Archives for September 2012

September 2012 - Page 6 of 19 - Money Morning - Only the News You Can Profit From

Stock Market Today: Will These Fear Factors Kill the Rally?

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The major headlines in the stock market today include: Stocks try to hold on to a third straight week of gains, manufacturing slumps to three-year lows, jobless claims remain depressing, and these two stocks deserve a closer look.

  • Stocks try to rally– It has been over a week since QE3 was announced and the markets recently have been sluggish. After a strong rally leading up to the announcement of QE3, stocks cooled off this week amid the continuing global uncertainty. Today's trading session opened with all three major indexes rising higher as they try to start September with three straight weeks of gains. If the markets hold on to their early gains it will be a solid start to the month. The bullish trend is threatened though as anxieties increase over the looming fiscal cliff and the ongoing trend of lousy economic data.

  • Jobless claims troubling again– The labor market and unemployment are the main reasons the U.S. Federal Reserve cited in their decision to implement QE3. Yesterday's (Thursday) initial jobless claims back up that move but economists will want to see improved numbers in the near future if QE3 is ever going to be considered successful for the economy. Last week's jobless claims fell to 382,000 from the previous week's 385,000 but still missed economists' projections for initial claims around 375,000. Another troubling sign is that the four-week average which is considered a less volatile figure rose by 2,000 to 377,750, the highest level since June. "Businesses clearly remain reluctant to aggressively boost their workforces amid the current risks associated with the soft economy and significant uncertainty surrounding fiscal policy next year," Jim Baird, chief investment strategist at Plante Moran Financial Advisors told MarketWatch.

  • Markit shows manufacturing weakest in 3 years – Manufacturing measured by the Markit Purchasing Managers Index remained at 51.5 in September. That was also the average for the third quarter and well below the 54.2 measure for last quarter. A reading above 50 indicates expansion but this number was not encouraging as it was the lowest quarterly average since the third quarter of 2009. "I don't think the economy is going anywhere fast. The jobs market is still very difficult and manufacturing, which was a key pillar of the recovery is beginning to crack," Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania told Reuters.

In the stock market, these two companies have started the day off strong:

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Celadon Group - Value

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Celadon Group Inc. (CGI) posted a nearly 22% positive earnings surprise in the fourth quarter of fiscal 2012, lifting shares of this cross country truckload transporter by more than 20% over the past month. This marked the sixth straight quarter of outperforming the Zacks Consensus Estimate. With attractive valuation metrics, including a P/E multiple of […]

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What Wall Street Will Never Tell You About Stock Buybacks

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Every time I hear a Wall Street analyst extolling the virtues of stock buybacks I just want to scream.

"Don't fall for the flim-flam," I think to myself, "demand the cash instead!"

That's why my Permanent Wealth Investor service focuses on the kinds of dividends you can actually hold in your hand. For me, cash is king.

Anything else is simply a magician's trick. It's a sleight of hand designed to make you think you're getting something when you really aren't.

Share repurchases or buybacks are the perfect example.

Behind the wondrous façade, stock buybacks are just a means for management to enrich themselves. The truth is buybacks are positively damaging to the interests of ordinary shareholders.

The Ruinous Truth Behind Apple's Stock Buyback

Take Apple Inc. (Nasdaq: AAPL), for instance. It's the stock everybody loves these days.

This $653 billion company recently announced a $10 billion stock buyback over three years, beginning October 1. Naturally, shareholders cheered, believing the buyback would boost the share price.

But consider this: Apple is buying back shares at several times book value, so the buyback will actually dilute Apple's book value per share.

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All Signs Now Point to Gold

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With another syringe of quantitative easing being injected into the U.S. economy's bloodstream, Ben Bernanke is giving the markets their liquidity fix.

The Federal Reserve's action reaffirmed the stance I've reiterated on several occasions that the governments across developed markets have no fiscal discipline, opting for ultra-easy monetary policies to stimulate growth instead.
The government's liquidity shot promptly boosted gold prices and gold stocks, as investors sought the protection of the precious metal as a real store of value.

In fact, since the beginning of 1984, as money supply has risen, so has the price of gold.

The dollar declined due to the Fed's easing, which isn't surprising, given the fact that gold and the greenback are often inversely correlated, and increasing money supply generally causes the currency to fall in value.

What's interesting is that currency decline was what Richard Nixon sought to avoid when he ended the gold standard in 1971 and announced that the country would no longer redeem its currency in gold.

During his televised speech to the American public, Nixon translated in simple terms the "bugaboo" of devaluation, saying, "if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today."

As you can see below, more than 40 years later, a dollar is worth only 17 cents.

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QE3 Is Strong Medicine for Dr. Copper

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With QE3, Ben Bernanke just gave Dr. Copper a shot in the arm that should carry prices to new highs.

