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In Today's Crazy Markets, Here's the One Global Region to Invest in Now
Money Morning global investing guru Martin Hutchinson has identified the one global region that he's focusing on as the world's next big profit play.
You'll be stunned to see what he's discovered.
But you'll also be wise to listen.
Why Traders Booed the Fed's "Operation Twist' – And You Should, Too
With "Operation Twist," U.S. Federal Reserve policymakers are attempting to use an old strategy to launch a new attack on the wheezing U.S. economy.
But the assault, announced after the central bank's Federal Open Market Committee (FOMC) meeting concluded yesterday (Wednesday) afternoon, isn't expected to have much long-term success.
"The way [Fed policymakers] handled this proves that the Fed doesn't have much power left," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "It tried to use big sweeping statements, and careful language … and it still didn't work – the market sold off … and traders [on the trading floor in New York] actually booed. They don't want this … they know it's bad."
As many expected, the central bank will use a derivation of a 1960 s initiative that's designed to "twist" the interest-rate "yield curve" by flattening it out. Between now and the end of June, the Fed will buy $400 billion worth of bonds with six-year to 30-year maturities while selling an equal amount of shorter-term debt with three -year maturities.
The Fed intended to rally markets with a sign of reassurance, but stocks failed to reverse their declines. The Dow Jones Industrial Average nose-dived 284 points, or 2.49%, the Standard & Poor's 500 Index skidded 2.94%, and the tech-laden Nasdaq Composite Index slumped 2.01%.
The market consensus: "Team Bernanke" has again made a move that will do more long-term harm than good to the U.S. economy.
Fed Preview: Today's FOMC Meeting Will Prove That Team Bernanke is Out of Ideas
If you're handicapping the U.S. Federal Reserve's two-day Federal Open Market Committee (FOMC) meeting that concludes today (Wednesday), you can make the following two predictions – and you'll almost certainly be right:
- U.S. Federal Reserve Chairman Ben S. Bernanke will announce some form of economic stimulus.
- But the short-term benefits will be small, and any long-term benefits won't be enough to help out-of-work Americans or jump-start the wheezing U.S. economy.
"I do think the Fed will intervene," Money Morning Chief Investment Strategist Keith Fitz-Gerald said in an interview. "But I don't believe for a second that the central bank's intervention will help the U.S. economy."
If anything, the nation's economy looks worse today than it did on Aug. 9, which is when central-bank policymakers last met. The "official" unemployment rate remains at an alarming 9.1% – with no jobs added in August – and true joblessness may range from 17% to 23%. Housing starts declined last month by the greatest amount since April. And the International Monetary Fund (IMF) just downgraded its U.S. growth forecast to 1.5% from 2.5% [To see related story in today's issue, please click here].
The spreading European sovereign debt crisis continues to whipsaw stocks, oil prices and gold. And several dramatic single-day plunges – in stocks and in gold – spooked investors for days after the event.
Bernanke feels pressure to act, but the odds that Federal Reserve policy can make a meaningful splash are low indeed, Money Morning's Fitz-Gerald says.
What to Expect From Today's FOMC Meeting
Since the Fed's actions have so far done little to ignite economic growth, investor expectations were muted ahead of today's FOMC meeting conclusion.
"It looks like the market is baking in an announcement of some kind of quantitative-easing strategy," Deirdre Dennehy, portfolio manager at Rockland Trust, said in an interview. "[But] for them to announce a QE3, I'm not sure how impactful that's going to be. The more times they do that, the less the effect in the market."
Analysts expect the Fed will attack longer-term rates by adjusting its $1.7 trillion portfolio of U.S. Treasury securities.
- What to Expect from this Week's FOMC Meeting
These Money Manager Stocks Will See Pay Day, Not Pain, from Market Turmoil
Recent market volatility has scared mutual fund investors out of stock funds and into more diversified investments – opening the door for you to profit from a rebound in the top money manager stocks.
Anxious mutual fund investors pulled a net $21.4 billion from U.S. stock mutual funds in August after the Dow Jones Industrial Average had two of its top-10 worst days ever on Aug. 4 and Aug. 8, according to industry consultant Strategic Insight.
These recent single-day plunges erased billions in retirement holdings' value – and fund investors are tired of the quick losses.
"You can't keep having bombs, so to speak, go off," Andrew Goldberg, a market strategist at JPMorgan Funds, told Bloomberg. "If the second you walk outside another one goes off, you're going to stay inside for longer, and that's what's going on."
Now mutual fund investors are looking for more globally diversified funds and a broader range of asset classes, meaning companies offering those will be able to cash in on the changing fund-investing environment.
Not only that, these companies' share prices have hit new lows, meaning now's the time to get the top money manager stocks at a steep discount.
Don't Expect Any Groundbreaking Proposals in Obama's Jobs Speech
U.S. President Barack Obama's jobs speech Thursday night will address one of the most critical economic factors affecting the country – but the content is likely to disappoint America's unemployed.
Last week's jobs report showed zero job growth in August, and the unemployment rate held at 9.1%, increasing pressure on Washington to deliver relief for the jobless.
But analysts warn not to expect any revolutionary new developments on how to improve the country's weak employment outlook.
"I don't believe we are going to be slack-jawed by the speech," Larry Sabato, director of the Center of Politics at the University of Virginia, told MarketWatch.
President Obama and the White House have only previewed some of the details. The president is expected to propose a $300 billion job creation plan delivered through tax cuts, infrastructure spending and state and local government aid.
President Obama faces strong opposition from congressional Republicans who vehemently oppose more government spending when the country is already more than $14 trillion in debt. He'll also face many skeptics who see small business hiring as the only way to successfully cut the country's unemployment rate.
