Jason Simpkins
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Three Ways to Brace for a Double-Dip Recession
China Using Government Muscle to Turbo Charge its Auto Industry
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General Motors and Chrysler were forced into bankruptcy largely because they failed to pursue more fuel-efficient models. Indeed, GM and Chrysler looked wholly unprepared as gas prices soared over $4.00 a gallon in 2008.
As GM emerges from bankruptcy - having been bailed out by the U.S. government - it will put a renewed focus on alternative energy. Unfortunately, it's too late to make a difference. As U.S. car companies sputtered amid the country's economic collapse, carmakers in China raced ahead. And with billions of dollars in government backing, they are the companies that will set the pace for the global auto market.
Can High-Speed Rail Stay On Track in the United States?
President Barack Obama last year outlined an ambitious initiative to get high-speed rail on track in the United States. But while the government's high-speed rail initiative looked good on paper, it runs the risk of being derailed by high costs and political opposition.
"Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame," Obama said last year announcing his plan.
While most passenger trains in the United States travel at the maximum allowable speed of 79mph, trains in Europe and Asia typically travel in excess of 125mph. In France, for example, the Train Ga Grande Vitesse (TGV) travels at an average speed of 133 mph. Another French train actually reached 357.2mph in 2007, setting a new world record.
"Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame," Obama said last year announcing his plan.
While most passenger trains in the United States travel at the maximum allowable speed of 79mph, trains in Europe and Asia typically travel in excess of 125mph. In France, for example, the Train Ga Grande Vitesse (TGV) travels at an average speed of 133 mph. Another French train actually reached 357.2mph in 2007, setting a new world record.
Three Ways to Brace for a Double-Dip Recession: Recession-Proof Stocks
Today (Friday) we conclude our series on bracing for a double-dip recession.
In Part I of this investment series, "Three Ways to Brace for a Double-Dip Recession: Going for the Gold," we discussed ways investors could safeguard against the imminent decline of the U.S. dollar by buying gold.
In Part II, "Three Ways to Brace for a Double-Dip Recession: Going Global," we explored potential investments in foreign countries that have more stable economies and better growth prospects.
And today, we're going to conclude by looking at "recession-proof" stocks right here in the United States.
In Part I of this investment series, "Three Ways to Brace for a Double-Dip Recession: Going for the Gold," we discussed ways investors could safeguard against the imminent decline of the U.S. dollar by buying gold.
In Part II, "Three Ways to Brace for a Double-Dip Recession: Going Global," we explored potential investments in foreign countries that have more stable economies and better growth prospects.
And today, we're going to conclude by looking at "recession-proof" stocks right here in the United States.
Is the U.S. Economy Destined for Deflation?
With inflation low and the recovery waning, a growing chorus of analysts is beginning to suspect that U.S. policymakers aren't doing enough to head off deflation.
U.S. producer prices fell for a third straight month in June, sliding 0.5%. That follows declines of 0.1% in May and 0.3% in April. Core inflation, which excludes food and energy costs, managed only a 0.1% increase for the month, and is up just 1.1% in the past 12 months. The U.S. Federal Reserve's preferred target for inflation is 2%.
Meanwhile a high rate of unemployment continues to jeopardize the U.S. recovery, and economists fear that a significant drop in economic growth could tip the scales toward a deflationary spiral.
U.S. producer prices fell for a third straight month in June, sliding 0.5%. That follows declines of 0.1% in May and 0.3% in April. Core inflation, which excludes food and energy costs, managed only a 0.1% increase for the month, and is up just 1.1% in the past 12 months. The U.S. Federal Reserve's preferred target for inflation is 2%.
Meanwhile a high rate of unemployment continues to jeopardize the U.S. recovery, and economists fear that a significant drop in economic growth could tip the scales toward a deflationary spiral.
Misguided Policy Paving the Way for a Double-Dip Recession
With unemployment still hovering near 10%, policymakers should be doing all they can to combat joblessness and reinvigorate a recovery that is showing signs of weakness.
But they're not.
Instead, they're reeling in stimulus measures and enabling a double-dip recession, simply for the sake of fiscal austerity.
