Archives for January 2013

January 2013 - Page 12 of 20 - Money Morning - Only the News You Can Profit From

The China Smartphone Brand That's Beating Apple (Nasdaq: AAPL)

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Most investors who pour money into smartphone makers look to dominant players like Apple Inc. (Nasdaq: AAPL) – but they're missing a bigger part of the market.

The global smartphone industry is changing dramatically, as China surpassed the United States in 2012 to become the world's largest smartphone market by volume. Smartphone shipments to China in the third-quarter of 2012 hit a record 60 million.

Apple has noticed this shift. In fact, Apple CEO Tim Cook recently told Chinese-run Xinhua News Agency that he believes China will become the company's biggest market in the future.

But for now, it's the domestic brands that have won.

"Chinese brands have taken more than half the Chinese smartphone market this year, and they will take much more," Sandy Shen, the head of consumer research at technology research company Gartner in Shanghai, told the Financial Times.

U.S. Housing Market Recovery Just Rescued 4 Million Homeowners

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In further signs of a U.S. housing market recovery, home prices are up – meaning a whopping 33% fewer homeowners are underwater.

When the U.S. housing market bottomed out in 2008, nearly one in six homeowners owed more on mortgages than their homes were worth. That translated to 12 million underwater homeowners.

But the outlook has improved considerably.

That's because home prices, which peaked in 2007, rose 7.4% in November from a year ago, according to real estate firm CoreLogic. That's the largest year-over-year increase since 2006, when the housing industry was nearing its peak.

As home values rose, the number of "underwater" borrowers fell last year by almost 4 million, and that total could drop to 4 million within two years, according to JPMorgan Chase & Co. (NYSE: JPM).

That's good news not only for the housing industry, but for the entire economy.

"For most middle class households, homes are by far their biggest asset," Karen Weaver, head of market strategy and research at investment firm Seer Capital Management LP told Bloomberg News. "So once the housing market starts to recover it helps consumer spending, it helps the whole economy."

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The Fiscal Cliff Deal Just Made Bonds Even More Risky in 2013

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Going over the fiscal cliff would have been bullish for long term U.S. Treasuries. But that didn’t happen. Instead we got a deal with modest tax increases, tiny spending cuts and $64 billion worth of tax-exemption pork.

Now bonds have become toxic enough to make you wonder whether or not the bond bubble has sprung a leak.

But there’s quite a bit more to this story than just U.S. Treasuries.

Western Digital Seems to Have a Real Winner on its Hands

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With the commodities boom still in full swing you are probably aware the advantages of owning stocks related to gold, silver or other hard assets.

But when was the last time you heard someone extolling the investment virtues of helium?

And I'm not talking about helium as most folks think of it – in those giant (and comically overpriced) party balloons.

You see, a unit of disk-drive maker Western Digital Corp. (NasdaqGS: WDC) says it's discovered a way to help pump up the corporate computer networks around the world.

It'll debut later this year.  And helium will be the active ingredient.

Fitch's Warning on U.S. Credit Rating Downgrade

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Fitch Ratings agency said today (Tuesday) that if policymakers on Capitol Hill drag their heels in raising the country's debt ceiling, Fitch could issue a U.S. credit rating downgrade.

David Riley, managing director of the leading credit ratings firm said Tuesday that he is concerned about an impending credit crisis and cautioned that failure to raise the debt ceiling by March 1 will activate a formal review of the nation's coveted AAA rating.

"The pressure on the U.S. rating, if anything, is increasing," Riley said during a conference in London. "We thought the 2011 crisis was a one-off event… if we have a repeat we will place the U.S. rating under review."

Fitch presently maintains a "negative" outlook on the United States, and plans to decide this year if a downgrade is warranted.

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Facebook Graph Search: Not Good Enough to Help Stock

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The excitement Tuesday among Facebook stock (Nasdaq: FB) investors and industry followers over the company's mysterious event was quickly doused after the social networking giant announced the launch of a Facebook graph search – a kind of closed social search engine.

Immediately following the statement from Facebook CEO Mark Zuckerberg at the hyped media event at FB headquarters, shares of Facebook stock slipped more than 1% on extremely heavy volume. The news was a disappointment to many who had been hoping for something bigger, flashier and more tangible, like a Facebook phone.

The new "knowledgeable graph search" is not a Web search, Zuckerberg explained. It is a search that simply trolls Facebook's vast database.

"I thought that this couldn't be done, but like any good Facebook team would do, they took this challenge. A few months later they had a version that was basically working," a proud Zuckerberg said.

Facebook continues to try to find ways to monetize its massive 1 billion users. Graph search aims to do that by bringing people back to the site more frequently and keeping them there longer.

But Facebook stock investors question if this graph search tool can really do that.

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Can Improved U.S. Retail Sales Continue In 2013?

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The Commerce Department released its U.S. retail sales survey for December this morning (Tuesday) showing an unexpected increase – but does this gain have enough support to repeat in 2013?

Total retail sales were up by 0.5% compared with November, more than doubling the 0.2% average growth forecast by economists surveyed by Bloomberg.

The department noted U.S. retail sales would have been up by 0.8% if it had not been for a 14 cent-per-gallon decline in the average price of gasoline, which resulted in a 1.6% drop in sales at gas stations.

Why U.S. Retail Sales Improved

The increased U.S. retail sales came as an improved employment picture boosted incomes.

At the same time, housing prices are beginning to recover nationwide and this has led to an increase in housing construction activity. That's because a better outlook for housing construction means more demand for pickups and other light trucks.

