Archives for September 2012

September 2012 - Page 14 of 19 - Money Morning - Only the News You Can Profit From

Why the ECB's Plan Can't Save Europe

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So, Thursday was a big deal. Did you get that?

Markets rallied around the globe, especially European markets and U.S. markets.

But did you get what really happened?

I know you saw the rally, and I'm sure it lifted your spirits. It lifted mine for about a day – that is, until I lifted up the ECB's skirt to see if their provocative language would leave Europe's knickers in a twist or not.

If you're not the kind of person to look at such intimate things too closely, don't worry. I love all that stuff and am driven to know how all the bits and pieces come together or apart. So, I'll tell you what I saw up there.

Europe's knickers certainly are twisted. So much so that if an ill wind blows, everyone is going to see the naked truth.

Let me show you what I mean…

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Gold Bugs Love It, But a New Gold Standard is Just a Dream --For Now

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Thanks largely to Ron Paul, the Republicans have suddenly become enamored of gold.

And why not?…It is real money.

These newly-born gold bugs have even gone so far as to include a call for a commission to examine a return to the gold standard in the party platform.

Needless to say, we've come a long way since President Richard Nixon "closed the gold window" in 1971. Forty-one years, and a few financial disasters later, the debate has begun anew.

But it begs the question: How would the gold standard work?

What's more, what would the economic implications be, and is it likely to happen or is it all just a gold bug's dream?

In ancient and medieval times the answers were quite a bit more simple. Since there was no real banking system, there was also no argument.

Kings coined money with gold, silver, or copper, and the people accepted the money at a price based on its metal content. The idea of taking paper instead would have been thought of as sheer madness.

Only in China, an isolated and stable society, was paper money used during the Song Dynasty of the 10th through 13th centuries, but even there the Mongol invasion and fall of the Song regime caused the paper money system to collapse.

Paper money backed by gold only became possible once modern banking got going in Europe in the 16th and 17th centuries.

In fact, the British Gold Standard was devised in 1717 by no less than Isaac Newton, then Master of the Mint. Other countries soon joined Britain in linking their currencies to gold, including the United States from 1878 until its abandonment in 1933.

Of course, countries claimed to be on a gold standard under the Bretton Woods Agreement from 1944-71, but gold was only exchangeable between governments. Indeed, holding gold was prohibited in the U.S. for private individuals.

But inevitably, the Bretton Woods monetary system itself became manipulated and collapsed in inflation.

That brings us to today….

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National Conventions: It's My Party and I'll Lie If I Want To

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Now that both the Republican and Democratic national conventions are over, one key question remains: Which side has the best liars?

If America's two major political parties have anything in common, it's the ability to fold, twist and mutilate the facts of any given subject.

Almost every speaker at both national conventions did their utmost to uphold this ignoble tradition of American politics.

When the media called several GOP speakers on their political lies, a pollster for GOP candidate Mitt Romney, Neil Newhouse, responded with what may have been the most truthful words spoken by any political figure over the past two weeks:

"We're not going to let our campaign be dictated by fact-checkers."

The Democrats, of course, gleefully pointed this out at their national convention a few days later even while committing transgressions of their own.

Hypocrisy, thy name is politics.

Since the American voter deserves better in Election 2012, here's a more accurate look at some the truth-challenged rhetoric uttered by the people who want us to trust them with running the country:

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Romneycare vs. Obamacare: Insurance Companies Win Either Way

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Insurance companies would love to see a Mitt Romney victory in November that would result in the arrival of "Romneycare."

But they'd be equally happy if President Barack Obama is re-elected and his Affordable Care Act remains the law of the land.

In short, the insurance companies will profit either way and are planning accordingly.

But how is this possible?

By extending insurance to millions of people previously without coverage Obamacare will provide insurance companies with millions of new customers, a development that clearly will boost their bottom lines.

Romney has promised to dismantle Obamacare and replace it with his own "Romneycare," but don't mistake this new version for the comprehensive reform plan he signed into law as governor of Massachusetts in 2006.

Romney says his new plan would free up the healthcare markets to increase competition and drive down costs.

But this new incarnation of Romneycare — perhaps more accurately described as Romneycare 2.0 — is unlikely to contain healthcare costs and almost certainly will deliver fatter profits to private insurance companies.

"Under [Obamacare] reform, you get market expansion, and that's a good thing" for health companies, Dan Mendelson, the chief executive of Avalere Health, a consultancy told The Wall Street Journal.

"Under Romney, it's going to be like managed-care city," he said.

One thing is clear, however — neither Obamacare nor Romneycare can stop Americans from getting older and swelling the rolls of government medical plans.

And that will spell huge profits for the companies who manage government programs.

Here's why…

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Don't Let Fiscal Cliff 2013 Scare You from Dividend Stocks

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Amid all the talks of fiscal cliff 2013, which we'll hit Jan. 1 if Congress doesn't act, some analysts are warning of the impact on dividend stocks.

That's because some of the tax increases associated with the fiscal cliff could deliver a hefty tax hike to dividend income.

But the possibility of higher dividend taxes doesn't mean you should ignore the sector altogether.

History shows that dividend-paying stocks have outperformed non-dividend shares even at a time when taxes were much higher. For income-seeking investors, any pullback in dividend-paying stocks as the fiscal cliff approaches may just be a buying opportunity.

