Archives for January 2011

January 2011 - Page 7 of 10 - Money Morning - Only the News You Can Profit From

Bank of China Will Allow U.S. Yuan Trading in Game-Changing Step Toward Creating Global Currency

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State-owned Bank of China Ltd. has announced that it will allow U.S. customers to open yuan accounts to buy and sell China's currency.

According Money Morning Chief Investment Strategist Keith Fitz-Gerald this is yet another deliberate move by China, which is attempting to promote the role of its currency in global trade.

"Prior to July 2010 such trading had been confined within China," says Fitz-Gerald. "Then, the government allowed limited yuan trading in Hong Kong, which has surpassed all expectations by blossoming literally from zero to more than $400 million a day. Against that baseline, here they come and here the Yuan comes."

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Continued U.S. Housing Price Decline Won’t Derail the U.S. Economic Rebound

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U.S. housing prices still have further to fall -perhaps a lot further.

In fact, depending upon the circumstances, the additional price declines could be quite steep.

But here's the shocker: That decline won't necessarily cause a "double-dip" recession.

In fact, it probably won't even derail the U.S. economic recovery.

Let me explain.


To understand this seeming contradiction, please read on…

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2011 Manufacturing Outlook: Slow, but Steady Growth Could Win Profits for Investors

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It's often said that a little bit goes a long way, and that will certainly be the case for U.S. manufacturing growth in 2011. Although most projections still call for slower improvement in the sector than in 2010, the estimates have been characterized as "less bad" than originally expected -and that could translate into increased profit prospects for investors.

The market gave evidence of that just last Tuesday (Jan. 4) when the major indexes shrugged off other concerns and moved nicely higher in response to a larger-than-expected 0.7% rise in November factory orders, which had been forecast to fall by 0.1% according to a Thomson-Reuters survey of economists. Orders excluding the volatile transportation sector also posted their biggest gain in eight months.

Analysts characterized the numbers as "pointing to underlying strength in manufacturing." That bodes well for the greater economy, since U.S. manufacturers employ nearly 12 million people, or 9% of America's work force, and add $1.6 trillion annually to the U.S. economy, roughly 11% of gross domestic product (GDP).

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Stock Market 2011: Fed Policies, Inflation Concerns Make For Bearish Investors

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U.S. stocks have been on the march. Last year's market rally drove stocks up to levels not seen for two years – and many prognosticators believe that higher highs are still to come.

The U.S. Standard & Poor's 500 Index posted its best December performance in 19 years, and that bullish sentiment carried into the start of 2011.

The S&P 500 rose more than 1.1% on the New Year's first trading day to close at 1,271.89. It traded as high as 1,276.17, a 52-week high and its high-water mark for the last two years.

"More people have joined the bullish bandwagon for 2011 because individual investors are ready to purchase stocks for the first time in a long time," said Ned Riley, chief investment strategist for Riley Asset Management.

The latest economic reports have further buoyed investor bullishness. U.S. factory goods orders in November unexpectedly rose 0.7%, and U.S. construction spending rose for the third consecutive month in November.

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China Monetary Policy in Focus as Reserves and Lending Surge

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China's foreign-exchange reserves climbed to a world record $2.85 trillion last quarter as bank lending continued to exceed the government's annual target, putting more pressure on the central bank to increase borrowing costs to dampen down liquidity and tame inflation.

China's foreign reserves jumped by $199 billion in the fourth quarter, a much larger increase than economists expected. The People's Bank of China (PBOC) may need to raise benchmark interest rates, boost reserve requirements for lenders and allow faster yuan appreciation, as a result, according to economists from Standard Chartered Plc and Credit Agricole CIB.

"All eyes are going to be on what new policies the central bank can bring to the table,"Jinny Yan, a Shanghai-based economist at Standard Chartered told Bloomberg News. "But there's still going to be a lot of excess liquidity in the market in the first half of the year."

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U.S. Jobs Market 2011: Are You Worried About Your Job?

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The U.S. jobs market finally showed signs of improvement last month after the unemployment rate dropped to 9.4%. That was down from 9.8% in November and represented the first real change in any direction in months, the U.S. Labor Department reported last week.

