Archives for January 2013

January 2013 - Page 10 of 20 - Money Morning - Only the News You Can Profit From

Pay-Per-Mile Tax Will Make Every Road a Toll Road

If you thought all the talk about taxing the rich meant the government would not be reaching deeper into the pockets of most Americans, then you haven't heard about the pay-per-mile tax.

It hasn't happened yet. But Congress is considering a new way of taxing American drivers that would charge them per mile instead of the current 18.4 cent-per-gallon gasoline tax they pay now.

A new study by the U.S. Government Accountability Office (GAO) says that such a pay-per-mile tax, also known as a vehicle-miles-traveled tax (VMT tax) or ObamaMiles, would cost the average American motorist at least $100 more per year than the current gasoline tax.

The problem the federal government faces is that the annual gasoline tax revenue of $34 billion has fallen far below the $78 billion required to maintain the country's highway system.

Silver Prices: White Metal Mania Taking Hold in 2013

Silver prices are up nearly 8% in the past couple weeks as investors increasingly load up on the white metal.

In fact, the U.S. Mint has temporarily suspended sales of its 2013 American Eagle silver coins because it has none left.

Reuters reported today (Friday) that the Mint plans to restart sales in the last week of January after it has had a chance to restock.

The U.S. Mint generally sees a big influx of demand when it releases new coins at the beginning of the year. This year, however, investors seeking a safe haven for their money added to the usual collector demand leaving the Mint's vaults bare.

"It is easy to infer that some element of the fear trade may be at play," Joni Teves, an analyst at UBS AG in London, wrote today in an e-mailed report cited by Bloomberg News. "We view the chunky sales of American Eagle coins more a function of seasonality than anything else. It is important to keep an eye on U.S. coin sales in the coming months to see if volumes remain elevated as the debt ceiling showdown plays out."

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2013 IPO Calendar: Who to Watch

After Facebook Inc. (Nasdaq: FB) went public last year with disastrous results, the IPO calendar emptied for more than a month.

But thanks to a string of successes toward the end of 2012, the IPO market is heating up for 2013.

In fact, companies that went public after Facebook's May 18 IPO were up an average 31% through mid-December from their IPO price, with the S&P 500 only up 11% in that time.

As we start 2013, the overall pessimism that engulfed the IPO market since Facebook went public has disappeared.

"To me, it feels like a meaningful shift in the market," said Tom Murphy, a partner and head of the securities-capital and markets group at law firm McDermott Will & Emery. "With those companies [that had great IPOs], all in very different industries, getting out at the top of their ranges, and above, is a really strong signal."

The IPO Rebound

The IPO market started rebounding in October, specifically during the week of Oct. 8- Oct. 12, when nine companies went public, the most since the end of March.

"There was a big hiccup with Facebook, but in general, new issues in the market are doing well," Jonathan Crane, chairman of KeyBanc Capital Markets' equity-underwriting committee told The Wall Street Journal. "People are gravitating toward anything with growth, and in that respect, I think things have returned to normal."

The best performing of those October debuts was Workday Inc. (NYSE: WDAY), a provider of cloud-based applications used to organize human resources, accounting and other employee-related activities.

Workday went public Oct. 12 and opened at $48.05, 72% higher than its $28 offer price. It was the largest venture-backed IPO since Facebook went public in May, raising $637 million in cash. WDAY stock currently trades at $50.

Workday's IPO is part of a successful trend in cloud-based companies going public.

"For now, the megatrends in the IPO market include cloud-based computing – which includes companies such as Workday, Demandware Inc. (NYSE: DWRE), Splunk, ServiceNow Inc. (NYSE: NOW), Guidewire Software Inc. (NYSE: GWRE) and Palo Alto Networks – and high-end branded goods such as Michael Kors Holding Ltd. (NYSE: KORS) and Prada that appeal to consumers in emerging markets," says Sam Hamadeh, chief executive of Privco, a financial dataprovider.

Who to Put on Your 2013 IPO Calendar

Based on the performance of the above companies, there are plenty of reasons to be excited for next year's IPOs.

"The positive returns helped revive global IPO activity at the end of 2012 and should support stronger issuance in 2013 from the large $200 billion global IPO pipeline," according to Renaissance Capital's year-end IPO report.

Here are some IPOs in 2013 to keep an eye out for:

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What Happens if We Hit the Debt Ceiling?

With possibly less than a month before the United States hits its $16.4 trillion debt ceiling – aka falls off the "debt cliff" – the country is wondering what happens if Washington fails to raise the limit.

Almost everyone agrees that even though the GOP has hinted it will refuse to raise the debt limit to get its way with spending cuts, Congress will agree to another increase. The debt ceiling has been raised 79 times since 1960.

What could happen if it's not raised is a bit of a guessing game, since it's never happened before. But the consensus is we don't want to find out.

As Princeton professor and former vice-chairman of the Federal Reserve Alan Blinder wrote in The Wall Street Journal Monday morning, "Since the federal government has never crashed into the debt ceiling before, nobody knows exactly what will happen if it does. But whatever does happen, it won't be pretty."

Here's a look at what could go down.

If We Hit the Debt Ceiling, Who Gets Paid?

Hitting the U.S. debt ceiling – or, falling off the debt cliff – means the government may not borrow any more money, so some payments would have to stop immediately.

As Blinder outlined, "At current rates of spending and taxation, federal receipts cover less than 74% of federal outlays. So if the government hits the debt ceiling at full speed, total outlays-which includes everything from Social Security benefits to soldiers' pay to interest on the national debt-will have to be trimmed by more than 26% immediately. That amounts to more than 6% of GDP, far more than the fiscal cliff we just avoided."