The Labor Department is expected to report today (Friday) that the unemployment rate held steady at 9.7% in June, or worse, edged up to 9.8%. That would follow yesterday's (Thursday's) disappointing report that showed new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. The four-week moving average, which smoothes out volatility, rose by 3,250 to 466,500 - its highest level since March.
But they're not.
Instead, they're reeling in stimulus measures and enabling a double-dip recession, simply for the sake of fiscal austerity.
The Labor Department is expected to report today (Friday) that the unemployment rate held steady at 9.7% in June, or worse, edged up to 9.8%. That would follow yesterday's (Thursday's) disappointing report that showed new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. The four-week moving average, which smoothes out volatility, rose by 3,250 to 466,500 - its highest level since March.
George Soros: "We Have Just Entered Act II" of the Global Financial Crisis
George Soros gained global recognition when he co-founded the Quantum Fund with Jim Rogers in 1970. That fund generated an average annual return of more than 30% while he was at the helm.
Soros hasn't quit making timely market calls since: From his $10 billion bet against the British pound sterling in 1992 to his April 2008 prediction that we had not "seen the full effect" of the recession and that the situation was "more serious than the authorities admit or recognize."
In February, Soros called the euro's viability into question, and the currency has plunged some 10% since that time.
Soros hasn't quit making timely market calls since: From his $10 billion bet against the British pound sterling in 1992 to his April 2008 prediction that we had not "seen the full effect" of the recession and that the situation was "more serious than the authorities admit or recognize."
In February, Soros called the euro's viability into question, and the currency has plunged some 10% since that time.
Banks and Investors Both Rattled by European Debt Concerns
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The ECB is buying government bonds and increased its lending to banks, but that has done little to alleviate concern that the nearly-$1 trillion (750 billion euros) Eurozone bailout package announced last month won't be enough to prevent a collapse in the banking industry.
The ECB said on Monday that European banks will have to write off more loans this year than they did in 2009. The region's banks are expected to write off some $237 billion (195 billion euros) in bad debt by 2011.
Hot Stocks: Can Apple Be a Gentle Giant?
Apple Inc. (Nasdaq: AAPL) yesterday (Thursday) supplanted Microsoft Corp. (Nasdaq: MSFT) as the largest technology company in the United States. Apple now trails only Exxon Mobil Corp. (NYSE: XOM) in size, but that size will only make the company a bigger target if it fails to use its newfound market position prudently.
Just last month, Microsoft's market capitalization exceeded Apples by some $25 billion. But Apple has finally overtaken one its great archrivals. But being the new standard bearer for the technology sector brings with it more than bragging rights. It also will make Apple a bigger target for its competitors and government scrutiny.
As far as competition is concerned, there's no question that Apple has outdone Microsoft.
Just last month, Microsoft's market capitalization exceeded Apples by some $25 billion. But Apple has finally overtaken one its great archrivals. But being the new standard bearer for the technology sector brings with it more than bragging rights. It also will make Apple a bigger target for its competitors and government scrutiny.
As far as competition is concerned, there's no question that Apple has outdone Microsoft.
BP Bites the Bullet: Analyzing the Full Cost of the Gulf Oil Spill
The Exxon Valdez dumped 260,000 barrels of oil off the coast of Alaska, and ExxonMobil Corp. (NYSE: XOM) ended up spending about $4 billion in the wake of that disaster. That means Exxon spent nearly 600 times more on cleanup and litigation than what the oil was actually worth at that time.
So how much will BP PLC's (NYSE ADR: BP) Gulf oil spill, which is significantly greater, set it back?
The fact is, it's still impossible to know exactly how much BP will have to cough up to cleanse itself of this crude fiasco without knowing the full extent of the damage caused. But the picture is getting a little bit clearer each day the cleanup effort wears on.
So how much will BP PLC's (NYSE ADR: BP) Gulf oil spill, which is significantly greater, set it back?
The fact is, it's still impossible to know exactly how much BP will have to cough up to cleanse itself of this crude fiasco without knowing the full extent of the damage caused. But the picture is getting a little bit clearer each day the cleanup effort wears on.
Indonesia Catching China's Eye
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Indeed, China's appetite for commodities makes Indonesia - with its close proximity and abundance of natural resources - an ideal partner.
