Archives for July 2012

July 2012 - Page 16 of 17 - Money Morning - Only the News You Can Profit From

Three Reasons Oil Prices are Gushing

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Oil prices have taken a backseat lately to the turmoil in Europe and Obamacare. But investors and consumers are starting to take notice again.

For the first time in three weeks, oil staged a noticeable rally. Brent crude oil topped $100 a barrel on Tuesday and crude for August delivery jumped $3.80 to $87.57 a barrel.

Tuesday's rise in oil came off Monday's 1.4% decline and follows a selloff that has pushed oil down some 22% from its 2012 peak of $128.40 on March 1. In the second quarter, oil prices experienced their biggest quarterly drop since the financial crisis of 2008.

Moving oil prices higher on Tuesday was a trio of factors: Iran tensions, dwindling inventories, and a wager that further policy action to shore up global growth is on the horizon.

Oil Prices and Iran Tensions

Concerns about Iran had calmed over the past month along with the sagging worldwide oil prices, but those worries were stoked Tuesday by an army general in Iran.

The general reportedly said that the country wouldn't "sit idly by" as the U.S. and Europe built a missile-defense shield program that could target Iran.

Late Monday, Iranian authorities staged missile drills to test weapons reportedly capable of hitting targets as far away as Israel. Iran officials also announced possible legislation targeted at closing the Strait of Hormuz, one of the world's most important choke points. Approximately 20% of the world's oil, nearly 17 million barrels a day, passes through the narrow strait.

Iran's move came on the heels of the European Union's full embargo on Iranian oil that went into effect Sunday. The EU embargo halts the vast majority of imports into Europe, ending exemptions for contracts signed before 2012, and barring insurance for Iranian oil shipments.

"Iran is always a factor and it has the potential to have a dramatic impact on oil prices," Ben Le Brun, a markets analyst at OptionsXpress in Sydney, told Reuters.

While Iran was the biggest catalyst behind oil's ascent Tuesday, it wasn't the only factor moving oil upwards.

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iTunes Revamp Will Fortify Apple (Nasdaq: AAPL) Ecosystem

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A major revamp of its catch-all iTunes software will strengthen the already formidable Apple Inc. (Nasdaq: AAPL) ecosystem.

"People with direct knowledge of the matter" confirmed to Bloomberg News last week that Apple's biggest overhaul to iTunes since 2009 will appear before the end of the year.

According to the Bloomberg report, changes include the addition of music sharing features, better integration with Apple's iCloud remote storage service, and easier ways to discover new apps, music, and movies.

The upgrade is long overdue.

Launched as a mere music jukebox in 2001, iTunes has gradually added chores like media content management, an online store and syncing. As a result, it's evolved into a Frankenstein that fails to uphold Apple's legendary ease-of-use ideal.

"At some point, you've got to sit down and say, 'How do we create a really good, easy experience for consumers that doesn't involve them wading through endless tabs and subsections of the site," Carl Howe, research director at theYankee Group, told MacNewsWorld.

Although the iTunes Store generates a relatively small portion of Apple's overall revenue -$1.9 billion out a total of $39.2 billion in the March quarter – the software is a main ingredient of the glue that holds the Apple ecosystem together.

An iTunes revamp will tidy up the cluttered ecosystem that helps drive sales of iPhones, iPads and Macs – AAPL's real revenue generators.

With that in mind, it's also easy to see the iTunes overhaul as a defensive move.

It's surely no coincidence that the Bloomberg story appeared mere minutes after Google Inc. (Nasdaq: GOOG) announced an upgrade to the Android ecosystem. The Google Play store added movies, TV shows and magazine subscriptions – just like the iTunes Store.

What to Expect from an iTunes Revamp

While the details remain veiled in secrecy, the recent leaks offer several clues about what Apple has in mind for iTunes.

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Stock Market Today: Do You Own This 30% Winner?

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It was no surprise that the stock market today was quiet with little volume and not much movement.

In a day when the U.S. markets closed at 1 p.m. positive economic reports on motor vehicle sales and factory orders sent the markets slightly higher, and one company was up more than 30%.

Factory orders for U.S. factories rose 0.7% which was the first increase in bookings in three months. Last month's revised figure showed a 0.7% drop and economists had expected a 0.1% increase for June.

Many major automakers reported increased sales with U.S. automakers Chrysler, Ford and GM leading the way.

With the market off tomorrow and a shortened day today, traders expect a subdued state until Friday's latest unemployment numbers are released.

The major news came from British banking empire Barclays PLC (NYSE ADR: BCS).

Barclays PLC (NYSE ADR: BCS) announced Tuesday that its CEO Robert Diamond would resign effective immediately in the wake of the scandal involving lending rate manipulation.

Barclays was fined $450 million last week by British and U.S. regulators and is among other banks involved in similar lawsuits concerning rate fixing during the financial crisis of the past four years.

British Chancellor George Osborne cheered the resignation of Diamond calling it the "right decision" and encouraged banks to move forward and continue lending.

"We need our banks to be focused on lending to the economy, not on the scandals of the past, and I hope this will be the first step towards a new culture of responsibility in British banking which is what the British people want to see," Osborne told BBC Radio 4's "Today" program.

