Archives for August 2012

August 2012 - Page 10 of 20 - Money Morning - Only the News You Can Profit From

Oil Prices Headed Higher after this Week's Boost

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Oil prices have steadily inched upward, buoyed by a surprising drop in U.S. crude inventories, stronger than anticipated retail sales, and the heightening tensions in Iran.

Benchmark crude for September delivery rose $1.27 to finish at $95.60 per barrel in New York on Thursday. On the heels of the Commerce Department report Wednesday on retail sales, oil rose 90 cents, finishing at $94.33 a barrel, near three-month highs. Brent crude also rose, closing the day up 35 cents at $114.63.

Oil prices slipped a little Friday, but remained above $95 a barrel in morning trading. They fell on news that the Obama administration may release oil reserves to slow the oil price climb. Oil is up 23% since late June.

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Will Apple Buy Facebook? No, But It'll be More than a Friend

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It's a question that was getting asked as far back as three years ago, and seems to pop up again every time the Facebook stock price hits another new low: Will Apple buy Facebook?

Some tech pundits think that because Apple (Nasdaq: AAPL) has so much cash — $117 billion as of the June quarter – and lacks a presence in social media, buying Facebook (Nasdaq: FB) just makes sense.

Those with more level heads think such a move would be a spectacularly bad idea — and extremely unlikely.

"I can see Microsoft making a stupid decision like this but not Apple – MSFT has a history of overpaying for questionable assets, being late to the game and having lost what truly innovative mojo they had under [CEO Steve] Ballmer's watch," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"I think Apple knows that the Facebook model is kaput and that it's not profitable – very similar to Google in that regard, which has held off from really rolling out Google+," Fitz-Gerald added."Shareholders would revolt…and so would the institutional money."

But Apple Chief Executive Officer Tim Cook has strongly hinted at a cozier Apple-Facebook relationship.

Calling Facebook a "great company" at the D10 conference in May, Cook said, "We have great respect for them. I think we can do more with them. Just stay tuned on this one."

Why Apple (Nasdaq: AAPL) Will Not Buy FB

Facebook's shaky business model isn't the only reason Apple would shy away from buying the social media giant.

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The Truth Behind the Tragedy of High-Frequency Trading

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It's no wonder the public is scared to invest in stocks. They believe the game is rigged.

It is, and I'm going to tell you who's behind it, what's really happening, when it started, where the sinkholes are, why they're there, how you can play in the short run, and how America can get back to investing in a successful long-term future.

The bad news is the problems infecting our capital markets are all systemic. The good news is that they can be eradicated one by one, if not all at once (which won't happen).

Today, we're going to look behind the curtain of high-frequency trading.

It's a nasty bug in the system and has long-term consequences, including the potential to kill the markets.

First of all, high-frequency trading isn't just what you think it is. It is much more than you know, and is in fact part of the fabric of the markets.

High-frequency trading (HFT) is known to be a game that specialized firms and trading desks play. Here's what most people think they know about high-frequency trading.

The HFT crowd uses super-fast computers to execute trades across different exchanges. There are 15 exchanges in the U.S. and more than forty "dark pools" (private trading venues that serve as de-facto exchanges) where shares can be traded.

Part of the problem is that there are so many trading venues trading the same stocks, but that's another story.

Here's what the high-frequency trading game is really about.

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5 "Hidden" Obamacare Taxes That Will Crush the Middle Class

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The bill for Obamacare is on its way, and guess what? It's addressed to you.

You see, all those great benefits included in the Affordable Care Act don't come cheap, which is why the new healthcare law includes a barrage of new "Obamacare taxes."

And don't believe for a second the new Obamacare taxes will hit only the "rich" or those making over $250,000.

Some do, but you'd be surprised at how many of these new taxes also hit the middle class.

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Q&A with Keith: Why Bill Gross is Wrong About Stocks

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I've gotten quite a few great questions from readers lately so I thought we'd take a quick peek into the mail bag today.

As always, I love answering questions from the Money Morning family so please feel free to keep the conversation going by sending your questions to: [email protected]

Let's get started with a great question about what Bill Gross said a few weeks ago regarding stocks….

Q – What do you think of Bill Gross's recent comment that equities are dead? – Martin R.

A – I think he's as wrong about this as he was about his well-publicized February 2009 call to avoid bonds – a mistake, by the way, that cost investors $5.7 trillion according to Forbes contributor Peter Cohen – and his February 2012 call to do the same thing.

Sure it sounds great considering who he is in his capacity as a bond manager with $1.4 trillion under management, but avoiding equities is a sure path to ruin. They've always involved risk and risk produces returns. Therefore, if you want the returns, you have to take the risk.

It's how you control risk that matters when it comes to big, consistent profits. Most people, though, fail to make the connection and pay a terrible price as a result.

The other thing to think about is that the markets don't price on growth. That's something Wall Street analysts have cooked up to keep you distracted. They price for risk and always have, which is yet another reason to turn conventional thinking on its ear.

Q – I can't believe our leaders. A year after the last debt debate our spending is up another $2.1 trillion. And? – Dan B.