In fact, that decline pushed the national jobless rate down to its lowest level in 19 months, and created the first sense of optimism in more than a year.

Some analysts think December's numbers represent a sea change in the U.S. jobs market, and will mark the start of sustained improvement. They cite increasing job listings in 2010, rising corporate profits in 2011 and upward revisions of previous unemployment reports as reasons the job market pain could finally be subsiding.

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Shipping Prices Sink as Mining Companies Rack Up Record Profits

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As big mining companies are set to book record profits the shipping companies that deliver the precious raw materials are plagued with the lowest freight rates since 2002.

Average leasing costs for capesizes, the 1,000-foot-long ships hauling iron ore and coal, will drop 34% to $22,000 a day this year, according to a Bloomberg News survey of eight fund managers and analysts.

When prices last plummeted that low, China's economy, the biggest consumer of the minerals used in steel and power, was 75% smaller and the benchmark Standard & Poor's GSCI commodity index stood 67% lower, Bloomberg reported.

This time, the problem isn't a potential economic meltdown, which caused shipping prices to tank in 2008-2009, but a glut of new capacity coming to the world's shipping lanes.

About 200 capesizes, spanning some 35 miles end-to-end, will leave shipyards this year, expanding the fleet by 18%, the Bloomberg survey showed.

While Clarksons PLC, the world's biggest shipbroker, expects seaborne trade in iron ore and coal cargoes to surpass 2 billion metric tons for the first time this year, the 7% increase won't be enough to overcome the glut.

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Why Wall Street's Record Performance Spells Danger For Investors

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When U.S. taxpayers bailed out Wall Street back in 2008, the consensus was that this
Main-Street-led handout would bring down the curtain on a 25-year stretch of rampant – and too often reckless – speculation.

But that hasn't been the case.

In fact, in some areas, Wall Street deal volume is running at record levels.

In most cases, when an industry, sector or business is humming along and setting all sorts of records, that's very good news. It means profits are high, firms are hiring and shareholders are happy.

But when it's Wall Street setting the records, it can mean there's trouble ahead – lots of trouble. For instance, while overall profitability is down, those bottom-line figures do not determine Wall Street bonuses, which are expected to set a new per capita record. Junk bonds are being issued at double the previous record rate. Merger deals are cooking. And private equity is humming.

Smart investors will take steps to protect themselves from the looming fallout.

To find out how to profit from Wall Street's maneuvers, please read on...

Hot Stocks: DuPont (NYSE: DD) Shoots for Top Spots in Biofuels and Food Sectors

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U.S. manufacturing group E.I. du Pont de Nemours & Co. (NYSE: DD) announced Sunday it would buy Danish food ingredients company Danisco A/S (PINK: DNSOF) for $6.3 billion to broaden its presence in the fast-growing biofuels and food sectors.

DuPont will pay $5.8 billion cash and also assume $500 million in Danisco's debt. The company expects the deal to establish it as a leader in industrial biotechnology and help it successfully address global issues in food production and fossil fuel reduction.

"Danisco has two well-positioned global businesses that strongly complement our current biotechnology capabilities, R&D pipeline, and specialty food ingredients, a combination that offers attractive long-term financial returns," DuPont Chief Executive Officer Ellen Kullman said Sunday in a statement. "This also would create new opportunities across other parts of the DuPont portfolio, including traditional materials science offerings."

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Gas Prices are Headed Higher - Here's How to Profit

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As Money Morning predicted in its 2011 Outlook for oil prices, crude is poised to surge over $100 a barrel this year. And gas prices are likely to follow suit – perhaps even testing their record high above $4 a gallon.

In fact, one expert – former president of Shell Oil John Hoffmeister – predicts prices at the pump will top $5 a gallon.

The price of benchmark crude on the New York Mercantile Exchange (NYMEX) settled at $88.03 a barrel on Friday, after rising as high as $91.53 a barrel earlier in the week.

From there, black gold is set to shoot past the $100 a barrel mark and back toward the record territory it first established in 2008.

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