Archives for May 2010

May 2010 - Page 6 of 9 - Money Morning - Only the News You Can Profit From

Question of the Week: Readers Respond to Money Morning's Oil Spill Query

News of BP PLC's (NYSE ADR: BP) Gulf Coast oil spill was only hours old when Money Morning readers first weighed in on the tragedy. The chief concern: U.S. taxpayers will yet again be stuck with the tab for a problem caused by corporate malfeasance and lax governmental oversight.

Stricter government regulation could enforce safety shut off valves with remote control operations – a device that could have prevented the current disaster. The hefty $500,000 price tag on the safety control has been a past deterrent, but hard to argue against in the wake of the billion-dollar Gulf spill.

But investors understand that the long haul is what really matters, meaning that there's perhaps a bigger question here than who's at fault, and what will this cleanup cost….

Washington wants to limit U.S. dependence on foreign oil and create jobs, while also protecting natural resources and preventing future spill disasters. But the United States faces a future in which oil prices are likely to soar as thirsty nations compete for dwindling supplies.

Clearly, our leaders in Washington, the U.S. energy sector and U.S. environmental agencies and interests will have much to debate in the months and years to come.

This prompted last week's installment of Money Morning Question of the Week: Is U.S. offshore oil drilling going to disappear – why or why not? How does the industry affect you as an investor, taxpayer and consumer?

Here is a collection of thoughtful reader responses regarding the future of drilling and the oil spill.

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Could the British General Election's 'Hung Parliament' Lead to a Resurgent U.K. Economy?

In the depths of the Depression-ridden 1930s, two years after a British General Election that yielded a "hung parliament" – came the formation of a coalition government that resulted in one of the strongest decades the British economy has ever enjoyed.

Seventy-nine years later, in the throes of another global downturn – with another "hung parliament" and yesterday's (Tuesday's) resignation of Britain's prime minister paving the way – could history be repeating itself?

To find out how Britain's election results could nurture an economic rebound, please read on...

Can Corn Prices Make a Comeback?

Corn prices have slumped some 24% since January and more than 50% since hitting a record high $7.65 a bushel in June 2008. Now they are being further threatened by potentially the largest corn harvest in history.

Still, there's reason to believe that corn prices will rebound.

The summer season could be particularly harsh following a better-than-average spring, and rumors that China is gearing up to make a huge purchase so far has helped keep corn prices afloat – and could even send them higher. But before that happens there are some substantial headwinds for the crop to overcome.

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We Want to Hear From You: How Has the Market's "Flash Crash" Affected Your Investment Behavior?

Thursday's Dow Jones Industrial Average 1000-point drop triggered a roar of theories on the cause of the "flash crash." Was it a "fat finger" that entered an incorrect trade, leading automated trading systems to hit a high-frenzied sell mode? Did the initial sell-off fuel panic that escalated sales before manual corrections could be implemented?

As the New York Stock Exchange slowed trading, orders were routed to electronic exchanges that were not operating under the same safeguards and some companies' stocks were briefly valued at just pennies.

"I still haven't heard a satisfactory answer as to what happened and what could be done about it," Frank C. Boucher, the head of a Virginia-based financial planning firm, told Bloomberg on Monday – four days after the market's drop.

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Dramatic Drops and Short-Covering Rallies Illustrate How Capital Waves Lead to Profits

The Greece rescue package is signed and sealed, but is still far from being delivered. It took three tries, but this time global investors believe the EU got it right. Investors celebrated yesterday (Monday) with a relief rally that touched virtually all of the world's key financial markets – and that served as a strident counterpoint to the near-freefall that gripped the U.S. stock market on Thursday.

So is it finally time to shelve our fears of financial contagion, meaning the financial shocks that start with one nation or market and spark a conflagration that spreads through interdependent entities in plague-like fashion?

Definitely not. In fact, hang onto your hats: We have just entered the brave new world where a butterfly flapping its wings in China can fan a market fire on the other side of the world. There are more contagions to come. But because of forces known as "capital waves," the same heat that burns some investors can also generate substantial profits for those who understand how to position themselves.

To understand how capital waves bring profits, please read on...

SEC, Major Exchanges, Working on New 'Circuit-Breaker' Rules to Avoid Another 1,000-Point Plunge in the Dow

In response to the wild ride U.S. stocks endured Thursday, executives from six U.S. stock exchanges yesterday (Monday) agreed on a framework for "strengthening circuit breakers and handling erroneous trades," the U.S. Securities and Exchange Commission announced.

NYSE Euronext (NYSE: NYX), Nasdaq OMX Group Inc. (Nasdaq: NDAQ), Bats Global Markets, Direct Edge Holdings, International Securities Exchange Holdings Inc. and CBOE Holdings Inc. (Nasdaq: CME) met with SEC Chairwoman Mary L. Schapiro on Monday morning.

The SEC's Schapiro, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and officials from the various exchanges were also to meet later yesterday with U.S. Treasury Secretary Timothy Geithner. Officials from the CME Group Inc. (Nasdaq: CME), the largest U.S. futures exchange, also were to attend that meeting – after having met earlier in the day with CFTC leaders, The Wall Street Journal reported.

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Greek Bailout Fails to Defuse the Ticking Global Debt Bomb

The ticking global debt bomb is in the in the spotlight again.

Or, at least, it should be.

Greece's woes draw attention to the looming financing problems of other countries with a lot of debt. The strain of funding these requirements – the global debt bomb – is the greatest threat to global growth prospects. This is why central banks have flooded the financial system with money. It's the biggest and most critical financial battle of our time.

The Bank for International Settlements – essentially the central bank of the central bankers – said as much in a recent research paper, noting that governments around the world are overspending in an effort to make up for the lack of activity from cash-strapped consumers and companies. To maintain those high spending levels at a time when tax-receipts are down, however, governments have no choice but to borrow – a strategy that they cannot follow forever, BIS researchers said.

"Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable," the researchers said. "Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability."

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The Eurozone Bailout Plan Puts a $962 Billion Price Tag on Saving the Euro - But Is It Finally Enough?

European Union (EU) finance ministers yesterday (Monday) announced a $962 billion (750 billion euros) Eurozone bailout package that rallied global markets with a drastic new attempt to prevent a euro collapse and contain the Greek debt crisis. European policy makers agreed to the massive effort in a 14-hour meeting Sunday, trying to beat the start […]

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The Real Story Behind Last Week's Stock-Market Panic

Thursday's U.S. stock market trading session qualified as a genuine stock-market "panic." They're rare, fortunately, so they're memorable.

You can say you were there.

According to the volume analysts at Lowry Research Corp., this stock market panic was on par with the mini crash of October 1989, when the Dow Jones Industrial Average plunged 6.9% in a single day. But it wasn't on par with the famed session of October 1987, when the Dow plunged 22.6% in a day.

For an in-depth analysis of last week's U.S. stock market panic, please read on...

Buy, Sell or Hold: Cypress Semiconductors Boasts a Strong Showing Since Dec. 14 Recommendation

Back on Dec. 14 of last year – as the market had "inexplicably" risen and investors were jumping ship – afraid that the market would correct – I issued a call to buying Cypress Semiconductors Corp. (Nasdaq: CY).

I mentioned back then that, at $10.40 per share, the stock was a steal and that several factors would propel it much higher.  Today, with the stock having rallied some 10%, we will review these reasons to analyze their validity moving forward:

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