Archives for July 2011

July 2011 - Page 4 of 8 - Money Morning - Only the News You Can Profit From

Mobile Computing Patent Wars Could Cost Google $2 Billion Annually

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A mobile computing patent war launched by powerful tech rivals could snatch revenue away from Google Inc.'s (Nasdaq: GOOG) Android platform – and possibly threaten its viability as a free alternative operating system.

The threat to Android endangers as much as $2 billion in annual revenue for the search titan.

Google's rivals – which include such tech giants as Microsoft Corp. (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL) and Oracle Corp. (Nasdaq: ORCL) – have filed 48 patent infringement lawsuits against the Mountain View, CA company and many of its hardware partners.

Google rarely countersues, the most common way of battling patent lawsuits, because of its relatively paltry patent portfolio. Google has only about 700 patents, compared to about 4,000 for Apple and more than 17,000 for Microsoft.

So it stung particularly badly when Google lost the most recent patent wars battle by failing to win the auction for bankrupt Nortel Networks Corp.'s (PINK: NRLTQ) 6,000 patents earlier this month.

Instead, a consortium of its mobile computing competitors – Apple, Microsoft, Research in Motion (Nasdaq: RIMM), Sony Corp. (NYSE ADR: SNE) and LM Ericsson (Nasdaq ADR: ERIC) – won the Nortel patents with a bid of $4.5 billion.

"In the patent wars that are raging in the mobile computing world, this could turn out to beGoogle's Waterloo," observed The Financial Times.

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Mid-Cap Stocks Could Be Ready to Reverse Course

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Mid-cap stocks were one of the hottest investments of the past year until recently.

That is clearly exemplified by the iShares S&P MidCap 400 Index (NYSE: IJH), which jarred investors by sinking 2.3% over the past three trading days. The exchange-traded fund (ETF) had shot up 33% in the 12 months prior.

But the good news is that a reversal could be in the making.

That is, the sharp decline of the past few days may have helped to set the right shoulder of an inverse "head-and-shoulders" pattern. This is a classic reversal pattern that tends to occur at the end of major declines. You can see for yourself on the accompanying chart.

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A Sovereign-Debt-Default Survival Kit: The Four Countries That Will Keep Their AAA Ratings

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Stories about debt downgrades and sovereign-debt defaults are dominating the headlines.

And it's no longer just Europe that we have to be worried about. On Friday, Standard and Poor's warned that there was a 50-50 chance that the United States would lose its AAA debt rating in the next 90 days – even if the debt ceiling didn't result in a U.S. default.

When you get right down to it, we're all asking the same urgent question: Just where the hell can I go for a really safe investment?

Fortunately, I have an answer for you.

The Sovereign-Debt-Default Survival Guide

S&P put us on notice back in April, when the ratings agency affirmed the country's AAA/A-1+ sovereign credit ratings – but also cut its outlook on the United States' long-term debt rating from "stable" to "negative." The last time that happened to the United States was 70 years ago – right after the attack on Pearl Harbor.

What S&P is talking about now, though, is a reduction of the country's actual credit rating. For years, investors throughout the world have viewed U.S. government debt as the "safe haven" of last resort.

With a cut in the country's credit rating, those days would be over.

If you're searching for alternatives to U.S. debt, the good news is that Standard & Poor's has granted 18 other countries that top AAA credit rating. The bad news is that the selection isn't as luxuriant as it first appears.

It's important to separate the prospects from the suspects.

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What Should Greece Do?

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Global Economic Intersection article of the week Editor's Note: We all know the story: Greece has been living beyond its means for more than a decade. As a consequence, it is running out of money. And as Econintersect's Dr. Elliott R. Morss has documented in an earlier piece, Greece has entered into an unemployment-generating program […]

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The Painful Consequences of a Debt Ceiling Increase

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Failure to reach a compromise on a U.S. debt ceiling increase could result in an unmitigated economic disaster – one so unprecedented government and private analysts can't even accurately pinpoint all the potential consequences.

To avert this crisis, U.S. President Barack Obama wants a debt ceiling increase of $2 trillion, which analysts say would carry the country through the end of 2012. The president has moved the deadline for reaching an agreement up to July 22.

President Obama said the time cushion was needed to prevent a last-minute panic by the financial and debt markets that could "potentially create another recession" – panicking investors and possibly causing an economic meltdown even worse than the one in 2008.

