Archives for September 2012

September 2012 - Page 13 of 19 - Money Morning - Only the News You Can Profit From

Why Dividend Investors Should Worry About an Obama Victory

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I don't have to tell you there is a lot at stake for dividend investors in November.

In fact, an Obama victory could hit income investors with something of a double whammy.

You see, for dividend investors it isn't simply just a matter of higher tax rates, the changes President Obama has in mind may result in fewer dividends paid altogether.

You can chalk it up to the law of unintended consequences.

Let me explain.

Thanks to the Bush tax cuts of 2003, dividends are currently taxed at 15% to individual investors.

The rationale for the change was that dividends are paid from income that has already been taxed once at the corporate level. It means the total top federal tax rate on dividends, including the 35% corporate tax, is currently 45% (the net received is 85% of 65%).

Even with the tax break, that's still higher than the top 35% rate of personal income tax.

That's bad enough, but even if the Bush tax cuts are renewed before the "fiscal cliff" strikes at the end the year, investment income will suffer an additional 3.8% tax starting on January 1 to pay for Obamacare.

That means the total tax on dividends could jump to a whopping 47.2%.

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Fiscal Cliff Not a Priority for This Do-Nothing Congress

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With the United States poised to topple over a recession-inducing fiscal cliff in January 2013, you'd think Congress would be frantically working on a solution.

After all, that's what we elected them to do.

The fiscal cliff is political shorthand for the combination of spending cuts and tax increases scheduled to hit Jan. 1, 2013. It's the result of the expiration of the President Bush-era tax cuts combined with $1.2 trillion in automatic reductions in federal spending made last summer as part of the deal to raise the debt ceiling.

But rather than focus on figuring out how to avoid the fiscal cliff, Congress members are focused on figuring out how quickly they can get out of Washington for their next recess.

"Everyone wants to get out of town – fast," a top Senate aide told Reuters.

That would be fine if lawmakers were just finishing a grueling summer session, but they just returned from a five-week recess. The current session will last just two weeks, and then Congress departs for another recess, possibly as long as seven weeks.

And what lawmakers have placed on the agenda for their abbreviated session hardly compares to the flashing-red-lights, sirens-blaring crisis the United States faces with the fiscal cliff.

Instead Republicans and Democrats will spend much of their limited time voting on bills and holding hearings designed to score political points they can use in their re-election campaigns.

The Democrat-controlled Senate plans to vote on jobs bills they know the House Republicans will reject; the GOP-controlled House plans to repeal Obamacare for the umpteenth time, which obviously will get nowhere in the Senate.

"Democrats appear ready to ride out the rest of the year spinning tall tales that the economy is doing fine while doing virtually nothing about the problems we face as a nation," Senate Minority Leader Mitch McConnell, R-KY, told Politico.

Rep. Chris Van Hollen, D-MD, called the GOP moves an "example of Republicans wasting time that should be spent on finding solutions to the country's problems. We're up to zero votes on Obama's jobs bills and more than 30 votes to repeal Obamacare," he told Politico.

Meanwhile, America edges closer to the fiscal cliff with each passing day.

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Could QE3 Really Do Less for the Economy Than the iPhone 5?

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Investors are eagerly waiting to hear if U.S. Federal Reserve Chairman Ben Bernanke will announce QE3 this week. Bernanke speaks Thursday at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting and many expect him to announce some form of stimulus to revive the struggling U.S. economy.

But there's another huge event scheduled this week, one that could provide a tool other than printing money for boosting U.S. gross domestic product (GDP).

Believe it or not, analysts at JPMorgan Chase & Co. (NSYE: JPM) estimate that the Apple iPhone 5, expected to be unveiled tomorrow (Wednesday) afternoon and on sale by the end of this month, will raise GDP by 0.5% in the fourth quarter of this year.

Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." program Tuesday morning to discuss the possibility of this iPhone effect and what it implies.

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Facebook Stock Gains, But Rival Threatens Market Share

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Look out, Facebook: LinkedIn Corp. (NYSE: LNKD) is inching into your territory.

As Facebook stock (Nasdaq: FB) keeps climbing from its all-time low last week of $17.55 a share, business-oriented networking site LinkedIn has introduced some new features that resemble those of Facebook.

LinkedIn last week rolled out a new notification system and launched an update for its iPhone, iPad and Android apps. The updates now inform a member when someone likes or comments on one of their status updates – just like Facebook, the social networking leader.

In the past LinkedIn only sent notifications if someone sent a member a message or extended an invitation to become a connection.

In a statement, the company gushed, "You'll never miss a comment or update to an engaging discussion about a news article or trending topic on LinkedIn."

LinkedIn's head of mobile products Joff Redfern said in an interview that the update will also let a member peruse company pages and job postings on smartphones and tablets. According to Redfern, users requested the feature so they could covertly browse for jobs while at work.

