Tag Archives: QE

News, Politics, Government

Second Quarter GDP Beats Expectations At 1.7%, Bernanke Still Set To Taper This Year

Leave a comment

By Agustino Fontevecchia, Forbes Staff

The U.S. economy continues to muddle along, failing to gain momentum in the face of fiscal drag caused by Washington’s sequester.  The Bureau of Economic Analysis released its first second quarter GDP estimate on Wednesday, showing real output expanded 1.7%, substantially above estimates.  Yet downward revisions to the past four quarters suggest underlying trend growth hasn’t picked up at all.  The silver lining: demand, which pushed up imports and supported consumption spending.  In terms of what this means to Fed Chairman Ben Bernanke, it suggests he will move forward with plans to taper quantitative easing (QE) before the end of the year. …read more

Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

There Could Still Be Runs on the Money Market Funds

Leave a comment

By Robert Lenzner, Forbes Staff The President of the Federal Reserve Bank of Boston, Erick Rosengren, suggested this week that there could still be runs on money market mutual funds, as took place at the peak of the 2008 financial crisis, since these funds have “no capital” and invest in uninsured short term securities of banks and other financial service firms. While debate over potential regulatory solutions for money market funds continues on, the Boston Fed chief, emphasized that the safety of the money market mutual funds are a “significant unresolved issue.” As of April 13 there was $903.56 billion in retail money market funds sponsored by Fidelity, T. Rowe Price, Dreyfus, Invesco and others, The total amount of all kinds of money market funds, some owned by institutional investors, was $2.6 trillion. The average weekly yield was a record low of only 0.02%. He also singled out the issue of capital for the broker-dealer fraternity, where he raised the problem of “virtually no change for broker-dealers since the collapse of Lehman Brothers in September, 2008 and the shotgun marriage of Merrill Lynch into BankAmerica. The solution Rosengren recommended was that the “larger(these investment firms) get the higher the capital ratio”: should be imposed on them. The Boston Fed chief executive, speaking at Bard College’s Levy Institute conference on the economy and financial markets, seemed to be suggesting that the cause for this vacuum in policy is that “Regulatory bodies haven’t evolved as much as the financial markets.” In other words, 5 years after the 2008 meltdown we still have a major challenge in trying to make the global financial system secure against runs and speculative bubbles. There is still further to go in the structural reorganization of the danger from derivatives, but he believes clearing derivatives contracts on exchanges and the decline in bilateral transactions has reduced an element of risk. Nevertheless, Rosengren made crystal clear in conversation after his talk that he “sees no bubbles anywhere, not even in real estate where prices are still below their 2006 peak.” He believes prices of residential real estate in Boston and New York are still 15-20% under their peak– and prices in Miami, Phoenix, Las Vegas, California– are still priced at a steeper discount to the peak in 2006. As for the economy in general, Rosengren sees “traction” picking up momentum, in which case he would support the “prudent” position of gradually reducing the QE stimulus program. However, he is troubled by the fact that monetary policy(quantitative easing and record low interest rates) are in conflict with fiscal policy, the restraint of sequester and reduction of federal, state and local government spending, ie “the Obama cuts.”

From: http://www.forbes.com/sites/robertlenzner/2013/04/20/there-could-still-be-runs-on-the-money-market-funds/

News, Politics, Government

Fed's Bullard Says He's Ready To Increase QE As Inflation Is 'Too Low'

Leave a comment

By Agustino Fontevecchia, Forbes Staff

St. Louis Fed President James Bullard spoke in New York on Wednesday, warning that inflation remains too low and suggesting he’d be ready to increase the rate of asset purchases, or QE, to defend their target “from below.”

From: http://www.forbes.com/sites/afontevecchia/2013/04/17/feds-bullard-says-hes-ready-to-increase-qe-as-inflation-is-too-low/

News, Politics, Government

As the Dollar Strengthens, Gold and Crude Oil Drop in Tandem

Leave a comment

By Robert Lenzner, Forbes Staff I wanted to explain to myself why the price of gold took such a fast sharp plunge, and as the shiny metal is supposed to trade in inverse relation to the dollar, I ran off a chart comparing gold, oil and the dollar from 2003, when gold began its run at about $250 an ounce. As the price of gold rose in fits and starts to $900 an ounce in 2008– and then magically and steadily all the way to nearly $1900 an ounce in 2011– an incredible double when stocks were in the doghouse– the dollar also was in a swoon. Look at any chart and you will by staggered by dangerously steep decline of the dollar; In the meantime, though, crude oil acted like gold’s camp follower, trailing the price of gold as it made its ascent. The graph lines for gold and oil almost overlap as if they were commodity twins. Then, in the summer of 2011, the fantasies of gold enthusiasts came up empty– as the European fiscal crisis whacked the Euro– ant the coming austerity there and slow growth here meant very little inflationary pressure– while QE was working its magical potion on stock prices. The truth of the matter– looking back since summer of 2011 is that the dollar began strengthening– and that dynamic relationship between the dollar and gold was being reversed. A rising dollar since August, 2011 was to dampen enthusiasm for gold– and large owners like George Soros apparently chose to lighten up. In short gold was a fantastic play– $250 to $1850 in 8 years– as long as the dollar cooperated and weakened as Ben Bernanke added more and more paper money to the financial system. It took a while to sink in, but this week the damage came fast and furiously. The Gold Group will have to wait for the dollar to weaken again– and currently I’m not too sanguine about it.

