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The Biggest Tech Breakthrough in 50 Years

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

There are somewhere between two and three billion computers in the world right now.

And every last one is about to become obsolete.

Sorry, but yes, that goes for the computer you're using to read this.

It's a fundamental redesign of computing power that has been 50 years in the making.

You could probably manage to hang on to your current computer for a year or two, if you're patient.

But once your friends and neighbors start showing off the incredible speed and power of their new gadgets, or it turns out that incredible new software you've been eyeing won't run on your current computer, well, it's only a matter of time until you'll sign up this game-changing upgrade.

And consumer upgrades are just the beginning.

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Tech Stocks On the Move Today: SanDisk Corp. (Nasdaq: SNDK), Yahoo Inc. (Nasdaq: YHOO), IBM Corp. (NYSE: IBM)

By , Money Morning - • Print | Email

Stocks tumbled Wednesday due to investor unease, and contributed to slips in tech stocks including SanDisk Corp. (Nasdaq: SNDK), Yahoo! Inc. (Nasdaq: YHOO) and IBM Corp. (NYSE: IBM). Markets fell after minutes from the U.S. Federal Reserve meeting released Tuesday signaled no new stimulus from Team Bernanke. The Fed believes the U.S. economy is improving […]

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The Next "Lehman Moment" Is Coming Fast

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW - • Print | Email

It seems that my latest edition of Insights & Indictments was warmly received by the bullish crowd, many of whom reached out to me to thank me for my optimism.

I'm sorry to burst your bubbles, but I am not a raging bull (but thank you for asking).

In fact, I'm still bearish.

There's a big difference between being bullish and playing all stocks (and other asset classes) from the long (that means "buy") side… and judiciously buying select momentum stocks with fat dividend yields, which is what I was recommending.

I was talking about taking the path of least resistance, which I identified as "upward," based on equity activity so far in 2012. You've heard the old adage "the trend is your friend." Well, that's what I was talking about. The trend has been up.

I'm bearish because I'm afraid of a European meltdown and a "hard landing" in China.

But there's a huge danger in missing what could be the beginning of a real bull market.

So, it makes sense to start putting on solid positions and even speculating here and there. But I am not all in – not yet. However, the time is coming. But, that is also the problem.

I'm fearful that a crash is coming, and maybe soon. If we get one, and everything flushes out and we get a capitulation bottom amidst a global panic sell-off, then I'll be all in, all the way, for the long-term. I'm talking about loading the boat up with stocks and commodities and enjoying a generational ride that will last for maybe 10 years, or more.

What keeps me up at night now, however, is the echo of 2007.

I call where we are now 2007.2. If we are facing 2007.2, then 2008.2 will follow with a vengeance.

I'm guessing the breakdown could come in the second quarter of this year (although it could also take as long as 18 months to develop, which would only make it 10 times as bad when it does come).

Think about what I'm about to lay out for you, and ask yourself,
what if he's right?

Back in 2007…

In the spring of 2007, U.S. Treasury Secretary Henry Paulson, when addressing problems surfacing in the subprime mortgages arena said things "appear to be contained." Fed Chairman Ben Bernanke said, "We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited."

Comforting words, right?

Then, speaking to members of the Federal Reserve Bank of Chicago in May of 2007, Bernanke said, "Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market."

Comforting words, right?

Even before two Bear Stearns hedge funds imploded in June of 2007, the Fed Chairman was touting the virtues of derivatives and the widespread sale of mortgage-backed securities when he stated, "The key thing to remember is that these losses are not just held by American banks, as the bad loans were in Japan (referring to Japan's lost decade), but they are dispersed."

Comforting words, right?

Then, on August 9, 2007, after one Bear fund was shut down and the other fund temporary propped by an injection of some $3.2 billion from Bear itself, and the seemingly contained fallout from subprime and AAA mortgages hitting "dispersed" banks in Europe, the European Central Bank's website quietly announced that the ECB would provide as much funding as banks might wish to borrow at only 4%.

What was happening was that European banks weren't lending to each other. The commercial paper market was at a standstill, and there was no short-term funding facility open wide enough to finance their longer-term mortgage positions. And they couldn't sell their positions because after the Bear funds imploded, there were no buyers for mortgage bonds, even the super-senior AAA tranches many European banks and all the big American banks were holding.

Two hours later, 49 banks borrowed three times what they were usually asking to borrow. And by the time trading closed in the U.S. on that same day, gold had spiked higher, as had safe-haven U.S. treasuries.

Of course, the equity markets were doing their own thing and were rising that summer, nearing new all-time highs (which they would reach in September 2007).

It took another year before we got our "Lehman moment." But,
boy did it hurt.

