Buy, Sell or Hold: Is Sysco Eating Up the Competition?

You call to make reservations at that new and trendy restaurant.  Can you guess who the restaurant called prior to opening its doors?  Chances are the first call it made was to Sysco Corporation (NYSE: SYY).

Sysco's by far and away the leading provider of food to the restaurant industry. The company has an 18% share in a $235 billion dollar industry in the U.S., Canada and Ireland.

Sysco provides the restaurateur everything he needs – from high-quality chef ingredients to Styrofoam cups. It serves more than 400,000 customers and has over 180 distribution centers.

Shareholders have been rewarded by Sysco's fine execution of its business plan as it breaks above new multi-year highs.

However, there is something strange afoot.

Income Plays

How to Succeed in the Low-Yield Inflationary Matrix

In the 1999 sci-fi film, "The Matrix," the mentor Morpheus turns to the protagonist Neo and says, "Do you think that's air you're breathing now?"

The quote has become somewhat of a modern classic movie line, as the words serve to enlighten Neo that all is not what it seems in the world he perceives.

For income investors, there's a new matrix of sorts, and it's a world dominated by the very real toxic cocktail of low yields and rising inflation.

Income investors-most of whom are near or already in retirement-now are forced to breathe the thick air of dwindling income from traditional sources, and the rising costs of all sorts of goods and services.

On the yield front, we've seen the pernicious effects of the Federal Reserve's easy money policies on traditional yield-generating securities such as Treasury bonds.

Energy Investing

Are Higher Oil Prices in 2013 About to Set Off an Inflationary Spiral?

There is a long-held belief that significant increases in oil prices are harbingers of building inflationary pressures.

It follows from the observation that a market able to absorb more expensive oil is also one where prices are rising elsewhere.

Economic Reports

July Fed Beige Book Round Up

the beige book

Periodically, each Federal Reserve Bank gathers anecdotal information on current economic conditions in its geographic district.

Banks take into consideration the outlook of regional Fed bank directors, interviews with key business contacts, economists, market experts, and other sources.

This information comes out 8 times per year in a compilation report dubbed the "Beige Book" – it's essentially a summary of economic activity in the 12 Fed bank districts as prepared by a designated Federal Reserve Bank on a rotating basis.

Today (Wednesday), the Federal Reserve released its latest.

Therein, manufacturing reportedly expanded in most districts.

Consumer spending, auto sales, transportation, commercial real estate, and banking has improved.

Hiring activity modestly improved, but three districts noted businesses' reluctance to hire permanent workers. We're likely seeing the effects of Obamacare.

Notably, housing demand and construction activity increased at a moderate to strong pace in all districts.

Meanwhile, tourism and agricultural conditions seemed bogged down by bad weather.

In sum, overall economic activity has reportedly continued to increase at a modest pace since the last Beige Book, released on June 5.

Sounds good, but how about some specifics?

Here are some interesting economic tidbits I came across while perusing July's Beige Book, broken down by district:

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The Fed

Bernanke Testimony Sends Mixed Signals on QE3

Call it Ben Bernanke's Alan Greenspan moment.

As his predecessor as Federal Reserve chairman had often done, Bernanke sent decidedly mixed or unclear signals today (Wednesday) in testimony before Congress.

The Bernanke testimony, in prepared remarks delivered to the House Financial Services Committee, provided nothing close to a definitive answer on whether the Fed would scale back quantitative easing in September.

Bernanke's testimony came about a month after he floated a trial balloon by saying at a press conference the Fed could begin scaling back QE this year and end it altogether by mid-2014. The markets sold off immediately after Bernanke's June comments but have since recovered.

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These Global Construction Stocks Can Make You – and Your Grandchildren – Rich

There are engineering projects and then there are generational engineering projects.

A supertall skyscraper like Dubai's Burj Khalifa or New York City's One World Trade Center may take six or eight years from beginning of construction to topping it out. Contracts to construct buildings like these can bring significant revenues to the companies who land the jobs.

Then there are even bigger projects, huge infrastructure investments that have the tendency to alter the destiny of nations over the course of generations. Some of these projects are designed to be worked on and expanded indefinitely.

The challenges that changing climate and demographics pose will bring about a wave of these mega-projects around the world, most of which will take at least a generation to complete, and in many cases, far beyond that.

When they're finished, the face of the planet will be changed, hundreds of millions of people will be affected – for the better. And investors with the foresight to get in on the ground floor could end up being very rich.

The Delta Works

The Dutch have battled the North Sea and their rivers for centuries, keeping the water out, and claiming living space for their small, densely populated, low-lying country. Much of Western Europe drains into the Netherlands' meandering river system. Between the sea and the rivers, the country is in a watery squeeze, but it's more than holding its own.

Most of the Netherlands' territory has been claimed from the sea, two-thirds of its citizens live below sea level, and more than half the country lies at 1 meter or less below sea level.

After a disastrous flood in 1953 killed thousands and inundated more than 9% of their total farmland, the Dutch realized that a long-term solution was needed.

The Delta Commission, was formed, and afterward conceived of a mega-project under the omnibus Deltaplan, comprising a huge network of dams, bridges, sluices, locks, dikes, and storm surge barriers erected all over the soggy Rijn, Maas, and Scheldt deltas in the northwest of the country.

More than 50 years on, the system has worked with typical Dutch efficiency and effectiveness, but it's not truly "complete" yet.

