Archives for April 2011

April 2011 - Page 5 of 9 - Money Morning - Only the News You Can Profit From

S&P Debt Downgrade Ramps Up Pressure to Resolve Budget Crisis

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When Standard & Poor's Rating Services Inc. yesterday (Monday) downgraded its outlook on U.S. debt to "negative," it sent the U.S. government a simple message: Deal with your deficits.

The rating agency expressed concern that continued dithering in Washington over how to address the $14 trillion-plus debt and ever-growing annual budget deficits would "render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA' sovereigns" – a hint the United States could lose its AAA rating.

"More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," wrote S&P credit analyst Nikola G. Swann.

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Cash-Rich Companies Share the Wealth with Trillion-Dollar M&A Activity in 2011

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Mergers and acquisitions, or M&A activity, so far in 2011 has been a driving force in the stock market's positive performance.

In fact, global M&A activity in the first quarter topped $799.8 billion, the most since 2007's pre-crash frenzy, according to a recent report in Forbes magazine.

MergerInvesting.com, which tracks the M&A market, says 130 deals have either already been closed in 2011 or are currently pending. And, while the total number of global deals is down slightly from the same period in 2010, the actual value of the deals is up more than 55% (with deals involving U.S. companies accounting for 49.6% of that total – a 117% jump from 2010).

Looking forward, most M&A analysts now predict more than $3 trillion in takeover activity for all of 2011.

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Pocket Higher Profits By Spotting the Next Takeover Target

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Investors lucky enough to hold shares in a company before it's acquired by another can snag some hefty profits – and this year has been one of the hottest on record for deals.

Global merger and acquisition (M&A) activity in the first quarter topped $799.8 billion, the most since 2007's pre-crash frenzy, according to a recent report in Forbes magazine. Looking forward, most M&A analysts now predict well more than $3 trillion in takeover activity for all of 2011.

The question is, how can you spot a likely takeover target before the announcement of a potential deal hits the news?

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Buy, Sell or Hold: Hitachi (NYSE: HIT) May Be Too Hot to Hold

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Hitachi Ltd. (NYSE: HIT) is a prime example of a company heading in the wrong direction.

The company made the No. 4 reactor at Japan's troubled Fukushima Daiichi power plant. And over the next six to 12 months it's going to be thoroughly distracted by the emergency work necessary to decommission the plant.

Other planned projects already have been delayed or cancelled altogether.

Since real financial risks to the company outweigh any potential gains, Hitachi Ltd. is a "Sell" (**).

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Hear the Latest Top 2011 Investing Strategies from Money Morning Financial Experts

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As investors you are in one of the most uncertain periods in market history right now – and you want some clarity.

To shine light on how to navigate the rocky path ahead, Money Morning editors recently gathered in St. Petersburg, FL with other global financial experts for the Investment U Symposium. From March 23 to 26 they presented in-depth workshops, joined in panel discussions and mingled with investors like you to analyze the hottest and most pressing topics and investing strategies in the global economic landscape today.

Attendees were able to get detailed advice from our regular Money Morning contributors on a variety of topics.

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The U.S. Government Shutdown: How To Profit From The Federal Government Furlough

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U.S. Treasury Secretary Timothy Geithner is worried about hitting the debt ceiling, and the resultant debate has once again brought our government to the brink of a "shutdown". The entire debt ceiling concept – as well as the investor fear, political-posturing, self-aggrandizing behavior and government-shutdown debates this budget limit repeatedly spawns – is a joke, […]

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Microsoft-Nokia Deal Doesn't Guarantee a Spike in Smartphone Market Share

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While two major research firms predict that the February deal struck between Microsoft Corporation (Nasdaq: MSFT) and Nokia Corporation (NYSE ADR: NOK) will result in a huge jump in smartphone market share for Windows Phone, such gains won't come easily – if at all.

The two companies announced on Feb. 11 that they would jointly enter the mobile smartphone market – in what some might call a "shotgun marriage" – with Nokia making the hardware and Microsoft proving the operating system (OS).

Each company has lost significant market share over the past few years, starting with the debut of Apple Inc.'s (Nasdaq: AAPL) iPhone in 2007. When Google Inc.'s (Nasdaq: GOOG) Android landed the next year, its meteoric rise created a crisis for both Nokia's Symbian and Microsoft's Windows Mobile operating systems.

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Rate Hikes by Foreign Central Banks Could End the Party for U.S. Investors

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William McChesney Martin Jr., the revered former head of the U.S. Federal Reserve, is remembered for many things – including an unprecedented term as chairman that lasted from March 1951 to January 1970.

But Martin is perhaps best remembered for the central-banking aphorism that says that the Fed's most important job is "to take away the punch bowl just as the party gets going." (See accompanying graphic below.)

We'll have to wait until June 30 to see if current Fed Chairman Ben S. Bernanke brings down the curtain on "QE2" – the quantitative-easing bash that he spiked with $600 billion worth of economically inebriating liquidity.

Before that happens, however, we may discover that recent interest-rate increases by central bankers elsewhere in the world will act as sobering cold-water bracers that end up crashing the global-growth party a lot sooner than Bernanke & Co. desire.

To understand how foreign central banks could end the bull market, please read on…

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Obama Deficit Plan Sets Stage for Capitol Hill Budget Debate

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Calling for a reduction in federal deficits of $4 trillion over 12 years, U.S. President Barack Obama outlined his position in the looming Capitol Hill budget debate in a speech delivered yesterday (Wednesday) at George Washington University.

Although thin on specifics, some key elements of President Obama's deficit plan include eliminating the President Bush-era tax cuts for people making over $250,000 a year, reducing defense spending by $400 billion, and trimming Medicare and Medicaid costs by $480 billion by building on provisions in last year's healthcare reform package.

The president projects $1 trillion in savings from revenue increases, $1 trillion in savings on interest payments and $2 trillion from spending cuts.

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Oil Prices Look to Top $150 by Midsummer On Resilient Demand and MENA Turmoil

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Money Morning predicted in its 2011 Outlook series that oil prices would see $100 a barrel by summer. And that's proven to be true – but not entirely for the reasons we discussed.

In addition to the increased demand we talked about in January, violence in the Middle East and North Africa (MENA) has driven oil prices into the stratosphere. The price of light, sweet crude climbed above $112 a barrel last week, up more than 22% from where it started the year.

A recent pullback has driven prices back down to about $107 a barrel, but don't be fooled. Strong demand in emerging markets, a weak dollar, political turmoil in the MENA region, and a strong speculative sentiment will continue to push oil prices higher.

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