December 2012 - Money Morning - Only the News You Can Profit From

Possible Tax Changes for 2013 Trigger Stock Selling

Anxiety about tax changes for 2013 among investors holding high-yielding dividend-paying stocks has led to a selloff, driving down stock prices.

It's almost certain tax rates on dividend payments will rise, possibly by as much 43.4% for those in upper income brackets.

Some investors could be spared from the dividend tax, depending on the outcome of fiscal cliff negotiations. U.S. President Barack Obama has said he wants to increase the tax on those earning $400,000 or more, while Republicans have suggested raising the tax on those earning $1 million or more.

But even if you're not hit by higher dividend taxes, you could see the prices of stocks you own plunge because of a selloff by investors worried about the higher tax rates.

Two sectors – telecoms and utilities – have been especially hard hit.

Utilities could be the worst-performing sector in 2012, up only 2% through November compared with the Standard & Poor's 500 gain of 15%. Telecoms have slipped 5% to 6% just in the past few months.

Some larger investors in the telecoms sector may have been simply riding momentum and quickly sold out.

Sam Stovall, chief equity strategist at S&P Capital IQ, told CNBC "some of these groups will be and have been beaten up because a lot of these investors were riding the momentum wave for high yielders."

But the selling has been pretty consistent in recent months. From August-November, the top 20% of dividend-paying companies in the S&P 500 underperformed the index by about 3%.

Vadim Zlotnikov, chief market strategist at AllianceBernstein, told the Financial Times, "You can't argue that the threat of higher taxes is not important to investors."

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The Best and Worst Stocks of 2012

As we prepare to invest in the New Year, we can learn from the five best and worst performing stocks of 2012 in the Standard & Poor's 500 Index.

While any investor would have loved to know this list a year ago, it's a good guide for 2013. Several of the factors that drove these share prices up and down in 2012 haven't changed.

The best stocks were led by signs of a recovery in housing, a slight return of consumer confidence, and the U.S. Federal Reserve's unprecedented monetary easing measures.

"The sector leaders are what one would expect with the [Fed] policy and with continued monetary injections into the economy this year through bond purchases," Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC, told The Wall Street Journal. "By pumping money into the economy the Fed boosts consumer confidence-and spending-which one would expect to boost consumer and financial shares."

While the leaders' success was tied to central bank actions, the biggest losers simply stumbled from their lack of innovation, inept management, and failed business models.

Best Stocks of 2012

Here are the best performing stocks in the S&P 500 for 2012:

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Investing in 2013: Best Bets in an Uncertain Economy

If you're planning on investing in 2013, economic uncertainty probably will be a factor in deciding where to put your money – but some sectors stand out as solid prospects regardless of the economic climate.

Here's a breakdown of the best sectors for your money in the New Year.

Hot Sectors for Investing in 2013

Silver: With economic uncertainty expected for the near term, gold is typically considered the best hedging choice.

But, as Money Morning Global Resources Specialist Peter Krauth pointed out in his 2013 silver price forecast, silver actually provides more potential for appreciation – and at a far better starting price.

Krauth says the white metal, currently selling for around $30 an ounce, could move to a new high of $54 an ounce in 2013 – and not just because of its hedging value.

Investment demand for silver should continue to increase, driven by the creation and expansion of several silver-backed exchange-traded funds (ETFs) and increased minting of silver coins.
Industrial use of silver is expected to grow even faster. That's largely due to the use of silver in solar panel manufacturing, which consumed 60 million ounces in 2012.

Solar panel usage is expected to grow as a result of U.S. President Barack Obama's emphasis on alternative energy and increased demand from Japan, which has made a major shift away from nuclear power in the wake of the Fukushima nuclear power plant disaster.

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What if There's No Fiscal Cliff Deal?

Just hours remain for Democrats and Republicans to come up with some kind of fiscal cliff deal to avert the $600 billion in tax increases and spending cuts that are set to kick in tomorrow, Jan. 1.

With both parties still at odds, a tumble over the cliff looks likely.

The only thing that's likely to happen is a very rushed deal that fails to deliver significant changes to the pre-programmed tax hikes and spending cuts.

There were small signs of optimism out of Washington.

"The discussions are going very well," Republican Sen. Bob Corker told CNBC's "Squawk Box" early Monday morning, adding though that the agreement probably won't include significant moves on deficit reductions.

But Senate Majority Leader Harry Reid, D-NV, maintains that a deal is not likely.

"There is significant distance between both sides," Reid said Sunday night.