From: http://www.forbes.com/sites/robertlenzner/2013/04/16/as-the-dollar-strengthens-gold-and-crude-oil-drop-in-tandem/

News, Politics, Government

The 14% Rate of Corporate Profits Will Eventually Revert to the Mean, Spoiling the Party

Leave a comment

By Robert Lenzner, Forbes Staff But when? It’s the combination of Quantitative Easing plus the ability of large public multinationals to increase their profits on revenues that has powered this market— call it the Bernanke market, if you will. Think about it. 14% profits on revenues cannot continue indefinitely– especially if QE gets a bit of rejiggering sometime this year or next, as some regional Fed bosses are murmuring about.In fact, since World WAr 2, corporate profits after tax seem to retreat often enough to a range between 5% and 9% dependinmg on the severity of the economic cycle. So, I thought it was about time to consult the nature of the early warning signals that are about and see how they might play in the financial markets today. And I spotted this early warning signal NUmber One in the HUssman Funds founder John Hussman‘s weekly market comment of April 8; “Companies issuing negative earnings preannouncements for Q1 2013; 78%.” Holy Cow! THe advance indications from companies themselves about their first quarter 2013 earnings are for a decrease in profits per share– not an increase. Horror of horrors; the bearish Hussman is even considering the possiblity of the nation drifting into another recession. Just think what that will do to the unemployment figures– much less corporate profits. To buttress his case, Hussman raises the issue most sophisticated investment advisers are wondering, sometimes aloud– about the “successively lower levels” of economic activity that result from each new bout of QE. Today, the $85 billion QE is particularly suspect in the light of the unexpected weakness in job creation (88,000-last month)and the softness in the Chicago Purchasing Managers index. Here’s Hussman on April 8, writing ” For my part, I continue to expect the U.S. economy to join a global recession that is already” starting in much of the developed world. In light of this dark view it’s no surprise that Hussman scoffs at the consensus view that stocks are cheap at 14 times earnings– but “are instead strenuously overvalued.” Overvalued, you see, in the wake of the very bubble created by the Fed’s QE policy. That 14% corporate profit rate– you eee–is to some extent the unusual result of the Fed maintaining interest rates at near zero. At zero, at 2%, corporations can borrow money to do their business and still report very solid profits, thank you very much. And yes, if interest rates go still lower, profits might temporarily move slightly higher– all the while increasing your downside risk at the certain to happen reversion to the mean of corporate profits. THere’s other signs of the top as well. One of my newest financial gurus,John Maulkin of Dallas, sent me the April 9 King REport, from M. RAmsey KIng Securities, Inc. which woke me up to a quite worrisome technical sign in the market. ” A disturbing sign for equities is financial stocks have turned soft. Since 2009, financial stocks have led stocks. The XLF( financial stock ETF index) tends to peak a few weeks

Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

QE Optimism Pushes the Dow to Triple-Digit Gains

Leave a comment

By Dan Carroll, The Motley Fool

Filed under:

Forget yesterday’s measly market records — the Dow Jones Industrial Average is once again smashing through its former highs. As of 2:15 p.m. EDT the blue-chip index has surged 145 points, or about 1%, on good news for the future of quantitative easing. A mere three stocks on the index are in the red. Let’s find dig into just why the Dow’s rising and what the future holds for America’s easy money.

The Fed rides to the rescue
The Federal Reserve released its minutes today to the delight of Wall Street. The actual details of the most recent Fed meeting impressed few; opinions among FOMC members on the future of “QE infinity” remain mixed, with some saying the stimulus program should be slowed soon and others contending that stimulus should continue until the economy improves significantly. However, with March’s disappointing payroll data showing an economy still in recovery mode, optimism abounds that the Fed won’t touch QE any time soon. The markets have been surging with the help of the central bank’s easy money, and that trend doesn’t look to be slowing down in the near future.

That’s good news for stocks everywhere, and GE has capitalized on today’s run. Shares of the conglomerate rank near the top of the Dow picking up more than 2% so far. The company announced today that it would open up patents for crowdsourced innovation, allowing inventors to use select GE patents in order to develop new things. It’s a unique idea that should pay off for GE, which would still stand to receive royalties from new innovations while allowing opportunistic individuals to benefit from its patent base. It’s not likely to push the stock higher in the immediate future, but it’s a sign that GE is committed to an innovative future despite its size and breadth.

Health care stocks are on the move as well today, with both Pfizer and Merck pulling in gains of more than 2.5%. Both companies are still hunting for new drugs to power their future revenue as patents of older blockbusters expire, but Pfizer got a big boost today. The company’s developmental breast-cancer therapy palbociclib received a breakthrough designation from the FDA today, ensuring a speedy developmental and review cycle. It’s not the buzz of an approval, but it’s a piece of good news for breast cancer patients and Pfizer alike that palbociclib has caught the FDA‘s attention in a good way.

