Archives for August 2012

August 2012 - Page 6 of 20 - Money Morning - Only the News You Can Profit From

Where Would The Markets Be Without the Fed?

We've arrived. We're exactly in the middle between here and there.

The problem with being here is the "there" part.

I'm talking about where the markets are and where they're going next. Is "there" backwards or forwards? Are we coming or going from here?

Before I give you my own forecast, and recommendation, let me say this about that…

Here are the two best forecasts I've ever heard:

  • "It will fluctuate," which was what J.P. Morgan famously answered when asked what the market would do, and
  • "I cannot forecast to you the action… It is a riddle, wrapped in a mystery, inside an enigma," which is what Winston Churchill famously said, not about the market, but about Russia. (The full first line is, "I cannot forecast to you the action of Russia.") But you get the picture.

American markets are touching their highs. It's as if everything is clear and sunny. It's as if forecasting is as simple as looking out the window and calling out what you see.

It's clear and sunny. Haven't you looked outside? If only it was that easy…

But when you do look outside, let's say, through a window, you only see in one direction. The question can then be asked, is the weather you're looking at coming or going, or is it here to stay?

America, and indeed the global financial markets, came to the precipice of a cliff and barely caught their balance before plummeting into an abyss so deep and black that no one knows where it would have taken us. But my guess is to Hell.

The rope that held us from going over was stimulus, massive stimulus.

That stimulus was never mopped up. It's been left out there like water on everything after the fire has been doused; and there's more coming.

The Federal Reserve, which isn't playing just 18 holes, but seems like it's playing a marathon round of swinging hard and gently, but constantly swinging, is teeing up another ball with some little marking that reads QEsquared, or something like that.

Here's my guess on what the Fed is going to do…

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Stock Market Today: Stocks Edge Higher To End the Week

Here are the major headlines in the stock market today.

  • Capital goods orders declines most in 8 months- Orders for core capital goods which excludes transportation and defense dropped 3.4% in July, the biggest decline since November. Capital goods such as computers, engines, and communication equipment are thought to be key indicator of business spending and this drop certainly does not inspire any confidence in the economy. "There's uncertainty domestically about the tax environment, and there's uncertainty globally about the outcome of the European crisis," Millan Mulraine, a senior U.S. strategist at TD Securities in New York told Bloomberg. "This is not engendering business investment and hiring." Economists had expected this category to rise 0.7% after a previously reported 1.7% decline in June.
  • Durable goods orders rise– Manufactured goods which are expected to last at least three years, increased 4.3% in July fueled by airline and auto sales. Economists had expected on average a 2.5% increase. Overall orders last month were lifted by a 14.1 % jump in transportation equipment as demand for civilian aircraft surged 53.9%. This was led by Boeing Co. (NSYE: BA) which had a strong performance at the Farnborough Air Show and received orders for 260 aircraft, up from 24 planes in June. Motor vehicle sales increased 12.8%, the largest increase since last July. Yet omitting the transportation sector, orders fell 0.4% and declined for the second month in a row.


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Zacks #1 Rank Additions for Friday - Tale of the Tape

Here are 5 stocks added to the Zacks #1 Rank ("strong buy") List today: Berkshire Hathaway Inc. (BRK.B) China Telecom Corporation Limited (ADR) (CHA) CNO Financial Group Inc. (CNO) Cumberland Pharmaceuticals, Inc. (CPIX) Daktronics, Inc. (DAKT) View the entire Zacks #1 Rank List.    BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report CHINA TELCM-ADR (CHA): Free Stock […]

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Home Depot - Growth & Income

Home Depot Inc. (HD) has an impressive record of beating quarterly earnings expectations, which it continued in its fiscal second quarter 2012 by surpassing the Zacks Consensus Estimate by 4.1%. The home improvement retailer has also been paying a quarterly dividend for over 100 consecutive quarters, currently yielding nearly 2.05%. Shares of this Zacks #2 […]

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Five Ways to Consistently Bank Gains and Manage Winning Trades

Most investors become so focused on their losers that they have no idea how their winners are performing…until they become losers and start paying attention to them.

As far as I am concerned, that's bass-ackward.

What they should be doing is figuring out how to harvest their winners, especially now that the six-week rally we've enjoyed appears to be losing steam.

If you've been raised under the old axiom of "cut your losses and let your winners run," this may seem counterintuitive.

But, if you really want to succeed in today's markets, you have to consistently sell your winners. That way, you continually cycle your capital into brand new opportunities.

It's not much different than what regularly happens in the produce department at the grocery store. Places like Safeway Inc. (NYSE: SWY) always replenish the tomatoes and the like to keep them fresh.

You should do the same with the "inventory" in your portfolio because if you let your stocks sit on the shelf too long, they'll eventually go badjust like fruit that's past its expiration date.

Here are some of my favorite tactics to help you lock in profits instead of letting irrational behavior and emotion take over when the markets suddenly have a mind of their own.

