| August 26, 2013 | | | | |  | | | The Boy That Cried Taper | | | - How the market is reacting as the Fed's fake-out phase reaches a crescendo...
- The lesson you can learn from a timeless Charles Schulz gag...
- Plus, Neil George on the technology formerly pronounced dead, an investment opportunity that gives taper-talk the cold shoulder and plenty more!
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| | | | | | | This Obscure Metal is on the Verge of Becoming Earth's Most Precious Commodity
According to our experts, its price could soar in the triple digits over the coming months… And only one U.S. company is in a position to turn out this resource in mass quantities. Click here to learn more. | | | | | | | | Peter Coyne, imagining how investors will react come September's FOMC meeting...
 | | Peter Coyne | U.S. stocks edged up today. The S&P 500 kicked off its morning trading above its 50-day moving average. Even though the S&P finished last week up it was still down 2.7% from its Aug. 2 high of 1,709.67.
The dollar index is trending upward after Friday's negative session. Meanwhile, traditional stores of value had a mundane morning. Spot gold is $1,396 at writing, and silver is at $23.99.
In our opinion, the market's still in FFP, the Fed's fake-out phase. Recall Mr. Bernanke's rough guidelines: $85 billion purchases in Treasuries and mortgage-backed securities as far as the eye can see. That is, until unemployment reaches 6.5% or core personal consumption expenditures reach 2.5%.
We've been inching closer to the big day. In just three weeks and a day, the Federal Open Market Committee will hold its September meeting. Then we'll find out if Ben Bernanke will taper or if he'll pull a Lucy...
"Wow… he must think I'm the stupidest person ever."
"Come on, Charlie Brown. I won't lift the ball. Central bank credibility matters…"
"Well, if he's promising…an investor should never bet against the Fed...
Besides, he wouldn't try to trick me in a sluggish economy. This time I'm going to time this taper business right!"
[Starts running…]
Look at that smug SOB…
Maybe we'll have a clearer picture at the end of the week. But probably not. Jobless claims and GDP data will be released Thursday. The market consensus is the number of first-time unemployment claims will drop. But of course, those numbers will be revised. So don't hold your breath.
Our BS sense is tingling. Right now, unemployment stands at 7.4%, and inflation as gauged by the Fed has been consistently below 2%.
Something tells us that Bernanke will keep making excuses as to why tapering is soon likely... but not right now. Instead of September, we'll hear about December tapering. Once December rolls around, we'll get a new date. Each time he lifts the football, all the Charlie Browns out there will fall flat on their backs. Until one day when Bernanke cries taper for real and no one believes him. Then they'll really fall flat on their backs.
"We can expect $85 billion to flood into longer-term U.S. Treasury bonds and mortgage securities every month for at least the next two years," writes our income specialist Neil George.
Neil is convinced Bernanke will continue to allow U.S. banks to post mortgages and MBS for reserves and for loans from the Fed. "This has been a behind-the-scenes way of helping to prop up U.S. banks and even foreign banks with U.S. branches," he explains. "Banks with troubled mortgages on their books can keep them on their books at a higher than market value and get loans against them at next-to-nothing interest rates."
What loans have been made to which banks in what amounts remains unclear. But if we had to guess the amount, we'd estimate it's been a lot. We'd also hazard a guess that those loans have been the floating plank that drowning banks have grabbed to keep their heads above water.
"At some point," writes Neil, "they will have to have a reckoning, with either the Fed and taxpayers taking losses, or the banks. Either way -- the Fed isn't planning on reversing course, given the hundreds of billions of dollars on the line."
Strangely, Neil sees the Fed's financial repression as a boon to you, the income investor. "Low yields in Treasuries, money markets and even savings accounts will push demand for better yields in other markets."
What other markets, you ask?
"Right now, I see a few smaller companies," responds Neil, "with market caps of a billion dollars or less -- that make for very tempting new targets…" In today's episode of The Daily Reckoning, Neil fully dresses and presents the opportunity for you.
To do so, he climbs into his time machine to revisit an "old fashioned" technology that predates the computer. If you haven't heard, it's primed for yield-famished investors, taper or no. We're talking about the good ol' boob tube.
[Ed. Note: Before we kick it over to Neil below, we want to point out another trick he has up his sleeve. He has a legal method for you to collect three checks a month... 100% tax-free. It's perfectly legal and IRS approved and you can use it to collect up to 36 of these fat tax-free income checks over the coming year alone. Our publisher Joe sat down and had Neil explain how it works for you. The interview is right here.]
Then in today's DR PRO, our own Ryan O'Connor kicks off a week of taper tips. "While we're not totally convinced the Fed will make good on its threats," he writes in today's PRO, "you'd be stupid not to be prepared either way." He lays out two must-have short positions if the Fed surprises investors with tapering. If you'd like to access them, click here.
Read on below...
| | | | | | | Retiree Makes Heartbreaking Confession...
We just got a sad letter from a retired restaurant owner. Like millions of Americans, he's getting crushed by rising taxes on fixed income. What he doesn't know is that anybody is eligible to collect up to three extra government income checks per month -- 36 per year -- 100% tax-free. Click here to find out how... | | | | | | | | The Daily Reckoning Presents
| | | YouTube Boob Tube for the Taper Solution | | | | by Neil George | | | There are big bucks on the boob tube. When I was a kid, one of my mother's most common chastisements was to turn off the TV and go do something else. In her mind, anything was better than sitting relentlessly in front of the boob tube watching inane programs.
