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How "Minuteman" Warren Buffett is Leading America's New "War of Independence"

In our Aug. 11 Private Briefing report What Does This “Mysterious Signal” Tell Us About CB&I? we said we suspected that super-investor Warren Buffett would use the sell-off in Chicago Bridge & Iron NV (NYSE: CBI) to boost his stake in the this Netherlands-based infrastructure specialist.

And that’s just what happened…

  • Eurozone

  • Hungary is the Latest European Domino to Fall As if Greece, Spain and Portugal were not enough of a concern for the European financial system, another villain has emerged from behind the curtains: Hungary.

    A new government swept into office in late May and the ruling party leader declared the country had little chance of avoiding a Greek-style credit crisis because the former government had been cooking the books.

    A spokesman for Prime Minister Viktor Orban said it was not an exaggeration to talk about the potential for default.

    Read More...
  • Are Spain's Banks Better Off than Speculators Would Like to Believe? Somebody is bluffing.

    Either Spain's financial system is on the verge of a breakdown, or hedge funds and speculators are exaggerating the vulnerability of Spain's banks to capitalize on short-selling Eurozone securities.

    Investors will have a clearer picture of what's going on in Spain when the results of stress tests performed on the nation's banks are released. But until those results are known, rumors of a bailout of Spain will continue to circulate and liquidity will remain tight.

    Borrowing costs in Spain and throughout Europe have been on the rise in recent months, as market observers fret over high levels of debt. At a closely watched auction for 12- and 18-month bills on Tuesday, the Spanish government raised $6.4 billion (5.2 billion euros). However, the 2.3% interest rate on the 12-month bills was 0.7 percentage points higher than what it paid last month. And t he yield on the country's benchmark 10-year bond rose 9 basis points to 4.823%, the highest in almost two years.

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  • Stock Market Stuck as Investors Demand Risk Premium for Buying Stocks rose worldwide over the past week by 2% to 5%, swelling with sudden courage after positive economic reports from China and shaking off some worsening news in the United States about retail sales and jobs.

    Yet results in the past month are still heavily negative, ranging from -5.5% for U.S. stocks and -8.5% for Europe. China has suddenly become the most buoyant region, up 1.5% in the past month.

    The variation in one-week and one-month results illustrate perfectly how investors are showing that they are hopeful but unconvinced that recent strength in GDP growth and corporate income advances are sustainable, and therefore won't buy stocks heavily until prices are so cheap that they discount worst-case scenarios. They want a high risk premium, in other words, before buying -- sort of like demanding a 72-month warranty before buying an expensive car.

    Click Here to Find Out How the Risk Premium is Holding Back Stocks...

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  • From Leader to Laggard: Is it Time to Bet Against the U.S. Dollar? The U.S. dollar has been one of the world's strongest currencies in the first part of 2010, posting double-digit gains through the end of May.

    And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.

    In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.

    But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.

    To see why the dollar could roll over - and to see how to play it - please read on ... Read More...
  • Spain's Banco Santander Stands Strong Against Debt Crisis with Confident Global Expansion The Eurozone's largest bank, Banco Santander, S.A. (NYSE ADR: STD) of Spain, showed the European debt crisis has not hurt its prospects by announcing today (Wednesday) it would buy Bank of America Corp.'s (NYSE: BAC) stake in its Mexico unit. The $2.5 billion purchase increases Santander's exposure to the high growth opportunities of Mexico's banking sector.

    Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.

    "Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.

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  • Defensive Investing: Eight Ways to Tell if Your Mutual Fund Still Fits You With the whipsaw patterns U.S. stocks have experienced in recent weeks - both the Dow Jones Industrial Average and Standard & Poor's 500 Index are down 12% from their highs for the year - even the most ardent buy-and-hold investors are studying their portfolios, searching for holdings to cull.

    But what if your buy-and-hold strategy has been implemented using mutual funds? As part of a solid "defensive-investing" review, should you consider bailing out of your current mutual-fund holdings at this point and looking for better funds to ride into any future recovery?

    You'll only know if you take the time to make the review. And you should take that time.

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  • Why U.S. Stocks Will Rise Above Weak Growth in Global Markets After another lousy week, it's official: Global markets have suffered the worst late-spring setback since 1940 -- a May-June period when the Germans invaded the Netherlands, then marched into Paris, and Italy declared war on France and Great Britain. Just like that, seven decades ago, World War II was on, and markets went into freefall.

    If stocks are as good at anticipating global calamity this time as they were in that horrible spring 70 years ago, we may be in for a terrible second half.

    It's a bitter irony that so many of those old enmities are flaring up again on the Continent at this critical time. The European Union was created two decades ago at behest of the former Allies to prevent the Continent from sliding into armed conflict again, and the euro currency was later launched to cement the new political relationship.

    But many centuries of deep-seated distrust are hard to negate with diplomacy and idealistic optimism, and now we see Europeans back at each others' throats in a flurry of recriminations over who is to blame for outrageous deficits, debts and defaults in the Eurozone -- and more importantly, who should pay for them.