Not all stocks are up today, despite the surge. Travelers just can’t find its footing. The stock has lost about 0.6% today, although Travelers has been as good a bet as any on the Dow over the past year: In that time, the stock has gained more than 47%. CEO Jay Fishman pointed out how falling bond yields have pressured the company’s investments, pushing it to raise insurance coverage rates for some customers. It’s not the end of the world for the company, but

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Tech Stocks: The Wind Beneath the Dow's Wings

Leave a comment

By Jessica Alling, The Motley Fool

Filed under:

New records galore: After a quick dip yesterday morning, the Dow Jones Industrial Average gained 60 points to close at a new all-time high — and it wasn’t done there. Up 115 points as of 11 a.m. EDT, the index is gaining from positive housing market news and the FOMC‘s latest meeting minutes, as well as some international economic signs. Not to mention the fleet of big-time tech players on the move this morning.

After disclosing a disappointing 4% drop last week, the Mortgage Bankers Association reported that mortgage and refinancing loan applications were up 4.5% during the previous week. This is great news to investors who have been continually disappointed by more and more signs of a weakening labor market. Since the housing and labor markets are so closely tied with the performance of the overall economy, it’s important that at least one of them continues to gain momentum as the other dips.

Released five hours early, the FOMC‘s most recent meeting minutes gave investors some positive reinforcement as it showed most members in favor of continuing the current QE policy through the middle of the year. The last release of minutes caused most banks to stutter when it revealed that more and more committee members were concerned with the cost of continuing the current policy, and though it appeared that there was a similar case this time, it didn’t seem to worry investors as much. Later today, details of the March federal budget will be released.

Overseas, China reported an increase in imports and exports, signaling new opportunities for international trade. Imports were up 14.1%, while exports were up 10%.

This morning’s highfliers
Tech stocks are flying high again today, with Cisco taking the lead as the stock jumped 2.5% this morning. Hand in hand with Cisco is Microsoft , up 2.03%, as the two announce some joint projects to help IT customers. The companies will join Cisco’s Unified Data Center architecture with Microsoft’s Fast Track solutions to help reduce complexity and improve functionality for its data center customers. The two are also developing solutions for sellers of the current products to work jointly as a way to expand the data center business operations.

Intel is also on the rise, with a 3.06% gain. The chip maker is making solid gains into the Chinese mobile market, with the second phone to feature its CloverTrail+ Atom processor debuting at Beijing‘s 2013 IDF. The ZTE Geek (yep, you read that right) is the newest phone to feature the Intel processor, following the Lenovo K900, which scored big in early comparisons over other processors. With its foot in the door and positive feedback so far, Intel is on its way to becoming a true player in the mobile market — though it still has some catching up to do.

IBM is the tech laggard today, though the company is up 1.34% as of this writing.

Source: FULL ARTICLE at DailyFinance

News, Politics, Government

My Gold Guru Got It Right– and Then Wrong, as the Gold Craze Went Cold

Leave a comment

By Robert Lenzner, Forbes Staff My gold guru, Frank Giustra of Vancouver, Canada pushed me hard on gold from the summer of 2008 when it was selling at $900 an ounce– all the way up to $1900 an ounce in the summer of 2011– a hell of a run of accumulated gain of more than a double– while stocks floundered pretty badly. The gold story went like this; Ben Bernanke‘s policy of one QE after another– dramatically increasing the supply of greenbacks– was bound, sooner or later, to cause the dollar to face its own severe crisis of devaluation. Faith in the dollar was going to swoon badly– and then the late to the game investors would recognize that the only true protection against the denouement of paper currency was that precious metal gold. Giustra even believed that the panicky selling of dollars to escape its tarring and feathering would trigger a parabolic rise in the value of gold to some astronomically fantastic level– and then you were supposed to make your exit, selling to the crowd. Such noted hedge fund barons as George Soros and John Paulson signed onto this playbook to one degree or another. Family offices, public pension funds, fixed income advisors looking for an extra kick to their bond portfolios– and the many camp followers no matter how amateur trailed along, thinking to make a killing when gold shot through $200 an ounce to $5000 an ounce and tghen God knows where. Chinese banks, encouraged by the Communist government, allowed their banks to establish monthly gold accumulation plans as the way to stay ahead of whatever inflation hit the fastest growing economy in the world. Indian gold jewelry was hoarded while retail lenders offered credit to accumulators of silver, which was expected to move jointly with gold. Central banks in Asia and in Russia regularly purchased gold whenever the IMF scheduled auctions of its inventory. The tv networks were filled wit come-one advertisements to join the smart money. Then came the denouement in Europe, and pressure on the euro, while the Japanese economy languished and China appeared to be tightening up credit to avoid some kind of bubble. Gold retreated, advanced again, then retreated again– and seems stuck in a trading range between $1525 and $1650 an ounce. The dollar has not collapsed; rather it has gotten stronger as US treasuries are the safe haven of choice and are at record price levels as well as record low yields. Simultaneously, the shares of gold mining stocks have retreated due to the high cost of producing gold, political turmoil and strikes at major mines, and the need of governments like australia or Peru to seek high tax revenues from their mining giants. Desperately, the dreamers, the fantasists and the conspiracy end of civilization fanatics are looking for the new gold- Bitcoins, with staggering face values, or some new currency that will somehow have legs. It has been a great run. Even at $1550, the return since July, 2008 has been 67% over …read more

Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

My Cohort Believes QE Only Benefited the Nation's Wealthiest

Leave a comment

By Robert Lenzner, Forbes Staff There was plenty of lively controversy– consternation and even angry shouting at a midtown New York restaurant last night as two hedge fund mavens, two immensely successful internet investment services, a closely-followed fixed income adviser and two journalists met to hash over the economic and market controversies of our day. To my way of thinking, there was just about unanimous opinion that Ben Bernanke‘s 4 years of quantitative easing (QE) had for the most part benefited only the nation’s wealthiest cohort– without doing much practically to create more jobs for ordinary people. At least one participant was strident about phasing out QE and letting interest rates begin to rise, arguing vociferously that QE was just one major policy making mistake for America. The yelling across the table rose several pitches at this moment. One closely followed blogger of sharp wit and tongue was clear that Messrs. Bernanke, Paulson and Geithner should have let the insolvent giant banks fail rather than stabilizing them with cheap money. What’s more, QE was judged to have created a possible “bubble” in common stocks– and had as well pushed bond prices to peak historical prices, though I didn’t hear the concept of “bubble” bonds used derogatively. As to the possible inflation from QE, there was sharp divisive debate, with no clear resolution. The quick-witted investment blogger with a cool million followers across the table from me was adamant about Bernanke reversing QE now, reducing the amount of money supply by $3 billion a month, and letting the stimulus run off before it caused some terrible denouement. I didn’t hear the rest of the group sign on to this radicalism. A great deal of animal spirits were spent arguing about the need for a fiscal stimulus financed with 2% money to serve the nation’s infrastructure needs without any clear resolution. Same for the debate about the extent or even existence of structural unemployment. The fixed income maven did clear up my wonder at the public’s continuing hunger for low-yielding bond funds in the face of no real return; the public is moving out of zero yielding money market funds and switching into short-term bond funds yielding 1%, he told me. As we parted to get to the championship basketball game I asked for a raising of hands for my obsessive fantasy that it just may be that the denizens of Wall Street were more or less in charge of the governing of these United States of America. I got the clear impression all participants impulsively signed on to that sentiment. Wow! Comes the revolution. Their emotional instincts strengthened my resolve to have a more concerted go at proving this supposition. And yes, I got the feeling my cohort last night felt to varying degrees that we could well experience another meltdown in the financial markets since major banking institutions had not truly reformed themselves into reformed stalwart institutions. Some wickedly irreverent comments were offered about the pathetic level of oversight by the guardians of financial propriety. …read more

Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Why Resource Capital Is Poised to Outperform

Leave a comment

By Brian Pacampara, The Motley Fool

Filed under:

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, commercial real estate manager Resource Capital has earned a respected four-star ranking.

With that in mind, let’s take a closer look at Resource Capital and see what CAPS investors are saying about the stock right now.

Resource Capital facts

Headquarters (founded)

New York (2005)

Market Cap

$659.7 million

Industry

Mortgage REITs

Trailing-12-Month Revenue

$114.7 million

Management

CEO Jonathan Cohen
CFO David Bryant

Return on Equity (average, past 3 years)

9.6%

Cash / Debt

$117.0 million / $1.8 billion

Dividend Yield

12.4%

Competitors

Annaly Capital Management
Capstead Mortgage
Walter Investment Management

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 95% of the 310 members who have rated Resource Capital believe the stock will outperform the S&P 500 going forward.

Just last week, one of those Fools, PuddinHead42, succinctly summed up the Resource Capital bull case for our community: “A bet to profit from the various side effects of [QE-ternity]. Will only fail if QE stops which I can’t see except in a total US financial system collapse which probably is still some years away.”

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, Resource Capital may not be your top choice.

If that’s the case, we’ve compiled a special free report for investors called “The 3 Dow Stocks Dividend Investors Need,” which uncovers several other juicy income opportunities. The report is 100% free, but it won’t be around forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why Resource Capital Is Poised to Outperform originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

(function(c,a){window.mixpanel=a;var b,d,h,e;b=c.createElement(“script”);
b.type=”text/javascript”;b.async=!0;b.src=(“https:”===c.location.protocol?”https:”:”http:”)+
‘//cdn.mxpnl.com/libs/mixpanel-2.2.min.js’;d=c.getElementsByTagName(“script”)[0];
d.parentNode.insertBefore(b,d);a._i=[];a.init=function(b,c,f){function d(a,b){
var c=b.split(“.”);2==c.length&&(a=a[c[0]],b=c[1]);a[b]=function(){a.push([b].concat(
Array.prototype.slice.call(arguments,0)))}}var g=a;”undefined”!==typeof f?g=a[f]=[]:
f=”mixpanel”;g.people=g.people||[];h=[‘disable’,’track’,’track_pageview’,’track_links’,
‘track_forms’,’register’,’register_once’,’unregister’,’identify’,’alias’,’name_tag’,
‘set_config’,’people.set’,’people.increment’];for(e=0;e<h.length;e++)d(g,h[e]);
a._i.push([b,c,f])};a.__SV=1.2;})(document,window.mixpanel||[]);
mixpanel.init("9659875b92ba8fa639ba476aedbb73b9");
…read more

