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September 2010 - Page 3 of 9 - Money Morning - Only the News You Can Profit From

Hot Stocks: Adobe Systems Inc. Drives Investors Away With Weak Forecast and Disappointing Growth Outlook

Adobe Systems Inc. (Nasdaq: ADBE) stock yesterday (Wednesday) plunged the most in eight years after forecasting a disappointing fourth quarter, triggering a slew of analyst downgrades and recommendations for investors to move to Adobe's tech rivals.

The software maker fell as much as 21% Wednesday, at one point hitting a new 52-week low of $25.81. It closed at $26.67, a 19.03% drop.

The company on Tuesday announced that it's predicting a flatter fourth quarter than investors and analysts had hoped due to fewer than expected sales of its core Creative Suite 5 software. The CS5 package includes popular Photoshop, Illustrator and Dreamweaver programs. The stock had already slipped 10% so far this year before Wednesday's trading.

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The Bright Future for Cloud Computing is Becoming Much Clearer

The cloud computing industry has yet to fully take off, but for an indication of its potential, look at the players getting involved.

Microsoft Corp. (Nasdaq: MSFT), Hewlett-Packard Co. (NYSE: HPQ), Oracle Corp. (Nasdaq: ORCL), Google Inc. (Nasdaq: GOOG), and Inc. (Nasdaq: AMZN) – the biggest names in the tech sector – are all racing to take the lead in this burgeoning industry.

So what's all of the excitement about?

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Silver is Emerging From Under Gold's Shadow

Gold surged to an all-time record high of $1,298 an ounce yesterday (Wednesday) after a U.S. Federal Reserve plan to jump-start the American economy triggered a slump in the U.S. dollar.

The yellow metal has now rallied for five straight trading sessions and is up about 18% for the year. Investors are waking up to the fact that the central bank's plan to use U.S. Treasury purchases as a means of injecting another $2.3 trillion into the U.S. economy is only going to further debase the greenback.

There's no doubt that the ongoing slide in the dollar is going to be bullish for gold. But investors will do a lot better to focus on silver – the "other" precious metal.

"People are finally starting to understand that quantitative easing will devalue the currency," Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York, told Bloomberg News. "That's why they're shifting into gold and silver."

For six ways to profit from silver, please read on...

China Steps Up Effort to Derail BHP Bid for Potash

China is attempting to derail BHP Billiton Ltd's (NYSE ADR: BHP) bid for Potash Corp. (NYSE ADR: POT), as Beijing frets over the long-term supply of resources, according to a report yesterday (Wednesday) by the Financial Times.

Fearing that it could have a negative impact on Chinese imports, the state-run Sinochem Group has hired Deutsche Bank AG (NYSE: DB) and Citigroup Inc. (NYSE: C) to help disrupt BHP's bid for the fertilizer company, people familiar the matter told the FT. A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team.

Citigroup, which acts as joint corporate broker to BHP along with Bank of America Corp.'s (NYSE: BAC) Merrill Lynch unit, has asked to be relieved of its role in BHP's bid in order to advise Sinochem on a potential counter-bid.

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Question of the Week: The Battle Over Bush Tax Cuts is Destined for Deadlock

Democrats and Republicans have staked out their territory in the battle over the Bush tax cuts in the run up to November's midterm elections. However, readers remain unconvinced that the two parties will reach common ground on the issue anytime soon.

Most Republicans want to see all expiring tax cuts extended. Senate leader Mitch McConnell, R-KY, last week proposed legislation to continue the tax cuts indefinitely, wanting to show party unity after House Minority Leader John A. Boehner, R-OH, hinted that he'd be willing to compromise and vote for U.S. President Barack Obama's plan of continuing only middle-class tax cuts.

"If the only option I have is to vote for some of those tax reductions, I'll vote for them," Boehner told CBS's "Face the Nation" Sept. 12. Boehner had previously proposed extending the Bush tax cuts for two years.

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Currency Exchange Rates and Your Investments: What You Don't Know Can Hurt You

You may be facing immense foreign-currency risks in your investment portfolio – and not even realize it.

