October 2010 - Money Morning - Only the News You Can Profit From

Will Midterm Elections Ignite a Stock Market Rally?

The Democrats and Republicans have spent a record $3.5 billion in preparation for this year's midterm elections. But regardless of the outcome – whether you're a Democrat or Republican – the good news is that the stock market traditionally has performed well during midterm election cycles.

"The question is, 'Did the markets go up in the midterm election years by more than average in non-election years?' Brian Gendreau, market strategist for Financial Network told U.S. News & World Report. "And the answer is, 'Yes, by a huge amount more.'"

In the period from 1922 to 2006, the average gain of the Dow Jones Industrial Average over the 90 trading days following midterm elections (roughly November until mid-March) was 8.5%, according to a new study authored by Gendreau. That's almost 5% higher than the Dow's gains in non-election years.

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Money Morning Mailbag: Rising Global Energy Demand Is Providing Key Investor Opportunities

Energy companies reported robust third-quarter profits this week in another sign that rising global energy demand is something investors can't afford to ignore.

Exxon Mobil Corp. (NYSE: XOM) reported yesterday (Thursday) its third-quarter net income rose 55% from a year earlier to $7.35 billion, or $1.44 a share – the biggest jump in six years. Royal Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B) reported its third-quarter profit rose 18% from the year before, noting it's in a "delivery window for new growth," and ConocoPhillips (NYSE: COP) said its third-quarter profit more than doubled.

"Global oil demand implications have continued to surprise to the upside," Barclays Plc (NYSE ADR: BCS) analysts wrote in an Oct. 20 note to clients.

Money Morning Chief Investment Strategist Keith Fitz-Gerald addressed the importance of energy industry investing earlier this week on a Fox Business Network appearance.

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The "Mortgagegate" Scandal: Congratulations America, You're Now in the Title-Insurance Business

U.S. taxpayers already own pieces of such problem-plagued companies as General Motors Corp., Chrysler LLC, American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Now the increasingly problematic "Mortgagegate" saga could land American taxpayers in the trouble-ridden title-insurance business.

On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes – the same homes, coincidentally, that Bank of America wants to sell to new buyers.

This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.

It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game – it's a daisy-chain scheme that once again sets American households up as the biggest losers.

To understand the latest "Mortgagegate" developments - and see the steps to take - please read on...

Policymakers Panicked as China Rare Earth Ban Extends to the West

China for months has blocked shipments of rare earth metals intended for Japan in retaliation for a regional dispute. Now, China appears to have expanded its rare earth embargo to include Western countries – a move that has U.S. and European authorities scrambling to formulate a backup plan.

Rare earth metals are essential to the production of high-tech devices like computers, display screens, smart bombs, and hybrid-car batteries. And despite their name, rare earth metals aren't particularly rare. However, they are difficult to produce and many rare earth production companies have moved their operations to China to capitalize on cheaper extraction costs and the nation's commitment to growing its alternative energy sector.

China, which has one-third of the world's rare earth deposits, accounted for 97% of global production last year. Of course, the near-total monopoly China wields over the sector wasn't a major concern until just a few months ago when the country cut its production and export quotas.

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An Open Letter to Washington: How to Fix the Deficit and End the Bush-Tax-Cuts Debate

Dear Mr. President and members of Congress:

In the months that follow Tuesday's midterm elections, and into the New Year, you all face three very significant challenges. You must:

  • Find a solution to the Bush-tax-cuts controversy.
  • Rein in the huge-and-growing U.S. budget deficit.
  • And better police Wall Street, which got us into this mess in the first place.

You can solve all three of these problems with a single, simple proposition. And you can do so without having to ask U.S. taxpayers to dig into their wallets or savings.

Let me explain.

To see Hutchinson's solution, and to see how to join our campaign, please read on...

Warren Buffett Emphasizes Investment Risk Management With Successor Pick Todd Combs

Warren Buffett's announcement Monday that a little-known hedge fund manager, Todd Combs, will help oversee his $100 billion investment portfolio at Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) surprised investors and highlighted Buffett's emphasis on risk management for investment success.

Adding 39-year-old Combs to the Berkshire team makes him a top contender to take over Buffett's investment management duties whenever the Oracle of Omaha leaves his company.

"He is a 100% fit for our culture," said Buffett. "I can define the culture while I am here, but we want a culture that is so embedded that it doesn't get tested when the founder of it isn't around. Todd is perfect in that respect."

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Investment Strategies: Three Ways to Profit – No Matter Who Wins Tuesday's Midterm Elections

If you're worried that next week's midterm elections could further cloud an already-uncertain investment landscape, take a page from the investment playbook of Money Morning's Keith Fitz-Gerald: Position yourself to profit no matter which party wins on Tuesday.

During an interview with Fox Business Network journalist Stuart Varney yesterday (Tuesday), Fitz-Gerald detailed three strategies that will afford investors both safety and significant profit potential – whether the Democrats or Republicans carry the day.

For the full story - and a look at the video - please click here...

Surging Corn Prices Making Hay for Commodities Producers

Corn prices have surged more than 70% since May and could rise even higher in coming weeks. Prices will remain elevated for at least the next year, perhaps even testing their 2008 record high of $7.65 a bushel. That will likely mean higher food prices across the board for at least the next year.

Money Morning predicted in May that after falling below $3.50 per bushel in March, corn prices would surge higher than $6 by the end of the year. That forecast has proven prescient, as corn rose to a two-year high earlier this month.

Increased demand from emerging markets and a smaller-than-anticipated U.S. harvest are the driving forces behind corn's resurgence.

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