Companies like Apollo Group (APOL), Corinthian Colleges (COCO) and Strayer Education (STRA) were first hammered on news that their graduates are significantly more likely to default on federal student loans than alumni of traditional four-year colleges.  Then Barron’s quoted an analyst saying the Department of Education’s estimates are probably accurate, bringing more pain for these stocks.

Worse yet, for-profit education stocks are a subsector of the consumer discretionary space.  In this market environment, consumer discretionary names are tough bets from the long side.  Even so, there is opportunity among for-profit education names.  You just need to look outside the U.S. to China.

Consider New Oriental Education (EDU).  EDU is a Chinese provider of foreign language training, test preparation services and software products.  Shares of New Oriental were up slightly last month while the U.S.-based education stocks were deep in the red.

On a fundamental basis, there is a lot to like with New Oriental.  China takes education seriously.  As the country continues to boost its presence on the global economic stage, more Chinese citizens will need to learn foreign languages.  This will boost demand for New Oriental’s services.

The smart money crowd apparently likes New Oriental as well.  Second-quarter 13F filings show that the stock is among the favorite Chinese American depositary receipts owned by professional money managers.

To be sure, New Oriental is no stodgy blue chip.  This is a growth stock with growth stock traits.  The market cap is just $3.73 billion, putting New Oriental barely into the realm of the mid-cap universe.  Its trailing P/E is over 49, the forward P/E is over 28 and shares trade at almost 9x book value.  Year-to-date, the shares are up more than 30%.  That compares with a loss of 5% for the iShares/FTSE Xinhua China 25 Index Fund (FXI).

Recent performance underscores how New Oriental is a preferred option in the for-profit education space.  It’s also one of the better bets among all U.S.-listed Chinese stocks.  New Oriental may face some near-term headwinds simply because of negative market sentiment, but support for the stock seems firm at the 50-day moving average.  If EDU can hold the $97-$100 range heading into the fourth quarter, it could find its way above $110 by the end of this year.

To play the always-optimistic Chinese education market in a difficult year, go with EDU. All the best.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

This confluence of factors makes emerging markets even more appealing for investors who want capital appreciation and growth.  That said, not all emerging markets are created equal.  Not surprisingly, Asia is frequently a favored destination for investors who want to take advantage of emerging markets growth.  Two of the favorites are Thailand and Indonesia.

To say that Indonesia is one of the most compelling emerging markets opportunities is an understatement.  We’ve discussed how investors can get exposure to the Indonesian market before.  It’s worth noting that even on down days for U.S. stocks, the two Indonesia-specific ETFs traded here in the U.S. often find a way to trade higher.

Outside of ETFs, few Indonesian stocks are listed on U.S. exchanges.  We’ve found one that looks like an ideal trade for this market environment: Perusahaan Perseroan PT Telekomunikasi Indonesia (TLK).  OK, that’s a confusing name, but TLK is pretty straightforward.  This is a telecom stock, usually referred to simply as PT TELKOM.

The telecom sector is a favorite hideout in turbulent markets because telecom stocks are often less volatile due to their robust dividend yields.  TLK certainly swings around more than stocks like AT&T (T) or Verizon (VZ), but that is to be expected.  After all, TLK is an emerging market stock and the others are two of the stodgiest U.S. blue chips.  TLK’s current yield of 5.9% also trails the average yield of 6.45% of AT&T and Verizon.

TLK’s last dividend was a very nice $2.32 a share.  In the past six months, TLK shares are up 10% compared to a 7% gain for AT&T and a 2% run for Verizon.  Sometimes it’s worth sacrificing some yield for better capital appreciation.  You’re also tapping into one of the world’s top emerging markets.  To go with an Indonesian telecom while the U.S. market struggles, go with TLK.  All the best.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

One could argue that a flat yield curve will force banks to make more and riskier loans.  In addition, consumers and business owners will want to borrow more because the terms are more favorable.  But this doesn’t seem to be happening.  Consumer credit continues to shrink in the weak economy.  A bank’s ability to boost profits is in serious peril, which is probably bad news for the broader market.  In other words, a flat yield curve has the potential to chase investors from equities into bonds.

