Archives for June 2012

June 2012 - Page 10 of 16 - Money Morning - Only the News You Can Profit From

The Eurozone Bailout: Prepare for What's Next

Q: What will happen in Europe? Greece chickens out. The G20 has its hands out and wants to have Germany's standard of living. Germany should leave the EU and preserve its economy. There is no reason it should sacrifice itself to pay for the malfeasance and incompetence of everybody else. Politicians will kick the can […]

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Stock Market Today: Who to Avoid, Who to Consider

In a volatile trading session two companies are making news in the stock market today (Thursday): mobile phone provider Nokia Corp. (NYSE ADR: NOK) and supermarket chain The Kroger Co. (NYSE: KR).

Nokia Corp. (NYSE ADR: NOK) struggles continue: On Thursday Nokia announced it would cut 10,000 jobs, or one out of five workers, worldwide by the end of the year. It also warned of lower-than-expected financials for the second and third quarters.

The Finnish company had been the leading cell phone maker for 14 years and just last year was the leader in smartphones. Competition from rival companies, especially in the smartphone sector, has been a driving downward force for Nokia.

"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," Ben Wood, head of research at CCS Insight, told Reuters.

Prior to this announcement Nokia stock had taken a beating, down more than 50% in the past three months and has been down more than 15% today.

The stock's performance looks even worse going back three years. In June 2009 it traded around $15 a share, and has now fallen below $2.40.

Nokia's CEO Stephen Elop hopes these cuts can turnaround the company's prospects as many investors worry about Nokia's ability to stay afloat amid their cash problems.

"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Elop said in a statement.

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The 2012 IPO Calendar: How to Spot the Winners

You might find yourself eyeing the 2012 IPO calendar with a bit more scrutiny after the Facebook (Nasdaq: FB) fiasco.

Although Facebook has been nabbing the most attention for disappointing its investors, it's hardly the first IPO to do so. It's all part of the fickle IPO process.

In fact, about 40% of the IPOs to hit the market over the past 12 months have seen their share prices fall below their IPO prices.

Facebook isn't the only factor to blame — U.S. unemployment is up, the Eurozone debt crisis is sapping bullish spirit, and the upcoming U.S. presidential elections in November are adding to market uncertainty.

But avoiding IPOs altogether could also be a huge mistake.

Just ask those who bought the Google (Nasdsaq: GOOG) initial public offering. The Google IPO priced at $85, started trading at $100, and now trades around $560.

So how can you put yourself in the 60% group and earn a profit in the process?

With the right research and guidance, you can spot winners just like Google.

Do Your IPO Research

Investing in IPOs is like buying and selling any asset: due diligence is required.

An IPO, like a credit-default swap or subprime mortgage, is the ideal financial instrument for a limited set of circumstances. It is up to the individual or the institution to determine if the IPO they are considering is suitable for a long-term investment or a short-term flip.

If it qualifies as just a short-term flips, that is enough to tell you not to buy.

Whatever the investment objective, however, information is readily available for the necessary and needed due diligence.

For example, on March 17, 2011 Michael J. De La Merced wrote an article in The New York Times about the IPO of FriendFinder Networks (NYSE: FFN).

In his Timespiece,"FriendFinder Braves Choppy Market with IPO, Again," De La Merced did an excellent job of detailing his concerns with the stock, ranging from the disposition of the proceeds of the IPO to the accounting at the company to the number of times it had attempted to go public before and had to withdraw the offering.

FriendFinder Network IPO priced at $10 a share last year; it's now selling for around $1.15.

Other times an IPO can be hurt by factors having nothing to do with the financials of the company or the overall economic situation.

Take the Carlyle Group (Nasdaq: CG), a Washington, DC-based private equity group, which went public in May. Until Election Day in November, private equity groups will be vilified by the Obama Administration, unions and others due to Republican presidential candidate Mitt Romney's work with Bain Capital.

There is no way that can aid the share price of Carlyle Group. Now trading around $21 a share, Carlye Group has slipped from its IPO high of $22.45.

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5 Ways to Avoid the “Spailout” and Sleep Soundly at Night

It's unlikely the euro will survive what I'm calling the Spailout… meaning, the bailout of Spain, and the contagion to Italy, etc.

