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How to Profit From Wall Street's Biggest Gaffe in Decades

I was perusing the newswires a few weeks ago when the following Reuters news story headline all but physically grabbed my attention.

It stated: “Exclusive: Morgan Stanley Rebuilds in Commodities Trading.”

Most folks probably looked at this and tossed it off as just another of the endless machinations of Wall Street.

But I knew better…

  • Featured Story

    November U.S. Jobs Report: What to Expect

    When the Department of Labor releases the November U.S. jobs report tomorrow (Friday), brace yourself for dismal news.

    U.S. jobs growth most likely experienced a sharp slowdown last month as the late-October Superstorm Sandy interrupted economic activity.

    According to a Reuters survey of economists, nonfarm payrolls are forecast to show a gain of just 93,000 in November, down considerably from 171,000 in October.

    Economists surveyed by CNNMoney are more pessimistic, calling for nonfarm payroll gains of 77,000 in November.

    Barclays' outlook is even bleaker. The bank sees a gain of 50,000, which would push the jobless rate to 8.0% from 7.9%.

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  • Jobless Claims

  • Question of the Week: U.S. Government Spending the Wrong Way to Fix Job Market The U.S. unemployment rate has hovered around 10% for months - with no real signs of improvement. As American workers grow increasingly impatient, the U.S. government is running out of options to help the job market. But with midterm elections approaching, U.S. President Barack Obama is trying to show voters there's hope in resolving the stubbornly high unemployment rate. Last week he unveiled a six-year infrastructure plan that would invest billions in transportation projects and create a "substantial" number of jobs.

    The government would supply $50 billion off the bat to rebuild 150,000 miles of roads, 4,000 miles of rail and 150 miles of runway, plus modernize the air traffic control system. The plan also sets up a government-run infrastructure bank to finance the projects, combining tax dollars with private investment for funding.

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  • Obama Stimulus More About Politics Than Jobs U.S. President Barack Obama yesterday (Wednesday) finished unveiling of a $350 billion stimulus package that the White House hopes will assuage the fears of troubled homeowners and create jobs. But with midterm elections looming and Congressional Democrats expected to sustain heavy losses, it's unlikely the plan will even get passed - much less generate any meaningful economic growth.

    Indeed, the true aim of Obama's new stimulus is to put Republicans in a difficult position.

    "The president has changed the conversation from whether to renew or terminate President Bush's tax cuts to his own tax-cut agenda, and is promoting a couple of business-friendly proposals that Republicans have previously promoted," David Wessel wrote in The Wall Street Journal. "So Republicans either oppose them, and look hypocritical, or back him: a win-win for Democrats."

    Obama's new proposals employ a front-loaded approach with tax cuts to spur business spending and infrastructure projects to promote job creation.

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  • Question of the Week: Readers See Failures in Fed's Policies During U.S. Economic Recovery The U.S. Federal Reserve last week said it would take a small "easing" step - what Fed watchers described as a largely symbolic move designed to show the central bank is "concerned" with the nation's economic outlook. The central bank's policymaking Federal Open Market Committee (FOMC) said it would hold interest rates at record-low levels and announced it would reinvest maturing mortgage-backed securities back into the market so that its balance sheet does not shrink.

    However, Analysts think the Fed will have to do more to help the economy move along, and are expecting more announcements of policy easing in coming weeks.

    "I suspect that the Fed will, within time, purchase more longer-dated government securities" than is required by reinvesting the principal payments from agency debt and agency mortgage-backed securities in the Fed's portfolio, said veteran Wall Street economist Henry Kaufman to Reuters.

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  • Investing Strategies: How to Protect Yourself if the U.S. Economy Catches the "Japan Disease" Grim unemployment figures, growing worries about crushing debt loads and the apparent absence of any inflation are causing many investors to ask a tough question: Is the U.S. economy catching the "Japan disease," the dreaded and dreadful malaise that has left the onetime Asian powerhouse in a stagnant state since 1990?

    It's a crucial question.

    And the answer will guide your investment decisions for the next 20 years.

    To find out the best investments to be making right now, please read on... Read More...
  • Three Ways to Brace for a Double-Dip Recession: Going Global The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

    That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.

    The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real.

    The world's No. 1 economy lost 8.4 million jobs during the recession that got its start in December 2007, making it the worst national downturn since the Great Depression and the biggest loss of employment since the end of World War II.

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  • Three Ways to Brace for a Double-Dip Recession: Going for the Gold The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

    That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.

    The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real. Indeed, with each passing week, and with every new economic report that comes out, the possibility that the U.S. economy will backslide into a double-dip recession seems to become more of a probability - or even a likelihood.

    "For me a 'double-dip' is another recession before we've healed from this recession [and] the probability of that kind of double-dip is more than 50%," Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters. "I actually expect it."

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  • Emerging Stock Markets Thrive as U.S. Shares Tumble As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.

    Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook fromCisco SystemsInc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.

    Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.

