Saturday, October 31, 2009

Does Economics Violate the Laws of Physics?

The financial crisis and subsequent global recession have led to much soul-searching among economists, the vast majority of whom never saw it coming. But were their assumptions and models wrong only because of minor errors or because today's dominant economic thinking violates the laws of physics?

A small but growing group of academics believe the latter is true, and they are out to prove it. These thinkers say that the neoclassical mantra of constant economic growth is ignoring the world's diminishing supply of energy at humanity's peril, failing to take account of the principle of net energy return on investment. They hope that a set of theories they call "biophysical economics" will improve upon neoclassical theory, or even replace it altogether.

But even this nascent field finds itself divided, as evidenced by the vigorous and candid back-and-forth debate last week over where to go next. One camp says its models prove the world is headed toward a dramatic economic collapse as energy scarcity takes hold, while another camp believes there is still time to turn the ship around. Still, all biophysical economists see only very bleak prospects for the future of modern civilization, putting a whole new spin on the phrase "the dismal science."

Last week, about 50 scholars in economics, ecology, engineering and other fields met at the State University of New York's College of Environmental Science and Forestry for their second annual conference on biophysical economics. The new field shares features with ecological economics, a much more established discipline with conferences boasting hundreds of attendees, but the relatively smaller number of practitioners of biophysical economics believe theirs is a much more fundamental and truer form of economic reasoning.

"Real economics is the study of how people transform nature to meet their needs," said Charles Hall, professor of systems ecology at SUNY-ESF and organizer of both gatherings in Syracuse. "Neoclassical economics is inconsistent with the laws of thermodynamics."

Like Hall, many biophysical economic thinkers are trained in ecology and evolutionary biology, fields that do well at breaking down the natural world into a few fundamental laws and rules, just like physicists do. Though not all proponents of the new energy-centric academic study have been formally trained in economics, scholars coming in from other fields, especially ecology, say their skills allow them to see the global economy in a way that mainstream economists ignore.

Central to their argument is an understanding that the survival of all living creatures is limited by the concept of energy return on investment (EROI): that any living thing or living societies can survive only so long as they are capable of getting more net energy from any activity than they expend during the performance of that activity.

For instance, if a squirrel burns energy eating nuts, those nuts had better give the squirrel more energy back then it expended, or the squirrel will inevitably die. It is a rule that lies at the core of studying animal and plant behavior, and human society should be looked at no differently, as even technologically complex societies are still governed by EROI.

"The basic issue is very fundamental: Why should economics be a social science, because it's about stuff?" Hall said.

'Peak oil' embraced
The modern biophysical economics movement may be relatively young, but the ideas at its roots are not.

In 1926, Frederick Soddy, a chemist who was awarded the Nobel Prize just a few weeks before, published "Wealth, Virtual Wealth and Debt," one of the first books to argue that energy should lie at the heart of economics and not supply-demand curves.

Soddy also criticized traditional monetary policy theories for seemingly ignoring the fact that "real wealth" is derived from using energy to transform physical objects, and that these physical objects are inescapably subject to the laws of entropy, or inevitable decline and disintegration.

The sharpest difference between biophysical economics and the more widely held "Chicago School" approach is that biophysical economists readily accept the peak oil hypothesis: that society is fast approaching the point where global oil production will peak and then steadily decline.

The United States is held as the prime example. Though the United States is still the world's third-largest producer of oil, its oil production stopped growing more than a decade ago and has flatlined or steadily fallen ever since. Other once-robust oil-producing countries have experienced similar production curves.

But the more important indicator, biophysical economists say, is the fact that the U.S. oil industry's energy return on investment has been steadily sliding since the beginning of the century.

Through analyzing historical production data, experts say the petroleum sector's EROI in this country was about 100-to-1 in 1930, meaning one had to burn approximately 1 barrel of oil's worth of energy to get 100 barrels out of the ground. By the 1990s, it is thought, that number slid to less than 36-to-1, and further down to 19-to-1 by 2006.

"If you go from using a 20-to-1 energy return fuel down to a 3-to-1 fuel, economic collapse is guaranteed," as nothing is left for other economic activity, said Nate Hagens, editor of the popular peak oil blog "The Oil Drum."

"The main problem with neoclassical economics is that it treats energy as the same as any other commodity input into the production function," Hagens said. "They parse it into dollar terms and treat it the same as they would mittens or earmuffs or eggs...but without energy, you can't have any of that other stuff."

Nor is conservation or energy efficiency the answer. In his presentation, Henshaw noted that the International Energy Agency's own data show that energy use is doubling every 37 years or so, while energy productivity takes about 56 years to double.

In fact, the small world of biophysical economists seems to agree that energy and resource conservation is pointless in the economic system as it is now construed, contrary to what one might expect. Such efforts are noteworthy as it buys the world a bit more time, but the destination is inevitably the same—a gallon of gasoline not burned by an American will be burned by someone else anyway.

Other peaks?
Though not as closely studied, biophysical economists theorize that the peak oil phenomenon holds true for all non-renewable resources, especially energy commodities. Proponents of the field say they are moving closer to understanding "peak gas" and "peak coal." Consumption of many of the world's most valuable minerals could likewise see those resources nearing exhaustion, as well, they say.

And no amount of technology can fix the problem. Hagens points out that oil extraction has evolved by leaps and bounds since the early 1900s, and yet companies must expend much more energy to get less and less oil than they did back then.

"It isn't that there's no technology," Hall said. "The question is, technology is in a race with depletion, and that's a whole different concept. And we think that we can show empirically that depletion is winning, because the energy return on investment keeps dropping for gas and oil."

The most pessimistic of the biophysical economics camp sees the oil-fueled world economy grinding to a halt soon, possibly within 10 years. They are all working to get the message out, but not all of them believe their peers in other professions will listen.

"Of course I'm trying to send a message," said Joseph Tainter, chairman of Utah State University's Department of Environment and Society. "I just don't expect there's anyone out there to receive it."

