Archives for November 2012

November 2012 - Money Morning - Only the News You Can Profit From

Is Zynga (Nasdaq: ZNGA) Doomed Without Facebook?

Zynga Inc. (Nasdaq: ZNGA), creator of FarmVille and other popular social games, has lost its special relationship with Facebook.

Zynga and Facebook Inc. (Nasdaq: FB) have had a symbiotic relationship since 2010 by which Zynga was the only provider of social game software that was allowed to promote its games to Facebook's one billion users. In return, Zynga used Facebook's credit system to process payments even on its own games platform.

The close relationship between the two companies had made Zynga the single largest contributor to Facebook revenues outside of advertising. For its part, Zynga is thought to have received about 80% of its revenue from Facebook users.

The Best Stocks to Buy According to Top Hedge Funds

Knowing the best stocks to buy, and when to buy them, can be a daunting task.

But looking at the moves of the largest hedge funds enables investors to gain insight into what the big boys are doing.

FactSet Research Systems Inc. (NYSE: FDS), a financial research firm that provides analysis of the markets' biggest players, recently released its quarterly report on the stock positions held by the 50 largest hedge funds.

While the top held stock, Apple Inc. (Nasdaq: AAPL), had its exposure in the overall funds reduced by 1.8 million shares, the list of most added stocks might surprise you.

Best Stocks to Buy: Where Hedge Funds are Investing

In the third quarter, overall the top 50 hedge funds increased their exposure to stocks by 3%.

Here's a rundown of the top ten stocks that the top hedge funds were buying last quarter, listed in order by the amount of market value added to the funds.

Obama's Fiscal Cliff Plan Sends Message to GOP: You Lost

Flush with confidence after winning re-election by a convincing margin, U.S. President Barack Obama delivered a fiscal cliff plan heavy on Democratic ideas and light on compromise.

U.S. Treasury Secretary Timothy Geithner presented the president's fiscal cliff proposal to GOP Congressional leaders yesterday (Thursday).

It would raise $1.6 trillion via taxes, primarily on those making $250,000 a year and up, while delaying talks about spending cuts until later this year. The plan also proposes about $50 billion of assorted stimulus spending, which would include another extension of unemployment benefits, infrastructure, and mortgage relief.

Republican leaders were said to have literally laughed during Geithner's presentation.

"We can't move any closer to them because they're not even on our planet," one GOP aide told Reuters. "It was not a serious proposal."

No Compromise in Obama Fiscal Cliff Plan

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.

Republicans and Democratic leaders have both acknowledged the importance of dealing with the fiscal cliff, and even made some statements in recent weeks hinting that they were moving toward compromise.

That ended abruptly on Thursday.

The president's fiscal cliff proposal did not change even slightly since it was initially pitched to Republicans several weeks ago.

"The day after the White House meeting, we gave them our framework," a GOP aide told the Huffington Post. "It took them 10 days for them to give us theirs, and it didn't reflect any of the conversations we've had since then."

Even many economic experts were startled by the one-sidedness of the proposal.

"What's been put forward is insulting in terms of its arrogance," said Money Morning Capital Waves Strategist Shah Gilani. "More unmarked stimulus spending? No accountability as to which sinkhole it will fall into, is an abomination. Where are the other cuts? Where is the spending discipline now and into the future? Oh, we're supposed to believe it's going to get here? Santa's coming too, right?"

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Will Fiscal Cliff Talks Push Gold Prices to $1,800?

Gold prices fought back after Wednesday's fall as Washington appeared closer to making a deal to avert the looming fiscal cliff. Talks continued between the two sides and there was hope a resolution could be made by year's end.

Carlos Sanchez, director of asset management with CPM Group, said the longer investors have to wait for a deal, the more likely gold prices will rise.

He said to Kitco, "Uncertainty will support gold prices, while a resolution will bring prices down. We can see gold prices heading higher for the next week or two, rising to $1,780-$1,800."

Other analysts see higher gold prices regardless of the fiscal cliff outcome.

Economist Intelligence Unit's Caroline Bain said to Reuters, "It could be positive for gold whichever way the negotiations go, but a rally on a speedy resolution might be quite a short-term positive, whereas any risk of prolonged sovereign stress could be a longer-lasting positive."

Don't Bet on a RIM Stock Rally (Nasdaq: RIMM)

Research in Motion Ltd. (Nasdaq: RIMM), maker of the BlackBerry phone, traded sharply higher yesterday (Thursday) after Goldman Sachs analyst Simona Jankowski upgraded RIMM to a "Buy" with a price target of $16. RIM gained 4% Thursday to close at $11.54.

Although there are a growing number of bulls among analysts on the Street, there is still a large and vocal group of bears who think that RIM is done for.

Research in Motion is planning to launch its BlackBerry 10 smartphone on Jan. 30, 2013. The company is pinning its hopes of survival on the BlackBerry 10 taking a small piece of the smartphone market away from giants Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOG), which split the smartphone market between their iOS and Android operating systems, respectively.