In fact, shortly after the U.S. Federal Reserve announced its decision to launch a third round of bond buying, copper rallied to $3.84 a pound on the Comex division of the New York Mercantile Exchange, up from around $3.35 in mid-August.

But that is only part of the story…

As "the only metal with a Ph.D. in economics' because of its widespread use in industrial applications copper is an excellent bellwether for the state of global economic activity.

And right now copper is predicting a major global rebound.

"Investors' expectations for global economic growth in the fourth quarter are rising and Dr. Copper is rallying," Andrew Rosenberger, senior portfolio manager at Brinker Capital told MarketWatch.

"Copper and other assets which are linked to global growth are taking the approach of rally now, ask questions later," he said.

For investors, there are lots of reasons to like copper right now.

Let's take a look…

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Taxmageddon 2013: These Filers Are in the Crosshairs

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As Taxmageddon 2013 looms against the back drop of Election 2012 one thing is for certain: upper-income filers will take a hit in 2013 even if no new taxes are imposed, as will owners of some small businesses.

In Part One of our series on the tax outlook for 2013, we described how scheduled tax-law changes will affect capital gains – boosting taxes on long-term profits from 15% to 23.8% for some taxpayers. And, in Part Two, which ran last Thursday, we explained that dividend investors could suffer even more, with some seeing their tax bite rise from the current 15% to as much as 43.4%.

Those changes will have a major impact on individuals and couples in the highest income brackets, who will also see their marginal tax rates rise from 28% to 31%, from 33% to 36% and from 35% to 39.6%, respectively.

In addition, many of those taxpayers will see a significant reduction in the itemized deductions they can take.
Under the tax rules in effect for 2012, there's no overall limit on the number of itemized deductions you can take.

However, if the Bush cuts are allowed to expire, total allowable itemized deductions will be reduced by the lesser of 3% of adjusted gross income (AGI) above a certain threshold – expected to be about $174,450 for both individuals and couples in 2013 – or 80% of the amount of itemized deductions otherwise allowable.

I know, that's about as clear as mud, but I don't write the tax laws – which is why you should always have an accountant at least verify your calculations before filing, or actually prepare your returns in the first place.

The Best Dividend-Paying Stocks to Buy Now

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Some investors fail to realize that successful investing is a matter of continuous performance, not instantaneous performance.

That's why we like dividend-paying stocks.

Over time, dividends and reinvestment can account for 85%-90% of total stock market returns.

In some cases, the dividends are so steady and increase so much that you actually make more in dividends than you paid to buy the stocks that produce them.

And as inflation concerns grow following QE3, investors need to make sure they are protected.

Money Morning's Global Investing Strategist Martin Hutchinson says dividend-paying stocks offer that protection.

"Do you know what the ultimate investment protection is? It's not gold, and it's certainly not Treasuries. It's dividend stocks," said Hutchinson.

But before you go hunting for the best dividend-paying stocks, let's set some ground rules for evaluating which ones are most valuable.

First, a good cutoff is a stock with a yield close to 3%, preferably higher, and a payout ratio less than 60%. Any higher payout ratio would indicate that the company cannot sustain the dividends, manage debt and grow at the same time.

Second, look for companies that have price/earnings ratios less than 25 and a solid history of paying and increasing dividends.

This establishes a solid benchmark for dividend stocks and their fundamentals. Sometimes a dividend stock can look great because it has a 10% yield, but you have to look at the other numbers to decide if it's a worthy investment.

To avoid those high-yield traps, check out this list of some of the best dividend-paying stocks to buy right now.

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Fiscal Cliff 2013 Won't Damage These Stocks

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The U.S. economy is scheduled to "fall off" fiscal cliff 2013 on Jan. 2, when $530 billion in tax increases and spending cuts at the federal level will be actuated unless an agreement to avert it can be reached in Washington.

The Congressional Budget Office predicts fiscal cliff 2013 could send the United States into another recession.

But instead of worrying, investors should take this time to prepare.

Despite the magnitude of the fiscal cliff's consequences, there are stocks that will continue to deliver.

To survive the fiscal cliff, investors need to think big.

These Sectors Will Survive Fiscal Cliff 2013

The three sectors that will allow for gains after the fiscal cliff has been crossed are Big Pharma, Big Agriculture and Big Oil.  

What makes stocks in these sectors so appealing is that each is situated to gain from global demographic trends.

Pair that profit potential with high dividend yield and shareholders will find reliable returns.

We found three stocks that can deliver just that.

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AAR 1Q Lags Est., Ups Y/Y - Analyst Blog

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Illinois-based aerospace/defense products and services supplier, AAR Corp. (AIR) posted its fiscal first-quarter 2013 (ended August 31, 2012) financial results. The company reported earnings per share, excluding special items, of 45 cents, up 9.8% compared with 41 cents earned in the year-ago quarter. Result was at the high-end of management’s guided range of 42-45 cents; […]

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