Source: FULL ARTICLE at DailyFinance

News, Politics, Government

The Central Banks Are Stuck With Quantitative Easing

Leave a comment

By Robert Lenzner, Forbes Staff “QE will go on forever and it’s going to mean a very long and powerful bull market for stocks,” the former chairman of a major trust bank in New York told me today over lunch. He was articulating a growing theme you hear these days among some investors– bowing to the powers and authority of the Federal Reserve Bank— which is using its balance sheet to maintain a low interest rate environment and so to make more valuable than government bonds the shares of public corporations and the value of residential homes. This sentiment could be underscored in Tokyo today after the Bank of Japan disclosed it would copycat the Fed– and double its monetary base and holdings of Japanese government bonds over the next 2 years. Talk about playing catch up ball. It took the Fed 4 years to triple its balance sheet– and it’s clearly not through yet. The Japanese must think QE will spike its long suffering stock market; indeed the Topix, a Japanese index, is up 20.3% over the past 3 months, Some positive action finally. China, as well, desperately trying to fend off a slowdown that could lead to social unrest, has already increased the money supply by 60 trillion remimbis, the equivalent of $10 trillion dollars. This $10 trillion in Chinese currency means that over the past 4 years monetary credit in China has ballooned to 116% of Chinese GDP. That beats the Fed’s marker for assets held and suggests the Chinese better read their Ken Rogoff findings that a high amount of debt in relation to GDP translates into a slower rate of economic growth. The trend is clear; central banks are using their muscle in a prolonged attempt to bind up their national economies by driving up asset prices, most especially common stocks. In the short to medium period, the momentum is picking up worldwide to follow this guideline– which has never been attempted for such a long time period by many nations at the same time. To my way of thinking it would be more dangerous to cease and desist from QE than to keep this unconventional cooperative policy making going without a fixed finish date. My old friend Christopher Wood, who writes the GREED & fear commentary for CLSA in ASia, captured perhaps the worst unseen danger, when he wrote “The sheer prospect of an exit from quantitative easing would cause such trauma in equity and credit-related markets that the most likely consequence would be that the exit never happens until it is forced by market circumstances. And that sort of crisis probably means the end of the fiat paper currency system as currently constituted.” That last sentence is uncomfortable for even to write. But, I have to tell you that Wood predicted the collapse of Japan in the 1990s before it happened– and was quite conversant with the dangerous deterioration American banks before they became insolvent and had to be bailed out. So, a fair warning. …read more

Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Dow Tries to Rally, Leaves Tech Behind

Leave a comment

By Jessica Alling, The Motley Fool

Filed under:

After falling more than 100 points yesterday, the Dow Jones Industrial Average took a go at rallying earlier in trading, jumping 72 points after the Japanese central bank announced an accelerated QE policy this morning. But the gains were short-lived and the index fell again — though it remains in positive territory as of 11:45 a.m. Up 16 points, the Dow may have a fight ahead of it based on the weak economic news released so far this morning.

International news brought some good vibes to investors this morning as the Bank of Japan announced that it would be doubling its balance sheet by 2015 through accelerated bond purchases. The majority of the bonds would be long-term government paper as the bank tries to target a 2% inflation rate to spur on growth after years of deflation.

Yesterday’s weak labor market data really took its toll on the market, so today’s jobless claims report is likely to do the same. A spike in new claims surprised analysts, who expected claims to drop by 7,000 to 350,000 — instead, new jobless claims rose to 385,000 last week. Investors should pay close attention to tomorrow’s employment situation report, which could bring some positive news, but if it supports the trend of a softening labor market, then the Dow could be headed back south.

Tech gets left in the dust
 Of the Dow’s 30 component stocks, three major tech players were in the red this morning: Intel , IBM , and Microsoft .

Intel has had some positive news lately regarding its push to join the smartphone race, with its Atom Clover Trail+ processor in the Lenovo IdeaPhone K900 beating out the new Samsung Galaxy S4’s ARM CPU in benchmark tests. The chip maker is also expanding its mobile presence in the Chinese market, with an exclusive partnership with ZTE, China‘s second-largest mobile manufacturer. Closer to home, Big Blue is still dealing with its long-running antitrust case regarding the marketing of its microprocessors. Citing a recent Supreme Court case, Comcast v. Behrend, Intel is looking to have the defendants’ right to sue as a class rejected, which could lead to settlements if the company’s motion wins.

IBM has been trying to downplay the recent independent benchmark tests that showed the new chips and servers from rival Oracle outperformed the company’s own products. The continued race for speed and low cost has always dominated the industry, and IBM has to begin to find new ways to win. The tech giant is working on other projects, which have helped it along so far. Its big data push has been moving along, with the company announcing new improvements and advances for the Hadoop System that will accelerate performance and simplify administration.

Microsoft took a blow this morning with Bank of America/Merrill Lynch analysts’ downgrade of the company from “buy” to “neutral,” along with a lower price target. Some are concerned that Mr. Softy won’t …read more

Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Everybody is Furiously Looking for Bubbles

