Archives for July 2012

July 2012 - Page 10 of 17 - Money Morning - Only the News You Can Profit From

These South of the Border Bargains Offer Investors Real Growth

While the news worldwide seems universally gloomy, it doesn't mean that there aren't any bargains to be had.

If you're looking for opportunities to grow your money in ways that are not dependent on changes in monetary policy or a solution to the Eurozone debt crisis, here's a good one.

It's a brand "new" market that has just had a stroke of good fortune, which means its prospects now look much better than they did before.

It has a decent-sized market, with lots of companies listed in the United States, and low political risk.

It may surprise you to know that I'm talking about Mexico.

Now, I know that Mexico hasn't exactly been at the top of list when it comes to finding safe investments.

For the last decade, Mexico has been bedeviled by the stranglehold of oligarchy, slow growth and an economy which is excessively dependent on the United States.

Admittedly for investors, there did not seem to be much to go for. The big companies, such as those controlled by Carlos Slim, the world's richest man, sold on sky-high P/E ratios and seemed to offer more risk than opportunity. Meanwhile, smaller outfits were stifled by Mexico's bureaucracy and slow growth rate.

But the truth is things have been looking up recently for this down-beaten market.

The Economist panel of forecasters predicts Mexico will grow at 3.7% in 2012 and 3.8% in 2013.

That's nearly double the 2% GDP growth U.S. investors can expect and much more than double the forecast for the Eurozone, which is flirting with a recession.

In today's markets, Mexico is one of the few places that offer investors real growth.

Change South of the Border

But there's another reason for investors to begin to look south of the border.

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These Sugar-Fueled Brain Chips are Major Medical Breakthrough

It's just a simple carbohydrate that dissolves easily in water. But in human consumption, that means it hits the blood stream quickly and can spike blood-sugar levels to dangerous heights.

You could forgive doctors for declaring a "war" on sugar. After all, billions of people around the world consume more of this sweetener than they should almost every day.

Research reveals that sugar abuse is a major factor behind America's growing epidemic of obesity. Not only that, but many experts believe this tiny molecule is powering an explosion in cases of diabetes, too.

Some politicians have even jumped on the anti-sugar bandwagon. In the most recent case, New York Mayor Michael Bloomberg caused a firestorm of protest when he said he wants a city-wide ban on sugary drinks bigger than 16 ounces.
But the "battle of the bulge" here in the U.S. misses a key fact about sugar…

It could become a major fuel driving the biotech revolution.

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What Can Save This Economy?

Is QE 3 the only way to fix the struggling economy?

Money Morning's Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business this morning (Friday) and was asked to answer that question among other things concerning the economy.

Disagreeing with a New York Times article that cited signs of an economic pickup, Fitz-Gerald called those statements political "gerrymandering."

Regarding the present economic conditions Fitz-Gerald thinks there are ways to help the economy besides quantitative easing. Yet, he does expect more stimulus and tells investors to position their portfolios on the assumption that it is coming.

You can see all of Fitz-Gerald's analysis in the accompanying video.

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Bank Earnings Lead the Stock Market Today

The stock market finally broke its losing streak.

After five consecutive negative trading days the markets have finally rallied thanks to strong earnings reports from Wells Fargo and JP Morgan.

JPMorgan Chase (NSYE: JPM) and Wells Fargo (NYSE: WFC) both reported earnings this morning before the opening bell. The definitive winner of the two is Wells Fargo.

Wells reported another record quarter of earnings while JP Morgan felt the consequences of its "London Whale Trade."

JP Morgan announced the bet would cost the company a total of $5.8 billion, the high end of analyst's predictions. Of that loss $4.4 billion is accounted for in this quarter and the remaining $1.4 billion was put on last quarter's balance sheet.

What is positive about JP Morgan's earnings is the fact that the company was able to post profits despite the trading loss.
JPMorgan posted second-quarter net income of $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share a year earlier.

The derivative loss after taxes reduced earnings per share by 69 cents, the company said.