Diamond, who became CEO on Jan. 1 2011, is set to face British lawmakers tomorrow for questioning. Barclays stock fell 16% on June 28 when the scandal broke and is down almost 2% today.

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Barclays Libor Scandal: Britain Hopes for "New Culture" of Banking

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The Barclays Libor scandal involving price fixing of key interbank lending rates has already led to two major resignations at the bank, and has increased scrutiny on the global financial industry.

Barclays (NYSE ADR: BCS) last week was slapped with a $456 million fine for rigging Libor rates, the rates banks charge each other for loans.

The record fine was levied to settle an investigation into attempted manipulation and false reporting related to two benchmark interest rates. Those rates help determine terms of loans and financial contracts around the world that form the basis for hundreds of trillions of dollars' worth of transactions.

The news has been a major blow to Barclays' once stellar reputation, and now led to the fall of Chief Executive Officer Bob Diamond.

Barclays CEO Diamond Resigns

Diamond resigned Tuesday, a day after Chairman Marcus Agius stepped down amid the scandal.

"The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen," Diamond said in a statement Tuesday.

Agius took the blame Monday, acting as the fall guy. He said in a statement, the "buck stops with me, and I must acknowledge responsibility by standing aside."

Then a pressured Diamond announced he would leave, and Britain's politicians and regulators labeled this the first step towards "a new culture of British banking."

Scores of shareholders lobbied for Diamond to take responsibility.

John Mann, a Labour politician and among the panel of lawmakers who this week will question Diamond and Agius, said Monday on Sky News, "He (Diamond) must resign. He"s got to go. There is no role for people like him if banking is to be trusted again in this country and if British banking is to restore its tarnished reputation in the world, which of course is of great importance to our economy."

Agius will lead the bank temporarily and help search for a new CEO.

Barclays' board, trying to do some damage control, announced it would begin an audit of the financial services firm's business practices.

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Ours is the Greatest Story Ever Written

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Ask practically any American this week about their country, and they will likely tell you that – despite its faults – the United States is the greatest nation on earth.

I would even take it a step further by saying the United States is the greatest country there is, ever was, and ever will be…

But then again, I'm a bit of a homer.

Maybe it was all those World War II movies I watched with my great uncle when I was kid. He was an old sailor who was big on Admiral "Bull" Halsey, and by extension, so was I.

Or maybe it's because I'm much older now, and I realize just how dark the world would be without her. That much I am sure of.

But what I love most about my country is that it was founded on the idea that all men are created equal and are born with unalienable rights – among them life, liberty, and the pursuit of happiness.

Of course, Thomas Jefferson put those words much better than I ever could some 236 years ago when he penned the Declaration of Independence.

What you may not know is that Jefferson was just 33 years old when he sat down to the task of writing one of the most important documents of all time.

Chosen by John Adams for his "happy talent for composition and singular felicity of expression," it took Jefferson 17 days to complete under the apparent constant harassment of horseflies from a nearby barn. Being mid-June in Philadelphia, it was also undoubtedly quite warm.

I often wonder what that must have been like, using only an ink well, pen, and candlelight at night. Did Jefferson know his elegant phrasing and high tone would go on to forever change the world?

What was it like, that moment when he scratched out the word subjects and replaced it with the word citizens?

Was it a slip from a lifetime of habit… or Jefferson's first recognition that the people of his cause were no longer subjects of any nation- but citizens of an emerging democracy?

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The Next Phase of the Eurozone Debt Crisis

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Today (Monday), as we digest what happened in Europe, the obvious question arises: What comes next for the Eurozone debt crisis?

For starters, the heads of state coming out of the Council of Europe meeting last week pledged to have the new structure by July 9, even though the new stabilization mechanism will take longer to phase in.

For the first time, there will be a greater accountability (and control) over continent-wide commercial banking and access to some underwriting of debt coverage. It also means that national banking systems will need to relinquish some oversight to the European Central Bank (ECB).

For months, a number of people (myself included) have insisted that the solution to th e Eurozone debt crisis requires greater financial integration. The shortcoming seemed rather straightforward.

The EU had ushered in a more centralized monetary system (single currency and all that) but had no centralized fiscal system to parallel it. Simply put, that required adherence to currency rules without any ability to coordinate the credit and fiduciary end of the spectrum.

Well what came out of the Council in the early hours of Friday will not solve the debt problem in Spain , Italy , Portugal, or Greece. There is no magic short -term fix. But it might just provide the underpinnings for a credit system that may begin to operate.

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The banks are the problem right now

Taxmageddon Just Got More Frightening

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Political battles will take center stage in the second half of 2012, but few loom larger than the scheduled tax increases – "Taxmageddon" – set to take effect in January 2013.

Bush-era tax cuts, payroll tax breaks and other provisions set to expire next year could pack an enormous financial hit, harming the already-fragile U.S. economy and thousands of struggling families. While Democrats and Republicans alike are opposed to letting all the cuts expire, they disagree on exactly what to do about it.

Republicans blame U.S. President Barack Obama and his administration for the stalemate.

