Archives for July 2010

July 2010 - Page 7 of 11 - Money Morning - Only the News You Can Profit From

China Stockpiling Uranium in Rush to Build More Nuclear Plants

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China is stockpiling uranium and purchasing the yellow metal in unprecedented quantities as part of its effort to build new nuclear reactors and provide electricity for its power hungry populace.

The nation may purchase about 5,000 metric tons of uranium this year, more than twice as much as it consumes, Thomas Neff, a physicist and uranium-industry analyst at the Massachusetts Institute of Technology in Cambridge, said in a July 6 telephone interview with Bloomberg News.

India and China are gearing up for the biggest expansion of nuclear energy since the 1970s oil crisis to cut pollution and supply their economies with enough fuel to keep them growing twice as fast as Europe and North America.

"They are essentially stockpiling in anticipation of new reactor build," said Neff, who is an independent director of GoviEx Uranium Inc., a privately held exploration company with interests in Niger. "They are stockpiling like crazy."

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The CIVETS: Windfall Wealth From the 'New' BRIC Economies

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First it was the "BRICs." Now it's the "CIVETS."

In fact, the CIVETS are the "new" BRICs: Expect some of the CIVETS economies (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) to be among the world's hottest markets in the decade to come. They have the potential to generate the same kind of windfall wealth as the BRIC markets of Brazil, Russia, India and China did over the last 10 years – but only if you pick the right markets at the right time.

So let's figure that out right now.

To find out all about the "CIVETS" markets - and specifically which ones to buy - please read on...

The Case for the Yuan: Why China's Currency Isn't the Problem Policymakers Make it Out to Be

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By allowing the yuan to appreciate, China at least temporarily placated foreign trade partners that had expressed concern about the currency's value. However, the decision has done little to quell criticism from many U.S. policymakers and trade groups who are angry that the Obama administration refuses to brand China a "currency manipulator."

Still, while the yuan does need to appreciate, critics in the United States should remember that the dollar too is flawed, and that the uneven relationship between the two currencies has often worked to America's advantage.

Treasury Secretary Timothy Geithner has thrice declined to tag China as a currency manipulator in his biannual report to Congress. Geithner even delayed the release of the most recent report to give China more time to adjust its policy. That move paid off in June when just days ahead of the Group of 20 (G20) leaders' summit in Toronto, Beijing announced that it would allow the yuan to appreciate against the dollar. Since then, the currency has risen about 1% against the greenback.

Geithner, who made two visits to China in the spring for closed-door talks with top officials on the issue, called the policy shift a "significant step" in his report, but said the yuan remains "undervalued."

What matters now is "how far and how fast the renminbi [or yuan] appreciates," Geithner said, adding that the United States "will closely and regularly monitor the appreciation" of the currency.

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Tech Stocks Priced for Bargain Deals, Edge Higher on Analyst Upgrades

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Analyst upgrades lifted the technology sector on Monday, as cheap valuations and strong balance sheets in tech companies are making for good buys, as outlined in Money Morning's Midyear Forecast on tech stocks.

Analysts say tech stocks haven't been this cheap since 1992, excluding a brief period before the March 2009 bull market started, and now is the time to buy.

"Tech stocks have some of the strongest balance sheets in the S&P 500," Bruce Bittles, chief investment strategist of Robert W. Baird & Co., told Bloomberg. "The valuations are inexpensive – that's another plus. It's a good time to invest in tech."

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Think Gold Prices Have Peaked? Think Again

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If you think gold prices have peaked, think again. Gold may have fallen from its June 18 record high of $1258.30 an ounce, but the yellow metal is in for the long haul.

In fact, Credit Suisse Group AG (NYSE ADR: CS) has increased its long-range forecast for gold, arguing in a new report that prices should remain near current levels for at least the next four years.

CS analysts' 2014 target is now $1,300 and ounce, compared to their previous forecast of $1,120. That may not seem like a very brave forecast since gold is already trading at nearly $1,200 an ounce. But it has profound implications for gold miners, because mining stocks are priced based on expectations of future earnings. Removing the expectation that gold futures prices could slide way back removes an impediment to shares going higher.

The rationale for the change: Credit Suisse believes there is an 80% chance of a renewed quantitative easing – or money printing – due either to a full-blown sovereign debt crisis or a new recession. This enthusiastic and inflationary activity would rev up the safe haven buying that has pushed up gold prices over the past few years. The feeling is that companies and government officials may cheat and lie, but gold is as steady as a rock as an irrefutable, trusted source of value.

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Buy, Sell or Hold: Joy Global Inc. (NYSE: JOYG) Could Be a Gold Mine for Investors

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Uncertainty and volatility have plagued the markets of late but there's reason enough to believe a short-term up-trend is in store.

For one thing, the speed of recovery has varied from country to country but emerging markets and commodity-producing nations continue to post strong growth. And while the global slowdown has brought about very high fiscal deficits, particularly in Europe, fears that the Eurozone economy is edging towards collapse are beginning to dissipate.

The European debt problem should be addressed at the end of this month, when the European Central Bank (ECB) publicizes the results of its stress tests.  I expect the results will bring renewed confidence in the system. It's likely that the largest financial institutions will most probably all be sound, while there will be some smaller institutions that need restructuring.  These smaller banks will either quickly recapitalize or be absorbed by larger institutions.

That means we could soon see a strong short-term bullish market trend.

Meanwhile, the International Monetary Fund's (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.

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The S&P 500 is Set for a Surge... But It Won't Come Easy

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Stocks zipped higher in the past week, capping the first four-day rally since early 2009. Get out the party hats and confetti, right? Bears tried to knock shares lower on Tuesday and early Thursday, but after they failed bids hit the tape in a big way and gave it lift.

Technically, stocks continued to move out of the invalidated head-and-shoulders pattern we've discussed lately. With support below at 1,040, the S&P 500 Index should be good for a run to resistance at the 1,095 to 1,115 area in coming days as long as earnings reports and corporate outlooks are supportive.
But the bulls have their work cut out for them there.

To find out more about where stocks are headed next read on...

Google Hangs On To China, but It's Too Late to Make up Profit Losses

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Google Inc. (Nasdaq: GOOG) announced Friday that China renewed its Internet license to operate a Web site, but the previous months of tension have already damaged Google's chance at mainland profitability.

Google's chief legal officer David Drummond posted the announcement on the company's blog Friday morning.

"We are very pleased that the government has renewed our ICP license," Drummond wrote, referring to Internet content provider license. "And we look forward to continuing to provide Web search and local products to our users in China."

The license renewal should dissipate – at least, temporarily – months of tension that started earlier this year when Google claimed China was the source of cyber attacks on its databases and user e-mail accounts. Then the company said it would stop censoring search results in compliance with China's government regulations. China prohibits Internet users from accessing offensive and politically controversial material.

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South Korea Raises Interest Rates, Joining Asian Movement to Reduce Stimulus

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South Korea on Friday joined a chorus of Asian countries in cooling their economies by raising its benchmark interest rate and removing monetary stimulus from its financial system.

The Bank of Korea (BOK) joined counterparts across Asia by notching its rate up by 0.25 percentage point to 2.25%, lifting its key policy rate for the first time since August 2008 – the beginning of the global financial crisis.

But the BOK stressed it is just nudging rates up from emergency levels to counter the threat of inflation and curb a rise in household credit. Asia's fourth-biggest economy joined other economies during the global financial crisis by slashing interest rates, knocking them down three times and shaving a total of 325 basis points off the benchmark rate.

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