Archives for March 2013

March 2013 - Page 3 of 20 - Money Morning - Only the News You Can Profit From

What Was the Real Motive Behind Warren Buffett's Goldman Deal?

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Legendary investor Warren Buffett is set to become one Goldman Sachs Group Inc.'s (NYSE: GS) largest investors without shelling out one penny.

Impressive as that is, what's even more striking is how the guru investor brokered the Goldman deal to his distinct advantage.

The savvy CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) amended terms of warrants–a type of security that gives the holder the right to purchase securities from an issuer at a certain price within a certain time frame-issued to Berkshire during the 2008 financial meltdown.

At the time, Buffett's investment in Goldman was gutsy. It was viewed as a vote of confidence in the bank as the country faced economic crisis.

The warrants originally gave Berkshire the right to buy $5 billion worth of Goldman common shares at $115 each any time before Oct. 1. Thanks to the new $1.5 billion deal inked Tuesday, Buffett's company will receive 9.2 million shares.

According to data from Bloomberg News, that makes Berkshire the ninth-largest shareholder in Goldman.

The Oracle of Omaha said in a press release, "We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago. I have been privileged to have known and admired Goldman's executive leadership team since my first meeting with Sidney Weinberg in 1940."

Berkshire's windfall from the investment surpasses $3 billion, making it one of Buffett's most profitable wagers in recent history.

Goldman also benefits. The investment bank avoids a flood of sell-side shares that would have been dilutive. It also gets to include the revered name of Warren Buffett to its shareholder roster.

"We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Goldman's CEO Lloyd Blankfein said in a statement.

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Cyprus Bailout Plan: Reaction from the Front Lines

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As Money Morning Chief Investment Strategist Keith Fitz-Gerald warned last week, the Cyprus bailout plan is a breach of trust that could derail the entire Eurozone.

Not only does the plan fail to fix the country's economy, it has the potential to seriously damage people's trust in the banking system, making a bad situation even worse.

"Individuals deposit money in banks instead of stuffing it in their mattresses because they believe that their money will be safe there," explained Fitz-Gerald. "Once they realize, or even suspect, that the money they put in the bank is anything but safe, they will take whatever's left and run – and the bank will collapse in spite of the "bailout.'"

To get an idea of what life on the ground in Cyprus is really like right now, Fitz-Gerald recently talked to FOX Business Network's Washington Correspondent Rich Edson. Edson has been reporting from Cyprus as the controversial bailout plan unfolds.

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Robert Half Stays Neutral - Analyst Blog

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We reaffirm our Neutral recommendation on Robert Half International, Inc. (RHI) following the appraisal of fourth quarter 2012 results. The company’s financial performances were a mixed bag with positive earnings and top-line growth offset by currency translation headwinds. Why the Reiteration? Robert Half has witnessed strong revenue growth in each of its business segments, which […]

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New Chips from General Mills - Analyst Blog

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The Green Giant division of General Mills Inc. (GIS) recently introduced two new snacks called Green Giant Roasted Veggie Tortilla Chips Zesty Cheddar Flavor and Green Giant Multigrain Sweet Potato Chips Sea Salt Flavor. Both the products are expected to be offered at a retail price of $2.99. So far, Green Giant specialized in products […]

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What You Absolutely Need to Know About Money (Part 5)

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Chapter Four ended as a cartel of powerful bankers gathered on Jekyll Island to develop a plan for creating a central banking system which would work for their interests.

John Pierpont Morgan was no stranger to how central banks worked. He had witnessed their power firsthand.

Junius S. Morgan, Pierpont's father, became a partner at George Peabody and Company in 1854 and moved to London – where the American-born Peabody had been bankrolled by Baron Nathan Mayer Rothschild. At the time, the rich and powerful Rothschilds exerted extraordinary control over the Bank of England.

George Peabody and Company rode the mania for railroad shares, whose prices in 1857 were benefiting from the Crimean War's impact on rising grain prices, which Western railroads transported in huge quantities.

But the good times didn't last.

Three Stocks to Buy Now as Retailers Enjoy a Rally

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When screening for good stocks to buy now, you may have noticed this year's continued climb for retailers.

The SPDR S&P Retail ETF (NYSE: XRT), a collection of nearly 100 stocks, ranging from apparel retailers to specialty stores to Internet retailers, has surged nearly 13% year-to-date. The more concentrated Market Vectors Retail ETF (NYSE: RTH) is up 9.6%.