    1.) Recognize every day is a new day

This one is very simple. If the original reasons why you bought something are no longer true, ditch it – win, lose or draw.

You can't risk falling in love with your assets any more than you can let them rust – yet that's exactly what most investors do. They buy something then assume that it will somehow plod along on autopilot.

This is a variation of what I call the "greater fool theory" as in some greater fool is going to come along at a yet-to-be-determined point in the future and pay you more for a given investment than you paid to buy it.

I can't imagine what these folks are thinking.

Today, more than ever, you've got to continually re-evaluate your investments to ensure that they stand on their own merits and are worth the risk of continued ownership.

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Even the Eurozone Debt Crisis Gets a Vacation ...But Not For Long

The Eurozone debt crisis has taken a late summer vacation. Since it would be very inconvenient for a disaster to erupt while everyone is on holiday, it doesn't.

That's not to say this rule is infallible. One year, all the decision-makers went on holiday in late July, and came back to find themselves embroiled in World War I.

What traders and decision makers will find waiting for them when they get home from the beach could be almost as serious. Here's why…

A Laundry List of Problems

Greece has done nothing to redeem its position other than prepare an application for more money. Italy's GDP declined by 0.7% in the second quarter, and we are shortly to enter the run-up to the next Italian election.

What's more, Spain is trying desperately to avoid asking for a bailout, and may just succeed in doing so, but one more hiccup in its recalcitrant provincial governments will push it over the edge.

Then there's Portugal, which has entered a deep recession, and is showing signs of missing its budget targets again.

And that laundry list of potential problems doesn't include the biggest one of them all.

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Fiscal Cliff a Far Bigger Threat Than Most Investors Think

The United States may or may not go over the fiscal cliff in January, but few investors are taking the possibility seriously enough.

That's the message Goldman Sachs (NYSE: GS) chief U.S. equity strategist David Kostin had for his clients in a recent note.

He believes investors are not focusing enough on the potential impact of the fiscal cliff, which could set the stage for jittery markets akin to last year when the debt ceiling debates sent stocks tumbling.

When it comes to anticipating the impact the fiscal cliff will have on markets, "portfolio managers have been swayed by hope over experience," Kostin recently said in his note.

Kostin compared the current situation to last year's debt ceiling crisis when Congress waited until the eleventh hour to reach a deal.

"Investors were stunned and the S&P plunged 11% in 10 trading days (and more than 17% from the level one month prior to the deadline)," Kostin said. "Eventually Congress reached a compromise on raising the debt ceiling."

"We believe the uncertainty is greater this year than it was 12 months ago," Kostin said. "Political realities and last year's precedent suggest the potential that Congress fails to reach agreement in addressing the "fiscal cliff' is greater than what most market participants seem to believe based on our client conversations. In our opinion, equity investors seem unduly complacent on this issue."

The market rally enjoyed this month is a markedly different from last year's showing as markets skirted past the one-year anniversary of the debt ceiling face-offs. But Kostin says the S&P 500 is headed for a fall-and a steep one at that.

Kostin warns: "Assigning a P/E multiple to various fiscal cliff and earnings scenarios is difficult because ultimately we expect Congress will the address the situation. But investors must confront the risk they may not act until the final hour."

His year-end target for the S&P is 1,250; quite a bit lower than the current 1,424.

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Should You Buy Stocks or Gold?

Money Morning's Chief Investment Strategist Keith Fitz-Gerald led off Fox Business' "Varney & Co." this morning (Thursday) and offered his take on the recent market rally. Given the recent 4-year high in the markets, he was asked whether investors should buy stocks or gold.

According to Keith, you need both since "the market is addicted to cheap stimulus" In this case, its matter of keeping both bases covered since soon enough It'll be "time to pay the piper" he warned.

Watch the entire accompanying video to get Keith's full analysis and more.

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Stock Market Today: Poor Labor and Manufacturing Data Sends the Markets South

Here's what's making headlines in the stock market today.

  • Jobless claims rise again– A higher number of people filed for their first week of unemployment benefits last week, a sign that the job market is not improving as hoped. For the week ended August 18 372,000 filed for unemployment, up 4,000 from the previous week, the Department of Labor said Thursday. Economists had expected initial claims to be 368,000. As of the July jobs report, 12.8 million people were counted as unemployed and about 5.59 million people received some kind of state or federal benefit in the week ended Aug. 4. "Jobless claims continue to indicate … a sluggish labor market," Peter Cardillo, an economist at Rockwell Global Capital in New York told Reuters. "The numbers also strengthen the hand of the Fed to aid the economy with more stimulus."
  • Global manufacturing slumps- The flash manufacturing Purchasing Managers Index for the U.S. edged slightly higher to a 51.9 reading in August from 51.4 in July, according to Markit. The August reading marked the first monthly increase in five months, but it was the third weakest result since the manufacturing sector stopped shrinking in October 2009. New export orders continue to be below the 50 mark, indicating contraction, but output and new orders rose. Also causing concerns is the HSBC Flash China manufacturing PMI which fell to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.

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