Archives for March 2012

March 2012 - Page 4 of 12 - Money Morning - Only the News You Can Profit From

New Wave of Foreclosures Will Sink the Housing Market Rebound

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The long-anticipated housing market rebound will hit a speed bump this year as the number of foreclosures rises again.

With January's mammoth $26 billion settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.

The spike in foreclosures will arrive just as other data, such as the 5.1% increase in new construction permits reported on Tuesday, had begun to point to a housing market rebound.

"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Brandon Moore, CEO of RealtyTrac, told CNN Money.

RealtyTrac's February report showed new default notices – the first step in the foreclosure process – were up 1% from January. Default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).

"The pig is starting to move through the python," Daren Blomquist, director of marketing for RealtyTrac, told CNN Money.

Distressed sales already account for about one out of three U.S. home sales.

The National Association of Realtors (NAR) reported this week that 20% of home sales in February were foreclosures and 14% were short sales.

In a short sale, an owner who owes more on their home than it's worth agrees to sell for less, with the bank agreeing to accept the loss.

That's a far cry from a normal housing market, when distressed sales are less than 5%.

For 2012, RealtyTrac predicts a 25% increase in foreclosures, which will push the portion of distressed sales even higher.

And the picture doesn't figure to improve for quite some time. Paul Dales of Capital Economics estimates as many as an additional 3 million foreclosures over the next several years.

The Uneven Impact on the Housing Market

However, the impact of this wave of foreclosures will be felt unevenly.

All of the states that saw increases in new default notices were those in which the courts play a role in foreclosures. The robo-signing issues addressed in the bank settlement occurred almost exclusively in such states.

States that don't use a judicial foreclosure process didn't accumulate a backlog. In fact, foreclosure activity in those states was down 5% in February from the previous month, and down 23% from the February 2011.

But among the 26 states that use a judicial foreclosure process, activity rose 2% in February from the month before. Foreclosure activity was up 24% from the previous year.

That leaves little room for optimism in hard-hit states such as Florida.

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Keystone XL Oil Pipeline Project Back in Election 2012 Spotlight

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U.S. President Barack Obama announced today (Thursday) approval for part of the Keystone XL oil pipeline project – but his move was more about election votes than the country's energy needs.

President Obama said he is expediting approval for the southern portion of the Keystone oil pipeline. That section runs from Oklahoma to the Texas Gulf Coast.

The president told workers in Cushing, OK today that he was making that part of the Keystone XL project a "priority." The president said he remains committed to the project and defended his earlier rejection of the pipeline.

He blamed Republicans for insisting upon an application approval deadline that caused a rushed decision.

"Unfortunately, Congress decided they wanted their own timeline," President Obama said. "Not the company, not the experts, but members of Congress who decided this might be a fun political issue decided to try to intervene and make it impossible for us to make an informed decision."

The southern segment of the pipeline, however, is already planned to start construction in June, and is not the focus of the project's controversy. In fact, more than 99% of property owners in the southern route where the pipeline will run agree to it.

Instead, the president's announcement was more politics than progress – and triggered ample criticism from Republicans.

Many GOP members bashed the president's announcement as "meaningless."

A spokesman for Rep. John Boehner, R-OH, compared the news to "the governor holding a press conference to renew my driver's license — except this announcement still leaves American energy and jobs behind."

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Stocks to Watch Today: FedEx (NYSE: FDX), Lululemon (Nasdaq: LULU), McDonald's (NYSE: MCD)

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FedEx Corp. (NYSE: FDX), Lululemon Athletica Inc. (Nasdaq: LULU), and McDonald's Corp. (NYSE: MCD) are among the stocks to watch today after releasing earnings reports and management changes.

Here's what investors should know:

FedEx Corp. (NYSE: FDX) slumps, still a "Buy": FedEx Corp. released a lower-than-expected earnings outlook this morning, causing its share price to sink – but the company retained long-term buying support from The Street.

FedEx reported fiscal third-quarter earnings of $521 million, or $1.65 a share, up from 73 cents a year ago. Revenue rose 9% to $10.56 billion.

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Time: It's How Savvy Investors Build True Wealth

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Most investors think of time as an enemy, a predator that stalks them all of their lives. They never feel they have enough of it so they are constantly trying to outwit it.

Trying to beat time, they become irrational and make unpredictable, impulsive decisions to "get ahead" or hit the proverbial "home run."

Or, worse they pretend they have all the time in world and do nothing with it.

