Archives for December 2012

December 2012 - Page 5 of 17 - Money Morning - Only the News You Can Profit From

Four Fiscal Cliff Investing Strategies

With fiscal cliff talks stalled in Washington, investors are in limbo wondering how the outcome – deal or no deal – will affect their money.

That's why we've put together the following fiscal cliff investing strategies, thanks to Money Morning Global Investing Strategist Martin Hutchinson, so you can be prepared for whatever happens.

While Hutchinson thinks a deal is likely, it might not come until the early New Year. In the meantime, here's his fiscal cliff investing strategy overview, straight from a recent report for his Permanent Wealth Investor subscribers.

  • Fiscal Cliff Investing Strategy No. 1: Put Dividend Stocks in IRAs and 401(K)s

Since capital gains will continue to be taxed at a favorable rate, growth stocks are at less risk from possible tax rises. Hence your true dividend stocks should go in tax-free accounts.

  • Fiscal Cliff Investing Strategy No. 2: Maximize Your "Roth Conversions" in 2012

There are two types of individual retirement accounts: regular IRAs (in which contributions are tax deductible but withdrawals are taxed), and Roth IRAs (in which contributions are not tax-deductible, income and capital gains are tax free, and withdrawals are not taxed).

Since taxes are going up in 2013 and are likely to trend higher thereafter, you want most of your money in Roth IRAs unless you are very sure your income after retirement will be low enough to be in a low tax bracket. You can't make Roth IRA contributions directly unless your income is less than $100,000, roughly.

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What's Next for Fiscal Cliff Deal Talks?

After a lot of talk from Washington this week, we could actually be farther away from a fiscal cliff deal than we were before.

Republican House Speaker John Boehner's "Plan B," created to avert a tumble over the fiscal cliff, failed to garner enough support Thursday night from his own party.

Boehner said before the voting that he was confident his Plan B, which proposed extending the Bush era tax cuts, would sail through.

But around 8 p.m., House Majority Leader Eric Cantor, R-VA, emerged and announced the measure wouldn't go up for a vote.

This left the country asking, "What's next for the fiscal cliff?"

Boehner later said in a statement, "The House did not take up the tax measure today because it did not have sufficient support from our members to pass. Now it is up to the president to work with Senator (Harry) Reid to avert the fiscal cliff."

Equity markets reacted by tumbling on the open Friday. A majority of market participants had been optimistic until now, hopeful that a fiscal cliff deal would be reached and a recession in 2013 avoided.

But just 10 days remain before America faces the largest tax increase in history, coupled with steep automatic spending cuts, the outlook for next year has dimmed.

With Congress on recess for the Christmas holiday and no fiscal cliff deal in sight, investors are worried and rightly so.

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Avery Dennison Corporation - Momentum

Shares and earnings estimates of Avery Dennison Corporation (AVY) have been trending higher on the back of a solid third quarter – the best so far in 2012 in terms of earnings growth and earnings surprise. This producer of pressure-sensitive materials and office products hit its new 52-week high on November 26, 2012, and has […]

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Why You Can't Trust Bob Toll's Prediction of 20% Home Price Increases in 2013

Bob Toll, Executive Chairman of Toll Brothers, recently told Reuters that home prices are going to jump 20% in 2013 and another 25-30% in 2014.

But before you decide to pile into real estate, you might want to think about it for a moment.

It's not that there's anything wrong with Mr. Toll, nor even his prediction. He is a seasoned executive in one of the most respected homebuilders in the country; it's why he made this prognostication and what he stands to gain from it that bothers me:

  • Toll Brothers (NYSE: TOL) is one of the most prominent and capable homebuilders in the country. If people believe that real estate will appreciate, they are more likely to buy more of Bob Toll's product.
  • Toll Brothers needs more of the same – big bailouts, big stimulus and low interest rates because that greases the skids in the banking system for big real estate companies like his. Without the extra money floating around, Toll Brothers' financing options are limited and he can't build or at least build as much. Worse, if interest rates rise, his cost of capital will increase significantly and negatively impact his margins. Rising property values give companies like Toll Brothers greater collateral and borrowing power, so of course he wants properties to appreciate…a lot.
  • Toll is also an outside advisor to President Obama. That means he's plugged into the White House like other big business leaders and has a vested interest in preserving the status quo rather than shaking up the establishment and really fixing things.

As for the notion that real estate will appreciate 20% next year and as much as 30% the year after, that's a more nuanced insight. Note, I'm not saying it's impossible, just that it's highly unlikely on anything other than an extremely localized basis.

Why Bob Toll is Wrong About Home Prices

When viewed against the longer term lens of history, housing values are still as much as 6-12% overvalued.

You can see that quite clearly in the Case-Shiller Index created by Yale's Robert Shiller. Take a look:

Why Are Gold Prices Down?

