Archives for January 2011

January 2011 - Page 8 of 10 - Money Morning - Only the News You Can Profit From

Stock Market Bulls Have Bears on the Run Despite Poor Unemployment Report

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Stocks survived a big test of the winter rally on Friday as they finished a positive week with mild losses.

The Friday session featured a report on non-farm payrolls that came in worse than expected, but not egregiously so. Energy, industrials and utilities fared the best, while financials and telecoms slipped the most. Treasuries blew higher across the board, showing again why we always say that the bonds love misery.

Earlier in the week, I forecast that a disappointing payroll number and a modestly negative reaction would be the best possible result for bulls for three reasons: a) it maintains pressure on the Federal Reserve to keep interest rates low and to continue buying assets; b) it keeps pressure on the new Congress to keep up the pace of fiscal spending; and c) it provides a mildly oversold technical condition that provides a better base from which to rally later in the month.

Click Here to See Which Sectors Are Driving the Market...

Buy, Sell or Hold: Teck Resources Ltd. (NYSE: TCK) is the Perfect Example of a Global Macro Play

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The hedge fund industry has many distinct investment styles. One of them is called "Global Macro." It is the economic study of world events, with an eye toward making a profit from these events.

The Global Macro crowd looks for trades around the world, where they can be long one commodity and short a different commodity – due to weather conditions for example. The idea is to look for trades based on causation, not just correlation.

Here is an example of a global macro trade. If it is dry in Brazil during planting season, you want to go long on palm oil futures in Indonesia, because soybean crop yields will be late to market in Brazil. Palm oil will replace soybean oil in the kitchens of homes in Asia when this happens.

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Potential for Municipal Bond Defaults Rattles the Muni-Bond Market as Illinois Ponders Tax Increase

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Illinois lawmakers are considering a huge income tax increase to plug the state's massive $13 billion deficit as wary municipal-bond investors weigh the hazards of betting on the state's debt.

Meeting behind closed doors, Governor Pat Quinn and key Democratic leaders reached an agreement Thursday to raise the personal income tax that could give skeptical investors enough confidence to hold onto their Illinois bonds.

If approved, the proposal would raise the rate to 5.25% from 3%, a person familiar with the matter told The Wall Street Journal. The person said negotiations on the state's first income tax increase in roughly two decades were "still fluid" and the deal was not final.

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JPMorgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS) Poised to Profit From Hot Chinese IPO Market

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U.S. banks JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) announced Friday that they gained approval for securities joint ventures in China's mainland stock market, opening the door for Wall Street to profit from the booming Chinese initial public offering (IPO) market. JPMorgan will pair with First Capital Securities and hold a […]

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Telecom Investing Strategies: Six Ways to Profit From the International Broadband Boom

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Telecommunications stocks have long been favorites among American investors, both for their sustained growth and their typically lucrative dividend payouts. What many investors don't realize, however, is that U.S. telecom giants now badly lag the rest of the developed world in one key part of the telecommunications sector – broadband Internet service.

Broadband providers in much of the rest of the world offer much faster connections at generally much lower prices. And those overseas players tend to have much more room for growth than the highly saturated U.S. market.

That's why investors who are seeking to maximize their long-term profits from the telecom sector need to start looking at the industry's emerging international players.

"The average U.S. household has to pay an exorbitant amount of money for an Internet connection that the rest of the industrial world would find mediocre," reported a recent issue of Scientific American.

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Bond Investing: Inflation, Interest Rate Risk Weaken Corporate Bonds and TIPS

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To cushion the recession's financial blow and safeguard against shaky global markets, investors over the past few years retreated from stocks and poured billions of dollars into bonds.

From January 2008 through June 2010, outflows from equity funds totaled $232 billion, while inflows to bond funds hit a staggering $559 billion, according to the Investment Company Institute (ICI).

But as 2010's bull market continued climbing, and the U.S. Federal Reserve maintained its loose monetary policy, bonds' safe haven status faded in the second half of the year. Now analysts are warning investors to escape the investment in 2011, as inflation and interest rates are likely to rise and the bond market is headed for a downturn.

But as 2010's bull market continued climbing, and the U.S. Federal Reserve maintained its loose monetary policy, bonds' safe haven status faded in the second half of the year. Now analysts are warning investors to escape the investment in 2011, as inflation and interest rates are likely to rise and the bond market is headed for a downturn.

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What's Really Behind Goldman's Facebook Investment

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Talk about a social media bubble!

Facebook has raised $500 million from Goldman Sachs Group Inc. (NYSE: GS) and Russian investment firm Digital Sky Technologies, which implies that the social media darling is valued at a staggering $50 billion.

This reminds me of the valuations being assigned to Internet companies leading up to the "dot.bomb" crash. There's no way a company that relies on nothing more than bits of information – the vast majority of which are summarily ignored by the community that supposedly finds it so compelling – should have a valuation approaching The Walt Disney Co. (NYSE: DIS), equal to The Boeing Co. (NYSE: BA), and greater than Time Warner Inc. (NYSE: TWX).

Still, for the sake of argument, let's play along and suppose that the $500 million capital infusion is for real and that the $50 billion valuation it implies is correct. Then the question becomes: What does the transaction say about Goldman Sachs, which arranged the deal, and the regulators supposedly overseeing it?

To find out what Goldman has to gain from its Facebook investment, read on...

Hot Stocks: Vestas Wind Systems A/S (PINK:VWDRY) Could Bounce Back in 2011

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Danish wind turbine maker Vestas Wind Systems A/S (PINK ADR: VWDRY) has been racking up an impressive number of new orders lately – especially in the burgeoning Chinese market. Combined with several new manufacturing plants that will increase capacity in the United States, the surge should boost the company's performance in 2011.

Vestas, the world's biggest maker of wind turbines, said last week that its orders from China last year reached a record high.

"In 2010, Vestas has announced almost 1,000 megawatts (MW) worth of orders in China alone, which is a record high order intake for Vestas in this competitive market," the company said in a statement announcing an order from Chongli Construction Investment Huashi Wind Power Company Ltd.

Vestas got an order for 58 turbines with total capacity of 49.3 megawatts from Chongli China and logged multiple orders from Germany in the past week.

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Municipal Bond Forecast: Deadbeat States Emerge as Biggest Threat to Muni-Bond Investors

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The U.S. municipal bond market could be cruising for a bruising.

The same thing goes for muni-bond investors.

The danger is right out in the open for everyone to see. But investors aren't heeding the warnings.

The bottom line: Avoid the sector, except the very-highest-rated issues; and even then, given the low yields available, there are clearly lower-risk/higher-profit opportunities for your money.

To understand the spiralling dangers muni-bond investors face, please read on...

Record High World Food Prices Spark Fears of Looming Global Crisis

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World food prices hit a record high in December, jumping above the 2008 food crisis levels and developing into an "alarming" situation, according to a report released yesterday (Wednesday) by the United Nations' Food and Agriculture Organization (FAO).

"We are entering a danger territory," said Abdolreza Abbassian, an economist with the FAO. "It will be foolish to assume this is the peak."

The FAO's Food Price Index, which tracks the prices of 55 food commodities, climbed for the sixth consecutive month to hit 214.7 points in December, its highest reading since the measure was first calculated in 1990. This beat the previous June 2008 record of 213.5 and is a 25% increase from December 2009.

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