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Recession

Can Bulls Lift a Market Threatened By Uncertainty Surrounding U.S. Stimulus Measures?

Stocks spilled the past week like water over a broken dam as investors priced in more evidence that consumers, businesses and home-buyers have gone on strike despite U.S. stimulus measures and record-cheap interest rates that have put mortgages, car loans and store-credit costs at 100-year lows. In the five-day span, the Dow Jones Industrial Average fell 2.5% and the Standard & Poor's 500 Index sank 3.6%; Nasdaq and Russell 2000 Index all fell 3.2%.

Catalyst for the latest spasm of selling came from disappointing news on durable goods sales and initial jobless claims, and weak earnings news or outlooks from consumer-facing companies Bed Bath & Beyond Inc. (Nasdaq: BBBY), Darden Restaurants, Inc. (NYSE: DRI), Lennar Corp. (NYSE: LEN) and Nike, Inc. (NYSE: NKE). 

All of the major U.S. and global indexes are now below their 200-day averages for the first time since early June.

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How to Profit From Europe's Stealthy Resurgence

European countries – both inside and outside the Eurozone – are slashing their budget deficits.

Greece, Portugal and Spain – three of the so-called "PIGS" – have to do so, of course. But Germanygenerally reckoned to be in excellent shape – is also cutting its deficit, as is France, which hasn't run a budget surplus in 40 years. Britain, too, with no need to protect the euro (it's not a Eurozone member) just introduced a budget that cut the deficit by $140 billion over four years.

U.S. President Barack Obama and other Keynesians warn that Europe may push its own economy – or even the global economy – back into recession.

But here's the surprising reality: Europe may gain from its fiscal pain – and its deficit-trimming actions offer the best hope for a lengthy recovery.

To see which European countries are expected to rebound - and which ones to invest in - please read on...

Dodge a Possible Debt Debacle With These Two Stimulus-Plan Safety Plays

U.S. President Barack Obama's $862 billion stimulus plan, passed in great haste after his inauguration, has now revealed its true costs and benefits. It didn't revive the U.S. economy – that bottomed about May 2009, before a dollar of it had been spent. Further, combined with the mad wave of similar "stimulus" outlays across the planet, it has destabilized global bond markets – which may end up being very expensive indeed.

For details of the two stimulus-plan safety plays, read on…

For details of the two stimulus-plan safety plays, read on...

General Motors: On the Road to Recovery, but Moving Slowly

General Motors Corp. just logged its first quarterly profit since 2007. The company also claims to have paid back its government loans "in full," and is rumored to be interested in buying back its financing arm.

But the truth of the matter is that GM isn't as far down the path to recovery as it would like the public to believe. The company's strong first quarter was greatly aided by Toyota Motor Corp.'s (NYSE ADR: TM) highly publicized recalls. Its claims that it has paid back government debt have been greatly exaggerated. And the United Automobile Workers (UAW) union is already pushing for restoration of many of the perks that it lost during the auto industry's near collapse.

General Motors reported first-quarter profit of $865 million as its revenue surged 40% to $31.5 billion. That made for the company's first quarterly profit in three years. GM – a company that took millions in taxpayer money to remain viable and came close to running out of money in 2008 – reported free cash flow of $1 billion.

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Government Reports Show Consumer Spending Fueling Economic Recovery

A string of government reports show that the American consumer is making more money and spending again, providing impetus for a sustained economic recovery.

Personal income jumped 0.3%, or $32.3 billion, in April following a 0.1% rise the month before. The Commerce Department said individual spending rose 0.6%, or $36 billion, last month, the sixth consecutive month spending has increased. Both figures matched estimates from economists surveyed by Briefing.com.

Consumer spending makes up about 70% of the U.S. economy. Economists are keeping a close eye on income and spending because so far, this has largely been a jobless recovery.

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A V-Shaped Recovery? Don't Bet On It

Corporate profits appear to have returned in full, manufacturing is picking up around the world, commodities prices have rallied and the Standard & Poor's 500 Index is up about 60% since last March.

That makes a pretty compelling case for what some analysts are calling a "V-shaped" recovery. But even with all the momentum the economic recovery has accrued, that kind of talk may be a bit premature.

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Is There an Ulterior Motive for Bailing Out Greece?

Since back in December, when Fitch Ratings Inc. slashed its credit rating on Greece's debt to below investment grade for the first time in 10 years, there's been a mind-numbing flood of media coverage of that European country's debt crisis.

And yet, despite high-volume of high-level media coverage, none of the stories have picked up on a very basic – yet very key – fact…

The bailout being developed is as much for Germany as it is for Greece.

Let me explain …

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Retailers Make a Surprising Comeback

You may be hearing a lot of bearish commentary centering on the premise that the market's advance is unsustainable because it has benefited so much from government spending.

But one big swath of the rise in stock prices has come from retailers, and it's hard to make a direct link between fiscal spending and chain store sales.

When the government pays for things like more highways and military goods, more people gain employment and then their families go out and purchase things at companies like Family Dollar Stores Inc. (NYSE: FDO) – a position in our Strategic Advantage portfolio that is fast on the rise. But that's really a "second-derivative" concept, as the statisticians say.

Employment and wage improvements have been the big catalysts.

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Fastest Recovery Ever Could Push Corporate Profits to Record Highs in 2010 

Sometimes we get a little carried away talking about esoteric subjects like bulls, bears, supply, demand, moving averages and the like. But if you just want to focus on something real, then look at corporate profits. When they're rising from a low, that's good; when they're flat-lining or declining, that's bad. Pretty simple.

Much of the rally of the past year has been in anticipation of a profit recovery. And now that recovery is actually coming in a bit better than bulls expected, which is why they are able to elbow bears so effectively. ISI Group now figures that corporate profits will clock in at +38.8% for the first quarter (year over year) of 2010, then +42.4% in the second quarter, +36.8% in the third quarter and then +30% in the fourth quarter (against harder comparisons). That would put profits in 2010 up a record 36.1% overall.

To read more about how corporate earnings will shape the market click here.

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Four Ways to Profit From a Business-Driven Rebound

Last week we learned that the U.S. economy expanded by a whopping 5.7% annual rate in the 2009 fourth quarter – the biggest jump since 2003. This was well ahead of the 4.5% consensus estimate and solidly beats the 2.2% growth rate achieved in last year's third quarter. The turnaround is the largest in almost three decades.

The main driver of the performance was a big slowdown in the rate at which businesses were drawing down their inventories. This alone contributed 3.4% to overall growth in the quarter. Paul Ashworth at Capital Economics in London believes that inventory rebuilding will continue to boost gross-domestic-product (GDP) growth for another two or three quarters.

But what happens after that – especially after the stimulus spending out of Washington winds down later this year? Will this rate of growth continue?

Investors who know the answer to that question will be the best-positioned to profit.

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