February 2011 - Money Morning - Only the News You Can Profit From
China's Five-Year Economic Plan Calls For Slower Growth
China will take steps to cool off its red-hot economy in the next five years largely by increasing domestic consumption and de-emphasizing exports, Premier Wen Jiabao announced in an online chat with the country's citizens on Sunday.
Wen, China's leading economic official, said the government's official target for average gross domestic product (GDP) growth over the next five years will be reduced to 7% annually, down from a target of 7.5% in the past half decade.
China needs to slow economic growth to curb soaring food and housing prices and to restructure its economy, even as most developed economies around the globe struggle to sustain expansion.
Buy, Sell or Hold: The Libya Crisis and Record Oil Prices Will Ground United Continental Holdings Inc. (Nasdaq: UAL)
The growing Middle East unrest – and the impact that the turmoil and the resulting uncertainty is having on global oil prices – is clobbering the airline sector's bottom line. The crisis is far from over, and the implications of the higher fuel costs have not yet been fully discounted by the market.
The bottom line: It's time to sell United Continental Holdings Inc. (Nasdaq: UAL) – before it breaks down to new levels of weakness (**).
Investing in Sweden – A Cold Country with a Hot Economy
What comes to mind when you think of Sweden: Blonde hair, pale skin, and a pair of sullen blue eyes piercing through a whiteout – or an economy that grew 5.5% last year?
Too often, it's the former when it should be the latter.
Indeed, chances are you've never thought about investing in Sweden. But the country that is so often thought of as being cold – if it's thought of at all – is actually overheating.
The Swedish economy expanded by 5.5% last year, making it the fastest growing economy in Western Europe. Sweden's central bank, the Riksbank, was the first central bank in the European Union (EU) to raise interest rates. It has lifted its key repurchase rate five times since last July, squelching inflation.
The most recent hike came on Feb. 15 – a 0.25% increase that took the rate to 1.5%. And with the prospect of further rate increases in the short-term, the Swedish krona has risen to its highest level against the euro in 10 years.
Some manufacturers have warned that the soaring currency could undermine the country's export-led recovery, but the Swedish economy is still on pace to grow 4.4% this year.
Additionally, inflation remains low, unemployment is on the decline, and Sweden's national debt is lower now than it was in 2006.
The Boeing Co. (NYSE: BA) Wins Controversial $35 Billion Contract for Refueling Tanker
In a deal expected to spark an economic boon of more than 50,000 jobs, The Boeing Co. (NYSE: BA) last week was awarded a $35 billion contract to build a fleet of U.S. Air Force aerial refueling tankers.
After 10 years of controversy and haggling in Washington, Boeing was declared the "clear winner" over European Aeronautic Defense & Space Co. (EADS), the company that builds Airbus planes.
"We're honored to be given the opportunity to build the Air Force's next tanker and provide a vital capability to the men and women of our armed forces," Boeing CEO Jim McNerney said in a statement.
Deputy Defense Secretary William Lynn told Politico that Boeing won the contract on the strength of its bid price, how well each of the planes would meet military needs and the cost to operate them.
"This is one of the happiest days of my professional life," said Rep. Norm Dicks, D-WA, the ranking Democrat on the House Appropriations Committee. He added that a change he suggested to the method the Air Force used to evaluate the bids might have made the difference.
The Pentagon considered the cost to operate the planes over 40 years rather than 25 years, he said, and since Boeing's NewGen Tanker will burn 24% less fuel than the EADS A330 plane, Boeing had a big edge.
- 2011 Budget Showdown: Don't Raise the U.S. Debt Ceiling… Sell the White House!
$100 Oil Sparks Energy Investment Interest
Civil unrest in the Middle East continues to push oil prices higher as companies with Libyan operations shut down production, threatening oil exports to Europe.
Crude oil futures on Wednesday hit the $100 a barrel level on the New York Mercantile Exchange (NYMEX) for the first time since September 2008. The April contract was as high as $100.91 in pre-market trading yesterday (Thursday).
Prices are even higher in Europe as its market is much more sensitive to Libyan oil export disruption. April Brent crude futures contract rose $2.45, or 2.2%, to $113.75 a barrel yesterday and hit an intraday high of $119.79, the highest level since mid-2008.
Volatility and uncertainty are driving both prices up, according to Money Morning Contributing Editor Dr. Kent Moors, a noted energy expert and editor of the Oil and Energy Investor.
"The Brent is far more sensitive to what's occurring in the Middle East than the [West Texas Intermediate] WTI in New York," Moors said in a FoxBusiness interview Wednesday. "The Brent also is more widely traded internationally than WTI is. So the end result is whenever you get an uncertainty situation like the one we currently have, Brent is going to be spiking further."
The Middle East Crisis: Egypt, Libya and Triple-Digit Oil Prices
We are right now looking at the prospect of significant and sustained instability in a region that's home to two-thirds of the world's known crude oil reserves.
The Middle East crisis – and the unsettling reality it represents – has already sent tremors through the international energy sector. Oil prices are on the march. And this is merely the beginning.
The problems will likely get much worse.
But forewarned is forearmed: Even if the Middle East crisis continues to escalate, we can predict how the global energy sector will be affected. In fact, if the crisis reaches the severity that I'm expecting, it will send the world's energy sector through three very predictable phases.
And each of those phases affords investors with very specific profit opportunities – if they know what to expect.
Timber Investing: The Inflation Hedge That Pays Off in Every Type of Market
If you start a conversation about the building inflationary pressures already sapping consumer pocketbooks, that talk will almost certainly turn to such classic hedges as gold, silver and even crude oil.
But one of the best inflationary hedges of the 20th century is often forgotten – even though it's likely to be just as effective this time around.
We're talking about timber – and timber stocks. And the facts speak for themselves. Investing in timber is a move virtually every investor should carefully consider.
Hot Stocks: General Motors Co. (NYSE: GM) Marks Turnaround With First Full Year of Profits Since 2004
After suffering through years of enormous losses and one of the biggest bankruptcies in U.S. history, General Motors Co. (NYSE: GM) yesterday (Thursday) posted its first annual profit since 2004.
The Detroit automaker said it earned $4.7 billion in 2010, compared with a $21 billion loss posted by the current GM and its pre-bankruptcy predecessor in 2009.
"Last year was one of foundation building," Chairman and Chief Executive Officer Dan Akerson said in a statement. "Particularly pleasing was that we demonstrated GM's ability to achieve sustainable profitability near the bottom of the U.S. industry cycle, with four consecutive profitable quarters."
Global Bond Market Outlook: Three Ways to Dodge the Looming Bear Market in U.S. Bonds
Put 100 investors in a room and most will tell you how worried they are that the still-bullish U.S. stock market is going to betray them for a third time in slightly more than a decade.
But I submit that it's the bonds that these folks are right now holding that should be the real focus of their concern – and for one very good reason: Most investors view the global bond market as a stodgy source of fixed income, when it's actually the largest, most complex and most sensitive capital market in the world today.