Press Esc to close

Welcome to Money Morning - Only the News You Can Profit From.


Five Ways to Profit – By the Dawn's Early Light

During the wildly productive portion of his tenure as the head of the Walt Disney Co. (NYSE: DIS), then-CEO Michael Eisner had simple-but-elegant formula for success.

He was obsessive about controlling costs. He repeatedly urged his movie-development folks to focus on “singles and doubles” – instead of on home runs.

And he insisted that the best movie ideas – those with the greatest chances for success – would be so powerful that they could be summarized in two sentences or less…

  • QE3

  • Keep a Close Eye on Gold Prices Next Week The U.S. Federal Reserve is about to give a huge boost to gold prices, and the first push could come as soon as next week.

    The parade of dismal economic reports both here and abroad has stoked hopes that more stimulus, in the form of a third round of quantitative easing, is imminent. A clear signal of when we can expect QE3 could come at next week's two-day Federal Open Market Committee (FOMC) meeting that starts July 31.

    An increasing number of Federal Reserve officials are convinced the central bank must expand its stimulus operation immediately amid the recent spate of glum data signaling economic growth has hit a roadblock. Several members will push for urgent action, although some may move to delay a decision until September.

    Fed Chairman Ben Bernanke told Congress last week that a fresh round of quantitative easing is an option the FOMC is mulling to try and lower the elevated unemployment level.

    "We are committed to ensuring, or at least doing all we can to ensure, that we continue to make progress on unemployment," Bernanke said just last week.

    To continue reading, please click here...
  • Expect QE3 After Geithner's Warnings In testimony yesterday (Wednesday) before the House Financial Services Committee, U.S. Secretary of the Treasury Timothy Geithner may have inched us closer to QE3 when he warned that the U.S. economy will be slammed by two major factors: the immediate danger from the Eurozone debt crisis and fiscal cliff 2013 that is fast approaching.

    "The economic recession in Europe is hurting economic growth around the world, and the ongoing financial stress is causing a general tightening of financial conditions, exacerbating the global slowdown," Geithner said in his testimony.

    As much of the revenue for major U.S. corporations such as Ford Motor Co. (NYSE: F), DuPont (NYSE: DD) and Cisco Systems Inc. (Nasdaq: CSCO) comes from Europe, the damage is already being felt by both employees and shareholders. Cisco, down 20.52% for the quarter, recently announced the layoffs of 1,300 workers, about 2% of its global labor force.

    Geithner cited other factors harming the U.S. economy, including the rise in oil prices earlier this year, cuts to government spending and slow rates of income growth.

    Possible adverse developments in the future, particularly the fiscal cliff, led Geithner to warn that, "These potential threats underscore the need for continued progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run."

    To continue reading, please click here...
  • QE3 is on Its Way – Here's How to Prepare Federal Reserve Chairman Ben Bernanke spoke to the U.S. Senate Tuesday and yesterday (Wednesday) in his two-day biannual meeting with Congress - and failed to make any promise to institute more stimulus measures.

    He did leave the door open for the Fed to do something - even if it won't commit to what that will be.

    The markets rallied, although investors were disappointed that the Fed chief couldn't deliver a bigger commitment.

    But make no mistake - quantitative easing, or QE3, is coming.

    That is assured for one simple reason.

    The U.S. government can find few buyers for its debt at current low interest rates. And as Bernanke has stated publicly, low interest rates will remain in place until at least 2014.

    That means the Fed will have to continue its role of financing the budget deficit of the U.S. government through the inflation of its balance sheet.

    To continue reading, please click here...

  • Bernanke Keeps the Stock Market Waiting for QE3 Strong earnings reports could only lift the stock market today up so much as U.S. Federal Reserve Chairman Ben Bernanke would not give in to the cries for more stimulus.

    Speaking to the Senate Banking Committee Bernanke gave his semi-annual monetary policy testimony and predicted slow growth for the U.S. economy. Bernanke said that reducing unemployment is going to be "frustratingly slow."

    Bernanke repeated the Fed's mantra that if conditions deteriorate they will take appropriate measures when necessary. Some are beginning to wonder if QE3 will ever happen and how much worse things have to get before we see it.

    The chairman did specify that if the labor market doesn't improve the central bank is prepared to act to boost growth.