While the yield curve may sound like a wonkish concept reserved only for professional bond traders, retail investors can now profit from flattening and steepening in the curve, too.  This is possible thanks to the introduction of two new exchange traded notes (ETNs): STPP and FLAT.

Right now fears of a lingering recession seem to be further flattening the yield curve, so we’ll focus on the iPath US Treasury Flattener ETN (FLAT).  FLAT tracks the Barclays Capital US Treasury 2Y/10Y Yield Curve Index.  This index measures the spread between two-year and 10-year Treasury yields.  The ETN is designed so that a 0.1% change in the spread between those two yields should result in a 2% price move for FLAT.  Essentially, that means FLAT is a leveraged play on the yield curve.  Investors will need to exercise the same caution they would with traditional leveraged ETFs.

Investors should also fully understand the composition of the index that FLAT tracks.  The index is 76% weighted to a long position in futures contracts on two-year Treasury yields and 24% weighted to a short position in 10-year Treasury yields.  Beyond that, the expenses involved with FLAT are higher than most fixed-income ETFs and ETNs.  FLAT has an annual expense ratio of 0.75% and also dings investors with a one-cent hit to NAV when it rolls the contracts it tracks.

If you want to play the flattening yield curve, consider buying FLAT.  Given that this instrument recently came to market, you may just want to keep an eye on it for now.  Be sure you use a limit order if you do decide to purchase the ETN.  FLAT may do well while the yield curve is flattening, but it is equally important to realize that losses are certain if the yield curve steepens.  To exploit a flattening yield curve in a touchy investment environment, go with FLAT.

Data from the Federal Reserve H.15 Report

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

That’s good stuff.  Additionally, in the near-term, a report released earlier this week by Kotak Mahindra Old Mutual Life Insurance says Indian stocks will rise another 15% to a record high by March 2011.  Which individual Indian equities are poised to benefit?  We’ve previously examined an Indian ETF, but today we’re going to look at a superb Indian brand.  Tata Motors (TTM) is India’s top automaker and the owner of the Jaguar and Land Rover luxury brands.

China is now the world’s largest car market, having surpassed the U.S. earlier this year, but India is on the rise as well.  On Tuesday, Tata said it sold almost 67,800 vehicles in July, a 41% increase from July 2009.  Sales of commercial vehicles jumped 26%, with light commercial vehicle sales popping 15%.  Sales of medium and heavy commercial vehicles surged 43% over July of 2009, Tata said.  On top of that, Tata said it posted a fiscal first-quarter profit of $430 million after enduring a loss of $71 million in the year earlier period.  Total sales came in at $5.8 billion.

In a testament to the strength in Tata’s shares, the stock was up more than 4% yesterday in U.S. trading while the broader market was considerably weaker.  Tata shares hit another fresh 52-week high on volume that was nearly double the daily average.  Some investors are understandably gun-shy about the auto sector after the calamity of the last two years.  General Motors became property of the U.S. government.  Chrysler is an afterthought, and though Ford (F) has rebounded, it doesn’t pay a dividend.

On the other hand, Tata has a fair dividend yield of 2.3%.  It has also paid a dividend in 52 of its 54 years as a public company, making Tata an ideal way for a dividend hunter to tap into emerging markets growth without incurring significant risk.

Not impressed by the fundamentals?  Tata’s technical outlook is also appealing.  The stock has recently broken out in a big way and is solidly above its 50- and 200-day moving averages.  Tata’s stock isn’t a runaway train, but it sure is acting like a fast car.  Investors who bought on our recommendation in April 2009 are now sitting on gains of about +175%.  To buy into India’s booming auto market, go with Tata Motors.  All the best.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

While the effectiveness of the strategy can be debated, the result is that short-term interest rates in the U.S. currently hover near zero.  The resulting new liquidity makes many investors think twice about investing in long-term Treasuries.  Financial markets suspect the Federal Reserve will not be shy about raising interest rates when economic growth resumes.

