Archives for January 2013

January 2013 - Page 11 of 20 - Money Morning - Only the News You Can Profit From

German Gold Grab Could Call into Question the "Full Faith and Credit" of the U.S.

January 17, 2013 by

The recently publicized move by the German central bank to bring its gold home is sending a major message about trust in the United States.

The bank holds 45% of its 3,396 tons of gold in the vaults of the Federal Reserve Bank in New York, and wants to reduce those holdings to 37%. It also plans to take back all of its 11% of holdings currently stored at the Banque de France in Paris.

The immediate reaction to the German central bank's decision to repatriate some of its gold was to assert that the Bundesbank no longer trusted overseas central banks to look after their gold.

The German Federal Court of Auditors (Bundesrechnungshof) has ordered the Bundesbank to audit its gold reserves "because stocks have never been checked for authenticity and weight."

Prior to that, the Bundesbank had simply relied upon written certification from the central banks where its offshore gold is stored that the correct amount of gold is actually in the vaults and is of the appropriate fineness.

What's more, samples of gold from the Fed and the Banque de France will be melted down and tested for fineness or quality.

Suppose Germany's gold isn't all it is supposed to be?

The "full faith and credit" of the United States would certainly be called into question.

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Did the Fed Just Admit QE3 Has Been a Major Failure?

January 17, 2013 by David Zeiler

After four years of quantitative easing programs, including QE3 just last fall, U.S. Federal Reserve officials have started voicing doubts about its effectiveness and concerns that it is distorting the markets.

And it's not just the Fed's hawks, such as Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, speaking out against the bond-buying extravaganza.

Doves like Atlanta's Dennis Lockhart and moderates like Kansas City's Esther George have expressed concerns about QE3 as well.

"I do think the growth of the Fed's balance sheet could have longer-term consequences that are worrisome. While I've supported these policy decisions to date, I acknowledge legitimate concerns," Lockhart said in a speech in Atlanta on Monday.

According to the minutes of the December Federal Open Market Committee (FOMC) meeting, several members "thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet."

If in fact sentiment within the FOMC is turning against QE3, then the easy money spigot that has helped fuel the stock market and other investments could be switched off sooner than most expected, which could have a sharp impact on the markets.

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Stock Market Today: Builders, Banks, Boeing in Focus

January 17, 2013 by Diane Alter

The stock market today rose right out of the gate Thursday on improved economic data, with the Dow Jones Industrial Average up 70 points just before noon, and the Standard & Poor's 500 Index up 7.

Giving equities a lift was a pair of reports that showed the U.S. economy continues on the path to recovery.

The Department of Commerce reported Thursday morning that construction for new U.S. homes leapt in December to the highest rate in more than four years. Gains were logged all across the nation, as well as in buildings and single family homes.

The 12.1% jump in housing starts in December was the best reading since June 2008.

"Overall, this report reinforces the current narrative of a positive growth momentum in the housing sector," Millan Mulraine, a macro strategist at TD Securities told Market Watch.

A measure of homebuilders on the S&P 500 jumped 2.1%, poised for the highest closing level since 2007.

The second report that juiced markets was data from the Labor Department. A report revealed the number of Americans filing first-time claims for unemployment benefits fell more than expected in the latest week to the lowest level in five years.

In the week ending Jan. 12, applications for jobless benefits fell by 37,000 to 335,000, marking the lowest level since Jan. 19, 2008, and well below estimates of 369,000.

"The labor market is certainly getting better," Brian Jones, senior U.S. economist at Societe General in New York, told Bloomberg News.

Even with typical seasonal adjustment, Jones added, "this is still a good report. Chances are claims remain at a fairly low level."

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Meet the Biotech CEO With a $30 Billion Breakthrough

January 17, 2013 by Michael A. Robinson

Don't worry if you never heard of Dr. J. Joseph Kim. Most investors haven't-at least not yet.

He's the CEO of an early-stage biotech firm that has developed a truly novel product for one of the nation's major medical markets — vaccines.