"There's a big correlation between auto sales and housing starts," GM Treasurer Jim Davlin told Reuters. "The pickup truck market share is at historical lows. We would expect that to come back."

Sales of autos and auto parts were up by 1.6% month-on-month, the best performing category within the retail sector. December capped the best year for automobile sales since 2007.

U.S. retail sales excluding automobiles were up by 0.3%, also beating economists' estimates, compared with a 0.1% decline in November. Sales of furniture were up 1.4% from November while sales at clothing chains increased by 1.0%.

Core retail sales, which most closely correspond to the consumption component of gross domestic product (GDP,) also were up in December, by 0.6% after a 0.5% increase in November. Core retail sales exclude sales of automobiles, gasoline and building materials.

But the new tax law changes in 2013 threaten a continued recovery in U.S. retail sales…

With Apple Stock at the iPhone's Mercy, Time to Play Defense

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We hear one tidbit of bad news about Apple Inc. (Nasdaq: AAPL) cutting orders for iPhone 5 components and – boom! – Apple stock drops more than 6%.

The reason for the stark cause-and-effect on Apple stock is that the iPhone contributes about 53% of Apple's vast revenue. [In fact, were the iPhone a standalone company, it would rank 29th in the Fortune 500.]

This latest Apple bombshell broke late Sunday.

According to reports from Nikkei and The Wall Street Journal, Apple supposedly cut orders for several key iPhone 5 parts for the first quarter. The Cupertino, CA company's orders for iPhone 5 screens, in particular, were reportedly slashed in half.

That was immediately interpreted as a response to lower-than-anticipated iPhone 5 sales, which in turn raised alarms that Apple could be headed for more earnings disappointments, hence the selloff.

Apple followers have questioned the validity of the story. Some bloggers pointed out that the number of iPhone 5 screens that Nikkei said Apple ordered had to be false in that it was far beyond any realistic estimate of iPhone sales for the current quarter.

But whether there's anything to the report or not, its impact on Apple stock has been real.

In the immediate wake of the story, several analysts cut their ratings and price targets. In less than two trading days, AAPL has lost $30 billion of market capitalization – the equivalent of Lockheed Martin Corp.'s (NYSE: LMT) entire market cap.

Apple is now paying the price for having one of the most profitable consumer products in history.

iPhone Becomes Vulnerability for Apple Stock

On the way up, the iPhone made Apple the most valuable company on the planet.

But now that iPhone sales growth seems to be leveling off, the overdependence that such success created has become vulnerability, at least as far as Apple stock is concerned.

What Automatic Spending Cuts Would do to U.S. Defense Industry

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The looming automatic spending cuts would include a major hit to the U.S. defense industry, slashing $500 billion from the Pentagon budget over 10 years.

The cuts, known as sequester, would result from a law enacted in summer 2011 following Congress' failed attempt to find a balanced way to trim federal spending. Policymakers in Washington sought to resolve the issue again in December after elections, but the only thing agreed upon then was a two-month extension.

With talks set to resume on March 1, expectations have dimmed among senior defense officials that U.S. President Barack Obama and Congress will succeed in mapping out an all-encompassing deficit-reduction plan before the massive spending cuts envelope the country.

As a result, the Defense Department is prepping to ground military aircraft and radio ships back to port should the substantial cuts come.

Reductions in ship and pilot training, flying hours and equipment maintenance would also have to be implemented. Plus, civilian hiring freezes, travel halts and a decrease to base spending are all expected.

The uncertainty surrounding what's ahead has brought widespread concern. U.S. Defense Secretary Leon Panetta voiced his unease during a recent Pentagon briefing.

"(We) have no idea what the hell's going to happen. All told, this uncertainty, if left unresolved by the Congress, will seriously harm our military readiness," Panetta said.

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Fiscal Cliff Deal Tax Changes for 2013

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On Dec. 31, 2012 Washington hammered out a last-minute agreement for tax deals to avert the looming fiscal cliff.

A collective sigh of relief could be heard by taxpayers even though Congress did not fix spending cuts.

Now as we begin gathering documents for the April 15 tax filing date, there are new tax laws from the fiscal cliff deal that will affect everyone.

One immediate thing that will be noticed is the Internal Revenue Service (IRS), thanks to the last-minute changes, is processing tax returns at a slower rate.

But it doesn't mean you have to delay things.

U.S. President Barack Obama has said that 98% of Americans will not see their income taxes go up – but take a look to be sure, because there is something for everyone in here.

Your Fiscal Cliff Deal Tax Changes for 2013

First, here's some good news from the tax changes:

  • Being married isn't a bad thing! Couplesstill have the standard deduction that's twice that of individuals. For the 2012 tax year, this standard deduction increased to $6,100($12,200 for married couples filing jointly), a rise from $5,950 ($11,900 for married couples filing jointly).
  • Many middle-class taxpayers will be protected from the alternative minimum tax (AMT)as the income exemption level will now be permanently adjusted for inflation. This means taxes will be less for the 60 million Americans that would have impacted.
  • For homeowners who were either granted principal forgiveness or underwent a short sale or foreclosure, they will not have to pay tax on the forgiven debt amount with the deal's one-year extension.

But, here's where you got hit:

  • Say goodbye to the two-year payroll tax holiday. It has expired and now employees' net pay is down two percentage points as 6.2% of Social Security will be taken out of paychecks versus 4.2%. There is $113,700 wage ceiling so any wages over that will be exempt.
    • A worker with a $41,000 salary – the national average–will have $32 less in a biweekly paycheck, reported CNN.