Archives for January 2013

January 2013 - Page 2 of 20 - Money Morning - Only the News You Can Profit From

Will These Stocks Get a Lift from Super Bowl Commercials?

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Forget it's the first Super Bowl ever featuring brothers as opposing head coaches. Or the fact that Baltimore Ravens linebacker Ray Lewis will be playing in his last game. Or that the San Francisco 49ers quarterback, Colin Kaepernick, will be starting only the 10th NFL game of his career.

For many Americans, the commercials will be the most entertaining part of the Super Bowl on Sunday.

That helps explain why companies will spend almost $4 million this year for one 30-second ad.

The ads may or may not pay off in the form of higher sales or revenue.

But multiple studies show one clear benefit for publicly traded companies that advertise through Super Bowl commercials: The ads boost the companies' stock prices before and after the big game.

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Peter Schiff: "At some point, the dollar has to give"

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While the U.S Federal Reserve claims it needs to keep interest rates near zero to help the economy, renowned economist Peter Schiff says there's another reason.

According to Schiff, the Fed has little choice: If rates began to climb, the interest payments on the ballooning federal debt would explode making annual budget deficits far worse.

"We're now so addicted to debt that the highest rate we can afford is zero," Schiff, the CEO and chief global strategist of Euro Pacific Capital, told Casey Research chairman Doug Casey in a video interview published today.

"We pay about $300 billion a year right now in interest on a $16.5 trillion debt," Schiff explained. "What if, in two or three years — and the debt is $20 trillion — what happens if interest rates are 5%? Well, that's $1 trillion a year in interest payments."

This scenario is not at all far-fetched; the historic norm for interest rates is just below 5%, and rates in the early 1980s were triple that.

Another reason the Fed fears higher rates, Schiff said, is that it would probably bankrupt most of the "too-big-to-fail" banks that the government bailed out back in 2008.

"The only justification for keeping rates so low is that the Fed knows any increase in rates will collapse this phony economy and we'll be right back in recession," Schiff said.

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Q4 GDP Shrinks for the First Time Since the Great Recession

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For the first time since the Great Recession, the nation's gross domestic product contracted in the fourth quarter, declining 0.1% and falling well short of expectations, the Commerce Department said Wednesday.

GDP, the broadest measure of the nation's economic health, had climbed 3.1% in the third quarter. The consensus for Q4 GDP was 1% growth.

The first decrease in GDP in 3 1/2 years resulted largely from a steep decline in military spending with sequestration looming and lower company inventories as businesses curtailed investments and expansions amid fiscal cliff fears and higher taxes.

Some economists also pointed to Superstorm Sandy, budget battles and debt ceiling debates as additional culprits.

"It's hard to see the economy really kicking into higher gear until we're further down the line and have more of a chance to digest tax increases and the spending cuts that are coming,"
Moody Analytics chief economist Mark Zandi said in a call with reporters.

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Here's What a Jump in Pickup Sales Says About the U.S. Economy

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Rapidly increasing sales of Ford Motor Co. (NYSE: F) pickup trucks signal an improving outlook for the U.S. economy, particularly the agriculture and construction industries.

The pickup sales growth is one of those unconventional economic indicators that can give investors a deeper insight into what's really happening in the U.S. economy.

That's because most pickup trucks are purchased by people working in the construction trades or agriculture.

So better pickup sales are a good indication of long-term confidence in construction activity by those working in the construction trades and, for farmers, a belief that crop prices will remain higher for another few years.

Along with Ford, GM and Chrysler also have reported growing pickup sales.

Sales of Ford's F-Series pickups in December 2012 totaled 68,787, the best December since 2006 and the 17th consecutive year-on-year increase in monthly F-Series pickup sales. (The Ford F-150 has been the best-selling pickup in North America since 1976 and the best-selling vehicle in North America since 1981.)

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The Debt Ceiling 2013: How We Got Here, What Could Happen

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A new twist to investing and financial planning is averting travesties that the government itself created; first it was the fiscal cliff, now it's the debt ceiling 2013.

The debt ceiling is a part of the way government has to go about doing its business.

However, both sides of Washington have come to use the full faith and credit of the United States of America as a bargaining chip – and the consequences are huge.

But it wasn't always like this.

