2010 July
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Dr. Copper's Diagnosis: A Strong Recovery
As stocks have slipped lower over the last three months, copper has bucked the broad trend and broken the pattern of lower highs and lower lows it set in the spring.
After bottoming on June 7, the iPath Dow Jones-UBS Copper Subindex Total Return ETN – which closely tracks copper futures – has gained more than 12.2%. In the same span, the Russell 2000 small cap stock index has lost 0.6%.
The red metal is nicknamed Dr. Copper for its ability to peer around the corner and act as a leading indicator for the global economy. And right now, the commodity with a Ph.D. in economics seems to be saying the future looks bright. Is the trend set to continue?
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Question of the Week: Readers Respond to Money Morning's Investment Toolkit Query
Success in the business world is most often achieved by those with a competitive edge.
That's why, here at Money Morning, helping readers find that edge for their investment toolkit is Job One. In the past week alone, we've introduced readers to two little-followed indicators that have big proven payoffs. The first was the Baltic Dry Index, a shipping index that provides a panoramic view of the global economy. And the second was the "Gold Spike Indicator," which helps gold investors time their purchases.
Shrewdly used, either (or both) of these indicators have the potential to provide investors with that sought-after competitive edge.
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We Want to Hear From You: Will BP's Makeover Restore the Oil Giant's Image?
BP PLC (NYSE ADR: BP) confirmed Tuesday that embattled Chief Executive Officer Tony Hayward is being replaced by Robert Dudley – an American and a company insider – in a move that's intended to improve the oil giant's battered image.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico – the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top. -
The Housing Market Still Wobbly Despite May's Home Price Improvement
The S&P/Case-Shiller index of home prices increased more than forecast in May, but the combination of a now-expired government tax credit, skyrocketing foreclosures and deteriorating consumer confidence is expected to keep a lid on the housing market in the second half of 2010.
Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."
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Shah's Predictions for the Second Half
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Battle Over Expiring Bush Tax Cuts Likely to Shape Fall Elections
A colossal battle is shaping up in Congress over what to do about the Bush-era tax cuts that are set to expire at the end of this year. It's an issue that entails sufficient economic and political consequences that could shape the fall elections and fiscal policy for years to come.
The expiring tax breaks received little public attention this year as Congress tussled with heavyweight issues like healthcare reform and financial regulation. But the fate of the tax cuts will be a major focus of debate in September when lawmakers return to Washington from their summer recess and the midterm campaign gets rolling.
"It has enormous ramifications for the fall and clearly will be one of the dominant issues," Sen. Ron Wyden, D-OR, told The New York Times. "This is code for the role of the federal government, the debate over the size of government and the priorities of the nation."
Democratic party leaders, including President Barack Obama, have said they want to extend the tax cuts for individuals earning less than $200,000 and families earning less than $250,000, while letting the cuts expire as scheduled for those exceeding those thresholds.
Most Republicans, and some Democrats, want to extend the tax cuts for everyone, characterizing any tax increases on anyone in this fragile economy as unwise. If no action is taken, taxes on income, dividends, capital gains and estates will all rise.
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BP Hopes for a CEO Savior in American Robert Dudley
BP PLC (NYSE ADR: BP) plans to oust Chief Executive Officer Tony Hayward from the top spot and to appoint Robert Dudley – an American and an insider – in an attempt to regain U.S. trust after a highly criticized, ineffective response to the Gulf oil spill.
BP is expected to announce the change today (Tuesday) when it releases its second-quarter financial report and Hayward addresses shareholders. The official appointment would be effective Oct. 1 – following a transition period that would give BP time to permanently seal the massive oil leak and to clean up most of the five million barrels of oil that have polluted the Gulf region as a result of the worst environmental disaster in U.S. history.
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Stocks Stuck in Trading Range Despite Positive Earnings Reports
Despite positive earnings reports last week from more than a few bellwether companies, stocks remain stuck in a trading range that continues to test investors' patience and skill.
Stocks launched higher last week in another round of the hyper-volatile action that has plagued the equity markets over the last three months. The good news is that some technical resistance was knocked out in the process, potentially setting the stage for a bigger rally in weeks to come.
The not-so-great reality: Stocks remain mired in the same range that has boxed them in for the past three months because, let's face it, despite their strong move they really only ended the week a fraction above where they started the previous week.
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Why Second Quarter Earnings Haven't Spurred a Stock Market Rally
Second quarter earnings season is in full swing on Wall Street and investors are keeping a close eye on corporate profits.
But rather than pinning their hopes on earnings for relief from the recent downturn in stocks, investors seem to be suffering from tunnel vision. They're ignoring numerous positive earnings reports and instead focusing on macro-economic trends to determine the day-to-day fate of the markets.
And as a slew of economic reports continue to display conflicting trends, investors are finding it difficult to read the tea leaves. So far this earnings season, the market and the investors that drive it are all over the place.
The result has been a string of volatile trading days featuring gyrating and erratic stock trading.
