Archives for October 2012

October 2012 - Page 15 of 20 - Money Morning - Only the News You Can Profit From

Iran's Currency Collapse Has All the Markings of a Full-Blown Crisis

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Matters are beginning to come to a head in Iran.

So far, the impact of Western sanctions – an EU embargo of oil purchases, European and U.S. restrictions on Tehran's access to international banking, and a new move to intensify the trading restrictions even further – have had a devastating impact.

Iran's currency, the rial, has collapsed.

Riots have begun. Its government has rapidly lost its authority. And the Iranian economy is unraveling.

This has all the markings of a full-blown crisis.

It will have an uncertain impact on the region and the wider oil market. This could get very unpredictable and very nasty.

Let me explain…

Sanctions Paralyze Iran's Economy

Indications are emerging from several quarters that the current sanctions regime has dealt a major blow to the Iranian currency. The developments are prompting foreign initiatives to paralyze the regime in Tehran.

"The current perception is that the sanctions may have to be increased before Tehran will show clear signs of relenting," a source in the EU Energy Commissioner's office told me on October 6.

Still, it remains too early to determine how far EU members are prepared to go in strengthening anti-trade restrictions.

Nonetheless, several policy sources in Brussels, London, and Paris, confirmed last week that a rising consensus believes something additional is warranted.

A complete EU embargo of Iranian oil imports took effect on July 1. That action had widely been expected to put upward pressure on Brent prices in London. While some of that pressure has materialized, continuing demand concerns from the ongoing credit crisis and sluggish employment data have dampened the impact.

Still, a widening of the rift with Iran, coupled with the deteriorating situation on the Syrian-Turkish border, is certain to bring the problem to center stage.

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What to Expect When the Reign of the U.S. Dollar Comes to an End

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Lloyd Blankfein has got it all wrong again.

Speaking last week, the Chief Executive of Goldman Sachs (NYSE: GS) claimed that if the "fiscal cliff" of tax increases and spending cuts go into effect on January 1, the U.S. dollar would lose its reserve currency status.

As the Vampire Squid's representatives often do, Blankfein actually has it backwards.

Contrary to what Blankfein thinks, a legitimate movement to deal with the fiscal cliff would cut the federal deficit in half, make the country more or less solvent and strengthen the dollar.

However, the problem is that the fiscal cliff involves pain. And since politicians like to delay pain as long as possible, the chances are good the fiscal cliff will be postponed again.

Instead, the country will likely continue to run trillion-dollar deficits in the hopes that Ben Bernanke can finance them through even more quantitative easing. It's the only play in the Keynesian playbook.

Unfortunately, that is the policy most likely to crash the dollar — and it's headed our way.

So what will the world look like when the dollar has crashed, and international investors and traders have lost all of their confidence in the greenback?

The truth is if that happens it won't be like anything we've seen within living memory.

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Warning: The Fiscal Cliff Could Cost You Your Job

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While Americans stash extra cash to prepare for the economic effects of the looming fiscal cliff in 2013, another more immediate concern has developed: How many people will get laid off as companies brace for spending cuts and tax hikes?

The fiscal cliff will pack a double whammy to some businesses. Companies in certain tax brackets will be paying more to Uncle Sam, while some will see their government funding disappear.

The substantial fiscal cliff effect has prompted firms to rein in spending, delay projects, defer bids – and cut staff.

In fact, a recent study from Ernst & Young, the National Federation of Independent Business, the U.S. Chamber of Commerce and other business advocates revealed the fiscal cliff could slash 710,000 jobs from the already beleaguered job market.

It's already starting…

According to a Bloomberg News, companies in North America cut more than 62,000 jobs from Sept 1 through the end of October… the biggest two-month slashing of jobs since the beginning of 2010.

Further in the same time period, the computer industry cut more than 40,000 jobs… the transportation industry more than 33,000 jobs… and the insurance more than 7,000 jobs – all tremendous job loss increases over the same period in those industries last year, according to the USA Today.