Wells Fargo boosted its earnings 17% compared to the same quarter a year ago. Wells reported earnings of $0.82 per share beating expectations by a penny.

Wells Fargo stock (NSYE: WFC) is up over 3% and JP Morgan stock (NYSE: JPM) is up almost 5% as of noon.

The markets are ignoring the main economic indicator released today. The University of Michigan's Consumer sentiment index came in at 72.0 its lowest level of the year, down from 73.2 in June.

The lousy trend of hiring coupled with global uncertainties and a volatile stock market have weakened household spending which accounts for 70% of the economy. The Michigan survey's index of consumer expectations for six months from now also fell to a yearly low to 64.8 from 67.8.

Besides Wells and JP Morgan here are two other companies making news today.

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JP Morgan (NYSE: JPM) Earnings Pinched by Trading Blunder

Despite a $4.4 billion loss stemming from bad credit bets, JPMorgan Chase (NYSE: JPM) still posted a profit of $4.96 billion for the second quarter.

Total losses from the botched trades have reached $5.8 billion, according to Dough Braunstein, JP Morgan's CFO. And it's not over – CEO Jamie Dimon said in the earnings conference call Friday (today) that the fiasco could result in $700 million to $1.7 billion in further losses.

"We learned lessons that will make a stronger company," a contrite Dimon said.

And what expensive lessons they were. The company revealed that the loss on credit derivatives executed by traders in its London's chief investment office (CIO) swelled to $4.4 billion in the second quarter, up from the $2 billion loss it first reported in May when the trading gaffe was exposed.

Dimon nevertheless assured the analysts that JP Morgan has the crisis under control.

"We think we've boxed this," Dimon said.

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Wells Fargo Stock Gets Lift From Earnings

Wells Fargo stock (NYSE: WFC) rose in early trading behind a strong earnings report.

The company reported earnings of $4.6 billion or $0.82 per share. This slightly beat analysts' expectations for earnings of $0.81 per share.

Wells Fargo posted a 17% rise in its profits from $0.70 a year ago, marking the fourth consecutive quarter in which the company has posted rising profits.

Unfortunately for Wells, the earnings report comes at a bad time.

A discriminatory lending scandal was reported yesterday and that is keeping Wells Fargo stock from experiencing better gains than rival JPMorgan Chase (NYSE: JPM) today. The scandal involved Wells discriminating against African-American and Hispanic families who were forced into costlier subprime loans than comparable white families.

"If you were African-American or Latino, you were more likely to be placed in a subprime loan or pay more for your mortgage loan, even though you were qualified and deserved better treatment," Assistant Attorney General Thomas Perez said in prepared remarks Thursday.

Wells Fargo denied the matter and will settle the issue to avoid contested litigation. The San Francisco-based company will pay a total of $175 million: $125 million in compensation to victims of discrimination and $50 million in down-payment assistance to borrowers in affected communities.

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Three U.S. Stocks to Keep an Eye on as Earnings Season Unfolds

It's a proven fact — stock prices eventually follow earnings.

So as we enter second-quarter earnings season, an avalanche of corporate reports will likely set the tone for the stock market for the next six weeks.

If companies report healthy profits, stock prices are destined to charge higher. If earnings are flat or even begin show losses — look out below. U.S. stocks could tumble.

Either way, investors can expect increased volatility as earnings season kicked into high gear today with JPMorgan Chase (NYSE: JPM).

That's especially true when certain bellwether stocks report results. A bellwether stock, is loosely defined as company that tends to create, influence or set trends.

With that in mind, let's take a look at how earnings season is shaping up along with three stocks that will provide early clues about what might be coming for the rest of the market.

Predicting a Down Quarter for U.S. Stocks

Typically, earnings season is good for stocks.

Historically, the S&P 500 has rallied 67% of the time during earnings season, posting positive returns of roughly 3%. By comparison, stocks have dropped by 1.46% in between earnings seasons.

But we may not have much reason to cheer this time around.

