Category

U.S. Economy

Delay in Prudential's Deal for AIG's Insurance Unit Threatens U.S. Debt Repayment

Regulators in the United Kingdom threw a wrench into British insurer Prudential PLC's plan to buy American International Group Inc.'s (NYSE: AIG) Asian insurance unit, delaying its $21 billion rights offering until the two parties agree the combined company will have adequate capital.

The delay, or any disruption to the proposed takeover deal, could mean a major setback for AIG's efforts to raise funds to pay back its debts to the U.S. government.

Prudential had planned to issue a prospectus with details of the offering yesterday (Wednesday), including how many new shares will be issued and at what price to shareholders. But the British government's Financial Services Authority (FSA) put the deal on hold with a last minute request for further unspecified information.

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The Bull Market Will Pick Up Pace When Retail Investors Finally Climb Aboard

Data shows that retail investors have not yet bought into the bull market. But when they eventually do regain their confidence, the market will soar to new heights.

Consider this: Trim Tabs Investment Research, a boutique data analysis firm in the San Francisco Bay area that's popular with hedge fund managers, last week declared that it had turned fully bullish from cautiously bullish on U.S. stocks. The firm thus boosted its recommended equity exposure to 100% long from 50% long.

The reason for Trim Tabs' change of posture: Its unique blend of macroeconomic data shows the U.S. economy making a gradual recovery, corporate buybacks are picking up during earnings season, and demand indicators are increasingly bullish.

Let's spend some time understanding their point of view, as the firm is influential among large institutions.

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Question of the Week: Readers Respond to Money Morning's Corporate Profits Query

Corporate profits returned in full in the first quarter of the year, with company after company topping Wall Street estimates.

JPMorgan Chase & Co. (NYSE: JPM) raked in $3.33 billion in first-quarter net income. Ford Motor Co. (NYSE: F) beat analysts' estimates with a $2.1 billion profit. Apple Inc (Nasdaq: AAPL) brought in $3.38 billion.

"There is clear and broad-based improvement in the economic factors in the United States and around the world," said JPMorgan Chief Executive Officer Jamie Dimon. "It appears to be strengthening, not weakening. It is possible that they will strengthen enough to end up with a strong recovery."

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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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Buy, Sell or Hold: Altria Group Inc. (NYSE: MO) – The 'Sin Stock' You Have to Own

With more than 1 billion smokers worldwide, it is hard to conceive that companies selling cigarettes would not be extremely profitable.  In addition, the majority of people who are smokers also tend to be alcohol consumers. One company that services both of these vices is Altria Group Inc. (NYSE: MO)

Altria Group is a holding company; its wholly owned subsidiaries consist of Phillip Morris USA Inc., U.S. Smokeless Tobacco Co. (prior to 2001 it was known as United States Tobacco Inc.), John Middleton Co. and Phillip Morris Capital Corp.

On Jan. 6 2009, Altria Group purchased UST Inc. in a $10 billion deal that gave the maker of Marlboro cigarettes an entrée into the "smokeless tobacco" market, thanks to UST's ownership of the Skoal and Copenhagen brands.

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European Debt Crisis Raises Caution Flags But U.S. Economy Won't Be Derailed

Stocks somersaulted into the red early last week in the wake of European debt downgrades, rising revulsion over the prospect of a bailout of Athens and a broad re-pricing of risk. Breadth was negative, the number of new highs shrank and number of new lows swelled. Financials tumbled and retailers stumbled. Caution flags are rising.

Click Here to Read More on how European Debt Will Affect the Markets

China-U.S. Trade Relations Plagued by Protectionism

China yesterday (Wednesday) slapped the U.S. chicken industry with the second set of tariffs in less than three months, further escalating tensions with its all-important Western trade partner.

China's commerce ministry said the new tariffs, which will impose charges of as much as 31.4% on imports of U.S. chicken, were a response to what it said were subsidies that created an unfair advantage for U.S. chicken producers.

China in February imposed a 105.4% duty on imports of U.S. poultry after a government investigation found that such products were being sold by the United States at less than the fair value. The new tariffs could altogether close off the market to U.S. poultry producers.

China and the United States have a long history of trade disputes, but these conflicts in recent years have escalated in both frequency and intensity as the two nations vie for global influence.

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Should Investors Sell in May and Go Away, or Ride the Bull Awhile Longer?

I'm sure you have heard the old saw that it's a smart idea to "sell in May and go away."

That concept is based on the notion that the May-to-November span provides a weak environment for investors. I have already heard the cry go up recently because the major indexes are already up a lot more than anyone expected, and this would seem to be a convenient time to take profits.

Yet like most old market adages, there's not much substance to the concept if you take a good look at history.

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Question of the Week: Readers Respond to Money Morning's Financial Reform Query

A vote on financial reform Monday failed to produce the 60 votes needed to move ahead, as Republicans said they felt the bill was rushed and not ready to take the floor.

The Senate's second attempt at bringing the reform bill to debate occurred yesterday (Tuesday) on the same day as Goldman Sachs Group, Inc (NYSE: GS) executives – including vice president Fabrice Tourre, the only individual named in the suit – faced the Senate Permanent Subcommittee on Investigations in Washington. Tourre denied the Securities and Exchange Commission's charges and said the product in question "was not designed to fail."

Goldman was the recipient of $10 billion in bailout funds – one of the most contested topics halting financial reform progress.

The uproar over taxpayer-funded financial institution aid along with the looming financial regulation overhaul prompted our fifth installment of Money Morning "Question of the Week:" How do you feel about the status of financial reform? Has it gone far enough – will too much regulation crimp our free market system? Or does it need to go much further – and can the powers-that-be create an effective reform proposal?

Here is a collection of reader responses showing concern for the future, questions over government spending, and ideas for improvement.

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We Want to Hear From You: Do You Think Booming Corporate Profits Are the Sign of a Strengthening U.S. Economy?

The past few weeks have pulled in one earnings report after another for 2010's first quarter, allowing a better look at the status of corporate profits. Most companies hoped for marked improvements after restructuring and cutting costs in the wake of the financial meltdown that gave balance sheets a beating. And they weren't disappointed: JPMorgan […]

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