Lawmakers reconvened today (Monday) and will remain holed up on Capitol Hill perhaps late into the night.

Here's what to expect if we fall off the fiscal cliff.

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B&G Foods Inc. – Growth & Income

B&G Foods Inc. (BGS) performed well in 2012. The food retailer has surpassed earnings estimates in the first 3 quarters of the year, increased dividend rates regularly and has frequently acquired complimentary brands. In the past 10 quarters, this Zacks #2 Rank has beaten earnings estimates 7 times and matched 3 times. It also pays […]

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NVO's Ryzodeg Approved in Japan – Analyst Blog

Denmark based Novo Nordisk (NVO) recently announced that it has received approval in Japan for its diabetes treatment, Ryzodeg (insulin degludec/insulin aspart).   Ryzodeg was submitted for regulatory approval to the Japanese Ministry of Health, Labour and Welfare in March 2012.    Ryzodeg is a soluble formulation of Tresiba (insulin degludec) and NovoRapid (insulin aspart […]

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Why Inflation is the Economy's "Iceberg" in 2013

Even though Ben Bernanke's Fed has kept interest rates close to zero, inflation hasn't been a big problem since the 2008 financial crisis.

Despite what many observers have expected inflation has remained quite tame.

However in 2013, that may be about to change. One factor that might cause a surge in inflation is the fiscal cliff.

That's because Bernanke is already buying $1 trillion of Treasury and housing agency bonds each year ($85 billion per month) against a budget deficit that is about the same level.

That means the inflow of funds to the economy from the Fed and the outflow of money to fund the government's spending are about balanced.

However, if we go over the fiscal cliff the Federal deficit immediately falls to about $300 billion per annum. At that point, Bernanke would be injecting an extra $700 billion a year into the economy – which would have a corresponding inflationary effect.

The Case for Higher Inflation

But that's only part of the inflationary story.

Central banks around the world are also expanding their money supply. China has become more expansive, the European Central Bank is buying bonds of the continent's dodgier governments and Britain like the United States is monetizing nearly all the debt it creates to fund its budget deficit.

The big change in 2013 is now in Japan, where the new Abe government has told the Bank of Japan it wants much more buying of government bonds, to push the inflation rate up to 2%.

And just as Bernanke's money creation increases inflation internationally, Japan's new monetary push creation will likely increase inflation here in the United States.

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Here's Another Genius Mortgage Idea From Washington That Is Going to Cost You

Now here's another good idea from the geniuses that ruin, I mean run, our country.

The Obamarama administration really wants to help homeowners whose homes aren't worth what they borrowed to buy them. In other words, they are "underwater."

A lot of the loans to homeowners that are underwater are owned outright or, at a minimum, insured (more often both) by Fannie Mae and Freddie Mac, the government-sponsored (which means taxpayer saddled) enterprises that the government had to take over when in 2008 they lost on their trillion-dollar bets that home prices would go up forever. Geniuses!

In fact, these geniuses own or insure close to half of all home loans in the United States. Obviously, they like to bet big. But they didn't bet alone. They had betting partners.

The casino was the whole country and the whole system.

The mortgage originators, prime and subprime lenders, banks – everyone was handing out loans because, get this, they wouldn't be responsible for the loans they were making. Fannie and Freddie were buying them all up while the guilty parties would make money as Fannie and Freddie pipelined more products to – guess what – make more loans!

In case you forgot, that's where all the money came from in the whirling dervish derby that fed the mortgage bubble and aided and abetted Alan Greenspan's how-low-can-you-go interest rate policies. I guess we can call him the Big Pit Boss. But I digress…

So, if Fannie and Freddie own your loan and you're underwater, they have been cattle-prodded by the geniuses above them (yep, government geniuses) to let you refinance at a lower rate (lower than the crushing, sucker's rate that ballooned on you).

Because, as an investor (that's what home buying really is – an investment, not a right) you made a go-for-broke bet at the table and forgot your basic math. Math that says, "One, plus the none that I have, equals three, so this is a good bet I can double down on and retire."

What will these geniuses think of next?

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NVO's Ryzodeg Approved in Japan – Analyst Blog

Denmark based Novo Nordisk (NVO) recently announced that it has received approval in Japan for its diabetes treatment, Ryzodeg (insulin degludec/insulin aspart).   Ryzodeg was submitted for regulatory approval to the Japanese Ministry of Health, Labour and Welfare in March 2012.    Ryzodeg is a soluble formulation of Tresiba (insulin degludec) and NovoRapid (insulin aspart […]

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