The Fresh Market Inc. (TFM) is a specialty grocery retailer that has returned 47% so far this year. Furthermore, it appears to have enough potential for even further upside, as is evident from its robust long-term earnings growth projection of 23.1%. Management’s focus on expanding the store base, driving comparable-store sales and improving margins are […]
Archives for October 2012
October 2012 - Page 19 of 20 - Money Morning - Only the News You Can Profit From
Election 2012: Five Tough Questions That Need to be Asked at Tonight's Debate
I hate to break it to Ben Affleck, but he is wrong about the election. With just 34 days left until voters head to the polls, the election 2012 race is still completely up for grabs.
Even still, in a recent interview with the AP, Affleck lumped Romney comfortably in with the likes of such memorable losers as Michael Dukakis, Al Gore and Bob Dole.
However, a recent a poll released by Rasmussen yesterday would seem to suggest this contest is far from over.
According to the survey, President Obama only leads Mitt Romney by a razor slim advantage of 48% to 47%–well within the margin of error.
That makes tonight's presidential debates in Denver all the more critical for both candidates-especially since they will be devoted primarily to the economy and domestic policy.
Of course, here at Money Morning we have our own ideas on how the economy ought to be run, and a few questions of our own for each of tonight's debaters.
But we'll bet most of the tough questions will be completely missed by the media, who have an altogether-too-exalted an idea of the candidates' competence.
With that in mind, here are five questions that should get asked at tonight's debate-but won't.
Five Questions About the Economy That Beg To Be Answered
- Mr. President, Governor, study after study has shown that the healthcare system in this country is absorbing a larger and larger share of our Gross Domestic Product, and will bankrupt us all by 2050. Yet neither of you has any reliable plans to deal with this.
Mr. President, your Obamacare makes matters worse. Governor, your Romneycare in Massachusetts has also run wildly over budget and your Vice President's plan loads most medical cost increases onto individuals who get sick.
Other countries cope with medical cost inflation better than us; which of their schemes should we adopt?
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Why Oil Prices Are Entering a "New Normal"
One of the things I have learned from almost four decades of doing this is that oil and gas specialists know a great deal about what they do for a living.
However, few of these specialists really understand enough about what the person to the right or left of them does. This tends to breed tunnel vision.
And these days it has become a serious problem.
That's because what is now hitting the oil and gas markets requires a more expansive and integrative understanding of what is actually taking place.
The truth is energy markets are evolving.
We are entering a period in energy and oil prices that I have begun calling the "New Normal."
You see, a volatile, dynamically changing combination of factors now undermines the traditional way of viewing oil and gas markets.
And it is about to get a whole lot more unnerving for the average analyst who still insists on pushing square pegs into round holes.
Unfortunately, for the old school aficionado, we are rapidly moving into new territory. Here, market machinations are occurring that defy the "traditional" explanations.
Oil Prices and the Talking Heads
You know what I mean by "traditional."
The talking heads on television try to explain the latest spurt or dive in oil prices by relying on the same trite and tired lineage of explanations.
In just the last month, we've seen movements in energy prices justified solely on the following factors:
- A supply glut in Cushing, Okla.;
- Fluctuations in the euro-dollar exchange rate;
- The European credit crunch;
- The latest unemployment figures;
- Inflation;
- Manufacturing, housing, or production figures.
But it really doesn't work this way anymore. While such factors are not completely irrelevant, they are also not calling the shots.
There are several factors contributing to this New Normal, but I will be restricting my comments this morning to just three.
They are:
- The balance between conventional and unconventional production;
- Increased market volatility; and
- Global geopolitical matters.
So let's get started.
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How QE3 and Higher Inflation Are Part of the Fed's Master Plan
U.S. Federal Reserve Chairman Ben Bernanke might not admit it, but he just drastically increased the inflation risks for 2013 and beyond.
That's because Bernanke pledged on Sept. 13 that QE3 -unlike the stimulus programs before it – will continue for an unlimited timeframe.
QE3 has already led to a rally in commodity prices, like the previous Fed stimulus actions.
But this time the inflationary surge will get much, much worse.
"If the governments and central bankers continue to flood the world with cheap money, it has to translate into some kind of inflation," Money Morning Global Investing Strategist Martin Hutchinson recently explained. "We started with asset inflation. But my sense is that the transition from asset inflation to consumer inflation will happen very quickly."
With median income levels at averages not seen since the mid-90s, U.S. households need to prepare their savings to survive higher prices – especially while interest rates remain near zero.
Unfortunately, it appears this environment is exactly what Ben Bernanke has in mind.
"Not only will they tolerate higher inflation, not only will they wish for higher inflation, but they actually may target higher inflation," PIMCO CEO Mohamed El-Erian told CNBC ofthe Fed. "This is a historical bet that our kids will be reading about in history books."
Here's what Bernanke has planned.
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This Pattern Joins the Mounting Evidence for Recession 2013
Don't worry about scanning headlines every day to determine the U.S. economy's chances of entering a recession in 2013.
We already know the answer.
Such indicators as gross domestic product (GDP), consumer spending, durable goods and exports all point to an economy not in a slow recovery, but on the verge of a 2013 recession.