The Obama administration would be faced with a stark choice: Do we pay the interest on the national debt and avoid technical default?

If that is our choice, then we must also choose who will not get paid.

Will it be soldiers in Afghanistan? Retirees dependent upon their Social Security checks? Taxpayers waiting for tax refunds? Small businesses that have performed work for the U.S. government?

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Do Women Manage Money Better Than Men?

The hedge fund industry has long been a male-dominated arena, but maybe that should change.

Consider that a new study shows hedge funds led by women far outperformed the global hedge fund index in the first three quarters of 2012.

The study, by consulting firm Rothstein Kass, found hedge funds owned or managed by women produced a return of 8.95% through September compared with a 2.69% return for the HFRX Global Hedge Fund Index.

"The fact that women-owned or managed hedge funds have been able to handily outperform their male counterparts is not particularly surprising," Meredith Jones, director at Rothstein Kass, said in a news release.

Jones said a number of studies have shown women investors are more risk-averse than men and therefore potentially "better able to escape market downturns and volatility."

"The outperformance by women-owned or managed hedge funds should make the case that investing in these types of funds is a smart business decision, rather than one that just feels good," Jones said.

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Automatic Spending Cuts: What's Set to be Slashed

There was short-term optimism about the U.S. economy after the fiscal cliff deal, but there's still a looming problem for this year that can't be avoided: automatic spending cuts to government programs.

Because Congress did not reach an agreement on them, the automatic spending cuts – known as sequestration – are now delayed until March. Lawmakers will meet in March to try and restructure the cuts.

As of now, the cuts equal $1.2 trillion in savings over 10 years. If nothing is done, there will be across-the-board preprogrammed reductions in a number of government programs, with the defense industry being hit the hardest with $55 billion.

For lawmakers wielding the knife, deciding where to slash budgets is tricky. If there are too many reduction-related layoffs, the automatic cuts could kick the nation back to a recession.

Here's a breakdown of what will be cut if Washington does nothing and lets the sequester go through as planned.

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Bear of the Day: Stone Energy - Bear of the Day

We are downgrading our recommendation on Stone Energy Corp (SGY) to Underperform from Neutral. The company missed our expectation in the third quarter of 2012 and its quarterly earnings also plunged 54.7% from the year-earlier profit level, mainly due to lower price realization and higher operating expenses. The spiraling lease operating expenses added to Stone […]

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The Trillion Dollar Trick

The birth, and the apparent death, of the trillion dollar platinum coin idea may one day be recalled as a mere footnote in the current debt crisis drama. The ultimate rejection of the idea (which was to use a loophole in commemorative coinage law to mint a platinum coin of any denomination) by both the President and the Federal Reserve seems to offer some relief that our economic policy is not being run by out-of-touch academics and irresponsible congressmen. In reality, our government has been creating more than one trillion dollars out of thin air every year for the past five. The only difference is that the blatant dishonesty of a trillion-dollar platinum coin is so easy to understand that the public simply couldn't be expected to swallow it. The American people are more than willing to be fooled, but they won't tolerate so simple a ruse.

People have a long and intimate history with coins. Some of us collected them as kids, and we all touch and see them every day. Unlike currency bills, we know intuitively that a coin's value is supposed to come from its metal content. That's why quarters are bigger than dimes.As a result, most people have viscerally rejected the platinum coin idea. To assign an arbitrary, sky high, valuation to a small piece of metal strikes most people as a deceitful, desperate act. They are right.

However, the same people have no problem with images of thousands of crisp paper notes flying off the printing presses. The acceptance is not impacted by how many zeroes the bills contain. People simply believe that paper money derives value from the numbers, not the paper. This was not always so. Paper money originally entered the public awareness as promissory notes to pay different amounts of gold. Once people got used to the paper, few really cared when the gold backing was finally removed. As a result, the public would likely have been much more accepting of the Fed printing a trillion dollar bill than the government minting a trillion dollar coin. But there was no legal pathway for the Fed to simply give that money to the government.

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The government, not the Fed, mints coins, so they did not have to rely on the Fed to create value out of thin air. That is why the platinum coin idea was so seductive, if ultimately unsellable.

The Greatest Investing Mistake You'll Ever Make

I wrote an article for Money Morning on Tuesday entitled: "The Great Rotation Makes Stocks a Generational Buy."

The story drew several comments from readers – some in agreement, others… not so much.

For instance, reader Mike W. wrote in quoting the article:

"Last week $22 billion flowed into mutual funds and ETFs. That's the second-largest weekly flow on record. Of that… $8.9 billion flowed into equity mutual funds… the most since March 2000 and the fourth-largest weekly inflow on record."

He continued:

"What happened after the [largest] inflow of $23 billion in late 2007? The stock market fell off a cliff. What happened after March of 2000? The stock market fell off a cliff."

As you might have guessed, there's much more to this story…

The Move that is Costing Investors Big-Time

An interesting study published in Science recently found that people frequently underestimate their future selves. When asked to score their current preferences, values and personality traits compared with how they felt

10 years ago and how they will feel 10 years in the future, people believe they changed more in the past than they will in the future.

It didn't matter whether the participants were teenagers or middle-aged; people just assume that their present selves are "as good as it gets."

Investors have held a similar illusion about the stock market since the financial crisis.

With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward.

This turned out to be a mistaken belief: Take a look at the last four years of U.S. market and gold returns.