Category

Stocks

Washington

The Chained CPI Explained

By , Money Morning - • Print | Email

When U.S. President Obama released his 2014 budget proposal last month, many Americans who paid attention to the details needed a measurement he used – "chained CPI" – explained.

That's because President Obama used chained CPI (consumer price index) to help shave off more than $1 trillion from spending on government programs.

While that sounds like a good thing – it comes at a price. 

This budget calculation adjustment could affect your money, since many parts of our tax code, like the size of the standard deduction – that flat dollar amount that reduces taxable income – and the income thresholds for tax brackets are recalculated every year for inflation.

And adding chained CPI to the budget alters those calculations.

Here's how.

To continue reading, please click here...

Buy, Sell or Hold

Buy, Sell or Hold: With 46 Million People on Food Stamps This Is The Stock To Own

By , Money Morning - • Print | Email

With over 46 million Americans on food stamps, price-conscious shoppers have been flocking to the discount stores.

It's a profitable and steady niche in what has become a "food stamp economy."

It's lead by the big-box discounters such as Wal-Mart (NYSE: WMT) on one end and a trio of high-rising "dollar" stores at the other –Family Dollar Stores (NYSE: FDO), Dollar Tree (NASDAQ: DLTR) and Dollar General (NYSE:DG).

Since the start of the financial crisis, all of these discounters have seen their share prices skyrocket as consumers work overtime to stretch each and every dollar.

Chart forDollar General Corporation (DG)

My favorite company in this group is Dollar General Corp., which has seen its share price climb by 129% since its IPO in November 2009.

The question, of course, is whether or not Dollar General still has what it takes to stay in Wall Street's good graces and keep on growing.

Part of that answer depends on what your perception is about the overall state of the U.S. economy. The data is certainly a mixed bag.

But what I can tell you about Dollar General is how it differentiates itself from the competition and how the discounter will be able to hang on to shoppers even when the economy turns.

Here's why I like this company so much…

This is What Happened With Delcath

By , Executive Editor, Money Morning - • Print | Email

Shares of Delcath Systems Inc. (Nasdaq: DCTH) fell more than 40% yesterday after U.S. Food and Drug Administration (FDA) staffers said the company's experimental liver-cancer-treatment system would probably require another round of clinical trials. The surprise recommendation was contained in a briefing document that was posted yesterday on the FDA's Web site. The document outlines […]

Read More…

Investing Tips

Why Hedge Funds Are a Lousy Investment

By , Money Morning - • Print | Email

The one thing you can guarantee when investing in hedge funds is, the managers are going to get rich…even if the investors don't.

Don't get suckered into believing you will be taking your investing strategy to the next level. The difference between reality and perception is stark and the only people sure to win are the managers themselves.

The annual report on the 25 highest paid hedge fund managers came out last week and the results were no less outrageous than they have been for years: $14.1 billion in pay and paper profits on their own investments in 2012, slightly down from 2011's $14.4 billion, according to Institutional Investor Alpha's Rich List.

You can do the math – the average top 25 hedge fund manager took home $564 million in 2012, down from $576 million in 2011.

The big question is, what did these managers do for their investors to earn these kinds of sums?

After all Lloyd Blankfein, CEO of Goldman Sachs, took home a measly $21 million.

In 2011, the average hedge fund lost money, even before the $14+ billion creamed off by the top 25 managers. In 2012 the average hedge fund made a weak 6.4% for its investors, according to Hedge Fund Research.

That means it trailed a passive portfolio of 40% bonds and 60% stocks by almost 5 percentage points. This is one of the big reasons I have disliked hedge funds for so long. They seem built more for managers amassing wealth than doing so for their investors.

Hot Stocks

Stocks to Buy When South Korea Heads Higher

By , Money Morning - • Print | Email

One of the biggest stories of the year so far has been the saber rattling coming from North Korea.

The communist nation's young leader Kim Jong-un has insisted that his nation is at war with South Korea and war is imminent. He has refused diplomatic talks with South Korea and the United States and raised tensions on the peninsula to heights not seen in many years.