In other words, investors look at interest rates and say “There’s nowhere to go but up.”  This keeps some out of longer-dated Treasuries, an asset class normally viewed as a safe-haven from declining or volatile equity markets.

The problem with raising rates in a sluggish economy is that rate hikes are detrimental to growth.  Since growth in the U.S. is sluggish at best right now, inflation and rate increases may not be as big a danger as some fear-mongers would lead you to believe.

In fact, given the tame economic growth we’ve been seeing, deflation may be more of an issue.  That could mean it’s time to take a look at longer-term bonds.  The Vanguard Extended Duration Treasury ETF (EDV) is one way to exploit deflation.  We previously shed some light on the miniscule returns one can expect in money market funds currently.  EDV could be a compelling bet for investors looking to boost their fixed income exposure.

EDV tracks the Barclays Capital Long U.S. Treasury STRIPS 20-30 Year Par Bond Index.  This index includes “AAA” rated government debt with maturity dates of 20 years or more.  The average duration in the index is 26 years, which means it is supersensitive to interest rate changes.  STRIPS offer a twist on traditional Treasuries in that the interest and principal payments are separate from each other.  Yes, this is a somewhat complex play on bonds, but that doesn’t diminish the potential.

EDV’s performance on a year-to-date basis is something to behold.  While offering an annualized yield of 4.5%, EDV has also delivered capital appreciation of 15%.  That’s a stunning return for a bond fund.  Over the same period the S&P 500 is more or less flat, while previously hot niches like emerging markets are in the red.

There’s more to like with EDV.  The expense ratio of 0.14% is hardly noticeable.  Vanguard is known for its low expenses, and EDV is no exception.  That’s just another sign that EDV may have a home in your portfolio.  To use bonds for a potentially deflationary economy, go with EDV.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Represented by the symbol “Li,” lithium is the lightest and least dense of the solid elements. Lithium production has been growing for decades thanks to its use in small batteries.  Powering a car with electricity takes more than a few AAA cells, but it can be done.  The idea is increasingly popular as oil prices remain historically high.

This is good news for Chile. This slender South American country is the largest lithium producer in the world.  It is also good news for Sociedad Quimica y Minera de Chile ADR (SQM), often referred to by its English translation of Chemical & Mining Co. of Chile (SQM). The firm is a top holding in the first lithium-specific ETF. Obviously, the boom in lithium demand could be a boon for SQM. Driven by demand for hybrid and electric cars, lithium demand is expected to swell to 250,000 tons annually up from current levels of 100,000 tons.

Wall Street is taking note of the bullish trend. Several analysts think SQM could make its way to $70, well above the $36 area where the stock currently trades. UBS analysts put a $73 price target on SQM earlier this year.

SQM plans to invest $350 million to bolster its lithium production.  This may lead some investors to look at SQM as a company focused solely on lithium, but that’s not the case. SQM also offers investors significant exposure to increased global food demand. The company is one of Latin America’s top fertilizer producers, competing with the likes of Agrium (AGU) and Potash (POT). The fertilizer exposure highlights the diversity of SQM’s business model.  Investors are buying much more than lithium when they purchase SQM shares.

That said, it looks like lithium demand is driving SQM, at least in the short term. Last week, the company said it is talking with several Japanese automakers about their lithium needs. SQM is in what Fox Business News called “deep” discussions with Nissan. A sales agreement with Nissan to supply the Japanese auto giant with 10,000 tons of lithium per year could boost SQM’s top line by $55 million per year.

Valuations reflect that as SQM trades at 23.5 times forward earnings, but that really isn’t too rich as far as true growth stocks are concerned.  SQM has undergone a strong runup in July and may be vulnerable to a short-term pullback, although it should find support at $34.  To capitalize on rising lithium demand while still remaining diversified with fertilizer, go with lithium producer SQM.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Sugar prices rose dramatically in 2009 based on short global supply.  Weather issues in Brazil, the largest producer, coupled with higher demand in India caused global sugar prices to rise to an all-time high in February 2010 – nearly 30 cents per pound.  That’s one reason your favorite cake at the local bakery was more expensive, but prices eased earlier this year thanks to improved supply and slackened demand.  Sugar may have fallen from its recent highs, but the question remains:

Where is sugar going now?

