The Fed

FOMC Meeting: Can Bernanke Control the Market Reaction?

Financial markets have sometimes been turbulent after the release of the Federal Open Market Committee (FOMC) meeting statement.

For example, when the U.S. Federal Reserve announced on Aug. 9, 2011 to keep interest rates at a record low, the Dow plunged 205 points. Then before market close it turned around and closed 429.92 points, or 4%, higher.

According to former Fed governor Laurence Meyer, FOMC meeting statements on monetary policy are the second biggest market-moving events. FOMC meeting minutes releases are the first.

But the Fed is trying to change that.

In fact, the Fed will now issue its statement at 2 p.m., to give Chairman Ben Bernanke an opportunity to better control the message it sends to financial markets. Usually there are a couple hours that pass between the statement release and Bernanke's press conference.

"They probably did some research and said the market has periods of increased volatility right after the announcement," Robert Pavlik, chief market strategist at Banyan Partners, told the Associated Press. "Well, of course there's going to be. That's the way it works."

The Fed hopes the decreased time lapse will allow chief Bernanke to shed more light on Fed policy and prevent wild market swings based on speculation or concern.

"They are trying to be more open and work with the market to some degree. It's probably a good thing," said Pavlik. "You don't want to give away the store but to try to get their message across so that people can understand it in real time makes a lot of sense. Maybe, if they could put it in language that the average man can understand, instead of double-Fed-talk, it would probably make even more sense."

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Energy Investing

Investing in Clean Energy Stocks Just Got More Risky

Despite its promising future, clean energy stocks have proved to be an investing minefield.

Even China-based clean energy stocks are no longer a safe haven. Yesterday (Monday) Suntech Power Holdings Co. Ltd. (NYSE ADR: STP) defaulted on its debt.

Heavy losses caused by plummeting prices for solar panels – which fell 73% from 2010 to 2012 – left Suntech unable to make the payment on a $541 million bond that was due Friday.

The news caused Suntech stock, already down 80% over the past year, to slip another 10%.

While numerous U.S. renewable energy companies have faltered, most notably the 2011 bankruptcy of solar panel maker Solyndra, Suntech is the first Chinese clean energy company that could go under.

What's new is a reluctance on the part of the Chinese government to keep pouring subsidies into money-losing companies.

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Global Economy

The Cyprus Bailout Sets a "Very, Very Dangerous Precedent"

The Cyprus Parliament appeared poised Tuesday to reject the $13 billion international bailout that would force bank depositors to pay a levy.

So what happens now?

Will Russia step up to offer money in exchange for oil and gas? Will China offer a similar deal to Cyprus?

Will those with money in Cyprus banks withdraw it and deposit it elsewhere, leading to a run on the banks?

Will investors flock to gold as a safe-haven investment?

Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared Tuesday on Fox Business to talk about the fast-developing story in Cyprus and the potential fallout in Europe and well beyond, including in the United States.

Fitz-Gerald said a vote in the Cyprus Parliament to reject the bailout "is a big deal because it sets the stage for a very, very dangerous precedent."

Check out this video to hear Fitz-Gerald's perspective on the Cyprus situation – and whether the U.S. government could come after your bank deposits.

Read More…

Investing Tips

Why These Municipal Bond Insurers Make Good Investments

Given the unholy mess that is most local government finances, you would think municipal bond insurers are about to be washed away by a tsunami of defaults.

But legendary fund manager Bruce Berkowitz and other savvy investors have bet tens of millions of dollars that this view is wrong.

Companies that insure municipal bonds have been among the best-performing stocks so far this year and that outperformance seems likely to continue.

That's why Berkowitz has made a big bet on muni bond insurer MBIA Inc. (NYSE: MBI).

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U.S. Economy

Should Investors Still Trust the Dow Theory as a "Buy" Signal?

Richard Russell – godfather of financial newsletters, author, Dow Theory expert and longtime bear – just turned bullish.

One reason for his conversion: the Dow Theory, which is said to have formed the basis for all modern technical analysis through its definition of a trend and its reliance on studying price action.

The Dow Theory says the market is in a bullish trend if one of its averages – either the Dow Jones Industrial Average or the Dow Jones Transportation Average – advances above a previous important high and is followed by a similar advance in the other average.

The Transportation Average broke through its record high in January, and the Industrial Average hit an all-time high on March 5.

"With the Industrials and the Transports both in record high territory, I think being in the market is justified under Dow Theory," Russell wrote in his March 11 Dow Theory Letters, the oldest investing newsletter continuously written by one person.

But that's not to say it'll be a smooth ride for investors.

"My intuition tells me that there will be an early period [around now] of erratic and uneven scary advance, this to occur while formerly battered investors work up the nerve to enter this market," Russell predicted.

