These powerful computers allow the giant brokerages to process trades in a fraction of a second. It’s called “High Frequency Trading.” And it’s responsible for about 70 percent of the action on Wall Street.

That stinks. It means that those big brokerages see the market before you do. And that allows them to get better gains than the average investor acting alone. (Studies show individual investors do much worse, over the long run, than institutional traders.)

It’s not right.

There is a way to correct this imbalance. IDE’s Steve McDonald, Editor of The Bond Trader, offers the following advice:

1. Avoid the hot stock or trend of the week. With High Frequency Trading, it can turn against you in a nano-second.

2. Avoid day-trading as much as possible. With so many trades now occurring behind your back, it has become dangerous to play the price movement guessing game.

3. Stick with the investing strategy the entire IDE staff has been advocating since day one: a long-term time horizon, high-quality dividend stocks, and quality bonds at a discount. (For specific recommendations, start reading our flagship newsletter, Sound Profits.)

Prices hit $136 in 2007 and then began a long pullback to around $40. They bottomed in April and have since rebounded to the $50 per pound level. 

Can they go up from here? Based on market fundamentals, yes… and soon. 

Nuclear power contributes 16 percent of world energy demand. In the U.S., it contributes 20 percent. And with 30 nuclear plants under construction and another 38 in pre-construction stages, with dozens more planned, nuclear’s contribution is sure to rise. 

Meanwhile, there won’t be enough uranium to go around. The International Atomic Energy Agency recently said that Russia and the U.S. may cover only 5 percent of world demand by 2015. 

The current shortage in production is being covered by uranium from dismantled weapons the U.S. has been getting from Russia. The government-created company USEC down-blends this uranium for use in nuclear power plants. But that agreement with Russia goes away in 2013. 

The global nuclear power plant construction program isn’t going anywhere, though. With China and India leading the way, nuclear’s resurrection shouldn’t be ignored by investors. 

The entire nuclear industry is revving up, including uranium exploration and mining. (It takes eight to 12 years to build a mine and get the stuff out of the ground.) One of the bigger companies that has been mining uranium for a long time is Cameco (CCJ). Its stock should grow right along with the sector itself.  

[Ed. Note: Andrew Gordon shares his thoughts on the financial markets regularly in ETR's sister publication, Investor's Daily Edge. Get your free subscription here.

You can also check out Andrew's monthly newsletter,INCOME, for regular updates on how to grow your wealth with high yield and market-beating returns.] 

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Remember when it made the rounds over a year ago?

The idea was that even if the U.S. economy caught pneumonia, the rest of the world would at worst get a bad cough. It was argued that Europe and China were much less reliant on the U.S. economy than ever before. And China, with its massive import needs, would also keep economies from Brazil to Australia humming.

This gave governments, businesses, and investors hope. It was about as good as any other unproven theory – but it didn’t quite work out, did it?

America’s economic malaise quickly spread to other countries, including China in a very big way, and they caught much worse than just a cough.

Fact is, replacing the U.S.’s massive market is easier said than done. China’s quickest road to recovery is helping the U.S. recover. That’s why, despite a lot of moaning and groaning, China will continue to finance our growing debt and take their chances on a future devalued dollar.

China’s leaders understand better than most people in America that their heady economic growth was entirely dependent on our “borrow-and-spend” behavior.

With no replacement in sight, it’ll be next-to-impossible for China to turn around its economy. De-coupling has once again miscast China. China is no savior. The crisis began in the West and will end in the West. Only then will a recovery spread elsewhere.

Read my lips: A rescue is not around the corner. You should continue to invest defensively (in gold, for example) or bet the market short, because it still has another leg down to go.

[Ed. Note: You can read more of investment analyst Andrew Gordon's commentary on world markets and his advice for how to deal with them in these tough economic times in Investor's Daily Edge, ETR's free sister publication.]

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The banks are back, right?

Goldman Sachs, JP Morgan, Bank of America, Wells Fargo, and even Citigroup all reported profits for the first quarter of 2009. But a closer look under the hood reveals some “creative accounting”…

• Bank of America arbitrarily increased the value of its Merrill Lynch assets.
• Goldman Sachs bunched much of its losses into the month of December – a month it skipped reporting on this year.
• JP Morgan’s bonds fell in price. And that perversely allowed the bank to increase its bottom line.