All of this has weighed on the South Korean stock market and created what well may be a significant opportunity to find undervalued stocks to buy. The South Korean markets have sold off and are down on the year by about 6% when measured by the iShares South Korean ETF (NYSE: EWY).

The reality is that no matter how much saber rattling is done North Korea isn't likely to wage war on its Southern brethren. They simply cannot afford it. They don't have enough fuel and many parts of the country have no electricity and little food.

China may watch the rhetoric with a bemused eye but is unlikely to encourage a war.

Hot Stocks

Stocks to Buy: There's a Huge Opportunity in this Metals Producer

By , Money Morning - • Print | Email

Our latest report on stocks to buy focuses on a metals-related play that's highly undervalued – and about to introduce a game-changing development to its business.

As base metals and material stocks have sold off in recent weeks, most of the attention has fallen on the shinier metals like gold and silver.

Unnoticed by most traders is the fact that zinc has dropped as well, although not as sharply. Prices of zinc have dropped about 8% in the past month and this is setting up a major buying opportunity in this North American zinc producer.

Although rarely discussed with the same fervor or regularity as its metallic brethren, zinc is actually the fourth most used metal in the world, and will see sharp demand pick up when the economy improves.

Over 12 million tons of the metal is produced annually for a range of uses. Although not as widely discussed as other precious and industrial metals zinc is something we all use every day knowingly or not.

Zinc is part of several alloys including brass, aluminum solder and commercial bronze. Zinc is also the primary metal used in production of the U.S. penny coin and has been since 1982. The metal is used in pigments for paints, a catalyst for rubber production, a fire retardant and a rocket propellant.

Zinc is far more reactive than iron or steel and attracts oxidization so it is often used as a galvanizing agent with these metals. For example, zinc is regularly used in the boating industry to protect propellers and the rudder from oxidization caused by seawater.

All these mean zinc will continue to be important to a variety of industries. That's why we like the long-term potential of a U.S. zinc producer whose shares are trading at a discount.

The following company is making huge moves to be the world's lowest cost zinc producer, which should lead to higher earnings and a much higher stock price

Hot Stocks

Apple: Cash or Trash?

By , Chief Investment Strategist, Money Map Report - • Print | Email

With Apple Inc. (Nasdaq: AAPL) off nearly 50% from its $705.07 a share high set last September, many investors want to know if it's a buy.

Not in my book. Here's why:

1. The company has held on to its premium pricing strategy for too long. Going out on price as it has recently with iPhones, for example, is the death knell of competitive differentiation. Businesses that engage in price wars have a very difficult time climbing back up the proverbial ladder.

2. The present management team is having trouble fulfilling the late Steve Jobs' vision, and execution appears to be stumbling. The Maps thing, for instance, was an unmitigated disaster and shattered Apple's image of invincibility. The public noticed.

Hot Stocks

Three Stocks to Buy to Beat Warren Buffett's Gains

By , Money Morning - • Print | Email

While many look to Warren Buffett's holdings to find the best stocks to buy, it turns out his holdings' rivals could be the better picks.

Buffett is known not only for value investing, but also buying shares only of companies that operate in prosaic, easy-to-understand businesses. That's why the holdings of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) are spectacular.

But in this look at how to find more stocks to buy that deliver – and even beat – the gains of Buffett's most popular holdings, some of the best bets could be companies that share a market with Berkshire's big winners.

Take a look.

To continue reading, please click here...

This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks

By , Money Morning - • Print | Email

I am very disappointed by, but not surprised at, the latest transfer of weath to the bankers from everyone else. The most recent gold bear raid has vastly enriched the bullion bankers, once again, at the expense of everyone trying to protect their wealth from global central bank money printing.

The central plank of Bernanke's magic recovery plan has been to get everybody back borrowing, spending, and "investing" in stocks, bonds, and other financial assets. But not equally so – he has been instrumental in distorting the landscape towards risk assets and away from safe harbors.