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


Sharpen Your Pencil – And Put These Three Stocks on Your "Shopping List"

Ask any of our gurus for advice on how to survive a stock-market sell-off – or even a whipsaw period like the one we’re navigating now – and you’ll get a surprising answer.

Keep a shopping list ready, they’ll tell you…

  • US Economy

  • Why There's No Real Inflation (Yet) According to Nobel Prize-winning economist Milton Friedman, "inflation is always and everywhere a monetary phenomenon."

    Well, apparently not...

    There's certainly plenty of cause for inflation today. Every central bank in the Western world is holding interest rates down, and almost all of them are printing money like it's going out of style. And the big deficits governments were running should be making inflationary matters even worse. Taken together, monetary and fiscal policies are far more extreme than they have ever been.

    But today inflation is only running at around 2% - well below where it should be, according to Milton's monetarist theories.

    What does it all mean?
  • Here's What President Obama's Win Means For Your Money Bitter, negative, expensive...I am hard pressed to find any positive adjectives describing this year's presidential campaign.

    Evidently, the markets are struggling, too.

    As was widely expected leading up to the election, all of the major averages got slammed in early trading on news of President Obama's victory. Just over an hour into yesterday's session, the Dow dropped 262.51, the S&P 500 tumbled 27.58 and the tech- laden Nasdaq fell 59.55. Oil tanked 2.95% and $2.62 per barrel to $86.08 while 10-year bonds saw yields plummet 6.20% to 1.63%.


    There is a bright side, though. Now that all the hoopla is over, investors can get down to business.

    Here's what I'm expecting:

    To continue reading, please click here...
  • How the Fiscal Cliff will Deal a Blow to U.S. Defense Industry The fiscal cliff is taking down more than U.S. taxpayers - it will tear through the U.S. defense industry.

    At the end of this year, current tax policies are set to expire and new ones will go into effect at the start of 2013. What Americans can expect if the policies are not extended is a painful combo of tax increases and spending cuts that will thrust the struggling U.S. economy back into a recession.

    If U.S. lawmakers fail to act, scores of economists agree what we'll get is a $600 billion drag on the already sluggish economy. The tax implications have been widely discussed, but there has been little chatter about the impact on the defense sector, which stands to sorely suffer since it is subjected to half of the proposed spending cuts.

    To continue reading, please clich here...
  • Recession 2013: Retail Sales Figures are the Latest Sign of a Slowing Economy For the third consecutive month, retail sales fell as demand waned for everything from cars and electronics to building material, another telling sign that the U.S. economy may be slipping back into a recession.

    The Commerce Department reported Monday that retail sales dipped 0.5% in June, much less than analysts' forecasts of a 0.2% rise. The decline marked the first time retail sales had fallen for three straight months since late 2008, near the height of the Great Recession.

    Most noticeable in the rash of declining sales was the 0.6% drop in motor vehicles and parts, an area that was widely expected to show an uptick.

    Also showing a sharp slump were receipts for electronics and appliances which fell 0.8%. Sales of building materials sagged 1.6%, and receipts at gasoline stations dried up some 1.8% even while gasoline price fell during the month.

    The report adds more fodder to the lingering hope that the Federal Reserve could launch another round of quantitative easing.

    The dismal commerce numbers also add to the recent wave of weak economic data.

    On Monday, the International Monetary Fund (IMF) cut is forecast for global economic growth and urged European policy makers to take more aggressive measures to curtail their crisis, while cautioning that China's economy is at risk for taking a hard fall.

    Meanwhile, Reuters reported a poll released on Monday that revealed American companies have tempered any plans to hire workers, while a growing number of firms believe the mess in Europe is hurting sales. The poll showed nearly half (47%) of companies polled believe their sales have suffered thanks to the Eurozone debt crisis.

    To continue reading, please click here...
  • Both Parties Have it Wrong Today I have a question for you; make that two questions:

    1. Do you think that financial services should be more regulated or less regulated?
    2. Do you think that the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act), signed into law two years ago on July 21, has hurt:
      1. You personally?
      2. Businesspeople or businesses you know of?
      3. The economy in general?

    Here's my opinion; not that it matters that I'm an expert on the subject, or that I have 30 years in the financial services business, or that I own a couple of businesses, or that I'm getting back into the financial services game in a big way (more on that sometime in the future).

    It's just my stupid opinion. It really doesn't matter that I'm right, either, because it's just my opinion; did I say that?