Most of the banks did extremely well in fixed-income, currency, and commodities trading this past quarter. So is this the new bank model? Making boatloads of money from Forex and bonds?

Not likely. It looks more like a one-time bonanza to me.

The Fed and European central banks were broadcasting their quantitative easing efforts. It’s not hard to make money when the government is telling you which way rates are going. But now that the run-up to quantitative easing is over, making those oversized profits will get a lot harder. So where else will the banks be getting their money?

A bank’s loans are only good assets if they get paid back. And the brutal recession we’re having is forcing more and more loans into default. When their loans go into default, banks go from earning money to spending money. Each foreclosure, for example, costs a bank about $50,000.

The banks still have some tough sledding ahead.

[Ed. Note: Andrew Gordon is an investment analyst with decades of experience watching the markets. Get his take on the economy, under-the-radar investment opportunities, and more with Investor's Daily Edge, ETR's sister publication. Get your free subscription here.]

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Historically, far more companies have raised their dividends as opposed to cutting or suspending them. But in the first quarter of 2009 – for the very first time since 1955 when Standard & Poor’s started tracking this – the ratio reversed. For every three companies that raised dividends, four cut them.

This is yet another red flag indicating how tight credit still is.

But how about those dividend hikers?

Many raised their dividends by 5 to 10 percent or more this past quarter. And you can even find some – including Shell and AstraZeneca – that have upped their dividend payments by over 10 percent.

Raising dividends in this period of tight credit and slumping demand is either a huge bullish statement on the prospects of the company in question or…

The biggest con job this side of the Madoff scandal.

Occasionally I find a dividend hiker I don’t like. For example, General Dynamics raised its dividend last month but also announced that it would be laying off 12 percent of its workforce. This is not a company confident about its future earnings growth.

But I’ve found that 98 percent of dividend hikes are legit – made because the company has deep reserves of cash and solid revenues.

Companies like that are good investments right now. You’d be getting a double bang for your buck: increasingly big dividend checks and share prices poised to go up.

[Ed. Note: You can read the investment advice and musings of Andrew Gordon every day in ETR's sister publication Investor's Daily Edge . ]

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But there’s something else I need to know…

Was the operating margin lower or higher last year? And the year before? And the year before that? I like to see margins on an upward trend. It could mean several things, like…

• Strong and/or rising pricing power

• A shortage of products (Think Harley-Davidson, which deliberately makes fewer bikes than they could sell.)

• Technological leadership

• A transition from lower-end to higher-end products

• Rising productivity

• The ability to effectively manage costs

It takes more homework to figure out what is driving higher margins, but all of the above possibilities are good. So with an operating margin on an upward trend, even without doing the homework, you already know the company is running its business from a position of strength.

Profit margins go to the core of what makes a business successful. If you want a reality check, consider retailers.

Many retailers sold more product than ever during the 2008 holiday season. But because they had to slash prices to get customers to buy, their margins were squeezed to the max. So while sales were up, profits were down. That’s what happens when margins go in the wrong direction.

If you want to do the research yourself, the numbers are provided online by Reuters Finance. Just look up a specific company and click on “Ratios.”

[Ed. Note: This June, investment expert Andrew Gordon is just one of 9 investment experts who will show you exactly how you can make a fortune in today's market. Find out how to get their top recommendations for making 2009 the best year ever for your portfolio right here. ]

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But I suspect that these days it’s misused more often than not.
 
P/E is one of several metrics that can help you get a handle on how expensive or cheap a company is. A PEG of 1 or less means good growth for the price. Above that, and the stock is probably overvalued.

I used to love PEGs of 1 or less. Whenever I saw one, I wrote in the margins of my notebook, “High growth expected.”

Two years ago, this notation always meant “Good. The company is on a high-growth trajectory.” When I write the same thing now, it means something entirely different. I think, “Gee, can this company meet its high-growth expectations?”

Let’s take a look at Coke.

The forward P/E (based on expected earnings for the next 12 months) for the entire S&P 500 index is 12.42. Coke’s is 13.02.
 
