Archives for November 2012

November 2012 - Page 6 of 20 - Money Morning - Only the News You Can Profit From

Japanese Election: The Promise of "Unlimited Easing" Sparks More Yen Weakness

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Japanese equities have soared and the Japanese yen has weakened over the past week following prime minister Yoshihiko Noda's decision to dissolve the Diet and to call a Lower House election for December 16.

The Nikkei 225 Index, which is weighted more towards Japan's traditional export sector, is up 5.5% since the election was announced. The broad TOPIX index is up 6.2% The yen has fallen by 3.9%, more than 300 pips, and is now trading at an 82 handle for the first time since April.

The main reason for the weakness of the Japanese yen has been the repeated calls for "unlimited easing" by Liberal Democratic Party (LDP) president Shinzo Abe.

The LDP, which governed Japan from 1955 to 2009, is widely expected to be returned to power in the upcoming election. If the LDP wins an outright majority or leads a coalition government, Abe will become prime minister.

In the first few days of the election campaign, Abe made the case for aggressive monetary easing by the Bank of Japan to break the cycle of yen strength and deflation that is pushing the Japanese economy back into recession. Specifically, Abe wants the central bank to conduct "unlimited easing," with the aim of achieving 2% inflation and 3% GDP growth.

Among Abe's most controversial statements was his call for the Bank of Japan to directly finance a new wave of public works spending by directly purchasing construction bonds-off balance sheet government bonds used to fund long-term infrastructure projects considered to be investments.

Construction bonds are obligations of the Japanese government but are not considered to be part of the government's deficit.

"To protect people's lives and keep our children safe, we must implement public works spending and do so proudly," Abe said in a speech reported by The Wall Street Journal. "If possible, I'd like to see the Bank of Japan purchase all of the construction bonds that we need to issue to cover the cost. That would also forcefully circulate money in the market. That would be positive for the economy, too."

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Stocks to Buy in 2013 Using the "Best Six Months Strategy'

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Investors trying to figure out which stocks to buy in 2013 amidst warnings of a rocky year can take advantage of a consistent market pattern that's just turned positive.

It's called the "best six months strategy." Simply put, the markets — and the Dow Jones Industrial Average in particular — perform much better in the November-April period than the May-October period.

The May-October slump, in fact, gave rise to the old investing axiom, "sell in May and go away."

But most investors don't realize they can use the consistency of the pattern, and its oscillating nature, as an investing strategy.

"We've found that most of the market's gains are made from November to April, whereas you either go down or are flat from May through October," Jeff Hirsch, editor-in-chief of the Stock Trader's Almanac, said in an interview on Breakout.

The historic discrepancy is larger than one might think. Stock Trader's Almanac analyzed the performance of the Dow Jones from 1950 through 2011 and found that the November-April period showed an average increase of 7.5%, compared to a meager 0.4% average gain for the May-October period.

"It's a pretty robust strategy," Hirsch said. "It's worked over the years. It's one of the most consistent things we've seen."

Still, the best-six month strategy is not as easy as simply selling on May 1 and buying on Nov. 1. Investors need to keep an eye on macro events and use technical indicators for the best times to get in and out. In some years, Hirsch said, it's better to re-enter the market in October.

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How to Prepare for a Stock Market Pullback

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After getting slammed by a sharp post-election stock market pullback, many investors are trying to figure out if this is the beginning of a market crash or simply a needed correction.

Either way, legendary investors, hedge fund managers, and some of the largest investment firms are calling for a decline through the end of the year and possibly into 2013, depending on the resolution of the fiscal cliff.

On Monday, Goldman Sachs Group Inc. (NYSE: GS) Chief U.S. Strategist David Kostin restated his 1,250 year-end target for the Standard & Poor's 500, which is roughly 10% below yesterday's close.

"Uncertainty swirling around the 'fiscal cliff' that must be resolved by year-end, the pending jump in capital gains taxes at the start of 2013, and the debt ceiling that will be reached in late February represent clear and present downside risks to the market in the near-term," Kostin wrote to clients, effectively summarizing the bears' case for a continuation of the recent downturn.