    The correct answer (according to me) to question No. 1 is itself an economic postulate: "More is always better sooner." As in, we need more and better regulation, sooner rather than later. That's my final answer.

    The correct answer, in other words, my answer, to question No. 2 is: no, no, and no.

    I'm going to make this short and simple, because I want to hear from you on this subject. (Just click below and leave your answers in the comments section.)

    To continue reading, please click here...

  • Recession 2013: Prepare Your Portfolio with These Rock-Solid Dividend Payers Successful investing is a bit like connecting the dots. Put enough of them together and they begin to form a picture.

    Unfortunately, today's dots are pointing towards a recession.

    With first-quarter GDP growth under 2% and a whole host of indicators moving in the wrong direction, it looks as though the U.S. economy has stalled.

    That leaves income investors like us faced with a very important question: how do we best protect our portfolios from the stock price declines and dividend cuts that a recession would bring?

    One simple answer is to invest in those countries that are not suffering recession. That opens up a world of possibilities.

    For instance, you might consider investing in Japan, which grew at over 4% in the first quarter. Orix Corporation (NYSE: IX) is a name I like.

    Or better yet you could invest in emerging markets where growth continues to sizzle.

    That makes stocks like the Aberdeen Chile Fund (NYSE: CH) a good buy-especially considering the fund offers a dividend yield over 10%. The fund is attractive to me for two reasons.

    First, it's because Chile is a well-run country, standing higher than the U.S. on several international business surveys. But more importantly, its dependence on copper and other commodities is not a problem unless the global economy as a whole goes into recession, which I don't expect.

    With assets in primarily Chilean securities, the fund also offers investors a nice measure of diversification from the U.S. economy, since they can expect Chile to keep on growing-- even if the U.S. economy takes a step backwards.

    But that doesn't mean you need to avoid the U.S. altogether, either.

    In fact, there is a key indicator I'll discuss in a moment which will allow you to preserve your income and the value of your investments through all but the deepest recessions.

    First though, you'll need to avoid a few pitfalls. As always, it's never just a matter of picking the stocks with the highest dividend yield. It's just not that simple.

    To continue reading, please click here...
  • U.S. Economy 2012: Jack Welch on What's Stifling Job Creation Excessive government regulation and uncertainty over tax policies are what's restraining companies from hiring, former General Electric (NYSE: GE) CEO Jack Welch said on CNBC last Wednesday.

    Welch joins a large number of economists and pollsters trying to sort out why the U.S. economy in 2012 hasn't rebounded more strongly from the 2008-2009 recession.

    In particular, everyone is trying to figure out why job creation has been so sluggish.

    The U.S. economy added just 69,000 jobs in May. That's far below the 150,000 or so needed just to keep pace with new workers joining the labor force.

    "We should be poised to do well, but we are getting hammered by political forces who won't deal with the fiscal cliff coming up," said Welch, referring to the expiration of the President Bush-era tax cuts and sharp reductions in federal spending due to hit in January.

    Welch blamed an array of government agencies for cooking up more and more nitpicking rules. Such rules have little or no benefit, but hamper business owners and suppress job creation.

    "These are the things that are going on every day. They add up," Welch said. "That's why we're not taking off."

    Welch compared the current recovery to the Reagan Administration recovery in the mid-1980s. That recovery, once it got going, accelerated rapidly.

    "If you look at 2009, and you look at the recovery we launched, we were getting into a traditional recovery," Welch said. "We had 4%, 4.5% growth until we started getting into regulations."

    Jack Welch Not Alone in U.S. Economy View

    The blunt talk from Jack Welch echoes data from several recent surveys of businesses.

    To continue reading, please click here...
  • Five with Fitz: What I See When I Look Over the Horizon When you've been working the markets as long as I have, you learn that the biggest dangers are always found in a place just over the horizon.

    It's why I spend my time hunting for stories, news items and opinions that in the old days were considered far "below the fold."

    Invariably, what I am looking for is the stuff that everybody else has missed.

    Because I believe that's where the real information is -- especially when it comes to uncovering profitable opportunities others don't yet see or understand.

    It's the story behind the story that interests me. To find it, you need to go beyond the headline news.

    In that spirit, here's my take on five things that I'm thinking about right now.

    To continue reading, please, click here...
  • What U.S. Consumer Spending Data Is Telling Us The markets slid yesterday on news that U.S. consumer spending increased by 0.3% in March, while income rose 0.4% over the same time frame. This is the first time since December we've seen income rise faster than spending.

    I can't say I am entirely surprised.

