Wall Street has had its fair share of scams and those who have taken advantage of investors over the past year or two, and today there was news of another major insider trading scheme. Federal prosecutors are accusing Raj Rajaratnam, the billionaire founder of Galleon Group, as well as five others of the single biggest insider trading scheme ever in the history of hedge funds. The charges allege that Galleon Group, the famous hedge fund, made almost $17 million trading on inside information about PolyCom, Hilton, Akamai, Google, Clearwire, AMD, and PeopleSupport and their corporate results and impending news.

All of the defendants were caught by sophisticated devices such as wiretaps, which is a first time thing for federal prosecutors when it comes to finding insider trading. The prosecutors received court permission on March 7, 2008 to intercept phone calls in Rajaratnam’s cell phone. During the process their seems to have been some very damning evidence, including one call where Danielle Chiesi (another of the accused) tells a co-conspirator they need to keep their mouth shut about the evidence or ”I will be like fuc#### Martha Stewart.” Rajaratnam was ranked the 559th richest man in the world on this past year’s Forbes list.

Prosecutor Preet Bharara said this is the largest insider trading scheme ever and the tactics used were also innovative and show that the government will not let this kind of white collar crime take place. Prosecutors hope that a massive case like this will discourage other money managers from trying to get away with insider trading.

Inside the hedge fund world there was a lot of squirming today as many traders worry that every single thing they say about a publicly traded company could be used against them. Personally, I think the government should only use these methods when they have been previously tipped, as they were in this case. In the long run though, it is good for all investors when insider trading schemes are brought down. This is just another lesson in of how common and real investment scams are. Be very careful out there!

Google delivered it again! The search company handily beat third-quarter earnings expectations. It said revenue that excludes payments to advertising partners rose 7%, to $4.38 billion—significantly higher than the $4.24 billion expected by analysts surveyed by Thomson Reuters. Net income rose 27% to $1.64 billion, or $5.13 a share. The more closely watched profit excluding items such as stock option expenses was $5.89 a share, also beating the average forecast of $5.42 a share. A year ago, Google earned $4.92 a share on $4.04 billion in revenue.

“We now have the business confidence to invest in the next phase of innovation,” Google Chief Executive Eric Schmidt said on a conference call with analysts. Google stock jumped $17 (3.2%) in after-hours trading Thursday.

Two days ago, Intel also reported better-than-expected earnings and triggered a rally in Wall Street on October 14th. Google may trigger the same effect tomorrow…except for the fact IBM’s earnings report today didn’t impress investors. IBM beat last year’s earnings, beat estimates and raised their earnings outlook for the rest of the year. But much of their improvement was on cost cutting and that’s not what the market wants to hear. Market wants to see more revenue and more profit. IBM lost 4% in after-hours Thursday. GE is going to report earnings tomorrow morning. Numbers and comments from GE also will move the market.

There is going to be a lot of action in the market tomorrow. Be ready! Just don’t get killed!

Disclaimer: I own Google shares.

The Dow crossed the all important psychological mark of 10,000 today and set a new closing high for the year. This time the Dow passed over 10,000 by jumping 145 points on the back of strong corporate earnings from the likes of Intel and JP Morgan. The last time we saw Dow 10,000 was the during the free fall the stock market took on the first week of October in 2008.

First things first, let’s put things into perspective as far as how far we have come from the lows right now. The Dow now sits 53% above its lows from early March. The S&P 500 is up 60% from those lows and the NASDAQ is up a stunning 70%. These gains have been made over the last seven months as investors begin to believe that maybe the market overdid things on the downside, as it always does.

It is important to realize that while the Dow is now above 10,000 that doesn’t mean that consumers and investors are full of confidence. Actually businesses seem to have grown more confident than have consumers, as most individuals want to sit back and see the picture improving before they get too excited about the direction of the economy.

The fact that the Dow was able to close above 10,000 today was definitely psychologically important. It is all about confidence in the marketplace and the more we see positive numbers from corporations along with strong volume and the stock market to the upside, the more confidence investors will have.

Sometimes these kinds of milestones trigger a minor pullback, which is certainly possible in this instance. A pullback may provide a solid buying opportunity. One thing is for sure, despite the fact that the major market indices have all gone higher in a big way this year, there is definitely plenty of money still on the sidelines that is waiting to get into this stock market.

What will you do if you know the stock you own is “fairly valued”? Sell! That’s what Meredith Whitney, bank analyst, recommended.