PetroChina Co. Ltd. (NYSE ADR: PTR), Sinopec, Sinosteel, Minmetals and China Investment Corp (CIC) - Beijing's $300 billion sovereign wealth fund - are all aggressively scouring South East Asia's largest economy for takeover targets and joint venture partners, the Live Trading News reported.
With Inflation Accelerating Around the World, Will the United States be Next?
Inflation is now thoroughly entrenched in India's economy, and some analysts fear that the United States could suffer the same fate if adjustments to monetary policy aren't made soon.
India's wholesale price index-based inflation rate in February accelerated to 9.89% from a year earlier. That was the fastest pace in 16 months, blowing past the Reserve Bank of India's (RBI) estimate for an 8.5% inflation rate at the end of March.
Soaring food prices were the primary driver of inflation. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 16.3% in the week ended March 6 from a year earlier after a 17.81% gain the previous week.
India's wholesale price index-based inflation rate in February accelerated to 9.89% from a year earlier. That was the fastest pace in 16 months, blowing past the Reserve Bank of India's (RBI) estimate for an 8.5% inflation rate at the end of March.
Soaring food prices were the primary driver of inflation. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 16.3% in the week ended March 6 from a year earlier after a 17.81% gain the previous week.
Home Depot and Lowe's Laying the Foundation for Recovery with Little Help From the Housing Market
The housing market that was at the epicenter of the financial crisis has yet to approach a full-fledged recovery, but that hasn't stopped the nation's two biggest home-improvement retailers from rebuilding.
The Home Depot Inc. (NYSE: HD) and Lowe's Cos. Inc. (NYSE: LOW) both topped analysts estimates in the fourth-quarter, as more Americans undertook "do it yourself" projects and edged back into purchases of big-ticket items.
Home Depot's total revenue for the quarter ended Jan. 31 fell to $14.57 billion, but net income swung to a gain $342 million, or 20 cents a share, from a year-earlier loss of loss of $54 million, or 3 cents a share.
The Home Depot Inc. (NYSE: HD) and Lowe's Cos. Inc. (NYSE: LOW) both topped analysts estimates in the fourth-quarter, as more Americans undertook "do it yourself" projects and edged back into purchases of big-ticket items.
Home Depot's total revenue for the quarter ended Jan. 31 fell to $14.57 billion, but net income swung to a gain $342 million, or 20 cents a share, from a year-earlier loss of loss of $54 million, or 3 cents a share.
One Indicator That's Unquestionably Bullish
Many economic indicators are sending mixed signals, but one stalwart is coming through crystal clear.
And it suggests that U.S. stocks are poised for a strong showing in 2010.
The indicator I'm referring to is the oft-overlooked "Super Bowl Indicator," which as has correctly predicted the direction of the Dow Jones Industrial Average in 34 of the past 43 years. That's an enviable 79% success rate. And between 1967 and 1997, the indicator was correct 28 out of 31 times - a stunning 90% success rate.
And it suggests that U.S. stocks are poised for a strong showing in 2010.
The indicator I'm referring to is the oft-overlooked "Super Bowl Indicator," which as has correctly predicted the direction of the Dow Jones Industrial Average in 34 of the past 43 years. That's an enviable 79% success rate. And between 1967 and 1997, the indicator was correct 28 out of 31 times - a stunning 90% success rate.
Unemployment Report Set to Reflect the Bitter Face of a Jobless Recovery
New statistics from the Labor Department today (Friday) will likely confirm that the U.S. economy is in a deeper hole than previously thought.
Economists expect that the national unemployment rate rose to 10.1% in January from 10% in December. More importantly, however, the number of jobs lost from April 2008 to March 2009 will be revised upwards by 824,000 - the largest margin in 18 years, according to Bloomberg News.
Most of those losses came from companies that closed or went out of business, which would undermine the popular birth/death model for joblessness. That model is based on the assumption that hirings at newly formed companies generally offset the job losses associated with company closures.
Economists expect that the national unemployment rate rose to 10.1% in January from 10% in December. More importantly, however, the number of jobs lost from April 2008 to March 2009 will be revised upwards by 824,000 - the largest margin in 18 years, according to Bloomberg News.
Most of those losses came from companies that closed or went out of business, which would undermine the popular birth/death model for joblessness. That model is based on the assumption that hirings at newly formed companies generally offset the job losses associated with company closures.
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