The latest moves highlight how LinkedIn is morphing from a headhunting and career-networking site into something bigger. Facebook big.

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Investing in Gold ETFs: Don't Miss this Bull Market

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The gold bull market is alive and well, meaning now's the time for investing in gold exchange-traded funds (ETFs).

Gold kicked off the week with December futures rising $6.80 (0.4%) to $1,738.60 an ounce Monday. This came on the heels of Friday's disappointing U.S. jobs report and the anticipation of a newsworthy week for the precious metal thanks to some possible central bank action.

Gold futures again edged higher today (Tuesday) with December futures at $1,736 an ounce. The gold price rise continues thanks to an increasing euro and the anticipation of a German court ruling Wednesday on the Eurozone bailout fund's legality.

Adding to the bullish sentiment on gold is the anticipation of this week's two-day Federal Open Market Committee (FOMC) meeting: Will they or won't they announce another round of additional easing on Thursday?

While these events help price outlook for gold, they're also drawing investors to gold ETFs.

On Monday, gold ETFs rose to a record high of 72.49 million ounces, reported Reuters.

In 2012, total holdings have increased by almost 3.5 million ounces; in the last month 2.7 million ounces flowed into gold ETFs.

The interest in investing in gold ETFs is another bullish signal for the yellow metal, erasing some worries over the sustainability of gold's price rise.

"With a good portion of gold's recent strength accounted for by the sharp increase in spec positioning, this certainly raises concerns on the longevity of the [gold price] move, especially with fundamental buying virtually out of the picture," Edel Tully, a strategist at UBS, said to Reuters. "But the fact that the (ETF) camp – a relatively less-fickle group of buyers – has also been giving gold its vote of confidence offsets some of those worries."

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Stock Market Today: U.S. Credit Rating At Risk Again

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The major headlines in the stock market today (Tuesday) include Moody's warning it might lower America's AAA rating, the trade deficit and a financial shakeup:

  • U.S. Credit Rating at Risk– In a statement released Monday, ratings agency Moody's said the United States is in danger of losing its AAA credit rating if Congress cannot come up with a solid plan to lower the debt-to-GDP ratio. "If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable," Moody's said in an e-mailed statement. "If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1."

    Currently Moody's rates the U.S. AAA credit rating with a negative outlook. Standard & Poor's last year downgraded the U.S. to AA+ which is the equivalent to Moody's Aa1. Both agencies cite the political bickering in Congress and inability to deal with fiscal situations as the main reasons for the downgrades. S&P has mentioned that those risks could lead to another downgrade. When President Obama updated his federal budget in August the debt-to-GDP ratio was projected to be 75% by 2022, currently it is just over 1.04%. If lawmakers decide to go off the fiscal cliff as a debt reduction measure Moody's said it will maintain its current rating and negative outlook and then wait to see results of the fiscal cliff before deciding to return to a stable outlook.

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Is the iPhone 5 Better Stimulus than Bernanke?

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According to JPMorgan analysts, the Apple iPhone 5 could contribute up to half a percentage point of U.S. economic growth in 2012's fourth quarter.

The claim caused FoxBusiness' Stuart Varney to ask Money Morning Chief Investment Strategist Keith Fitz-Gerald if a cellphone really carries that much power.

Keith takes the question a step further: Is this possible because the U.S. economy is so bad that a consumer product could make a difference, or is this an example of how dependent we are on technology?

Meanwhile, the U.S. Federal Reserve could announce another growth-stimulating program this week when it meets tomorrow and Thursday.

Watch this video to hear Keith's explanation of how the Apple iPhone 5 could trigger economic growth that rivals – or exceeds – stimulus moves from Team Bernanke.

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Mylan, Pfizer Settle Patent Dispute - Analyst Blog

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Mylan Inc. (MYL) recently announced that it has entered into a settlement agreement with Pfizer Inc. (PFE), Pharmacia & Upjohn Company LLC and Pfizer Health AB. The patent litigation was related to Mylan’s generic version of Pfizer’s Detrol LA (tolterodine tartrate ER, 2 mg and 4 mg) for overactive bladder with symptoms of urge urinary […]

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Kraft Gives Post-Spinoff Outlook - Analyst Blog

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At an investor day held on September 7th, Kraft Foods Inc.(KFT) outlined the financial outlook for its soon to be spun off North American grocery business. The financial targets for its international snacks business, which is to be called Mondelez, were unveiled at the Barclays Capital Back to School Consumer Conference a day before the […]

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Zillow - Aggressive Growth

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Zillow Inc. (Z) recorded a massive 500% positive earnings surprise in its second quarter, marking its fourth consecutive earnings beat. The surprise was mainly due to a strong performance for Zillow Mortgage Marketplace. With a long-term earnings growth projection of 40%, this Zacks #1 Rank (Strong Buy) real estate information marketplace operator offers solid growth […]

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