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC.

Dividend Stocks with Money-Doubling Potential - CHL, PNY, PEG

After weeks of teasing, is the stock market is finally giving us a real "correction"?

Market setbacks always provide a good occasion for us to recheck our premises. Is the major uptrend still intact? If so, we should use this dip to beef up our equity holdings.

On the other hand, if the selling reflects a significantly worsening economic outlook, we should adopt a more cautious policy (hedging, selling any subsequent rallies, etc.).

Fortunately, it appears that the market is simply digesting its monster gains of the past seven months.

The U.S. economy is emerging from its deepest downturn since World War II. In the early stages of a business recovery, it's common for the statistics to paint a mixed picture. This week, for example, the Commerce Department reported that sales of new homes fell 3.6% in September, the first monthly drop since March. Economists had predicted a gain.

Of course, just last week, the National Association of Realtors reported that sales of existing homes surged 9.2% in September. Since existing homes make up more than 90% of total home sales, last week's number was by far the more important.

We can expect a few more bumps (and bruises) over the next couple of weeks as the market adjusts to the fact that many parts of the economy are still struggling. However, I don't foresee a huge drop in the Dow from here. Most of the damage is probably behind us.

Accordingly, you should take advantage of the current weakness to do some buying. Not overpaying, mind you, but buying good-quality stocks that have the potential to give you solid returns.

Since early March, electric, gas and water distributors have lagged the blue chip indexes by a wide margin—to such an extent, in fact, that I think the pendulum may be just about ready to swing in the other direction.

For income seekers, now is an excellent time to build a stake in these classic high-dividend vehicles. I’m steadily accumulating them myself (one of the few market niches where I’m buying aggressively at the moment). Over the next three to five years, I figure, some of the most undervalued stocks in the group will probably double my money, including reinvested dividends.

Telecom stocks are a special category. Domestic telcos are coping with a renewed onslaught of competition from the cable providers, which threatens to erode the franchise value of both parties. On the other hand, big-name telco stocks like
AT&T (T) and Verizon (VZ) are cheap by almost any yardstick, and their dividends don’t appear to be in any immediate danger. It’s OK to nibble at T (below $27) and VZ (below $31) for income, but don’t go overboard. Current yields exceed 6%.

Dividend Stock #1 - China Mobile (CHL)


For greater total-return potential, I prefer
China Mobile (CHL). With a staggering 493 million cell phone customers and a market value of $200 billion, CHL ranks among the bluest of China’s blue chips. Unlike Sprint (S) and other troubled U.S. wireless carriers, China Mobile keeps debt to an absolute minimum, financing nearly all its growth through internal cash generation.

Most likely, CHL won’t be able to triple its sales over the next five years, as it did from 2003 to 2008. However, I still expect the company to grow considerably faster than most Western telecoms. In addition, CHL’s ample cash flow gives the directors plenty of room to hike the dividend. (The stock already yields 3.4%.) If you’re headed into retirement and you’re concerned, as I am, about the future purchasing power of the dollar, you need stocks like CHL that can deliver a rising income stream over the long run. Better yet, CHL pays in a strong currency—the yuan—that will almost certainly appreciate, in time, against the sickly greenback.

Dividend Stock #2 - Piedmont Natural Gas (PNY)


I have been following North Carolina-based
Piedmont Natural Gas (PNY) since March 1990. (Yikes, that long ago!) If you were invest in PNY then and hang on the whole time, reinvesting your dividends, you’ve clocked a total return of 1,390% on your original investment.

Even more remarkable, PNY still offers great value today. At a yield of 4.5%, the stock throws off about 20% more cash for each dollar you invest than the average gas utility. Yet Piedmont is anything but average, having sweetened its dividend every year since 1979. Over the past decade, the dividend has grown 56%, well ahead of the cost of living.

While the recession has clearly dented the company’s service area, I believe that, in the years to come, the Carolinas economy will again grow faster than the nation as a whole.

Dividend Stock #3 - Public Service Enterprise Group (PEG)


Public Service Enterprise Group (PEG), fondly known as Peggy to generations of stock traders, has delivered electricity to densely populated northern New Jersey since 1903. In recent years, PEG has also branched out into wholesale generating (producing and selling power to other utilities). Many utes have found the wholesale business too hot to handle, but Peggy has wisely maintained a conservative financial profile— and chalked up consistent profits. In fact, record earnings are pretty much in the bag for 2009, with another (though smaller) gain likely next year.

At last glance, PEG was quoted at a beggarly 5.9 times cash flow. As a rule of thumb, I consider an electric utility to be a takeover candidate when its share price falls below 7.5 times. Peggy is already there. If a suitor showed up, you could pocket a 25%–30% return on your money, virtually overnight. Current yield: 4.3%, more than a Treasury bond. PEG is an excellent buy.

Cosmetics Stocks EL, REV, RDEN Can Make Your Portfolio Beautiful

It’s better to look good than to feel good. At least, that’s what one famous comedian used to say. And though I don’t think most women live by that adage, there is one thing for certain; women certainly take their beauty needs seriously. This week we found out just how serious women have been of late when it comes to their cosmetic purchases.

On Thursday, Oct. 29, cosmetic maker Revlon (REV) dressed up the Street with an unexpectedly strong third-quarter showing. The beauty products maker earned $23.1 million, or 45 cents a share, compared with a profit of $29.2 million, or 57 cents, in the year-ago period. It was certainly down, but consensus estimates called for a loss of 16 cents a share.

As you might expect after such a surprise earnings beat, REV shares soared in the session. Well, soared really isn’t the right word. Exploded is the more appropriate term, as they ended Thursday’s session an amazing 43% higher. The Revlon beat and subsequent takeoff in the shares was indeed impressive, but Revlon wasn’t the only cosmetic company that tantalized the Street Thursday.

