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Archives for April 2012

April 2012 - Money Morning - Only the News You Can Profit From

Sunoco (NYSE: SUN) Deal is All About the Pipeline

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Merger Monday lived up to its moniker today as Energy Transfer Partners LP (NYSE: ETP) announced plans to acquire Sunoco Inc. (NYSE: SUN) for $5.3 billion.

Investors cheered the deal, sending shares of both companies higher. Following the announcement, Sunoco stock gushed higher by more than 20%, its biggest gain in more than three years. Energy Transfer Partners rose almost 6%.

The acquisition is just the latest in big-time energy deals fueled by the need for expanding pipeline networks.

The deal gives Energy Partners 7,900 miles of oil pipelines, as well as 4,900 Sunoco branded retail fueling stations in the United States.

Darren Horowitz, an analyst with Raymond James & Associates says the transaction will help Energy Transfer attain its objective of expanding both the geography of the company's pipeline network and the products it ships, adding, "It opens the door for greater growth."

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Are Economic Indicators Signaling a Sell Off?

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Summary:A slew of economic indicators – weak growth, poor jobs, low home prices – are pointing south, but the stock market has been moving up. Money Morning Capital Waves Strategist Shah Gilani joined Fox Business' "Varney & Co." Monday to explain the disconnect between the markets and the U.S. economy. Gilani forecast what investors can […]

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EPA Official Resigns over Crucifixion Comments

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On Friday, we discussed the regulatory philosophy of certain Environmental Protection Agency officials in how they regulate the U.S. oil and gas sector.

Dr. Alfredo Armendariz, the EPA regional administrator for Region 6, was overly candid in a 2010 policy discussion in which he said that the agency's stance is to "crucify" a few oil and gas companies in order to set an example and force the rest of the industry to submit to new rules.

"You make examples out of people who are not complying with the law," he stated.

Now, it looks like those comments have cost him his job.

Morgan Little at the LA Times explains.

"Alfredo Armendariz, a regional administrator for theEnvironmental Protection Agency, has resigned in the wake of criticism for comments made in Texas two years ago comparing the methods of the EPA to those of Romans using crucifixions to conquer foreign lands."

The resignation is certainly a starting point in order to limit the political damage.

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Silver Prices: New Chinese Futures Trading Supports Rally

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We already told you that silver prices would rally this year, and developments last week could make the surge approach even faster.

The white metal was trending down last week until dovish remarks from Team Bernanke following the Federal Open Market Committee meeting on April 25 reversed the price slide. Spot silver prices on the Comex ended the week at $31.27.

But there's another reason supporting a long-term silver price climb.

That reason lies in a news item out of China that many investors may have missed.

China and Silver Prices

On April 26, China Daily reported that the Shanghai Futures Exchange received approval to begin trading silver futures.

Previously, Asian investors had to access international markets to trade silver futures, or else they could trade indirectly on local Chinese markets.

"There has been an absence of a means of trading in silver in China," Wang Ruilei, an analyst with precious metal trader CGS Co Ltd, told China Daily. "The market will be bigger and more liquid with the advent of these futures contracts."

The Chinese announcement allows for two major things to take place.

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Is Apple Inc.'s (Nasdaq: AAPL) Bet on Liquidmetal About to Pay Off?

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Apple Inc. (Nasdaq: AAPL) loves to think of lucrative new uses for other people's bright ideas.

For instance, the original iPod wouldn't have been possible without Toshiba's innovative 1.8-inch hard drive.

And when Steve Jobs learned about Gorilla Glass in 2006, he convinced Corning to revive the largely unused technology so Apple could put it in the iPhone.

So it's no surprise that Apple has been toying with yet another breakthrough technology.

It's called Liquidmetal.

Liquidmetal is a family of metal alloys that combines a variety of metallic elements. It's a technique that rapidly cools the mixture into a "metallic glass" with a distinctly different molecular structure than conventional metals. It becomes amorphous, as opposed to crystalline.

That amorphous structure is the secret behind Liquidmetal's many remarkable properties.

