Last week, natural gas prices fell below $2 per 1,000 cubic feet for the first time in a decade. Let's talk about what that means for you, as an investor. The oversupply of natural gas continues to swell thanks to breakthrough technologies in fracking and horizontal drilling that "unlocked" this huge swath of energy. Tack […]
Archives for April 2012
April 2012 - Page 5 of 13 - Money Morning - Only the News You Can Profit From
Earnings Fuel Stock Market Gains – Dow Jones Soared More than 100 Points Midday
Yes, Friday was all about the earnings.
The stock market rallied Friday thanks to a roaring round of positive earnings reports – with a little help from positive news out of Europe.
Just after noon, the Dow Jones Industrial Average climbed 113 points, the Standard & Poor's 500 jumped 9 points and the Nasdaq gained 22.
With little on the economic calendar to close out the week, and no major reports due, market participants focused on encouraging first-quarter results from a spate of several large and market-influencing firms.
"There's been a wrestling match all week long between strong earnings and weak economic data. At the moment earnings are winning," Lawrence Centura, portfolio manager at Federated Investors told the Associated Press.
Strong Earnings Push Stock Market Gains
To date, quarterly earning has been pleasantly strong.
"The number of companies reporting positive surprises is much higher than it typically is at this stage in the game," Fred Dickson, chief market strategist of D.A. Davidson & Co. told CNN Money. "They're only beating by a little, but it's still a significant number of companies and that's the wow factor."
Of the 212 companies in the S&P 500 that have reported, better than 80% have exceeded expectations, according to Thomson Reuters. During a typical quarter, the percentage of companies that top forecasts is 60%.
Here are some recent highlights:
- Tech giant Microsoft (Nasdaq: MSFT) lead Friday's gains in the broad-based rally after beating expectations late Thursday, reporting sales growth of 6% thanks to its Window and Office products. MSFT gained 4.55% Friday to close at $32.42.
- Investors also ate up better-than-expected numbers from fast-food king McDonald's Corp. (NYSE: MCD), which ended the day up. The company proved it remained a worldwide favorite with same-store sales up 8.9% in the U.S., 5% in Europe and 5.5% in Asia-Pacific, Middle East and Africa. Revenue rose 8% (excluding currency fluctuations).
- Robust earnings from General Electric (NYSE: GE) pushed its stock up 1.15% to $19.36. GE narrowly beat expectations with quarterly profit of 34 cents a share, a penny higher than expected, and revenue of $35.18 billion compared to a forecast $34.7 billion.
- Meanwhile, traders traded E*Trade (Nasdaq: ETFC) up some 6% on better-than-expected first-quarter results. E*Trade's first-quarter profit rose 38% from a year earlier.
- Technology manufacturer Honeywell (NYSE: HON) beat on both earnings and revenue, sending the honey pot buzzing. First-quarter income climbed 17% from a year earlier, and the company raised its 2012 forecast.
Keystone Pipeline a Shining Example of What's Wrong with U.S. Energy Policy
With election season now entering full swing, many Democrats are beginning to distance themselves from the current administration's policies.
Mass. Rep. Barney Frank last week stated that the Affordable Healthcare Act (Obamacare) had political consequences and shouldn't have been the focus of the party when it held both arms of Congress in 2009 and 2010.
Now, Democrats are distancing themselves from President Obama on another important election issue: Energy policy.
Wrote Byron York at the Washington Examiner:
"The president has put his feet in cement in opposition to the Keystone oil pipeline. But on Capitol Hill, more and more Democrats are joining Republicans to force approval of the pipeline, whether Obama wants it or not.
The latest action happened Wednesday, when the House passed a measure to move the pipeline forward. Before the vote, Obama issued a veto threat. The House approved the pipeline anyway — by a veto-proof majority, 293 to 127. Sixty-nine Democrats abandoned the president to vote with Republicans."
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Buy on the Lows as Silver Prices Will Rally in 2012
Silver prices Friday headed for a gain of 0.9% this week, its biggest weekly gain in nearly two months as the metal has taken a dip this year.