    Bernanke also commented that the looming "fiscal cliff" and the possibility that Europe's debt crisis will worsen remain significant risks.

    He mentioned the Libor manipulation scandal and called the rate-setting system "structurally flawed." However he offered no explanation as to why the Fed didn't become more involved when it learned in 2008 that Barclays Plc (NYSE: BCS) was reporting false numbers.

    Bernanke will speak again tomorrow morning before the House Financial Services Committee.

    To continue reading, please click here...
  • Five Winners in the Stock Market Today It appears the stock market is headed for its fifth straight negative day as the markets opened lower on continued global concerns.

    Any optimistic sentiments from Europe's recent summit and bailouts have passed, as Germany still is not committed to measures in the agreements.

    After Spanish Prime Minister Mariano Rajoy announced surprisingly harsher austerity plans for Spain, there were riots in Madrid where more than 70 people were injured.

    The stock market wasn't quite as violent, but after the U.S. Federal Reserve's minutes revealed no signs of QE3, the markets took a hit before finishing the day slightly higher. Today the market is still reeling as all three major indexes opened well in the red.

    Even news of the lowest number of initial unemployment claims filed since March of 2008 could not lift the market. The Labor Department announced that initial claims seasonally adjusted came in at 350,000, down 26,000 from the previous week. Analysts had expected on average between 355,000 to 395,000 claims to be filed.

    Those numbers may not be reliable, as many economists say the claims are lower due to automakers choosing to keep their plants open throughout the summer.

    Typically many auto plants close for two weeks in the summer and lay off workers temporarily as the plants are prepped for new models. With higher demand this year many plants have remained open through July.

    "It seems like the Labor Department is pretty adamant that this is more of a wonky seasonal adjustment than something we need to put too much stock in," Michael Hanson, U.S. economist at Bank of America-Merrill Lynch told Reuters. "The underlying trend in claims is probably still in the 370,000 range."

    Those numbers are also low due to the fact that they are gathered from the holiday-shortened 4th of July week.

    Even with the markets' slide today, there are still winners to be found. Here are five of the best performing stocks today:

    Merck and Co. Inc. (NYSE: MRK) announced it received favorable results for its latest experimental osteoporosis drug, odancatib, and ended trials early because it worked so well. The drug is supposed to prevent bone fractures in women with osteoporosis and has been in testing since 2007.

    Merck stock is up almost 4.5% as of noon.

    To continue reading, please click here...
  • FOMC Meeting Minutes: Will We Ever See QE3? Investors were anxiously listening today (Wednesday) to see if the Federal Open Market Committee (FOMC) meeting minutes gave any hints the Fed may engage in a third round of quantitative easing (QE3) to bolster the ailing U.S. economy.

    But no such clues were shared.

    Last month the Federal Reserve decided to extend Operation Twist, a bond maturity extension program. But many investors wanted a third round of asset buying, or QE3, instead of more twisting.

    Immediately following details of the June FOMC meeting, the Dow Jones Industrial Average, which had been choppy all day, was little changed. Then came the negative reaction and all three major indexes ticked lower, and the VIX, the "fear index," edged higher. The Dow fell as much as 90.14 points, or 0.7%, to 12,562.98 in afternoon trading.

    Though QE3 is not completely out of the question, things need to deteriorate further for the Fed to even consider more bond purchasing as a means of stoking the economy, according to the FOMC meeting minutes.

    Just four Fed officials referred to more quantitative easing in their individual forecasts, with two in favor and two considering another round.

    Had that FOMC meeting been held today, maybe more officials would have supported a heavier stimulus measure. Since that meeting, fresh data have shown manufacturing is weak and unemployment levels are still elevated - and look to move higher.

    In addition, economists have drastically reduced second-quarter growth estimates amid the weaker-than-expected numbers.

    This has left scores scratching their heads asking how much worse things need to get before the Fed makes a move.

    The minutes also show that several Fed officials want to create "new tools" to ease financial conditions. With little left in their cache to give the economy a much needed boost, "new tools" are warranted, but scarce at best.

    To continue reading, please click here...
  • Stock Market Today: Will the Fed Finally Give In to QE3? The stock market today opened flat awaiting minutes from the Federal Open Market Committee's (FOMC) June meeting that will be released this afternoon.