It's a $30 billion a year business in just the U.S. alone.

The problem is that the vaccine technology we use today to prevent diseases like the flu, chicken pox and polio is hopelessly outdated because it still relies on the delivery of a portion of the actual virus to develop immunity.

Not only that, but some of these agents are still grown in chicken eggs like they were back in the 1930s.

And while they are still relatively safe, the vaccines themselves or their additives can still make people sick.

But what if you could develop a whole new class of vaccines that were actually safe using a synthetic DNA?

Better yet, what if you could vaccinate yourself against HIV, cervical cancer, leukemia, and hepatitis?

The payoff would be tremendous.

Now you know why I was so anxious to meet with Kim, the founder and CEO of Inovio Pharmaceuticals Inc. (NYSE:INO) last week.

The Next (Energy) Revolution Starts Here

January 17, 2013 by Dr. Kent Moors

There are a few times in life when you stand at the beginning of a revolutionary change.

This is one of those moments.

On Monday, I introduced the next wave coming in energy. Profit centers are going to develop in the interconnections among the production, processing, storage, transmission, and distribution of distinct energy sources.

Indicators are emerging from some heavyweights that the move in this direction has begun in earnest.

These include policy makers and analysts from the International Energy Agency (IEA) in Paris, the World Bank and White House in Washington, the Windsor Energy Group in London, as well as my industry contacts in several parts of the globe.

The new emphasis will be on energy balance.

Bull of the Day: Southwest Airlines - Bull of the Day

January 17, 2013 by

We upgrade our recommendation on Southwest Airlines (LUV) to Outperform from Neutral based on a number of constructive actions adopted by management. We believe that the company remains committed to sustain its brand and operational excellence via its cost-cutting measures, fleet rightsizing, addition of new and attractive destinations. The company's Evolve retrofit program, steady capacity […]

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Why We'll Be Talking About Sequestration For a Long Time

January 16, 2013 by David Zeiler

Another fiscal crisis lurks just on the horizon – a combination of the mandatory spending cuts known as sequestration and the need to raise the U.S. debt ceiling – and pundits are losing sleep trying to figure out what Washington is going to do about it.

They're wasting their time.

"The odds that Congress and the White House will ink a comprehensive deficit-reduction deal appear as long as they have been in more than two years, even though both parties acknowledge it's the only way to break the cycle of fiscal cliffs," Politico observed yesterday (Tuesday).

In all likelihood, Democratic and Republican leaders will make a last-minute deal that achieves the minimum necessary to keep the government running while putting off the harder decisions until later – three months, six months or even a year.

That's what they always do, although the script may change a little.

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Cheap Natural Gas Prices Give Hope to this U.S. Industry

January 16, 2013 by Tony Daltorio

While natural gas prices are up 50% from their 2011 lows below $2 per 1,000 cubic feet (million BTUs), they're still cheap at just over $3.

Lower-priced natural gas has helped a number of industries, like chemicals and utilities, cut costs, as Money Morning Global Energy Strategist Dr. Kent Moors pointed out in his 2013 natural gas price outlook.

Now there's another U.S. industry that hopes cheap natural gas can revive its flagging performance.

I'm talking about steel.

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U.S. Debt Ceiling: Government "Borrows" Pension Funds to Avoid Default

January 16, 2013 by Diane Alter

The U.S. Treasury, in order to avoid default, has resorted to an eyebrow-raising move: it has borrowed from the federal employee pension fund as the country nears its debt ceiling.

The U.S. government stopped investing in the federal employee pension fund Tuesday "to avoid breaching the statutory debt limit," according to a letter Treasury Secretary Timothy Geithner sent to Congress.

Geithner said that the move will free up some $156 billion in borrowing authority, while policy leaders in Washington wrangle over raising the $16.4 trillion debt limit.

Geithner promised the fund would be "made whole once the debt limit is increased," and maintains that federal employees and retirees would not be affected by the action.

But an IOU from the federal government isn't very settling for those relying on the fund for retirement.

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