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A Greek Default is Bad – But a Greek Bailout Much Worse
Many investors continue to favor a Greek bailout to prevent the Eurozone's first sovereign default – but they are rooting for the wrong solution.
Greece has requested another loan from its European neighbors to cover next year's $43 billion (30 billion euros) shortfall as yields on 10-year Greek bonds have climbed over 16%.
The second Greek bailout would come about a year after the European Union (EU) and International Monetary Fund (IMF) loaned the struggling country $158 billion (110 billion euros) to meet soaring financial obligations. Greece took the money on the terms that it would implement austerity measures and cut its massive budget deficit, but the country failed to meet the agreed-upon targets.
EU and IMF officials have been reviewing Greece's cost-cutting actions to determine if the country – now with about $430 billion (299 billion euros) in debt – deserves another huge loan. EU leaders have also considered asking investors to reinvest in new Greek debt when existing bonds mature, buying time to stabilize Greece's sinking economy.
Extreme Weather Conditions to Threaten U.S. Agriculture for Next Decade
U.S. agriculture is likely to face harsh weather for the next decade, threatening food production and the livelihood of the nation's farmers.
Extreme weather conditions have slammed the United States this spring. Tornadoes and flooding in many U.S. states have killed hundreds and ripped through millions of acres of farmland. Residents of Joplin, MO continued to sift through rubble this week after being hit Sunday by the nation's deadliest tornado since 1953.
Many U.S. towns now have to rebuild from devastating losses, and many farmers are left with a questionable future for their land.
This prompted a reader to ask the Money Morning Mailbag how U.S. agriculture and food prices have been affected by the nation's drastic weather conditions.
What does all the recent weather catastrophes in the United States mean for crops and farmland? Will this add to food prices that are already too high for our own good?
– Rob S.
Restrained Worldwide Population Growth is a Long-Term Benefit
Money Morning Contributing Editor Martin Hutchinson detailed earlier this week how worldwide population growth will affect global commodity prices, prompting many readers to express praise for his well-supported analysis.
Hutchinson cited the United Nations report "2010 Revision of World Population Prospects" published May 3, where the UN estimated that the global population would reach 9.3 billion in 2050. This means prices for oil, metals, and food are also likely to climb much higher by 2050.
"The total impact of the UN's spiraling population projections will be seen over the long haul," said Hutchinson. "And that means that — even when interest rates are back to normal levels — global commodity prices will not return to levels we would consider ‘normal.' Oil prices will never see $20 a barrel again; their bottom is probably somewhere in the range of $60 a barrel to $80 a barrel — after which they march higher."
Increasing U.S. Oil Production Won't Stop Rising Gasoline Prices
This year's surge in oil prices and resulting high gasoline prices have many calling for more U.S. oil production as a solution.
Rising oil prices have pushed the U.S. average price per gallon of gasoline to $3.98. Oil prices, despite a recent slip, are up about 11% this year. West Texas Intermediate crude oil hovered around $99 a barrel yesterday (Thursday), and many experts expect it to hit $150 a barrel this year.
Many consumers want an increase in U.S. oil production to lower oil and gasoline prices, as well as reduce U.S. dependence on foreign oil for a national security benefit. Domestic activity has slowed since BP PLC's (NYSE ADR: BP) Gulf oil spill last April. Critics claim that U.S. President Barack Obama hasn't done enough to support a U.S. oil industry that provides needed jobs and revenue and could help keep oil costs from rising much higher.
Copper Price Forecast: Why the Red Metal is on a Long-Term Bull Run
With metals and commodities on a long-term bull-market run, investors have recently turned their attention to copper.
The red metal's price recently has fallen due to mixed economic data. Copper's use as an industrial metal – it's widely used in buildings, electronics, appliances and automobiles – makes it sensitive to economic growth prospects.
But despite the recent dip, many analysts and industry experts have a bullish copper price forecast.
U.S. Consumers Stumble Over Bernanke's "Transitory Inflation" Claim
In the first-ever press conference by the U.S. Federal Reserve, Fed Chairman Ben Bernanke tackled a handful of eager reporter questions about why he continues to think rising inflation does not warrant a change in interest rates.
The Fed announced Wednesday after a two-day meeting of the Federal Open Market Committee (FOMC) that it would keep its record-low interest rates between 0.00% and 0.25% "for an extended period."
Bernanke stressed to reporters that "longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued," and Fed policies would keep "transitory inflation" under control.
Haynesville Shale a Key Producer in U.S. Natural Gas Industry
U.S. interest in renewable energy sources like natural gas has increased as oil prices continue their steep climb.
Natural gas futures on the New York Mercantile Exchange (NYMEX) yesterday (Thursday) rose 2.48% to $4.42 per million British thermal units (btu) after the U.S. Energy Department reported a smaller than expected storage increase.
A recent Money Morning Mailbag installment addressed how rising natural gas demand has turned investors on to shale gas, the unconventional gas found in tight shale rock formations.
Rising Natural Gas Demand Turns Investors on to Shale Gas
Natural gas will become more important as the world slowly transitions to renewable energy sources, making shale gas reserves a hot topic in the energy industry.
A recent report from Canadian investment bank AltaCorp Capital Inc. said natural gas use could increase nearly 80% over current levels by 2050.
"In the move towards increasing use of renewables, natural gas will play a much bigger role than just 'bridge fuel,' we believe it will become the largest source of energy on the planet," AltaCorp analyst John Mawdsley wrote in the report. "We expect companies levered to natural gas, especially those with long-term unconventional resources, will see significant share price appreciation as natural gas demand increases."
Obama Energy Policy Boosts Natural Gas Stocks
U.S. President Barack Obama addressed Georgetown University students Wednesday with a speech about U.S. energy policy. Many of his goals were the same as previous U.S. government energy policies: cut foreign oil dependence, promote energy conservation, and explore alternative fuels.
However, it was the president's comments regarding natural gas that had the biggest impact on energy markets.
The natural gas contract for May delivery gained 9 cents, more than 2%, to $4.356 per 1,000 cubic feet on the New York Mercantile Exchange following Obama's speech Wednesday.
Three Investments to Consider for Your Retirement Portfolio
Americans used to ride a "three-lane highway" into retirement: a traditional pension, Social Security, and individual savings plans, like 401(k)s.
But the recent economic downturn packed a devastating punch to many 401(k) accounts, U.S. households have dipped into savings to make ends meet, and debt-laden federal, state and local governments will have trouble meeting pension and Social Security obligations.
The 2011 Retirement Confidence Survey released last week by the Employee Benefit Research Institute showed 27% of workers are "not at all confident" about their retirement, up 5% from a year ago.