    Prior to the release of the Fed minutes, Spanish Prime Minister Mariano Rajoy announced that Spain will work immediately towards more government efficiency and austerity. After yesterday's announcement by the Eurozone finance ministers to inject Spanish banks with 30 billion euros ($36.6 billion), Rajoy declared that Spain would cut 65 billion euros or almost $80 billion from its budget in less than three years.

    Rajoy said this would be done through cutting public institutions and social welfare programs such as unemployment, plus raising taxes. These decisions come a day after Spain was given an extra year to lower its deficit.

    The Federal Reserve will release its minutes around 2 p.m. today and everyone will want to know if QE3 is on its way.

    For over a year now investors have pined over the prospect of the Fed lifting the markets, if only for the short-term, through more quantitative easing measures. As experts have proclaimed this action would simply be another "Band-Aid" for a beaten down market.

    Money Morning's Chief Investment Strategist Keith Fitz-Gerald put the effects of additional stimulus very simply.

    "It has never worked since the dawn of recorded time and it will not work now," said Fitz-Gerald. "You cannot debase your currency and work your way out of this for anything but a short-term basis."

    With last week's underwhelming jobs reports and signs from corporate earnings and manufacturing that the economy is slowing further, it might be hard for Chairman Bernanke and the Fed to ignore the option of QE3 any longer.

    If Bernanke continues to just hint at more easing that may not be enough to lift this struggling market.

    In other domestic news the trade deficit shrank 3.8% to $48.7 billion led by lower crude oil prices, bringing imports down while exports held up well, increasing 0.2%. U.S. wholesale inventories rose 0.3% but these numbers did little to soothe investor's fears ahead of the Fed minutes.

    To continue reading, please click here...
  • Today's FOMC Meeting: Fed Votes Operation Twist to Continue Today's FOMC meeting - which started Tuesday - ended in a widely expected manner.

    The Fed announced it will extend Operation Twist, which was set to expire at month's end, until the end of 2012, in an effort to keep interest rates low.

    The Fed will expand Operation Twist, which replaces short-term bonds with longer-term debt, by $267 billion.

    In a statement, the FOMC said the prolongation of Operation Twist "should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

    The Fed pointed to the U.S. economy's poor recovery as reason for more "twist."

    "Growth in employment has slowed in recent months and the unemployment rate remains elevated," the Fed reported. "Household spending appears to be rising at a slower pace than earlier in the year."

    The lack of more intense stimulus, namely a third round of quantitative easing, sent the Dow Jones, which had been flat all day, plummeting some 50 points in just seconds. All three major indexes treaded lower following the report. Gold, hoping for QE3, sold off some $25 an ounce.

    The yield on the 10-year Treasury note rose to 1.67% just after 1 p.m. in New York from 1.62% late yesterday.

    To continue reading, please click here...
  • The Fed's Mixed Messages on QE3 Federal Reserve Chairman Ben Bernanke, speaking before the Joint Economic Committee Thursday morning, refused to hint at whether or not investors can expect another round of stimulus - either in QE3 or Operation Twist - to help the struggling U.S. economy.

    Rep. Kevin Brady, R-TX, asked Bernanke to "look the market in the eye" and tell investors what to expect from the Fed. Bernanke refused to commit to a policy, but said the Fed could deliver an answer in the next couple of weeks.

    Bernanke's comments indicated that the Fed would continue to monitor the U.S. economy as needed, but that no action like another round of quantitative easing was immediately necessary.

    "The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery," Bernanke said in prepared remarks.

    His non-committal comments contrasted those made a day before by other Fed members, including Vice Chair Janet Yellen and San Francisco Fed President John Williams, who indicated that more stimulus by the central bank is necessary to boost the U.S. economy.

    "It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest," Yellen said Wednesday in a speech in Boston.

    Also on Wednesday Federal Reserve Bank of Atlanta President Dennis Lockhart said another round of Operation Twist could be considered.

    "There is capacity to do more," Lockhart in a speech in Florida. "It is certainly an option. I'm not going to speculate on what the FOMC will do."

    Bernanke's remarks followed the market's best daily performance of 2012. The Dow surged 287 points on Wednesday, closing at 12,414.79. Despite the mixed Fed messages, markets started off well Thursday, with each index rising more than 1% after The Peoples Bank of China announced it would cut its deposit and lending rates 0.25%, marking its first cut since 2008.

