Archives for November 2012

November 2012 - Page 2 of 20 - Money Morning - Only the News You Can Profit From

Drop in New Home Sales Short Detour in Long, Slow Recovery

Yesterday's (Wednesday) report of a drop in new home sales for October briefly sent shudders through a housing market that has appeared on the road to recovery, but experts immediately offered assurances that the bad news was temporary.

"The new-home sales data are volatile and revision-prone and we are not changing our view that a modest recovery in home sales, construction activity, and prices is well under way," John Ryding and Conrad DeQuadros of RDQ Economics said in a research note.

New home sales fell 0.3% in October, to an annual rate of 368,000 compared to September's 369,000. Economists had expected a rate of 390,000.

Though a slight drop from the previous month, October's new home sales rate is actually up 17.2% year over year.

And while far below the peak of 1.4 million reached at the height of the housing bubble, new home sales continue to creep up from the sub-300,000 lows seen in 2010 and 2011.

That, combined with recent positive trends from just about every other housing indicator, such as existing home sales, housing starts, building permits, and the home builder sentiment index, had most analysts brushing off the negative new home sales numbers.

On Monday, for instance, the Case-Shiller index for the third quarter showed housing prices nationwide were up 3.6% from the same period one year ago, its second year-over-year gain.

"We expect new single-family housing demand to continue its modest upward trend throughout the next year, driven by record-high affordability," Yelena Shulyatyeva, an economist with BNP Paribas, said in a research note.

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Avoid the Fiscal Cliff with These Three Investments

As most income investors know, the Bush-era dividend tax reduction is among the old tax cuts that could become a new increase if we "fall off" the fiscal cliff.

This uncertainty is one reason stocks have slumped since Election Day. Predictably, investors are fearful companies will be less inclined to pay new dividends or raise existing payouts if the dividend tax rate jumps.

As it pertains to U.S. stocks, there is at least one bright spot, that being the average payout ratio of U.S. dividend-paying firms is just 30%. That is well below the rates of 50% or higher seen in the 1950s through the 1970s.

The even better news for dividend seekers is the fiscal cliff can be dodged to some extent by establishing a bias toward international dividend stocks. Remember, the fiscal cliff is a U.S. phenomenon and many international companies have diverse, global shareholder bases.

In other words, just because a U.S. telecommunications stock is suffering due to fiscal cliff fears, it does not mean a European or Latin American equivalent will be treated the same way.

Consider these international dividend plays before letting fiscal cliff fears get the better of your investing emotions.

How to Avoid the Fiscal Cliff: Europe Without the Euro

The WisdomTree Europe Hedged Equity Fund (NYSE: HEDJ) is a new twist on an old exchange-traded fund (ETF).

Previously, the fund was heavily exposed to international financial services stocks, and featured stocks from multiple regions. These days, HEDJ is light on financials (less than 8% of the fund's weight) and focuses solely on Europe-based dividend equities.

Alone, exposure to Europe might imply a high degree of risk with HEDJ – but that is not the case because the ETF features a couple of unique twists.

First, HEDJ's index is designed to be a hedge against euro weakness, meaning this a fine ETF to be involved with when the U.S. dollar is rising against the controversial common currency.

Stock Market Today: GDP Revised Higher, but Data Still Ugly

The stock market today opened higher as third-quarter U.S. gross domestic product (GDP) was revised from its original 2.0% reading to 2.7%. The market boost could reverse depending on what happens after key political figures meet in Washington today to discuss the fiscal cliff.

Here's a closer look:

  • GDP lifted for all the wrong reasons– Today the U.S. Commerce Department reported its second estimate for third-quarter GDP, and at first glance the 2.7% revision seems to indicate growth after the second quarter's dismal 1.3% level.

Yet, today's number missed estimates which called for 2.8% growth, and was driven largely by government spending which accounted for 0.67 percentage points of the reading and inventories which contributed 0.77 percentage points. This was the first positive reading for government spending in over two years and the increased inventories suggest businesses could limit production in the fourth-quarter, especially with the looming fiscal cliff.