"Then the action will smooth out as the crowd gathers courage and confidence.Finally, in the last stage of this advance we might see the stock averages rise in parabolic fashion.This will be the time to pack our bags and get out."

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Tech Investing

This Biotech Patent Leader Generates an 8.3% Dividend Yield

I was a hard-working journalist in the early 1990s – and the whole Human Genome effort was transforming biotechnology into front-page news – when the Oakland Tribune offered me a job as a financial writer.

When the editor explained that biotechnology would be one of my "beats" … well, I jumped at the chance.

It was one of the best career decisions I ever made.

Biotech was an exciting beat to work … and that was an exciting time to work it. So I immersed myself in my assignments. And that meant that I talked at length with patients, company executives, industry analysts, financiers, top researchers, and senior officials at the U.S. Food and Drug Administration (FDA), the federal agency that approves all new drugs sold in the United States.

A five-part series that I produced about a pioneering therapy for multiple sclerosis generated a lot of accolades and was one of my favorite achievements from the four years I spent on the biotech beat.

But the real benefit was in the insights that I gained, and the lessons I learned.

They've paid off for me in a big way through the years.

And now they're going to pay off for you.

Energy Investing

Oil Companies Hope for New Opportunity in Energy-Rich Venezuela

One of the biggest headlines recently related to oil companies was news of the passing of Venezuelan President Hugo Chavez.

"El Commandante" as he was affectionately referred to by his countrymen, at least by those who approved of his leftist policies, was 58 and succumbed to a lengthy battle with cancer.

Predictably, news of Chavez's passing has sparked ample speculation about what the future holds for Venezuela's oil industry and those oil companies looking to profit from a possible renaissance there.

Venezuela is South America's largest oil producer and an OPEC member. In what may come as a surprise to some investors, Venezuela could be called the Saudi Arabia of OPEC.

In other words, the South American nation is home to about 300 billion barrels of proven oil reserves, compared to about 270 billion barrels in Saudi Arabia. That is according to OPEC's own estimate.

Not only that, but Venezuela is home to the largest natural gas reserves in the Western Hemisphere.

Given those superlatives, it is easy to understand why some Western oil companies are cautiously optimistic about what the future may hold for them in Venezuela.

Global Economy

Why the Cyprus Bailout Could Set Banking Back 300 Years

Even by the standards of the EU bureaucracy, raiding the private deposits of Cyprus' banks is spectacularly foolish.

For a measly $5.8 billion euros, the EU has now put the entire Eurozone on edge-not to mention the entire global economy.

It revolves around something as simple as trust. And as a former banker, I can tell you that there's no substitute for the belief that your deposits are safe and sound.

It's a thin line and once it's been crossed it's nearly impossible to repair.

Now savers in Spain, Italy and elsewhere in the Eurozone are left to wonder about the safety of their own accounts.

Here's why savers everywhere should be concerned…

Hot Stocks

Top Stocks Hedge Funds Have Been Buying – and Selling

Managers of hedge funds spend most of their time evaluating stocks, so it's usually a good idea to keep an eye on what they're buying and selling.

If nothing else, trends among fund managers can move stocks in both directions. Apple Inc. (Nasdaq: AAPL) is a textbook case.

Billions of dollars in hedge fund money played a major role in pushing Apple stock to its highs last year, and contributed to its fall in the fourth quarter as many fund managers reversed their position.

Of course, many retail investors like to follow what the hedge funds are doing because their moves can often point to hot stocks or hot sectors.

Contrarian investors like to know where the big money is going so they can bet in the opposite direction.

The best way to follow the stock choices of hedge funds is to study their quarterly 13F filings with the Securities and Exchange Commission (SEC).

So here's a look at what has been moving in and out of hedge funds recently.

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Stock Market Today

How the Stock Market Today Digested Cyprus News

Worries over the plan to force bank depositors in Cyprus to help fund a $13 billion international bailout rattled global equities and sent the U.S. stock market today (Monday) lower. 

Right after the open, the Dow Jones Industrial Average, the Standard & Poor's 500 Index and the Nasdaq were all sharply lower.

By mid-afternoon, all three indexes remained in negative territory with the Dow down 4.76, or .03% at 14,509.03; the S&P down 2.97, or 0.17%, at 1,557. 73, and the Nasdaq down 2.11, or 0.11%, at 3,247.

Sending global markets lower Monday was the unprecedented agreement reached this weekend over Cyprus' bailout plan.

The proposed plan – by representatives of the International Monetary Fund, the European Central Bank and Eurozone's finance ministers – includes taxing deposits over 100,000 euros ($128,950) at 9.9%, while those with less than that amount would be subject to a 6.75% levy.

The aim is to raise 5.8 billion euros ($7.52 billion) that would go toward the $13 billion international bailout of the country.

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