Archives for June 2011

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

With Small Businesses Sidelined, the U.S. Job Market is Headed for a Double-Dip

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After showing some improvement over the past year, the U.S. job market is now beginning a double-dip.

The reason is simple: The number of start-up businesses has hit its lowest level since at least the early 1990s.

Indeed, small businesses are the main drivers of job growth and no amount of stimulus can compensate for their absence.

For instance, between the recession that ended in late 2001 and the start of the most recent recession in late 2007, businesses that employed fewer than 500 workers added nearly 7 million employees, according to ADP payroll services. Larger businesses cut nearly 1 million employees in that period.

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The Next Day Of Infamy

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The key liquidity indicators outside of Fed POMO, including commercial bank and foreign central bank purchases of Treasuries and Agencies, large domestic bank trading accounts of non fixed income assets, and equity mutual fund flows all remain weak. Only net cash flowing from money funds into the banking system is still in a bullish trend, but it is on the cusp of turning bearish.

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Socially Responsible Investing: Four Ways to Profit as You Help Clean up Wall Street

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I look around, and I'm appalled – and not just by the banking crises, financial follies, threats of sovereign-debt default or spikes in food or gasoline prices that dominate the daily headlines.

Those problems come and go. What bothers me is the almost-total abandonment of professional judgment and ethics in Washington and on Wall Street – and the absolute lack of urgency that these problems should be attacked and fixed, once and for all.

Roll your eyes, if you want, but I'm deeply troubled. That's why I believe the time is right for a socially responsible investing strategy that will serve as a wakeup call to Corporate America, Washington and Wall Street. And I'm going to show you four investments that will help get you started.

An Ethical Wakeup Call

Maybe I am old-fashioned, naïve or both, but I believe that our elected leaders and corporate institutions should be setting examples for the rest of us. So I don't think it's okay for our elected officials to engage in extramarital affairs or to "sext" blackjack dealers, or for Wall Street firms to trade against clients. But two-time California Gov. Arnold Schwarzenegger and House Democrat Anthony Weiner, and Goldman Sachs Group Inc. (NYSE: GS) apparently do.

The way I see it, our leaders and our financial institutions need to be doing everything cleaner, better and more ethically than the rest of us because their ability to serve us depends on the most delicate – and critical – of all human attributes.

I'm talking, of course, about trust.

Unfortunately, it's very clear that trust doesn't rank very high on their list of priorities at the present moment. As a result, I believe that we should take matters into our own hands by embracing the social-investing philosophy. This approach to ethical investing is one that's coming back into vogue -one we are very likely to hear a whole lot more about in the years to come – and one that will deliver a very clear message to our leaders in New York and Washington.

That message: We want change.

I'm not alone in making this call.

Click here to read on…

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Hot Stocks: Don't Let Groupon Inc. Play You For a Fool

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Groupon Inc. will try to get you to jump on its initial public offering (IPO) by touting its extreme growth and its profit potential – but don't believe it.

Even though Chicago-based Groupon, an e-commerce player that offers daily discounts to subscribers via e-mail, has exploded since it entered the online coupon world in 2008, that growth is threatened by the company's competition and mounting losses.

"The market opportunity isn't as big as the industry players would like you to believe," Sucharita Mulpuru, an analyst with Forrester Research Inc. (Nasdaq: FORR) wrote in an open letter to investors considering Groupon. "This IPO game isn't about finding value, it's about finding a greater fool who actually believes the valuation is true. Trust me, you will be the fool."

Here's why buying into what Groupon's saying about its profitability is a foolish move.

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With the Sale of Arby's, Wendy's Stock Deserves a Fresh Look

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With the sale of Arby's, Wendy's Arby's Group Inc. (NYSE: WEN) may finally be ready to compete with rival McDonald's Corp. (NYSE: MCD). And the company's stock, which has plunged nearly 80% over the past four years, may finally see a rebound.

It was announced yesterday (Monday) that private equity firm Roark Capital Group would pay $130 million in cash for Arby's and assume $190 million in debt. Wendy's also will receive an $80 million tax benefit and retain an 18.5% stake in Arby's. The full value of the deal, expected to close in the third quarter, is $430 million.

The sale will furnish Wendy's with the cash the company needs to focus on its turnaround efforts, which include improving its breakfast offerings, remodeling its restaurants and expanding its overseas franchises.

"This transaction provides substantial value to our stockholders, as it is expected to be accretive to earnings, deleverage the balance sheet and allow us to devote our full attention and resources on the exciting growth opportunities we have at Wendy's," Roland Smith, Wendy's/Arby's chief executive, said in a statement.

Smith told Bloomberg News that the cash portion of the deal would be invested in "Wendy's growth opportunities" and not used to pay down more debt.

The split comes less than three years after Triarc Cos, Arby's parent in 2008, acquired Wendy's for $2.2 billion and created the third-largest fast-food chain in the world. At the time Wendy's was looking for a way to reverse a series of disappointing earnings reports, having stumbled in the years following the 2002 death of founder Dave Thomas.

The merger was intended to generate $60 million in annual savings by streamlining support services and corporate functions.

Unfortunately, the timing could not have been worse – the deal closed just before the 2008 financial crisis struck.

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Buy, Sell or Hold: Bank of America Corp. (NYSE: BAC) Is a House of Cards on the Verge of Collapse

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Bank of America Corp. (NYSE: BAC) is one of the largest banking complexes in the United States. But its strategy of growing through acquisitions has left the company terribly vulnerable to an economic downturn.

That's why it's time to "Sell" Bank of America Corp. (**).

For complete disclosure: I worked for Bank of America as a teller 20 years ago. So I have a slight bias. I want that to be clear upfront.

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U.S. Housing Report: How To Survive & Profit From The Double Dip

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With the latest data pointing to a double-dip in home prices, it has become increasingly clear that the wobbly economic recovery won't be getting any help from the housing sector. Existing home sales sank 9.6% from the previous month, while prices fell 5.2% to a median of $156,000, the lowest since April 2002. And since […]

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Why Shah Gilani's Plan to Fix the U.S. Housing Market is a Winner

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Money Morning Contributing Editor Shah Gilani told us last week that if something isn't done now to fix the U.S. housing market it'll "drag the rest of the economy down into a hellish bottom that will take years, if not decades, to crawl out of."

"The housing market is our single-most important generator of gross domestic product (GDP) and, ultimately, national wealth," said Gilani. "And we can almost immediately execute a simple plan to fix mortgage financing and stabilize U.S. housing prices."

Gilani outlined steps the U.S. government needs to take to resuscitate the U.S. housing market, including unwinding Fannie Mae (OTC: FNMA) and Freddie Mac, making bailed-out banks contribute to a private national pool of mortgage capital, and creating a new ratings agency to assess the creditworthiness of mortgage pools – with a tax on the pools' interest.

He also called for more up-front money from borrowers, and for a tax-incentive program to stimulate buyer demand and stabilize the housing market.

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