Upscale cosmetics maker Elizabeth Arden (RDEN) also posted an unexpected profit, and though the shares ended the session lower, they did surge higher initially in reaction to the earnings news. The company earned $40,000, or essentially flat earnings per share, in the quarter. And though that may not seem impressive, it is when compared to the loss of $12.5 million, or 45 cents, in the same quarter one year ago. The number also was well above estimates for a loss of 6 cents per share.

10 Expensive Stocks That Are Worth Every Penny

Perhaps more important than Elizabeth Arden’s past quarter was the company’s forecast for the next three months. Here it expects fiscal second-quarter earnings to come in between 65 cents and 75 cents a share. Elizabeth Arden also raised its full-year revenue and earnings forecast. The company expects to earn 55 to 65 cents per share for the full fiscal year. It also expects net sales to rise 2.5% to 3.5%. Its previous forecast was for earnings of 50 to 65 cents per share along with a net sales increase of 2% to 3.5%.

On Friday, Oct. 30, we found out how well another cosmetic giant, Estee Lauder (EL), did in their most recent quarter. Before the release -- several weeks ago -- Estee Lauder gave us a hint at how well things were going by issuing a very upbeat forecast for its fiscal Q1, saying they expect profits to be significantly higher than originally anticipated. Well, the company did not disappoint.

EL reported a huge increase in quarterly profit, while also raising its 2010 forecast. Estee Lauder earned $140.7 million, or 85 cents per share excluding one-time charges, in fiscal Q1, up substantially from $51.1 million, or 26 cents per share, in the year prior. The consensus forecast was for earnings of just 34 cents per share. Once again, a cosmetics company earnings beat cause traders to swoon, as EL shares rose nearly 10% in pre-market trade, and gapped up higher immediately after the ringing of Friday’s opening bell.

There are a lot of reasons why Revlon, Elizabeth Arden and Estee Lauder are enjoying better days here. For starters, women have grown tired of the “frugal nation” mentality that permeated the national zeitgeist in late 2008 and early 2009. Also, strong economic growth in Asia, particularly China, has created a whole new cosmetics consumer class with a lot of expendable income to devote to beauty needs. Finally, increased sales of cosmetic products at duty-free shops have helped spur the revenue of all three of these cosmetics makers.

The one exception to the bevy of better-than-expected cosmetics company performances is Avon (AVP). On Thursday, the company reported a 30% profit decline, earning $156.2 million, or 42 cents per share on an adjusted basis, in the third quarter. That’s down sharply from the $222.6 million, or 52 cents per share, in the same quarter a year ago. But despite the decline in profits, the 42 cents per share did beat analyst estimates for a profit of 40 cents per share. AVP shares were down over 1% in Thursday trade.

I think the outlook for cosmetics makers is good here, especially for the higher-end brands like Elizabeth Arden and Estee Lauder, but I suspect all four of these stocks will continue looking better and better over the next several months. And while it may not be better to look good than to feel good, there’s nothing wrong with making your portfolio look good via a little cosmetic help.

By Jim Woods, Contributing Editor, InvestorPlace

5 Frightening Stocks for Halloween

Scary Stock #1: Palm (PALM)

Palm (PALM) is the unfortunate company that has to go head-to-head against Apple's (AAPL) iPhone and Research In Motion's (RIMM) BlackBerry, not to mention both companies' enormously deep pockets. PALM will not win against such stiff competition.

Palm continues to lose money and burn cash faster than the Bush and Obama administrations. On Aug. 31, it had $277 million in cash and receivables, and $522 million in payables and short-term debt, while long-term debt is $389 million. And this is a company that may generate $400 million in revenue next year, and perhaps $500 million the year after, but no profits!

Barring an acquisition by a company dumber than Palm (where are the Chinese companies when you need them?), the stock is worthless.

Scary Stock #2: Open Table (OPEN)

Open Table (OPEN), a company that allows people to make restaurant reservations online, is a cult stock that's unspeakably overvalued. Think about it. Restaurants, especially higher-end ones, continue to lose business as consumers pinch pennies, and OPEN is a pure play on the restaurant business. This non-tech outfit is selling for six times revenue and 100 times forward earnings based on analyst estimates.

Management says it will fuel growth by expanding in Europe, but have you ever been to the typical high-end European restaurant? Fugheddaboudit! Management and other insiders just dumped a humongous number of shares in a secondary offering, which didn't raise any money for the company -- it just let investors and managers get liquid.

Scary Stock #3: Blue Nile (NILE)

Blue Nile (NILE) is another cult stock. It's well managed and a great brand for those buying jewelry online. The Street sees NILE as a "trading down" winner for people looking to save money who will buy their jewels online to save money. That may be true to some extent, but you need a credit card to buy online and income to back up the credit card -- and Blue Nile's core customer isn't the person who will go to Tiffany (TIF) while wearing a Hermes scarf.

Consensus estimates have NILE with a forward P/E in 2010 of 62. No kidding. The stock right now is range bound and has been driven by the troika that kills fundamental investors -- short squeezes, momentum traders and the willfully blind.

Bottom line: This company (while a great franchise) has a stock that is due to blow up. The only question is when.

Scary Stock #4: First Solar (FSLR)

First Solar (FSLR) is part of the Chinese solar industry -- an industry that's one big bubble!

I would like to provide a fundamental analysis of First Solar, but since it's a Chinese company, that would require paranormal skills that are found only in buy-side analysts who do investment banking or hope to do investment banking business in China and the Chinese solar industry. These companies boast iffy and unreliable accounting data. Orders from suppliers to assemblers are single, double and triple booked -- not in their earnings statements, but in the "insights" provided by analysts.

Furthermore, solar sales are being driven by Chinese government largesse; stock prices are being driven by loans from state-owned banks; and how long do you think the United States and Europe are going to give these companies unfettered access to their markets if China does not devalue? Plus, the put premiums reflect the contention that the Chinese solar industry is in a big bubble. Stay away!