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CEOs, CFOs Voice Concerns over Crippling Fiscal Cliff

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While the fiscal cliff might not be at the forefront of concerns for the average American, it is deeply affecting the spending and hiring plans of many businesses.

Four recent surveys show that corporate chief executive officers and chief financial officers are taking measures to prepare for the Jan. 2, 2013 actuation of the fiscal cliff.

According to a recent study by the Congressional Budget Office, this could easily take the U.S. economy back into another recession. Despite that threat, it appears less and less likely that anything will be done by the Obama administration and Congress to avert the crisis.

Needless to say, this has not gone unnoticed by the high level executive leadership of corporate America.

"This complete Mexican standoff that we have now is not getting us anywhere," Jim McNery, Chief Executive Officer of Boeing Company (NYSE: BA) said about the looming failure of Congress and the Obama administration to mitigate the impact of the fiscal cliff.

Business Feels Bearish

Since businesses see fiscal cliff talks failing to deliver progress, growth expectations of the country's biggest companies have fallen.

Members of the Business Roundtable, an association of chief executive officers, expressed in a recent survey bearish sentiment for every business measure (sales, capital spending and hiring).

From the results of this research, the Business Roundtable has lowered its projections for a wide range of economic indicators for its most recent CEO Economic Outlook Survey. These were registered at the lowest level since 2009, the nadir of the Great Recession.

Those closest to the fiscal operations of a company, the chief financial officers, are similarly bearish due in a large part to fiscal cliff 2013.

The CFO Signals Survey found that 47% of chief financial officers are more pessimistic about how well their company will do this quarter.

According to the survey, that sentiment represents the "most somber year-over-year expectations" ever in the history of that research report.

Editors Note: Don’t let your profits be dragged down with this gloomy outlook. Put your money in silver – [ppopup id="70925"]here's how[/ppopup].

CEOs and CFOs view hitting the fiscal cliff as a huge failure in the economic leadership from the elected political leaders in Washington, DC.

John Engler, the former governor of Michigan who is now the President of the Business Roundtable, compared the negligence to the recent standoff between the National Football League (NFL) and its referees.

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Why Huawei is the Hottest IPO to Never Be

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The Wall Street Journal reported last week that Huawei Technologies Co Ltd, the world's second-largest telecommunications equipment company, is mulling an initial public offering.

A big reason for a Huawei IPO is to expand business while U.S. carriers need faster 4G networks to support exploding data usage. The telecom equipment industry is fast-growing thanks to the increasing global use of mobile technology, which would make cash-rich Huawei a hot IPO.

But an even bigger reason for a Huawei IPO: Going public would make the China-based company more transparent, helping it score big contracts worldwide. Huawei needs to make friends if it's going to continue its global reach.

And the most important friend it has to make to do that is the U.S. government.

That's because the government is incredibly wary of trusting Huawei, so much so that it discourages U.S. businesses from joining forces with the China telecom.

The reasons why sound right out of a James Bond movie: Espionage, a recluse CEO, worries over Communist party control, a threat to wireless communications and risks to national security.

Featured on CBS's "60 Minutes" Oct. 7, the story of Huawei is an eye-opening, eyebrow-raising tale about concerns to U.S. security should the company get a foothold in the United States.

"If I were an American company today, and I'll tell you this as the chairman of the House Permanent Select Committee on Intelligence, and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America," Rep. Mike Rogers, R-MI, told "60 Minutes" correspondent Steve Kroft.

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Six Stocks You Should Own If Obama Wins Election 2012

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Debates and attack ads aside, the U.S. presidential election remains too close to call — all the more reason for investors to position themselves to profit whether Mitt Romney or President Barack Obama wins in November.

As we noted last month when we looked at stocks to own if Romney wins, certain industries tend to perform better under Republican policies, others under Democrats.

Here's a look at six stocks that would benefit if President Obama wins Election 2012.