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The Strategic Petroleum Reserve Becomes a Political Football (Yet Again)

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI - • Print | Email

With the prices of both crude oil and gasoline racing higher, it was just a matter of time before the cries began sounding to open up the Strategic Petroleum Reserve (SPR). The White House is now under renewed pressure to combat rising gas prices by releasing that oil. The problem is that the SPR was […]

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Oil and Gasoline: A Tale of Two Prices

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI - • Print | Email

A number of you have contacted me asking some variation of the same question.

How can the price of oil be declining, yet the price of gasoline remain so high?

Good observation.

At close of trade yesterday, the West Texas Intermediate (WTI) benchmark futures crude oil contract for the near out month in NYMEX trade had declined 2.6% for the week and 4% for the month.

However, the same contract for RBOB (Reformulated Blendstock for Oxygenate Blending) – the NYMEX gasoline futures standard – was up 1.6% for the week and 4.2% for the month.

Normally, we expect that movements in the crude oil price, as the single-largest component in oil product prices, would pretty much dictate where gasoline is headed.

And in normal circumstances, that is usually the case.

Welcome to the Unusual Pricing Case

The current gasoline phenomenon results from several factors:

  • Refinery capacity utilization;
  • The continuing outsized spread between WTI and Brent oil prices in London; and
  • The mix of increasing unconventional domestic oil flow (shale, heavy, tight oils produced in the U.S., synthetic oil from oil sands coming down from Canada); and

As to the last point, the unconventional production actually adds cost to the extraction-upgrading-processing sequence.

Put simply, while we are using more of this new "replacement oil" than we ever have (a good thing for those concerned about reliance on imports from abroad), its use is also adding to the price at the pump.

Of greater importance, however, is the second element: the WTI-Brent pricing environment.

We have talked about this spread on a number of previous occasions. Brent is again selling higher by about 20% to the price of WTI.

That's important when factoring in the actual cost of the feeder stock for refineries.

While the WTI price has been going down (until this morning), Brent has been more subdued. In fact, the Brent price is down only 0.5% over the past month and is slightly higher (also about 0.5%) over the past week.

This year, the U.S. market is likely to be importing on average about 45% to 47% of what it needs on a daily basis. Only a few years ago, that market was dependent on imports for two-thirds of its requirements.

Additionally, American domestic daily production will be close to 10 million barrels, a level not seen since the mid-1990s. That is a result of the acceleration in unconventional extractions in places like the Bakken in North Dakota, the Monterey in California, and Eagle Ford in Texas, as well as for prospects for new basins like the Utica in eastern Ohio.

There's another important question that needs to be asked at this point.

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The Banks Win, Again

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW - • Print | Email

Finally, some well-deserved help for beleaguered monster banks is on its way.

Make that, well on its way.

Those poor big banks accidently and inadvertently got caught up making so many easy loans to deserving, hard-up borrowers, who wanted to buy overpriced dream homes, and a few million other folks who deserved two homes and McMansions to keep up with the Joneses (you know the Joneses… most of them were "friends of Angelo").

But now, at last, the banks are making profits again.

After suffering the indignity of insolvency and near collapse for all their hard work, the New Samaritans are still being haunted by their generosity, as regulators hound them into settlement submission, merely for doing God's work.

So, what's the good news?

The second quarter may be a good one for the three biggest servicer banks, namely Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), and – the little bank that could, run by that kid named Jamie – JPMorgan Chase (NYSE:JPM).

What's strange is that these do-gooders are being helped by some of the same government folks who are still attacking them in public venues where voters hang their hats.

What's not strange is that tons of underwater homebuyers, who are drowning in debt on dwellings whose prices have fallen 30% to 40%, aren't blaming banks and are running to their rescue.

Okay, maybe they're not running, maybe it's more that they're being corralled, like sheep. But either way, they are helping banks fatten their profits pools (make that bonus pools) again.

They're repaying the banks' favor of giving them loans in the first place by coming (more like being forced) back to the banks to get refinanced on better terms.

But they're not doing it on their own. The banks have a partner helping to round up their old customers and corral them into the breeding profits barn.

That Partner is HARP 2.0

The original Home Affordable Refinance Program, which was launched in April 2009, failed miserably (because there was nothing in it for banks). But the powers that be (the banks… DUH) harped for a new HARP, and they got it last November.

The new program is known as HARP 2.0 (that's because it's twice as profitable for the big banks that sunk the economy and the world under Housing Bubblemania 1.0).

Okay, enough sarcasm; let me slice and dice this succinctly for you.