Gold prices plunged Thursday, hitting lows not seen since August, after the U.S. Commerce Department reported an unexpectedly robust reading on third quarter U.S. gross domestic product (GDP).

After the surprising strong report, February gold tumbled $14.50 an ounce to $1,653.50 and spot gold sank $22.80 to $1,643.10.

Silver prices fell as well, losing $1.13 to $29.95 shortly before noon. Prior to the report, the yellow and white metals were little changed.

The fresh report revealed GDP in the third quarter expanded at an annual rate of 3.1%, the fastest growth since late 2011. That was up from the 2.7% pace logged last month, and better than economists' expected 2.8% rate.

Phil Streible, a senior commodity broker at R.J. O'Brien & Associates in Chicago told Bloomberg News, "The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3."

Gold and silver have been big beneficiaries of the FOMC's generous QE3 programs.

But there's more than the end of QE measures as to why gold prices are down.

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ICE-NYSE Deal Signals Major Change in Future of Trading

Intercontinental Exchange (NYSE: ICE) and NYSE Euronext (NYSE: NYX) announced a deal before market open today (Thursday) by which ICE will acquire NYSE Euronext for $8.2 billion in cash and shares.

News of an ICE-NYSE deal pushed NYX shares up 33% by afternoon trading, near the $33.12 bid price. The acquisition is subject to approval by regulators in the United States and Europe.

This is ICE's second bite at the apple. A deal in which ICE and NASDAQ planned to take over NYX was scuttled last year by U.S. regulators who said that a combination between NYSE and NASDAQ OMX Group (NASDAQ: NDAQ) would create an equity trading monopoly in the United States.

Most analysts agree that the major rationale behind ICE's interest in NYSE Euronext is the latter's ownership of LIFFE, the leading European derivatives exchange. European regulators would have to approve the acquisition of LIFFE by ICE, which is a major electronic commodities and derivatives exchange in the U.S.

"ICE is after Liffe, that is the crown jewel of NYSE Euronext," said Peter Lenardos, analyst at RBC Capital Markets in an interview with Reuters. "Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way."

Lenardos said that a combined entirety would be able to compete more effectively with the CME Group in both trading and clearing of OTC products.

Why Recession 2013 Could Hit Regardless of Fiscal Cliff Deal

Stalled fiscal cliff negotiations have fueled concerns the U.S. could face a recession in 2013 if the country fails to avert the cliff.

But recession 2013 may be on the way regardless of what happens with the fiscal cliff talks.

The latest sign of an economic downturn came Tuesday in a U.S. Commerce Department report showing imports to the United States have fallen two consecutive months after dropping 8.4% in the third quarter and 2% the previous quarter.

Robert Brusca, chief economist at FAO Economics, told MarketWatch when the economy weakens, imports decline quickly.

Brusca called the latest figures a "red flag" and said a 2013 recession is a "real risk."

The last time imports declined for two quarters was in 2009, at the end of a four-quarter decrease in imports during the Great Recession.

Gold Prices: What Happened to the Rise?

One of the more confusing things for investors right now is why gold prices aren't going through the roof. As the Fed, European banks, China and Japan pump massive amounts of money into global markets, investors are scratching their heads when they look at the price of gold. Since reaching the $1,800 an ounce level […]

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Fiscal Cliff Deal Talks Hit Major Roadblock

The apparent breakdown of talks between U.S. President Barack Obama and Republican House Speaker John Boehner on a fiscal cliff deal took the optimism out of the markets on Wednesday, with the Dow Jones Industrial Average falling nearly 100 points.

As the markets prepared to open for trading Thursday, U.S. stock futures were lower.

Boehner has decided to go ahead with a vote on his "Plan B," which would extend the Bush-era tax rates for all taxpayers with income of less than $1 million but would not deal with any of the automatic spending cuts that would take effect after Jan. 1.

In an effort to win support from wavering House Republicans, it has been reported that a companion bill could be brought to the floor with Plan B. The bill would prevent across-the-board cuts required by the fiscal cliff from being applied to the military and other specific programs.

Assuming Boehner can round up enough votes to pass Plan B, then "the president will have a decision to make," Boehner said. "He can call on the Senate Democrats to pass that bill or he can be responsible for the largest tax increase in American history."

Senate majority leader Harry Reid, D-NV, has indicated Plan B will not pass in the Democrat-controlled Senate, and President Obama has vowed to veto the bill if it reaches his desk.

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G-III Apparel Group - Value

G-III Apparel Group, Ltd. (GIII) raised its earnings outlook for the fiscal year during its quarterly report, which led to all earnings estimates being revised higher. Furthermore, this Zacks #2 Rank (Buy) apparel manufacturer and distributor has become a compelling valuation, as evidenced from its low price-to-sales (P/S) ratio of 0.53 and its price-to-book (P/B) […]

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