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Stocks

Stock Market Today: Poor Labor and Manufacturing Data Sends the Markets South

By , Money Morning - • Print | Email

Here's what's making headlines in the stock market today.

  • Jobless claims rise again– A higher number of people filed for their first week of unemployment benefits last week, a sign that the job market is not improving as hoped. For the week ended August 18 372,000 filed for unemployment, up 4,000 from the previous week, the Department of Labor said Thursday. Economists had expected initial claims to be 368,000. As of the July jobs report, 12.8 million people were counted as unemployed and about 5.59 million people received some kind of state or federal benefit in the week ended Aug. 4. "Jobless claims continue to indicate … a sluggish labor market," Peter Cardillo, an economist at Rockwell Global Capital in New York told Reuters. "The numbers also strengthen the hand of the Fed to aid the economy with more stimulus."
  • Global manufacturing slumps- The flash manufacturing Purchasing Managers Index for the U.S. edged slightly higher to a 51.9 reading in August from 51.4 in July, according to Markit. The August reading marked the first monthly increase in five months, but it was the third weakest result since the manufacturing sector stopped shrinking in October 2009. New export orders continue to be below the 50 mark, indicating contraction, but output and new orders rose. Also causing concerns is the HSBC Flash China manufacturing PMI which fell to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.

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What to Do When Every Market Is Ponzi Scheme

By , Money Morning - • Print | Email

LIBOR, Bernie Madoff, MF Global, Peregrine Financial, zero-percent interest rates, the Social Security and Medicare entitlement funds, many state and municipal pension funds, mark-to-model asset values, quote stuffing and high frequency trading (HFT), and debt-based money?

What do the following have in common?…

The answer is that every single thing in that list is an example of market rigging, fraud, or both.

How are we supposed to make decisions in today's rigged and often fraudulent market environment?

Where should you put your money if you don't know where the risks lie? How does one control risk when control fraud runs rampant?

Unfortunately, there are no perfect answers to these questions.

Instead, the task is to recognize what sort of world we happen to live in today and adjust one's actions to the realities as they happen to be.

The purpose of this report is not to stir up resentment or anger — although those are perfectly valid responses to the abuses we are forced to live with — but to simply acknowledge the landscape as it is so that we can make informed decisions.

In this report I connect the dots on the fraud, noting both what we already know about and what we'd better prudently suspect is happening but not yet revealed. (If you'd like to jump straight to our conclusions about this Ponzi scheme click here.)

Swimming Naked

As Warren Buffet said, "It's only when the tide goes out that you learn who's been swimming naked."

What he meant was that poorly-run companies can appear healthy during boom times but are later exposed as hollow shells when the economic tide retreats. Naturally it's a lot easier to make money when times are booming, but much more difficult when the economic pie is stagnant or shrinking. The dot-com companies of the late 1990s are the poster children for this phenomenon.

My corollary to Buffet's naked swimming quote is this: It's only when the pie stops expanding that you find out who's been running a Ponzi scheme.

The global pie is no longer expanding, and the relentless parade of disquieting economic and financial news can be laid right upon that fact.

Sure, there are the prosecutable examples, such as Bernie Madoff, but state and municipal pensions and the Social Security entitlement program also fit the definition. So does the practice of expanding public debt at a faster pace than GDP, which many nations, provinces, and states have done for many years running.

These are all Ponzi schemes in the sense that they require constant growth to remain 'healthy' (or hidden, more accurately) and are therefore mathematically certain to fail. Now that the economic pie is no longer growing like it used to and most likely will not for decades to come (if ever), all of these schemes are rapidly falling apart.

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Stock Market Today: Waiting On Clues From the Fed

By , Money Morning - • Print | Email

Here's what's making the headlines in the stock market today.

  • The FOMC will release minutes from its July meeting at 2 p.m. EDT- Even though further additional stimulus measures were not announced at the last meeting investors will try to decipher what was said for clues that QE3 could be on the way. Many economists think that the Federal Reserve could announce the measure at the Jackson Hole, WY symposium which takes place next Friday and Saturday Aug 31- Sep 1.

    • Bernanke announced QE2 in Jackson Hole in 2010 but investors may be disappointed this time around. "There's not going to be enough data for him to say anything new," Catherine Mann, a finance professor at Brandeis University and former Fed economist who has attended the meeting twice told CNN. "It's possible he will make some reference to slowing global growth, increasing headwinds from Europe, and the slowing of the economy as the consequence of uncertainty related to fiscal cliff."