Sen. John Cornyn, R-TX, has said Republicans want to extend all of the Bush tax cuts, including the "big-ticket" ones, and even some Democrats support reform of the entire tax code, but "the bad news is that President Obama is missing in action."

"Unless Congress and the president act, January will bring us the largest tax increases in American history-a tax increase of approximately $500 billion," Cornyn said in a weekly radio address last week.

President Obama wants to end the Bush-era tax cuts for individuals making more than $200,000 a year and couples making more than $250,000 annually. The move is aimed to garner more revenue for a government saddled with growing federal debt. The president has said that wealthier Americans are in a position to help.

But Taxmageddon will fall principally on middle and low income Americans because 60% of the Bush tax cuts went to middle- and low-income taxpayers.

Cornyn said in the Republican radio address, "Make no mistake, every single working American will see his or her taxes go up on January 1 absent action. Family budgets will be squeezed even tighter. Disposable income will shrink. And many jobs will be destroyed."

The uncertainty over federal taxes has weighed on the U.S. economy, Cornyn added.

"Raising taxes is the last thing we should do amid the weakest economic recovery since World War II," he said. "Unfortunately, even if we avoid the full "Taxmageddon" scenario, President Obama's health care law also contains a new surtax on investment that will take effect in 2013. This new surtax will hamper small business investment, which is the lifeblood of private sector job creation."

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New Technology Trends: June's Most Fascinating Updates

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[Editor's Note: This column appeared in Michael A. Robinson's Era of Radical Change newsletter last week. For more insights into the latest tech innovations, click here and let Michael introduce you to the Era of Radical Change. Enjoy.]

Over the last several months, I've written about a number of new technology trends reshaping the world around us, with an eye toward how to profit from them.

As it turns out, I've barely scratched the surface…

You see, almost every day in the Era of Radical Change, we get some exciting breakthroughs with huge potential. Each week, I learn about dozens of new advances, personally. Sometimes that leaves me frustrated, because I just don't have the time and space to get them all in print to you. But I hate to see these great ideas and incredible developments go above notice.

That's why today I'm launching a new feature I think you'll find intriguing…

Called Fascinations of the Month, this recurring column will arrive at the end of each month and cover several shorter items in less depth. I believe they will expand your knowledge of cutting-edge high tech and give you something fascinating to tell your neighbors about.

And you just never know; you may pick up an investment idea or two along the way.

Here are our first Fascinations of the Month…

Voyager 1 is About to Leave Solar System

Many of you recall that the Voyager 1 is a robotic space probe traveling through the solar system. NASA says the little probe was built to last.

No kidding…

It left earth 35 years ago, sent back the first detailed pictures of Jupiter and Saturn, and has now traveled more than 11 billion miles from earth. That's the farthest any of man-made space craft has ever gone.

Voyager 1 is tasked with locating and studying the boundaries of the Solar System. But the fact is, the probe is about to leave our solar system. No one knows precisely when that will occur, but it could be a matter of only a few days. This means the human race will soon enter uncharted territory.

No human or man-built craft has ever entered deep space. Voyager 1 really is on an "interstellar mission," as NASA likes to say.

But there's more. Its sibling, Voyager 2, is only a couple of billion miles behind. It, too, will continue to chart space and send data back to earth.

Oh, and just in case one (or both) of the ships come across extraterrestrial life while in orbit, they contain greetings for other life forms. On board is a 12-inch gold-plated copper disk that contains sounds and images picked to portray a wide range of life and culture on Earth.

And it turns out that isn't the only big trend involving unmanned space travel…

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Stock Market Today: M&A Activity Rules the Day

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The stock market today has been relatively mild following Friday's buyer-friendly session.

Friday's momentum was halted as poor reports from around the globe surfaced today.

Unemployment in the Eurozone has reached a record high of 11.1%, the highest since the inception of the euro in 1999. In total the level of unemployment for the 27 countries in the European Union stayed at its May level of 10.3%.

On Sunday Spain dominated the final of the European Championship soccer tournament, beating Italy 4-0 – but that will do little to comfort the fact that Spain has the highest unemployment in the EU at 24.6%.

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Are We Headed Straight for Recession 2013?

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Fresh reports pointing to a slowdown in the struggling U.S. economy, coupled with worries of Europe's fiscal woes, have experts warning that Recession 2013 is inevitable.

The dismal and downtrodden jobs numbers, the elevated long-term unemployment levels, the ailing housing market and the looming "fiscal cliff" are all fueling recession fears.

Just last month, the nonpartisan Congressional Budget Office reported that unless lawmakers move to avert scheduled tax increases and spending cuts at the end of this year, a recession is likely.

This marked the first time the CBO has forecast a recession resulting from the fiscal cliff.

The CBO projected that gross domestic product (GDP) will contract by 1.3% in the first half of 2013 before growing 2.3% later in the year. Annualized, GDP would grow just 0.5% in 2013.

That forecast is an about face from January when the CBO forecast a 1.1% GDP growth in 2013 (if policies are not dealt with).

The report stated, "Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession."

Now other economic experts are saying the same.

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