If Coke were expected to increase earnings at a rate of 13.02 percent a year over the next five years, its PEG (P/E divided by earnings growth) would be exactly 1.

With a 13.02 P/E, the last thing I want is a PEG of 1 or less. In such a case, the company would be expected to grow earnings by at least 13.02 percent a year. And in this global environment, that would be next to impossible.

But Coke’s PEG isn’t 1. It’s 1.69. That makes its projected annual earnings growth a very achievable 7.7 percent.

The stock market is all about expectations. When a company disappoints analysts and investors, it can lead to a decrease in its share price.

With a PEG of 1 or less, that’s a probable outcome these days. I don’t go there anymore – and neither should you.

[Ed. Note: Investment expert Andrew Gordon has mastered the art and science of value investing. He uses these skills to identify both undervalued and overvalued opportunities. And boy, are those short positions paying off! Just recently, he closed gains of 116%... 98%... 101%... 148%... 106%... and 103%. Find out how you can get the secrets behind these big plays right here.]

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Obama will begin withdrawing troops as soon as he can. That may not be until 2010, but much of the planning will be laid out this year.

But downsizing troops doesn’t mean downsizing our involvement. The goal is to save lives. And the quid pro quo will be spending more money.

So talk about reducing contractor levels in Iraq is just that – talk. The next stage will be a big increase in outsourcing reconstruction and security functions to the private sector.

Iraq will be getting loads of new stuff, including tow trucks, communications vehicles, hauling vehicles, aerial platforms for construction, fire and garbage trucks, and heavy-load hauling vehicles.

And Uncle Sam, of course, will be paying the bill.

The companies that can take advantage of both of Obama’s huge infrastructure programs – the one that will play out in the U.S. and the one that will play out in Iraq and Afghanistan – will be big winners in 2009 and 2010.

[Ed. Note: Investment expert Andrew Gordon is just one of 14 masters of making money who will be giving you the inside scoop on some very hush-hush secrets for turning a nifty buck in the next few years. Find out how to get your hands on these experts' SAFEST and most PROFITABLE income-generating and entrepreneurial opportunities right here.]

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You should stay away from them. But why not invest in the next big technology the auto companies will need? All of them have plans to introduce or step up the production of battery-driven cars beginning around 2011-12.

The batteries being used today won’t be the batteries that will be used in a few years. Nickel-cadmium batteries are on the way out. On the way in are lithium-ion batteries, with twice the capacity and half the weight. Plus, they work fine in hot or cold weather.

This market is flying under the radar. From $9 billion today, it could reach $150 billion in the next 10 years.

There are about 30 car manufacturers around the world dying to get their hands on this new technology. And those companies that have already begun production have the best chance of becoming big players in this market.

[Ed. Note: Investment expert Andrew Gordon has mastered the art and science of value investing. He uses these skills to identify both undervalued and overvalued opportunities. And boy, are those short positions paying off! Just recently, he closed gains of 116%... 98%... 101%... 148%... 106%... and 103%. Find out how you can get the secrets behind these big plays right here.]

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Were you tempted to buy Bank of America, GM, or GE? Or wannabe giant-killer American Micro Devices that had Intel on the ropes for a few shining months?

Human nature can be our worst enemy when we invest. We think a company “deserves” better, is “misunderstood,” is ready to “fight back”… as if the market cares about any of these things.

There are a lot of screaming bargains available right now. Lots of companies with compelling stories. Lots of companies in sexy sectors (like alternative energy). But, you’re not looking for romance. You’re looking for a good investment.

Usually, you can tell a risky stock when you see one. GM never looked good last year. Bank of America made headlines for all the wrong reasons. GE kept revising its earnings down. American Micro Devices is the classic underdog, but had serious money problems it couldn’t hide from anybody.

You know better than to invest in companies like these. Look for your thrills elsewhere – and remember that the biggest investment mistakes are stocks you bought, not the ones you missed.

[Ed. Note: Thousands of Americans are cashing in on a loophole for collecting up to $8,881 a month, backed by an "explicit" U.S. Treasury guarantee... and the next batch of checks is going out on March 27, 2009. Learn how you can get your name on the list by reading on here.]

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