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As Prices Rise, Here's How to Play Natural Gas Companies

By , Money Morning - • Print | Email

The price of natural gas hit a 10-year low in April, sinking to $1.91 per MMBtu on April 19. Since then, natural gas prices are on the rise. In fact, prices have surged nearly 50%, to around $2.75 per MMBtu over the past four months.

What changed?

One, the sector came out of a very mild winter that saw very poor demand for natural gas.

Two, the onset of summer – and a particularly hot one, at that – has had the exact opposite effect.

This summer's record-setting heat has wreaked serious havoc on the economy. The price of everything we consume has been to some degree impacted by the heat, and natural gas is no exception. As temperatures have risen, utility companies have had to rely more and more on natural gas to generate electricity.

What's more, due to strengthened environmental regulations, coal-fired power plants are coming off-line, and their capacity is being replaced by natural gas.

On the supply side, prices were also juiced by last week's Energy Information Administration report that supplies increased by 24 billion cubic feet, missing expectations of a rise between 27 million bcf and 31 million bcf.

While prices are up, they're still hovering below $3. Since much of the country is still in the throes one of the hottest summers on record, there's still some money to be made.

What's more, analysts are predicting a colder winter than last year, which should bring some stability to prices when the heat wave subsides.

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How to Be Safely Diversified and Earn Hefty Yields

By , Money Morning - • Print | Email

If you're not at all concerned about yield, diversified income investing is easy.

The market is full consumer goods companies offering 3-4% yields some of which have staggering records of dividend increases for 30, 40 or even 50 years.

Provided these companies are not overpriced, they make very good long-term "heirloom" investments since they are very nearly recession-proof. What's more, once companies like these have established a track record of dividend increases for several decades, they take pains to keep it.

But the truth is a 3-4% yield on its own simply doesn't cut it for most income-seeking investors.

In Ben Bernanke's rotten world, a few select high-yield investments are practically a necessity these days.

After all, if you are looking to establish a $100,000 income stream, you'd need nearly $3 million in principal if your yield is in the 3-4% range. For many income investors, it's just not enough.

The problem is once you start to look for companies with a 5% yield or better, the selection of investible companies becomes much more narrow.

And here's what I know about narrow: it tends to concentrate your investments in a few sectors, which can be risky.

The good news is this diversification problem can be overcome. Let me explain.

The Search for Attractive Yields

In today's market, there are two types of companies that offer attractive dividends in the 7-10% yield range. They are real estate investment trusts (REITs) and energy/resources master limited partnerships (MLPs).

Both these investments benefit from special tax treatment, which means they don't pay corporate tax, provided they pass their income through to investors as dividends.

Although they are tied to the real estate cycle in apartments, offices, warehouses or retail buildings, equity REITs make solid investments.

They're not to be confused with the high yielding mortgage REITs that currently benefit from the Ben Bernanke yield curve.

The largest of these are American Capital Agency Inc. (Nasdaq: AGNC) and Annaly Capital Management (NYSE:NLY) both of which pay yields in excess of 13%. They invest in long-term fixed rate mortgages and finance themselves in the short-term repo market.

That's a very dangerous game, which promises to blow up when interest rates eventually rise. So don't get fooled by those gigantic yields, stick the property REITs.

On the other hand, MLPs offer investors the chance to benefit from the resource extraction business, whether oil, gas or mining. MLPs routinely pay yields over 6%, with some into the double-digits.

The snag to watch here is that income stream for most of them is tied to a finite pool of assets, or will expire in a finite period of time.

Since your investment is essentially "on the clock" that means that what you see is not precisely what you get; you have to look closely under the hood.

In this case investors need to make sure the yield is high enough and the pool of assets or life of the company long enough to justify the overall investment.

Another sector that offers high dividend yields is shipping.

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Invest in Gold Mining Stocks While They're Still a Bargain

By , Money Morning - • Print | Email

With gold prices high and likely to go higher, this might be the best time to invest in gold mining stocks.

Gold prices eked out a small gain Friday to close at $1,616.30 an ounce.

Comments from German Chancellor Angela Merkel Thursday supporting European Central Bank President Mario Draghi's crisis strategy to do "whatever it takes" to save the euro helped push gold prices higher.

More disappointing U.S. economic news in manufacturing and housing starts could also boost the yellow metal. The more the U.S. economy struggles, the more likely the U.S. Federal Reserve will launch another stimulus program that would favor higher gold prices.

For some investors, this adds to their dilemma of whether to invest in physical gold or gold equities.

History is on the side of physical gold. Citigroup Inc. (NYSE: C) has found that in the last five years, physical gold has outperformed global gold stocks by 120%.

But because gold stocks – and gold mining stocks in particular – have lagged gold prices, they have a lot of upside potential.

