Archives for February 2013

February 2013 - Page 17 of 17 - Money Morning - Only the News You Can Profit From

Why the Debt Crisis is Here to Stay

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On Thursday, the Senate passed a 90-day suspension of the debt ceiling, postponing the looming debt crisis for three months until a deal can be worked out.

That's the theory, at least.

In fact, most experts, if they are being honest, agree that, unless major changes are made to both taxation and spending, budget crises will be a permanent feature of American life and politics.

It now looks as if the federal government is going to muddle its way into a situation where sequestration, once a dreaded threat to be avoided at all costs, now looks like the only way to implement across-the-board budget cuts.

Sequestration takes an axe to the entire budget thereby avoiding responsibility for any unpleasant outcomes resulting from the spending cuts. It's not the smartest way to cut spending but is one of ways to do it without making difficult choices.

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Why You Should Hate Ethanol (Even Though the EPA Doesn't)

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Proving once again that the government refuses to learn from its mistakes, the Environmental Protection Agency yesterday (Thursday) again increased its ethanol mandate.

The EPA raised the Renewable Fuels Standard (RFS) mandate to 16.55 billion gallons for 2013, up from 15.2 billion gallons last year, while ignoring signs that the policy is doing more harm than good.

The list of problems starts with what the use of ethanol-gasoline blends might be doing to our cars.

Earlier this week, the Coordinating Research Council, a group backed by several major automakers, released a study showing that E15, which blends 15% ethanol with gasoline instead of the previous level of 10%, can damage autos.

The tests showed E15 could cause faulty fuel-gauge readings and check-engine alerts. In some cases, E15 could cause swelling and failure of auto components that "could result in breakdowns," according to Robert Greco, a director with the American Petroleum Institute.

The American Automobile Association (AAA) last fall voiced similar concerns and asked the EPA to withdraw E15. AAA said that since only 5% of the cars on U.S. roads are approved for E15, the possibility for accidental use in vehicles is too high.

"AAA automotive engineering experts have reviewed the available research and believe that sustained use of E15 in both newer and older vehicles could result in significant problems such as accelerated engine wear and failure, and fuel-system damage," the organization said in a press release on its Website.

These new concerns come on top of historic complaints that ethanol blends reduce a vehicle's miles per gallon by about 27%, meaning more trips to the gas station and more money out of drivers' pockets.

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Stock Market Today: Will the Dow Keep Going Above 14,000?

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The stock market today (Friday) hit a high not seen in more than five years when the Dow Jones Industrial Average crossed 14,000 for the first time since October 2007.

Less than an hour into trading the Dow spiked 140 points, or 1%, to hit 14,000.97. In mid-afternoon trading, the Dow rallied further, tacking on 150 points. The move leaves the Dow around 200 points, or 2%, from its all-time high of 14,198.10.

Friday's strong showing came on the heels of the Dow's strongest January (up 5.8%) since 1994.

The Standard & Poor's 500 Index, which logged its best January since 1997, added 15 points, or just shy of 1%. The Nasdaq advanced 40.

The robust rally followed a lackluster report on the job market which gave "strength to the argument that the Fed will continue its bond buying program and keep rates low, which is also a positive for the stock market," Tom Schrader, managing director at Stifel Nicolaus told CNN Money.

That sentiment also gave bonds and precious metals a boost. Gold prices moved up $7 to $1,670. Silver added 37 cents to $31.94

A bevy of reports helped buoy markets Friday.

A Census Bureau report showed construction rose 0.9% in December, well above forecasts. The Institute for Supply Management's monthly manufacturing index rose to 53.1 in January, ahead of the expected 50.5 read, and the University of Michigan's sentiment index climbed to 73.8 last month, better than the expected 71.4.

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The Frightening Financial Crisis Facing Young Americans

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Young Americans are falling deeper and deeper into a financial crisis that will be nearly impossible to escape from in their lifetimes.

Unfortunately, the problems start at a very young age. Not only do a record number of school-age children live in poverty, but the number of homeless children in the public school system has reached an all-time high.

