Hoping to win more public and political support for its involvement in the bailout of Greece, Germany has banned the naked short-selling of European sovereign debt instruments. However, other European governments are refusing to follow suit, highlighting the lack of political will that's needed to regulate the credit default swap (CDS) market.
German Chancellor Angela Merkel said that the ban would remain in place until the EU comes up with a comprehensive plan for financial reform.
"This will all remain in place until other rules are established on the European level," she said.
Germany did something on Tuesday that I've been hoping would happen for three years: It outlawed naked short-selling and speculation on European government bonds with naked credit default swaps.
The financial institutions that have been profiting from this type of speculation immediately went on the offensive.
German officials justified the surprise, unilateral move by financial regulator BaFin by stating that the "exceptional volatility" in government debt - if accompanied by massive short-selling and naked CDS trading - could result in excessive price movements that would actually "endanger the stability of the entire financial system."
The euro, which made huge gains against the dollar in the wake of 2008's financial crisis, has come plummeting back to earth amid fears that the Greek credit crisis would spread and undermine the European Union (EU). The euro's decline has meant a sharp rebound for the dollar, which according to respected market researcher Bespoke Investment Group LLC, is now "extremely overbought."
The euro has plunged some 21% versus the dollar from its all-time high back in 2008, Bespoke says. And while it is still above its historical average of $1.183, it is currently less than 2% above its 2008 low.
Meanwhile, the U.S. Dollar Index has rallied over 14% since its short-term lows in November, and it is up 3.5% this week alone.
Corporate profits returned in full in the first quarter of the year, with company after company topping Wall Street estimates.
JPMorgan Chase & Co. (NYSE: JPM) raked in $3.33 billion in first-quarter net income. Ford Motor Co. (NYSE: F) beat analysts' estimates with a $2.1 billion profit. Apple Inc (Nasdaq: AAPL) brought in $3.38 billion.
Dividends are one of the most overlooked ways for investors to notch big gains in their portfolio. And with earnings for companies in the S&P 500 surging 176% in the fourth quarter of 2009, more and more companies are using this as an opportunity to reward their investors. Read this report to find out what stocks could bring much needed income to your portfolio.
Goldman Sachs Group, Inc (NYSE: GS) fell 9.39% Friday after being downgraded on news released Thursday that federal prosecutors started a criminal investigation into whether Goldman committed securities fraud.
The past few weeks have pulled in one earnings report after another for 2010's first quarter, allowing a better look at the status of corporate profits. Most companies hoped for marked improvements after restructuring and cutting costs in the wake of the financial meltdown that gave balance sheets a beating. And they weren't disappointed: JPMorgan […]
Virtually every investor has heard about how the emergence of China and India promise to send commodity prices skyward in the months and years to come. The promised run-up has yet to begin in earnest, but prognosticators say it's merely a matter of time and just the "right" catalyst.
Money Morning Contributing Editor Peter Krauth - a noted commodities expert and editor of the Global Resource Alert advisory service - says he's found that "just right" catalyst. He's calling it the "Great Global Commodities Grab," and says it's being engineered by some of Wall Street's biggest investment banks.
But here's the key point: Because Wall Street is essentially "gaming" the system, this commodities grab is a chance for investors to reap bigger returns than they would get with the leverage afforded through options and futures - but without the risk.
Investors have reached the point where this physical commodities grab "gets really interesting," Krauth said in an interview with Money Morning. "JPMorgan Chase & Co. (NYSE: JPM) now owns ships overseas and storage tanks in Canada, Asia and Europe [that hold] millions of barrels of oil. And it's far from being the only one. Back in December, one report stated that if all the tankers being used as offshore storage tanks were placed end to end, that string of ships would stretch 26 miles."
Added Krauth: "We're talking about oil supplies being physically taken off the market... that can't help but affect market prices. And that's just with oil - Wall Street investment banks are taking major physical stakes in such commodities as gold and other precious metals, too."
Krauth - a highly regarded market analyst and expert in metals, mining and energy stocks - recently sat down with Money Morning Executive Editor William Patalon III to talk about how the "Great Global Commodities Grab" is going to ignite a rally in the prices of oil, gold, other precious metals and even agricultural commodities. During the question-and-answer session, Krauth also:
Detailed how two leading investment banks just spent more than $2 billion to buy precious-metals-storage companies.
Talked about how gold, throughout history, always ends up taking over for fiat (paper) currencies.