What's more, gold mining stocks offer something in return – dividends – in addition to benefiting from a continued rise in gold prices. Many commodities experts think gold prices could reach $2,000 an ounce or more within the next six months.

While not quite in bull mode, gold mining stocks have begun to stir of late. Here are three gold mining stocks worth a look for gold equity investors.

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5 Reasons Apple (Nasdaq: AAPL) Stock Hit a New All-Time High

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

Just when it looked like the Apple Inc. (Nasdaq: AAPL) success story had taken a detour, Apple stock suddenly hits a new all-time high.

AAPL shot past its previous intraday high record of $644 by reaching $648.19 during Friday's session. The close of $648.11 easily broke the $636.23 record closing price set on April 9.

Today (Monday) Apple stock is up more than 1% in early trading, reaching an intraday high of $656.35.

That's hardly what many investors expected after Apple reported on July 24 that it missed on its June quarter earnings and offered weak guidance for the current quarter.

After that Apple stock dipped into the $570 range several times before quietly starting its climb back to its previous high.

Since those lows of late July, AAPL has soared 12% — more than twice the rise of the Standard & Poor's 500 index and almost triple the performance of the Dow Jones Industrial Average.

How can this be? Why are investors so high on a company that hasn't really done anything spectacular lately?

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What Skirt Lengths Tell You About The Stock Market

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

Over the years I've written a number of articles about trading indicators.

They have ranged from the commonly used variety – like moving averages, crossovers, the VIX, death crosses, and Bollinger Bands – to the esoteric, including the tallest buildings, Big Money Polls, financial astrology and, more recently, magazine covers.

You'd think the tools market technicians typically use would generate the most interest. But inevitably, it's the more unusual indicators that people are most attracted to.

Why?… I have no idea. I am not a social scientist.

But I can tell you this – having spent tens of thousands of hours computer modeling almost every indicator you can conceive of, the most consistent and best performing indicators are almost always behaviorally-based.

What I mean by that is that there is inevitably an element of human behavior that is either: a) responsible for the indicator itself; or b) contributes significantly to how it functions and why it's relevant.

My grandmother, Mimi, a seasoned successful investor in her own right after being widowed at a young age, used to chalk this up to what she called the "complexity problem" – as in, if it's too complex for me to understand, it's a problem.

She didn't use the term like I do today in a non-linear sense. She simply reasoned that if something was too complex to explain to her, it wasn't worth her time or her money.

Skirt Chasing and the Stock Markets

And that brings me to women's skirts.

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Three New Breakthroughs Give Alzheimer's Patients Hope

By , Defense + Tech Specialist, Money Morning • @Robinson_STI - • Print | Email

We recently received news from Johnson & Johnson (NYSE:JNJ) and Pfizer Inc. (NYSE:PFE) about their clinical trials for what many hoped would become a knockout Alzheimer's drug.

The compound would have become the first to fully address the steady decline in memory the disease causes. But new tests showed the drug simply didn't work.

No doubt this was a setback for the firms, who sunk millions of dollars into developing the drug. And it's truly disappointing for millions of current Alzheimer's patients and their families.

But I don't think we should be worried.

As I see it, this is a setback, not a fatal flaw. Remember, no road to victory follows a straight path.

And this field is moving so quickly that a new drug – or novel therapy – could come along any day now to provide relief to the five million Americans who have this disease closely associated with aging.

After all, we are living in the Era of Radical Change, a period like none we've seen before. We see hundreds of important breakthroughs in high tech and biosciences every year. The pace of change comes so fast no one person on earth can begin to understand what it all means.

But I do know this.

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Facebook Stock Hits New Low, So What Now for Mark Zuckerberg?

By , Contributing Writer, Money Morning - • Print | Email

Since Facebook's (Nasdaq: FB) hugely hyped and highly anticipated initial public offering on May 18 at $38, shares have been sliced in half, hitting a low of $19.01 in trading today (Friday).

Now, chatter is swirling that CEO Mark Zuckerberg should step down and let a more experienced executive take the helm.

"There is a growing sense that Mark Zuckerberg, talented though he may be, is in over his hoodies as CEO of a multibillion-dollar public company," Sam Hamadeh, head of research firm PrivCo, told the Los Angeles Times. "While in many cases a company founder can, and does, grow into the job, things are happening so quickly that there is precious little time here for Zuckerberg to do that."

Fueling the sentiment is Facebook's steady descent since its calamitous IPO. On Thursday, as the first lockup period ended, which allowed early investors and venture capitalists to unburden their portfolio of battered shares, the stock hit a fresh low.

Facebook's shares closed Thursday at $19.87, a far cry from its debut price and peak of $45 a share.

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