While U.S. Presidential headlines dominate the airwaves this week, there is another "election" under way thousands of miles from our own shores that may be even more important when it comes to your money.
The 18th National Party Congress is now underway in Beijing. Attendees are girding for a week of symbolic posturing and speeches, the culmination of which will be a new set of Chinese leaders and a new Chinese President for the next 10 years.
While this is a complicated process when things are running smoothly, this particular Congress is really critical. China is a mess. Recent economic challenges and corruption on a scale that has boggled even the most jaded of insiders are at the top of the "fix it" list.
Outgoing Chinese President Hu Jintao's replacement and China's presumptive new leader looks to be a man named Xi Jinping.
At 59 years old, he's a power player with close ties to the People's Liberation Army (PLA).
While he's not a military man per se, as the son of a revolutionary general he currently holds several significant offices that give him wide-ranging and very significant exposure to both the State and Communist Party.
What's significant about this is that there are three parallel strands in Chinese government structure: the Communist Party, State, and Military.
The Party and State are deeply intertwined, but the military is less so, except at the top levels of leadership. Consequently, China's new leader is intimately familiar with the Chinese military and also the likely new head of China's Central Military Commission.
I'm not so sure we've ever seen this exact combination before and I think it's going to challenge President Barack Obama in ways that he hasn't thought through yet.
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Why the Dow Fell Yesterday
Concerns over how politicians will handle the fiscal cliff was the biggest driver behind why the Dow fell yesterday, tumbling more than 300 points in its biggest loss this year.
Political worries were exacerbated by worse than expected monthly sales from McDonald's Corp. (NYSE: MCD) and fears that Apple Inc. (Nasdaq: AAPL) had entered a bear market.
The fiscal cliff continued to dominate investor sentiment today as both Republicans and Democrats expressed their intentions of working together to find a solution to the impending crisis but failed to offer any concrete evidence of their willingness to budge from long-held positions.
Afraid that Republicans and Democrats will not compromise, even when the stakes are high, investors are bailing out. It is too close to the end of the year-too close to bonus time-to be a hero now.
In his victory speech following his re-election on Tuesday, U.S. President Barack Obama said that he is "looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together."
Senate minority leader Republican Mitch McConnell said, "To the extent [the President] wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him halfway."
Jim Manley, a former aide to Senate majority leader Democrat Harry Reid, hoped that President Obama would become more personally involved in the negotiations on the resolution of the fiscal cliff.
"He's simply going to have to take a more active and forceful role," Manley told Bloomberg News. "He never got involved in the nitty-gritty of the legislative process. In light of the hyper-partisanship that still surrounds Capitol Hill, he's going to have to change, and he's going to have to take more of a lead in breaking the logjam."
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Stock Market Today: Why Marc Faber Predicts a 20% Slide
The stock market today (Thursday) is recovering slightly from yesterday's massive sell-off. Less than eight hours after President Obama gave his victory speech the Dow Jones was down 300 points yesterday in its biggest drop in over a year.
Even though the markets started today positive, many financial experts, including Marc Faber and Peter Schiff, are extremely bearish now that the president has been re-elected.
Here's what they have to say on the economy and the fiscal cliff, as well as some stocks that investors should avoid.
- Marc Faber warns of 20% market plunge- The Swiss investment analyst and entrepreneur spoke with Fox Business Network on what to expect from the markets during a second Obama term and about the impending fiscal cliff. "I think from the peak the market will drop at least 20%. I think we will revisit the lows of June at 1,266 on the S&P." On the markets' reaction to the election he added, "I'm not surprised the market is selling off because technically the market was weak already for a couple of months and we are in a downtrend and Mr. Obama's economic policies are obviously not very good for an economic expansion."
Fiscal Cliff: Are We About to See Compromise in Washington?
Now that Election 2012 is over, Washington is readying for its next battle: the fiscal cliff.
U.S. President Barack Obama's victory in Tuesday's election has upset the Republicans' political calculus. The purpose of four years of obstruction was to deny the president any legislative achievements and thereby prevent his re-election.
It didn't work.
With the election behind us, the politics of obstruction has lost its meaning. There is nothing to be gained from obstruction for obstruction's sake.