Investors early to the game will enjoy dividend payments and also benefit from these companies' healthy market performance.

Fiscal Cliff Effect on Dividends

If nothing is resolved before year-end and Congress fails to take action, dividends received will be taxed as ordinary income instead of the current maximum 15%. Ordinary income tax rates are scheduled to revert to pre-2003 levels, with a maximum of 39.6%.

In addition, a new 3.8% tax will be tacked on to help pay for the Affordable Care Act. For some taxpayers, dividend taxes would nearly triple.

But remember, before investors enjoyed the 2003 dividend tax breaks that put dividend taxes on par with capital gains taxes, payouts had been taxed for decades at ordinary income rates. For some, the tax was as much as 91% in the late 1950s and early 1960s, 70% in the 1970s and 50% in the early 1980s.

Despite those lofty tax rates, dividend stocks continued to maintain a prominent position in portfolios of income oriented investors, and these stocks continue to share their wealth with satisfied shareholders.

From the end of 1979 through July 2012, dividend-paying stocks in the Standard & Poor's 500 Index carried an annualized total return of 12.1%. That compares with a 10.7% return for nonpayers, according to data from research firm S&P Capital IQ.

MarketWatch did the math and calculated that an initial investment of $10,000 in the dividend bunch would have morphed to a whopping $408,000 over that time frame compared to $271,000 for the nonpaying group.

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QE3: Get Ahead of the Fed

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The U.S. Federal Reserve has consistently pointed to high unemployment as a reason to deliver more stimulus, which makes this week a perfect time to announce quantitative easing, or QE3.

The Federal Open Market Committee (FOMC) meeting this week is fresh off Friday's Labor Department report that nonfarm payrolls increased by 96,000 jobs last month. Economists were hoping to see an increase of 125,000 jobs.

Unemployment fell to 8.1% from 8.3% as 368,000 people dropped out of the labor force.

The employment numbers were depressing – but for investors this was always a win-win situation.

If the jobs number had blown past 125,000 that would have been good for the markets – but so is a number that missed the mark.

That's because from whichever angle the Fed and Chairman Ben Bernanke look at this, the report is more fuel for the QE3 fire.

"This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week," Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, NJ told Reuters last week.

Unemployment fell even though fewer jobs were added because the labor participation rate dropped to 63.5%, its lowest level in 30 years. The amount of underemployed and unemployed people is now above 25 million and the U-6 rate, the broad total unemployment rate which many consider to be a more accurate gauge of unemployment, stands at 14.7%.

With the rally the markets had last Thursday after the European Central Bank announced its new bond-buying plan, expect the markets to continue their bullish trend when Bernanke takes action.

That means now's the time for investors to prepare to profit from QE3.

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G-III Apparel Tops, Outlook up - Analyst Blog

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New York-based G-III Apparel Group, Ltd. (GIII) reported adjusted earnings of 13 cents per share in the second quarter of fiscal 2013, breezing past the Zacks Consensus Estimate of 7 cents. Reported results were also above the company’s guided range of 4 cents to 8 cents. On a GAAP basis, including expenses associated with the […]

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Goldman Lands in New Legal Tussle - Analyst Blog

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On Friday, DZ Bank AG, a German lender, jumped the bandwagon of other German lenders and filed a lawsuit against The Goldman Sachs Group Inc. (GS) for misrepresentation of documents while selling mortgage-backed securities (MBS), Bloomberg reported. The lodged complaint accuses Goldman of presenting modified documents related to the sale of over $188.6 million in […]

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Omega Healthcare Investors - Growth & Income

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Shares of Omega Healthcare Investors Inc. (OHI) have been on a long-term uptrend since year-end 2011 and are currently trading near its 52-week high. Stellar second quarter 2012 results with a 31.0% year-over-year increase in FFO (fund from operations) and an impressive dividend yield of 6.8% make this healthcare-facilities REIT (real estate investment trust) a […]

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When I Look at the Future of Tech, All I Can Say is-- “Wow!”

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Can you imagine the home of the future?

It now appears that crews will be able to "print" out your home… in a single day… and hey, on Mars, no less, if that's where you want to go.

See, NASA is now funding a project in the fast-growing field of 3D printers.

These are devices that take blueprints and turn them into real objects. The "printer" has a nozzle that spits out special polymers. Once you add a binding agent, you can create everything from replica car parts to human jaws.

Back in March I wrote about these "desktop factories" in Money Morning. I predicted that, by the end of this decade, everyone from consumers to big businesses to solo inventors will be able to make their own unique products in just a couple of hours. (You can read that article right here.)

Now, with funding from NASA, USC engineering professor Behrokh Khoshnevis has devised a process he calls "contour crafting." The prof says the printed home of the future will have it all – wiring, plumbing, and air conditioning. He says this field has the "potential to build safe, reliable, and affordable lunar and Martian structures, habitats, laboratories, and other facilities before the arrival of human beings."

Wow…

Like I keep telling you, this is the Era of Radical Change. Soon, we will be traveling to other planets as a matter of course, as part of the New Space Race. So I wanted to keep you abreast of the latest breakthrough in this field.

And that was far from the only fascinating piece of cutting-edge tech I came across this month.

Take a look…

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