- We Want to Hear From You: Do You Think Booming Corporate Profits Are the Sign of a Strengthening U.S. Economy?
The Only U.S. Automaker on Track, Ford Posts $2.1 Billion First-Quarter Earnings
Ford Motor Co. (NYSE: F) beat Wall Street estimates by posting first-quarter earnings of $2.1 billion and said it will deliver a "solid profit" for all of 2010, a year earlier than Chief Executive Officer Alan Mulally had projected previously.
Reaping the benefits from a recovering auto market and higher prices for cars and trucks, Ford chalked up its fourth consecutive quarter of net income, the longest streak since 2005.
Ford's U.S. deliveries surged by 37%, more than twice the industry wide average through March, boosting domestic market share at the fastest pace in 33 years. Ford was the only U.S. automaker to avoid bankruptcy in 2009.
First-quarter revenue rose 15% to $28.1 billion, and net income after one-time charges was 50 cents a share, handily beating the projected adjusted earnings of 31 cents a share compiled by Bloomberg . The Dearborn, Michigan based company posted a net loss of $1.43 billion, or 60 cents, a year earlier.
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.
Stocks – Led by Apple Inc. – On a Hot Bull Run No Investor Should Miss
Stocks flipped out late Friday morning following an announcement of Greece's decision to seek help from the European Union and International Monetary Fund. But by the end of the session, cooler heads began to prevail and the major indexes ended well into the black, continuing the bull run.
The Dow Jones Industrial Average, Standard & Poor's 500 and Nasdaq all closed about 1.1% lower for the session, but the week's results were a lot better: flat for the Dow and S&P 500, up 0.75% for the S&P Midcap 400 and up 1.7% for the S&P Smallcap 600.
Overseas large-caps ended the week flat, though China sank another 1%. Our own top choice overseas fared better, as Market Vectors Indonesia Index (NYSE: IDX) closed the week up 4%. Another star off the week overseas was iShares MSCI Turkey Index Fund (NYSE: TUR), up 3%.
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.
IMF Proposes "Fat Cat" Taxes on Banks to Pay for Future Financial Crises
The International Monetary Fund (IMF) is proposing that Group-of-20 (G20) nations levy two separate taxes on banks, including a "Fat Cat" tax on profits and compensation to pay for the costs of any bailouts resulting from future financial crises.
"Expecting taxpayers to support the [financial] sector during bad times while allowing owners, managers and/or creditors of financial institutions to enjoy the gains of good times misallocates resources and undermines long-term growth," the IMF wrote in a briefing paper for the G-20 industrialized and developing countries, obtained by The Wall Street Journal.
The report proposes a tax – called the Financial Activities Tax (FAT) or "Fat Cat" tax – that would be levied against financial institution balance sheets, profits and compensation. It would be paid into a nation's treasury to help finance the broader costs of a financial crisis, The Journal reported.
Question of the Week: The Lingering Sting of a Jobless Recovery
The U.S. unemployment rate held steady at 9.7% for the third straight month in March as the world's largest economy added jobs at the fastest pace in three years – the most-certain sign yet that the worst job market in a generation is finally improving and ending the "jobless recovery," economists say.
"This recovery is for real," Chris Rupkey, an economist at The Bank of Tokyo Mitsubishi UFJ Ltd., said in a statement.
Still, there's cause for concern.
We Want to Hear From You: How Do You Feel About the Status of U.S. Financial Reform?
When the Securities and Exchange Commission announced last Friday it was slapping Goldman Sachs Group, Inc. (NYSE: GS) with fraud charges, Wall Street – facing financial reform – took a big gulp of reality.
Scores of traders hurried to sell off Goldman shares, causing the stock to sharply fall 12.8%. Meanwhile, spectators on Main Street cheered the thought of a financial giant – that has faced scrutiny for housing market investments, executive bonuses and bailout money – finally having to face the firing squad.
Money Morning readers' comments clearly expressed their negative feelings toward Wall Street, our government and the SEC: "Crooks, political snakes, fraudsters, soulless and self-interested leaders, running a corrupt nation…"
Here's Why U.S. Stocks May be Headed Higher
U.S. stocks were back up to their old tricks last week, as volatility waned and financial, industrial and retail stocks waxed. It was a week in which risk was in fashion – until Friday, when the U.S. Securities and Exchange Commission (SEC) hammered Goldman Sachs Group Inc. (NYSE: GS) with fraud charges related to the subprime-mortgage crisis. With that, playing defense was considered offensive.
Leading the way forward were companies that are the ultimate in beta and hopefulness – such as beaten-down bond insurer Ambac Financial Group Inc. (NYSE: ABK), which rose 60%, beaten-down car parts maker American Axle & Manufacturing Holdings Inc. (NYSE: AXL), up 10%, beaten-up retailer Tuesday Morning Corp. (Nasdaq: TUES), up 24%; and beaten shoemaker Crocs (Nasdaq: CROX), up 20%. We're not talking, here, about investors who last year bought the shares of companies that were left for dead; these stocks might actually be worth something in an economic turnaround.
Regional Banks Are Bouncing Back – And You Can Profit
Our contrarian thesis in regional bank stocks has played out well in the past few weeks, as other investors are beginning to see that these companies are under-appreciated, under-priced, over-hated and over-shorted.
The iShares Regional Banks (NYSE: IAT) ripped higher by more than 8% in the past week alone. And I still think that many of these stocks have a long way to go, since fair value in some cases is 2x, 3x, and even 5x higher than current levels.
Super-regional southern bank Regions Financial Corp. (NYSE: RF), for instance, traded as high as $32.50 in 2007, then fell as low as $2.27 in 2009 – a decline of 93% in just two years. RF's recovery has gotten off to a much slower start than peers like U.S. Bancorp (NYSE: USB) because it made a lot more iffy loans along the Gulf coast. But over the past six months, it has become clear that super-low interest rates will allow RF to build enough reserve against losses. Additionally, other distressed-debt firms are stepping up to take problem mortgages off their hands.