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U.S. Economy

Fighting to Feed the Dragon: McDonald's Vs. Yum!

Speed kills. And in the fast food industry, it's imperative.

The speed of service and the ability to quickly adapt menus, packaging and advertising are what makes a market leader. And right now, the speed at which fast food companies make the transition into foreign markets, particularly China, is what matters most of all.

The industry's two biggest players, McDonald's Corp. (NYSE: MCD) and Yum! Brands Inc. (NYSE: YUM) – the parent company of KFC, Pizza Hut, and Taco Bell – know that.

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The End of the Cap-and-Trade Masquerade Opens New Doors For Investors

When U.S. Sen. Harry Reid, D-NV, last week disclosed that the so-called "cap-and-trade' energy proposal that passed the U.S. House of Representatives last year would not be taken up by the Senate, climate-bill proponents were deeply dismayed.

Indeed, Financial Times columnist Clive Crook even said that the United States "has let the world down on climate."

But here's the irony. With the Senate's refusal, we may just have moved a step closer to a climate change policy that will actually work. And that's good news for U.S. taxpayers. And it opens new doors for U.S. investors.

To see the sectors that will benefit from the likely direction of climate reform, please read on...

How to Pick Stocks in the 'New Normal' Economy

In today's potentially ultra-slow-growth "New Normal" economy, old stock market multiples do not apply.

In fact, investors who rely on long-held rules about Price/Earnings (P/E) ratios when they buy and sell stocks are risking a pretty big "haircut:" They may be overvaluing some of their stocks – and the stock market in general – by 17% to 20%.

Let's take a closer look…

To understand how to value stocks in the "New Normal" economy, please read on...

History Gives a Reason to Be Hopeful about U.S. Stocks

Volatility has hamstrung U.S. stocks recently, but history suggests there's a reason for hope on the horizon.

The past week and a half has been a welcome reprieve from the extreme volatility we've seen over the past few months. There have been no fewer than 19 days this year in which up or down volume has accounted for more than 90% of total volume.

The rapid up-and-down, all-or-nothing nature of the stock market has confounded even the most talented, highly paid and well informed traders. The hedge fund industry as a whole has been caught flat-footed – posting losses in each of the last two months.

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World's Largest Steelmaker Warns of Slowing Economic Recovery

Lakshmi Mittal, the chairman of ArcelorMittal (NYSE ADR: MT), the world's largest steel company, yesterday (Wednesday) issued a warning about the slowing pace of the global economic recovery and lowered his company's third-quarter forecast.

ArcelorMittal posted a 146% rise in net profits in the second quarter compared with the same period last year as demand recovered. However, the company warned third quarter results would slump by as much as 30% – hit by a seasonal dip in demand during the European summer, slower growth in China, and higher costs for iron ore.

"The improved performance in the second quarter is in line with our expectations and reflects the continued slow and progressive recovery," Mittal told The Wall Street Journal. "The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers."

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GM Hopes to Lead Budding U.S. Electric Car Market with Chevrolet Volt

General Motors Corp. on Tuesday announced the price tag on its hybrid Chevrolet Volt due out this fall, hoping to blaze the trail for an up-and-coming U.S. electric car industry and entice buyers to take a greener route.

The extended-range electric Volt, running on battery power and a small engine, will be priced at $41,000 and will qualify for a $7,500 tax credit. The price is close to analysts' $40,000 estimate, but significantly higher than the $32,780 cost of its competitor, the Nissan Leaf.

GM justifies the price difference with the Volt's significantly better driving-range benefit: The Volt will run for 40 miles on battery power and then a small gasoline engine will kick in as a generator, powering the vehicle for another 300 – 400 miles.

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Battle Over Expiring Bush Tax Cuts Likely to Shape Fall Elections

A colossal battle is shaping up in Congress over what to do about the Bush-era tax cuts that are set to expire at the end of this year. It's an issue that entails sufficient economic and political consequences that could shape the fall elections and fiscal policy for years to come.

The expiring tax breaks received little public attention this year as Congress tussled with heavyweight issues like healthcare reform and financial regulation. But the fate of the tax cuts will be a major focus of debate in September when lawmakers return to Washington from their summer recess and the midterm campaign gets rolling.

"It has enormous ramifications for the fall and clearly will be one of the dominant issues," Sen. Ron Wyden, D-OR, told The New York Times. "This is code for the role of the federal government, the debate over the size of government and the priorities of the nation."

Democratic party leaders, including President Barack Obama, have said they want to extend the tax cuts for individuals earning less than $200,000 and families earning less than $250,000, while letting the cuts expire as scheduled for those exceeding those thresholds.

Most Republicans, and some Democrats, want to extend the tax cuts for everyone, characterizing any tax increases on anyone in this fragile economy as unwise. If no action is taken, taxes on income, dividends, capital gains and estates will all rise.

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Has the U.S. Lost its Grip on the Credit-Rating Business?

There's a new name in the credit-rating-agency business these days: It's Dagong Global Credit Rating Co. Ltd., and this Beijing-backed business is China's bid for a spot in the global-credit-rating oligopoly.

And Dagong's Chairman Guan Jianzhong doesn't think much of his long-established U.S. competitors.

"The Western rating agencies are politicized and highly ideological and they do not adhere to objective standards," Jianzhong told The Financial Times earlier this month.

Is he right? And does the newly passed Wall Street Reform and Consumer Protection Act correct their flaws, or does it make matters worse? It's a question that affects all investors – even those of us that don't invest in bonds, as we'll soon see.

To understand how credit-raters will influence investments going forward, please read on...

Stocks Stuck in Trading Range Despite Positive Earnings Reports

Despite positive earnings reports last week from more than a few bellwether companies, stocks remain stuck in a trading range that continues to test investors' patience and skill.

Stocks launched higher last week in another round of the hyper-volatile action that has plagued the equity markets over the last three months. The good news is that some technical resistance was knocked out in the process, potentially setting the stage for a bigger rally in weeks to come.

The not-so-great reality: Stocks remain mired in the same range that has boxed them in for the past three months because, let's face it, despite their strong move they really only ended the week a fraction above where they started the previous week.


 

Read more about which stocks are leading the pack...

Why Second Quarter Earnings Haven't Spurred a Stock Market Rally

Second quarter earnings season is in full swing on Wall Street and investors are keeping a close eye on corporate profits.

But rather than pinning their hopes on earnings for relief from the recent downturn in stocks, investors seem to be suffering from tunnel vision. They're ignoring numerous positive earnings reports and instead focusing on macro-economic trends to determine the day-to-day fate of the markets.

And as a slew of economic reports continue to display conflicting trends, investors are finding it difficult to read the tea leaves. So far this earnings season, the market and the investors that drive it are all over the place.

The result has been a string of volatile trading days featuring gyrating and erratic stock trading. 

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