I owned Goldman Sachs (GS) shares and I still have some stock options on Goldman Sachs. I was planning to unload them just before Goldman Sachs’s earning announcement on October 15th. I am late by two days, Meredith slapped “neutral” rating on Goldman Sachs today and the stock fell by 2% to $186. I sold all my shares this morning and put tight stop in option positions.

Meredith Whitney said she now believes bank stocks are “at least fairly valued.” and downgraded Goldman Sachs from “buy” to “neutral”. Neutral is the nice way of saying “Sell” in Wall Street.

Ms. Whitney, whose bearish calls on large bank stocks gained renown during the financial crisis that erupted last year, said in a note she is now “far less bullish” on banks than last quarter and urged clients “either to take profits or go neutral into the next two weeks.” She also lowered her earnings outlooks for Bank of America (BAC) and Citigroup (C). Panic set in now. Even the banking stocks like J. P. Morgan Chase (JPM) fell 1.8%.

If you own banking stocks and had decent profits in the recent run, you may want to unwind some positions to protect your profit. Major U.S. banks report earnings this week starting with J.P. Morgan Chase tomorrow. Goldman Sachs and Citigroup report on October 15th. Bank of America will announce earnings on October 16th.

Take your profits when you can!

Related Links: Goldman Sachs Downgrade | Caution: Banking Stocks Ahead

Disclaimer: I own stock options in Goldman Sachs.

As an investor it should be your goal to use every tool at your disposal to help you get ahead of the rest of the investment world. Every little piece of data is important and every trend or anything of statistical significance you can find is very important. History is one of the things that you can use as guide, but you have to be careful not overuse the history of the stock market.

Stock market history graphs and stock market historical average returns are things that are interesting to know, but don’t put too much stock into them (no pun intended). On the other hand historical stock market valuations and lessons from mistakes made by other investors in the past are things you should pay more attention to.

Why are things such as historical stock market valuations so important? These things allow you to take a look at the overall market valuation or individual stock valuations and see where they are now compared to what they typically have been at. These things are particularly valuable for stocks that are mature and have been consistent performers. At times these stocks will be overpriced based on their historical valuations and at other times you can find a deal because of their relative value compared to the past.

When people get into trouble is when they start believing that since something has happened a certain way in the stock market in the past, it will happen that way again. Let’s be honest here, the stock market and the overall economy today is very different than it was 30 years ago, so charts from the late 1970′s probably won’t do as much good as many people think they might. As the economy adapts so does the stock market.

Keep in mind that historical stock data can be used as a positive, but predicting future moves based on past trading patterns gets more sketchy by the day.

It is definitely encouraging when we hear some of the best economists say that the worst may well be over. Today a very interesting study was released by the National Association for Business Economics (NABE) which showed some heartening results. For their survey they polled 43 economists and asked them if they believe the downturn has ended and the recovery has begun. The results are quite encouraging. Out of the 43 economists, 35 of them believe the recovery has begun, while just four believe the economy is still in a recession, and four say they are uncertain. This means that only 9% of the top economists polled believe we are still in the midst of the recession. The economists in the survey predicted that in the 3 month period ending in September the United States economy grew at an annual rate of 3%.

While those numbers are encouraging, the economists also believe things will be slow to recover. 92% of the economists surveyed believe it will take until at least the end of 2012 to gain back the jobs that have been lost during the downturn. They expect the unemployment rate to hit 10% later this year, before falling very slowly to 9.5% by the end of 2010. They believe that the labor market and the housing market will be the last to recover.

The brightest of minds in economics seem to be in agreement that the recession is indeed over. They are also in agreement that the pain will continue to be felt for quite a while going forward since the recovery will be very slow. I think that as individuals we should consider this good news though, since a year ago at this time we were talking about a second great depression and now we are talking about a slow recovery. Recoveries don’t happen overnight, but most economists believe that this recovery is now in progress and that is a huge step forward.

Lakshman Achuthan is a smart guy. He is the managing director of Economic Cycle Research Institute (ECRI). His job is to predict recessions and economic cycle. He thinks that there is no downturn in economy anytime soon. See his interview here. I agree with him because I am an optimistic person! I know, I know, optimism alone is not going to make me profits. However, it’s nice to see someone, an expert in predicting recessions, is optimistic about economy recovery.