Wall Street analysts project a 1% decline in second-quarter 2012 S&P 500 operating earnings, according to Capital IQ consensus earnings expectations.

The last time companies were this negative coming into an earnings season was the fourth quarter of 2008, when the financial crisis was wreaking havoc on the U.S economy.

Here's why…

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Both Parties Have it Wrong

Today I have a question for you; make that two questions:

  1. Do you think that financial services should be more regulated or less regulated?
  2. Do you think that the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act), signed into law two years ago on July 21, has hurt:
    1. You personally?
    2. Businesspeople or businesses you know of?
    3. The economy in general?

Here's my opinion; not that it matters that I'm an expert on the subject, or that I have 30 years in the financial services business, or that I own a couple of businesses, or that I'm getting back into the financial services game in a big way (more on that sometime in the future).

It's just my stupid opinion. It really doesn't matter that I'm right, either, because it's just my opinion; did I say that?

The correct answer (according to me) to question No. 1 is itself an economic postulate: "More is always better sooner." As in, we need more and better regulation, sooner rather than later. That's my final answer.

The correct answer, in other words, my answer, to question No. 2 is: no, no, and no.

I'm going to make this short and simple, because I want to hear from you on this subject. (Just click below and leave your answers in the comments section.)

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Five "Extra" Moves to Make Right Now to Protect Your Financial Future

I hear from countless investors around the world every week. Many of them want to know what "else" they can do to protect their financial future, especially now that the markets could get ugly (again).

Here are a few quick thoughts:

1) Chart your course

A surprising number of investors tell me that things were going along just fine then – boom – one day they woke up and everything had turned into a disaster.

If only it were that simple. The truth is digging a hole takes time and a whole lot of effort. If you're in trouble now it's because you haven't been paying attention for a while.

Knowing what to do is only 10% of the game. The other 90% comes from having a plan.

I don't care if it's nothing more than on the back of an envelope or a Post-it like the ones that cover my desk. It's vitally important you have one.

Unfortunately, "Beating the S&P 500" doesn't qualify as a plan. Neither does "retiring in style." You have to plan for real-life goals.

For some people, this may be paying for a grandchild's education. For others it might mean building up $20,000 over five years to take that once-in-a lifetime trip, accumulating $300,000 to build a vacation home, or ensuring that you have $2,000-$10,000 a month to live on 20 years from now.

You have to be specific. That way you learn to control your money before it controls you. If you need help, find a competent financial advisor immediately and ask the right questions.

If you realize you can meet your goals by hitting singles, it makes no sense to constantly swing for the fences and risk striking out. Lower your risk and concentrate on the return of your money rather than the return on your money.

Not only will you sleep better, but chances are your returns will be more consistent for having done so.

2) Refinance your home (and everything else, too)

Interest rates have fallen for more than 30 years to near zero. They are unlikely to fall much further. If anything they are likely to rise. Nobody knows exactly when or how high they will rise, but that's not the point.

What's important to realize (and that many people have forgotten) is that the median 30-year mortgage rate is nearly 9%, or roughly 150% higher than the best rates available today. Even a minor uptick means you will lose huge amounts of purchasing power.

Obviously you have to pay closing costs every time you refinance, but the fees can be worth it if you plan to be in your house long enough to break even.

Here's how to run the numbers.

Why Jim Rogers is Investing in Farmland

Legendary Wall Street trader and best-selling author Jim Rogers recently offered this unconventional advice: If you want to get rich, you should be investing in farmland.

Don't laugh. Rogers is good at what he does. Really good.

Together with George Soros, he founded the Quantum Fund in the 1970s and posted returns of 4,200% over 10 years. Rogers retired in 1980 at the age of 37, but is still active as a private investor.

Back in 1999, Jim Rogers recommended gold when it was trading at $252 and silver at $4. You know what happened after that.

Now Rogers thinks investing in farmland will pay off in a big way.

"It's the farmers, the producers, who are going to be in the captain's seat when the prices go through the roof," he told The Australian Financial Review.

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