Even young adults who are able to attend college have trouble supporting themselves after graduation. Students take on mountains of debt to pay for school, but all too many of them can't find a decent job that covers their bills and their loans.

And those who do find jobs will likely be working for many more years than previous generations. That's because Social Security is expected to run out well before today's youngest workers retire. Those who have failed to save enough will end up working into their 60s, 70s and 80s.

"We don't know how the story ends, but we know how the story is beginning," Paul Taylor, executive vice president of the Pew Research Center, told CNN. "At the beginning, today's young people are not doing better than yesterday's young adults."

Here are 14 startling statistics painting a bleak financial picture for many young Americans.

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January 2013 Jobs Report: 4 Reasons Unemployment Will Stay High

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The U.S. Labor Department released the January 2013 jobs report Friday, showing the unemployment rate inched upward from 7.8% to 7.9%.

Employers added 157,000 jobs in January, short estimates of 168,000, which would have kept the unemployment rate stable.

The jobs report included some good news: Revisions to last year's data, customary in January, show the U.S. added 335,000 more jobs than initially reported in 2012, bringing the monthly average for jobs gained to 181,000 from the 153,000 initially reported.

Employment gains for November and December were revised higher by a total of 127,000.

Contributing most to January payroll increases were the retail, construction and healthcare sectors. The government continued to shed workers, a trend that began four years ago.

But the employment outlook remains bleak. Joblessness has proved persistent, with the unemployment rate stuck above an unhealthy 7% for more than four years.

"The good news is that January's employment gains, coupled with large revisions to the prior months, may translate into more consumer spending power. The bad news is that unemployment remains stubbornly high," said Kathy Bostjanic, director of macroeconomics analysis at the Conference Board.

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IPO Calendar 2013: Three Sweet Deals for February

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The IPO market is off to a solid start in 2013, with more upcoming opportunities to mark on your IPO calendar.

There have been several successful offerings so far this year that have rewarded investors with quick profits. Bright Horizons Family Solutions Inc. (NYSE: BFAM) was priced last month at $22 a share, and has delivered a 27% gain already. Norwegian Cruise Line Holdings Ltd. (Nasdaq: NCLH) was priced at $19 in mid-January and has already soared 39%.

The number of deals so far has been fairly small, but investors' appetite for IPOs remains strong as we move into February.

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How the Pentagon Aims to Stop China's Cyber-Hacking of America

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Given the deficit fears and budget skirmishes that are focus of the moment down in Washington, it's tough to get excited about defense-related investments right now.

Defense outlays are destined to shrink.

But there's one area where spending is slated to go up …

And I mean go way up.

I'm talking, of course, about defense-related spending that will promote cybersecurity and combat cyber-terrorism.

Buy Signal: Top Hedge Funds Are Moving Into Energy

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There is an easy way to find out where the market thinks a particular sector is heading: Check out the movement of futures contracts held by top hedge fund managers.

These days the signal is clear and pointing in one direction. It's in energy.

Reports have recently surfaced that hedge funds are moving into commodities in general, and energy commodities in particular. What's more these moves are more bullish than at any time since midsummer.

The reason is the same one that we have been discussing for several months. Demand is coming back more quickly than anticipated.

Energy spikes usually start that way. Indicators of market resurgence seem to rush onto the scene, catch analysts by surprise, and the acceleration begins.

But this time, those who survey the market should have seen it coming. After all, the indicators and benchmarks have been there. I have been laying them out here in Money Morning for weeks.

Two elements have emerged over the past several days that finally require the pundits to catch up with us.

First, it is becoming impossible to ignore what is happening in the U.S. and China. Both markets are moving up, with that direction intensifying of late.

In the U.S., forward economic indicators are developing into a bull market signal. This has augmented the run we have experienced of late, largely due to the combination of an oversold condition, no bad news (Congress and the White House may at last be learning how to play nice in the sandbox), and money moving back in.

But it's the second factor that everybody will be talking about this week.