Top performing stocks - Spear Report - Terrorist plots effect on the market

Gregory Spear, editor of The Spear Report newsletter, discusses the recent terrorist plot that was foiled and the Federal Open Markets Committee (FOMC) pause. Learn about one company's advanced products that can help in the fight against terrorism. Afterward, take a sneak peek into this featured expert's Consensus Buy List portfolio. Detail from August 11 The news on Thursday morning (8/10) that British authorities thwarted a terrorist plan to blow up as many as ten U.S.-based jumbo jets in mid-flight using liquid explosives smuggled in carry-on luggage is a stark reminder that many in the world hold a rather dim view of U.S. foreign policy in the Middle East, and are willing to take extreme measures to voice those objections. The plot apparently targeted American, Continental and United flights from Britain. As a consequence, liquids and lotions are being banned from U.S. flights and the national terror alert level has been raised to Red. The good news, supposedly, is that since the London bombing in July 2005, which resulted in a sharp intraday reversal and a multi-week rally, equity markets have been immune to terrorism news. On Thursday, Wall Street celebrated its resilience once again but the impetus behind the rally was half-hearted. The market remains profoundly uncertain and is exhibiting sudden shifts in direction that correspond with that state of confusion. The TSR Timing Model suggests a 25% exposure level. That seems about right. Scanning not Banning The latest terrorist plot was foiled, but the sad part is that such plots are very likely to succeed one day, yet we have the technology to stop most, if not all of them. Companies like American Science and Engineering (ASEI) have advanced products that will do the job, but they have to struggle for business because most nations are unwilling to upgrade outdated scanning equipment. Instead, we spend the money on personnel who pester us to untie our shoes, take off our belts and pat us down in a false show of conscientiousness that can be easily foiled by anyone who cares to. Some advanced equipment has been installed in Europe, and of course, in Israel. In Manchester, England, for example, new in-line systems enable screening of luggage eight times faster than in the average U.S. airport where bags are handled manually. Paradoxically, the Transportation Security Administration (TSA) is the chief obstacle to equipment upgrades in America. In the 2004 Intelligence Reform and Terrorism Prevention Act, Congress mandated the TSA to get better baggage screening technology into our airports, and all that the TSA has done is set up a committee, which has produced nothing of practical value. Instead, we get reactive edicts that ban the weapons-du-jour, which will now include just about everything, but we lack the technology to enforce the code in an efficient manner. Moreover, the latest ban on liquids will not stop the threat if manual searches remain the only verification method. Clothing can easily be constructed to hide such materials, which will not show up on the conventional metal scanners we walk through. If there is any lasting benefit from the massive media coverage of the London incident, it should be that a new level of high-tech inspection will now be demanded, using the type of equipment that sees through clothing and can identify the presence of all types of contraband, including dangerous organic compounds. American Science and Engineering's SmartCheck system is just such a device.' The Fed Anticlimax After 17 consecutive steps up the rate ladder, the Federal Open Markets Committee (FOMC) paused on Tuesday. This good news event was widely anticipated and thus Wall Street took it as an opportunity for selling, rather than buying. Chairman Bernanke can't keep a secret. He is far more transparent than his predecessor, which spreads the natural volatility of important Fed announcements over a period of weeks or even months, diminishing its final impact. The market had already reacted to the possibility of this news twice in June and twice in July, which resulted in a 5% rally for the S&P 500 well before the August 8th meeting. Unfortunately, the Dow Transportation Index, the former bulwark of the bulls, is reacting poorly of late, which is suggestive of the typical rotation from cyclicals to staples that occurs near the top of the business cycle. Gregory Spear and his team continue to recommend stocks with below-market multiples, exposure to emerging market economies and generous dividends as they feel these attributes will provide a margin of safety should the market trend downward. A Sampling of the Consensus Buy List Marathon Oil (MRO) is an energy company engaged in the worldwide exploration, production and transportation of crude oil and natural gas. The company refines, markets and transports petroleum products in the United States through Marathon Ashland Petroleum LLC, a joint venture company between Marathon and Ashland, Inc. Flextronic International (FLEX) is a leading provider of advanced electronics manufacturing services to OEMs primarily in the telecommunications and networking, consumer electronics and computer industries. The company's strategy is to provide customers with the ability to outsource, on a global basis, a complete product where the company's take responsibility for engineering, supply chain management, assembly, integration, test and logistics management. The company provides complete product design services, including electrical and mechanical, circuit and layout. Timken Company�s (TKR) activities are divided into two principal segments. The first is anti-friction bearings and the other is steel. Timken is a leading international manufacturer of highly engineered bearings, alloy and specialty steels and components, as well as related products and services. The company also produces custom-made steel products including precision steel components for automotive and industrial customers. Content Courtesy: Zacks Investment Research | Blog Home| VitalStocks Home