Besides Goldman, Marc Faber has predicted a 20% market plunge will occur during President Barack Obama's second term. Peter Schiff recently called QE3,"Operation Screw" because "everybody's pretty much screwed if they own dollars," and even technical indicators are hinting at an upcoming slide.

This doesn't mean panic or run – in fact, those are the worst things you could do. Instead, follow these steps to prepare for a stock market pullback.

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Black Friday Shopping 2012 Gets Even Crazier and Angrier

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Black Friday shopping typically involves the most inventive, discounted sales of the year.

This year, with waning sales, stiff competition and the new trend of comparison shopping via smartphone apps, both brick-and-mortar and online retailers are pulling out all the stops to win over customers.

According to a recent consumer survey by the bargain website DealNews.com, just 2% of Black Friday shoppers will shop solely in stores, while 28% will shop purely online. But retailers aim to change that stat.

New services offered this year by brick-and-mortar stores include: reserved parking spots, complimentary food and drink, survival kits of energy bars, water and coffee coupons, safe stations that will hold people's packages while they peruse and spend, and security guard escorts who will personally carry loads of gifts to parked cars.

At Mall of America in Bloomington, MN, a tailor shop will check coats for a $1, with proceeds collected benefiting the Make-A-Wish Foundation and the Salvation Army.

Some of the more upscale stores are even offering VIP lounges where shoppers can nosh, nibble, receive complimentary goodie bags, and relax until they feel rested enough to again face the maddening crowds.

John D. Morris, a senior retail analyst with BMO Capital Markets told The Wall Street Journal of this move by retailers, "It's their way of telling shoppers, "We feel your pain.'"

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Uranium Stocks to Benefit From Nuclear Resurgence (CCJ) (DNN)

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Nuclear power is poised to make a comeback, and the spike in uranium demand it will bring over the next few years will send uranium stocks soaring.

While the Fukushima nuclear disaster in Japan in March 2011 stirred a lot of talk about abandoning nuclear power, nations have since come to realize their energy needs can't be met without nuclear being part of the equation.

The Japanese blowout scared the public so badly, in fact, that many governments vowed to severely cut back on nuclear power. Germany said it would quit using it altogether.

But then reality struck.

Major export economies in Europe and Asia have energy-intensive industries that can't just dump nuclear energy overnight.

The best proof that nuclear is not going away is right in Japan, which already has been forced to restart two reactors, and more will be restarted soon.

The Prime Minister of Japan called restarting the reactors a "matter of national survival," because the high cost of imported liquid natural gas was crippling the economy.

And nuclear energy has proven itself to be a safe alternative to the smog-belching coal plants in emerging countries like China and India.

Even oil-rich countries like Saudi Arabia are building new nuclear reactors now — a clear sign nuclear energy is here to stay.

Simply put, the world not only needs low-cost nuclear power – it needs more, not less of it.

And uranium is the only fuel that can possibly give billions of new consumers in energy-starved countries like India and China the power they need.

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Cybersecurity Companies Gear Up for Huge Role in 2013

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Cyber threats from hacktivists, criminal enterprises, and others will only grow worse in 2013 and beyond – increasing the importance of cybersecurity companies.

This has led the Obama administration to continually warn about cyber threats that are capable of causing widespread damage.

In a recent speech, Defense Secretary Leon Panetta said computer assaults from rogue countries or terrorists could be as destructive as the Sept. 11 attacks. At the Pentagon, plans have been in place since 2010 to combat this threat.

But it's not just the nation's security that is at risk. Most global corporations are also vulnerable to cyberattacks.

An August cyberattack on Saudi Arabia's state oil company, Saudi Aramco, incapacitated about 30,000 computers. It was probably the most destructive attack ever launched against a non-government entity.