A – Me neither. The actual fiscal gap – that's the present value difference between projected spending and income – is a staggering $222 trillion. That's $11 trillion more than it was last year and represents the true federal deficit according to Boston University Professor, Laurence Kotlikoff, who reviewed the latest CBO data.

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Economist Robert Shiller On Housing Bubble: "Are We Off To The Races Again?"

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Even as we continue to unwind from the biggest housing crash in history, a renowned economist is warning a new mortgage bubble could be dangerously brewing.

In a riveting interview on Fox Business, Robert Shiller, the Yale economist who was the first to predict the massive mortgage blow up of 2008, said he was alarmed by the bubble-like characteristics occurring in areas around the country.

"I think in cities like Phoenix and San Francisco we might be seeing some pretty big things developing," Shiller said.

"These things take you by surprise. Bubbles occur in the least optimal times. That's because people want to buy before the news. So, in the midst of the recession you could start a bubble."

In July, the median price for new homes sales in the San Francisco Bay hit its highest level since August of 2008. And, according to one study, nationwide foreclosure rates dropped to its lowest levels since 2007.

"The real question in my mind is "Are we possibly off to the races again?," Shiller asked. "People there are very speculative-minded.

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Why Retailers Are Betting Big on Mobile Wallet Technology

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If you're one who often forgets your wallet at home, you're in luck: Your smartphone is increasingly becoming an acceptable means of payment.

Welcome to the mobile wallet era.

Billions of dollars are flowing into the development of mobile-payments systems that function as so called "digital wallets." Businesses across the board are confident that consumers will soon be as comfortable making purchases with their phones as they currently are when paying by credit or debit cards.

Now a group of U.S. retailers on Wednesday embraced the growing trend in mobile wallet technology. They want to get a jumpstart on the new way of paying for everything from a Slurpee to a tank of gas to major appliances.

The dozen plus big retailers have formed a new company called Merchant Customer Exchange (MCX) and will create their very own mobile wallet application. The companies include Best Buy Co Inc. (NYSE: BBY), 7-Eleven, Target Corp. (NYSE: TGT), Wal-Mart Stores Inc. (NYSE: WMT), Royal Dutch Shell Plc (NYSE: RDS.A, RDS.B), CVS Caremark Corp. (NYSE: CVS), and Darden Restaurants Inc. (NYSE: DRI), among others. More retailers are expected to join in the coming months.

MCX intends to cash in on the broad reach of the collaborating businesses', which together take in some $1 trillion in annual sales and serve nearly every smartphone user in the United States.

In addition to eliminating the need for cash, the MCX platform will offer promotions, retail programs and customized offers.

It is unusual to see such a partnership among direct competitors, but these merchants recognize they need each to establish a presence in the mobile tech industry.

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Warren Buffett's Berkshire Hathaway Holdings Show Major Selling

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For those who want to model their investments after the famed Berkshire Hathaway holdings, this is your week.

Berkshire CEO Warren Buffett along with other iconic investors such as George Soros this week revealed their second-quarter stock moves – and you may be a little more than surprised to see what they've been up to.

The two billionaire investors disclosed their most recent investments in 13F filings, which are released by the U.S. Securities and Exchange Commission 45 days after the close of a quarter.

While Buffett has stepped back a bit from the business as he anticipates retirement, the Berkshire Hathaway holdings show he's still the driving force behind the firm's investing success.

"Buffett continues to hold sway over a meaningful amount of the equity portfolio–something we don't anticipate changing too significantly in the near to medium term," wrote Morningstar analyst Greggory Warren.

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Investing in Smart Grid Technology: Two Stocks to Power Up Your Portfolio

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There's a saying that goes, when you lose the Internet it's like 1979 but when you lose power it's like 1879.

For a while, we actually lived through it when a big swath of the mid-Atlantic lost power in July. Let me tell you, it was ugly.

I've lived in Northern Virginia for most of my life. I remember dill pickles in a barrel at the grocery store, Quisp and Quake cereal, and Frank Howard was my hero on the Washington Senators, if that gives you an idea of old I am. In all of those years I have never seen anything like it.

The power went out on Friday night and by mid-morning Saturday, there wasn't a hotel room with air conditioning to be found in a 50 mile radius.

So many street lights were out that it was up to the drivers to figure who went next, and you're talking a metropolitan area of about 12 million people cycling through. That doesn't even account for the fact that I-95 cuts through the whole area with trucks, tourists, etc.

It was completely nuts.

Now imagine what it was like in India where nearly 700 million lost power. Yes, that's 700 million suddenly without power.

That's like the entire U.S. going down and then adding another 200+ million on top of that.

The lesson in both instances though is the same: It's necessary to build a "smart" grid.

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Soros and Paulson Load Up On Gold... Major Economic Dangers Ahead?

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Billionaire investors George Soros and John Paulson dramatically increased their gold stakes this month, as market analysts fear economic dangers lay ahead. Paulson purchased 4.53 million shares of SPDR Gold Trust for his $21 billion hedge fund Paulson & Co. That leaves a whopping 44 percent of Paulson's U.S. traded equities tied to bullion. On […]

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