Back in the spring, short-term trends were downward.  But sugar established a bottom in May and June.  Since then, prices have strengthened steadily.  A gentle uptrend is now in effect. Chartists would point to how prices broke above a retracement bar on the weekly charts – a bullish indicator suggesting more upward momentum.  One technical analyst thinks the sweetener will rise 10% in the coming months based on a Fibonacci retracement.  The technicians may be wrong, but global crops haven’t improved dramatically enough to indicate further price declines.  We like sugar’s chances at rising again.

Traditionally, commodities like sugar have been traded at the futures exchanges.  The main contract for sugar futures is Sugar No. 11, sold in New York at the Intercontinental Exchange (ICE).  ICE plays host to other unique commodities like Sugar No. 16, Cotton No. 2, and Coffee – but Chicago is still the futures trading capital of the world.  Fortunately, you no longer have to expect delivery of truckloads of sugar to your front lawn while trading the commodity.  These days you can buy an exchange traded product (ETP) that mirrors sugar prices on the exchanges.

In January, we recommended Brazilian sugar producer Cosan Ltd (CZZ).  Since then, CZZ is more than 16% despite economic challenges in both North and South America.  We think sugar is heading up again.  Instead of locking in on one stock, a better bet might be with an ETP.  Right now, the only sugar ETP available is iPath DJ-UBS Sugar TR Sub-Index ETN (SGG).

Technically, SGG is not an ETF – it’s an ETN, or exchange traded note.  As such, it carries the credit risk of the issuer, in this case Barclays.  Barclays iPath ETNs are described as “senior, unsecured, unsubordinated debt securities issued by Barclays Bank PLC.”  Aside from the risk of Barclay’s default, SGG is a far-superior product for most investors.  To profit from the global bounce in sugar prices, go with SGG.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Weather is also a factor for stocks. For instance, utility companies tend to trend upward in especially hot summers. It makes sense. Investors expect energy output to be higher as consumers cool their homes and businesses cool their offices. That’s important to consider given this summer’s weather pattern. Whatever is happening outside your window, the summer of 2010 has been especially hot in many areas of the U.S.

A recent analysis from Ned Davis Research reported, “Cooling degree days (CDD), measured as monthly deviation from trend, rose to 56 in June, the most since August 2007. CDD has been at least as high on only three other occasions since 1983, all of which were mid-summer months that registered strong growth in utilities output.” Higher utility output means more revenue for utility companies.

This may be good news for revenues, but what about expenses? How do these utilities generate electricity, and are their expenses reasonable compared to revenues? Each utility generates electricity in different ways. Companies may use coal, wind, natural gas, or even nuclear power to create electricity. Right now, those using natural gas are in a particularly attractive situation. Why? Because natural gas prices are low and will probably stay that way for some time.

Natural gas has been trending down since mid-2008 when it reached almost $14 per million BTU (MMBtu). Since then prices have settled down near $4.60 MMBtu – a virtual crash in the natural gas market. This is horrible news for anyone who went long in 2008 but great news for companies dependent on natural gas.

OGE Energy Corporation (OGE) stands to benefit from the seasonal rise in the utility sector. OGE is the Oklahoma City-based parent company of OG&E Electric Services, Enogex LLC, and OGE Energy Resources. The firm services utility customers in Oklahoma and western Arkansas. They generate electricity from coal and wind, but their largest source is natural gas. Low prices for natural gas are keeping their expenses low during this hot summer.

The numbers look good for OGE as well. Their profit margins are healthy at 8.5% with $3.14 billion in revenue. Year-over-year earnings growth is an astounding 44%. The charts tend to agree with these positive numbers. OGE stock prices rose with the broader market since March 2009 and peaked in early May. Later that month, the shares lost steam, trading as low as $34. Since then, it has been trending higher, and last week prices broke above their June peak and are once again trading above $38.

