Archives for May 2011

May 2011 - Page 8 of 9 - Money Morning - Only the News You Can Profit From

Justice Department Sues Deutsche Bank AG (NYSE: DB) for 'Reckless Lending'

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The U.S. Department of Justice filed a lawsuit Tuesday accusing Deutsche Bank AG (NYSE: DB) of "reckless lending practices" when recommending loans to be insured by the Federal Housing Administration (FHA).

The suit seeks damages of more than $1 billion.

Deutsche Bank and its subsidiary, MortgageIT, broke U.S. Department of Housing and Urban Development (HUD) rules for establishing that borrowers had the income and credit histories that would ensure repayment of the loans, according to the Justice Department's complaint.

"As alleged, MortgageIT and Deutsche Bank ignored every type of red flag and breached every duty of due diligence before underwriting thousands of federally insured mortgages," U.S. Attorney Preet Bharara told United Press International. "Ultimately, prudence was trumped by profit, and good faith took a back seat to good fees. This is exactly the kind of misconduct that our Civil Frauds Unit was created to combat."

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U.S. Federal Reserve Chairman Ben Bernanke Disappoints with Press Conference

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The U.S. Federal Reserve on April 27 held its first-ever press conference – an extraordinary development that generated more buzz than typically surrounds a Federal Open Market Committee (FOMC) meeting.

Many wondered if U.S. Federal Reserve Chairman Ben Bernanke would deliver clear-cut explanations or a script of "Fedspeak" when he fielded press questions for 45 minutes.

Reporters shot questions at the Fed chief as they searched for concrete answers to the most pressing economic topics:

  • When will interest rates be raised?
  • Has quantitative easing done anything to boost economic growth?
  • Do you still believe inflation is "transitory"?
  • And what else will be done to support the economic recovery?

Bernanke defended the central bank's strategies and said that the Fed policies will help navigate the U.S. economy through a temporary economic growth slowdown and transitory inflation.

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Industrial Demand Set to Drive a Rebound in Silver Prices

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After a shocking upward climb to nearly $50 an ounce, silver prices have been walloped over the past two days – plunging to $41.50 an ounce in afternoon trading yesterday (Tuesday).

But regardless of this sharp decline, now isn't the time to panic. After all, the U.S. Federal Reserve has given no indication that it plans to tighten monetary policy anytime soon, and as a result the dollar continues to weaken.

That bodes well for all precious metals, which serve well as a store of value. Furthermore, silver has another trump card – its widespread use in industry and manufacturing.

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Capital Waves Investing: How to Profit From the "New Normal"

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Buy-and-hold investing is dead.

In the aftermath of the global financial crisis, the fact is that there are far too many strong financial institutions and armies of traders manipulating the financial markets. And that has relegated buy-and-hold investing – a hands-off strategy that for decades was a mainstay for retail investors – to the rubbish heap.

Today's investor has to employ a hands-on approach that uses so-called "capital waves" – the huge swaths of cash that flow from one market to another around the globe – to generate quick profits, says Money Morning Contributing Editor Shah Gilani, a former trader and hedge-fund manager whose trading service, the Capital Wave Forecast, has kicked off 2011 with 17 straight winners.

"Trading is the new normal," Gilani said in an interview. "Capital movement is the benchmark of normalcy."

Gilani recently sat down with Money Morning Executive Editor William Patalon III to discuss the recent successes of his trading service – and to give readers a glimpse of what's to come in the financial markets.

"There were several capital waves that ebbed and flowed in the first quarter that created opportunities for us," said Gilani. "There was money moving in and out of Treasuries, the euro, stocks, and commodities."

Identifying and understanding "capital waves" is the first step to unlocking massive amounts of wealth and not getting beached by Wall Street, according to Gilani. The second step is to avoid trying to fight the tides of investment capital that are swirling from market to market in the modern world. Instead, investors should ride their momentum to big-time gains.

What follows is a full transcript of Gilani's Money Morning interview. In it, he discusses the areas in which he's had success predicting profit-making opportunities this year, as well as his current investment prospects.

To read about what market strategies Gilani is using, please read on…

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What Do You Think Are the Biggest Threats to the U.S. Economic Recovery?

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A handful of factors threaten the strength of the U.S. economic recovery this year, leading many to wonder just how well the country's economy will fare in 2011.

The U.S. Commerce Department last week reported that U.S. gross domestic product (GDP) growth slowed in 2011's first quarter to 1.8%, down from 3.1% at the end of 2010. High gasoline prices and rough winter weather combined to drag down GDP.

The news came a day after U.S. Federal Reserve Chairman Ben Bernanke held the first-ever Fed press conference and said he expects the U.S. economy to grow at a rate of 3.1% to 3.3% this year (down from the 3.4% to 3.9% range previously projected).

"Coming in at 1.8, to get to where Fed's forecast is, you're going to need some robust growth in [quarters] two, three and four," Bob Andres, chief investment strategist and economist at Merion Wealth Partners told Reuters. "In my mind, the Fed's forecast and the Street's forecast are more than likely a little too optimistic going forward."

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The Death of bin Laden: What it Means for Pakistan, the Dow and Your Financial Security

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The finding and killing of Osama bin Laden after 10 years of searching is clearly being heralded as an enormous U.S. victory.

But once you look past the news itself, the death of bin Laden brings to light some highly worrisome revelations about Pakistan. And those revelations have some potentially serious long-term implications for the Dow Jones Industrial Average – and for your money and future financial security.

So let's look at the longer-term implications of the death of bin Laden, the troubling new insights that we've gained about the "real" Pakistan, and how this development actually injects even more geopolitical uncertainty into an already uncertain world.

To understand the true implications of this development - and the moves you must make now - please read on...

Hot Stocks: Starbucks Turnaround Brings Back the Grande Profits

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Reaping the fruits of a remarkable turnaround, Starbucks Corp. (Nasdaq: SBUX) last week reported a 20% increase in profit just days after learning it had become the No. 3 restaurant chain in the United States.

Such achievements were virtually unthinkable back in 2008, when the coffee store chain's annual profits plummeted 53.1% to $315 million from $672.6 million the year before (Starbucks' fiscal year ends September 30).

But lately Starbucks has been on a winning streak.

"What they've done to turn the company around has been nothing short of remarkable," R.J. Hottovy, an analyst with Morningstar, told Retail Traffic. "They are very well positioned and I think there are still some growth opportunities for them out there."

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Treasury and Fed Put Out Cash, Raising Fist Pumping Crowd for Ben

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The market waltzed through a week of heavy Treasury auction supply, but it did not have to pay the piper until Friday and Monday, May 2, when all the new paper was due to settle. Thursday's settlement actually saw bills paid down by $11 billion. That and $16 billion in POMO gave the markets plenty of juice for Ben's coming out party. The US Government, just like Colonel Kadaffy, sent out wads of cash to its minions to insure that cheering, fist pumping crowds would show up for Ben's appearance before the scripted, adoring mob of ink stained wretches. It was sickening. And I'm not even talking about the so called reporters in the room with him. I'm talking about the security market apparatus. Anyone who dared protest that the market show had gone too far was beaten to a pulp. Even venerable bear David Rosenberg of Gluskin Sheff was cowed into submission.

Friday and Monday the market has a big pile of new paper to settle. We have to wonder whether having spent every last penny they had in propping things up earlier in the week, the dealers have anything left come Monday. The markets "should" sell off, if not today, then Monday.

The indirect bid at the auctions continues to weaken, suggesting that foreign central bank (FCB) players continue to withdraw from the game, but the Fed's custodial data on FCB holdings went the other way, showing an explosion of FCB buying the prior week.

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