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U.S. Economy

Buy, Sell or Hold: Enbridge Energy Partners, L.P. (NYSE: EEP) Brings Some Stability to a Volatile Market

It seems like every week there's a new development that forces investors to rethink their investment strategies.

This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.

The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.

China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.

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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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GOP Takes Hardline on Federal Deficit By Killing Unemployment Benefits Extension

Drawing a line in the sand over the federal deficit, Senate Republicans on Thursday killed a spending bill that included an extension of unemployment benefits and increased taxes on bonuses paid to executives at private equity firms.

The collapse of the comprehensive legislation spells the end of assistance for a total of 1.3 million unemployed Americans who were scheduled to lose their benefits at the end of last week. It also will leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid.

Even though lawmakers voted 57-41 in favor of the measure, Democrats failed to secure the 60 votes needed to end a GOP-led filibuster. The legislators split along party lines with the exception of Sen. Ben Nelson, D-NE, who voted with the Republicans. Senate Majority Leader Harry Reid, D-NV, said this third vote on the matter would be the last, and that the Senate needed to move on to legislation cutting taxes for small businesses.

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Washington Reaches Financial Reform Deal That Packs Lighter Punch Than Wall Street Had Feared

The biggest Wall Street regulation overhaul since the Great Depression was approved after 20-hour House-Senate negotiations ended this morning (Friday). The legislation brings a dramatic shift in financial reform, but comes down easier on financial institutions than initially planned.

The bill, named the Dodd-Frank Act after Sen. Christopher J. Dodd, D-CT, and Rep. Barney Frank, D-MA, brings sweeping reforms to consumer protection, trading restrictions for big banks, and the regulation of financial products.

"It establishes the greatest consumer financial protections in American history. It prevents financial firms from taking risks that will threaten the economy. And it provides the government with significant new tools to better protect taxpayers from the damage of future financial crises," U.S. Treasury Secretary Timothy F. Geithner said in a statement.

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Money Morning Mailbag: Will Elections and a Resignation Open the Door for U.S. Budget Changes?

Administration officials announced this week that the White House Budget Director Peter Orszag plans to leave U.S. President Barack Obama's Cabinet before work on the next U.S. budget begins, which could be some time in the next few weeks. Orszag would be the first member of President Obama's Cabinet to exit.

The U.S. budget is under scrutiny as the budget deficit is forecast to hit $1.6 trillion by 2011. A President-appointed panel is currently working on budget reduction plans to be presented in a report due in December.

Orszag's strategies as former head of the Congressional Budget Office (CBO) supported a stop to deficit spending, but once he was placed in the budget driver's seat, making significant cuts was nearly impossible with recovery progress slow and unemployment high. Orszag instead ended up helping outline the $787 billion stimulus package in 2009.

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United States Fears Economic Stimulus Measures Will Choke on Europe's Drastic Budget Slashing

While U.S. President Barack Obama will be gunning for more economic stimulus measures at this weekend's Group of 20 (G20) meeting in Canada, European lawmakers continue drastic efforts to rein in spending.

The coordination of global efforts to promote economic recovery will be the main issue at the weekend's meeting, which was set to spotlight the value of China's currency before Beijing announced Saturday that it would allow the yuan to appreciate. The United States and Europe's differing views on the most effective strategies to maintain global economic growth and slash bloated government budgets are increasing tensions between leaders.

"There is a need to move toward rebalancing," Stewart M. Patrick, a senior fellow at the Council on Foreign Relations in Washington, told CNN. "But every country has different domestic political demands, and that is what drives decision making."

President Obama is worried that drastic austerity measures in Europe will choke global growth and collapse a fragile recovery.

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The Midterm Elections: No Panacea for the U.S. Economy

With many of the primaries past, and the November 2010 midterm elections less than five months away, it is worth taking a look at what policy changes we might expect from the next U.S. Congress. Both the political and economic worlds have changed one hell of a lot since the last elections, in 2008.

Thus, even though U.S. President Barack Obama is slated to remain in office until at least 2013, the Congress elected in November will be very different from the one that was elected in November 2008.

For a view of the future after the U.S. midterm elections, please read on...

After a Strong First Half, Is the U.S. Dollar Headed for a Reversal?

In spite of an assortment of economic uncertainties at home, the U.S. dollar has been the star of the currency world for most of 2010. Spooked by persistent and seemingly insurmountable debt problems in the European Union – and the specter of unsustainable growth and potential inflation in China – investors fled European and Asian currencies for the perceived relative safe haven of the dollar.

But the U.S. dollar may have topped out.

Let me explain …

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Four Factors to Consider Before Determining Your Long-Term View on U.S. Stocks

Stocks rose worldwide over the past week — ranging from +2% in U.S. big caps to +6% in gold — as investors swelled with sudden courage in response to positive reports on Chinese economy and glimmers of hope that European governments can get their financial houses in order.  

The week's results erased four weeks of losses, including the despairing session that ensued on June 7 after a disappointing report on U.S. employment.  Meanwhile, the result of the past 35 trading days, or seven calendar weeks, are still largely negative, ranging from a loss of 5.5% for U.S. stocks and -8.5% for Europe. Only gold stocks have eluded the smoke monster, rising 7% in the span.

The variation in one-week and one-month results illustrate perfectly how investors are showing that they are hopeful but unconvinced that recent strength in gross domestic product (GDP) growth and corporate income advances are sustainable, and therefore won't buy stocks heavily until prices are so cheap that they discount worst-case scenarios. In other words, they want a high risk premium before buying — sort of like demanding a 72-month warranty before buying an expensive car.

To read about the four factors you should consider before investing click here.

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Money Morning Mid-Year Forecast: The Dollar Headed for Some Change 

In spite of an assortment of economic uncertainties at home, the U.S. dollar has been the star of the currency world for most of 2010. Spooked by persistent and seemingly insurmountable debt problems east of the Atlantic and the specter of unsustainable growth and potential inflation on the Pacific side of the globe, savers and investors fled European and Asian currencies for the relative safe haven of the dollar.

As Keith Fitz-Gerald, Money Morning's Chief Investment Strategist, pointed out last week (June 10), from January through May, the dollar gained ground against all but two of the world's leading currencies – China's yuan and the Japanese yen – and it retained parity with them. The greenback appreciated by as much as 16% versus the struggling euro, which last week (June 8) briefly dipped to a four-year low below $1.20, and 13% against the British pound.

The InterContinental Exchange's (ICE) U.S. Dollar Index (USDX), which measures the dollar's value versus a trade-weighted basket of six leading foreign currencies, climbed from a low of 76.732 on Jan. 14, 2010, to an intra-day high of 88.586 on June 8.

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