Boehner made that abundantly clear when he read a statement Wednesday afternoon in which he opened up the possibility of compromise in order to avoid the looming fiscal cliff at the end of the year.
"For purposes of forging a bipartisan agreement that begins to solve the problem, we're willing to accept new revenue, under the right conditions," Boehner said.
"The president has signaled a willingness to do tax reform with lower rates," Boehner continued. "Republicans have signaled a willingness to accept new revenue if it comes from growth and reform. Let's start the discussion there."
What is the Fiscal Cliff?
What is the fiscal cliff, and how do we avoid it?
The fiscal cliff will be crossed on Jan. 2, 2013 when $530 billion in tax increases and spending cuts at the federal level take place due to a previous budget agreement between Congress and the Obama administration.
Since Congress and the Obama administration could not reach an accord to reduce the federal budget deficit, a series of automatic tax hikes and decreases in spending will take place instead to achieve the necessary savings.
This is much like the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act from 1985. The fiscal cliff will pack a one-two punch to U.S. cities that are already burdened by heavy debt loads, and raise taxes on U.S. households struggling to recover.
What is the Fiscal Cliff Effect on the U.S. Economy?According to the Congressional Budget Office, a non-partisan organization, if there is no other agreement and the fiscal cliff is crossed on Jan. 2, the United States could fall back into a recession in 2013.
That will have a tremendous negative impact on the global economy as Europe is in a recession and economic growth is slowing in China and India.
Based on the 320-point drop in the Dow Jones Industrial Average the day after President Obama's re-election, Wall Street is not bullish about the future of the economy.
The Real Question Facing Tech Investors Is The Jobless Recovery
Now that the election is over, the real question facing tech investors is the same today as it was in January 2009 -- how to play the Jobless Recovery.
Clearly, the stats show a modest rebound -- weak progress on jobs that is just slightly ahead of population growth.
I still see a sluggish economy for the next few quarters. We haven't had any news out of Washington -- from either party -- to give employers the confidence they need to hire in a big way.
Now, with Obamacare kicking in along with new regulations on banks and finance companies, I believe that trend will continue.
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Stock Market Today: Why Post-Sandy Trading Could Be Volatile
The stock market today reopened after having its first two-day weather-related shutdown since 1888. While most of New York is still in clean up and recovery mode following Hurricane Sandy, investors are back in action in what is expected to be a busy remainder to the week.
Here are the latest headlines:
- Traders try to play catch up- The NYSE's two-day closure resulted in delayed earnings and economic reports, and unluckily came at the end of the month. Investors and especially traders will be trying to make up for the lost time, leading to higher volume due to unfulfilled trades from Monday and Tuesday. Besides the volume, volatility could be high as traders close out their books for the month. Also, for some mutual funds today is the end of their fiscal year, meaning more losses could be taken to offset capital gains. "The two-day delay is really the perfect storm in terms of when it occurred. To happen in the heart of earnings season and just a week before an election is rather unfortunate," Ryan Detrick, senior technical analyst at Schaeffer's Investment Research told Yahoo! Finance. "Had this happened during the boring summer months it wouldn't have mattered as much, but with so much happening currently, the odds of some huge volatility on big volume is very good. Throw in the fact this is the end of the month and the end of the year for some hedge funds, volume today could be in line with what we normally see on expiration Friday once a month as firms close their books on the year."
The Next Stock Market Crash Will Be Bigger Than "Black Monday"
Friday was the 25th anniversary of Black Monday. On October 19, 1987 the Dow Jones Industrial Average fell 508 points, or a mind-numbing 22.6%.
How bad was it?...
Let's put it this way, if it happened today the Dow would drop 2,965 points on the session to finish at roughly 10,158. You can imagine the depression.
Now you know why they call it "Black Monday," even though it occurred in a sea of red.
In absolute or percentage terms it was the largest one-day drop ever-- beating the 13.6% drop on the worst day of the 1929 crash.
But then again, the 1929 crash was caused only by human beings. The 1987 event, on the other hand, was largely computer-driven. Of such is progress made!
For British observers like me, Black Monday was memorable as being the first business day after the Great Storm, the first hurricane to hit the British Isles since 1703.