The risk of an attack is particularly high in the corporate sector because of the complacency of its executives. According to a recent study by the consultancy firm PwC, entitled PwC's 2013 Global State of Information Security Survey, most executives are too optimistic about their companies' ability to handle cyberattacks.

The study warned that the rise in the number and sophistication of security incidents globally, along with scrimped corporate budgets, are leaving many firms open to attack. The survey found that, in reality, only 8% of companies truly qualify as information security leaders, with many faults detected.

For example, one of the most common faults found was the lack of a security strategy (protection against malware, etc.) to address personal devices used for work purposes in the workplace.

Mark Lobel, a principal in PwC's Advisory practice, told the Financial Times, "Security models of the past decade are no longer effective. Companies…should prepare to play a new game – one that requires advanced skills and strategy to win against emerging threats."

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The Latest Hewlett-Packard (NYSE: HPQ) Deal Disaster

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Computer maker Hewlett-Packard Co. (NYSE: HPQ) reported fourth-quarter earnings yesterday (Tuesday), surprising the market with an $8.8 billion charge against its acquisition of British software company Autonomy.

HP alleges that $5 billion of the charge is related to fraud and misrepresentation by Autonomy management prior to the acquisition, a charge that former Autonomy CEO Mike Lynch vehemently denies.

This is the second multi-billion dollar charge to earnings resulting from an acquisition in as many quarters. In the third quarter, Hewlett-Packard took a nearly $11 billion charge on its acquisition of Electronic Data Systems (EDS), which failed to perform up to expectations.

Hewlett-Packard acquired Autonomy in the summer of 2011 as part of former CEO Leo Apotheker's strategy to move HP away from its reliance on computer hardware and increase revenue from the sale of high value-added software. Apotheker was forced out of Hewlett-Packard only three weeks after Autonomy was acquired and HP's new CEO, Meg Whitman, has put less emphasis on the software side of the business as she tackles the much bigger problem of restructuring the company's product lineup and its global strategy.

During Tuesday's conference call, Whitman talked about Autonomy, saying, "The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations that occurred prior to HP's acquisition of Autonomy and the associated impact on the expected financial performance of the business over the long term."

"These improprieties were discovered through an internal investigation after a senior member of Autonomy's leadership team came forward following the departure of Mike Lynch on May 23. Based on this information, HP initiated an intense internal investigation into the allegations, including a third-party forensic review of Autonomy's historical financial results."

Whitman concluded, "HP has contacted the SEC's enforcement division and the U.K.'s Serious Fraud Office. We have requested that both agencies open criminal and civil investigations into this matter. In addition, HP intends to seek redress against various parties in the appropriate civil courts to recoup what we can for our shareholders."

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Lancaster Colony Corp. - Growth & Income

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Lancaster Colony Corporation (LANC), which manufactures and markets food products, pays a regular quarterly dividend and has a history of increasing its dividend annually for the last 50 years. Solid fiscal first-quarter results, a dividend yield of 2.1% and a debt-free balance sheet make this Zacks #2 Rank (Buy) a good pick for investors looking […]

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The FHA Is Just Another Thanksgiving Turkey Whose Time Has Come

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In 2008, when mortgage-backed securities bled rivers of red ink from the slaughtered subprime housing market, Fannie Mae and Freddie Mac rolled over dead in their tracks.

Then, government geniuses scrambled to fix the crisis by pushing forward another sacrificial turkey.

The Federal Housing Administration (FHA), once a New Deal-era agency tasked with helping needy borrowers in rural America get mortgages, became the mortgage market's savior when Fannie and Freddie had to be taken over by Uncle Sam.

Now, four years later–the day before Thanksgiving — that turkey, the FHA, is clucking for its life.

As it turns out, the FHA is now saddled with over a trillion dollars worth of mortgages it insured for a lot less than prime borrowers, and is itself in need of a bailout.

The biggest question now isn't how much the FHA will cost taxpayers.

It is whether or not a struggling FHA will become another setback for the housing market and the economic recovery.

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