Believe me, you're going to be seeing and hearing this non-stop in the media for quite some time. And fear will be running rampant as a result.

I'm going to explain everything about the Spanish situation in a moment – probably more than most people care to know – but first, let me share something with you that's worth your attention.

You don't have to repeat the fears and frustrations of this financial crisis, let alone see a huge drop in profits.

So take a deep breath and think about these five things you can do right now that will help you protect your money, build your future despite this madness and sleep soundly at night.

  1. Take advantage of stimulus-induced rallies to sell into strength and rebalance your portfolio. Many people think you want to sell your losers and let your winners run but that's not quite right. What you actually want to do is sell as the markets are rising (and demand is strong) and use the proceeds to shore up underweighted segments of your portfolio. Over time, this can dramatically improve your returns because it forces you to harvest winners and constantly capitalize upside potential.
  2. Raise cash using your trailing stops to prune those holdings that do roll over – you are running them, right!! This is closely related to Item #1. Here, too, many investors make a classic mistake. They assume trailing stops are used only to protect against losses. What they fail to realize is that trailing stops are one of the most effective means available to capture gains. To use them properly, you want to ratchet them up constantly as stocks (or any investment, really) runs higher. You never reduce them. So, for example, if you buy a stock at $5 and it runs to $12.70 as NetQin (NYSE: NQ) recently did for my Strike Force readers, a 25% stop means you'd sell out at $9.52 and realize a healthy 90.50% gain…with no emotional turmoil, no hesitation and no fear of letting a healthy winner turn into a loser as so many investors do.
  3. Confine new money to "glocal" choices put on sale. Focus on yield because it helps solidify your portfolio and hold down risk. Fragile markets and an unsettled future mean that quality matters more than ever before. I prefer big multinationals with fortress-like balance sheets, growing earnings and solid dividends right now because they're more stable than the broader markets and, indeed, entire countries at the moment. The key is not so much the diversification of risk in the classic sense, but the concentration of potential. I'd rather bet on savvy business leaders than feckless politicians any day.
  4. Include specialized investments like the Rydex Inverse S&P 500 Strategy Fund (RYURX), the Rydex Inverse Government Long Bond Strategy (RYJUX) and gold in whatever form you prefer. The takeoff may not be immediate, but that's not the point. Hedges work over time, not just in the immediate moment. What you are doing is adding holdings like these to stabilize your upside and give you the chance to stay invested when times are tough.
  5. Try not to overthink this mess no matter how ugly the headlines get. Believe it or not, the markets have seen far worse over the years, including the panic and depression of 1869-1873, the economic collapse of 1893, and, of course, the rout in 1929 that lead to the Great Depression. All proved to be tremendous buying opportunities for those who had the courage to go on the offensive and the knowledge to invest selectively.

Now let me give you the skinny on the Spailout and why it will destroy the euro as we know it.

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Healthcare Stocks: What Happens if Obamacare is Overturned

With the Supreme Court ruling on President Barack Obama's healthcare reform law just three weeks away, investors in healthcare stocks need to be prepared.

While some are confident the Supreme Court will rule in favor of the Patient Protection and Affordable Care Act, a rejection of the law — or at least of the mandate requiring everyone to buy insurance — may be more likely.

If so, Obamacare could be toast.

Based on tough questioning from moderate Justice Anthony Kennedy in Supreme Court hearings in March, the odds of that happening are rising. In close cases, Kennedy is often the swing vote.

At InTrade – where people can bet on the outcome of real world events -the probability of Obamacare being overturned has risen to about 70%.

So what would happen to healthcare stocks if Obamacare was overturned?

Surprisingly, it is less than you'd think.

In fact, most healthcare stocks will benefit simply by having a definitive answer on the fate of the law. A decision would lift the uncertainty hanging over the sector since Obamacare passed in 2009.

"Coming off the market lows of 2009, you saw multiple expansion in virtually every sector of the S&P 500, but very little in health care," Eddie Yoon, Fidelity Investment's top health-care analyst, told Barron's.

Still, some healthcare stocks would gain more than others if Obamacare gets torpedoed. And a few could get a little dinged.

