Archives for November 2010

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

No Rest for the Weary: Unemployment to Remain High Through 2011 and Beyond

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Stocks are up nearly 70% from their bear market lows. Corporate profits are rising. And the economy is expanding. Yet the unemployment rate continues to hover around 10%.

Neither President Barack Obama's $787 billion stimulus program, nor the U.S. Federal Reserve's quantitative easing has generated enough good news to convince companies to hire meaningful numbers of new workers.

Of the 8.7 million people who lost their jobs during the recession, more than 7.3 million are still without work. There are still nearly five job seekers for every job opening. In fact, adding in workers who are working part time but looking for full-time work and those who have given up looking all together brings the "real" unemployment rate to a staggering 17% compared to 16.5% last year, the latest government report shows.

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Can the Bull Market in Stocks Get Running as Uncertainty Recedes?

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Stocks rose briskly in the second half of last week as investors cheered the return of General Motors Co. (NYSE: GM) shares to the Street and the return of Irish budget officials to the debt negotiating table. It's amazing how quickly people forget what a horrible company GM was and what a mess Dublin has made of governance. In a twinkling of an eye, all was forgiven. Must be a bull market.

To find out whether or not the bull market still has legs, read on...

Muni-Bond Market Tumbles As Investors Demand Higher Yields on Shaky Finances

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California's efforts to sell $10 billion in short-term bonds last week attracted only tepid interest, adding to concerns that some local governments are on shaky financial ground and may have to pay more to attract investors.

The widely watched sale drew interest from around the country as debate continued over whether the stability of municipal finances has been a factor in market prices. The tax-exempt bond market has been overwhelmed by a deluge of supply that has decreased demand, depressed prices and forced yields higher.

"The tax-exempt municipal bond market is a cold, cold world right now for issuers and taxpayers," Tom Dresslar, a spokesman for the California State Treasurer told The Wall Street Journal. He added that the state decided to cancel another $267.3 million bond sale it planned to price this week "in light of market conditions."

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Why the Federal Reserve's Quantitative Easing Strategy Won't Save the US Economy

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With a second round of "quantitative easing" underway, the U.S. Federal Reserve wants us to believe that it is doing its duty as the nation's central bank – promoting maximum employment, keeping a lid on inflation and making sure that long-term interest rates remain at reasonable levels.

This is known as the Fed's "dual mandate," since the inflation and interest-rate objectives are really the same goal.

But here's a shocker: The Federal Reserve's real dual mandate is to enrich the banks the central bank is created by and works for – and to cover Congress when its laws enrich banks at the expense of jobless American taxpayers.

Understanding how quantitative easing works is simple. Understanding how banks and Congress are manipulating this economic tool is just a tad more complicated. Understanding how quantitative easing will impact your life – and your financial future – is just a matter of understanding the facts

For additional insights on the Fed's true workings, please read on...

Stock Market Analysts and Insiders Wave Caution Flags After $20 Billion GM IPO

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General Motors Co. (NYSE: GM) yesterday (Thursday) raised $20.1 billion in an initial public offering (IPO) that moves the company closer to paying back the taxpayer funds it received in a bailout last year.

However, GM's journey doesn't end there. Even after all of the IPO money changes hands, the company will still owe the federal government more than $26 billion. And the challenges that drove the company into bankruptcy to begin with – union payouts, tougher competition, and higher gas prices – are still relevant.

Ford Motor Co. (NYSE: F), Honda Motor Co. (NYSE ADR: HMC), and Toyota Motor Co. (NYSE ADR: TM) remain as well, having avoided bankruptcy all together.

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Money Morning Mailbag: Natural Gas Prices Present New Era of Energy Investing - But U.S. Government Not Up to Speed

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Last week Money Morning Contributing Writer Jack Barnes explained how the delayed rebound in natural gas prices is offering investors a key opportunity in energy investing.

Spot prices for crude oil and liquefied natural gas, or LNG, have risen disproportionately to the low price of natural gas on the U.S. market.

"Why didn't natural gas bounce like its two other energy brethren?" Barnes asked. "That's easy. Once the United States discovered an abundant supply of natural gas in its shale basins, the fear that this country would run out of this critical source of energy basically disappeared. This new supply of natural gas is changing the way the United States views energy. In the past, we expected to have to use imports to meet our energy needs. But that may not be the case going forward."

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No Rebound in 2011 as the Housing Market Continues to Rot

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The year of 2010 saw very little improvement in the housing sector, and that's not likely to change in 2011.

The industry's weaknesses – high unemployment, tight credit, ineffectual government programs, soaring inventories, plunging prices, and so on – are simply too gaping to be resolved by next year.

Even the normally ultra-optimistic National Association of Realtors (NAR) came out of its annual conference in New Orleans in early November with a frown on its face, predicting that, "nationwide, homeowners can expect little, if any, increase in home values in 2011."

The real estate research and online brokerage firm Zillow agreed, issuing a report on Nov. 10 noting that U.S. home values fell by 4.3% in the third quarter and chances for improvement over the winter are slim.

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United Nations Warns of Food Price Hikes, Painting a Picture Similar to 2008's "Silent Tsunami"

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The United Nations' Food and Agricultural Organization (FAO) yesterday (Wednesday) warned that food prices could rise through 2011 unless production of major crops rises significantly, outlining a situation reminiscent of 2008's "silent tsunami" food crisis.

The FAO announced in its twice-yearly Food Outlook report that global food import costs will jump 15% in 2010 to $1.026 trillion – dangerously close to the 2008 crisis level of $1.031 trillion. The world food import outlook was revised up from a June estimate of $921 billion.

Increasing global demand is boosting the food bill, and price climbs in grain and sugar – which recently passed its 30-year peak – have signaled even higher prices ahead.

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