    Read on to find which markets are outshining the U.S.... Read More...
  • An Anemic Economic Recovery Keeps the Fed From Focusing on Inflation With interest rates near zero and a balance sheet that's in excess of $2 trillion, U.S. Federal Reserve Chairman Ben Bernanke would be very glad to offload some of the Fed's obligations. But so far he's has been unable to do so, as an anemic economic recovery continues to monopolize his attention.

    The central bank yesterday (Tuesday) announced that it would reinvest the proceeds from expiring mortgage-backed securities into longer-term U.S. Treasuries. The move should help a weakening economy by keeping mortgage rates low. And while it also may boost inflationary pressures, the central bank feels it had little choice.

    "Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months," the Federal Open Market Committee said.

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  • Slight Job Gains Won't Shrink the High Unemployment Rate Employment reports released this week show mixed results, but lead to the same conclusion: The high unemployment rate isn't improving any time soon.

    U.S. private-sector jobs last month grew by only 42,000, according to a report issued yesterday (Wednesday) by payrolls processor Automatic Data Processing, Inc. (Nasdaq: ADP). ADP revised the number of jobs added in June to 19,000 from 13,000, which fell far short of economists' predictions of 39,000.

    The ADP report "shows continued weakness in the jobs market, which is in part caused by the uncertainty in the economy and general business climate," said Gary Butler, ADP's chief executive, in a statement. "American businesses are on the cusp of recovery, but more effective incentives are needed to encourage business investment resulting in the creation of more jobs."

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  • Consumers Buck Economic Trends to Help Retail Sales Post Fastest Growth in Four Years The American consumer bucked strong economic headwinds to help retail sales post the fastest growth in four years, a report is expected to show today (Thursday), boosting optimism that shoppers are overcoming concerns about unemployment and a slumping housing market.

    Sales are expected to come in at the upper end of a range between 3-4% for the first five months of the retail fiscal year that began Jan. 31, the biggest gain since 2006, the International Council of Shopping Centers (ICSC) said in advance of its June report.

    The biggest gain in retail sales since 2006 could be a signal that consumers are weathering last month's drop in consumer confidence and are not as concerned as analysts feared about the economic rebound.

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  • U.S. Economy: Headed For a Second-Half Slowdown Constant stock market volatility, a crippled job market and the troubles plaguing the European markets are starting to take their toll on the U.S. economy. After the major market rally of 2009, is the U.S. economy headed for a second-half slowdown... or, worse, the dreaded double-dip recession? Read this report to find out exactly what’s in store for the U.S. economy... Read More...
  • Misguided Policy Paving the Way for a Double-Dip Recession With unemployment still hovering near 10%, policymakers should be doing all they can to combat joblessness and reinvigorate a recovery that is showing signs of weakness.

    But they're not.

    Instead, they're reeling in stimulus measures and enabling a double-dip recession, simply for the sake of fiscal austerity.

    The Labor Department is expected to report today (Friday) that the unemployment rate held steady at 9.7% in June, or worse, edged up to 9.8%. That would follow yesterday's (Thursday's) disappointing report that showed new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. The four-week moving average, which smoothes out volatility, rose by 3,250 to 466,500 - its highest level since March.

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  • Money Morning Midyear Forecast: The U.S. Economy is Headed For a Second-Half Slowdown Most textbook economists say that the U.S. economy is engaged in a broad-based recovery. But while there's a consensus that there's no "double-dip" recession on the horizon, the evidence suggests the nation's economy is headed for a slowdown in the second half of 2010.

    The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.

    If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.

    And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.

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  • Can Bulls Lift a Market Threatened By Uncertainty Surrounding U.S. Stimulus Measures? Stocks spilled the past week like water over a broken dam as investors priced in more evidence that consumers, businesses and home-buyers have gone on strike despite U.S. stimulus measures and record-cheap interest rates that have put mortgages, car loans and store-credit costs at 100-year lows. In the five-day span, the Dow Jones Industrial Average fell 2.5% and the Standard & Poor's 500 Index sank 3.6%; Nasdaq and Russell 2000 Index all fell 3.2%.

    Catalyst for the latest spasm of selling came from disappointing news on durable goods sales and initial jobless claims, and weak earnings news or outlooks from consumer-facing companies BedBath & Beyond Inc.(Nasdaq: BBBY),Darden Restaurants, Inc.(NYSE: DRI),Lennar Corp.(NYSE: LEN) andNike, Inc.(NYSE: NKE).

    All of the major U.S. and global indexes are now below their 200-day averages for the first time since early June.

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  • Slower Productivity Growth May Force Businesses to Increase Hiring U.S. productivity rose faster than expected in the first three months of the year, as employers continued to squeeze existing workers to boost output before hiring new ones, Labor Department figures showed today (Thursday). But the rate of growth slowed, which may force businesses to increase hiring in the coming months.

    Separately, fewer Americans filed claims for unemployment benefits for the third consecutive week, in a sign the labor market is slowly recovering from the worst recession since the 1930s.

    Productivity rose at a 3.6% annual rate in the first quarter, exceeding the 2.6% median forecast of economists surveyed by Bloomberg News but down sharply from 6.3% in the previous three months.

    Read More...