Groupon CEO Andrew Mason May Need a New Daily Deal for Himself

Groupon CEO Andrew Mason may soon be hunting for a new deal of his own.

The Groupon Inc. (Nasdaq: GRPN) leader and founder just might find himself looking for a new gig as reports have surfaced that the company's board could ask him to step down. The board is set to meet today (Thursday) to discuss the company and Mason.

Mason admits there have been "bumps in the road." Yet with GRPN shares down some 80% from its November 2011 initial public offering price of $20, it's more fitting to call Groupon's recent performance a train wreck.

Speaking this week at the Business Insider Ignition 2012 conference in New York, Mason said, "If I ever thought I wasn't the right guy for the job, I'd be the first person to fire myself."

Mason also confessed to Business Insider's Henry Blodget, "It would be weird if the board wasn't discussing if I was the right guy for the job."

But, the fraught CEO added "that he was confident that wasn't going to happen."

Yet, market participants appeared more confident that it just might happen, and sent shares up 12% Wednesday after the buzz surfaced.

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Why Market-Making Giants Want Knight Capital Group

Knight Capital Group (NYSE: KCG), which had to be rescued after it went belly-up in August following a $440 million loss later blamed on a "computer glitch," is expected to entertain takeover bids from interested parties this week.

Yesterday, high-frequency trading (HFT) giant Getco Securities, which already owns a 23.8% stake in Knight Capital, offered a combination of cash and shares valuing Knight at $3.50 per share, a 17.8% premium to Tuesday's close. Knight's share price rose 15% in trading yesterday in reaction to the bid, which was acknowledged by Knight management.

"I am convinced that this merger would unlock tremendous value for the shareholders of both firms while establishing a global leader in market-making and agency execution," Getco CEO Daniel Coleman said in the letter to Knight's board.

Another high-frequency trading firm, Virtu Financial Capital Markets LLC, reportedly plans to make an all-cash offer at $3.00 per share, according to FOX Business Network.

Wednesday's share-price rally was Knight Capital's biggest in nine years, as it could be about to be the focus on a bidding war between HFT firms.

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Triumph Group, Inc. (TGI) - Bull of the Day

We are upgrading our recommendation on Triumph Group, Inc. (TGI) from Neutral to Outperform based on the huge organic growth the company has experienced on the back of high demand in the industry. Also, efforts of lowering costs, increasing margins and a strong balance sheet bode well for the stock. The company's concerted efforts in […]

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2013 Silver Price Forecast: Silver Will Perform Like Gold on Steroids

This past March, I asked a highly successful investment advisor what he thought about gold. Since he deals almost exclusively with very high net-worth individuals, his point of view was especially intriguing.

He confided to me that many of his clients had been asking for gold and gold-related investments over the past few years. I can't say that I was surprised.

But what he told me next simply shocked me.

"Gold's much too volatile, it's too risky", he said. "Sure it's up, but I try to discourage my clients from investing in it."

It simply floored me that he thought gold was too volatile. Gold is only up 580% since it bottomed in 2001, without a single losing year to date.

That's not something you can say about the stock market or any other type of investment.

I can hardly imagine what he must think of silver, as silver prices are up by 725% since 2001.

Today, silver is trading around $34, but our 2013 silver price forecast now has the shiny metal going much, much higher.

What will power that rise?

Since it's slaved to its richer cousin, all the fundamentals for higher gold would apply.

I wrote about them yesterday in my 2013 gold price forecast.

As history has shown, silver moves almost in sync with gold, but exaggerates its movements, both on the up and down sides. That's why I like to think of silver as "gold on steroids".

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Shield Your Portfolio with Israel's "Iron Dome"

Israel has a radical new ballistic-missile defense system, known as the Iron Dome, and it has saved countless lives during the last couple of weeks.

The Iron Dome is not a literal "protective bubble" set up over a city.

But it might as well be…

This portable system is made up of three components: 1) a detection and tracking radar system, 2) the Battle Management & Weapon Control (BMC) – basically a computer control center – and 3) units that fire missiles.