Leave a comment

By Robert Lenzner, Forbes Staff No sooner did the stock indexes go to a new peak than whispers about a “bubble” bursting– look out below because stocks are vulnerable to a 20%-40% move– begin to make the rounds. Out ahead of thge “bubble” pack was the Treasury bond bubble being predicted for many months by the fixed income gurus who predict QE means a massive inflation– and by some Cassandras who know it’s a route to shooting off their mouths on television. Lately, with home prices rising every month, and the inventory from the mortgage forfeitures and financial meltdown rapidly disappearing, there has even begun to be worry warts wondering if the run on home prices has had its day– for the time being. Thankfully, the fears of a “bubble” in commodities, especially crude oil and gold, which have been fomented by billionaire hedge fund impresarios and those wannabe hedge fund billionaire impresarios– have been relatively quiet. And for good measure, too. The Chinese economy seems to be getting squeezed by tighter capital controls and a slowing in growth. The dollar is strong– a slap in the face to the goldbugs, who absolutely must have a fast depreciating dollar to get the parabolic rise in gold to $5000 an ounce (it’s $1600) that will allow them to sell into it. None of this is remotely like the Hunt brothers driving silver to $50 an ounce in 1980 as they famously tried to corner the market. None of this is at all as exaggerated as the manic spike in Japanese stock and real estate prices in the late 1980s– which, as we all know well, precipitated the fall since then. None of this is as irrational as the run-up in technology stocks in the late 1990s, when shrewd investors like Leon Levy dared go short and ride the turmoil to profits. Nor does it correspond to the madness of the credit market bubble prior to 2007 when every fool in the world was buying mortgage backed securities without understanding the value of the real estate that backed them. All those incidents– those painful happenings– were bubbles gone bursting. Lucky for us, esteemed veteran investment adviser Morris Offit, founder of OffitBank, has just published his pithy opinion underscoring that for now no investment asset class is at an extremely irrational level. For a “bubble” to happen, writes Offit, “the price in the market grows well beyond the maximum value that any of the traditional demanders available willing to pay.” Even the 10 year Treasury at a yield of 1.50% or 1.85% or 2% looks to be a bubble since the Fed itself is acquiring two-thirds of the newly marketed government debt alongside accumulation from pension funds, insurance companies, clearing houses and family offices. Just because everyone receives a negative return on these securities does not make the Treasury market a “bubble,” Offit strongly believes. I’m with him. Yes, eventually interest rates will begin to rise– but not in a ruinous spike. Summing up, Offit writes; “The special …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

As Europe Struggles, Japan Threatens to Erupt

Leave a comment

By David Lee Smith, The Motley Fool

Filed under:

My Foolish colleague Morgan Housel began an article a few days ago by noting that, “Poor Cyprus is in terrible shape.” The tiny Mediterranean nation virtually crept into that forlorn condition before most of us were aware of its difficulties. Of course, we’d known about the withering economies of Greece, Spain, and Italy. But now, unbeknownst to many, Japan, the world’s third-largest economy, may also be headed for what would be a far more resounding crash.

Some Fools may recall the Japanese “bubble economy,” which, before it came to an abrupt halt in 1991, was characterized by nosebleed values on real estate and stock prices. But, since that time, the country’s economic circumstances have continued to wweaken.

Not pretty numbers
Today, Japan‘s government debt to GDP is a whopping and globe-topping 245%. Beyond that, its total debt to GDP is about 500%, while the Japanese government spends at a rate of 2000% of its revenues. As a result, evenamid at prevailing rock-bottom rates, its interest costs on the government‘s portion of its debt runs to nearly 25% of the same government‘s revenue. Largely as a result, from July through September, the country’s economy was shrinking at an annualized rate of about 3.5%.

But that may be only a temporary phenomenon. Newly reinstated Prime Minister Shinzo Abe — who in the past had held the same post under the auspices of the Liberal Democratic Party and was returned by the electorate in December — apparently intends to undertake the quantitative easing (QE) approach that has become the apparent elixir for sluggish economies, whether in Europe or the U.S. In addition tied to an avowed object of turning Japan‘s deflationary economy into one that sports about a 2% growth rate. Further, “Abenomics” also includes “structural reforms,” including a round of deregulation.

Another prescription from Abe’s crew clearly involves letting the yen slide. Indeed, the currency has been lowered by 20% during just the past four months. That decline has essentially occurred under the cover of darkness, without generating any real attention. Its clear intent is to benefit the likes of the Japanese automobile manufacturers and other areas of industry. (This, despite Toyota‘s having recaptured the automotive world’s top spot from General Motors in 2012, while rival Honda recorded a 24% hike in U.S. sales for the year.)

Predicting problems
the face of the country’s dicey economics, however, and despite the ministrations of Abe and his minions, there are numerous Asia-watchers who have become convinced that an economic tumble for Japan is inevitable and possibly imminent. For instance, longtime Japan observer and Asian securities specialist James Gruber maintains that, a yield that expanded to 2% would result in the interest portion of the government‘s debt absorbing a clearly unsustainable 80% of its total revenues.

Also, the Dallas-based founder of Hayman Capital Management, Kyle Bass — one of the early seers of the …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

"QE-Japan" Is Coming as Shinzo Abe Unleashes Easy Money

Leave a comment

By Dan Carroll, The Motley Fool

Filed under:

Is easy money the path to prosperity? That’s what Japan‘s trying to find out in 2013, as it embarks under new prime minister Shinzo Abe and his dovish monetary policy; so far, things have gone even better than expected. The Nikkei took a hit this week in losing around 1% over the past five days, but Japan‘s leading stock index is up more than 18% year to date. The ongoing Cyprus drama in the eurozone took a whack at markets across Asia, but despite stocks retreating during the past week, many investors are still optimistic about Japan‘s bold new direction.