Scary Stock #5: Wynn Resorts (WYNN)

Wynn Resorts' (WYNN) Steve Wynn is a guy I really love. He went from a bingo parlor operator to the world's most famous and innovative casino operator -- all while battling near-blindness from retinitis pigmentosa. He brought Frank Sinatra, the Mirage, Bellagio and the Wynn to Las Vegas, bought this, sold that and just brought $1.5 billion back home by cashing in on an IPO for his Macau venture.

He is one cool customer, but financial success in stock markets does not mean people are spending more money -- in fact, they are spending less. There will not be much growth in Las Vegas or Macau. In fact, I believe Las Vegas is gong to be seriously impaired for at least several years, and WYNN is radically overvalued.

Most importantly, in the short term, the stock is headed down and just dipped below its exponential six-monthmoving average, and is now hovering just above its 50-day moving average. Oh, and it is selling for 100 times earnings.

Finally, Mr. Wynn does not have a history of returning cash to investors; rather, he spends it on new hotels and casinos.



M A R K E T C O M M E N T A R Y

The STOCK INDEXES

The December NASDAQ 100 closed sharply lower on Friday as it extended this week's decline. The low-range close sets the
stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that additional weakness is
possible near-term. If December extends this week's decline, this month's low crossing at 1649.75 is the next downside target.
Closes above the 10-day moving average crossing at 1729.92 would confirm that a short-term low has been posted. First
resistance is the 20-day moving average crossing at 1725.30. Second resistance is the 10-day moving average crossing at
1729.92. First support is today's low crossing at 1661.50. Second support is this month's low crossing at 1649.75.

The December S&P 500 index closed sharply lower on Friday as it extended this week's decline. The low-range close sets the
stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that additional weakness is
possible near-term. If December extends this week's decline, this month's low crossing at 1012.10 is the next downside target.
Closes above the 10-day moving average crossing at 1068.40 would signal that a short-term low has been posted. First
resistance is the 20-day moving average crossing at 1067.70. Second resistance is the 10-day moving average crossing at
1068.40. First support is today's low crossing at 1029.50. Second support is this month's low crossing at 1012.10.

The Dow closed sharply lower on Friday as it extended this week's decline and closed below the 20-day moving average
crossing at 9892 confirming that a short-term low has been posted. The low-range close sets the stage for a steady to lower
opening on Monday. Stochastics and the RSI remain bearish signaling that additional weakness is possible near-term. If the
Dow extends this week's decline, this month's low crossing at 9430 is the next downside target. Closes above the 10-day
moving average crossing at 9932 would confirm that a short-term low has been posted. First resistance is the 20-day moving
average crossing at 9892. Second resistance is this month's high crossing at 10,119. First support is today's low crossing at
9684. Second support is this month's low crossing at 9430.

INTEREST RATES

December T-bonds closed up 1-15/32's at 120-05.

December T-bonds closed sharply higher on Friday due to weakness in the equity markets and above the 20-day moving average
crossing at 120-04. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are
bullish signaling that sideways to higher prices are possible near-term. Multiple closes above the 20-day moving average
crossing at 120-04 are needed to confirm that a short-term low has been posted. If December renews this month's decline, the
reaction low crossing at 117-20 is the next downside target. First resistance is today's high crossing at 120-05. Second
resistance is the reaction high crossing at 121-02. First support is Tuesday's low crossing at 117-31. Second support is the
reaction low crossing at 117-20.

ENERGY MARKETS

December crude oil closed sharply lower on Friday as it extended this week's decline. The low-range close sets the stage for a
steady to lower opening on Monday. Closes below the 20-day moving average crossing at 76.59 are needed to confirm that a
short-term top has been posted. If December renews this month's rally, the 38% retracement level of the 2008-2009-decline
crossing at 84.64 is the next upside target. First resistance is Thursday's high crossing at 80.46. Second resistance is last
week's high crossing at 82.00. First support is today's low crossing at 76.85. Second support is the 20-day moving average
crossing at 76.59.

December heating oil closed sharply lower on Friday as it extended this week's decline and tested support marked by the 20-day moving average crossing at 199.82. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics
and the RSI remain bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving
average crossing at 199.82 would confirm that a short-term top has been posted. If December renews this month's rally, the
38% retracement level of the 2008-2009-decline crossing at 242.65 is the next upside target. First resistance is Thursday's high
crossing at 209.75. Second resistance is last week's high crossing at 215.78. First support is the 20-day moving average
crossing at 199.82. Second support is today's low crossing at 199.75.

December unleaded gas closed lower on Friday as it extended this week's decline. The low-range close sets the stage for a
steady to lower opening on Monday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible
near-term. Closes below the 20-day moving average crossing at 192.99 would confirm that a short-term top has been posted. If
December renews this fall's rally, the 50% retracement level of the 2008-2009-decline crossing at 229.90 is the next upside
target. First resistance is Monday's high crossing at 210.15. Second resistance is the 50% retracement level of the 2008-2009-
decline crossing at 229.90. First support is today's low crossing at 194.40. Second support is the 20-day moving average
crossing at 192.99.

December Henry natural gas closed lower on Friday but remains above the 62% retracement level of this fall's rally crossing at
4.970. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold but
remain neutral to bearish signaling that additional weakness is still possible near-term. If December extends this week's decline,
the 75% retracement level crossing at 4.752 is the next downside target. Closes above the 20-day moving average crossing at
5.515 are needed to confirm that a low has been posted. First resistance is the 10-day moving average crossing at 5.425. Second
resistance is Monday's gap crossing at 5.473. First support is Thursday's low crossing at 4.941. Second support is the 75%
retracement level crossing at 4.752.
CURRENCIES

The December Dollar closed higher on Friday as it consolidates above the 20-day moving average crossing at 76.06. The high-
range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI remain bullish signaling that
sideways to higher prices are possible near-term. If December extends this week's rally, the reaction high crossing at 76.85 is
the next upside target. Closes below the 10-day moving average crossing at 75.88 would confirm that a short-term top has been
posted. First resistance is Thursday's high crossing at 76.75. Second resistance is the reaction high crossing at 76.85. First
support is the 10-day moving average crossing at 75.88. Second support is last Wednesday's low crossing at 75.09.