Explained how the aggressive price forecasts Wall Street investment banks have made for both oil and gold are certain to become self-fulfilling prophecies.
And described two companies - one an energy player and the other a junior miner - that he recently recommended to his advisory service, using them as illustrations to underscore his commodity-price predictions.
Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.
The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.
Goldman Sachs Group Inc. (NYSE: GS) just reported that its first-quarter earnings nearly doubled to $3.46 billion, the investment-banking giant's second-most-profitable quarter since going public a decade ago.
And Bank of America Corp. (NYSE: BAC) reported that its earnings for the first three months of the year rang in at $2.83 billion.
For all three of these banking giants, the first-quarter results blew past analyst expectations. Their stock prices? Approaching levels not seen since the start of the financial crisis. In fact, JPMorgan's stock is within 10% of its five-year high.
Major bank profits are zooming - despite the fact that U.S. consumers are struggling to repay loans.
So how are these guys pulling this off? Well, if you dig, you'll find that the bulk of major bank profits are coming from stronger trading revenue and other segments that are enabling the largest banks to overcome weakness in the lending area, which decades ago was the banking sector's bread-and-butter business.
If you dig deeper still, as I've done, you unearth one of the key reasons these banking behemoths are booking such massive profits. They've been moving enormous amounts of capital into one area of the market.
By Don Miller, Contributing Writer, Money Morning-
The world's factories are churning out products at record rates, fueling the global economic recovery at a faster pace than thought possible just a few months ago.
The latest figures show factory output is growing at a record rate from the United States to China to Europe and beyond. And as manufacturing expands, economists expect the world's economies to continue to expand, creating jobs and putting money in consumer pocketbooks.
As long as companies have plenty of cash to finance expansion, output from the world's factories should continue to grow, according to Money Morning Contributing Writer Shah Gilani, who recently launched the Capital Wave Forecast, a new trading service based on capital flows.
Recent surveys show U.S. companies are sitting on almost $1 trillion in cash.
U.S. stocks were back up to their old tricks last week, as volatility waned and financial, industrial and retail stocks waxed. It was a week in which risk was in fashion - until Friday, when the U.S. Securities and Exchange Commission (SEC) hammered Goldman Sachs Group Inc. (NYSE: GS) with fraud charges related to the subprime-mortgage crisis. With that, playing defense was considered offensive.
Leading the way forward were companies that are the ultimate in beta and hopefulness - such as beaten-down bond insurer Ambac Financial Group Inc. (NYSE: ABK), which rose 60%, beaten-down car parts maker American Axle & Manufacturing Holdings Inc.(NYSE: AXL), up 10%, beaten-up retailer Tuesday MorningCorp. (Nasdaq: TUES), up 24%; and beaten shoemaker Crocs(Nasdaq: CROX), up 20%. We're not talking, here, about investors who last year bought the shares of companies that were left for dead; these stocks might actually be worth something in an economic turnaround.
JPMorgan Chase & Co. (NYSE: JPM) posted a 55% rise in first-quarter net income led by fixed-income trading and investment banking. But to ensure its profits remain in tact, the bank continues to fight against proposed financial reform.
JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.
Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.
JPMorgan claims the results are a strong indication of global financial economic improvement.
By Don Miller, Contributing Writer, Money Morning-
A surge in purchases of emerging market debt and a dip in buyers' appetite for U.S. Treasury bonds has sparked speculation that developing nations have become the next safe haven for bond investors. But the more likely scenario is a reversal of capital flows that will sustain Treasury debt for a little while longer.
Emerging market bonds have enjoyed the best first quarter on record as new issuance has surged and interest rate spreads over U.S. Treasuries have narrowed to their lowest since 2008.
Sovereign bond markets in developing countries have sold a record $157 billion so far this year, a 42% jump over the same period in 2009, which marked the previous record, according to data from Dealogic Holdings plc.
JPMorgan Chase & Co. (NYSE: JMP) is close to a deal that gives the financial giant a $1.4 billion tax refund, even though it received a $25 billion bailout in 2008. JPMorgan is the latest company to take advantage of the tax refund, which is giving billions to everyone from retailers and airlines to energy companies and homebuilders.
A little-known provision in a November addition to the 2009 stimulus bill allows companies to apply losses from 2008 and 2009 to taxes paid up to five years ago, expanding the usual two-year limit. The " net operating loss carryback" extends the timeframe into years when companies were profiting and had to pay in each tax season.