Archives for November 2012

November 2012 - Page 12 of 20 - Money Morning - Only the News You Can Profit From

Will the Fiscal Cliff Clash Damage the U.S. Credit Rating?

by

There are less than fifty days left for lawmakers to come to agreement on the fiscal cliff, but uncertainty surrounding the dilemma is already affecting the economy. The political bickering over solving the fiscal cliff issue now has put the U.S. AAA credit rating at risk again.

In early September ratings agency Moody's Corp. (NYSE: MCO) announced it would likely downgrade the U.S. credit rating if no deal is reached before the end of the year, and on Monday the company reiterated its stance.

"A scenario whereby action on the budget is delayed until sometime in 2013 appears increasingly likely; for example, via a temporary extension of most measures except the increase in payroll tax," Moody's officials said.

"Such deferment, if not accompanied by an apparent commitment to achieving agreement and a credible timetable for implementing the necessary reforms to preserve sovereign creditworthiness, would be inconsistent with maintaining a AAA rating," they warned.

Fiscal Cliff Bickering Must End

Due to the higher taxes and automatic cuts that come with the fiscal cliff, corporations already are starting to lay off workers. The independent Tax Policy Center estimates that taxes will increase almost $3,500 per household as a result of the fiscal cliff.

It remains to be seen whether the fiscal cliff will be resolved before the year is up, but even if that happens the U.S. could still have its rating lowered by Moody's due to the political stalemate and partisanship that has gone on the past two years.

Immediately after the election all focus has shifted towards the fiscal cliff and whether or not Congress and the president can work together.

House Speaker John Boehner, R-OH, has been very vocal after the election, calling for compromise and insisting that Republicans can accept more revenue.

However, many are wondering if that is just a post-election piecemeal offering and if his true feelings were voiced before the election.

To continue reading, please click here...

Why Home Depot Stock (NYSE: HD) Rallied While Homebuilders Fell

by

The Home Depot Inc. (NYSE: HD) reported third-quarter business results on Tuesday and its management cited improved housing demand for their solid sales and earnings growth, particularly in the U.S. market.

Similarly, homebuilders Beazer Homes USA Inc. (NYSE: BZH) and D. R. Horton Inc. (NYSE: DHI) reported fourth-quarter earnings Monday, which, according to each company's management, reflected a continued U.S. housing market recovery.

Despite improved earnings for fiscal 2012 and a positive outlook for fiscal 2013, shares of Beazer and D.R. Horton were off sharply in afternoon trading on Monday, with BZH down about 17% and DHI 6%. They recovered slightly by Tuesday afternoon.

Home Depot, on the other hand, has rallied sharply on Tuesday, hitting a new 12-year high and closing in on its all-time high of $70, set back in April 2000.

What accounts for the remarkable divergence between the homebuilders and Home Depot?

The answer comes down to comments made by Donald J. Tomnitz, Vice-Chairman, Chief Executive Officer, President and Member of the Executive Committee for D.R. Horton.

Read More…

Why Sinofsky Left Microsoft (Nasdaq: MSFT)

by

It hasn't even been three weeks since the hugely hyped release of Windows 8, and Windows division president Steven Sinofsky has left Microsoft Corp. (Nasdaq: MSFT).

The abrupt departure has many questioning the success of Windows 8, Sinofsky's relationship with Microsoft CEO Steve Ballmer, and the evolution of the software giant.

"It is a little surprising to see a departure of someone at this level in charge of so many products with such immediacy, with no transition period. Microsoft is going to enter another period of management transition," Michael Gartenberg, an analyst at Gartner Inc. told Bloomberg News.

During his tenure at Microsoft, Sinofsky won accolades for leading intricate software projects and making sure they were delivered on time.

It had been widely speculated that Sinofsky, a 23-year Microsoft veteran, would take the reins when Ballmer stepped down.

But according to insiders, Sinofsky and Ballmer didn't always see eye-to-eye.

To continue reading, please click here...

Weyerhaeuser Co. (WY) - Bull of the Day

by

We are upgrading our recommendation on Weyerhaeuser Co. (WY) from Neutral to Outperform based on the high growth the company has achieved, reducing total costs and increasing prices. Also, the company is making an earnest effort to reduce its debt and maintain a healthy debt to equity ratio. The company's earnings increased a whopping 83% […]

Read More…

It Looks Like the Market Is Saying "OMG"

by

Today I want to talk about a few things I've been scratching my head over lately.

First, about those polls leading up to the presidential contest.