The December Euro closed lower on Friday as it consolidates below the 20-day moving average crossing at 148.362. The low-
range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that
sideways to lower prices are possible near-term. If December extends this week's decline, this month's low crossing at 144.790
is the next downside target. Closes above the 10-day moving average crossing at 148.871 are needed to confirm that a low has
been posted. First resistance is the 10-day moving average crossing at 148.871. Second resistance is Monday's high crossing at
150.620. First support is Thursday's low crossing at 146.810. Second support is this month's low crossing at 144.790.

The December British Pound closed lower on Friday as it consolidates some of Thursday's rally. The low-range close sets the
stage for a steady to lower opening on Monday. Stochastics and the RSI are turning bullish hinting that sideways to higher
prices are possible near-term. If December extends this month's rally, the reaction high crossing at 1.6742 is the next upside
target. Closes below the 20-day moving average crossing at 1.6213 would confirm that a short-term top has been posted. First
resistance is Thursday's high crossing at 1.6602. Second resistance is last Friday's high crossing at 1.6689. First support is
Monday's low crossing at 1.6245. Second support is the 20-day moving average crossing at 1.6213.

The December Swiss Franc closed lower on Friday and is poised to renew this week's decline. The low-range close sets the
stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices
are possible near-term. If December extends this week's decline, the reaction low crossing at .9657 is the next downside target.
Closes above the 10-day moving average crossing at .9852 would confirm that a short-term low has been posted. First
resistance is today's high crossing at .9850. Second resistance is the 10-day moving average crossing at .9852. First support is
Thursday's low crossing at .9723. Second support is the reaction low crossing at .9657.

The December Canadian Dollar closed lower on Friday as it extended this week's decline. The low-range close sets the stage for
a steady to lower opening on Monday. Stochastics and the RSI are bearish but oversold warning bears that a short-term low
might be in or is near. If December extends this week's decline, the reaction low crossing at 91.24 is the next downside target.
Closes above the 20-day moving average crossing at 95.11 would confirm that a short-term low has been posted. First
resistance is the 20-day moving average crossing at 95.11. Second resistance is the reaction high crossing at 96.36. First
support is today's low crossing at 92.26. Second support is the reaction low crossing at 91.24.

The December Japanese Yen closed higher on Friday and above the 20-day moving average crossing at .11066 confirming that
a short-term low has been posted. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and
the RSI have turned bullish signaling that additional gains are possible. If December extends this week's rally, the reaction high
crossing at .11261 is the next upside target. Closes below the 10-day moving average crossing at .10965 are needed to confirm
that a short-term top has been posted. First resistance is today's high crossing at .11124. Second resistance is the reaction high
crossing at .11261. First support is Tuesday's low crossing at .10834. Second support is the reaction low crossing at .10812.

PRECIOUS METALS

December gold closed slightly lower due to profit taking on Friday as it consolidates below the 20-day moving average. The
high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are overbought and are
turning neutral to bullish hinting that a short-term low might be in or is near. Closes above the 10-day moving average crossing
at 1049.80 are needed to confirm that a short-term low has been posted. If December extends this week's decline, broken
resistance crossing at 1025.80 is the next downside target. First resistance is today's high crossing at 1049.20. Second
resistance is the 10-day moving average crossing at 1049.80. First support is Wednesday's low crossing at 1026.90. Second
support is broken resistance crossing at 1025.80.

December silver closed lower on Friday but the mid-range close sets the stage for a steady opening on Monday. Stochastics and
the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near-term. If December extends this
week's decline, the reaction low crossing at 15.920 is the next downside target. Closes above the 20-day moving average
crossing at 17.320 are needed to confirm that a short-term low has been posted. First resistance is the 20-day moving average
crossing at 17.320. Second resistance is last Wednesday's high crossing at 18.175. First support is Wednesday's low crossing
at 16.120. Second support is the reaction low crossing at 15.920.

December copper closed lower on Friday as it consolidated some of Thursday's rally. The low-range close sets the stage for a
steady to lower opening on Monday. Stochastics and the RSI are neutral to bearish hinting that a short-term top might be in or
is near. Closes below the 20-day moving average crossing at 290.60 are needed to confirm that a top has been posted. If
December renews this month's rally, the 75% retracement level of the 2008-2009-decline crossing at 316.36 is the next upside
target. First resistance is Monday's high crossing at 306.20. Second resistance is the 75% retracement level of the 2008-2009-
decline crossing at 316.36. First support is Thursday's low crossing at 291.80. Second support is the 20-day moving average
crossing at 290.60.

FOOD & FIBER

December coffee closed lower on Friday as it consolidates below the 20-day moving average. The mid-range close sets the stage
for a steady to lower opening on Monday. Stochastics and the RSI remain neutral to bearish signaling that additional weakness
is possible near-term. If December extends this week's decline, the reaction low crossing at 12.53 is the next downside target.
Closes above the 10-day moving average crossing at 13.91 would confirm that a short-term low has been posted.

December cocoa closed lower on Friday as it extended this week's decline. The low-range close sets the stage for a steady to
lower opening on Monday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible
near-term. Closes below the 20-day moving average crossing at 32.74 would confirm that a short-term top has been posted. If
December renews the rally off August's low, weekly resistance crossing at 34.35 is the next upside target.

March sugar closed slightly lower on Friday as it consolidates below the 10-day moving average crossing at 23.11. The high-
range close set the stage for a steady to higher opening on Monday. Stochastics and the RSI remain bearish signaling that
sideways to lower prices are possible near-term. If March extends this week's decline, the reaction low crossing at 21.95 is the
next downside target. Closes above the reaction high crossing at 24.68 are needed to renew this month's rally.

