The Obvious Isn't Always So Obvious: Expectations Are Low For Earnings

	Thursday, July 10, 2008 Whitelist Us         How to Get the Green in Green without Ending Up Black and Blue By Lynn Carpenter On Tuesday, Andy Gordon suggested that Americans might be faster than people expected to save energy. He was talking about the Beat, Chevy’s answer to Daimler’s Smart car. I have further evidence that Andy’s right and the move to conservation is even broader. But there’s some bad news. They will be punished. Andy (Carpenter) and I just got a note from the town fathers that our water rate is going up 23%. Does water in the reservoir cost them more? Is it scarcer? Have they recently invested in upgrading the infrastructure? Nope. None of the above. In fact, all of New England had record snowfall last winter, regular rain this spring, and constant thundershowers this summer. There is no drought. The town is raising rates because demand is down. It seems that the economy is bad, so people are saving money by conserving water. The town does not see any point in helping them out. Providing clean water is not a public service. Selling water is a moneymaker. If we use less, by golly, they will charge us more. Only in government and highly regulated markets can falling demand translate to rising prices. If you are thinking of investing in conservation and earth-friendly ideas, evaluate carefully. Good ideas do not always reach the buying masses. An example: When I got my first full-time paid job as an editor, I arrived for work the first day to discover I could hardly get in the office. Lawyers with briefcases and empty shopping bags were lined up four-abreast all around the block. I had happened to walk into the EPA’s Office of Solid Waste on the very day its first bundle long-awaited Resource Conservation Recovery Act regulations were published. These hazardous waste rules were an answer to horrendous poisonings at places like Love Canal. Yet, you can believe that the oil companies, chemists, printers and others were ready to fight to get them overturned if possible and discover loopholes if not. My generation of college students was sympathetic to the environment and gentler living, but not everyone was. Hundreds of small companies began making herbal and organic treats like teas, but only Hain went on to become a billion-dollar business. Hundreds of engineering firms got into the environmental audit or cleanup business, but only a few went on to the success of Waste Management or Fluor. When an idea seems timely—like energy efficient cars, wind power or non-poisonous agriculture—why does it often fail? Why don’t lots of businesses working in the area make it to the big time? This is a good question for you as an investor. There’s a lot of opportunity out there. In fact, I am working on an “end of the world” portfolio to take advantage of it right now. But the obvious and “right” is not always commercially successful. I’ve discovered a couple of reasons why, I believe. One: The obvious is not always obvious to everyone. My peers and I got a big dose of environmentalism in school, especially in college. Our minds were prepared to accept. Our parents were not in the same situation. Their formal schooling had ended before ecology was a common concept. INTERNAL ENDORSEMENT Winners Cherry Pick! Losers Bottom Feed Thousands of stocks have just fallen 40% or more... most will continue to tumble… but you should still overpower the markets. Because a select few stocks are now set to roar back for outstanding near-term gains. It’s time to party like it’s 2002 You don’t want to miss out… because, today, you can jump into any one of seven companies at what should be their once-in-a-lifetime lows… each is poised to take you to new highs. Grab this low-hanging fruit here. In addition to that, I was raised in the country, among farms. Any farmer can see runoff in the form of dirt eroding to streams. It’s not hard to imagine the same happens with less visible material like pesticides or manure dissolved in rainwater. And it’s not hard for a farmer to realize that chemicals that run off his property are a waste of money. What’s more, in the 1970s, many older farmers remembered when the surface water on their farms was used directly and without treatment by their own families. Not just the wells that brought up safe drinking water, but the springs and ponds that provided backup water, laundry water and drinking water for cattle. But as I walk around my suburban neighborhood today, these viewpoints don’t seem so obvious at all. Half or more of my neighbors do not have a farmer’s-eye understanding of runoff. Every spring the competition is on for the first green and weed-free lawn, which is achieved with massive doses of herbicides, pesticides and non-organic fertilizers. Far more than it takes to do the job. I take the dog for a walk and feel an urge to shower afterwards. The landscapers put little flags on the turf to warn passersby that these green lawns are unsafe for pets and children. Yet my neighbors are blithely unconcerned about living in the middle of something that unhealthy. They certainly do not envision this stuff running off to the closest lake every time it rains. And they wouldn’t be drinking it before it went through city processing anyway. What is obvious to me might as well be the principles of gravity on Mars to them. The second reason good ideas fail is competition. By this, I do not mean something like Waste Management Inc. competing against Allied Waste Inc. in the waste business or “local organic teacompany” trying to sell to grocers who are stocking Hain Celestial teas. I mean the competition that comes from existing beneficiaries of the way things are… the lawyers who represent well-moneyed firms that don’t want change. The sellers of large cars that have ignored small cars for the past two decades—and had to if they wanted to sell to families demanding their very own SUVs. The small businesses that swore there was no global warming, long after big businesses had moved to protect themselves from it. In alternative energy, we recently saw many technologies get little help from the government’s purported intent to foster energy independence. It was not the best plan from all that we might have backed that got most of the money. Instead, powerful agricultural interests worked on the pols to make corn, soy and sugar ethanol the winner in the funding game. Anyone with a modicum of insight could have predicted the problems that came about. But the pushers outweighed them. The bottom line to all this insight is a clue on how to invest in alternative energy, green technologies, smaller cars and such. Everyone else focuses on the reasons for such improvements, expecting good sense and good citizenship to carry burden. That’s not enough. The worth of the new idea might not be obvious to all and, even if it is, it might have too much competition to succeed. To find a winner, focus on who’s against it. Then choose a company that looks to be stronger than its enemies, not one that is merely enjoying the praise of friends. Good luck. Lynn Carpenter   P.S.  