But silver prices are set to rally in the second of half of 2012, according to a report from the global head of metals analytics at Thomas Reuters GFMS.
Philip Klapwijk of GFMS says silver sales for industrial application as well as for jewelry, silver, silverware and photography will rise as end-users restock inventories that diminished in late 2011. Fabrication demand makes up 80% of total demand for the metal, and should be up about 3% to 5% this year to roughly 900 million ounces in 2012.
Klapwijk told Dow Jones Newswire, "We see a range for silver north of $40 and maybe getting to a low of $28" per troy ounce.
GFMS's independently researched and assembled World Silver Survey 2012, released Thursday, stated silver prices will pick up into the end of the year. Factors boosting investors' desire for silver will help drive the price.
"We see a continuation of very loose monetary policy," Klapwijk said. "We also see rates likely being cut in some of the emerging-market economies such as China, India and Brazil."
This means current silver market lulls are great buying opportunities since the long-term silver prices outlook remains bullish.
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Four Defensive Stocks for a Market Pullback: MCD, MO, CAG, JNJ
If you looked at just the first-quarter results you could be forgiven for thinking that everything in the stock market is rosy.
The Dow Jones Industrials and the S&P 500 turned in their best performances since 1998, rising 8.14% and 12.0%, respectively.
Meanwhile, the Nasdaq was even stronger, riding a tech-stock rally to a gain of nearly 19% – its best yearly start since 1991.
But as every seasoned investor knows, the markets never go straight up or straight down.
Prospects for continued strength may seem bright, but the recent five-day slide that took the Dow down almost 550 points might be pointing to something else entirely.
That's why now is the perfect time to consider shifting at least some of your funds into "defensive" stocks.
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How to Profit from the Bakken Oil Shale Boom
Did you ever wish you'd been around for the California gold rush of 1849? Or the Texas oil boom of the early 1900s?
Maybe you can't go back in time, but you don't have to.
The Bakken oil shale boom going on in North Dakota right now is just as big-if not bigger.
Just take a look at what's been happening in Williston, ND, the epicenter of the Bakken oil shale boom.
In Williston, it's like the recession never happened.
Unemployment is under 0.8% — that's right, less than 1%, far below the national average of 8.2%. And the new oil jobs pay well, too. The average oil worker is making more than $90,000 a year.
The flood of jobs has made Williston the fastest-growing small city in the United States.
Consequently, there was no collapse in home prices in Williston. The inrush of new employees to work the Bakken oil shale boom has actually created a housing shortage.
A one-bedroom apartment that went for $500 in 2005 costs at least $2,000 now. Builders literally cannot build homes fast enough.
The rapid population growth from the Bakken oil shale boom has left many people sleeping in cars and tents. Williston just this week was forced to pass an ordinance that makes it illegal to live in a camper within city limits.
And while other states have been cutting services, shedding jobs and raising taxes, North Dakota is building up the state trust fund and reducing property taxes. All that, and still it projects a $1 billion surplus for its two-year budget.
"This boom is just wild and crazy," Williston Mayor Ward Koeser told Governing magazine last year. "It's more than you can fathom."
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Oil Price Manipulation: What President Obama Doesn't Understand About Oil
If you think gasoline prices are volatile now, stay tuned. President Obama's plan to clamp down on oil speculators is going to make things worse.
I'm sure you've seen the news by now.
The president wants to clamp down on so-called "oil price manipulation" and has proposed a $52 billion plan to increase f ederal supervision of oil markets.
What the p resident doesn't understand is that the oil markets already have this function built in.
Speaking from the Rose Garden last Tuesday, President Obama noted specifically that we can't afford to have "speculators artificially manipulating markets buy buying up oil, creating the perception of a shortage and driving prices higher – only to flip the oil for a quick profit."
Evidently, the president hasn't passed Econ 101.
If he had he would know that prices on everything from eggs to houses are by their very definition self regulating.
Speculation, as opposed to manipulation, is a vital part of the markets – they are not the same thing despite the fact that the p resident is interchanging the terms.
If prices are too high, people stop buying. If prices are too low, they stop selling. By authorizing $52 billion in oversight, he's chasing a ghost that he'll never catch.