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Stock Market Today: What Investors Can't Miss

Companies making headlines in the stock market today include Dell (Nasdaq: DELL), Johnson & Johnson (NYSE: JNJ), and JPMorgan Chase (NYSE: JPM).

After Tuesday's closing bell Dell (Nasdaq: DELL) gave shareholders good news: it will begin paying a dividend later this year.

The struggling tech company expects to pay quarterly cash dividends of 8 cents per share on all common stock starting during the third quarter of this year.

Using Tuesday's closing price of $11.97 as a benchmark would give Dell a dividend yield of 2.7%, higher than the average yield of the stocks in the S&P 500.

Dell's CFO Brian Gladden hopes this move can turnaround the beleaguered company whose stock is trading well below its 52-week high of $18.36.

"The payment of a quarterly cash dividend to Dell's shareholders adds another element to our disciplined capital allocation strategy," Gladden said.

Dell stock was up more than 4.5% in early trading Wednesday.

Johnson & Johnson (NYSE: JNJ) announced after market close Tuesday that it will be able to complete its acquisition of Swiss medical device maker Synthes on Thursday, much earlier than expected.

JNJ initiated the $19.7 billion deal, its largest ever, in April 2011. The purchase will make JNJ a prominent player in the orthopedic surgery business. Synthes also offers a strong presence in emerging markets like Russia, China and India.

In a turnaround of expectations JNJ stated that the deal will actually add 3 to 5 cents per share to its annual earnings. Earlier projections by the company stated the move would trim up to 22 cents off of its profits.

The Three Big Factors Weighing on Oil Prices

Oil prices this week have been pressured by a trio of global factors: OPEC, Iran, and the Eurozone debt crisis.

Crude experienced wide swings on Tuesday, sinking as low as $81 a barrel, a new eight-month low. Prices bounced back later in the day and finished moderately higher at $83.34.

Over the last year, oil prices have fluctuated between $74.95 and $110.55 – with more volatility expected.

Oil's recent wide price swings highlight the market's uncertainty over changes in global supply and demand.

"Oil has given up the ghost, the overriding concern is for global demand to moderate or even come off quite a bit in Europe, the United States and even China and India," David Morrison at GFT Global told Reuters.

Oil Prices and the OPEC Summit

Weighing on crude oil prices this week were words Monday from Saudi Arabia's oil minister as he arrived in Vienna for Thursday's OPEC summit.

The Saudi minister remarked that OPEC production quotas may be too low. The suggestion could move OPEC members such as Iran and Venezuela to shy away from a production cut.

In a research note Tuesday, analysts at energy focused investment bank Simmons and Company wrote, "This position is an indication that Saudi is not overly concerned about the recent pullback in oil prices. It is not yet anxious to aggressively cut supply."

As a matter of fact, Saudi Arabia has actually been increasing its oil supply over the last few months in an effort to pick up the slack from Iran's declining output, which experienced a slump in exports on the heels of tightening U.S. sanctions.

Iran is the No. 2 oil producer in OPEC's exporting countries, earning more than half of government revenue from oil sales, according to the International Monetary Fund (IMF). Its oil output has slipped more than 40% this year, the International Energy Agency (IEA) reported Wednesday.

The IEA report could influence OPEC's decision on production quotas. At OPEC's last meeting in December the members decided to maintain actual output at 30 million barrels per day.

Iran Sanctions Approaching

Also influencing oil prices was a report from the Obama administration on Monday that noted seven countries, including India and South Korea (sizable importers of Iranian crude), have sufficiently reduced their oil imports from Iran and will not be subject to sanctions from the U.S., set to take effect at the end of June.

"By reducing Iran's oil sales, we are sending a decisive message to Iran's leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure," U.S. Secretary of State Hillary Clinton said in a statement Monday.

Oil prices have slipped as markets expect the U.S. exemptions will prevent major supply disruptions.

China, the leading Iranian crude importer in the first half of last year, has not yet been granted an exemption. U.S. officials said talks were ongoing and that status could change before the June 28 deadline to impose sanctions.

Talks over Iran's nuclear programs will restart this weekend in Moscow. It'll likely be the final round of discussion before the sanctions and before a ban on importing Iranian oil into Europe is set in motion.