Now imagine what Apple could do with a material that:

  • Is five times as strong as aluminum and twice as strong as titanium;
  • Is three times as elastic as ordinary metals;
  • Is highly resistant to corrosion;
  • Is highly resistant to scratching and wear;
  • Has a fingerprint-resistant, glossy finish that needs no polishing;
  • And can be blow-molded like glass or injection-molded like plastic.

And while most of the basic ingredients of Liquidmetal — zirconium, titanium, nickel, copper, and beryllium — remain the same, adjustments to the ratios and manufacturing process can customize the alloy for many different purposes.

Invented in 1992 as part of a joint project between NASA, the California Institute of Technology and the U.S. Department of Energy, Liquidmetal creates vast new possibilities – particularly in the hands of a company as innovative and resource-rich as Apple.

As NASA's web page for spinoff technologies puts it:

"In the same way that the inventions of steel in the 1800s and plastic in the 1900s sparked revolutions for industry, [this] new class of amorphous alloys is poised to redefine materials science as we know it in the 21st century."

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DRIPs: How to Invest in Dividend Reinvestment Plans

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The real secret to long-term investing success is income – and with stocks, that means dividends.

Numerous studies, both academic and financial, have found dividends accounted for more than 60% of total U.S. stock market returns since 1870.

More recently, a study by Ned Davis Research covering the period from 1972 through 2008 found that dividend-paying stocks provided an annual return of 7.6% versus a mere 0.2% for non-dividend-paying shares.

What's more, companies with a record of steadily raising their dividends returned an even more impressive 8.6%.

But if you really want to boost your returns, investing in DRIPs – dividend reinvestment plans –is a safe, steady road to building true wealth.

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How to Avoid the Approaching Bond Market Debacle

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If you're an income investor, you probably feel like you're in one of those nightmares where you're trying to run like hell – but aren't getting anywhere.

Martin Hutchinson and I were talking about this predicament last week.

As editor of the Permanent Wealth Investor, Martin is our income guru here at Money Map Press. His advice on how to thrive in this lousy-income environment was so good that I had to pass it along to you – along with one of his favorite income plays.

Traditionally, bonds – especially U.S. Treasury bonds – are the favored holding of income-seekers. But bonds face two big challenges right now – and we have the U.S. Federal Reserve to thank for both of them.

First, thanks to the ultra-low-interest-rate policies of the nation's central bank, Treasury bonds are yielding next to nothing. When I looked Friday afternoon, the 10-year was yielding 1.94% and the 30-year 3.12%.

Now, according to the latest federal figures, the U.S. consumer price index (CPI) fell to 2.7% in March from 2.9% in February. The CPI is the "official" gauge of U.S. inflation. But as we explained back on March 2, this is a bogus number.

The American Institute for Economic Research (AIER) says everyday prices – the ones that matter most to working Americans – are up a good 8% over the past year.

So income investors who stick to traditional tactics are actually losing ground to inflation. And you absolutely don't want to outlive your money.

If that were the only problem, it would be pretty bad. But there's a second challenge – and it's a doozy.

You see, the central bank's Federal Funds rate – the benchmark that helps determine most borrowing rates that American consumers and businesses pay – remains down near zero. And while no one can predict with certainty when rates will change, there is one thing you can bank on: When rates do change, they can only go up.

And since bond prices move opposite interest rates (bond prices fall when rates rise, and vice versa), those fixed-income securities will take a beating when rates increase.

And so will the investors who hold them.

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There's Always Money in this Fund

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It's a tricky market out there for energy investors.

Even though opportunity abounds, there are plenty of factors driving ordinary investors away from the market, like global political tensions, ongoing concerns about available supplies, credit limitations for producers, increased volatility on the derivatives markets, and rising global demand.

There's a lot of noise, and short-term irrationality is trumping fundamentals.

But even amid the confusion, we know one thing for sure.

The price of oil is going to accelerate.

As Kent said on Monday, we have a very different dynamic taking place in the markets from the events of 2008. Three years ago, speculation drove oil prices, but an outside crisis decimated the global markets (namely, the subprime mortgage mess and the corresponding credit freeze).