    To read about how Europe's turmoil could affect the U.S. economy, click here. Read More...
  • This Weekend's G-20 Meeting Won't Bring Any Answers on Financial Regulation Finance ministers from the Group of 20 (G-20) nations this weekend will attempt to reach a compromise on the implementation of stricter banking regulations at a meeting in Busan, South Korea. However, significant changes to financial regulation will come slow, if at all.

    The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.

    "Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."

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  • Two Big Reasons to Believe the U.S. Stock Market Will Bounce Back There's been a lot of cheerless news coming out of Europe lately, and that's taken a toll on the U.S. stock market. But I want to take this opportunity to offer up some positive points and remind investors that it's still too early to declare the bull-market dead, and even more premature to fret over a new bear market beginning.

    There are two key considerations that support a continued rise in U.S. stocks:

    To find out why it's too early to give up on stocks, read on... Read More...
  • Banks and Investors Both Rattled by European Debt Concerns European debt concerns continued to weigh on investor sentiment today (Thursday) as rumors circulated that the European Central Bank (ECB) was planning an intervention into the continent's banking sector.

    The ECB is buying government bonds and increased its lending to banks, but that has done little to alleviate concern that the nearly-$1 trillion (750 billion euros) Eurozone bailout package announced last month won't be enough to prevent a collapse in the banking industry.

    The ECB said on Monday that European banks will have to write off more loans this year than they did in 2009. The region's banks are expected to write off some $237 billion (195 billion euros) in bad debt by 2011.

    Read More...
  • Question of the Week: Readers Respond to Money Morning's Market Volatility Query The Dow Jones Industrial Average last week dipped below 10,000 for the first time since February as a month of market volatility and price declines continued. Analysts predicted volatility to continue into June as government exit strategies begin and liquidity dwindles.

    The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.

    "I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst." Read More...
  • Caution Is the Buzzword After Last Week's Stock Market Drop Risk aversion was the story of the week last week amid rising exasperation with Eurozone countries to act in unison to solve their debt afflictions and swelling concerns that financial reform may constrain U.S. financial companies' profits. Economic reports didn't offer much help to the stock market, as industrial manufacturing outlooks showed a surprising amount of slowing.

    Stocks mounted a modest bounce on Friday after a week that saw the major market averages sink another 2% to 4%. All of the positive action in the week came in a single low-volume session on Thursday that didn't ultimately do much to erase the negative tone of the worst May since the Kennedy administration.

    More troublesome was the fact that positive corporate earnings news and mergers failed to bolster the appetite for stocks. Companies as varied as Dell Inc. (Nasdaq: DELL), Chicos FAS Inc. (NYSE: CHS), Brocade Communications Systems Inc. (Nasdaq: BRCD) and Sears Holding Corp. (Nasdaq: SHLD) beat analysts' expectations this month but saw their shares thrashed by up to 20%.

    Most emerging markets fell hard during the week, and there was a broad sense that institutional investors were purging portfolios of high-beta assets that could be vulnerable to a slowdown in earnings growth. This is why bland food makers like Campbell Soup Co. (NYSE: CPB) and General Mills (NYSE: GIS) have survived the month without a crunch, but more economically sensitive companies like Johnson & Johnson (NYSE: JNJ) and Intel Corp. (Nasdaq: INTC) have flailed.

    While the Standard & Poor's 500 Index did not close on Friday above its 200-day average -- the level that separates bull cycles from bear cycles -- the Nasdaq 100, Midcap 400 and Smallcap 600 did. This will be used by bulls as evidence that the May decline was just a modest setback on an upward journey.

    Yet bears are making a good case that this is much more than a mere correction. Breadth has been hellaciously negative except for the 11-1 positive session on Thursday, and less than 100 stocks are making new highs on the three major U.S. exchanges. Plus volume has been much bigger on down days than up days, a sign of distribution.

    Read More...
  • Global Recovery Gaining Momentum, but Obstacles Remain The Organization for Economic Cooperation and Development (OECD) announced yesterday (Wednesday) that it has lifted its economic growth outlook, but warned that governments must enforce strict fiscal policies to sustain the global recovery and balance global expansion.

    The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.

    The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.

    Read More...
  • Is Europe on the Verge of a Liquidity Crisis? The euro's recent struggles have done more than bring the currency's viability into question. They've put the European Central Bank (ECB) on a collision course with a liquidity crisis.

    The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.

    The euro yesterday (Wednesday) remained at a near four-year low against the dollar, tumbling 0.5% to $1.2306. The beleaguered currency dropped against the yen and British pound, as well.

    Read More...
  • U.S. Treasury Bonds: The Not-So-Safe "Safe Haven" In the last few weeks, international investors spooked by the budget crisis in Greece and the turmoil in southern Europe have been flocking into the U.S. Treasury bond market as a "safe haven."

    The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?

    To learn about the potential investment dangers posed by U.S. government debt, please read on... Read More...