Later they find themselves playing a costly game of catch-up they cannot possibly hope to win without taking huge risks.

Unfortunately, that's exactly where many investors find themselves today. They are sitting on the sidelines faced with the daunting task of making up the time they'll never get back.

As a seasoned investor, I prefer to think of time as a constant companion– one that is willing to work with me every day if I harness it properly.

Rather than trying to cheat it, I work with it so that I tip the scales in my favor. This ensures that time becomes my ally rather than my enemy.

It's What You Don't Know About Time That Kills Your Returns

Let me illustrate.

Which action do you think will earn you more money over the next 20 years?

  • Investing $12,000 in a single lump sum today; or
  • Investing a total of $24,000 in increments of $100 a month?

Most people chose b – investing $24,000 in increments of $100 a month.

And for one highly logical reason – you would be investing two-times more principal.

The truth, though, is that putting away $12,000 right now is actually the more profitable choice.

We have been conditioned to put a little away each month on the assumption that this will add up over time. But that's only half the story.

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How to Pick Winning Dividend Stocks

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Do you need more income? Join the crowd.

It seems everyone is scouring the landscape these days for decent income investments to beef up their monthly take-home – especially now with the price of gas and other everyday items skyrocketing.

But it's not too late to find great dividend stocks. You can still get cold, hard cash on a regular basis by investing in companies that reward loyal investors with substantial dividends.

In fact, if dividend-paying stocks aren't a major part of your portfolio, the odds of being successful in the markets are stacked against you.

Need proof?

An exhaustive study of stock market returns from 1871 through 2003 showed that over a 135-year period owning stocks and reinvesting the dividends produced 97% of all stock market returns. Meanwhile a paltry 3% was produced by capital gains.

Dividend stocks are safer too. The very same qualities that allow companies to pay steady dividends means they're much less vulnerable to broad market drops than your typical stock.

And right now corporate America is willing to pay even more in dividends.

Companies are on pace to pay a record $263 billion in dividends to shareholders over the next year even though the S&P 500 Index is still more than 10% below its peak, according to S&P Capital IQ reports.

"We're seeing good dividend increases across the board," Richard Helm of Cohen & Steers Dividend Value fund told USA Today.

Buying Great Dividend Stocks

It's no secret – a company's dividends play a major role in their performance. Yet many investors completely ignore this important fact.

But you can't just plunk your money down on any old dividend stock.

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The Stock Market Today: Zynga (ZNGA), Kraft (KFT), Hewlett-Packard (HPQ), Hartford (HIG)

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Companies making news in the stock market today include Zynga Inc. (Nasdaq: ZNGA), Kraft Foods Inc. (NYSE: KFT), Hewlett-Packard Co (NYSE: HPQ) and Hartford Financial Services (NYSE: HIG).

Here's a roundup of these market moves:

Zynga Inc. (Nasdaq: ZNGA) said Wednesday it plans to buy OMGPOP, maker of the explosively popular "Draw Something" game.

Financial terms were not disclosed, but Zynga is rumored to have paid about $200 million for the start-up.

OMGPOP's Draw Something game tops both the iTunes "top paid" and "top free" lists, and is the top-grossing iTunes app. AllThingsD reports the company has recently been netting around $250,000 a day from the game, even after Apple (Nasdaq: AAPL) takes its 30% cut.

ZNGA rose 2.46% Wednesday to close at $13.72.

Kraft Foods Inc. (NYSE: KFT) announced a name-change for its global snacks business to be spunoff this year –

drumroll, please...

Why a Goldman Sachs (NYSE: GS) Report Says It's Time to Buy Stocks

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A Goldman Sachs (NYSE: GS) report released today (Wednesday) forecast a "steady upward trajectory" for the stock market over the next few years, telling investors now is the time to buy stocks – and reject bonds.

"The prospects for future returns in equities relative to bonds are as good as they have been in a generation," Chief Global Equity Strategist Peter Oppenheimer wrote in the Goldman Sachs report, "The Long Good Buy; the Case for Equities." "Given current valuations, we think it's time to say a "long goodbye' to bonds, and embrace the "long good buy' for equities as we expect them to embark on an upward trend over the next few years."

The report's main focus is that when you compare the price and future returns of stocks to bonds, stocks are a much better deal. Inflation concerns are threatening the bull market in bonds, and a Treasury sell-off has pushed up yields.

The 10-year Treasury yield has risen more than 30 basis points (0.3 percentage point) in a week to close to 2.4%. The 10-year Treasury yield hit a record low of 1.67% in September last year.

