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Global Debt Crisis

Written By Brian Hicks

Posted December 12, 2009

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

Christian DeHaemer is right. The credit rating agencies really do suck.

They couldn’t see one of the biggest economic disasters (since the Great Depression) unfolding in front of them… the same fools that rated junk as triple-A status… and the same fools that are just now catching on to the problems unfolding in Greece.

Fitch is just now downgrading Greece’s sovereign rating from A- to BBB+ after countless years of Greece’s mounting debt, lax policies, and alleged tax evasion that had their economy shoulder-deep in red. National debt here is also expected to rise to 125% of GDP by 2010…

And the rating agencies are just now worried that other government debts are unsustainable — another notion that most consider old hat.

Not even a month ago, the International Monetary Fund projected "that the average debt to gross domestic product ratio of the 10 advanced countries… would mushroom to 118% by 2014." But the agencies are just now getting worried?

Who needs ’em?

Now the [better] news from this week:

  • According to Green Chip Stocks, General Electric just landed a $1.4 billion contract from power producer Caithness Energy to supply turbines for what could be the biggest wind farm ever… and supply about a tenth of Southern California Edison’s renewable energy. When completed, the Shepherd’s Flat project will supply energy to the U.S. west coast grid, provide enough energy to power 235,000 California homes, and have the capacity to generate two billion kilowatts a year. Now that’s cool. Stay tuned for more on this developing story from Green Chip Stocks.

  • There was even some good news for housing… Despite the coming mountain of Option ARM resets, the housing sector can use all the good news it can get. In November 2009, "only" 307,000 Americans received foreclosure notices — that’s down 8% month-over-month. But it’s still up 18% year-over-year. While somewhat encouraging, U.S. foreclosure filing will hit a record high.

  • As for wild options activity, keep an eye on Interoil (IOC). The last time we played this company, we walked with 34%, 83%, and 60% gains in less than a month. This time, however, as the stock nearly doubled in months… the bulls aren’t done, as Papua New Guinea approved the company’s project agreement for the construction of a liquefied natural gas plant. Yet, despite the news, the stock is still thinly covered by analysts. But it’s showing marked improvements — and is still a steal. The bulls realize this and are buying up the January 60 calls.

  • Turns out Bank of America call option buyers of the last few weeks didn’t get the positive outcome they were hoping for. Good thing we sat that round out! Despite news that the bank repaid the U.S. Treasury $45 billion as part of the Troubled Asset Relief Program, the stock has barely moved on the news. Repayment followed the completion of a securities offering where the company sold 1.286 billion common shares, generating $19.2 billion.

  • Even Citigroup has barely moved, despite bullish activity in call options. Not to be outdone by Bank of America, the company said it was preparing to raise up to $20 billion in common stock to pay back TARP… which could dilute shares by up to 20%. The company is said to be looking for terms similar to what Bank of America got. Stay away. Shorts are coming back to financials.
  • Speaking of options, trading them was once considered a risky, speculative, and complicated way to trade stocks. But that’s no longer the case. Maximizing gain potential couldn’t be easier these days. Yet, not every one should be trading them — that is, not without proper options education. Which is why we’re teaching the ins and outs of options with our soon-to-be-launched Options Trading Coach (a $299 value). It’s being offered free to Options Trading Pit readers. Options trading just got easier.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

P.S. In case you missed any of the week’s top-read articles from Wealth Daily and our sister publications, I’ve included them for you here.

2010 Stock Market Outlook: Great Start and a Troubled Finish
Wealth Daily Editor Steve Christ offers his 2010 stock market outlook and details why the first half will be better than the second.

Why I’m Buying Gold Dips: The Printing Presses Are Just Getting Warmed Up
Wealth Daily Analyst Adam Sharp explains why the head-fake recovery may give us a rare opportunity to buy gold before it takes off again.

America’s Unsustainable Debt: 3 Charts You Must See Now
Editor Christian DeHaemer discusses why U.S. debt is unsustainable; rating agencies are worthless; and the reasons to buy this gold dip below $1,100.

Record Volumes in Gold: What’s Next for Gold
Wealth Daily reports: Gold prices are up over 35% year to date but sold off in the last week, leaving many to wonder if the bubble has burst. Others, however, say the upside momentum isn’t over just yet.

The Smart Grid’s Coming Electric Economy: The Utilities’ View of the Smart Grid
Energy & Capital Editor Nick Hodge discusses utilities and the smart grid, and how the relationship between the two can make you money.

The Top Biotech Stocks: The Race for the Cure
Not only is this company working on the cure to one of the deadliest diseases know to man… it’s also following an enormously profitable trend in the biotech sector. Wealth Daily reveals this company in a new report.