Goldman Sachs' Jankowski says that the BlackBerry 10 (BB10 in the terse to the point of being unintelligible analyst-speak) doesn't even have to be a success for RIMM shares to perform well.

"We now assess a 30 percent chance of success for BB10 given positive early reviews, broad-based carrier support, attractive features, and interest by carriers and consumers in broadening the field beyond Android/iOS," Jankowski wrote.

Other analysts are even more bullish.

Economist Richard Duncan: Civilization May Not Survive 'Death Spiral'

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America's $16 trillion federal debt has escalated into a "death spiral, "as he told CNBC.

And it could result in a depression so severe that he doesn't "think our civilization could survive it."

And Duncan is not alone in warning that the U.S. economy may go into a "death spiral."

Since the recession, noted economists including Laurence Kotlikoff, a former member of President Reagan's Council of Economic Advisers, have come to similar conclusions.

Kotlikoff estimates the true fiscal gap is $211 trillion when unfunded entitlements like Social Security and Medicare are included.

However, while the debt crisis numbers are well known to most Americans, the economy hasn't suffered a major correction for almost 4 years.

So the questions remain: Is the threat of collapse for real? And if so, when?

A team of scientists, economists, and geopolitical analysts believes they have proof that the threat is indeed real – and the danger imminent.

One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings:

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.

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Ingredion Incorporated - Value

Ingredion Incorporated (INGR) touched a new 52-week high of $65.62 on November 27 and has a year-to-date return of about 30%. This maker of starch and sweetener ingredients reported a solid third quarter late last month, including a raised EPS outlook for the full year. In addition to all this, an attractive price-to-earnings (P/E) ratio […]

2013 Bond Market Forecast: Is the Bond Bubble Finally About to Burst?

The Federal Reserve's multi-year prescription of targeting super-low interest rates on federal funds, along with various quantitative easing programs, has pushed yields down on all fixed-income instruments to the benefit of issuers and the detriment of investors.

There is little doubt that the Fed's articulated and executed policies have resulted in a bond-bubble with both short and long-term consequences for investors and the economy.

At some point the bond-bubble will burst. But there is no certainty on when that will happen or what ultimately will cause rates to rise.

What investors need to understand is that while yields and bond prices in 2013 could remain flat relative to closing third quarter 2012 measures, yields are unlikely to fall further and prices are unlikely to rally in 2013, with the possible exception of short-term U.S. treasuries.

However, there is the possibility of what I'm calling a "skyfall."

For fixed-income investors this means there is a chance the bond bubble may finally burst.

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Why Ben Bernanke Could Learn a Thing or Two From Mark Carney

Now that President Barack Obama has been reelected, Federal Reserve Chairman Ben Bernanke's easy money policies may well be with us for the next four years.

And even if Obama replaces Bernanke when his term ends in January 2014, he's likely to choose another soft-money acolyte like Fed Vice-chairman Janet Yellen to lead the Fed.

For believers in sound money like me, that's something of a gloomy prospect.

As for the rest of the world, the prospects for higher interest rates don't look too good, either.

However, on Monday I did catch a glimmer of light when it was announced the Bank of England's new Governor is going to be Mark Carney, the former head of the Bank of Canada.

Now I'll be the first to admit that, at first glance, Carney doesn't look too promising.

He did, after all, spend 13 years at Goldman Sachs (NYSE: GS). And we all know the track record of Goldman Sachs has been nothing short of appalling.

The bank itself made a bundle by shorting the housing market on the way down and persuaded its alumnus Hank Paulson to bail out its dodgy AIG credit default swaps with $13 billion of taxpayer money.

However, the truth is Carney has been out of Goldman since 2004, and his track record at the Bank of Canada has been very good indeed.

To Carney's credit, he didn't cut interest rates as far as the Fed and has actually raised them part of the way back. What's more, Carney only did $20 billion of "quantitative easing" bond purchases in 2009, at the height of the crisis, and has since sold the extra bonds back to the market.

In the aftermath, Canada's economy has notably outperformed the U.S. economy over the last five years, and continues to do so even though house prices there are currently looking wobbly.

Ben Bernanke could learn a thing or two here.

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Why Brazil Will Keep Buying Gold – and Driving Up the Price

Money Morning Global Resources Specialist Peter Krauth stated in his 2013 gold price forecast that the yellow metal was headed to $2,200 an ounce next year, with one of the main price drivers being the increased rate at which central banks are buying gold.

As a group, central banks will have bought about 500 tons of gold this year, the most in more than 40 years. More large purchases are expected in 2013.

Foremost amongst the gold buyers are the central banks of emerging economies around the globe. Recent years have seen purchases by Russia, South Korea, Mexico, India and, as most believe, China.

Another country joining the party, or in this case the carnival, is Brazil.

According to the International Monetary Fund, Brazil raised its gold reserves for the second month in a row in October. Brazil made its first significant gold purchase in more than a decade in September. It expanded its gold holdings by a hefty 17.2 tons last month to 52.5 tons.

This is the largest amount of gold Brazil has held in more than 11 years, since January 2001.

So why is Brazil jumping aboard the bandwagon now and buying gold at a record pace?

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