Archives for May 2011
May 2011 - Page 3 of 9 - Money Morning - Only the News You Can Profit From
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Oil prices took a hit last week, falling as much as $10 a barrel in one day. Money Morning Chief Investment Strategist Keith Fitz-Gerald joined FoxBusiness' "Varney & Co." to analyze what last week's drop in oil prices means for investors and consumers, and to share his long-term oil market outlook.
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They ruled them.
Microsoft's Windows operating system ran more than 95% of the world's PCs, and its word-processing and spreadsheet programs accounted for an estimated 95% of the market for office-applications software. The company was a constant target of state, federal and overseas governments, which tried in vain to break – or at least slow – the monopolistic juggernaut.
Intel, the other half of the so-called "Wintel" duopoly, had its chips in more than 90% of the world's PCs. Its identity was so strong that – by stamping "Intel Inside" on the beige PC cases – the company was able to "brand" what might otherwise have been a commodity product.
And Cisco was acknowledged as the backbone of the Internet, a key reason that – back in March 2000, with a market cap of $555.4 billion – it became the most valuable company on earth.
Throughout the 1990s, the shares of all three companies performed as the "must-own" stocks that they were: Microsoft's shares rose more than 9,000%, Intel's 10,000% and Cisco's 66,000% during that 10-year stretch.
The great commodity pull back of 2011 has started.
Soft agricultural commodities in particular have pulled back a lot lately, generating what appears to be a buying opportunity in the sector. However, I believe it is still too early to dive into a new position in Archer Daniels Midland Co. (NYSE: ADM).
Archer Daniels Midland has experienced a major pull back in the last few weeks. But in my opinion, the stock price will need to show that it has bottomed, and started to trade on expectations of future bullish events before it is again a "Buy."
That means it's time to "Hold" Archer Daniels Midland Co. (NYSE: ADM) (**) – until the current pullback runs its full course and gives investors a safe place to reenter the stock.
The Eurozone project has seen better days, which is why the future of the euro isn't a bright one. In fact, as all the latest speculation about Greece either abandoning the euro currency – or being booted out of the Eurozone outright – is demonstrating, "the market" is about to apply a level of pressure […]
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The markets responded as expected to this week's light Treasury supply, which included a hefty paydown on Thursday along with the usual dose of POMO. Stocks sold off Monday under the pressure of settling $72 billion in new notes and bonds, but then they recovered as POMO and $10 billion in Treasury paydowns put cash back in the pockets of the market's movers and shakers. As usual, they deployed some of it into stocks.
However, there was a fly in the ointment of this week's light Treasury schedule. The evidence suggests that the foreign central banks ran away from the auctions. If this is the reversal of their short term buying cycle, it should depress the performance of the markets in the weeks ahead. I'll look at the Fed's custodial data on FCB holdings in the Fed report, to be posted on Friday.
Money Morning Contributing Editor Martin Hutchinson detailed earlier this week how worldwide population growth will affect global commodity prices, prompting many readers to express praise for his well-supported analysis.
Hutchinson cited the United Nations report "2010 Revision of World Population Prospects" published May 3, where the UN estimated that the global population would reach 9.3 billion in 2050. This means prices for oil, metals, and food are also likely to climb much higher by 2050.
"The total impact of the UN's spiraling population projections will be seen over the long haul," said Hutchinson. "And that means that — even when interest rates are back to normal levels — global commodity prices will not return to levels we would consider ‘normal.' Oil prices will never see $20 a barrel again; their bottom is probably somewhere in the range of $60 a barrel to $80 a barrel — after which they march higher."
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Dominique Strauss-Kahn resigned as leader of the International Monetary Fund (IMF) late Wednesday night, triggering a global battle between developed economies and emerging markets to find a new IMF managing director.
Strauss-Kahn, who was arrested May 14 on sexual assault charges, said in a statement released yesterday (Thursday) morning that he felt "compelled" to resign.
"I want to protect this institution which I have served with honor and devotion, and especially – especially – I want to devote all my strength, all my time, and all my energy to proving my innocence," Strauss-Kahn wrote.
South Carolina is close to pulling off a dramatic end-run around the federal government.
If that state succeeds, the end result could have a serious impact on every U.S. manufacturing industry from cars to toilets.
It could even help balance state budgets.
Dueling Light-Bulb Laws
I'm talking about South Carolina's Incandescent Light Bulb Freedom Act – a trivial-sounding piece of state legislation that could open a significant loophole for states that are desperate to create jobs and drum up revenue.
The Energy Independence and Security Act of 2007 – a predating piece of federal legislation – decreed that all incandescent bulbs be phased out by 2012, and permanently replaced by their fluorescent and halogen counterparts.
That's where the loophole comes in. You see, South Carolina's light bulb legislation would let the state continue to manufacture and sell incandescent bulbs – so long as they were made and sold exclusively in South Carolina.
While South Carolina's attempt to nullify a federal law smacks of an antebellum crisis, the move may well work. That's because, according to the Supreme Court's 1935 decision in the case of Schechter Poultry vs. United States, the federal government does not have the power to regulate commerce that is entirely conducted within a state.
So if South Carolina attempted to buy incandescent light bulbs from one of the country's leading manufacturers, it would be in trouble – since none of the major light bulb manufacturers are South Carolina companies.
But if South Carolina makes the bulbs itself, and offers them for sale only within the state, the Schechter decision would seem to apply – though subsequent Supreme Court decisions in the opposite direction make the question a close one.
Chocolate Eggs, Toilets and '59 Caddies
Still, if successful, this would be a major coup for many U.S. manufacturers, as it would set a significant precedent. Soon, any unpopular federal product regulations could potentially be nullified by a state that's seeking popular support.
I've lectured on investment strategies the world over, but I recently got one of the most intriguing questions I've been asked in a long time at the Global Currency Expo in San Diego, California.
An attendee asked me: "Is it possible to achieve decent performance if I don't want to include stocks?"
In short, the answer is "yes" — though I wouldn't recommend a "stockless" portfolio because of the tradeoffs involved.
Still, it is possible to achieve a "decent" performance without stocks.
Here's how you'd do it.