How come they were so wrong? How come the candidates were inches apart right up to the finish line, and then it's like a "tortoise and the hare" kind of ending?

Did Romney even finish? Is he finished? Is the Republican Party finished?

Maybe the problem is the questions they ask, the pollsters, that is, or the way they ask them. Maybe they ask questions like a lawyer leading a witness would.

You have to wonder who pays for those polls, too. Survey says: the Super PACs – or is that the stupid hacks? Don't you wish they'd post the questions they asked along with the "Survey Says" results?

And, how stupid are the markets, make that investors, you know who you are. The day of the election, the market was anticipating a Romney victory, after all the polls said it was more than possible, so we got a smart little rally.

Then reality set in. Four more years. And you think it's going to get better?

Here's something else to chew on. If you think the Republicans are going to roll over and play dead, now that they are dead, think again.

The only way to fight back when you're dead is to kill the other guy, so you're both dead. Then, of course, you say, I was dead first, I couldn't have killed the economy, I couldn't have driven us over the fiscal cliff, they did it!

It looks like the market is saying, OMG (that's Oh My God, for you non-texters), we're going over the cliff and there's no stopping us.

Trust me on this one, that cliff everyone's been talking about – it ain't the only cliff.

To continue reading, please click here...

Why Obama's Victory Means Higher Gold Prices

by

Our recent story on the secret return to the gold standard drew an interesting response from Money Morning reader John B., which I've paraphrased below.

In response to the article, John wrote:

"All this talk about buying gold. Where is the gold going to come from? No one seems to be selling. And what about all the scamming that's going on in the gold market these days?"

Here's the thing: John essentially agrees with the case we made for gold – he just doesn't realize it.

And with President Barack Obama's successful re-election, the case for higher gold prices got even stronger – overnight.

Let me give you seven reasons that gold prices are destined to head much higher in the next several years. Let's call it the Obama "baker's half-dozen" case for gold:

  1. The Central Banker Effect: Official statistics, which some observers dispute (I'll get to that in a minute), say that the world's central banks have become net buyers of gold for the first time in nearly a quarter century. If that's the case, that's clearly bullish for gold. At the very least, we're not going to see any big selling.
  2. The Central Banker Effect (Part Deux): Although we referred to the "Secret Gold Standard" to underscore the point that central banks were returning to the gold market, we made clear this wasn't a literal return to a Bretton Woods-style "gold standard." There's not enough gold in the world to support such a move – which is why Capital Economics Chief Economist Julian Jessop recently estimated that a return to the gold standard would cause the price of the yellow metal to spike to $10,000 an ounce. There's an important lesson here: If central banks are hoarding gold, prices can't help but go higher – gold standard or not.

To continue reading, please click here...

Peter Schiff: Thanks to QE3, We're All Screwed

by

U.S. Federal Reserve policies like QE3 are building up to an inflationary catastrophe, says economic expert Peter Schiff.

Schiff, the CEO and Chief Global Strategist of Euro Pacific Capital, made his remarks about the dire consequences of excessive quantitative easing in a video interview on Yahoo! Finance's Breakout.

Schiff said he has dubbed the Fed's third round of bond-buying, known as QE3, "Operation Screw" because "everybody's pretty much screwed if they own dollars."

He warned that the Fed can only continue its policies of buying U.S. Treasuries and mortgages by printing more money, and printing more money inevitably will drive much higher inflation.

"The Fed is now promising to print $85 billion a month," Schiff said. "That's over a trillion dollars a year. And I think that's just their opening bid."

To continue reading, please click here...

Positive U.S. Energy Outlook Hinges on the Fracking Fight

by

The International Energy Agency (IEA) released their World Energy Outlook report for 2012 today making headlines by forecasting that the United States will become the world's largest oil producer by 2020.

"North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world…" said IEA Executive Director Maria van der Hoeven in today's press release.

"The WEO finds that the extraordinary growth in oil and natural gas output in the United States will mean a sea-change in global energy flows," the press release continued. "…the United States becomes a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035. North America emerges as a net oil exporter…"

All of this good news is based upon the continued rapid development of America's shale gas and shale oil resources through the use of fracking.

To continue reading, please click here...

Does Post-Election Market Drop Mean It’s Time to Buy?

by

Less than 12 hours after President Obama was re-elected, the Dow Jones fell 300 points, and has continued to head lower. It appears many investors are "knee-jerk" selling because of the president's second term. The last time President Obama was elected, in 2008, the markets hit lows just a few months later. Early 2009 ended […]

Read More…