But this time, we're experiencing a constriction produced by a significant cutback in new oil drilling. With greater unconventional production in the cards and greater concerns about the availability of supply, we're witnessing a perfectly predictable storm of events that will drive prices higher.

Still there's one thing that Kent and I continue to stress before you go out and start buying up energy stocks. That's this:

Rising oil prices will not drive similar performances in all energy companies.

You need to grasp an overall strategy to profit this time around.

The lack of cheap supplies and the cost of procurement in unconventional sources are major concerns. So is the acceleration in short-term swings in volatility. We are entering a period of boosted unconventional oil and gas production to tackle these challenges.

Access to unconventional sources has set off an energy boom here in the United States, as new technologies have enabled this country to greatly improve its oil and gas sourcing. Moving forward, the United States will look to its oil and gas shale plays and to source an expanding fuel supply from our neighbor to the north: Canada.

But it won't be cheap to do this, especially while increased swings in volatility become the norm.

So what's the best way to play volatility while managing your risk?

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How "Nano Gold" Could Revolutionize Biotech

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Thanks for your tremendous response to my first column forEra of Radical Change.

I was touched that so many of you wrote in to share your own stories about watching a loved one battle cancer, or having been through it yourself. No doubt it's a terrible disease.

That's why today I want to talk about another cancer breakthrough that epitomizes this new era.

It's found in gold.

As it turns out, gold is a natural-born killer of unhealthy human cells. It has distinct properties that make it ideal for linking medical science with the new field of nanotech.

I believe the yellow metal will play a vital role in the Era of Radical Change, in which human beings routinely live healthy, productive lives well into our hundreds. And gold's growing use in both biotech and nanotech will greatly expand our chances to score big stock gains, too.

A new kind of gold rush has started. And not only can you make money from it – it could also save the human race from the most deadly diseases.

I predict that by the end of this decade, gold will be used as a lethal weapon in the battle against a wide range of killer tumors.

It has to do with so-called gold nanoparticles.

The odds are good you've seen "nano gold" in the past but didn't even know it. If you've ever looked at a photo of stained-glass windows in old medieval European churches, the red and yellow in those scenes came from nanoparticles of gold and silver embedded in the glass.

Fact is, we've been putting these tiny specks of gold to use, in one form or another, for centuries. But they've only lately become a key tool for fighting disease and making new medical discoveries.

Take the recent breakthrough from a team at Stanford University.

Scientists there used nano gold to find and highlight aggressive forms of brain tumors. They used tiny gold spheres so small it boggles the mind – they measured less than five one-millionths of an inch in diameter. Each piece of nano gold was coated with an agent that allowed the tiny balls to be viewed with three different types of body imaging techniques.

In this test at Stanford, team members found they could see and remove tumors marked by nano gold from the brains of mice with the highest degree of accuracy reported to date.

Here's why that's so important.

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Investing in Biotech Stocks: The Buyout Binge Continues

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The biotechnology buyout deals just keep coming, meaning those investing in biotech stocks have scored some juicy profits – with more on the way.

Watson Pharmaceuticals (NYSE: WPI) announced Wednesday it would buy competitor Actavis for $5.6 billion- the latest deal in an already-white-hot market for biotech buyouts.

In fact, get this: Although healthcare deals in the first four months of 2012 are down 32% on a year-over-year basis compared with the same period in 2011, biotech mergers-and-acquisition deals are up 38% so far this year.

And biotech merger mania is far from over.

AstraZeneca PLC (NYSE ADR: AZN) early Monday offered to pay $1.1 billion for Ardea Biosciences Inc. (Nasdaq: RDEA).

And Amylin Pharmaceuticals Inc. (Nasdaq: AMLN) – a San Diego-based diabetes drugmaker whose shares recently surged after allegedly spurning a $3.5 billion offer from Bristol-Myers Squibb Co. (NYSE: BMY) – appears to be seeking a buyer.

On Sunday, Reuters reported that Amylin has hired Credit Suisse AG (NYSE ADR: CS) and Goldman Sachs Group Inc. (NYSE: GS) as its financial advisers, and Skadden Arps as its legal adviser.

These deals have been going on all year.

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