We like OGE’s chances to move above $42 and resume a longer-term trend. To own a seasonal utility with low expenses in a long-term uptrend, buy OGE.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Every snapshot is part of a bigger picture. That’s why a longer-term perspective is also essential. Looking at weekly or monthly charts helps remind you that your investments are comprised of more than daily price fluctuations. They exist in a larger continuum of market action.

Despite a short-term bounce this week, we think stocks are still heading down. November 2009 support was taken out last week. Volatility has reached last summer’s levels and global pressures are driving equities lower. Governmental efforts to stop the downturn seem to be failing. Robert Reich, former U.S. Labor Secretary recently said, “The economy is still in the gravitational pull of the Great Recession. All the booster rockets for getting us beyond it are failing.”

Every bear market has its share of good days, but right now the medium-term bearish trend is still in place. Stocks are anything but stable. We’ve been riding this downtrend since June 17 with an inverse S&P 500 ETF, SDS. As of Wednesday’s close, that trade was up +9.6%.

Instead of re-recommending a broad-based short ETF, we think it’s time to get strategic. The weakest part of the U.S. equity market is small caps, publicly-traded companies with market values between $300 million and $2 billion.

Small caps are often tied to consumer spending. Since the Consumer Confidence Index dropped sharply in June (from 62.7 to 52.9), stocks with higher consumer exposure are not faring well. Small-cap stocks in the S&P 600 and the Russell 2000 both fell for the sixth day in a row on Tuesday.

One good way to take advantage of the small cap implosion is Short Russell 2000 ProShares (RWM). This ETF “seeks daily investment results, before fees and expenses, which correspond to the inverse of the daily performance of the Russell 2000 index.” In other words, when the Russell 2000 (U.S.-based small caps) falls, RWM appreciates. RWM is a non-leveraged ETF that should generally go up as the Russell 2000 goes down. However, since it rebalances every day and is subject to fees and expenses, don’t expect a one-for-one correlation.

On the chart, RWM broke through resistance on July 1, a level that is being tested this week. Next stop may be the intermediate-term high set in February near $47. A breakout above that level would open the door for even higher prices. No long-term move will happen without dips along the way, of course. Even with those considerations, RWM looks like a solid pick for this week. To win when small caps lose, go with RWM.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

We don’t think the market is turning around in the near term.  In fact, there will probably be more volatility in the coming weeks.  On Tuesday, Treasury yields fell hard amid economic concerns.  The yield on the two-year note fell to an all-time low while the 10-year note yield found its way back to April 2009 levels.  This is a bearish sign as investors look for safe havens.  Add to that anxiety about weakened growth in China and the slump in consumer confidence, and you have a skittish market.  Stocks are taking it on the chin.

However, it’s not always best to short a market in times like these.  A better move is to look for a non-correlated asset to help you weather the storm. Find alternatives outside of stocks that tend to do better in periods of uncertainty.

There are two reasons we think the US Dollar is the safe-haven of choice right now.  For one, the European sovereign debt crisis is far from over.  Ongoing worries about European liquidity capabilities continue to plague the market. This is causing even more traders to bail on the Euro.  The big winner turns out to be the Euro’s biggest competitor:  the Dollar.

Secondly, the Dollar has been a traditional shelter in times of market uncertainty.  As the market was reeling from the credit crisis in 2008 and 2009, the Dollar surged.  Conversely, when the market rallied starting in March 2009, the Dollar began its fall.  Right now, the Dollar is in a long-term and intermediate-term uptrend.  This up-pattern in the Dollar, as in the past, is inversely correlated to the market.

The best way to go long the Dollar is with PowerShares DB US Dollar Index Bullish (UUP).  This ETF is composed of futures contracts “designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.”  You won’t get rich with UUP, but you should find some shelter from the headwinds of a down trending market.  Though longer term trends are positive for the market, the short-term isn’t inspiring.  That makes this a buying opportunity for the US Dollar.  To seek stability in a shifting market, buy the Dollar with UUP.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.