Even some of the retail sector's dogs have gotten in on the act. Best Buy Co. Inc. (NYSE: BBY), a stock that was cut in half in the second half of 2012, has nearly doubled this year. After being dead money for several years, The Gap Inc. (NYSE: GPS) started breaking out in 2012 and has kept the good times going this year with a gain of nearly 13%.

Statistics like that might imply that investors who have been slow to embrace retail stocks may have already missed out on the easy money. That risk always exists following voracious broader market rallies, such as the one investors have been treated to over the past few months.

The good news is there are a few retailers that have more upside potential in store for the rest of 2013.

Once Its New Weight-Loss Drug Hits the Shelves, This Stock Is Headed 50% Higher

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You don't have to be an expert to know that the FDA can literally make or break pharmaceutical stocks.

Depending on how the FDA rules, investors can either make a pile of cash or lose a bundle in a big sell off.

But here's something most investors don't know: There's another federal agency besides the FDA that can rear its ugly head at the worst possible time.

It's the U.S. Drug Enforcement Agency.

It's true. The same agency that chases coke and crack dealers also has the responsibility to regulate prescription drugs to make sure that patients don't abuse them.

That's one of the reasons why shareholders of Arena Pharmaceuticals Inc. (NasdaqGS:ARNA) aren't smiling all the way to the bank — yet.

These 5 Charts Prove the Housing Recovery is for Real - and Just Beginning

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The housing market has rebounded in a big way, with home prices increasing the most since the housing bubble burst in 2006.

Prices aren't the only indicator pointed toward recovery.

Housing barometers including sales, permits and housing starts have surged well beyond their recession troughs and back into healthy territory – and bullish analysts say there's plenty more room for growth after years of decreased activity.

The housing market activity has been driven by pent-up demand, improved consumer confidence, low interest rates and still affordable prices. And the industry's comeback comes at a time when supply is tight. The inventory of homes available is at near-historic lows, and foreclosures have declined.

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Stock Market Today is Up, But is a Pullback on the Way?

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A handful of economic data helped the stock market today (Tuesday) resume a robust rally – but are we due for a pullback?

The Dow Jones Industrial Average closed up 111.90 points, or 0.77%, at 14,559.65. The Standard & Poor's 500 Index jumped 12.08 points, or 0.78%, to 1,563.77 – just a couple points from its record high. The Nasdaq climbed 17.18 points, or 0.53%, to close at 3,252.48.

The broad-based stock market rally followed a sell-off Monday, which took the Dow down 64.28 points, or 0.4%, to close at 14,447.75. The S&P and Nasdaq both fell 0.3% as investors mulled a bailout deal for Cyprus.

But the old adage that investors have a very short memory rang true Tuesday. Shrugging off yesterday's woes, market participants instead focused on encouraging U.S. economic data.

Buoying stocks Tuesday was a Commerce Department report that showed durable goods orders surged 5.7% in February. That handily beat economists' expectations of a 0.5% rise and reversed January's 3.8% plunge.

A separate report Tuesday revealed single-family home prices began 2013 with the biggest annual increase in six-and-a-half years. The S&P/Case Shiller composite index report is a further sign of a recovery in the housing market.

But the big question is if the rally will last.

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Gold Prices Will "Explode" When These Investors Start Buying

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Until recently, an entire class of investors that control a huge pool of money – more than $27 trillion worldwide – have almost entirely ignored gold.

But lately, this group has begun to show more interest in the yellow metal, a trend that ultimately will exert massive upward pressure on gold prices.

We're talking about pension funds, which typically have had little interest in gold.

But with more traditional investments like bonds at historic lows, many pension funds aren't getting the returns they need to fund future obligations.

And with central banks debasing most major currencies and risking higher inflation, pension fund managers almost have no choice but to consider adding gold.

It's already started in Japan, which has about $3.4 trillion in pension funds – second only to the U.S., which has about $20 trillion.

In response to Prime Minister Shinzo Abe's pledge to spur inflation by printing more yen, Japanese hedge fund managers plan to double their gold holdings from about $500 million to $1.1 billion over the next two years, primarily by investing in gold exchange-traded funds (ETFs).

Itsuo Toshima, who represented the Tokyo office of World Gold Council for 23 years through 2011 and now advises Japanese pension fund managers, sees gold becoming a standard asset as inflation becomes more of a threat – with major consequences for gold prices.

"Pension money invested in bullion is "peanuts' at the moment," Toshima told Bloomberg News. "If 1% of their total assets shift to the metal, the gold market would explode."

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