How the Greece Bailout Turned Gold Into a 'Must-Have' Investment
With so much uncertainty in the U.S. stock market - not to mention the debt-contagion concerns emanating from Greece and other European Union (EU) countries - it's more important than ever for investors to hold "hard assets," such as gold and other commodities.
In my view, what's happening in Europe is particularly important for investors to be aware of and understand. The so-called " shock-and-awe" bailout strategy undertaken by the EU and the International Monetary Fund (IMF) - which establishes a $1 trillion rescue package for member-countries facing financial crisis - will not be the answer.
To see how gold and other hard assets are becoming "must-have" investments, please read on... Read More...
Question of the Week: Readers Respond to Money Morning's Corporate Profits Query
Corporate profits returned in full in the first quarter of the year, with company after company topping Wall Street estimates.
JPMorgan Chase & Co. (NYSE: JPM) raked in $3.33 billion in first-quarter net income. Ford Motor Co. (NYSE: F) beat analysts' estimates with a $2.1 billion profit. Apple Inc (Nasdaq: AAPL) brought in $3.38 billion.
"There is clear and broad-based improvement in the economic factors in the United States and around the world," said JPMorgan Chief Executive Officer Jamie Dimon. "It appears to be strengthening, not weakening. It is possible that they will strengthen enough to end up with a strong recovery."
China Manufacturing Data Could Presage a Rising Yuan
Manufacturing activity in China and much of Asia continued to expand in March, underscoring the region's role as a driving force in the global economic recovery.
China's official Purchasing Managers' Index (PMI) rose to a seasonally adjusted 55.1 from 52 in February, according to Li & Fung Group, a Hong Kong-based company that releases data for the Federation of Logistics and Purchasing. It marked the 13th straight month the index showed expansion and was in line with the median estimate in a Bloomberg News survey of 13 economists. A reading above 50 indicates growth.
Another PMI for China released by HSBC Holdings PLC (NYSE ADR: HBC) was even more positive, showing a rise to 57.0 in March from 55.8 in February.
With Inflation Accelerating Around the World, Will the United States be Next?
Inflation is now thoroughly entrenched in India's economy, and some analysts fear that the United States could suffer the same fate if adjustments to monetary policy aren't made soon.
India's wholesale price index-based inflation rate in February accelerated to 9.89% from a year earlier. That was the fastest pace in 16 months, blowing past the Reserve Bank of India's (RBI) estimate for an 8.5% inflation rate at the end of March.
Soaring food prices were the primary driver of inflation. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 16.3% in the week ended March 6 from a year earlier after a 17.81% gain the previous week.
Producer Price Index Drop Supports Fed's Position on Keeping Low Interest Rates
The Producer Price Index (PPI) saw its biggest drop in seven months in February, fueling the U.S. Federal Reserve's argument that interest rates can remain low "for an extended period" without yet facing dangerous inflationary pressures.
Wholesale prices were down a seasonally adjusted 0.6% in February, the Labor Department reported today (Wednesday), a day after the Fed's one-day policy meeting where it reiterated the need to encourage economic growth through low interest rates.
The central bank's position to keep the federal funds rate at a record low range of zero to 0.25% since December 2008 has sparked inflation concerns among many investors. However, proof of tame inflation buys the Fed more time in deciding when to continue with its "exit strategy" and pull the trigger on a rate hike. The Fed has remained firm on its stance that there is no evidence of rising inflation due to low interest rates.
Will Obama's "Soft Money" Fed Lead to Hard Times for the U.S. Economy?
For a U.S. president, nominating Fed governors is a little like nominating Supreme Court justices: Since they serve a 14-year term, you have the chance to shape the U.S. Federal Reserve for a decade after your administration ends. What's more - even though Fed governors are subject to confirmation by the U.S. Senate - you're far less likely to have trouble getting them through than you do with the Supremes.
That's why U.S. President Barack Obama's current chance to nominate three out of the seven Fed governors is legitimate front-page news - and isn't merely the "inside monetary baseball" trivia that occupies much of the daily business section. Probably two of those three governors still will be serving in 2020, long after President Obama has published his memoirs.
The bottom line: One of President Obama's legacies will be a "soft money" Fed.
To discover the dangers of a "soft money" Fed, read on... Read More...