To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com. [Ed. Note: For more companies that can protect and grow your wealth, check out Lynn Carpenter's Rising Tide Letter. She recommends companies that consistently deliver outstanding results. Click here for more info.] Market Watch All This and Earnings, Too? By Lynn Carpenter If you’re checking quotes every day, 2008 is a painful year. Hardly do we see a slight improvement, then bam—the market stinks again. We’re on our fourth new low since last October, and each one has been a little lower than the one before it. Now, to add to the hubbub, earnings season starts again. That always causes more commotion than usual. Alcoa is traditionally the first of the Dow Jones Industrials to report. It marks the start of the high season for earnings reports. Though most companies cluster their reports in a few weeks, earnings go on all the time. Some stocks have already reported second quarter results recently, and some late first-quarter filers have finally come in just before the second-quarter season begins in earnest. These stragglers may provide a clue. Of the stocks I have been actively watching, earnings have been as good as expected or better. There’s a reason that this may be a broad trend. We have four successive quarters of disappointments behind us, with fewer and fewer companies beating expectations. Add in the general economic gloom, and analysts are not so overly optimistic as they have been before. It should therefore be easier for companies to give us positive earnings surprises. Chart courtesy of Bespoke Investment Group So far, however, the recent good earnings reports have met with initial enthusiasm and a rise in the stock price. Then a few days later, the stocks settle back into the market and take the same blows every other stock is taking. That will be the big contest this earnings season. Which will win? Will the easier comparables provide enough good news to get a rally started and keep it going? Or will the barrage of mean economic news repeatedly unravel the gains we make? I will be watching with great interest. If we are to have a bull market, then the first hint will be sustained gains in stocks reporting good news. The second broad clue will be good earnings news for the day outweighing the same day’s bad economic news. Alcoa reported Tuesday, July 5, and the season has begun. More companies will be pitching in next week and the three weeks after. Watch the balance between good earnings and bad economy to get a feel for whether this bear market is winding down yet. But one thing that is only slightly likely to signal the end of this bear — the usual 90-90 blowout. That’s a day when 90% of the stocks fall and 90% of the volume is in selling. A 90-90 day often marks the bottom of a bearish leg. But this year, we’ve already had some of those this year and we’re still dropping. I don’t think we need another mega-blowout day to end this bear market. This bear will probably end by starvation, not a bullet to the heart. I’m expecting a quiet attrition in selling, not another 90% down day.   INTERNAL ENDORSEMENT Energy Panic! How The Next Oil and Natural Gas Price Surge Could Make You Richer Faster. Just when it seemed the energy crisis couldn't possible get any worse, it's doing just that — causing major supply bottlenecks, triggering truckers' strikes in several industrial nations, prompting widespread cutbacks by U.S. airlines, and fast becoming an energy panic of historic dimensions. Click here for more information ...   If you enjoy IDE's daily investing advice, you'll definitely be interested in checking out our sister publication, Early to Rise. Each morning, you'll get powerful wealth-building advice covering real estate, entrepreneurship, personal finance, marketing, and much more. Sign-Up for Early To Rise today! To unsubscribe, Click here To change your email address, Click here To cancel or for any other subscription issues, write us at: Investor's Daily Edge 245 NE 4th Ave, Suite 201 Delray Beach, Fl 33483 Phone: (800) 681-4759	The Market Minute The bear market marches on... with 64% of NYSE stocks and 82% of its volume in declining issues yesterday (Wednesday). Make that 68% and 84% for Nasdaq. But if you are looking for a a trend among the winners, here it is: good news in the past 24-hours. Unfortunately, gains from earnings surprises are still tending to dwindle away a week later.       In The Markets   Last Change YTD Dow 11,147.44 236.77 -15.96% Nasdaq 2,234.89 59.55 -15.74% S&P 500 1,244.68 29.02 -15.23% Gold 927.90 8.20 11.35% Silver 18.12 0.34 22.68% Oil 135.54 0.50 41.22% Nat Gas 11.93 0.44 59.49%   Newsworthy A Barron’s story astutely asks, “What do British Airways, German Pharmaceutical giant Bayer, and French water-service leader Suez have in common? They've left the New York Stock Exchange in the past year and let their shares trade over-the-counter.” Recently while researching worldwide companies in the alternative energy game I found that most of the European companies with solid businesses did not have a regular U.S. listing. They were on the pink sheets. Barron’s concentrated on the Sarbanes-Oxley cause. But to us, the cause is somewhat irrelevant. The effect is that we will have to look much harder for good investments in coming years as the world goes increasingly global and fewer of the best companies feel the urge to list their shares on the NYSE, Nasdaq or Amex. Some companies have already chosen to delist.  Barron’s noted that this trend “can mean that a mutual fund limited to owning listed stocks must sell these shares. Among the most affected was the PowerShares BLDRS Europe 100 ADR Index fund (ADRU), which replaced 22 delisted ADRs.” Another reason why making your own choices is better than buying a mutual fund.     Meet the Team MaryEllen Tribby - Publisher Jedd Canty - Business Director Rick Pendergraft - Managing Editor Jon Herring - Editor Nicole Reynolds - Marketing Analysts / Editorial Contributors Michael Masterson Charles Delvalle Andrew M. Gordon Dr. Russell Mcdougal D.D.S.

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