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Investing in 2013: Watch These Emerging Market Rebounders

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Broadly speaking, 2012 was an excellent year for investing in emerging markets stocks and ETFs – making some of them a good bet for investing in 2013.

The returns offered by the iShares MSCI Emerging Markets Index Fund (NYSE: EEM), which has almost $51 billion in assets under management and is used by many professional investors as an emerging markets benchmark, indicate as much. EEM, the second-largest emerging markets ETF, returned 13.4% last year.

Given that EEM offers exposure (to varying degrees) to more than 20 countries, the ETF's 2012 performance could leave some investors thinking the just completed year was one big party for developing market equities. Unfortunately, that was not the case as some of the developing world's marquee countries, at least at the ETF level, were absolute laggards.

So while investors were tantalized by the jaw-dropping returns generated by ETFs tracking the likes of Mexico, the Philippines and Thailand just to name a few, chances are there were some mediocre performances from ETFs tracking countries in the same region.

However, there is an important factor when it comes to investing in emerging markets and it is one that runs counter to conventional wisdom.

The conventional wisdom is that it's best to avoid laggards and embrace leaders. But with emerging markets ETFs, they take turns moving between the leaders and laggards categories.

For example, the iShares MSCI Thailand Investable Market Index Fund (NYSE: THD) finished 2011 in the red. In 2012, THD gained over 36%, making it one of the best ETFs tracking any asset class.

While that doesn't mean THD is bound to be a laggard this year, it does mean some emerging markets funds that left investors with sour tastes in their mouths last year have the potential to soar in 2013.

Here are a couple to consider.

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Why There's No Real Inflation (Yet)

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According to Milton Friedman, "inflation is always and everywhere a monetary phenomenon."

If that is true, then you have to wonder where the heck all of the inflation is.

Every central bank in the Western world is holding interest rates down, and almost all of them are printing money like it's going out of style.

Five years ago, nearly every economist in the world would have told you this would cause inflation to skyrocket, and the big deficits governments were running would make matters even worse.

Taken together, monetary and fiscal policies are far more extreme than they have ever been.

Yet, inflation has remained rather tame. In Friedman's world that just wouldn't be possible.

But today inflation is only running at around 2%–well below where it should be according to his monetarist theories.

What does it all mean?….

It means even Nobel Prize-winning economists can get it wrong-at least in the short run.

Here's why Friedman has been wrong on inflation so far. It starts with his basic theory.

The Doomsayers Are Wrong About Oil Prices

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The stock market is not the only thing that is up. Crude oil prices have jumped as well rising faster than the S&P for the past month.

West Texas Intermediate (WTI) next month futures contract prices for crude oil on the NYMEX increased again last week. That marked the seventh consecutive week oil prices have gained, the first time that has happened since 2009. Overall, WTI pricing level has risen 11% since mid-December.

Now all of this means something pretty important. As we've known for a while now, the oil market has been oversold with values unusually low. This has largely resulted from concerns over demand related to the ongoing recovery/recession debate.

However, that debate has never been a particularly genuine one, certainly not for the last two quarters.

Yes, if we fell off a fiscal cliff or ran into a budgetary wall or failed to raise the debt ceiling and the living room chandelier fell on our heads there would be some substance in the Chicken Little approach to market analysis.

But we haven't, and, we won't.

With Congressional approval ratings just above those of Attila the Hun, they will slink in, kick some cans down the street, and slink out. That means the penumbra behind which the doomsayers have operated is no longer worth the smoke and mirrors it is based upon.

Here's why…

FOMC Preview: Will the Fed Continue its $85B/Month Bond-Buying Program?

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Investors will be looking to the Federal Reserve Wednesday for clues about how long it might continue its bond-buying program aimed at pushing interest rates down.

The Federal Open Market Committee is expected to release a policy statement at 2:15 p.m. Wednesday, the second day of its two-day meeting.

In keeping with a practice it began last January, the first meeting of the new year will highlight the FOMC's long-term goals and monetary policy.

The Central Bank likely will reiterate the goal it has maintained all of last year: boosting the stagnant U.S. economy.

The Fed's first meeting of 2013 comes after an extraordinarily busy year, capped by two key moves in December.

That's when the Fed said it would continue spending $85 billion a month on bond purchases to keep interest rates low. At the same time, the Fed set unemployment and inflation "thresholds" instead of a date when the central bank expected to be able to raise interest rates.

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