Archives for December 2010

December 2010 - Page 7 of 9 - Money Morning - Only the News You Can Profit From

Obama Now Must Rally Democrats to Seal Tax Deal With GOP

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President Barack Obama on Monday struck a deal with Republicans to extend the Bush-era tax cuts and federal unemployment insurance as well as a host of other tax breaks, but now he faces an uphill battle to convince reluctant members of his own party to go along.

Ignoring Democratic opposition, President Obama agreed to the compromise package, which cuts taxes on businesses in an effort to help the economy recover.

The deal capped weeks of negotiations between leaders in Congress and an administration team led by U.S. Treasury Secretary Timothy Geithner. Ultimately, Obama accepted a deal that contradicts his long-held position that tax cuts should only be extended for lower and middle-class earners in exchange for a 13-month extension of jobless benefits for the long-term unemployed.

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We Want to Hear From You: What Do You Think Of President Obama's Proposed Tax Deal?

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For months now, U.S. President Barack Obama watched as the expiration date for the Bush tax cuts drew closer and closer – with no signs of compromise among Congressional Republicans.

So in an attempt to beat the Dec. 31 deadline – and the big tax increase facing American individuals and businesses – President Obama on Monday struck a controversial compromise with Republicans.

Pundits are now questioning his call. Did President Obama cave to pressure, or did he pull off a sly political coup? Will this decision aid a still-struggling U.S. recovery, or will it add to the mountain of existing U.S. debt and stick future generations with the tab?

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Pfizer Hopes New CEO Ian Read Can Help Drugmaker Overcome Lipitor Revenue Loss

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Pfizer Inc. (NYSE: PFE) surprised analysts and investors Sunday by announcing the replacement of Chief Executive Officer Jeffrey B. Kindler with Ian C. Read, the company's head of global biopharmaceutical operations. The move was made as the world's largest drugmaker prepares for generic competition for its top-selling cholesterol drug Lipitor.

After four and a half years in the top spot, Kindler suddenly announced his retirement, saying in a statement that the job had been "extremely demanding on me personally" and he needed to "recharge my batteries."

Pfizer needs sharp, powerful management to ready the pharmaceutical giant for the November 2011 patent expiration of cholesterol pill Lipitor, the world's top-selling drug. Lipitor accounted for $11.5 billion in sales last year – 23% of Pfizer's $50 billion total annual sales.

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Investing in the Americas: Natural Resource Prices Will Be Key to 2011 Profits

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Whether you win or lose on your Americas-related investments in 2011 will come down to a single factor – natural-resource prices.

If the prices of oil, gold, copper and other natural resources are high, the hideous flaws in the economies of a number of the countries north and south of the U.S. border will remain hidden behind, as if by magic.

But if resource prices plummet, then even some of the best-run countries in North and South America will probably stumble a bit – and several will be revealed as true economic basket cases.

When we refer to "the Americas," we're talking about all the countries in North, Central and South America – with the United States excluded. There's a great divergence in potential. So let's begin our journey with Latin America.

To learn which four markets to invest in, please read on…

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Uranium Prices Surge on China's $511 Billion Investment in Nukes

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China's push for energy security is igniting a boom in the country's nuclear power plant construction, rekindling demand for uranium and leading its price higher.

China held its first International Nuclear Symposium on November 24-25 in Beijing. The meeting was packed with nuclear industry heavyweights scrambling for new contracts after the Red Dragon announced its intentions to spend $511 billion to build as many as 245 reactors in the next two decades – nearly doubling previous plans.

"Money is not an issue, which is different from the rest of the world. The Chinese have the capacity to deliver and they are deadly serious about achieving it," Steve Kidd, director of strategy and research at the London-based World Nuclear Association (WNA), told Bloomberg News.

President Hu Jintao said China aims to generate at least 15% of its energy from non-fossil fuels by 2020. Although the Chinese have invested heavily in wind farms and solar arrays, nuclear power is the only source of energy that could reach his goal.