If that's the case, don't feel bad: You're not alone.

The reality is that most American investors have no idea that currency exchange rates directly affect U.S. corporate earnings, this country's stock market, or the growth rate of our economy.

The bottom line: These investors don't realize that they face some pretty major foreign-exchange-rate exposure in their investment portfolios – as well as with the individual stocks contained in those portfolios.

This exchange-rate exposure can be accompanied by some pretty major risks. Understanding how currency fluctuations can enhance or destroy corporate earnings, the export sector and the U.S. economy, and even your personal wealth will make you a smarter, better investor.

To understand how the currency markets are determining the fate of our economy, please read on...

Will Other Tech Companies Follow Cisco's Lead by Paying Out Dividends?

When Cisco Systems Inc. (Nasdaq: CSCO) last week announced that it would institute the first dividend in company history, it raised hopes among investors that hi-tech companies would finally begin to loosen the strings on their hefty cash holdings.

But will other tech giants really follow suit and institute dividends of their own?

Cisco Chief Executive Officer John Chambers announced the payout last Tuesday, saying the networking giant would reward shareholders with a dividend likely to yield between 1% and 2%. The exact amount will be determined in the coming months while the company considers developments on the tax front and broader market conditions.

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We Want to Hear From You: Should the U.S. Federal Reserve Keep Interest Rates Low?

After their meeting yesterday (Tuesday), U.S. Federal Reserve policymakers said they are more worried about deflation than inflation and vowed to look for ways to help along an economy that is experiencing worrisomely slow growth.

In fact, the central bank's rate-setting Federal Open Market Committee (FOMC) said it plans to keep the benchmark Federal Funds rate at its record-low level unchanged between 0.00% and 0.25% for the 20th consecutive month. And, central bank policymakers said rates could remain that low for "an extended period."

In the near term, that appears justified. Core inflation is running at just 0.9%, below the Fed's comfort-level target of 1% to 2% – where it says the inflation rate needs to be for price stability. Fed Funds futures at the Chicago Board of Trade (CBOT) now show that traders believe there is a 54% chance the Fed won't increase short-term rates until its November 2011 policymaking meeting.

In the interim, faced with a still-wheezing economy, the central bank may even start buying back large blocks of U.S. Treasury bonds – a technique that pushes liquidity out where its needed.

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Don't Get Bullied out of Bonds

Bonds have provided a welcome safe-haven for investors seeking shelter from the financial maelstrom of the past two years, offering steady returns while stocks bounce up and down.

Now some analysts are afraid that once the selling of bonds begins it will be indiscriminate, and there will be a bloodbath. But that fear totally ignores the new investment reality in which we're living.

The fact is, stocks won't be crawling out of the gutter anytime soon, and until they do, investors will continue to look elsewhere for a store of value. They have already decided they can find it in two places: U.S. bonds and gold.

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Will The Fed Fall Back on Treasury Purchases to Fuel Economic Growth?

Faced with a faltering recovery, the U.S. Federal Reserve today (Tuesday) will again consider ramping up purchases of Treasuries, a policy known as quantitative easing, to promote growth.

The Standard & Poor's 500 Index closed yesterday with a 1.5% gain on speculation that the Fed would at least indicate to investors that it is prepared to take further action to support the economy.

The Fed conducted its last major round of Treasury purchases from January 2009 to March 2010, buying $1.25 trillion in mortgage-backed securities and about $175 billion in debt owed by government agencies. The Fed planned on gradually reducing its balance sheet as the debt matured or was prepaid.

But last month the Fed signaled it might resume its quantitative easing steps when it voted to reinvest the principal payments in longer term Treasury securities. And with little improvement in the U.S. economy since then, analysts think the central bank is preparing to take the next step.

"The Fed's rhetoric will get the markets ready for the real possibility of expanding their balance sheet at a later meeting this year," Richard Clarida, a Columbia University professor and global strategic adviser for PIMCO, said Monday in a Bloomberg radio interview.

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