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Student Loan Interest Rates Still Tangled Up In Congress

Student debt in the United States has already surpassed the country's auto loans and consumer credit card debt. A student loan bubble looms on America's horizon, and promises dark times should it ever burst.

And earlier this month, the student loan problem worsened.

Federally subsidized Stafford loan interest rates doubled from 3.4% to 6.8% after Congress missed the July 1st 2013 deadline, and instead recessed for the Independence Day holiday.

The failure sparked frustration amongst student advocates nationwide.

However, Congress is able to retroactively "fix" the damage done by the soaring rate increase – that is, if Democrats and Republicans can come to an agreement on the matter.

So far, no dice: an emerging bipartisan Senate deal hit a stumbling block last week.

Even though the House was able to pass its own plan in May, the Senate is still at an impasse.

Democratic senators are avoiding the prospect of trying to "balance the budget on the backs of students."

On the other hand, Republican senators want a plan that doesn't risk adding huge sums to the deficit.

Here's what we've got so far:

The tentative deal ties Stafford loan interest rates with rates on the 10-year U.S. Treasury note.

Additionally, there would be a capped interest rate of 8.25% for undergraduates and 9.25% for all other loans.

Republicans would get a link between the financial markets and borrowing terms through this proposal.

Democrats would get a guarantee that interest rates would not reach 10%, their proverbial line in the sand.

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Housing Market

Big REIT Opportunities in the Housing Market Recovery

If you listen to most pundits, you would think housing is on its way back.

But I don't listen to people. I do my own research and make up my mind.

And what I've found is that this housing rally is a double-edged sword. But if you're smart you take advantage of its potential while eliminating much of its real risks.

The one edge: A more active market is undoubtedly good for the economy, since it leaves less money trapped in houses people no longer want. But rising prices are not good news, as I explain below.

The other: There are still some excellent opportunities in the real estate sector through real estate investment trusts (REITs), but you need to very selective (also below).

And as usual, it's all about 3 things: location, location, location.

Except this time around, it's not the locations you would think.

A Cautionary Tale

Let me explain by example…

I have just returned from Britain and the trajectory of that economy shows very clearly: High real estate prices are a major competitive disadvantage.

House prices in Britain are much higher than in the United States. The average house price in June 2013, according to Rightmove's house price index, was 253,000 pounds, about $382,000 at today's exchange rates.

That compares with about $266,000 in the U.S., taking a weighted average of new and existing home sales prices. However, you have to add into this calculation the reality that British incomes are only around 80% of U.S. incomes, when converted at market exchange rates (about 75% at purchasing power parity).

So in terms of earning power, U.K. house prices average about 80% higher than U.S. house prices.

That doesn't take into account the fact that British houses are on average substantially smaller than U.S. houses, or the exorbitant additional costs of trying to live in London, Britain's bloated capital, where house prices have been pushed up by the advent of wealthy Russians.


Commodities 2013 Halftime Report: A Time to Mine for Opportunity?

It was a challenging first half of the year for most commodities, with only two resources we track on our Periodic Table of Commodities Returns rising in value.

Natural gas and oil rose 6.5 percent and 5 percent, respectively, while silver lost a third of its value and gold lost a quarter of its price from the beginning of the year.

At first glance, the correction seems to support naysayers who believe the supercycle in commodities has ended, such as Credit Suisse analysts, who had declared that the "era is over," in its digital magazine, The Financialist.

We disagree. Instead, we see severe price declines as possible buying opportunities during this ongoing commodity supercycle.

Consider the extreme pessimism on gold. As one measure of how bears have ganged up against the yellow metal, take a look at the spike in the level of short positions on the precious metal since the beginning of the year.

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Wall Street

Dark Pools of Liquidity Are a Big Problem for Free Markets

by Greg Madison, Associate Editor, Money Morning

Everything runs on liquidity. Unless you know something I don't, that dollar bill in your pocket is just as likely to buy a can of Pabst Blue Ribbon today as it was yesterday, and will be tomorrow.

Or you could sell 1,000 lbs. of gold – if you have that lying around – without fear of completely scuttling the global gold market. Your bank has to have cash, liquidity, lying around somewhere in the back if it wants to stay in business.

And in many cases, it's easy to see or verify this liquidity. It helps everyone feel better about doing anything.

But there are markets where this liquidity is kept off the open exchanges, where it can be used to juice up huge deals. Or it can prevent these huge deals from having the impact that they "should" have, keeping the hands of large traders hidden.

These are the sinister-sounding dark pools of liquidity.

Dark liquidity is generated and stored in a variety of ways, most of which are possible due to the huge variety of trading venues, electronic and traditional.

With dark pools, neither the size of the order nor the entity making that order can be known until the order is completed. Rosenberg Securities Inc. estimates that fully 15% – trillions of dollars – of all trades occurring on American exchanges, every day, utilize dark pools.

Not Playing Straight Poker

And the markets, like nearly everything else, operate on the wide availability and transparency of good, reliable information. A poker game gets its lurid thrills from the partial presence of that information, or the possibility that the information could be faulty. You wouldn't want to play with all your cards face-up. You just don't know, and that's why it's fun to play poker.

But the markets, despite some inkling to the contrary, can't function with true optimum efficiency if good information isn't available to the widest possible group of participants.

It's not that a player has to have the information, but it should be available to the player if things are going to work the way they should. One is a vying, gambling game, and the other is a free market. We should be able to tell the difference.

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