    To continue reading, please click here...
  • Bernanke's Jackson Hole Speech: Why QE3 Won't Spell Relief U.S. Federal Reserve Chairman Ben S. Bernanke has a choice to make this morning (Friday) before giving his Jackson Hole speech.

    And he can't win either way.

    Bernanke can telegraph a third round of quantitative easing (QE3), which most economists believe would at best be ineffective. Or he could do nothing to reassure the markets that have already priced in another $500 billion to $600 billion of central bank U.S. Treasury purchases.

    In either case, the outcome won't be pretty.

    Many analysts already have questioned the effectiveness of QE1 and QE2, and even the ones that don't are pessimistic about the potential outcome of QE3.

    Money Morning Chief Investment Strategist Keith Fitz-Gerald said that although the markets may be looking for QE3, it would be a bad idea.

    "It has never worked since the dawn of recorded time and it will not work now," Money Morning Chief Investment Strategist Keith Fitz-Gerald said on the Fox Business program "Varney and Co." "You cannot debase your currency and work your way out of this for anything but a short-term basis."

    However, should Bernanke indicate the Fed is not considering QE3, the markets - which have risen about 5% this week -- could choke on the news.

    "The market's sending a signal to Bernanke saying, 'We want QE3 and we want it this week, or we're going to hammer you and the market will get absolutely killed,'" Keith Springer, president of Springer Financial Advisory, told "The stock market is addicted to QE."

    Third Time the Charm?

    Some observers viewed the week's glum economic reports on housing, manufacturing and unemployment as possible catalysts for Fed action.

    "It's almost as if negative news is being priced in as something positive because it underscores the argument that the Fed needs to do something," Abigail Huffman, director of research for Russell Investments, told The Wall Street Journal. "People are hedging their bets. They're hoping for the best and positioning for the worst."

    To continue reading, please click here...
  • The U.S. Federal Reserve Plan For QE3 – And Why It's a Done Deal When U.S. central bank policymakers conclude their two-day meeting today (Wednesday), there's really only one question investors want an answer to: What's the U.S. Federal Reserve plan for QE3?

    Let me answer that for you: QE3 is a done deal - although Fed Chairman Ben Bernanke & Co. might well give it another name.

    Let me explain ...

    $2.3 Trillion ... And Counting

    Since December 2008, when a worldwide credit crisis threatened to take down the global financial system, the U.S. Federal Reserve has had a starring role. It has held the benchmark Federal Funds rate at historic lows between zero and 0.25% to keep the U.S. economy from stalling. And it's pumped more than $2.3 trillion into the American financial system, mostly by purchasing securities on the open market.

    The key to these asset purchases has been two "quantitative easing" plans. The second of the two, known as "QE2," was a $600 billion initiative that was rolled out in November. It's supposed to wind down when the second quarter ends next week - which is what the Fed promised at the end of its last FOMC meeting in late April.

    When the Fed's policymaking Federal Open Market Committee (FOMC) meeting breaks up at around noon today, pundits are expecting Team Bernanke to announce that it's holding rates steady, and is winding down QE2 as promised.

    But I'm just not buying this.

    To continue reading, please click here ...

  • Did Ben Bernanke Hint at QE3 During Historic Fed Press Conference? While the first press conference ever held by U.S. Federal Reserve Chairman Ben Bernanke grabbed most of the headlines this afternoon (Wednesday), it was the post-meeting statement issued earlier in the day that grabbed my attention.

    In particular, I zeroed in on the part about the policymaking Federal Open Market Committee (FOMC) regularly reviewing "the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability."

  • Quantitative Easing: The Real Reason the Fed May Go For QE3 Ben Bernanke has a secret.

    And it's a secret that very likely terrifies him and his policymaking brethren at the U.S. Federal Reserve.

    That secret has to do with his latest round of "quantitative easing," a liquidity-push known as "QE2."

    What Bernanke & Co. don't want Americans to know is that painfully slow growth - or even a double-dip recession - isn't their greatest fear. Bernanke's greatest fear is that without this liquidity, one or more of the massive, already-bailed-out U.S. banks could stumble and once again undermine the global financial system.

    And this time around, the outcome would be much, much uglier.

    To discover the Fed's real objective, read on...