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Archives for September 2010
September 2010 - Page 8 of 9 - Money Morning - Only the News You Can Profit From
How to Use Utilities Stocks to Pump Up Your Portfolio
There was a time when the words "widows and orphans" pretty much defined utilities stocks. As well-regulated monopolies whose products were in constant and increasing demand, they provided a steady stream of income with a level of safety adequate for even the most conservative portfolios.
Because of more competition, looser rate regulation, and slower growth, utility stocks aren't quite the safe haven they once were. But with interest rates at all-time lows and continuing economic turmoil, they still have something to offer most investors.
Of course, the public utilities field today is considerably less broad and diverse than when your grandmother went looking for her retirement stocks.
Following the dismantling of Ma Bell (the original AT&T), which began in 1974, regulated phone utilities gradually disappeared in all but a few rural areas, leading to today's highly competitive tangle of publicly traded telephone companies.
Similarly, most of the smaller public water companies have been snapped up by a few big players – like American Water Works Co. Inc. (NYSE: AWK) – who run them as state-regulated subsidiaries.
That makes energy companies the most viable options for utilities stocks. And recent numbers indicate a turnaround is brewing in that sector.
Stock Market's Rally A Salute to Slow Growth
The markets staged a relief rally last week that reflects Wall Street's attitude about the overall economy. Simply put, investors are saying they can live with slow growth, so long as the U.S. can avoid a double-dip recession.
Stocks leapt around the world last week like jets of water shooting out of a fountain that had been closed down for weeks. The major U.S. indexes rose 3%, the NASDAQ rose 4%, non-U.S. foreign big-caps rose 3.6% and small-caps rose 4.6%.
Many of our plays on growth overseas rose even more: iShares MSCI Thailand Index Fund (NYSE: THD) jumped 4.9% and iShares MSCI Chile Investable Market Index Fund (NYSE: ECH) rose 4.4%, while iShares MSCI Singapore Index Fund (NYSE: EWS) rose 3.2% and iShares MSCI Turkey Index Fund (NYSE: TUR) rose 3.5%. Once again, as we have seen all year, the response in iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI) was more muted, up 2.4%.
Read on to see where the next turning point for the market will come…
Buy, Sell or Hold: Despite Challenges, Innovation Will Provide Long-Term Boost to Software Leader Microsoft Corp. (Nasdaq: MSFT)
Thanks to some shrewd maneuvering with its first major software contract in the early 1980s, Microsoft Corp. (Nasdaq: MSFT) built itself into a tech giant and software powerhouse. But the global financial crisis and increasing competition are eroding that longstanding dominance.
There's no doubt the company has made successful strategic decisions for decades.
Founder and Chairman William H. Gates III established Microsoft in 1975 and made it the worldwide leader in software products and services, including operating systems for servers, personal computers and intelligent devices, server applications, business solutions applications, software development tools and video games. It offers product support and consulting services on its impressive array of products, including its widely used Windows operating systems and Microsoft Office software suite.
How to Profit From the "Widow-Maker" Trade - Shorting U.S. Treasury Bonds
Although we're in the midst of a U.S. Treasury bond bubble so big that pundits are calling for investors to short the government paper, resist the urge to jump in with both feet.
Doing so right now is nothing more than a "widow-maker" trade that will test both your patience and your pocket book. And yet, "shorting" the U.S. Treasury bond market is an opportunity you can't afford to pass up – so long as you execute the trade correctly.
For the best Treasury bond strategy to deploy right now, please read on…
China Using Government Muscle to Turbo Charge its Auto Industry
Having already supplanted the United States as the world's largest auto market, China is on the fast track to becoming the global leader in hybrid and electric cars.
General Motors and Chrysler were forced into bankruptcy largely because they failed to pursue more fuel-efficient models. Indeed, GM and Chrysler looked wholly unprepared as gas prices soared over $4.00 a gallon in 2008.
As GM emerges from bankruptcy – having been bailed out by the U.S. government – it will put a renewed focus on alternative energy. Unfortunately, it's too late to make a difference. As U.S. car companies sputtered amid the country's economic collapse, carmakers in China raced ahead. And with billions of dollars in government backing, they are the companies that will set the pace for the global auto market.
Money Morning Mailbag: Small Business Owners Find Hope in Big Banks' Lending Promises
Larger financial institutions are increasing loans to big companies, but small business owners are still feeling the credit crunch.
U.S. Federal Reserve Chairman Ben S. Bernanke noted at a lending conference in July that there was a serious gap developing between large businesses that were building up cash and smaller ones still unable to get credit, and blamed tight credit for preventing small businesses from hiring.
"Making credit accessible to sound small businesses is crucial to our economic recovery," Bernanke said at the conference.
According to the National Small Business Association's 2010 Mid-Year Economic Report, 41% of small businesses were still having trouble obtaining credit in July.
Petrobras Sets Long-Term Financing Plan by Selling $42.5 Billion of Stock to Government
Petroleo Brasileiro SA (NYSE ADR: PBR), the Brazilian national oil company better known as Petrobras, announced Wednesday that it had agreed to issue $42.5 billion in new stock to the Brazilian government to obtain the rights to five billion barrels of oil in offshore fields.
Petrobras will pay an average of $8.51 a barrel for the oil after almost two weeks of negotiations with the government, according to a regulatory filing. More than half the oil will come from the Franco field in the offshore Santos Basin, the company said.
Even though the company paid what is seen by many analysts as a premium for the rights, the deal is the linchpin for the Latin American oil giant's long-term financing plans.
Brick-and-Mortar Retailers Moving Business Online as Foot Traffic Declines
U.S. retailers this year geared up for the annual back-to-school shopping season, the parents and children didn't fill the streets and shopping malls – they stayed inside, and online, cruising for bargains on the Internet.
Overall sales this August were up only slightly from last year, failing to give stores the boost they needed after a sluggish summer.
A report from MasterCard's SpendingPulse released yesterday (Wednesday) showed that consumers gave a slight bump to children's clothing and consumer electronics with their back-to-school shopping, but pulled back in other areas of merchandise which cut into sales gains.
But among uneven retail numbers this year exists a bright spot that has been growing for years, and is leading companies to overhaul their traditional business models: the online retail market.
Is BP Dealing Away Its Future?
In the aftermath of the biggest environmental disaster in U.S. history, the Gulf of Mexico relief-well saga continues to monopolize our attention.
But here's the reality: Money problems – not the relief wells – could prove to be the undoing of BP PLC (NYSE ADR: BP). And that means the company's fate is most closely tied to its ongoing efforts to raise money by selling key assets from around the world.
BP is looking to divest $30 billion in assets during the next 18 months.Selling its assets is one way for the company to raise the money needed to cover its expected liabilities. But here's the problem: Those sales are moving right into the teeth of a new round of mergers-and-acquisitions (M&A) deals that were already taking place in the oil-and-gas sector, due to rising volatility there and the inability of some to withstand the uncertainty.
As a result of all this wheeling and dealing, the big will get bigger – and BP will get smaller. Indeed, the BP that emerges from the mess that it created should be smaller, leaner and smarter. But will that be good enough?
To understand BP's financial strategy, please read on...