Well, it seems Ma was wrong. Not only did my retinas not burn out from staring at the TV, but I've managed to make over 128% so far this year by simply keeping an eye on it. I'd like to highlight some television companies that may be worthy of your investment dollars--especially if you're looking for a play that won't be affected by the Fed's taper talk.
Because despite what you may have heard, television is far from dead. On any given day, some 2.2 trillion hours of television are being watched across the United States, according to Nielsen.
More surprisingly, people watch television over 4.6 times longer than they surf the Web, according to recent data from New Media TrendWatch.
So it boggles my mind that so many stock-picking gurus have been touting Web companies with questionable revenue streams. Consider Facebook, which has barely made it back to its IPO price. In fact, more than 54% of the Web company stocks tracked by the Dow Jones Internet index have lost money or trailed the S&P 500.
Meanwhile, we've been quietly racking up gains with what's really making money in the modern media age.
Simply put, it pays to advertise. Almost all media live and die by advertising revenue. And advertisers have a very good reason to continue throwing their money at television stations -- nothing else can match their scope.
Television has the reach of nearly 89% of the total U.S. population. Radio offers only a scant 58.8% reach. Newspapers fall to a mere 36.1% of the nation. (No wonder The New York Times and Washington Post both dumped newspaper assets.)
The only thing that comes close to matching television's reach is the Internet -- currently hitting 73.1% of the population. Good, but nowhere near the total reach of television.
And advertisers know that not only do they reach more folks through television, but also they get more action. Advertising industry studies show that nearly 40% of consumers first learn of brands that they buy from TV ads, compared with only 8.7% from Internet ads.
Furthermore, 37.2% of people cite television ads when making purchasing decisions, against a paltry 5.6% who cite Internet ads.
This all points to the obvious -- that television controls the vast majority of ad spending. It now makes up 54% of all U.S. ad spending… up from 52% just a few years ago.
But there's even more good news on the television ad market. Local television websites continue to draw in new viewers, and ad dollars have followed. Local online advertising revenues nationwide are up over 175.19% over the past five years -- 1.3 times higher than the overall growth of Internet advertising spending.
Of course, audiences aren't the only thing about television that's growing. Televisions themselves have gotten huge. Decades ago, a 25-inch screen was a big deal. Today, you'll find screens reaching 40, 50, 60 and 80 inches… and even bigger. (Most of them built with technology from another favorite company of mine, Samsung Electronics. But that's a story for another issue.)
But the same concept of bigger is better is what's happening for television station companies as well. They're expanding into markets around their home regions and nationwide.
There are some key reasons for this. First, as noted above, television dominates media attention and spending. So the more stations you own, the better.
Second, expanding regionally helps lower costs. If you have news reporters in each locality, you can have fewer covering larger-scale events.
Also, when it comes time to buy content for your television stations, the more eyeballs you can reach, the better the deals you can cut with distributors.
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Increasingly, the bigger television companies with more market controls are even getting national networks to pay them to put their content out on local broadcasts. And the same goes for cable and satellite providers. They know all too well that folks demand local news and content, as well as network broadcasts that all have to flow through or from local television companies.
Third, there's been a major shift in the way television is broadcast -- and it's continuing to evolve, setting up another major growth area for television broadcast companies.
Back in 2009, the U.S. government mandated a switch from analog television broadcasting to digital.
But with the newer digital broadcasting standards, broadcast television companies discovered they were using less spectrum than they were allotted. So now companies are using that excess spectrum to roll out additional channels that are even more tailored to specific viewer groups.
This sets up whole new revenue streams that advertisers and content providers are eager to work with, resulting in more cash for broadcasters.
And it gets even better. Wireless data for smartphones and tablets demand more and more bandwidth -- and companies like Dish Network and even the U.S. government want to buy, or at least contract to use, some of the excess spectrum broadcasters are sitting on.
This means that broadcast companies are sitting on an increasingly valuable additional asset.
 1.3 times higher advertising spending than overall growth in Internet spending? Groovy.
Armed with all of this good news, leaders in local television are scrambling to buy more local stations and other broadcast companies.
Deals are now coming at a fast pace. Tribune has upped its television companies by 100%, to 42 nationwide. Its latest deal bought out 19 stations from privately held Local TV Holdings. And Gannett is in the process of expanding its station count to 43, with the additional 20 coming from its deal to absorb Belo.
For Lifetime Income Report readers, I've picked out three specific broadcasting companies -- with market caps of a billion dollars or less -- that make for very tempting new targets for speculative investors.
Regards,
Neil George
for The Daily Reckoning
P.S. The three broadcasting companies I just mentioned to you are only one taper solution I have up my sleeve. I won't go into full detail here, but another trick I've shown my readers is a way to collect tax-free income (don't worry, it's 100% legal). The Supreme Court issued a ruling that the news completely ignored -- basically, the federal tax man isn't allowed to touch a nickel of income collected using my income method.
It allows you to collect up to 36 tax-free income checks over the coming year alone, and there are no red flags and no audits. It's 100% free of federal income taxes (this method is real… but not for everyone. If you read the details and it's not something you're able to use, don't broadcast it… keep the method to yourself out of courtesy for other Daily Reckoning subscribers who want to use it). The details are right here.
| | | | | | |  Neil George is the editor of Lifetime Income Report and Total Income Alert -- investment advisories dedicated to finding Wall Streets best-yields. | | | | | | | | | BE SURE TO ADD dr@dailyreckoning.com to your address book.
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