December cotton closed higher due to short covering on Friday as it consolidates above the 38% retracement level of the 2008-
decline crossing at 66.78. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the
RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving
average crossing at 66.08 would confirm that a short-term top has been posted. If December extends this month's rally, the 50%
retracement level of the 2008-decline crossing at 73.41 is the next upside target.

GRAINS

December Corn closed down 13 1/2-cents at 3.66.

December corn closed lower on Friday as it extended this week's decline. A bullish extended weather forecast for the Midwest
along with strength in the Dollar helped to pressure the corn market today. The low-range close sets the stage for a steady to
lower opening on Monday. Stochastics and the RSI remain bearish signaling that additional weakness is possible near-term. If
December extends this week's decline, the 50% retracement level of this fall's decline crossing at 3.59 is the next downside
target. Closes above the 10-day moving average crossing at 3.83 1/4 would temper the near-term bearish outlook. First
resistance is Thursday's high crossing at 3.81 3/4. Second resistance is the 10-day moving average crossing at 3.83 1/4. First
support is today's low crossing at 3.64. Second support is the 50% retracement level of this fall's decline crossing at 3.59

December wheat closed down 9 1/2-cents at 4.94 1/4.

December wheat closed lower on Friday as it extended this week's decline below the 20-day moving average. The mid-range
close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to
lower prices are possible near-term. If December extends this week's decline, the 75% retracement level of this fall's rally
crossing at 4.72 3/4 is the next downside target. Closes above the 10-day moving average crossing at 5.20 are needed to confirm
that a short-term low has been posted. First resistance is the 20-day moving average crossing at 5.01 1/2. Second resistance is
the 10-day moving average crossing at 5.20. First support is today's low crossing at 4.89. Second support is the 75%
retracement level of this fall's rally crossing at 4.72 3/4.

December Kansas City Wheat closed down 9-cents at 4.99.

December Kansas City Wheat closed lower on Friday as it extended this week's decline below the 20-day moving average. The
low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that
additional weakness is possible near-term. If December extends this week's decline, the reaction low crossing at 4.79 is the next
downside target. Closes above the 10-day moving average crossing at 5.25 1/4 would confirm that a short-term low has been
posted. First resistance is the 20-day moving average crossing at 5.11 3/4. Second resistance is the 10-day moving average
crossing at 5.25 1/4. First support is today's low crossing at 4.97. Second support is the reaction low crossing at 4.79.

December Minneapolis wheat closed down 11-cents at 5.12 3/4.

December Minneapolis wheat closed lower on Friday as it extended this week's decline below the 20-day moving average. The
low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that
additional weakness is possible near-term. If December extends this week's decline, the reaction low crossing at 4.98 is the next
downside target. Closes above the 10-day moving average crossing at 5.37 3/4 would confirm that a short-term low has been
posted. First resistance is the 10-day moving average crossing at 5.37 3/4. Second resistance is last Friday's high crossing at
5.83. First support is today's low crossing at 5.10 1/2. Second support is the reaction low crossing at 4.98.

SOYBEAN COMPLEX


January soybeans closed down 10 1/2-cents at 9.76 1/2.

January soybeans closed lower on Friday as a bearish extended weather for the Midwest and a stronger Dollar pressured the
market today. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish
despite today's rebound signaling that additional short-term weakness is still possible near-term. If January extends this week's
decline, the 50% retracement level of this fall's rally crossing at 9.57 is the next downside target. Closes above the 10-day
moving average crossing at 9.90 3/4 are needed to confirm that a short-term low has been posted. First resistance is Thursday's
high crossing at 9.90 1/2. Second resistance is last week's high crossing at 10.28. First support is Wednesday's low crossing at
9.63. Second support is the 50% retracement level of this fall's rally crossing at 9.57.

December soybean meal closed up $1.70 at $297.00.

December soybean meal closed higher on Friday and above the 10-day moving average crossing at 295.90 confirming that a
short-term low has been posted. Profit taking tempered early session gains and the mid-range close sets the stage for a steady
opening on Monday. Stochastics and the RSI are turning neutral hinting that sideways to higher prices are possible near-term. If
December extends this week's rally, the reaction high crossing at 308.20 is the next upside target. Closes below Wednesday's
low crossing at 285.50 would confirm that a short-term top has been posted. First resistance is today's high crossing at 301.50.
Second resistance is the reaction high crossing at 308.20. First support is Wednesday's low crossing at 285.50. Second support
is the October 6th gap crossing at 273.20.

December soybean oil closed down 112 pts. at 36.40.

December soybean oil gapped down and closed sharply lower on Friday. Weakness in energy markets along with a stronger
Dollar was the main factors in today's sell off, which also led to a close below the 20-day moving average. The low-range close
sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower
prices are possible near-term. If December extends this week's decline, the reaction low crossing at 35.90 is the next downside
target. Closes above the 10-day moving average crossing at 37.57 are needed to confirm that a short-term low has been posted.
First resistance is the 10-day moving average crossing at 37.57. Second resistance is last Wednesday's high crossing at 38.75.
First support is today's low crossing at 36.26. Second support is the reaction low crossing at 35.90.

LIVESTOCK

December hogs closed down $0.50 at $56.70.

December hogs closed lower due to profit taking on Friday as it consolidated some of this week's rally. The mid-range close sets
the stage for a steady opening on Monday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices
are possible near-term. If December extends this month's rally, the 38% retracement level of the 2008-2009-decline crossing at
62.12 is the next upside target. Closes below the 20-day moving average crossing at 53.56 would confirm that a short-term top
has been posted. First resistance is Thursday's high crossing at 57.65. Second resistance is the 38% retracement level of the
2008-2009-decline crossing at 62.12. First support is the 10-day moving average crossing at 54.61. Second support is the 20-
day moving average crossing at 53.56.

February bellies closed down $1.50 at $89.30.

