Pfizer (PFE), and Altria (MO).

Adams initially started investing in companies he loved, like Enron, WorldCom, and Webvan, and absolutely lost his shirt. Adams' advice to BP is not to waste money on artificial, sincere ad campaigns apologizing, but get us to hate them more. Bring on more dead bird pictures!

Who is Adams about to hate next? Apple (AAPL), because he irrationally craves their products, resents their emotional control over his entire family, can't get ITunes to work, and is appalled by those aloof? black turtlenecks that Steve Jobs wears. For my own recent piece on Apple, please click here. To read the entire, hilarious piece in full, please click here .

Hand Me a Buy Ticket! &*%@*!

Featured Trades: (OCTOBER NONFARM PAYROLL)

1) Don't Pop the Champagne on Those October Nonfarm Payroll Figures. Poor Obama. The guy just can't catch a break. A day after the midterm election delivered a 'shellacking' to the once, and possibly future, community organizer from South Chicago, Ben Bernanke announces one of the greatest economic stimulative efforts of all time. Two days later, and the October nonfarm payroll comes in at a rollicking +151,000, one of the best reports of the year.

Would it have been enough to tip the election outcome in his favor? It certainly might have in the closest run races, such as for his old Senate seat in Illinois. A state with a population of 12.9 million, it took only 71,501 votes to deliver it to Republican Mark Kirk. We shall never know for sure.

Sifting through the data, it is clear that this was a good report. Private employment jumped by 159,000, and there were sizeable revisions upwards in the July and August numbers. Unfortunately, 150,000 jobs a month is precisely what we need to tread water, in order to accommodate population growth and immigration. That's why the unemployment rate remained unchanged at 9.6%.

The number that jumped off the page, grabbed me by the lapels, and shook me until my Japanese gold inlays fell out of my teeth was the 35,000 in gains in temporary help. I predict this will be a large element of future positive employment reports. It is proof that corporate managers have absolutely no confidence in the future, will only hire full time workers at the point of a gun, preferring to add only part timers without benefits that can be dumped at the first sign of trouble.

Also of note is the 14,000 in losses in local government workers. Local school districts have taken the cue from the corporate world by firing teachers and rehiring them as substitutes at one third of their old pay, with no benefits. This is a continuation of a new, major long-term trend for the economy, which I believe will be a decade long affair. Local governments are sucking money out of the economy as fast as the federal government is shoveling it in.

The bottom line for you and me is that American economic growth will continue poking along at a subdued long term average of only 2% a year, that US assets should continue to under-perform, and you should get your money the hell out of the country into foreign markets where you can earn real returns.

Featured Trades: (GOLD), (GLD), (ABX)

3) You No Longer Have to Be Crazy to Buy Gold. The good news is that you no longer have to be crazy to buy gold. Until recently, certifiable believers chasing the barbaric relic were driven by a host of urban legends and wild conspiracy theories which frequently appear on the Internet, such as the imminent bankruptcy of the US Treasury, Fort Knox holding only titanium bars that had been painted gold, Weimar style hyperinflation that is just around the corner, or the gold ETF (GLD) owning only paper, and not physical gold.

No more. The long term structural demand for the yellow metal is now so well known, that I can read about it in the tabloids while waiting in line at Safeway. There is an emerging market central bank bidding war going on, with India and China trying to outmaneuver each other to raise their gold holdings to developed world levels. The EC or the IMF may sate that demand by selling off their remaining holdings to bail out Greece. A rising emerging market middle class also brings large, newly enriched consumers from countries that have long cultural preferences for owning gold and silver over paper fiat currencies.

Now that we have decisively broken through to a new all time high, how high can we go? Surely peak gold is upon us. Barrick Gold (ABX), the world's largest gold producer, would not be hacking out new mines under incredibly harsh conditions at 15,000 feet in the Andes if there were easier supplies to develop.

My own long term gold forecast has been the old inflation adjusted high of $2,300 (click here for the call). But higher altitudes beckon. If you want to take gold up to its historic peak in world GDP last seen in 1980, that would see gold at $5,300. Also, keep in mind that the total world gold supply has increased since then from 110,000 tonnes to 170,000 tonnes. For gold to recover the old peak percentage of the world monetary base, M3, it would need to rise to $5,700.

Then there is the grand daddy forecast of them all. After the US allowed the price of gold to float from $34/ounce in 1971, it rose 2,500% to $850. An equal move of the 1999 $250 bottom would take us up to $6,250. I think I'd be a seller there.

The great thing about gold is that, absent a dividend or a coupon, you can never claim it is too cheap or too expensive. While the current production cost at the big mines is around $400/ounce, the only certainty is that there are now more buyers than sellers. Look at the table below of the performance of gold so far, relative to other bull markets of the last three decades, and it is clear that we are only just getting started.

Featured Trades: (OIL), (XOM), (OXY), (COP)

2) The Price of Oil is Going Up. The free Ben Bernanke put also applies to the commodities markets. I received another scratchy, crackling cell phone call from my drilling buddy in the Texas natural gas fields today. You could almost choke from the dust on the line.

He told me that the BP Gulf disaster was turning the fundamental assumptions of the oil industry upside down, and that sharply higher oil prices were in the cards, probably $100/barrel by year end. Major oil companies with deep pockets at risk were rushing to offload their existing offshore leases and partnerships in producing wells to avoid BP's potential $30 billion hickey.

If nothing else, the majors have learned that liability caps are nothing more than wishful thinking. They can only speculate what a new round of vengeful regulation will cost them. Hedge funds looking for 'the next big play' were willing buyers, but only at substantial bargains. We are witnessing nothing less than the birth of a new distressed junk market.

It is all part of a repricing of risk that values offshore assets at a discount, and onshore ones at a new found premium. Only big swinging dicks need apply, as minimum participations are going for as much as $50 million.

The impairment of Gulf assets is also breathing life into the once moribund natural gas market. Enough gas supplies are being left under the Gulf to offset the enormous new production coming online through the new 'fracting' technology, where everyone is using a volume strategy to offset plunging prices. Gas is not heading off to the races, but supplies will be tight enough to sustain it in a $3.50-$5.00 trading range for the next 18 months.

It all makes me want to go back and buy more ExxonMobil (XOM) ( click here for my piece), Occidental Petroleum (OXY) ( click here for the report), and Conoco Phillips (COP). I'd love to get more out of my friend, but I don't think my aged, arthritic back could take another three hours driving down washboard roads in a beat up pickup truck with no springs to track him down at his newest drilling location. Besides, I already have enough 8 x 10 signed glossy portraits of George W. Bush to last a lifetime, and I didn't want to hurt his feelings by turning down more.