Aggressive money moves has Japan in a groove
With a new chief in at the Bank of Japan, the country’s central bank is set to begin buying up trillions of yen worth of bonds, much as the U.S. Federal Reserve has done with its “QE-infinity” program. Abe’s targeting 2% inflation, as he tries to jump-start an economy that’s stagnated since the ’90s, as deflation has hurt consumer prices, wages, and property prices. Still, the moves have sparked fears of a currency war with other leading economies, as well as risking the stability of Japan‘s bond market — in which Japan‘s banks are heavily invested — if Abe’s goals fail.

A weaker yen will help drive up import prices as well as boost exports for multinational Japanese companies looking for a leg up on competitors, but it could hurt average Japanese consumers if wages can’t rise fast enough to outpace inflation. It won’t make the international community very happy, either: Asian rival China continues to put pressure on its island neighbor and other nations pursuing weaker monetary policy. China also hasn’t been too happy lately over Japan regarding the Senkaku Islands, claimed by both nations in a dispute that has continued to simmer over recent months.

That dispute has resulted in Japanese carmakers worrying about losing influence in the lucrative Chinese auto market. Toyota‘s Chinese sales in January and February fell 13% year over year as the automaker attempts to mitigate its losses from the international row. Outgoing Toyota chairman Fujio Cho expressed his sentiments on Friday that Japan and China need to keep economic exchanges open, even with the political fight, but Toyota will need more than that to overtake rival GM in the second-largest economy.

Fellow Japanese carmaker Honda has taken hits this week, as shares fell 0.5%, and it’s facing recalls. The company is recalling 76,000 of its Acura TSX cars made between 2004 and 2008, telling the National Highway Transportation Safety Administration of a stalling problem in the vehicles. It’s only a regional recall – a tactic that can save automakers money – that affects vehicles in certain Northeastern and Midwestern states, so it’s doubtful it will hurt investors too badly. Still, Honda’s faced a number of safety issues that have sparked recalls recently, and this latest problem won’t inspire confidence.

Outside of the auto sphere, electronics maker Panasonic is preparing for a …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Should I Borrow to Invest in AstraZeneca, National Grid, and Vodafone Group?

Leave a comment

By Harvey Jones, The Motley Fool

Filed under:

LONDON — Crazy days! Interest rates have been stuck at all-time lows for more than four years, and the first rate hike could be another four years away. This has led to some crazy anomalies.

You can now get a five-year fixed-rate mortgage charging just 2.74%, up to 60% loan-to-value (LTV), or a 10-year deal at 3.99%, up to 75% LTV (subject to status, as they say).

At the same time, you can earn a yield of 5% and 6% by investing in solid FTSE 100 favorites, plus the prospect of capital growth if QE-fuelled markets keep rising.

I wouldn’t normally urge you to borrow to invest in shares, because gearing adds an extra layer of risk. But does it make sense today?

Borrow and buy
Do you expect your portfolio to deliver a total return of more than 4% a year over the next decade? I certainly do. If so, and if you’ve got enough spare equity in your home to access a best-buy home loan, then, maybe, just maybe, you should be in less of a hurry to pay down that mortgage.

If you’re tempted, I would suggest taking out a long-term fixed-rate loan, preferably for 10 years, so your plans aren’t scuppered by a sudden upward lurch in interest rates.

To add an extra layer of security, you could then invest into a fat FTSE high-yielder or three. Dividend income is taxable, so, if you’re bold enough to follow this controversial course, use your ISA allowance.

I’ll leave you to find out the cheapest way to borrow money, but here are three stocks you might consider investing in.

AstraZeneca
AstraZeneca  currently yields a base-rate-busting 6.1%. Pharmaceutical stocks are supposed to be defensive, but it is some years since this one has appeared solid at the back. AstraZeneca scored an embarrassing own goal with its $15.6 billion acquisition of Medimmune in 2007, while sales and revenues have plunged lately, as lucrative drug patents expire, and the pipeline of new products remains blocked. New chief executive Pascal Soriot has just announced a major reorganization, axing 1,600 jobs, and investing in new research and development (R&D) centres in the U.S., U.K. and Sweden, in a bid to “put science at the heart of everything we do” and improve R&D productivity. The overhaul will last for three uncertain years.

These disappointments have knocked AstraZeneca’s valuation, which trades on a mere seven times earnings, roughly half the FTSE 100 average. Given its forecast earnings per share (EPS) growth of -19% in 2013, and -3% in 2014, that lowly valuation looks richly deserved. But it does give the share price plenty of scope to recover, if Soriot gets his strategy right. Despite its recent troubles, AstraZeneca is up 7% over the past 12 months, giving a total return of 13%. AstraZeneca is also the biggest single holding in dividend dangerman Neil Woodford‘s Invesco-Perpetual High Income fund, at 8.53%, and he tends to get these things right in the longer …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Bernanke Admits His Childhood Home Is In Foreclosure And Relative Is Unemployed

Leave a comment

By Agustino Fontevecchia Fed chief Ben Bernanke admitted he has an unemployed relative and that the house in which he grew up has been foreclosed on during the post-FOMC press conference on Wednesday. The Chairman stuck to his playbook, reaffirming that QE and record-low interest rates are here to stay, adding that while some of his colleagues are concerned about the possible risks of his unconventional policy, he isn?t. …read more
Source: FULL ARTICLE at Forbes Markets

Business, Finance, Occupation & Industry

Dow Ends at a Record Again, S&amp;P in 7th Straight Gain

Leave a comment

By Reuters

Dow ends at a record again, S&P in 7th straight gain

Filed under: ,

By Chuck Mikolajczak

NEW YORK – Wall Street rose modestly on Monday, lifting the Dow to another record and giving the S&P 500 its seventh straight advance as early weakness enticed buyers. The gains briefly lifted the benchmark S&P 500 index to its highest intraday level since October 2007.