    As prices for "must haves" like gasoline and food continue to rise, consumers are digging into their savings to cope. This is not small potatoes, given that the average family saved a mere $38 out of every $1,000 in take home pay last month, according to the U.S. Commerce Department.

    I can't help but have huge concerns about Team Bernanke's plan; no amount of stimulus is going to overcome the struggle most families are having - which is to boost savings and shed debt.

    Here's the thing... if consumers can't save, then they can't buy. And if they can't buy, they can't build up the nation's wealth, which is predicated on consumer spending.

    All three sets of figures in isolation really don't tell you much. But when taken together - spending, income, and GDP - they suggest our economy is too weak to put millions of Americans back to work, much less in jobs for which they are appropriately qualified.

    To continue reading please click here...
  • How Political Spin Skewed the U.S. Jobs Report
    The stock market – closed Friday for a holiday – had a chance today (Monday) to react to the March employment report – and fell in morning trading.

    Although job gains continued in March, they were about 90,000 short of what was expected. Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business’ “Varney & Co.” program Monday morning to take a closer look at the U.S. jobs report.

    Fitz-Gerald detailed why investors need to look beyond the unemployment rate drop at more telling numbers – data the White House would like you to ignore.

    Watch this video of Fitz-Gerald with “Varney & Co.” host Stuart Varney to find out what you need to know about the U.S. jobs report, and how it could affect the markets and economic recovery. Read More...
  • Obama's Trade Enforcement Unit and the Looming Trade War with China U.S. President Barack Obama in Tuesday's State of the Union speech called for the creation of a Trade Enforcement Unit to end unfair practices hindering U.S. trade growth - especially tactics employed by China.

    "I will go anywhere in the world to open new markets for American products," the president said in his annual address to the nation. "And I will not stand by when our competitors don't play by the rules."

    President Obama hopes this new initiative will help bolster a U.S.... Read More...
  • Paul Krugman is Dead Wrong: Debt Matters Paul Krugman, the Princeton University economics professor, Nobel Prize winner, and regular New York Times op-ed contributor says, "Debt matters, but not that much."

    Not only is he off the reservation on this one, but he's completely fallen off his high horse.

    In the real world, debt actually matters a lot.

    In a Houston Chronicle opinion piece last week, Krugman, riding his horse - whose name might as well be Liberal Conscience - trampled conservatives under the guise of an economics lesson that derided "deficit-worriers" for wrongly seeing "America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments."

    According to Krugman, that's a bad analogy and "the way our politicians think about debt is all wrong, and exaggerates the problem's size."

    Decide for yourself. Either debt matters a lot, or not that much...

    The World According to Paul Krugman

    Professor Krugman calls all the conversation in Washington about debt and deficits a "misplaced focus" and says all of the economic experts "on whom much of Congress relies have been repeatedly wrong about the short-run effects of budget deficits."

    He derides the fears that deficits will cause interest rates to soar by pointing out that they haven't moved.

    What he doesn't say is that they haven't moved because they're not free to move.

    The fact is that the U.S. Federal Reserve has corralled the free market in interest rates by knocking short-term rates to almost zero through successive open market operations and extraordinary quantitative easing measures.

    Mr. Krugman mocks those waiting for rates to rise and notes that while they wait "rates have dropped to historical lows."

    Maybe what he doesn't realize is that the Fed's actions themselves have been nothing short of historical.

    The crux of Mr. Krugman's supposition that debt doesn't matter much is based on his bashing of the popular analogy comparing America's debt problems to those of a mortgaged homeowner.

    All of which Krugman claims is "a really bad analogy in at least two ways."

    He says, "First, families have to pay back their debt. Governments don't - all they need to do is ensure that debt grows more slowly than their tax base."

    "Second," he says, "an over-borrowed family owes the money to someone else; U.S. debt is, to a large extent, money we owe ourselves."

    He goes on to say that the debt from World War II was never repaid and didn't make postwar America poorer.

    In fact, the Professor points out, "the debt didn't prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation's history."

    Krugman is Flat Out Wrong

    First off, the homeowner analogy is excellent--not irrelevant.

    Mr. Krugman is wrong when he says that homeowners have to pay back their debt. The truth is they don't have to.

    To continue reading, please click here...

  • Why America Hates Congress Everybody knows that screwing up a critical assignment at work will almost surely get you fired.

    That is, unless you work as a member of the U.S. Congress.

    After more than two months of bickering, the six Republicans and six Democrats on the "super committee" tasked with finding at least $1.2 trillion debt reduction savings over the next decade have thrown in the towel.