Health Care Stocks Helped by an Obama Win

No matter what, one of the top issues will continue to be health care, with a particular focus on the Patient Protection and Affordable Care Act (PPACA) – otherwise known as "Obamacare."

Unless the Republicans sweep both houses of Congress and win the White House, Obamacare will remain the law of the land.

Large hospital chains benefit from the survival of Obamacare because it expands health coverage to millions of previously uninsured individuals, including those with pre-existing conditions. That will significantly reduce the burden on hospital emergency rooms, which must now treat these patients even if they can't pay.

While such major hospital operators as Tenet Healthcare Corp. (NYSE: THC) and Community Health Systems (NYSE: CYH) would get a lift from this, a better choice in this sector is:

  • Health Management Associates Inc. (NYSE: HMA), recent price $8.16 – HMA operates 66 hospitals with more than 10,300 beds, most of them located across the South and in Appalachia, where the current percentage of uninsured patients is among the highest in the country. Increased reimbursements under Obamacare could spark a turnaround in HMA revenues and earnings, which have fallen in four of the last five quarters, slipping from 20 cents a share in the second quarter of 2011 to just 16 cents in Q2 2012. The stock pays no dividend, but offers good growth potential since its current price is well off the five-year high of $11.32 set in April 2011.

Other winners under Obamacare would be companies that receive large research and/or specialized treatment grants from government agencies. The National Institute of Health (NIH), for instance, could see budget cuts of 5% or more if Romney wins and begins to rein in discretionary federal spending.

A good bet in this category is:

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Prepare for Worst Earnings Season Since 2009

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Analysts are predicting that the upcoming third-quarter earnings season could be the worst since 2009.

So what does that mean for your investments?

Money Morning's Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." program to answer what potentially disastrous earnings could do to markets.

"Well, you know it should mean that the stock market is going to come down but what I think it really means is this, and there's a far bigger question here," Fitz-Gerald explains. "If the analysts are right and the earnings stink, then we're going to find out once and for all whether this market is actually all about Ben Bernanke and Club Fed."

But Keith doesn't think this is the time to run away.

"You have to be in this market because Ben Bernanke wants you to be in this market. They're trying to induce inflation, that inflation theoretically trickles into the stock market and you can't afford to sit this one out," said Keith.

Watch the accompanying video to hear which sectors Keith likes and what investments to stay away from.

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If You're Investing in Gold, Singapore Just Became More Important to You

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Singapore recently made a huge step forward in establishing itself as one of the biggest players in the global market for investing in gold.

The Asian city's government repealed a 7% tax on gold and silver effective Oct.1. Now investors can store their gold in Singapore without costly value-added taxes.

Singapore hopes the move will help the region morph into a precious metals trading market like London and Zurich.

"It seems a little unfair to put a sales tax on what is essentially money. The removal of the GST on gold will allow Singapore to better compete with Hong Kong and other bullion trading centers in the region," Nick Trevethan, a senior commodity strategist at ANZ in Singapore told Reuters.

Singapore currently controls roughly 2% of global gold demand and aims to grow that share to some 10% to 15% over the next five to 10 years.

The market expansion is expected to increase global demand for gold and silver bars and coins in the fourth quarter of 2012. An influx of precious metal traders to Singapore is also expected, with more commodity offices and bullion storage facilities to follow.

Anticipating the opportunity, JPMorgan Chase & Co. (NYSE: JPM) opened a precious metals vault in the city in 2010.

"I think this is really going to change the landscape in Singapore," a gold dealer told Asia One Business. "A lot of companies will find the incentive to start operations in Singapore. This news is going to draw attention to Singapore as a safer place to park funds."

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Zynga Provides Dull Outlook - Analyst Blog

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Zynga Inc. (ZNGA) recently announced its fiscal third quarter 2012 preliminary results, wherein the company projected a quarterly loss. Following the announcement, shares of Zynga took a tumble, closing roughly 12.0% lower on Friday. The company is expected to report its third quarter results on October 24, 2012. For the third quarter, Zynga expects to […]

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