"We would expect the early rises in bond yields to be positive for equity prices as they both become a reflection of rising growth and inflationary expectations, and could expect some equity re-rating in the initial stages of rising yields," Oppenheimer wrote in the report.

With Goldman Sachs' endorsement to buy stocks, investors following their call could push the market higher than the 12% gains netted already this year.

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Cameco Corp. (NYSE: CCJ) and Uranium Energy Corp. (AMEX: UEC) Are Poised to Profit from a Nuclear Renaissance

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Uranium stocks got hammered last year in the wake of the Fukushima disaster.

But now, roughly one year later, uranium mining stocks have finally begun to bounce back… just like we told you they would.

After getting pummeled in 2011, shares of Cameco Corp. (NYSE: CCJ) – the world's second-largest uranium miner – are up 32% year-to-date.

Meanwhile, Uranium Resources Inc. (Nasdaq: URRE) and Uranium Energy Corp. (AMEX: UEC) are each up about 30% since the start of the year. And the Global X Uranium ETF (NYSE: URA) is up 25%.

But that's just the beginning.

These stocks are all still about 50% below where they traded prior to Japan's disaster.

And rising demand for nuclear energy and a dearth of uranium supplies will soon conspire to push these companies back to their pre-Fukushima levels.

You see, uranium miners cannot expand their operations – or even tread water – with uranium prices at $50.00-$60.00 per pound like they are currently.

They'd much rather have uranium prices of $70.00-$80.00 per pound. So right now there's not enough uranium being produced to keep up with growing demand.

About 170 million pounds of uranium was consumed last year, but only 140 million pounds was produced. And when you look at the way nuclear power projects are coming back online, it's obvious that the discrepancy will only get worse.

Global use of nuclear energy could increase by as much as 100% in the next two decades, according to the International Atomic Energy Agency (IAEA).

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Germany Set to Invest $260 Billion in a Renewable Revolution

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The moment Germany announced its highly publicized decision to phase out nuclear energy in the wake of the Japanese triple disaster; observers began to ask one very important question.

Just what energy source would replace such a huge swath of power in Europe's dominant economy?

The short-term solution had to be natural gas.

But this would make Germany more dependent upon imported energy, especially from Russia.

In that sense, the nuclear phase-out made the Nord Stream pipeline – from Russia, under the Baltic Sea, to northern Germany – absolutely essential.

Today, the first line of the twin pipeline is already in operation. The second should be on line at the end of next year (if not sooner).

Then there is the other Russian project – South Stream. This one intends to move Russian and Central Asian gas into Southern and Central Europe.

Much of that will also reach Germany.

In addition, several pipeline projects are vying for the excess production from the second phase of the Azerbaijani Shah Deniz offshore development in the Caspian Sea.

Included among these is Nabucco, a venture to bypass Russia and transport gas into the Baumgarten hub in Austria for ongoing distribution.

Nabucco has long been the European Union favorite, but it has been unable to attract sufficient supplies. Three other pipeline proposals also are attempting to secure the Caspian gas for transit to Europe.

But there is a problem for Germany in all of this.

It does not want to form an increasing dependence upon imported gas to power its economy.

And this sentiment is driving one of the biggest alternative energy revolutions in recent memory.

The German Push Toward Wind and Solar Power

The 17 currently operating nuclear reactors in the country provide about 20% of the national electricity needs. Any replacement of those plants (where capital expenses are already sunk) will add significantly to the end costs of energy.

That means a political decision following the Fukushima Daiichi disaster one year ago ends up costing the average German citizen even more to secure what is already among the most expensive electricity in the world.

Germany does have shale gas.

But the furor over nuclear power is paralleled with a similar environmental concern regarding the dangers of fracking, a process of pumping water and chemicals under high-pressure to break open the rock and free the gas.

There are now four U.S. examples of seismic anomalies resulting from the combination of fracking and deep horizontal drilling.

And they have not instilled much confidence for the markets.

Instead, what the Germans are deciding to do is already being called the biggest restructuring of the national energy landscape since the end of World War II.

The government will initiate a campaign valued at more than $260 billion to harness wind and solar power.

The price tag is staggering. It is already pegged at more than 8% of the nation's entire gross domestic product (GDP). And it could move even higher.

This will involve huge wind farm areas in the Baltic and massive new high-power transit lines nationwide. The goal is to have at least 35% of the nation's power needs generated from renewable sources by 2020.

However, the developments of this massive policy shift are even more exciting.

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