March 2010 Archives - 4/11 - Money Morning - Only the News You Can Profit From
Shaky CBO Deficit Projections Help Healthcare Reform Bill Pass House
When the comprehensive healthcare reform bill won approval from the House on Sunday, some of the swing lawmakers were won over by a new Congressional Budget Office (CBO) analysis showing the bill will slash the deficit by over $1.3 trillion over the next 20 years.
But at a time when the U.S. budget is already saddled with hefty doses of red ink, there's a growing debate about whether the new bill will reduce the deficit or evolve into another entitlement program that will expand the country's debt beyond already record levels.
Even though the bill – which President Barack Obama has hailed as the "most significant effort to reduce the deficit since the Balanced Budget Act" of the 1990s – will cost the federal government $940 billion over a ten-year period, the CBO said it will increase revenue and cut other costs by an even greater amount.
Beware of Eurozone Plans for Greek Debt Bailout
An old proverb dating back to the Trojan War tells us to "beware of Greeks bearing gifts."
Today, with the fate of the European euro and perhaps even the entire Eurozone region hanging in the balance – and Greece needing a bailout to avoid default on its massive public debt – a more-appropriate warning might be: "Beware of Greeks seeking gifts."
Unfortunately, European finance ministers are looking at a bailout proposal that would amount to little more than an outright gift.
And it's a gift that – in my opinion – should never be given.
To understand the risks posed by a bailout-plan for Greece, please read on.
U.S. Loses Crown as King of M&A to Emerging Markets
Maybe U.S. investment bankers are losing their touch.
For the first time since Thomson Reuters began keeping track in 1976, fewer merger and acquisition (M&A) deals were done in the United States in the first six weeks of 2010 than in emerging-markets.
During that stretch, emerging markets such as India, Mexico, Brazil and China accounted for 43% of global M&A volume with $91.2 billion worth of deals. That outpaced the United States, which completed roughly $55 billion in deals, accounting for a 29.5% share.
Surprisingly, Mexico alone did more volume, with 19.1% of the market versus Europe's 17.1% share.
- Wall Street vs. Health Care?
The Year of the Tiger is the Perfect Time for Caterpillar Inc.
In China, the tiger is commonly thought of as lazy, merely appearing to be strong and ferocious.
But that's truly not the case. The tiger does not waste his energy showing his strength. Instead, it sees the future and knows precisely when to pounce on its prey. Those who can see past the great wall of today and look into the future – much like our wise friend, the tiger – understand just what it takes to be successful.
If we were to analyze the growth potential for the worldwide construction industry, we would find that Japan's Komatsu Ltd. (OTC ADR: KMTUY) and the U.S.-based Caterpillar Inc. (NYSE: CAT) are best-positioned for global success.
Capital Wave Investing: Is it Time to Profit From the Cash-Rich Technology Sector?
A little more than one year after the economy hit bottom during the Great Recession, American companies are sitting on nearly $1 trillion in cash, a capital wave serving as a call to action for a long-moribund mergers-and-acquisition market.And history shows that a burst of M&A activity can be just what the doctor ordered for a stock-market rally that's looking for a booster shot: After a near-record-breaking rally in the first year of the current bull market, a flurry of dealmaking could be the catalyst that fuels Year Two of the rally – perhaps even pushing stock prices back to, or even past, their previous highs.
As a rule, an increase in M&A activity is a bullish sign for both the economy and the stock market, says Money Morning Contributing Editor Shah Gilani, who tracks deals for his own advisory service, The Capital Wave Forecast. As far as capital waves go, this surge in cash-driven deals is one of the most powerful around, and will have substantial spillover effects.
Fastest Recovery Ever Could Push Corporate Profits to Record Highs in 2010
Sometimes we get a little carried away talking about esoteric subjects like bulls, bears, supply, demand, moving averages and the like. But if you just want to focus on something real, then look at corporate profits. When they're rising from a low, that's good; when they're flat-lining or declining, that's bad. Pretty simple.
Much of the rally of the past year has been in anticipation of a profit recovery. And now that recovery is actually coming in a bit better than bulls expected, which is why they are able to elbow bears so effectively. ISI Group now figures that corporate profits will clock in at +38.8% for the first quarter (year over year) of 2010, then +42.4% in the second quarter, +36.8% in the third quarter and then +30% in the fourth quarter (against harder comparisons). That would put profits in 2010 up a record 36.1% overall.
To read more about how corporate earnings will shape the market click here.
With Inflation Accelerating Around the World, Will the United States be Next?
Inflation is now thoroughly entrenched in India's economy, and some analysts fear that the United States could suffer the same fate if adjustments to monetary policy aren't made soon.
India's wholesale price index-based inflation rate in February accelerated to 9.89% from a year earlier. That was the fastest pace in 16 months, blowing past the Reserve Bank of India's (RBI) estimate for an 8.5% inflation rate at the end of March.
Soaring food prices were the primary driver of inflation. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 16.3% in the week ended March 6 from a year earlier after a 17.81% gain the previous week.
Goldman Backs Money Morning Prediction That China's Yuan Will Dethrone the Dollar
Back in May, just after he'd completed his latest investing tour of China, Money Morning Chief Investment Strategist Keith Fitz-Gerald made a bold prediction: China's currency, the yuan, is destined to dethrone the U.S. dollar as the world's chief reserve currency.
In an essay that's part of a report published Friday for Chatham House, a London-based foreign-affairs researcher, O'Neill wrote that China's yuan is destined to become a global reserve currency on par with the U.S. dollar or European euro.