The radar detects incoming missiles and tracks their trajectories. Then, using this data, the BMC calculates where the missiles will likely hit and determines whether they pose a threat – and only then does the firing unit launch an interceptor (also a missile).

In this way, they take out the incoming rockets in midair, where it's safe to do so, far before they can reach their target on the ground below.

This is no easy feat. Think of standing in a field with a bow and arrow and trying to shoot down another arrow launched from a few hundred yards away. What's more, the system can handle multiple threats simultaneously and works in any kind of weather (day or night).

Designing something that complex boggles the mind, as does the fact that it works so well.

Thanks to an unending stream of breakthroughs in computing, sensors, radar, software, and guidance systems, we're at the point where one "arrow" can now shoot down another in a matter of seconds.

The Iron Dome is a clear game-changer in defense technology.

And the investment potential is just as big…

Why Warren Buffett Doesn't Fear the Fiscal Cliff, and How He'd Fix it

Warren Buffett, CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), is doubtful that Congress can get its act together and compromise on the fiscal cliff before the Dec. 31 deadline.

However, Buffett expects a deal to be reached shortly after that deadline, and he is not concerned with going over the infamous fiscal cliff.

"The fiscal cliff does not enter into my long-term investment decisions… and it wouldn't surprise me if we go past January 1," Buffett said on CNBC's Squawk box Wednesday morning. "[If that happens] I don't think the world will come to an end."

Buffett is in the minority with that sentiment, as investors have been fretting over the fiscal cliff since the election and will continue to do so until Washington finalizes a deal.

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Just 2% of U.S. Geothermal Power Could Supply 2,500 Times Our Energy Needs

There's a story about a king in India.

He asks the royal leather worker to cover his kingdom in leather, so wherever he walks, he will never stub his toes.

The leather worker pauses and then suggests to the king that if he covered his feet in leather he could walk wherever he chose, anywhere in the world.

This is the story about the first pair of shoes.

It's emblematic of the way many people look at renewable energy. Right now we are trying to cover the world with solar panels or wind turbines.

But what if we decided to look at the world as its own solar panel?

I'm talking about geothermal power and the good news is we already have the technology to tap into it.

So how big is U.S. geothermal power?…

MIT estimates that just 2% of the heat below the United States at depths of 3-10 kilometers would be enough to supply 2,500 times the nation's current energy needs.

The compelling part about geothermal energy is that it isn't as cost-intensive as solar or wind. It's also far more reliable – available 24 hours a day, 7 days a week at consistent, predictable levels.

That means more geothermal energy can be uploaded to the grid far more efficiently and on a larger scale than either solar or wind.

This technology is also proven and is already in commercial and industrial use west of the Mississippi and for residential applications around the globe.

And now, there are two factors that have the potential to put this clean energy resource on a level far beyond its previously limited scope.

Geothermal Power for Your Home

There are two types of geothermal that work off the same underlying principle.

Residential geothermal – the kind you would run a house on, uses the "earth-as-solar panel" concept.

In this case, geothermal heat pumps take advantage of the solar energy stored just below the surface of the ground.

If you're a solar power fan, then consider this a passive solar unit because the earth is a highly efficient photovoltaic panel: 40% – 60% of the Sun's energy is directly absorbed into the ground.

In cold months the pump pulls the heat from the earth and heats your house. Residual heat is used to heat your water.

Conversely, in the summer months the heat is pulled from the house and pumped into the earth loop where it dissipates into the earth and the cool solution in the pipes acts as a refrigerant.

This video from GeoSystems does a good job of giving you an overview of the process.

Believe it or not, with geothermal energy, you can cut your heating and cooling bills by 70% and have virtually free hot water whether you live in southern Florida or northern Minnesota.

In fact, its potential for residential use is so strong both the Department of Energy and the Environmental Protection Agency have dubbed individual geothermal as "the heating system of the 21st Century."

Industrial Scale Geothermal Power

Industrial geothermal is a slightly different animal.

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