Archives for June 2011

June 2011 - Page 7 of 9 - Money Morning - Only the News You Can Profit From

The Death of Nuclear Power: The Five Global Energy Moves to Make Now

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Nuclear power was gaining a lot of momentum prior to the terrible disaster at Japan's Fukushima powerplant in March.


But since then, atomic energy has come under increased scrutiny and once again drawn the ire of environmentalists who were just warming up to its carbon-free emissions.

The German government's decision to close all of its existing nuclear reactors by 2022 shows that this shift in sentiment is gaining traction. And it increases the likelihood that the nuclear-powerplant building boom that had seemed at hand will be set back.

Without a doubt, this new reality will lead to global energy shortages and much-higher energy costs.

But for us as investors, the real issue is this: Which sectors will step up to alleviate the shortfall resulting from the inevitable disappearance of nuclear power?

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Goldman Subpoena, Investigation Add to Pressure on Bank Stock Prices

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Big bank stock prices, already suffering from an avalanche of difficulties, suffered another setback when news broke last Thursday that Goldman Sachs Group Inc. (NYSE:GS) had received a subpoena from the Manhattan district attorney for records relating to its role in collapse of the mortgage market.

The subpoena served as a reminder that the fallout from the financial crisis that hit its apex in 2008 is far from over.

The banking sector already has had a rough year, as its 6% decline is the worst performance among the 10 industries tracked within the Standard & Poor's 500 Index.

"Financials have become hated in recent months," Alan Villalon, a senior bank analyst at Chicago-based Nuveen Investments, told Reuters.

The Goldman subpoena is part of a probe based on the findings of the Senate Permanent Subcommittee on Investigations, released in April. The panel's report accused the bank of profiting at the expense of clients when it bet against the mortgage market in 2007 by taking large short positions in mortgage-related securities.

Goldman disagreed.

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How to Profit From a Non-U.S. Investing Strategy

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After reading columnist Martin Hutchinson's latest report on the Greek debt crisis last week, one Money Morning reader posed an excellent question: Given the crises already afflicting the markets in Europe and Japan – and the clearly darkening outlook for the U.S. economy – is it possible to craft a "non-U.S. investing strategy" of some type?

The answer, surprisingly enough, is "yes." You can put together an investment plan that largely avoids U.S.-related holdings – in essence, a non-U.S. investing strategy – and you can put it to work.

But before you can do that, you must fully understand the current challenges at hand.

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Weak Employment Growth Should Not Have Surprised

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The market was disappointed with Friday's employment data. But actual total employment, as opposed to the widely reported seasonally adjusted numbers, was nowhere near the catastrophe that the market's reaction made it seem. The problem was that economists' expectations were misguided, partly as a result of their focus on seasonally adjusted fictitious data which in recent months had appeared to be on a solid uptrend. On Friday, the market was surprised when payrolls showed a seasonally adjusted gain of 54,000 for May. Economists, looking in their one-way rear view mirror, had expected 125,000, which was after adjusting down when they saw the lousy report on private payrolls from ADP. Their prior estimates were even wider of the mark. Fortunately for them, their pay does not depend on their being right.

Had the market and economists been paying attention to the real trends in the actual, not seasonally manipulated data, they would not have been shocked by the number.

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Liquidity Flows Suggest Big Problems Ahead

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Bonds rallied but stocks were left in their wake last week. There should have been plenty of cash around after Tuesday's huge settlement of $61 billion in net new Treasury paper was put to bed, but the boys threw a stock market party instead of paying the bill for the Treasuries on Tuesday. That left them with a hangover for which they paid a price the rest of the week in spite of the gusher of incoming cash from the Fed and Treasury.

The Treasury paid down T-bills to the tune of $10 billion on Thursday and the Fed pumped in another $14 billion from Wednesday to Friday. All of that cash high tailed into the Treasury market, ignoring stocks. The charts suggest that yields will fall further as the insane Treasury buying panic continues. That's bad news for stocks.

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Buy, Sell or Hold: El Paso Corp. (NYSE: EP) Spin-Offs Will Unlock Profits for Investors

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You may be surprised to learn that there's still an energy company out there that's undervalued by the market.

It's a natural gas company that has two divisions, which makes it difficult to appraise.

I'm talking about El Paso Corp. (NYSE: EP).

Some investors bought the stock to hold as a pipeline company; others bought the stock to invest in an exploration and development company.

But in the end, no one quite knew exactly which it was. That caused its assets to be valued at less than the equivalent assets held by its peers. This locked-up value caused El Paso's stock price to stagnate for years, even as other energy stocks surged to new highs.

In the industry, we call this a value trap.

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U.S. Automakers Throttle Past Japan Quake Supply Chain Woes, While Others Stall

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While Japan's March 11 earthquake did not damage the global supply chain as badly as initially feared, the world's automakers – particularly those based in Japan – have faced a tougher road to recovery.

Thanks to a smaller reliance on Japanese parts and a quick response to the crisis, U.S. automakers have weathered the disruption to their supply chains well, with minimal impact on production.

The Japanese automakers, however, with their strong reliance on the just-in-time inventory system and preference for single-source suppliers, have struggled to get back on their feet and stand to lose market share, at least in the short term.

"In the race to provide better quality at lower prices, manufacturers picked very narrow, optimized supply chains," said Willy C. Shih, Professor of Management Practice in the Technology and Operations Management unit at Harvard Business School. "They put all of their eggs with one supplier that had the best product at the lowest price."

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IPO Outlook: Groupon, MGM China Deals Underscore Bullish Nature of the Initial Public Offering Market

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On the heels of hot initial-public-offering (IPO) deals for LinkedIn Corp. (NYSE: LNKD) and Yandex NV (Nasdaq: YNDX), new developments involving daily-deals site Groupon Inc. and casino joint venture MGM China Holdings Ltd. have bolstered an already-bullish IPO outlook.

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Treasury Bonds Inflection Point Report: Profit As The Fed Crushes Bond Prices

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The U.S. Federal Reserve only officially sets one interest rate, which is the "discount rate" at which a bank in trouble can borrow from the U.S. central bank. As the Fed itself states: "The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional […]

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