But even after a debt ceiling increase is approved – though it would obviously produce a brief sigh of collective fiscal relief – the U.S. economy and markets will suffer painful effects, and almost no longer-term positive impact.

So what can investors expect once the U.S. debt limit is, in fact, raised?

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The Outlook for Gold and the Dollar Make Newmont Mining Corp. (NYSE: NEM) a "Buy"

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Newmont Mining Corp. (NYSE: NEM) is one of the largest mining companies in the world. And like Goldcorp Inc. (NYSE: GG), which I discussed last week, it stands to profit handsomely from any additional monetary stimulus enacted over the next few months.

So let's buy Newmont Mining Corp. (**), and hold on for as long as Federal Reserve Chairman Ben S. Bernanke is allowed to debase the U.S. dollar to help his friends in the banking industry.

Gold is hitting record-high levels in almost every fiat currency.

This bull market move up in gold hasn't gone unnoticed, either. There is a major buyer of gold future calls in the options market. The buyer of these calls is an extremely deep-pocketed buyer.

The size of this trade and the potential profits would be staggering if the price of gold breaks above $1,600 an ounce. I have seen estimates of $100 billion profit potential.

I honestly believe that only a central bank or one of the largest hedge funds has the capital and mandate to take this kind of risk.

If this trade starts to come into the money, and it is nearly there now, I expect that the senior gold producers will find a real market bid.

So let's talk about Newmont.

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U.S. Economy: Why The Republicans Want The Economy To Tank

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I'm not a believer in conspiracy theories, but I am a firm believer in Public Choice Theory. Want to know the key to American politics? Assume all politicians are working for their own benefit, not that of the public. Republicans and Democrats are battling over the debt ceiling extension, with neither side in firm control […]

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Moody's Warning Edges U.S. Credit Rating Closer to Downgrade

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With time running out on a deal to raise the U.S. debt ceiling, Moody's Investors Service turned up the heat by warning Washington's bickering politicians that any missed debt payments will result in a credit rating downgrade.

Such a downgrade would have economically catastrophic consequences, roiling stock markets worldwide, sharply increasing borrowing costs for the U.S. government as well as businesses, and derailing an already-anemic economic recovery.

Indeed, Moody's announcement triggered a 1.1% drop in the dollar on Wednesday – its biggest one-day drop in six months.

Most observers have assumed that Congress and U.S. President Barack Obama would eventually reach a deal on raising the $14.3 trillion debt ceiling and the growing federal deficits before the Aug. 2 deadline – necessary to avoid losing the ability to borrow and a possible default on the federal debt.

But with little progress having been made on a deal and the deadline less than three weeks away, concern is growing that ideological stubbornness and posturing for the 2012 elections had led to an impasse.

"They are worried they are having these ideological arguments while Rome burns," Carl Kaufman, portfolio manager at Osterweis Capital Management, told Reuters.

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The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?

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We talked yesterday (Thursday) about the debt ceiling debate, and how the GOP is making the most of its opportunity to affect the economy in the run up to the 2012 election.

Well, the Democrats are doing the same thing – except whereas the Republicans are looking to make long-term fixes at the expense of short-term growth, Democrats are doing the opposite.

I'll show you what I mean.

As I said in my previous piece on GOP economic strategy, I'm a firm believer in Public Choice Theory.

And in this battle the Democrats would like to see rapid growth between now and November 2012. More than anything, they want to see unemployment come down sharply.

They don't care so much about whether inflation is ticking up a bit, or whether an over-large budget deficit may cause trouble in the future. If they get elected in November 2012, they can try to sort out problems then – particularly if they can recapture the House of Representatives.

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A New Way for Income Investors to Get Ahead

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The market isn't an easy place for income investors right now.

Stocks are too volatile, U.S. Treasury yields are anemic, and a strong reliable dividend is a rarity.

But income investors have a relatively new way they can use options to collect solid payouts on a routine basis. And they can do it without actually owning the underlying stock.

I'm talking about Weekly Options, or Weeklys.

Weeklys, which have a maximum lifespan of just seven trading days, are available on more than 40 widely traded stocks and a handful of indexes – including the Standard & Poor's 500 Index.

The great thing about Weeklys is that you can take advantage of short-term moves in the price of a stock or index. You can also generate income on a weekly basis by implementing a simple covered-call strategy.

Here's how.

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