The Real Problem with Oil Prices
The real problem is that the United States consumes 20% of the world's crude but only produces 2%.
It comes a time when oil demand is expected to rise more than 25% (to 105 million barrels a day) by 2015, according to a new report titled Oil and Gas: A Global Outlook by Global Industry Analysts, Inc.
If you want the biggest piece of the pie from the deli, you have to pay a premium.
There is no hocus pocus and there's no additional oversight necessary. Rather, we need to enforce the laws we already have on the books.
Sure the $10 million fines he's jawboning about (up from $1 million) sound great but they're really a non-starter. In fact, given that Exxon Mobil Corporation (NYSE: XOM) alone generated an average of $1.33 billion a day in 2011, they're little more than an acceptable cost of doing business. Nice try.
Take gasoline, for example.
Prices have jumped 78.2% since the p resident took office and that doesn't sit well with the party faithful who are convinced that evil oil price speculators are responsible.
They are distraught that traders put hundreds of billions of dollars into energy every month because that may cause prices to rise.
This is not complicated. Any time there are more buyers than sellers, prices go up. Any time there is more demand than supply, prices go up.
Contrast what's going on in the oil markets with what's happening in natural gas.
Prices for natural gas are at ten- year lows. Demand has risen but supply has risen faster. There are more suppliers than buyers. So natural gas prices drop.
Natural gas, by the way, is traded by many of the same traders who trade oil.
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Facebook IPO Date: May 17 Might Be the Magic Day
Here's some news devout Facebook followers and savvy investors are sure to "like" – don't write it in ink just yet, but looks like May 17 could be the Facebook IPO date.
While Facebook (NASDAQ: FB) refused to comment, "multiple sources close to the company" say that is the date, according to TechCrunch.
Ever since Facebook filed the necessary papers to go public in February, speculation has run rampant as to the exact timing. Late spring sprung up as the most likely time, but no precise date was set.
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Exxon-Rosneft Deal Centers on Arctic Oil (NYSE: XOM)
Quite a few emails already coming in about the potential of the $3.2 billion Exxon-Rosneft deal.
On April 16, Exxon (NYSE: XOM) officially entered into a massive offshore exploration partnership with Russia's Rosneft to jointly develop resources in the Kara and Black Seas.
From the Rosneft press release:
"The agreements signed today form joint ventures to manage an exploration program in the Kara Sea and Black Sea. They also set the terms for investments to be made by the partners in Russian offshore projects. The initial cost of preliminary exploration is estimated at over US $3.2 billion.
Neftegaz Holding America Limited, an independent indirect subsidiary of Rosneft registered in Delaware, concluded separate agreements on the acquisition of a 30 percent equity in ExxonMobil's share in the La Escalera Ranch project in the Delaware Basin in West Texas in the United States."
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Bank of America (NYSE: BAC) May Never Fully Recover
Bank of America (NYSE: BAC) has been working hard to regain its profitability and stature, but a better-than-expected earnings report isn't enough.
On Thursday the company reported earnings of 3 cents a share. Revenue came in light at $22.28 billion.
Although analysts were looking for 12 cents a share, several weighed in saying that a $4.8 billion charge known as debt valuation adjustment (DVA) complicated the earnings report. Some say BofA actually beat core earnings expectations.
Evercore analyst Andrew Marquardt wrote, "Our initial view of core is closer to 26 cents."
Return on average equity of 11.05% beat fourth-quarter results, but was less than the 15.41% return the bank posted for the first quarter a year ago. BAC succeeded in reducing its credit-loss provisions to $2.42 billion from $3.81 billion in the fourth quarter.
"You had very favorable tailwinds in the fixed-income markets and so trading revenues are very strong for this universe right now," Charles Peabody, an analyst at Portales Partners LLC in New York, said in a Bloomberg Radio interview. "There's no question the earnings that are being reported are very good — the question is the sustainability."
Despite beating estimates with its first-quarter earnings, BofA has struggled more than its counterparts in the wake of the financial crisis. The damage may be too much to allow the bank to grow to as big as it once was.
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