February bellies closed lower due to profit taking on Friday as it consolidated some of this month's rally. The low-range close
sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are turning bearish hinting that a short-term
top might be in or is near. Closes below the 20-day moving average crossing at 84.33 are needed to confirm that a short-term
top has been posted. If February extends this month's rally, June's high crossing at 95.00 is the next upside target. First
resistance is Tuesday's high crossing at 91.70. Second resistance is June's high crossing at 95.00. First support is the 10-day
moving average crossing at 86.17. Second support is the 20-day moving average crossing at 84.33.

December cattle closed down $0.60 at 85.68.

December cattle closed lower on Friday and below the 20-day moving average crossing at 85.77 confirming that a short-term
top has been posted. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are
bearish signaling that sideways to lower prices are possible near-term. If December extends this week's decline, the reaction low
crossing at 84.25 is the next downside target. Closes above the 10-day moving average crossing at 86.76 would temper the near-
term bearish outlook in the market. First resistance is the 10-day moving average crossing at 86.76. Second resistance is last
Friday's high crossing at 87.90. First support is today's low crossing at 85.25. Second support is the reaction low crossing at
84.25.

November feeder cattle closed up $0.20 at $94.80.

November Feeder cattle closed higher on Friday due to short covering as it consolidated some of this week's decline. The low-
range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are bearish signaling that sideways
to lower prices are possible near-term. If November extends this week's decline, the reaction low crossing at 93.02 is the next
downside target. Closes above the 10-day moving average crossing at 95.55 would confirm that a short-term low has been posted.

E X T R E M E F U T U R E S

WINNERS

LB.F10 LUMBER (RANDOM LENGTH) Jan 2010 211.0 8.5 +4.20
BCX.U10 CBOT SOYBEAN CRUSH INDEX Sep 2010 74.75 2.75 +4.07
AA.Y$$ BUTTER (SPOT) Cash 1410 50 +3.68
NGX.Z09 5 YEAR INT RATE SWAP (IMPLIED YLD) Dec 2009 2.87207 0.07202 +2.57
NIX.Z09 10 YEAR INT RATE SWAP (IMPLIED YLD) Dec 2009 3.72654 0.08528 +2.34
RR.X09 ROUGH RICE Nov 2009 14.36 0.28 +1.99
JY.Z09 JAPANESE YEN Dec 2009 0.011113 0.000185 +1.69
US.Z09 T-BONDS Dec 2009 120.15625 1.46875 +1.24
DA.X09 MILK CLASS III Nov 2009 13.93 0.13 +0.95
NI.Z09 10 YEAR INT RATE SWAP Dec 2009 103.156250 0.890625 +0.87

LOSERS

BCX.G11 CBOT SOYBEAN CRUSH INDEX Feb 2011 64.00 -6.00 -9.49
RB.X09 RBOB GASOLINE Nov 2009 1.9432 -0.0758 -3.78
CL.Z09 CRUDE OIL Dec 2009 77.00 -2.87 -3.60
YC.Z09 CORN (MINI) Dec 2009 366.00 -13.50 -3.56
C.Z09 CORN Dec 2009 366.0 -13.5 -3.55
LC.V09 LIVE CATTLE Oct 2009 81.65 -3.00 -3.54
HO.X09 HEATING OIL Nov 2009 1.9811 -0.0731 -3.54
GI.X09 S&P GSCI COMMODITY INDEX Nov 2009 495.5 -17.5 -3.41
VB RUSSELL 2000 VALUE INDEX 783.33 -26.75 -3.30
NK.H10 NIKKEI 225 INDEX Mar 2010 9770 -310 -3.08

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E X T R E M E S T O C K S

WINNERS

MSTR MICROSTRATEGY INC CL A 87.41 13.97 +19.02
CEC CEC ENTERTAINMENT INC 29.250 3.920 +15.48
NANO NANOMETRICS INC 8.25 1.04 +14.42
HAR HARMAN INTL IND INC 37.7300 4.7300 +14.33
TSYS TELECOM SYSTEM 8.96 1.04 +13.13
WLFC WILLIS LEASE FINANCE CORP 12.73 1.42 +12.56
CVTI COVENANT TRANS GROUP A 5.050 0.560 +12.47
UFX DOMTAR PAPER INC 45.99 4.82 +11.71
DORM DORMAN PRODUCTS INC 14.63 1.40 +10.58
SXE STANLEY INC 28.25 2.46 +9.54

LOSERS

NVTL NOVATEL WIRELESS INC 8.90 -3.29 -26.99
GGC GEORGIA GULF CORP 14.39 -4.83 -25.13
GFIG GFI GROUP INC 5.15 -1.51 -22.67
ELNCF ELAN CORP 5.486 -1.364 -19.91
DDRX DIEDRICH COFFEE INC 21.89 -4.91 -18.32
TSRA TESSERA TECHNOLOGIES 22.13 -4.73 -17.61
IOSP INNOSPEC INC 11.78 -2.35 -16.63
LAD LITHIA MOTORS INC CL A 8.34 -1.59 -16.01
MBLX METABOLIX INC 10.139 -1.881 -15.65
SMP STANDARD MOTOR PRODUCTS 8.36 -1.50 -15.21





CHINA WIND SYSTEMS, INC. (OTCBB: CHWY)

 CHWYLogo
China Wind Systems, Inc.
(
OTC BB: CHWY)

Alternative Energy
Click for Research Report $11
On October 13, 2009, China Wind Systems completed a one-for-three stock split intended to position the Company for a move to a senior exchange. We think the NASDAQ is the market of choice for the Company and by splitting the stock, the Company meets one of the NASDAQ listing requirements – a stock price above $4. In addition, the Company has announced plans to expand its forged product facility in Wuxi City to include a new production line for the manufacture of electro-slag remelted (ESR) forged high performance components for use in wind power turbines. Due to the stock split and the announcement of the ESR production line, we are adjusting our estimates for 2009 and 2010, as well as out price target. We have adjusted our revenue and cash flow targets to account for the ESR business. No impact on revenue is expected n 2009, but we begin to add revenue in late 2010. We are maintaining our “Buy” recommendation, and adjusting our 12-month price target to $11.
Click Here For Full Report
Videos from China
Dave Gentry Visits China Wind:
watch video
Dave Gentry Visits China Wind - Dye Machine Factory: watch video
Investment Highlights
  • We are maintaining our “Buy” rating.
  • We are adjusting our target price from $3.50 to $11 due to stock split.
  • Adjusting forecast estimates to reflect stock split.
  • Electro-Slag Remelting (ESR) production line announced with start-up expected in late 2010.