That's because the trend lines, rather than showing gradual improvement, are moving in the opposite direction. The economy, after spending months with its head just barely above water, is about to go under.
The U.S. Commerce Department last week revised second quarter GDP sharply downward from 1.7% to 1.25%. The GDP was 1.9% in the first quarter of 2012. While we do not yet have any official data for the current quarter, a Federal Reserve Bank of Philadelphia survey of forecasters in August put the number at 1.6%.
That's an ominous pattern.
James Pethokoukis of the American Enterprise Institute explains: "Research from the Fed … finds that since 1947, when two-quarter annualized real GDP growth falls below 2%, recession follows within a year 48% of the time. And when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time."
The Mounting Evidence for Recession 2013
There's actually a term for what we're experiencing: the "stall-speed economy." It's roughly defined as a period of two or more quarters in which the GDP remains mired below 2%.
Stock Market Today: Looks Like Europe is Still a Huge Mess
The major headlines in the stock market today include: the ECB's about to release its balance sheet – which is quite scary, Spain is about to request a full-fledged bailout, and disappointing motor vehicle sales follow an unexpectedly good manufacturing report.
Here's a closer look.
- Europe is nowhere near fixed- Stocks opened higher Tuesday on hopes that Spain would request a bailout for the entire country and not just the banks. This drove the markets higher but stocks have since pared gains after digesting the release of the European Central Bank's balance sheet which showed $21 trillion in assets and $22 trillion in liabilities. Never mind that there are more liabilities than assets and no equity to speak of, the questions economists are asking is where is all this money, who is accountable for it and can we even trust these numbers to be accurate.
Perhaps the most troubling news from overseas is the record unemployment of 11.4% in the Eurozone. Spain and Greece continue to have unemployment above 25% and Spain's youth unemployment is above 50%. "Youth unemployment, especially if prolonged, threatens to harm the self-esteem and economic potential of young people now and in the future," Jonathan Todd, a spokesman for the European Commission, said in a statement on Monday after the release of joblessness figures. "This could also pose a serious threat to social cohesion and increase the risk of political extremism," he said. "E.U. institutions and governments, businesses and social partners at all levels need to do all they can to avoid a "lost generation,' which would be an economic and social disaster."
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Ahead of Wall Street - October 2, 2012 - Ahead of Wall Street
Tuesday, October 2, 2012 We made a positive start to the last quarter of the year on Monday with the U.S. manufacturing sector moving firmly in the growth column after staying in contractionary territory over the preceding three months. This is particularly significant as the U.S. reading bucked a worldwide trend evident from PMI readings […]
Finish Line Beats by a Nickel - Analyst Blog
The Finish Line Inc. (FINL) posted earnings of 49 cents per share in the second quarter of fiscal 2013. The quarterly earnings per share beat the Zacks Consensus Estimate of 44 cents and were ahead of the year-ago results of 39 cents. Indianapolis-based Finish Line reported year-over-year net sales growth of 16.1% in the quarter […]
NYSE Euronext, Inc. (NYX) - Bear of the Day
We are downgrading our recommendation on NYSE Euronext, Inc. (NYX) to Underperform based on weak volumes and pricing across trading venues, which led to a reduced top line and lower operating margin. Its second quarter earnings beat the Zacks Consensus Estimate by a penny but faltered year over year. Meanwhile, the recent termination of the […]
Don't Let the Market Play You For the "Greater Fool"
More than a decade has passed since the dot-bomb implosion, and many of us are still amazed that so many investors got sucked into such an insane speculative financial mania.
The thing is, it has happened many times before.
For instance, in the mid-1600s Holland literally drove itself to ruin over flowers – tulips, to be precise.
Referred to today as Tulip Mania, Tulipomania, or Tulpewoerde, it was the first recorded speculative mania in modern history.
Indeed, the financial frenzy that unfolded between 1634 and 1637 crashed so hard that it actually helped smash the Dutch economy, transforming one of the world's first superpowers into an economic backwater.
Writing nearly 200 years later in his classic work, "Memoirs of Extraordinary Popular Delusions and the Madness of Crowds," historian Charles MacKay said:
"In 1634, the rage among the Dutch to possess [tulip bulbs] was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, engaged in the tulip trade. As the mania increased, prices augmented, until in the year 1635, many persons were known to invest a fortune of 100,000 florins for the purchase of 40 roots."
For some context, the annual income of a middle-class urban family in Holland was 200 to 1,000 florins. (University of Kansas Prof. Mark Hirschey estimated that peak prices for tulip bulbs ranged between $17,000 and $76,000 apiece in today's money.)
Tulip Madness Takes Hold
Like most manias, Tulip Madness took hold during a period of prosperity, when credit was easy to obtain. The Netherlands had the world's most powerful navy, accounted for half the world's shipping trade, was a center of science and, with artists like Vermeer, was also the cultural center of Europe.
The country was newly affluent and tulips, which had come to Europe in the late 1500s, were difficult to obtain and became a way to flaunt that wealth.
Naturally, the DeVries wanted to keep up with the Van Dijks, and tulip prices began their upward march.
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