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Stock Market Today: Housing Data Makes KB Home (NYSE: KBH), Homebuilder
Stocks a "Hold"

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

This week's housing market data ended with lower new home sales than expected, triggering a slip for KB Home (NYSE: KBH) and other homebuilder stocks in the stock market today (Friday).

Shares of builder KB Home tumbled more than 13% in early morning trading. Also pushing investors away from the stock was the company earnings report that missed analyst expectations.

For the quarter ended Feb. 29, KB Home's net loss was $45.8 million, or 59 cents a share, down from a $114.5 million loss, or $1.49 a share, a year earlier. Analysts expected a loss of 23 cents a share, according to Bloomberg News.

Signs of a housing market bottom have helped push KBH up 67% this year. As of Thursday's close it was one of the top performers in the S&P 500 Index year-to-date.

But new home orders slipped last quarter – and the company is saddled with debt. Net orders declined 8.1% to 1,197 homes. The cancellation rate rose to 36% from 29% a year earlier.

Its high debt level has prevented KBH from regaining profitability.

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How to Profit on the Natural Gas Surplus

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI - • Print | Email

The recent mild winter and the unparalleled potential in new shale gas production have combined to result in a depressed pricing market for natural gas.

The rise in demand for everything from electricity to petrochemical feeder stock, liquefied natural gas (LNG) exports, and even usage in vehicle fuels, will start driving that price up over the next two years.

You already know that, of course.

We've talked about it many times before.

But now there's something else on the horizon that is likely to provide a boost to investor prospects even sooner.

Utilities, one of the main beneficiaries of the gas boom, are moving to capitalize on the accelerating transition in power generation.

And in the process, two important trends are emerging that will be of interest to retail investors.

First, the low current prices and the prospect of rapid increases in extraction rates, if the market warrants, are allowing electricity managers the opportunity to plan for multi-year cost projections.

That, in turn, is propelling the intensified replacement of aging capacity with new gas-fueled plants.

As Pacific Gas & Electric Co. (NYSE: PCG) CEO Tony Earley noted this week, infrastructure investment becomes a priority when projected fuel prices are low. The system has to be upgraded and replaced in any event, as large segments of it reach the point of "retirement."

Earley also has advanced the idea that the power industry needs to speak with one voice in its dealings with regulators and policy makers.

This need for solidarity has been reflected in comments from other leaders in the power industry as well.

As policymakers increase capital expenditure spending in infrastructure replacement and expansion, we are also likely to see a renewed interest in developing a consensus on where the next "generation of generators" is going to be moving.

And one of the drivers coming onto the scene moves right into familiar – and profitable -territory, at least for us.

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The Irony of China's Search for Energy

By , Money Morning - • Print | Email

Kent was in Huntington Beach, Calif., earlier this week to present the keynote address on "The Future of U.S. Energy Policy" at the CoBank Annual Meetings.

I hope he didn't have to rent a car. If so, he's probably still suffering from sticker shock.

The average price of regular gasoline in the Golden State is around $4.32 – a record high for this time of year.

He probably would have been better off cruising down to Mexico to refill his tank instead.

Thanks to government regulations to artificially suppress the price, American drivers can find gasoline in Mexico for up to $1.50 a gallon cheaper than in the U.S.

But drivers also have to ignore U.S. State Department travel warnings. A willingness to cross the border anyway shows just how important inexpensive fuel is to drivers living on a budget.

It all comes back to the subject that Kent and I have written on with a lot of passion in the last few months.

The U.S. has lacked a cohesive energy policy for the last four decades, with every President since Nixon ignoring his own calls for energy independence and an effective strategy moving forward.

And as the global economy becomes more competitive, access to less expensive sources of oil wanes, and political tensions drive greater uncertainty, there's new irony to our lack of a real energy policy.

And it's leading to new competition for fuels in our own back yard.

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Monday's Stock Market News: UPS Inc. (NYSE: UPS), US Steel Corp (NYSE: X), Glencore

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

Monday's stock market news from United Parcel Service Inc. (NYSE: UPS), U.S. Steel Corp. (NYSE: X), and Glencore International Plchelped drive gains in U.S. markets. The Dow moved up a slim 0.05% to close at 13,239.13; the S&P 500 climbed 0.4% to close at 1,409.75; and the Nasdaq rose 0.75% to 3,078.32.

United Parcel Service Inc. (NYSE: UPS) biggest deal in company history: UPS announced Monday a $6.77 billion deal to buy Netherlands-based delivery service TNT Express NV to bolster global sales growth.

TNT is Europe's second-biggest express mail company. Its acquisition will double the UPS presence in Europe and give it about the same market share as the region's industry leader DHL. The deal also will boost UPS's international sales to 36% of its total from 26% currently – a significant leap towards the company's goal of 50%.

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