Archives for March 2010

March 2010 - Page 6 of 11 - Money Morning - Only the News You Can Profit From

Eurozone Announces Greece Rescue Plan To Encourage Investor Confidence

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Eurozone countries yesterday (Monday) drew up a rescue plan to safeguard the euro in case Greece defaults on its debt in the hopes of stabilizing its currency.

Broadcasting the fact that Greece's euro partners have drawn up an emergency loan strategy is meant to steady the bond markets and give investors confidence in Greece's ability to pull out of its debt crisis, analysts said. The decision also pressures Greece to rely on its own measures for resolution.

"The objective would not be to provide financing at average Eurozone interest rates, but to safeguard financial stability in the euro area as a whole," the European finance ministers said in a statement.

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Iron Ore Negotiations Reach an All-Too-Familiar Impasse

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Iron ore negotiations have ground to a halt – again.

Iron ore producers and consumers were so far apart last year that negotiations on pricing broke down entirely. No price benchmark was reached between major Australian iron ore miners and China's steel mills.

Instead, steelmakers resorted to buying their iron ore from smaller producers on the volatile spot market. And they may have to do the same thing again this year.

That's because iron ore producers – led by Brazil's Vale SA (NYSE ADR: VALE) and Australian juggernauts BHP Billiton (NYSE ADR: BHP) and Rio Tinto PLC (NYSE ADR: RTP) – are reportedly looking for an increase of as much as 90% in the benchmark price.

"The negotiations are difficult. These miners hope for a large rise" in the 2010 benchmark price of iron ore, said Deng Qilin, the chairman of both the China Iron and Steel Association and the Wuhan Iron & Steel Group. "We can't digest the pressure of what they're asking us."

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No Changes to Fed Policy

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The U.S. Federal Reserve today (Tuesday) kept its benchmark interest rate at a record low level Tuesday and made no changes to the key "extended period" policy pledge.

In its description of the economy, the Fed noted that "household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit." Also, the housing market has yet to turn a significant corner and the commercial real estate market remains in dire straits.

"Investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls," the Fed statement said.

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Fed Plan to End Mortgage-Backed Securities Purchase Program Brings Market Anxiety

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Anxiety surrounds Tuesday's Federal Open Market Committee (FOMC) meeting as the central bank's year-long mortgage-backed securities (MBS) purchase program nears its scheduled March 31 close, opening the door for mortgage rate increases and surprising market fluctuations.

The Fed spent billions of dollars on MBS guaranteed by Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and Ginnie Mae weekly for the past year, topping out its portfolio at $1.25 trillion.

As the program ends, investors and analysts are speculating that mortgage rates could rise – and rise fast.

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It's Time to Invest in Canada

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This isn't the first time that I've written about Canada, a well-run country that has avoided many of the mistakes made by the United States. Its budget deficit is moderate, its balance-of-payments deficit is also small, its banking system is in pretty good shape and it faces very little inflation risk, since the country has maintained a reasonable monetary policy.

At this point, you might well be asking: Well, if you've said this all before, why does it bear repeating now?

The answer is simple: As I've hunted for attractive investments recently, I have noticed that a very high percentage of those companies are domiciled north of the border.

In short, it's time to invest in Canada.

To discover the profit opportunities available just north of the border, please read on...

Stock Market Buying Power Hits New Rally High, as Demand Outpaces Supply

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Checking in with the volume experts over at Lowry Research Corp., it appears that U.S. stock market buying power hit a new rally high last week, while selling pressure hit a new low.

That reflects the same pattern of expanding demand and contracting supply that has characterized the entire rally out of the March 2009 lows – a rally that's now one year old.

According to Lowry analysts, if you look back over the past eight decades, every major market top has been preceded by a sustained period of rising supply and falling demand as profit-taking becomes increasingly aggressive.

And that's not all. If you look at the six-month stretch that precedes a market top, advance/decline (A/D) lines have always deteriorated for at least six months before a major top. At the moment, by their measures, the U.S. market remains in the first phase of a long-term uptrend, which is the lowest-risk period for new buying after a bear market.

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Chinese Premier Wen Rejects U.S. & European Pleas, Says Yuan to Stay Stable

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China's Premier Wen Jiabao vigorously defended his country's economic policies on Sunday, rejecting calls to let the yuan appreciate, and ratcheting up trade tensions with the United States where lawmakers and economists insist his stance is hindering a global recovery.

"I don't think the renminbi is undervalued," Wen said at a press conference in Beijing, using the Chinese currency's official name. "We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency."

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The 10 Keys to Short-Selling Profits

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Short sellers took a lot of flak for their alleged role in the stock market meltdown of 2008-2009, getting blamed for artificially depressing stock prices, exaggerating the impact of the bad economic news rolling out of Washington and exacerbating the volatility that intensified the financial panic experienced by investors and the general public.

That last allegation was particularly troublesome to market regulators, especially after stock-market researcher Birinyi Associates traced a sudden sharp rise in stock volatility back to mid-July of 2007, a point coinciding with the repeal of the so-called "uptick rule." The uptick rule was a Depression-era regulation that allowed the short sale of a stock only when the prior trade had resulted in an upward move in its price.

That concern over volatility led to a lot of official posturing as the government struggled to come up with solutions to prevent future market mayhem, the result of which (at least for the time being) was the Securities and Exchange Commission (SEC) Feb. 24 adoption of a new "alternative uptick rule."

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Bulls Overcome Market Tug of War to Send Stocks off to Strong March Start

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Stocks rose briskly last week, resulting in a big week for the major market indexes. Weekly and monthly index charts improved, and such major U.S. stocks as The Boeing Co. (NYSE: BA), Hewlett Packard Co. (NYSE: HPQ), American Express Co. (NYSE: AXP), Google Inc. (NASDAQ: GOOG), Apple Inc. (AAPL), Goldman Sachs Group Inc. (NYSE: GS) and General Electric Co. (NYSE: GE) emerged from flat-lining or faltering price patterns on decent, if not outstanding, volume.

Just two weeks ago, every one of the afore-mentioned stocks looked terrible, exhibiting intense apathy amid slow, grinding declines. Then the skies parted, and suddenly the sun is shining on these shares once again.

That's why U.S. stocks are off to a strong March start – already up 4.1% from the end of February. And don't forget, a year ago at about this time (March 9, 2009), the market reached its nadir: The Standard & Poor's 500 Index is up 69.98% since that time.

Here's why the shift seems so abrupt. The markets are now in a tug of war between two forces:

  • On the plus side are good fourth-quarter earnings reports related to an improving economy.
  • On the negative side – as a friend at a major macro hedge fund described it last week – are "frigid winds blowing across the credit icebergs."

To find out who’s winning the stock-market tug of war,

please read on…

Buy, Sell or Hold: JDS Uniphase Corp. (Nasdaq: JDSU) Is Yet Another Rising Star in the Broadband Revolution

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We keep getting good news with respect to the broadband revolution. If you have not read my prior posts, do not miss this special report on it. These developments are revolutionizing the tech world right now and we are at the very inception of an explosive and highly profitable trend.

For starters, both the U.S. economy and the global economy are faring much better than most of the market expected. In fact, last Friday we saw February's retail sales blow away even the most optimistic forecasts. Sales excluding autos did particularly well, which is good news for Internet sales.

We also saw Cisco Systems Inc. (Nasdaq: CSCO) launch its new "super-router” which is many times faster than existing devices. This will speed up network traffic, enabling faster video, teleconferencing and downloading. More traffic means more bandwidth, and that means more infrastructure.

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