Overview
China Wind Systems is strategically positioned to answer the world's call for more wind power. Through our affiliates – the Huayang Companies – we are effectively transferring a wealth of precision manufacturing expertise gained over the years into our wind energy component operations. Our precision forging technology and upgraded capacity will enable us to deliver high quality and quantity large forged rolled rings, gearboxes, yaw bearings and shafts for use in large-scale windmills. The mix of advanced technology and an established satisfied customer network sets us apart from the competition. Already a key industry player, we are well-positioned to become a leading wind components supplier in the years to come.

China Wind Systems enjoys a track record of operating a profitable business in precision manufacturing for more than a decade. Additionally, we have an established and growing national network of satisfied customers, and strong ties within the wind industry, including wind turbine manufacturers. Located in Wuxi, Jiangsu Province – the central point of the Eastern Corridor Wind Resource – China Wind Systems is close to and conveniently accessible by all major modes of transportation. Transportation is a significant expense factor for our customers; our geographic advantage affords cost savings in this area. We completed another major milestone in October 2008 – the installation and testing of the new equipment and processes as part of our Phase I Expansion. This marked the start of supplying forged rolled rings and shafts for larger wind turbine units. We have complete confidence in our ability to execute our business plan.

Dolphin Digital Media, Inc. (OTC BB: DPDM)

Dolphin Digital Media Announces Partnership With Catskill Central School District

MIAMI, Oct. 14, 2009 (GLOBE NEWSWIRE) -- Dolphin Digital Media, Inc. (OTCBB:DPDM - News), a creator of secure social networking websites for children utilizing state-of the-art fingerprint identification technology, is pleased to announce its partnership with Catskill Central School District in New York to implement Dolphin Secure on all of their high school students' laptops.

Representatives of both Catskill Central School District and Dolphin Digital Media will be in attendance at the Annual New York State School Board Association Conference, which begins today in New York City. Students from Catskill will be on-hand to demonstrate Dolphin Secure, and its unique fingerprint reader log-in system.

Dolphin Secure is a groundbreaking family Internet solution that gives parents the tools to protect their children from online threats such as pornography, cyber-bullying and unsolicited chat requests while they are using their home computers. Now this protection will be extended to schools and school computers, including netbooks that the children take home with them.

Children registered within Dolphin Secure automatically become members of Dolphin Surf, which is a customizable gateway to the Internet with full social networking capabilities, wherein the children can establish profiles, search for friends, IM one another, write blogs, and upload photos. Students will be able to be a part of the Catskill High School groups on Dolphin Surf, and chat with classmates in a safe setting that requires fingerprint verification at log-in.

Upon registration, a student scans their finger using the Dolphin Secure UPEK fingerprint reader. The scanned fingerprint is then converted into a number and stored in a protected, remote database. The student's account details (e.g., parental and school settings and personal preferences) are associated with this number, which is created by an irreversible algorithm. A copy (or a "print") of a child's actual fingerprint is never taken, let alone stored anywhere within the Dolphin Secure system. Only the unique number created by a child's unique fingerprint is kept. Through the use of fingerprint verification at log-in, Dolphin Secure is able to ensure that the user is the student associated with their account and not someone trying to impersonate the student, thus greatly reducing the risk of cyber-bullying which students face online on a daily basis.

"We are very excited to be Dolphin Secure's first pilot program, and embarking on this initiative just two weeks after their launch," said CCSD Superintendent of Schools, Dr. Kathleen Farrell. "I am very impressed by the design of this software. It is very simple to use and, in terms of safety, it is most definitely a new standard, a full step above anything else I've seen. By installing Dolphin Secure, I know that we can responsibly allow our high school students to experience all of the benefits of the Internet, while feeling assured that we as administrators have done all we can to protect them from harmful influences," said Farrell.

Dolphin Secure permits the parents and school administrators to set the boundaries of which websites their students can visit and the parameters of who they can send instant messages to while online. The sites that can be visited, and the people that students are allowed to chat with, can be customized for each particular student, grade level or school. In addition to having their own groups on Dolphin Surf, accessible only by Catskill students using the fingerprint log-in of Dolphin Secure, the Catskill PTA will also have the ability to use Dolphin Secure as a fundraiser for every parent that signs up for in-home use.

"I couldn't be more excited to announce the pilot program between Dolphin Secure and Catskill," said Bill O'Dowd, Chief Executive Officer of Dolphin Digital Media, Inc. "We knew that Dolphin Secure would be a perfect way for schools to begin allowing live chat, or instant messaging, into the world of education. Dr. Farrell was an immediate supporter of ours, and she quickly grasped and shared our vision of a world in which students of all ages are safe to experience all of the great benefits of the Internet, together," continued O'Dowd. "As the Internet will only increase in importance in our children's lives and in the way we educate our children, Dolphin Secure is proud to work with Dr. Farrell and the Catskill Central School District in creating a new standard for the online safety of students, through the use of Dolphin Secure and its fingerprint log-in system."

Dolphin Digital Media

Dolphin Digital Media, Inc. (http://www.dolphindigitalmedia.com) creates and manages social networking websites for children utilizing state-of the-art user-verification technology. As a leading developer of Internet safety technology operating in the digital media, education and entertainment sectors, there is a focus on the growing global market for social networking, user-generated content, and safe content delivery.

www.redchip.com