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Everything You Need to Know About Junior Mining Stocks

Let's make something clear up front: junior mining stocks are not for the faint of heart.

Legendary investor Doug Casey calls them "the most volatile stocks on earth."

They can and do regularly undergo massive swings, both positive and negative.

It's a really tough business. Many flame out.

But all it takes is just one 10-bagger to make up for all the dogs in the pound.

Thanks to a new discovery, a takeover bid or full-blown investment mania, it's not uncommon for some of these stocks to return as much as 1,000%, 5,000%, and even 10,000%.

Those are not typos. In fact, there are countless examples.

Aber Resources was a $3 stock in 1993 before it made a big diamond discovery. Four years later, the stock hit $28/share, handing early investors over 900% returns.

Then there's Diamond Fields Resources. Its shares were $4 before geologists made a massive nickel discovery in 1994. Not long after, the stock hit a pre-split equivalent of $160 for a 4,000% return.

That phenomenal 4,000% return was repeated in 2006, when Aurelian Resources Inc. made a high-grade gold discovery in Ecuador. Shares of the junior miner went from $0.89 to almost $40.

So what makes a stock a "junior miner"?

In a pure sense, junior mining companies have market caps somewhere between $5 million and $100 million.

But here's the thing the makes them not for the faint of heart.

Usually, junior miners don't make any money. They just raise money from investors to explore properties for gold, silver, base metals, oil, gas, potash, or uranium, just to name a few.

And even if they make a significant find, junior miners rarely develop it themselves. Instead they sell the project to a major miner, who can more easily raise the required funding and has the experience to build and operate a mine.

OK, so now you're pumped with the idea that one of these little mining companies could help you retire in two years.

And you're right, they can. But not so fast.

The truth is you need to approach this mining subsector with a game plan — an investment "toolkit" if you will – to help you to cast aside the dogs and focus on the "diamonds in the rough."

Essentially, there are four main areas you need to vet in order to decide if a given junior miner is one to add to your portfolio.

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Recession 2013: This Report Shows We're Already Headed There

Recent reports have indicated a downturn in the U.S. economy. Coupled with fears stemming from the Eurozone debt crisis, they've fueled speculation about "Recession 2013."

In fact, former President Bill Clinton said he thinks we are already in a recession – and that was before the latest U.S. unemployment numbers were released, painting an even gloomier picture.

By now most of you have heard about the awful numbers in the discouraging U.S. jobs report for May, where only 69,000 jobs were added – nowhere near the 150,000 expected.

But what's worse about the U.S. jobs report is the trend of long-term unemployment.

Even though the national unemployment rate has dropped from its October 2009 high of 10.1% to its current level of 8.2%, the long-term unemployment levels have not seen a similar drop.

Without improvement in these numbers, fears regarding another recession will become reality.

How U.S. Jobs Trend Will Spell "Recession 2013"

Long-term unemployment, measured every six months, reached a peak of 46% of the unemployed population during May 2010.

That number has only fallen to 42.8%, or 5.4 million of the total unemployed, and has risen of late.

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Is Tata Motors (NYSE: TTM) the New GM?

As far as prestigious SUVs go, the Land Rover badge has been a mainstay in the road-less hinterlands for decades.

Yet it has taken years for someone to actually get the formula right. BMW tried. Then Ford.

But neither one of them could quite get it.

Oddly enough the company to finally pull it off is headquartered in the former British colony of India.

With its Range Rover Evoque, Tata Motors took the top prize as the Motor Trend SUV of the Year for 2012.

According to Motor Trend, "the Evoque hits all of the marks."

So what exactly is Tata Motors? It may not be as familiar to you as General Motors (NYSE: GM), but someday it will be.

A fast growing newcomer, Tata Motors (NYSE: TTM) is becoming a global force in the auto, defense and commercial vehicle sectors.

Now it certainly doesn't hurt that the local India market has a population approaching 1 billion people and that as these folks continue to move up the economic ladder they will be able to buy cars in greater quantities.

That's a bonus for certain. But it's not the entire story.

The truth is Tata is a leading builder of mass transportation vehicles (busses) in India as well as Spain, Brazil and South Korea.

Simply put, Tata is now a significant global player.

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