July 2010 Archives - 4/11 - Money Morning - Only the News You Can Profit From
Taxpayers' $3.7 Trillion Bailout Hasn't Saved the U.S. Housing Market
The amount of taxpayer dollars directed at the Troubled Asset Relief Program (TARP) continues to grow but with little economic progress being made, particularly in the housing market.
"Indeed, the current outstanding balance of overall Federal support for the nation's financial system…has actually increased more than 23% over the past year…the equivalent of a fully deployed TARP program – largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," said Barofsky.
- Equitymaster: How to invest in an infra stock?
- Taipan Daily: Reasons to sell in the aftermath of the Agricultural Bank of China IPO
Four Ways to Profit From Britain's Surprising Post-Election Rebound
I have been negative on Britain for a decade – and with good reason. The British economy was over-dependent on financial services, and government spending – at greater than 50% of gross domestic product (GDP) – was out of control.
However, the new government that took office in May has prompted me to reconsider my investment viewpoint. The new coalition has made progress on both of these once-worrisome issues.
And that means the British market is now one that investors should very carefully consider.
Let me explain…
Question of the Week: Readers Respond to Money Morning's Credit Score Query
More Americans than ever before are seeing their credit score slip to the subprime level, according to a new report released last week by credit-scoring firm Fair Isaac Corp. (NYSE: FICO). That means it's going to get a lot tougher for U.S. consumers to borrow money – especially given that banks are becoming more and more reluctant to lend.
"It's hard to see the good news in this report, unless you are speaking for the payday lenders, title lenders, and pawn stores," said John Ulzheimer, president of consumer education at Credit.com.
The FICO report shows that 25.5% of consumers – or nearly 43.4 million people – have a credit score below 600, putting them in the subprime realm. That makes them a high risk for lenders and means they'll have a tough time getting a credit card, mortgage or auto loan under stricter lending standards.
Canada's Economy Casts a Long Shadow Over its U.S. Counterpart
Canada's economy has consistently outperformed that of the United States since the beginning of the financial crisis. And while it's showing signs of slowing down, Canada's pending decline will be far shallower than that of the United States, and its rebound more dynamic.
Canada's gross domestic product (GDP) expanded by 6.1% in the first quarter of the year – the highest rate of growth among developed nations – and the country is expected to lead Group Seven (G7) nations in economic growth for at least the next two years.
The reasons are many:
- Canada's banking system is sound.
- It has a generous bounty of resources.
- Its economy is more service-based than it's been in years past.
- Corporate interests have less influence over government policy.
- And it has far less government debt.
Goldman Joins Chorus of Big Banks Reporting Weaker Earnings
Goldman Sachs Group Inc. (NYSE: GS) joined a chorus of big banks reporting weaker earnings for the second quarter as a weakening economy led investors to refrain from making deals.
Goldman's earnings plummeted 82% in the second quarter, hammered by the investment bank's settlement of Securities and Exchange Commission (SEC) fraud allegations and the U.K. tax on bank executive bonuses.
Strong trading and bond underwriting had bolstered the company's first-quarter results. But markets began to gyrate in April, and investor nervousness increased after the "flash crash" in May. Volatility has continued to rock the markets throughout the summer with investors' ongoing concerns about economies in Europe and fears that the U.S. recovery might be stalling.
We Want to Hear From You: What's in Your Investment Toolkit?
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.
Take the Baltic Dry Index. As Money Morning Guest Columnist Jack Barnes explained, "the Baltic Dry Index has [historically] shown itself to be the EKG of future industrial demand. And, right now, the BDI is screaming "Danger, Will Robinson!" to any investor who will read it and heed it as a true leading indicator."
Money Morning Mid-Year Forecast: Why China's Economy Will Exceed Expectations in the Second Half of 2010
The rapid growth China's economy experienced in the first half of the year was a blessing and a curse. It helped propel the world out of a disastrous recession, but it forced policymakers into action to prevent overheating – which scared off many investors.
But the fact is that while most of the world was struggling to keep the engine of economic recovery from sputtering to a halt, China spent the first half of 2010 with its foot on the brake. And now that the Red Dragon has reigned in growth, the second half of 2010 will likely look very different from the first.
Money Morning Chief Investment Strategist Keith Fitz-Gerald says nearly everyone felt the first quarter's 11.9% growth in Chinese gross domestic product (GDP) was "too hot." But the 10.3% growth China saw in the second quarter will likely be topped in the second half.
The reasons for that are simple:
- Exports remain strong.
- Chinese stocks are oversold.
- China's property market isn't the ticking time bomb many analysts believe it is.
- And policies implemented to cool growth in the first half of the year will likely be relaxed in the next six months.
"From an investment perspective, the single biggest concern right now is how hard and for how long the Chinese government will keep tapping on the brakes," says Fitz-Gerald. "I personally don't think it's going to be too much longer – an easing sometime in the third quarter now seems realistic."
When This Indicator Says to 'Buy Gold,' It's Never Wrong
Granted, a move of that magnitude represents a dizzying long-term profit opportunity. But that's just it – it's a long-term profit opportunity.
I've uncovered some profit plays that offer equally hefty gains – but in the short term.
One in particular stands out – a profit opportunity that relates to a signal that I refer to as the "Gold Spike Indicator," or GSI. Because of the nature of the indicator itself, this profit opportunity is available only four times a year.
And the next "window" of opportunity is just weeks away.