The headline itself sounds very strange, but indeed the famous commodity investor Jim Rogers said today that believes it will happen in the next ten years. Gold is currently trading at historical highs, above the $1,060 mark. Rogers believes that gold, as well as other commodities are the single best way to diversify your portfolio in this market era. He also calls the dollar a “terribly flawed currency.”

Rogers actually believes that while gold will get the most attention, silver and palladium will perform even better since they are even more undervalued than gold at this time. Rogers stated that he currently owns gold, silver, platinum, palladium, and agricultural commodities such as sugar.

The words from the famous commodity investors struck many as overly bullish, though many on Wall Street agree that commodities are set to continue their strong run in the coming years. What are the main reasons that commodities are seen as having such a strong outlook? The rising amount of debt across the world and the need for the most trusted asset types. Also, the demand coming from Asia has really put a dent in the ability for producers to supply enough of these hot commodities.

What should you do with your portfolio regarding commodities? As an individual investor it is wise to diversify in every way possible, which would mean having some exposure to commodities such as gold or silver. The easiest way to invest in something like gold is to buy a ETF that is a basket of gold stocks in one.

If you have little or no exposure to commodities you should probably start trying to get into that space, but don’t go wild simply getting out of other assets to jump into commodities. Jim Rogers could be right, but he has always been extremely bullish on commodities and there are ebbs and flows to their demand, so don’t jump in blindly.

Rambus (RMBS) is going to report earnings on October 15th. It appears that some people already know Rambus is going to report good earnings. May be some serious speculation is going on. Rambus is up $1.07 (6%) today. There is a lot of action going on in Rambus’s call options. As I write this, more than 9,454 call option transactions for October 18 call took place today. Someone is expecting huge move after Rambus reports earnings next week. October calls expire on October 16, one day after Rambus reports earnings.

Rambus’s options volume is running six times the usual volume and call volume accounts for 88 percent of today’s volume.

Options activity in XTO Energy (XTO) also rose to two times the usual volume, with 34,000 traded and put volume representing about 69 percent of the activity. XTO Energy reports earnings on November 4th. KB Homes (KBH) also experience similar options activity that is running two times the usual volume. 19,000 contracts traded and put volume accounting for about 86 percent of the activity.

Disclaimer: I do not own stocks or options mentioned in this article.

Official start of the third-quarter earnings cycle was kicked off with Alcoa’s (AA) earnings yesterday after market hours. Alcoa, the world’s largest aluminum producer, was the first component of the Dow to report. They announced a surprise third-quarter profit, helped by higher aluminum prices and demand. Profit came in at $77 million or 8 cents a share, beating forecasts. Although well down from the year-ago period, it ended three straight quarters of losses due to slender demand for aluminum used in cars, homes and airplanes. The company said there finally seems to be stabilizing due to distributors’ low inventories. Spot aluminum prices have risen nicely since June; at the end of September, Alcoa’s average price per metric ton rose 18% to $1,972. Demand for the metal is up, mostly led by China replenishing its stockpiles.

Alcoa’s surprise earnings report is a good signal for the entire market. Before the bell today, shares of Alcoa shot up 5.2 percent to $14.94. PepsiCo (PEP) also reported a stronger-than-expected quarterly profit on higher volume in snacks and beverages, sending its shares up 1.2 percent to $61.90 before the bell. It’s really a robust start to the earnings season. This is going to give the market an upward bias for at least few more weeks or until some major company screws up with its earnings.

Initial claims for jobless benefits fell by 33,000 to 521,000 in the week ended Oct. 3, the Labor Department said, the lowest level since Jan. 3. Economists surveyed by Dow Jones Newswires had expected a decrease of only 11,000. The number of continuing claims drawn by workers for more than one week in the week ended Sept. 26 fell by 72,000 to 6,040,000 from the preceding week’s revised level of 6,112,000. That represents the lowest figure since March 28.

Retailers are posting higher-than-expected September same-store sales, even as analysts raised their estimates as the month came to a close, with the outperformance potentially enough to end a year-long streak of falling sales. Costco reported a 3% gain excluding gasoline sales, doubling analysts’ expectations. Walgreen reported higher non-pharmacy sales last week. Not all retailers are doing well, but most of them reporting better sales.

Alcoa’s surprise earnings, deeper-than-expected fall in jobless benefit claims and better-than-expected retail sales are going to cause fireworks in Wall Street today. About 25 minutes before the start of trading in New York, Dow Jones industrial average futures gained 86 points and Nasdaq 100 futures added 16 points.

Go and make lot of Moola now!