    They have no debt reduction plan.

    Analysts agree that despite the urgency of addressing America's fiscal issues, both sides are more interested in scoring political points than solving problems.

    Meanwhile, the federal debt continues to grow. It eclipsed $15 trillion last week.

    With representatives pocketing salaries of $174,000 a year despite their failures, it's no wonder U.S. citizens are down on Congress. A recent New York Times/CBS poll showed Congressional approval sinking to just 9%.

    Even some members of Congress admit it.

    "The politicians care more about their parties and getting reelected than they do the very real problem," Sen. Tom Coburn, R-OK, said Sunday on C-SPAN's "Newsmakers" program. "[The super committee] was Washington's answer to kicking the can down the road."

    According to the law passed as part of the debt ceiling deal over the summer, failure of the super committee to come up with a debt reduction plan is supposed to result in $1.2 trillion in automatic cuts, known as "sequestration."

    Half of those cuts, $600 billion, are to come from defense spending, with the other half coming from such areas as education, the environment, transportation, housing assistance and veterans' healthcare.

    But just because that's what the law says doesn't mean it will happen. Congress, don't forget, can undo any laws it creates. Ideological opposites Sen. John McCain, R-AZ, and Rep. Maxine Waters, D-CA, among others, are already working on this.

    It's just more evidence of a disingenuous Congress.

    Pointing Fingers

    Instead of developing a deficit reduction solution, lawmakers have tried to convince the American people that the super committee's failure is the other party's fault.

    Democrats had called for a "balanced" approach of some higher taxes, mostly on the wealthy, and spending cuts. Republicans eschewed any increase in taxes, preferring instead to reach debt reduction goals entirely through spending cuts.

    "The wealthiest of Americans, those who earn more than $1 million every year, have to share, too. And that line in the sand, we haven't seen any Republicans willing to cross yet," super committee co-chair Sen. Patty Murray, D-WA, said on CNN's"State of the Union."

    "I don't understand the economics that says that if we raise taxes on my employer, or my boss, somehow they're going to go out and hire my unemployed brother-in-law," Rep. Jeb Hensarling, R-TX, another committee co-chair, countered on "Fox News Sunday."

    Why so much rhetoric and no action?

    The main reason is that the automatic cuts don't kick in until January 2013 - after the key 2012 elections. Both sides hope to pin the blame on the other side to secure election victories next November that will empower them to solve the debt problem their way.

    To continue reading, please click here...

  • How the U.S. Housing Market Can Save the U.S. Economy Everyone knows that the U.S. housing market caused the current economic funk.

    But here's the irony: The American housing market - a principal actor and victim of a bubble that burst, causing the worst recession since the Great Depression - may now be in a position to save the U.S. economy.

    In other words, if we fix the housing market, we stand an excellent chance of fixing the economy.

    And my housing plan may be the dual fix we've been looking for .

    Plan Generates Huge Response

    In Money Morning exactly one week ago, I presented a plan to fix the broken U.S. housing market. And while I wanted feedback on the plan, I was stunned to receive hundreds of e-mails, phone calls and comments - underscoring just what an intensely emotional topic housing continues to be in this country.

    Many people lauded my plan. But I was somewhat surprised at the number of people who trashed it. For those critics, the main issue was that they didn't feel the plan addressed the real root causes of the current housing crisis.

    I got an earful about what the root problems are. Eventually, it struck me. It wasn't my plan that people didn't like, it was that I didn't explain how my housing plan would fix those root problems.

    Those root problems are no small thing. They caused the housing crisis in the first place. They're keeping the housing market from recovering now. And they're a major drag on the U.S. recovery - and could end up as a proximate cause, or key catalyst, of the much-feared "double-dip recession."

    To continue reading, please click here...
  • Gas Prices, Bad Weather Slam U.S. Economy; GDP Growth Slowed to 1.8% The U.S. economy's struggling recovery hit another bump in the road in the first quarter, with brutal winter weather and rising gas prices combining to put the brakes on growth.

    According to the U.S. Commerce Department, gross domestic product (GDP) growth slowed to an annual rate of only 1.8%, compared with 3.1% in the last quarter of 2010. The GDP measures all the goods and services produced in the United States.

    "The biggest factor was weather. It hurt consumption and construction," Stephen Stanley, chief economist at Pierpont Securities, told Reuters. "Energy hurt consumption as well. Higher gasoline prices took a bigger bite out of people's budget."