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You Heard it Here First: Silver's 30-Year High is Just the Beginning

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The price of silver today (Monday) surged above $30 an ounce for the first time since 1980, after U.S. Federal Reserve Chairman Ben Bernanke indicated that further quantitative easing (QE) could be on the way.

Silver futures have gained almost 70% since August, when expectations of more QE were first discussed. Since then, the Federal Reserve has set about purchasing $600 billion of U.S. Treasuries and the Fed Chairman said on Sunday that more debt purchases are "certainly possible."

The result was a rally in precious metals, which played host to investors looking to preserve their wealth against further depreciation. The price of silver topped $30 for the first time since 1980, soaring as high as $30.09 an ounce in afternoon trading.

But that's just the beginning.

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Buy, Sell or Hold Pairs Trade: Why it's Time to Sell Fiat SpA (Pink ADR: FIATY) and Buy Ford Motor Co. (NYSE: F)

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With all that's happening in Europe right now – not to mention economic expectations and consumer-spending trends both overseas and here in the United States – I find that we have an interesting "pairs trade" available to us.

And the trade that I'm talking about is to have investors sell Fiat SpA (Pink ADR: FIATY) and buy Ford Motor Co. (NYSE: F).

The inspiration for this trade stems from an experience I had as a teenager.

Indeed, it's been more than 25 years since the story I'm about to relate took place, but the memories are so vivid that they're never far from my thoughts.

Neither are the lessons I learned – which is fortuitous, since those lessons are especially applicable in today's unforgiving financial markets.

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How to Play Market Uncertainty With an Options Straddle

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It's often said that the only thing certain in the stock market is uncertainty – and that's certainly been the case this fall.

Since 1950, September has consistently been the worst month for stock performance and October is most notable for the market crashes it has seen – 1929 and 1987, to name two. This year, however, the Dow Jones Industrial Average broke out of a summer slump and gained 11.08% over those two months, with similar percentage gains by the other major indexes. Then, in November, the Dow and other broad indexes lost more than 1%, only to rebound by more than 2% each on Dec. 1 in a 250-point Dow rally inspired by a better-than-expected November jobs report.

What will happen next?

Will Wednesday's surge turn into a legitimate Santa Claus rally, followed by a strong January Effect advance? Or, will poorer economic numbers and a wave of tax-related selling send the market reeling as fall winners cash in their gains and summer losers shed their poor performers?

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Chilly Winter Will Offer Hot Stock Buys As Market's Bull Run Still Has Legs

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Stocks swept higher over the past week as investors swooped in to pick up bargains lying on the stock exchange floors. It did not matter if they were in Asia, Europe or the United States. If they were down 10% or more in the past month, they were vacuumed up.

The Dow Jones Industrial Average rose 2.6% for the week, the Nasdaq Composite went up 2%, the Standard & Poor's 500 Index climbed 3% and the S&P 400 Midcap Index rose 3.2%. Developed markets overseas rose 3.9%, emerging markets jumped 5%, gold increased 3.7%, crude oil rose 6.5% and silver was the star, up 9.4%. The U.S. dollar, which has been driving the bus, fell 1.2%, making the equity gains possible.

Crude futures busted through the $88 per barrel level that has proven to be resistance three times this year. It was fair to expect the resistance to hold again, as there are forces in the Middle East and elsewhere that do not want to allow prices to rise to demand-destroying levels, but traders made it happen.

Read on to see why energy prices -- and the bull market -- will head higher

No Rebound in 2011: The Housing Market Continues to Rot

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The year 2010 brought very little improvement in the U.S. 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 within the 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. It recently issued a report noting that U.S. home values fell by 4.3% in the third quarter of 2010, and chances for improvement over the winter are slim.

"The unceasing declines in home values signal that we're in for a long, bleak winter of continued troubles for the housing market," said Zillow Chief Economist Stan Humphries. "The length and depth of the current housing recession is rivaling the Great Depression's real estate downturn and, with encouraging signs fading, will easily eclipse it in the coming months."

Read this full report to see why you don't need to avoid the housing industry altogether…

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