The relief at not having lost a third of the British Navy, which happened on the previous occasion, made Black Monday seem a minor hiccup. I actually bought some shares as the U.S. markets opened, and was delighted to see that they closed at a higher price than I paid!
There was also the satisfaction of hearing about a rather smug ex-colleague, who had received a large payout from the bank where we had worked (no such payout came my way, alas) and had invested it and margined 50% in the U.S. market.
Alas, blessed by Fortune though he was, he was awakened at 1:30 am London time by a margin call for $700,000. I always felt it was something of a fitting recompense for greed and creepiness to authority.
How the Market CrashedOf course, those whose trading lives don't extend back to 1987 doubtless feel that it can't happen again.
Well, I have news for you....
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Stock Market Today: These Earnings Expose a Huge Concern for 2013
The stock market today opened lower as yet another American corporation, Caterpillar Inc. (NYSE: CAT), disappointed investors with its earnings call.
Here's the market roundup, along with one stock that is soaring today because analysts say there is a "50% chance" it could be acquired.
- Caterpillar lowers earnings outlook for second time this year- The world's largest construction maker reported third-quarter earnings that beat expectations but cut its 2012 sales and earnings forecasts. CAT joins a growing list of American firms including McDonald's Corp. (NYSE: MCD), Google Inc. (Nasdaq: GOOG), and General Electric Co. (NYSE: GE) that have either missed expectations or lowered their outlook this earnings season. Caterpillar reported third-quarter net income of $1.7 billion, or $2.54 per share, compared with $1.14 billion, or $1.71 per share a year ago. Adjusting for one-time items CAT earned a profit of $2.26 per share, ahead of analysts' estimate of $2.22. The troubling facts for CAT include its order backlog fell 18% from the second quarter of this year and the Peoria, IL-based company now expects to generate much lower sales for the remainder of this year and 2013.
While earnings have taken their toll on corporate giants, this stock is up almost 30% today on hopes of a buyout:
Stock Market Today: Earnings Crush Giants as This Stock Gains 30%
The stock market today opened well in the red after earnings from industry leaders disappointed investors on the 25th anniversary of Black Friday.
Here's today's roundup and one stock that has gained over 30% this week.
- General Electric Co. (NYSE: GE), Microsoft Corp. (Nasdaq: MSFT) fall short of estimates- Two American titans, software leader Microsoft and diversified conglomerate General Electric, reported their latest earnings. GE saw its third-quarter profit rise 8.3% to $3.49 billion, or 33 cents per share, from $3.22 billion, or 22 cents per share a year earlier. Yet the company's revenue fell short of expectations and its outlook for next year did not inspire much confidence. Microsoft saw its fiscal first-quarter earnings drop 22% from a year ago and missed analysts' forecasts for earnings and revenue. GE and Microsoft are struggling with the same obstacles that have scared investors and hurt other businesses: the global economic slowdown and uncertainty regarding the fiscal cliff. "We're not assuming that Europe gets any better," GE's Chief Executive Officer, Jeff Immelt, told investors on a conference call. "We're looking at '13 being kind of like '12, with the big variable being the fiscal cliff." GE stock is down 2.5% in early trading and MSFT stock is down almost 3%.
- Restaurant stocks hurt by drought- McDonald's Corp. (NYSE: MCD) and Chipotle Mexican Grill Inc. (NYSE: CMG) both reported weak third-quarter earnings, an indication they are still feeling the effects of this summer's epic drought. Same-store sales were the driving negative factor for both restaurants. McDonald's posted global same-store sales growth of 1.9%, the first time that number has been below 2% since 2003. Chipotle's comparable sales rose 4.8% in the quarter, its lowest growth in almost three years. "I think that competition has certainly gotten more aggressive the past several quarters," Morningstar analyst R.J. Hottovy told Reuters. "Between commodity costs coming in and companies being able to price more aggressively, but also consumers still being very fixated on value, it's led to a very cutthroat restaurant environment." Chipotle has seen its stock plunge to under $250 from above $400 earlier this summer after two consecutive dismal earnings reports. "They're coming up against a little bit of a ceiling," Peter Saleh, a New York-based analyst at Telsey Advisory Group, told Bloomberg. "They need to do something more either on advertising or new product news to draw more customers into their stores." MCD stock is down 3.4% today and CMG stock is down over 14% as of noon.