China's Exports Surged by 46% in February, Adding to Currency Pressures
China exports in February rose for the third month in a row, beating forecasts and putting added pressure on government officials to rein in stimulus spending and loosen currency policies.
Exports in February jumped 45.6% from a year earlier after a 21% advance in January, the customs bureau reported today (Wednesday) on its Web site.
Seasonally adjusted imports in February rose 6.3% from the previous month, reversing January's 0.9% drop and narrowing the Red Dragon's trade surplus, indicating domestic demand remains strong despite government efforts to slow lending.
Analysts say the February data is hard to interpret since... Read More...
China Draws Plan to Reduce Risk While Continuing Economic Growth
Chinese Premier Wen Jiabao on Friday pledged to maintain economic growth of at least 8% in 2010, while gradually drawing down government spending and taking measures to guard against inflation and potentially devastating asset bubbles.
The remarks came during Wen's annual report to the National People's Congress in Beijing - which is the equivalent of the United States' State of the Union speech - and they highlight the central government's determination to promote responsible levels of growth.
The call for 8% annual economic growth is the same goal that has been maintained since 2005 - and one that was easily passed last year with the implementation of a sprawling $586 billion stimulus package.
Six Ways to Profit as Brazil's Economy Takes Off
In many ways, Brazil offers some of the best prospects among emerging markets and deserves to be a core holding in any international portfolio.
Brazil's economy had only a shallow recession and is now recovering nicely. Its market has been one of the best performing since Dec. 31, 2008, and both inflation and the budget deficit remain under control.
Yet one can be only moderately bullish - and I'll explain why.
To find out how to profit from Brazil's bullish prospects, read on...
Australia Increases Rates, Canada Stays Steady as Both Cast Wary Eyes Toward Inflation
Canada and Australia, two resource-rich nations that are recovering quickly from the global recession, yesterday (Tuesday) reaffirmed interest rate policies as both promised to remain vigilant about rising inflation.
The Reserve Bank of Australia (RBA) raised its cash rate target by a quarter of a percentage point to 4.00%, while the Bank of Canada (BOC) kept its benchmark interest rate at record lows. Both central banks said inflation and economic output have been higher than policymakers expected.
The target rate for overnight loans between commercial banks in Canada will remain at 0.25%, the same level it's been since April 2009, exactly in line with predictions by 22 economists surveyed by Bloomberg News. The central bank also repeated a pledge to leave it unchanged through June unless the current inflation outlook shifts.
Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"
Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.
Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.
The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions -- including low rates of resource utilization, subdued inflation trends, and stable inflation expectations -- are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.
The Essential Eight: The Only Economic Indicators Investors Need to Know
Housing starts. PPI. Same-store sales. Weekly jobless claims. Philly Fed. Lagging indicators. Core CPI. Industrial production.
When it comes to economic indicators, the list is almost endless. One economic indicator follows another, filling an entire calendar - weekly, monthly, quarterly, annually. But on the specific day an indicator is announced, it seems to be the biggest deal going: Commentators comment, pundits pontificate, analysts and economics analyze, predict and forecast, and financial markets around the world react - often violently.
The next day brings a new batch of indicator reports. Yesterday is forgotten as the frenetic cycle plays itself out all over again.
Given this pattern, it's not surprising that the economic-indicator game seems confusing - and perhaps even pointless. In the eyes of many investors, the only thing these indicators seem to "indicate" about the economy is that it can be highly confusing and extremely difficult to predict.
How the Looming "Debt Bomb" Will Crush the Dollar
The U.S. dollar has staged a short term rally against other currencies. But the U.S. is already gripped by hidden inflation and must refinance a mountain of short-term debt in just months.
Here's how to protect - and grow - your money, even as the debt bomb explodes... Read More...
The Five Factors That Could Rescue U.S. Stocks
When the stock market is enduring as much trouble as it has been lately, it pays to remember that there are still many positive catalysts that are in place and working to buoy securities prices.
Let's take a few moments to consider the top candidates:
- A Friendly Fed: The current U.S. Federal Reserve under Chairman Ben S. Bernanke is the most accommodative in history and is likely to keep short-term interest rates at or near zero for the remainder of this year. Occasionally there will be rumblings of an increase - as there was in The Wall Street Journal last Monday, but they are likely just smoke screens.
Europe-China Connection Could Rattle Stocks
I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.
The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.
Read more about the Europe-China connection... Read More...