Get Ready Now for Dismal September Market Performance
Investors beware – the dismal days of September market performance are here.
September notoriously often leaves markets in negative territory. Since the start of the Dow Jones Industrial Average in 1896, the index has lost an average of 1.07% in September, with a 0.71% average gain for all other months.
That's a 1.78-point spread – enough to be "statistically significant at the 95% confidence level," and be considered a genuine pattern by statisticians.
More discouraging, the market has performed especially poorly in past Septembers when the preceding months were weak.
And that's where we are today.
August took markets on a wild ride. The Standard & Poor's 500 Index fell 5.7% and the Dow 4.4%. The month included two of the top ten worst-performing Dow days ever – a 635-point drop on Aug. 8 and a 513-point drop on Aug. 4.
Now with investors digesting a slew of disappointing economic reports, and the U.S. Federal Reserve unlikely to announce any stimulus measures until the end of the month at the earliest, it doesn't look like this September will buck the trend.
In fact, it could easily be worse.
30 Dismal Days Hath September
Investors tend to misidentify October as the worst month for stocks, but September has had its share of dismal days.
Apple Inc. (Nasdaq: AAPL) Loses its Magic Touch with Steve Jobs' Departure
Jobs helped Apple's share price climb to $373 – a 9,020% gain since 1997 when he was named interim CEO. Earlier this month, Apple's market capitalization grew to $337.17 billion and it briefly displaced Exxon Mobil Corp. (NYSE: XOM) as the most valuable U.S. company, but was unable to hold the lead.
All this from a college dropout who quit his first job to backpack around India.
Yet, the legendary Jobs stunned fans and employees late Wednesday when he announced he would step down as the chief executive officer of the tech giant, 35 years after making his first computer in his parents' garage.
Jobs recommended the company appoint his current fill-in Chief Operating Officer Tim Cook as CEO. Apple's Board immediately did so.
Still, as capable as Cook may be, Jobs' "magic man" presence is irreplaceable.
"I believe the top is in for Apple and it will become a more "normal' company in the future," said Money Morning Global Macro Trends Specialist Jack Barnes. "Steve was an edge they cannot replace. While the company is rich and profitable, it has lost its prophet."
Steve Jobs' Irreplaceable Creative Force
The news wasn't a shock to some Apple-watchers who speculated Jobs' worsening health would lead to a premature exit.
Jobs had been on medical leave since January, popping up occasionally for conferences and product unveilings. This is his third health-related absence; he was gone in 2004 to undergo pancreatic cancer treatment, and again in 2009 for a liver transplant.
Jobs' personality and demanding management style – paired with his creative genius – are what vaulted Apple to the innovative tech leader it's become.
Perhaps the hardest loss for Apple will be Jobs' intuition.
"The big thing about Steve Jobs is not his genius or his charisma but his extraordinary risk-taking," Alan Deutschman, who wrote a biography of Jobs, told The New York Times. "Apple has been so innovative because Jobs takes major risks, which is rare in corporate America. He doesn't market-test anything. It's all his own judgment and perfectionism and gut."
Target Corp. (NYSE: TGT) Has Dethroned Wal-Mart as the Discount King
For years retailers have tried to get an edge on Wal-Mart, and through added business segments, new discounts and a streamlined store focus, Target may have done just that.
Even with a tough outlook for U.S. retail spending, the company is expected to do well for the rest of the year.
Burt Flickinger, managing director of Strategic Resource Group, said Target's been delivering all the right moves a retail company should make when the economy falters.
"Target's strategic plan is much stronger than Wal-Mart," Flickinger said. "Wal-Mart is going the wrong way."
Target Corp.: Shoppers' Delight
To compensate for a stagnant economy, Target slowed store openings and gave added incentives through discounts. The efforts helped boost same-store sales 3.9% last quarter, the biggest boost since 2007.
It also opened a grocery section in most stores to become more of a one-stop shopping experience, like many Wal-Mart locations. The grocery business boosted profitability and only slimmed margins to 31.6% from 32%.
Target's focus on consumable items is part of a strategy to generate more same-store sales in a few geographic regions, compared to geographically diversified Wal-Mart. The business shift has paid off.
It's Not Just Congress – the System Has Failed
Sandra Bloom is in a frustrating position, and she feels stuck.
She put faith in people to do some work for her – and they've failed.
Not only did they fail to fulfill promises, they've created a bigger mess than the one they were supposed to fix.
Like many Americans, Bloom hoped the U.S. Congress would improve the country's struggling economy this year. Instead, she watched elected leaders squabble and finger-point while the U.S. credit rating was downgraded and federal debt climbed past $14 trillion.
"I am so angry at Congress for the way it is not doing its job," Bloom wrote in an e-mail to Money Morning. "There is no longer any attempt to do what is best for the country, no attempt to compromise."
Bloom shared her thoughts on what's wrong with Congress in response to a dismal CBS News/New York Times poll in early August that revealed 82% of Americans disapprove of the way Congress is doing its job – the highest disapproval rating since polling began in 1977.
This was on the heels of a USA Today/Gallup Poll in Julythat showed just 7% of Americans believed their representatives in Washington were negotiating in good faith when it came to the debt-ceiling debate.
We asked you, our readers, just what's wrong with Congress – and the overwhelming majority emphatically agreed: Elected representatives are only out for their own interests, not those of the people.
"All they have been doing is playing chicken to see who blinks first, and the American public is the loser," said Bloom. "They would rather one side's ideas be defeated than accomplish any meaningful legislation."
That could mean it's time for a change.