With the slight advance, U.S. stocks continued last week’s rally that took the Dow Jones industrial average to record highs. The S&P 500’s record closing high stands at 1,565.15, which it reached on Oct. 9, 2007.

Wall Street‘s “fear gauge” closed at its lowest level since February 2007, suggesting investors were not spooked by Monday’s brief pullback, despite expectations by many investors that a correction may be looming. The CBOE Volatility Index, known as the VIX, dropped 8.2 percent to 11.56.

U.S. equities have rallied strongly since the start of the year, helped by signs of improvement in the economy and the support of equities by the Federal Reserve‘s quantitative easing program. These factors have contained recent pullbacks as investors have used them as a buying opportunity.

“These dips are consistently bought. There is definitely a soft floor for the market,” said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

“It’s a QE bid,” Kenny said, referring to the Fed’s policy of keeping short-term interest rates near zero since late 2008. “Quite frankly, earnings have not disappointed to the point where it is has been disrupted, and there is nothing out there that seems to be getting in the way of this slow but very consistent and methodical drift higher in the market.”

But volume was light, with about 5.39 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.47 billion, suggesting the rally may be losing steam.

On Monday, the S&P 500 climbed as high as 1,556.27 – its highest intraday level since Oct. 15, 2007.

The Dow has gained over 10 percent for the year, while the S&P 500 is up more than 9 percent.

Wall Street had traded slightly lower earlier in the day as Italy‘s credit downgrade and disappointing Chinese economic data gave investors a reason to pause.

The Dow Jones industrial average gained 50.22 points, or 0.35 percent, to 14,447.29, a record closing high. The Standard & Poor’s 500 Index rose 5.04 points, or 0.32 percent, to 1,556.22. The Nasdaq Composite Index added 8.51 points, or 0.26 percent, to close at 3,252.87.

Earlier in the session, the Dow reached another lifetime intraday high, rising as high as 14,448.06.

Sponsored Linksadsonar_placementId=1505951;adsonar_pid=1990767;adsonar_ps=-1;adsonar_zw=242;adsonar_zh=252;adsonar_jv=’ads.tw.adsonar.com’;

Boeing Co (BA) rose to $83.03, its highest level since May 2008, after the U.S. aircraft manufacturer said strong demand was prompting it to increase its production rates of commercial planes. The stock, which rose 2 percent to $82.94 at the close, was the Dow’s biggest percentage gainer. Boeing also gave …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Did My Stock Just Die?

Leave a comment

By Rich Duprey, The Motley Fool

Filed under:

It was only a 42-point gain yesterday, but the Dow Jones Industrial Average rose to yet another new record high, hitting 14,296 and making this the eighth longest bull market since 1928. With Fed Chairman Ben Bernanke greasing the skids with his QE-infinity, Warren Buffett agreed in a CNBC interview that “cheap money makes things happen.” Of course, what happens when the spigot gets turned off, as it eventually must, is left unsaid.

The three stocks below, however, were in no mood to celebrate, with several incurring double-digit losses on the day. But don’t go running over the cliff with them like a bunch of lemmings: This could just be a temporary situation. Let’s first see whether they had good reason to fall as panic-fueled routs can sometimes lead to excellent buying opportunities.

Company

% Change

Acura Pharmaceuticals

(12.2%)

Sohu.com

(11.1%)

AeroVironment

(9.8%)

Accurately depicted
Two steps forward, one step back. That describes what you’re seeing at Acura Pharmaceuticals after the stock pulled back following its 48% gain the day before after announcing the Kerr Drug chain would carry its Nexafed decongestant throughout its stores in North Carolina.

As part of the FDA‘s push to make it difficult to abuse certain drugs, Nexafed is designed so it is difficult to make into methamphetamine. Its composition is such that should a drug abuser try to extract the active ingredient, pseudoephedrine, the whole thing would turn into an unusable thick gel.

Acura began selling Nexafed in December and has been anticipating independent drug stores rather than chains picking up the decongestant, and when it reported its fourth quarter results on Monday, it said it had entered distribution agreements at the end of February with most national and regional drug wholesalers.

Although the stock is down another 9% in early morning trading, it remains up 10% so far this year.

Privately speaking
Sohu.com also gave back the gains it made the day before after the Chinese Internet portal denied rumors it was actively seeking a go-private deal. On Tuesday, Sohu’s stock jumped 12% after the South China Morning Post reported that the company was in talks with investment banks and private equity funds about a possible buyout, but yesterday the CFO shot them down saying the reports were inaccurate as not only were they not involved in any such discussions, but the idea wasn’t even being considered.

Sohu’s stock ended the day at $43.44, some $0.20 lower than where they had been before the rumor was published, making it down 16% for the past year.

It wouldn’t have been a surprise, though, had Sohu actually confirmed the rumor. After numerous reports of fraud and financial shenanigans occurred at small, Chinese companies over the past few years, investors lost their appetite for them, and many company insiders began mulling whether to take their companies private. The Chinese government jumped into the fray by actively …read more
Source: FULL ARTICLE at DailyFinance