Archives for April 2011

April 2011 - Page 2 of 9 - Money Morning - Only the News You Can Profit From

Case Shiller's Double Dip Has Come and Gone

The S&P/Case Shiller Home Price Indices reported Tuesday are, as usual, so far behind the curve that not only did they miss the "double dip" that has come and gone, it will be at least July or August before it reports an apparent upturn in prices in March and April. S&P's view of the data was dour. "There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing, " said S&P's David Blitzer. "The 20-City Composite is within a hair's breadth of a double dip."

There's just one problem with that. Other price indicators that are not constructed with the Case Shiller's large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low.'s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. ZIllow's listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.

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Investment Strategies: Why Dividends, Inverse Funds, "Glocal" Stocks, Commodities and Emerging Economies Are the Places to Be

After a wild first quarter that included unrest in Egypt, Libya and Saudi Arabia, a spike in oil and gasoline prices, an apparent acceleration of inflation and continued global debt fears, investors need to embrace investment strategies and investment choices that will provide returns even as they manage risk, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"In many ways, we are truly entering uncharted territory," Fitz-Gerald said.Money Morning Quarterly Report

In a wide-ranging interview with Executive Editor William Patalon III that represents the latest installment of Money Morning's "Quarterly Report" series for the 2011 second quarter, Fitz-Gerald talked about the first quarter and provided a detailed look at what he sees ahead. For instance, Fitz-Gerald said that:

  • Despite the bull market in U.S. stocks, the U.S. economy and accompanying financial system isn't as strong as it looks, noting that "there are still massive cracks in the system."
  • Investors should make sure to watch the U.S. Federal Reserve, since its decision to continue or to end its current monetary-policy strategies could determine where U.S. stock prices go from here.
  • Prices will continue their general upward trajectory, which is why he ultimately sees oil at $150 a barrel, gold at $2,500 an ounce and silver crossing the $50-an-ounce threshold.

Fitz-Gerald also detailed some of the investment strategies investors needed to consider, including the use of "inverse funds," dividend-paying stocks, and so-called "glocal" stock plays. "Glocal" stocks are the term Fitz-Gerald uses to describe large, U.S.-based multinational corporations whose global operations include a local presence – especially in the crucial markets of China and Greater Asia. Most of these companies are publicly traded, and have their shares listed on the Standard & Poor's 500 Index today.

What follows is an edited transcript of the question-and-answer session that Patalon hosted with Fitz-Gerald.

How to Use Capital Flows to Turn the Economy's Job Losses Into Portfolio Gains

Even though the U.S. unemployment rate fell to 8.8% in March from 10.1% at the height of the Great Recession, sidelined investors are still waiting for better news.

But what they don't realize is that it's a mistake to wait. Instead, what they should be doing is using so-called "capital flows," or the global trends that dictate the flow of investment dollars, to find new profit opportunities.

The U.S. labor market is a perfect – albeit bleak – example of what I'm talking about.

To find out how you can take advantage of the sea change underway in the global labor market, read on…

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U.S. Government Faces Credit Rating Downgrade Without Radical Budget Changes

Could the United States lose its status as the world's premier safe harbor for global investors?

Credit-rating heavyweight Standard & Poor's last week threatened to cut the United States' top-tier credit rating, saying the country's political infighting and burgeoning debt may warrant a downgrade.

In short: This country's days as a AAA-rated investment may be numbered.

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Fed Press Conference: What Do You Think of the Outcome? 

The U.S. Federal Reserve today (Wednesday) will hold its first-ever press conference – an extraordinary development that has generated more buzz than typically surrounds a Federal Open Market Committee (FOMC) meeting.

But many wonder, will U.S. Federal Reserve Chairman Ben S. Bernanke deliver clear-cut explanations, or a script of "Fedspeak"?

Bernanke will start the Fed press conference at 2:15 p.m. EDT after the two-day meeting of the Federal Open Market Committee (FOMC). The agenda includes a review of the Fed's economic projections and the FOMC's policy decisions, which will be released in a policy announcement at 12:15 p.m.

Then – the part everyone is really waiting for – Bernanke will field press questions for about 45 minutes.

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MIT's Billion Prices Project Reappears

The U.S. country index of the Billion Prices Project, a real-time inflation index published by the Massachusetts Institute of Technology, is back after mysteriously disappearing last week.

The BPP tracked online prices of over a half million products sold online in seven nations. OK, so it wasn't a billion prices, but it was certainly large enough to be a representative sample of a broad spectrum of products and services.

The U.S. index had recently become increasingly popular in the economic blogosphere. It was thus a growing source of embarrassment for the Fed because it showed much greater inflation across a wide spectrum of goods and services, generally not impacted by energy prices, than the Fed has been willing to admit to.

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The Death of the Dollar: Will the Fed Kill the Greenback at Tomorrow's FOMC Meeting?

Months or years from now, when analysts are studying the death of the U.S. dollar, they'll look back and see that the greenback's demise began on a specific day – Wednesday, April 27, 2011.

As in … tomorrow.

At 12:15 p.m. tomorrow, at the conclusion of a two-day Federal Open Market Committee (FOMC) meeting, we'll find out whether U.S. Federal Reserve Chairman Ben S. Bernanke and his policymaking posse opted for a sharp increase in U.S. interest rates – which appears to me to be the only solution to a looming third-quarter crunch.

Unfortunately, I don't think that Bernanke & Co. will make the needed move.

And without that sharp rate increase tomorrow, investors can look forward to rampant inflation, an evisceration of the U.S. Treasury bond market and – in a worst-case scenario – the death of the dollar.

Let me show you why….

To understand why it's crunch time for the dollar, please read on …

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Barrick Gold Corp. (NYSE: ABX) Bets Big on Copper Demand in $7 Billion Deal

Barrick Gold Corp. (NYSE: ABX), the world's biggest gold company, announced a big bet on copper yesterday (Monday) with a $7.68 billion ($7.3 billion Canadian) offer for copper producer Equinox Minerals Ltd. (ASX: EQN; TSE: EQN).

Copper prices are up about 15% in the past year on higher demand from China and other developing economies.

Equinox owns two key sources of copper production: the Lumwana mine – Africa's third largest by production – in Zambia's rich copper region; and most of Saudi Arabia's Jabal Sayid project, the country's biggest deposit of the metal. At full capacity, Lumwana is expected to account for 20% of Zambia's copper production.

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